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: 811-02924
LORD ABBETT U.S. GOVERNMENT & GOVERNMENT SPONSORED
ENTERPRISES MONEY MARKET FUND, INC.
(Exact name of Registrant as specified in charter)
90 Hudson Street, Jersey City, NJ 07302
(Address of principal executive offices) (Zip code)
Brooke A. Fapohunda, Esq., 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: 6/30
Date of reporting period: 12/31/2015
| Item 1: | Report(s) to Shareholders. |
2015 LORD ABBETT
SEMIANNUAL REPORT
Lord Abbett
U.S. Government & Government Sponsored
Enterprises Money Market Fund
For the six-month period ended December 31, 2015
Table of Contents
Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund
Semiannual Report
For the six-month period ended December 31, 2015
Daria L. Foster, Director, President and Chief Executive Officer of the Lord Abbett Funds, and E. Thayer Bigelow, Independent Chairman of the Lord Abbett Funds. | | Dear Shareholders: We are pleased to provide you with this semiannual report for Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund for the six-month period ended December 31, 2015. For additional information about the Fund, please visit our website at www.lordabbett.com, where you can access the quarterly commentaries by the Fund’s portfolio managers. General information about Lord Abbett mutual funds, as well as in-depth discussions of market trends and investment strategies, is also provided in Lord Abbett Insights, a quarterly newsletter available on our website. 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, 
Daria L. Foster Director, President and Chief Executive Officer |
| | | |
1
Expense Example
As a shareholder of the Fund you incur ongoing costs, including management fees; distribution and service (12b-1) fees (currently only Class B shares have an active 12b-1 Plan); 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 (July 1, 2015 through December 31, 2015).
Actual Expenses
For each class of the Fund, the first line of the applicable 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 titled “Expenses Paid During Period 7/1/15 – 12/31/15” 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.
2
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 | | Ending | | Expenses |
| | | Account | | Account | | Paid During |
| | | Value | | Value | | Period† |
| | | | | | | 7/1/15 - |
| | | 7/1/15 | | 12/31/15 | | 12/31/15 |
| Class A | | | | | | |
| Actual | | $1,000.00 | | $1,000.10 | | $0.60 |
| Hypothetical (5% Return Before Expenses) | | $1,000.00 | | $1,024.53 | | $0.61 |
| Class B | | | | | | |
| Actual | | $1,000.00 | | $1,000.00 | | $0.70 |
| Hypothetical (5% Return Before Expenses) | | $1,000.00 | | $1,024.43 | | $0.71 |
| Class C | | | | | | |
| Actual | | $1,000.00 | | $1,000.10 | | $0.60 |
| Hypothetical (5% Return Before Expenses) | | $1,000.00 | | $1,024.53 | | $0.61 |
| Class I | | | | | | |
| Actual | | $1,000.00 | | $1,000.10 | | $0.60 |
| Hypothetical (5% Return Before Expenses) | | $1,000.00 | | $1,024.53 | | $0.61 |
| † | For each class of the Fund, net expenses are equal to the annualized expense ratio for such class (0.12% for Classes A, C and I, and 0.14% for Class B) multiplied by the average account value over the period, multiplied by 184/366 (to reflect one-half year period). |
Portfolio Holdings Presented by Maturity
December 31, 2015
| Days | %* |
| 1 – 30 days | 43.40 | % |
| 31 – 60 days | 24.25 | % |
| 61 – 90 days | 13.84 | % |
| 91 – 120 days | 10.81 | % |
| Over 120 days | 7.70 | % |
| Total | 100.00 | % |
| * | Represents percent of total investments. |
3
Schedule of Investments (unaudited)
December 31, 2015
| | | | | | | Principal | | | | |
| | | | | Maturity | | Amount | | | Fair | |
| Investments | | Yield(1) | | Date | | (000) | | | Value | |
| GOVERNMENT SPONSORED ENTERPRISES SECURITIES 78.81% | | | | | | | | | | | | |
| Federal Home Loan Bank | | 0.15% | | 1/25/2016 | | $ | 14,000 | | | $ | 13,998,600 | |
| Federal Home Loan Bank | | 0.16% | | 1/4/2016 | | | 2,000 | | | | 1,999,973 | |
| Federal Home Loan Bank | | 0.19% | | 2/3/2016 | | | 11,000 | | | | 10,998,084 | |
| Federal Home Loan Bank | | 0.20% | | 1/20/2016 | | | 13,000 | | | | 12,998,683 | |
| Federal Home Loan Bank | | 0.21% | | 2/5/2016 | | | 60,890 | | | | 60,878,993 | |
| Federal Home Loan Bank | | 0.22% | | 2/5/2016 | | | 8,000 | | | | 7,998,328 | |
| Federal Home Loan Bank | | 0.24% | | 1/26/2016 | | | 12,500 | | | | 12,497,917 | |
| Federal Home Loan Bank | | 0.24% | | 1/27/2016 | | | 13,000 | | | | 12,997,747 | |
| Federal Home Loan Bank | | 0.24% | | 2/19/2016 | | | 19,000 | | | | 18,993,949 | |
| Federal Home Loan Bank | | 0.24% | | 2/19/2016 | | | 19,000 | | | | 18,993,793 | |
| Federal Home Loan Bank | | 0.28% | | 2/26/2016 | | | 16,500 | | | | 16,492,813 | |
| Federal Home Loan Bank | | 0.28% | | 3/23/2016 | | | 16,000 | | | | 15,989,796 | |
| Federal Home Loan Bank | | 0.28% | | 4/27/2016 | | | 21,000 | | | | 20,981,231 | |
| Federal Home Loan Bank | | 0.29% | | 2/24/2016 | | | 5,000 | | | | 4,997,825 | |
| Federal Home Loan Bank | | 0.29% | | 2/26/2016 | | | 4,000 | | | | 3,998,227 | |
| Federal Home Loan Bank | | 0.29% | | 4/29/2016 | | | 28,000 | | | | 27,973,622 | |
| Federal Home Loan Bank | | 0.32% | | 3/9/2016 | | | 6,000 | | | | 5,996,373 | |
| Federal Home Loan Bank | | 0.36% | | 3/4/2016 | | | 22,000 | | | | 21,986,525 | |
| Federal Home Loan Bank | | 0.36% | | 5/6/2016 | | | 3,000 | | | | 2,996,272 | |
| Federal Home Loan Bank | | 0.38% | | 5/2/2016 | | | 4,000 | | | | 3,994,984 | |
| Federal Home Loan Bank | | 0.39% | | 2/24/2016 | | | 10,000 | | | | 9,994,300 | |
| Federal Home Loan Bank | | 0.42% | | 5/27/2016 | | | 14,500 | | | | 14,475,665 | |
| Federal Home Loan Bank | | 0.44% | | 3/9/2016 | | | 15,000 | | | | 14,987,817 | |
| Federal Home Loan Mortgage Corp. | | 0.11% | | 1/25/2016 | | | 8,000 | | | | 7,999,413 | |
| Federal Home Loan Mortgage Corp. | | 0.15% | | 1/4/2016 | | | 6,000 | | | | 5,999,925 | |
| Federal Home Loan Mortgage Corp. | | 0.16% | | 1/15/2016 | | | 7,000 | | | | 6,999,564 | |
| Federal Home Loan Mortgage Corp. | | 0.16% | | 2/3/2016 | | | 7,000 | | | | 6,998,973 | |
| Federal Home Loan Mortgage Corp. | | 0.16% | | 3/4/2016 | | | 7,000 | | | | 6,998,040 | |
| Federal Home Loan Mortgage Corp. | | 0.18% | | 1/22/2016 | | | 5,000 | | | | 4,999,490 | |
| Federal Home Loan Mortgage Corp. | | 0.19% | | 2/25/2016 | | | 11,000 | | | | 10,996,891 | |
| Federal Home Loan Mortgage Corp. | | 0.21% | | 2/24/2016 | | | 22,000 | | | | 21,993,070 | |
| Federal Home Loan Mortgage Corp. | | 0.22% | | 1/4/2016 | | | 17,000 | | | | 16,999,688 | |
| Federal Home Loan Mortgage Corp. | | 0.22% | | 4/15/2016 | | | 6,000 | | | | 5,996,237 | |
| Federal Home Loan Mortgage Corp. | | 0.23% | | 1/21/2016 | | | 18,000 | | | | 17,997,780 | |
| Federal Home Loan Mortgage Corp. | | 0.23% | | 3/18/2016 | | | 12,000 | | | | 11,994,174 | |
| Federal Home Loan Mortgage Corp. | | 0.25% | | 2/3/2016 | | | 5,900 | | | | 5,898,648 | |
| Federal Home Loan Mortgage Corp. | | 0.47% | | 4/12/2016 | | | 24,000 | | | | 23,968,720 | |
| Federal Home Loan Mortgage Corp. | | 0.51% | | 5/18/2016 | | | 4,500 | | | | 4,491,375 | |
| 4 | See Notes to Financial Statements. |
Schedule of Investments (unaudited)(continued)
December 31, 2015
| | | | | | | Principal | | | | |
| | | | | Maturity | | Amount | | | Fair | |
| Investments | | Yield(1) | | Date | | (000) | | | Value | |
| GOVERNMENT SPONSORED ENTERPRISES SECURITIES (continued) | | | | | | | | | | | | |
| Federal National Mortgage Assoc. | | 0.11% | | 1/20/2016 | | $ | 22,000 | | | $ | 21,998,781 | |
| Federal National Mortgage Assoc. | | 0.14% | | 1/8/2016 | | | 7,000 | | | | 6,999,809 | |
| Federal National Mortgage Assoc. | | 0.16% | | 1/11/2016 | | | 15,000 | | | | 14,999,333 | |
| Federal National Mortgage Assoc. | | 0.18% | | 1/25/2016 | | | 5,000 | | | | 4,999,400 | |
| Federal National Mortgage Assoc. | | 0.20% | | 3/14/2016 | | | 16,000 | | | | 15,993,511 | |
| Federal National Mortgage Assoc. | | 0.22% | | 1/14/2016 | | | 5,000 | | | | 4,999,603 | |
| Federal National Mortgage Assoc. | | 0.25% | | 4/14/2016 | | | 6,000 | | | | 5,995,667 | |
| Federal National Mortgage Assoc. | | 0.27% | | 4/11/2016 | | | 8,000 | | | | 7,994,052 | |
| Federal National Mortgage Assoc. | | 0.29% | | 2/17/2016 | | | 4,000 | | | | 3,998,533 | |
| Federal National Mortgage Assoc. | | 0.29% | | 4/6/2016 | | | 4,000 | | | | 3,996,907 | |
| Federal National Mortgage Assoc. | | 0.30% | | 2/8/2016 | | | 14,000 | | | | 13,995,567 | |
| Federal National Mortgage Assoc. | | 0.31% | | 3/9/2016 | | | 5,000 | | | | 4,997,072 | |
| Federal National Mortgage Assoc. | | 0.39% | | 5/25/2016 | | | 6,000 | | | | 5,990,817 | |
| Federal National Mortgage Assoc. | | 0.44% | | 3/9/2016 | | | 25,000 | | | | 24,979,694 | |
| Federal National Mortgage Assoc. | | 0.51% | | 5/25/2016 | | | 15,000 | | | | 14,969,792 | |
| Total Government Sponsored Enterprises Securities (cost $654,462,043) | | | | | | | | | 654,462,043 | |
| | | | | | | | | | | | | |
| U.S. TREASURY OBLIGATION 2.65% | | | | | | | | | | | | |
U.S. Treasury Note
(cost $22,004,988) | | 0.50% | | 6/15/2016 | | | 22,000 | | | | 22,004,988 | |
| | See Notes to Financial Statements. | 5 |
Schedule of Investments (unaudited)(concluded)
December 31, 2015
| | | | | | | Principal | | | | |
| | | | | | | Amount | | | Fair | |
| Investments | | | | | | (000) | | | Value | |
| SHORT-TERM INVESTMENTS 26.40% | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Repurchase Agreements | | | | | | | | | | | | |
| Repurchase Agreement dated 12/31/2015, 0.03% due 1/4/2016 with Fixed Income Clearing Corp. collateralized by $121,425,000 of U.S. Treasury Note at 1.625% due 7/31/2020; value: $121,576,781; proceeds: $119,193,035 | | | | | | $ | 119,193 | | | $ | 119,192,638 | |
| Repurchase Agreement dated 12/31/2015, 0.23% due 1/4/2016 with J.P. Morgan Chase & Co. collateralized by $98,152,000 of Federal National Mortgage Assoc. at 5.057% due 12/8/2028; value: $101,632,693; proceeds: $100,002,556 | | | | | | | 100,000 | | | | 100,000,000 | |
| Total Repurchase Agreements (cost $219,192,638) | | | | | | | | | | | 219,192,638 | |
| Total Investments in Securities 107.86% (cost $895,659,669)* | | | | | | | | | | | 895,659,669 | |
| Liabilities in Excess of Other Assets (7.86%) | | | | | | | | | | | (65,302,628 | ) |
| Net Assets 100.00% | | | | | | | | | | $ | 830,357,041 | |
| (1) | | Represents annualized yield at date of purchase for discount securities, and coupon for coupon-bearing securities. |
| * | | Cost for Federal income tax purposes is $895,659,669. Weighted average maturity of investments: 48 days. |
The following is a summary of the inputs used as of December 31, 2015 in valuing the Fund’s investments carried at fair value(1):
| Investment Type(2) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Government Sponsored Enterprises Securities | | $ | – | | | $ | 654,462,043 | | | $ | – | | | $ | 654,462,043 | |
| U.S. Treasury Obligation | | | – | | | | 22,004,988 | | | | – | | | | 22,004,988 | |
| Repurchase Agreements | | | – | | | | 219,192,638 | | | | – | | | | 219,192,638 | |
| Total | | $ | – | | | $ | 895,659,669 | | | $ | – | | | $ | 895,659,669 | |
| (1) | | Refer to Note 2(g) for a description of fair value measurements and the three-tier hierarchy of inputs. |
| (2) | | There were no Level 1/Level 2 transfers during the period ended December 31, 2015. |
| 6 | See Notes to Financial Statements. |
Statement of Assets and Liabilities (unaudited)
December 31, 2015
| ASSETS: | | | | |
| Investments in securities, at cost and fair value | | $ | 676,467,031 | |
| Investments in repurchase agreements, at cost and fair value | | | 219,192,638 | |
| Receivables: | | | | |
| Capital shares sold | | | 4,177,797 | |
| Interest | | | 8,488 | |
| Prepaid expenses | | | 65,951 | |
| Total assets | | | 899,911,905 | |
| LIABILITIES: | | | | |
| Payables: | | | | |
| Investment securities purchased | | | 67,297,670 | |
| Capital shares reacquired | | | 1,838,029 | |
| Management fee | | | 11,371 | |
| Directors’ fees | | | 165,190 | |
| 12b-1 distribution plan | | | 66,195 | |
| Fund administration | | | 26,374 | |
| Distributions payable | | | 2,895 | |
| Accrued expenses | | | 147,140 | |
| Total liabilities | | | 69,554,864 | |
| NET ASSETS | | $ | 830,357,041 | |
| COMPOSITION OF NET ASSETS: | | | | |
| Paid-in capital | | $ | 830,351,235 | |
| Undistributed net investment income | | | 259 | |
| Accumulated net realized gain on investments | | | 5,547 | |
| Net Assets | | $ | 830,357,041 | |
| Net assets by class: | | | | |
| Class A Shares | | $ | 715,167,769 | |
| Class B Shares | | $ | 4,255,552 | |
| Class C Shares | | $ | 86,849,343 | |
| Class I Shares | | $ | 24,084,377 | |
| Outstanding shares by class: | | | | |
| Class A Shares (2 billion shares of common stock authorized, $.001 par value) | | | 715,162,672 | |
| Class B Shares (400 million shares of common stock authorized, $.001 par value) | | | 4,255,385 | |
| Class C Shares (500 million shares of common stock authorized, $.001 par value) | | | 86,848,945 | |
| Class I Shares (100 million shares of common stock authorized, $.001 par value) | | | 24,084,294 | |
Net asset value, offering and redemption price per share
(Net assets divided by outstanding shares): | | | | |
| Class A Shares-Net asset value | | | $1.00 | |
| Class B Shares-Net asset value | | | $1.00 | |
| Class C Shares-Net asset value | | | $1.00 | |
| Class I Shares-Net asset value | | | $1.00 | |
| | See Notes to Financial Statements. | 7 |
Statement of Operations (unaudited)
For the Six Months Ended December 31, 2015
| Investment income: | | | | |
| Interest and other | | $ | 493,651 | |
| Expenses: | | | | |
| Management fee | | | 1,600,154 | |
| 12b-1 distribution plan-Class B | | | 18,190 | |
| Shareholder servicing | | | 389,869 | |
| Fund administration | | | 141,162 | |
| Registration | | | 49,219 | |
| Professional | | | 21,797 | |
| Reports to shareholders | | | 20,838 | |
| Directors’ fees | | | 8,627 | |
| Custody | | | 6,004 | |
| Other | | | 59,447 | |
| Gross expenses | | | 2,315,307 | |
| Expense reductions (See Note 7) | | | (364 | ) |
| Fees waived and expenses reimbursed (See Note 3) | | | (1,876,262 | ) |
| 12b-1 distribution plan-Class B reimbursed (See Note 3) | | | (17,705 | ) |
| Net expenses | | | 420,976 | |
| Net investment income | | | 72,675 | |
| Net Increase in Net Assets Resulting From Operations | | $ | 72,675 | |
| 8 | See Notes to Financial Statements. |
Statements of Changes in Net Assets
| | | For the Six Months | | | | |
| | | Ended December 31, 2015 | | | For the Year Ended | |
| INCREASE IN NET ASSETS | | (unaudited) | | | June 30, 2015 | |
| Operations: | | | | | | | | |
| Net investment income | | $ | 72,675 | | | $ | 117,972 | |
| Net increase in net assets resulting from operations | | | 72,675 | | | | 117,972 | |
| Distributions to shareholders from: | | | | | | | | |
| Net investment income | | | | | | | | |
| Class A | | | (62,668 | ) | | | (103,944 | ) |
| Class B | | | (11 | ) | | | – | |
| Class C | | | (7,476 | ) | | | (9,861 | ) |
| Class I | | | (2,520 | ) | | | (4,167 | ) |
| Total distributions to shareholders | | | (72,675 | ) | | | (117,972 | ) |
| Capital share transactions (Net of share conversions) (See Note 10): | | | | | | | | |
| Net proceeds from sales of shares | | | 645,390,614 | | | | 949,525,430 | |
| Reinvestment of distributions | | | 63,791 | | | | 106,412 | |
| Cost of shares reacquired | | | (431,431,679 | ) | | | (889,098,761 | ) |
| Net increase in net assets resulting from capital share transactions | | | 214,022,726 | | | | 60,533,081 | |
| Net increase in net assets | | | 214,022,726 | | | | 60,533,081 | |
| NET ASSETS: | | | | | | | | |
| Beginning of period | | $ | 616,334,315 | | | $ | 555,801,234 | |
| End of period | | $ | 830,357,041 | | | $ | 616,334,315 | |
| Undistributed net investment income | | $ | 259 | | | $ | 259 | |
| | See Notes to Financial Statements. | 9 |
Financial Highlights
| | | | | | Per Share Operating Performance: | | | |
| | | | | | Investment operations: | | Distributions
to
shareholders
from: | | | |
| | | | | | | | | | | |
| | | Net asset
value,
beginning of
period | | Net
investment
income(a) | | Net
realized and
unrealized
gain (loss) | | Total from
investment
operations | | Net
investment
income | | Net asset
value,
end of
period |
| Class A | | | | | | | | | | | | | | | | | | | | | | | | |
| 12/31/2015(c) | | | $1.00 | | | | $– | (d) | | | $– | | | | $– | (d) | | | $– | (d) | | | $1.00 | |
| 6/30/2015 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2014 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2013 | | | 1.00 | | | | – | (d) | | | – | (d) | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2012 | | | 1.00 | | | | – | (d) | | | – | (d) | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2011 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Class B | | | | | | | | | | | | | | | | | | | | | | | | |
| 12/31/2015(c) | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | | | | 1.00 | |
| 6/30/2015 | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| 6/30/2014 | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| 6/30/2013 | | | 1.00 | | | | – | | | | – | (d) | | | – | (d) | | | – | | | | 1.00 | |
| 6/30/2012 | | | 1.00 | | | | – | | | | – | (d) | | | – | (d) | | | – | | | | 1.00 | |
| 6/30/2011 | | | 1.00 | | | | – | | | | – | | | | – | | | | – | | | | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Class C | | | | | | | | | | | | | | | | | | | | | | | | |
| 12/31/2015(c) | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2015 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2014 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2013 | | | 1.00 | | | | – | (d) | | | – | (d) | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2012 | | | 1.00 | | | | – | (d) | | | – | (d) | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2011 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Class I | | | | | | | | | | | | | | | | | | | | | | | | |
| 12/31/2015(c) | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2015 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2014 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2013 | | | 1.00 | | | | – | (d) | | | – | (d) | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2012 | | | 1.00 | | | | – | (d) | | | – | (d) | | | – | (d) | | | – | (d) | | | 1.00 | |
| 6/30/2011 | | | 1.00 | | | | – | (d) | | | – | | | | – | (d) | | | – | (d) | | | 1.00 | |
| (a) | | Calculated using average shares outstanding during the period. |
| (b) | | Total return for Classes A, B and C does not consider the effects of sales loads and assumes the reinvestment of all distributions. Total return for all other classes assumes the reinvestment of all distributions. |
| (c) | | Unaudited. |
| (d) | | Amount less than $.01. |
| (e) | | Not annualized. |
| (f) | | Round to less than .01%. |
| 10 | See Notes to Financial Statements. |
| | | Ratios to Average Net Assets: | | Supplemental
Data: |
| | | | | |
Total
return(b)
(%) | | Total
expenses after
waivers and/or
reimbursements
(%) | | Total
expenses
(%) | | Net
investment
income
(%) | | Net assets,
end of
period
(000) |
| | | | | | | | | |
| | 0.01 | (e) | | | 0.06 | (e) | | | 0.33 | (e) | | | 0.01 | (e) | | | $ 715,168 | |
| | 0.02 | | | | 0.06 | | | | 0.68 | | | | 0.02 | | | | 522,385 | |
| | 0.02 | | | | 0.06 | | | | 0.66 | | | | 0.02 | | | | 485,799 | |
| | 0.02 | | | | 0.11 | | | | 0.68 | | | | 0.02 | | | | 687,458 | |
| | 0.02 | | | | 0.06 | | | | 0.66 | | | | 0.02 | | | | 538,523 | |
| | 0.02 | | | | 0.14 | | | | 0.68 | | | | 0.02 | | | | 539,205 | |
| | | | | | | | | | | | | | | | | | | |
| | 0.00 | (e) | | | 0.07 | (e) | | | 0.71 | (e) | | | 0.00 | (e)(f) | | | 4,256 | |
| | 0.00 | | | | 0.08 | | | | 1.43 | | | | – | | | | 5,243 | |
| | 0.00 | | | | 0.08 | | | | 1.41 | | | | – | | | | 8,051 | |
| | 0.00 | | | | 0.13 | | | | 1.43 | | | | – | | | | 13,682 | |
| | 0.00 | | | | 0.08 | | | | 1.41 | | | | – | | | | 16,456 | |
| | 0.00 | | | | 0.16 | | | | 1.43 | | | | – | | | | 23,172 | |
| | | | | | | | | | | | | | | | | | | |
| | 0.01 | (e) | | | 0.06 | (e) | | | 0.33 | (e) | | | 0.01 | (e) | | | 86,849 | |
| | 0.02 | | | | 0.06 | | | | 0.68 | | | | 0.02 | | | | 65,596 | |
| | 0.02 | | | | 0.06 | | | | 0.66 | | | | 0.02 | | | | 42,018 | |
| | 0.02 | | | | 0.11 | | | | 0.68 | | | | 0.02 | | | | 62,773 | |
| | 0.02 | | | | 0.06 | | | | 0.66 | | | | 0.02 | | | | 45,710 | |
| | 0.02 | | | | 0.14 | | | | 0.68 | | | | 0.02 | | | | 38,965 | |
| | | | | | | | | | | | | | | | | | | |
| | 0.01 | (e) | | | 0.06 | (e) | | | 0.33 | (e) | | | 0.01 | (e) | | | 24,084 | |
| | 0.02 | | | | 0.06 | | | | 0.68 | | | | 0.02 | | | | 23,111 | |
| | 0.02 | | | | 0.06 | | | | 0.66 | | | | 0.02 | | | | 19,934 | |
| | 0.02 | | | | 0.11 | | | | 0.68 | | | | 0.02 | | | | 13,613 | |
| | 0.02 | | | | 0.06 | | | | 0.66 | | | | 0.02 | | | | 12,219 | |
| | 0.02 | | | | 0.14 | | | | 0.68 | | | | 0.02 | | | | 9,846 | |
| | See Notes to Financial Statements. | 11 |
Notes to Financial Statements (unaudited)
Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund, Inc. (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. The Fund was incorporated under Maryland law on May 9, 1979.
The investment objective of the Fund is to seek high current income and preservation of capital through investments in high quality, short-term, liquid securities. These securities are commonly known as money market instruments.
The Fund has four classes of shares: Classes A, B, C and I. There are no front-end sales charges on shares of each class, although there may be a contingent deferred sales charge (“CDSC”) applied to a class of shares as follows: certain redemptions of Class A or Class C shares acquired through an exchange; and Class B shares redeemed before the sixth anniversary of purchase. Class B shares will automatically convert to Class A shares on the 25th day of the month (or, if the 25th day is not a business day, the next business day thereafter) following the eighth anniversary of the day on which the purchase order was accepted. The Fund no longer issues Class B shares for purchase.
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) 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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
| (a) | Investment Valuation–Under procedures approved by the Fund’s Board of Directors (the “Board”), Lord, Abbett & Co. LLC (“Lord Abbett”), the Fund’s investment manager, has formed a Pricing Committee to administer the pricing and valuation of portfolio investments and to ensure that prices utilized reasonably reflect fair value. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value. |
| | |
| | The Fund values securities utilizing the amortized cost method, which approximates fair value. Under the amortized cost method, all investments purchased at a discount or premium are valued by amortizing the difference between the original purchase price and maturity value of the issue over the period to maturity. Securities purchased at face value are valued at cost, which approximates fair value due to the short duration of the issue. |
| | |
| (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. |
| | |
| (c) | Investment Income–Interest income is recorded on the accrual basis as earned. Discounts are accreted and premiums are amortized using the effective interest method and are included in Interest and other income on the Statement of Operations. Investment income is allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. Withholding taxes on foreign dividends have been provided for in accordance with the applicable country’s tax rules and rates. |
12
Notes to Financial Statements (unaudited)(continued)
| (d) | Income 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 income tax provision is required. |
| | |
| | The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s filed U.S. federal tax returns remains open for the fiscal years ended June 30, 2012 through June 30, 2015. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. |
| | |
| (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. Class B shares bear all expenses and fees relating to the Fund’s 12b-1 Distribution Plan. |
| | |
| (f) | Repurchase Agreements–The Fund may enter into repurchase agreements with respect to securities. A repurchase agreement is a transaction in which a 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 fair value of these securities has declined, the Fund may incur a loss upon disposition of the securities. |
| | |
| (g) | Fair Value Measurements–Fair value is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk – for example, the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below: |
| • | Level 1 – | unadjusted quoted prices in active markets for identical investments; |
| | | |
| • | Level 2 – | other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.); and |
| | | |
| • | Level 3 – | significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). |
13
Notes to Financial Statements (unaudited)(continued)
A summary of inputs used in valuing the Fund’s investments as of December 31, 2015 and, if applicable, Level 1/Level 2 transfers and Level 3 rollforwards for the six months then ended is included in the Fund’s Schedule of Investments.
Changes in valuation techniques may result in transfers into or out of an assigned level within the three-tier hierarchy. All transfers between different levels within the three-tier hierarchy are deemed to have occurred as of the beginning of the reporting period. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
| 3. | MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES |
Management Fee
The Fund has a management agreement with Lord Abbett, pursuant to which Lord Abbett supplies the Fund with investment management services and executive and other personnel, 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 rate:
| First $250 million | .50% |
| Next $250 million | .45% |
| Over $500 million | .40% |
For the fiscal year ended December 31, 2015, the effective management fee, net of waivers, was at an annualized rate of 0.00% of the Fund’s average daily net assets.
In addition, Lord Abbett provides certain administrative services to the Fund pursuant to an Administrative Services Agreement in return for a fee at an annual rate of .04% of the Fund’s average daily net assets.
Lord Abbett voluntarily waived the Fund’s management fee and administrative services fee, and reimbursed a portion of the Fund’s other expenses to the extent necessary to maintain a .02% annualized distribution yield for Class A, C and I shares and a .00% annualized distribution yield for Class B shares. Accordingly, for the six months ended December 31, 2015, Lord Abbett waived a portion of its management fee and administrative services fee of $1,586,085 and $114,789, respectively, and reimbursed other expenses of $175,388. In addition, Lord Abbett Distributor LLC (the “Distributor”) voluntarily reimbursed Class B 12b-1 distribution fees of $17,705 in order to maintain a .00% annualized distribution yield, as described above.
12b-1 Distribution Plan
The Fund has adopted a distribution plan with respect to Class A, B and C shares pursuant to Rule 12b-1 under the Act, which provides for the payment of ongoing distribution and service fees to the Distributor, an affiliate of Lord Abbett. The following annual rates have been authorized by the Board pursuant to the plan:
| Fees | Class A | Class B | Class C |
| Service | – | – | – |
| Distribution | – | .75% | – |
Class I shares do not have a distribution plan.
A Director and certain of the Fund’s officers have an interest in Lord Abbett.
14
Notes to Financial Statements (unaudited)(continued)
Dividends from net investment income are declared daily and paid monthly.
The tax character of distributions paid during the six months ended December 31, 2015 and fiscal year ended June 30, 2015 was as follows:
| | | Six Months Ended | | | |
| | | 12/31/2015 | | | Year Ended |
| | | (unaudited) | | | 6/30/2015 |
| Distributions paid from: | | | | | | | |
| Ordinary income | | $ | 72,675 | | | $ | 117,972 |
| Total distributions paid | | $ | 72,675 | | | $ | 117,972 |
| 5. | DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES |
The Financial Accounting Standards Board (“FASB”) requires disclosures intended to help better assess the effect or potential effect of offsetting arrangements on a fund’s financial position. The following tables illustrate gross and net information about recognized assets and liabilities eligible for offset in the statement of assets and liabilities; and disclose such amounts subject to an enforceable master netting agreement or similar agreement, by counterparty. A master netting agreement is an agreement between a fund and a counterparty which provides for the net settlement of amounts owed under all contracts traded under that agreement, as well as cash collateral, through a single payment by one party to the other in the event of default on or termination of any one contract. The Fund’s accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the master netting agreement does not result in an offset of reported amounts of financial assets and liabilities in the statement of assets and liabilities across transactions between the Fund and the applicable counterparty:
| | | | | | Gross Amounts | | | Net Amounts of |
| | | | | | Offset in the | | | Assets Presented |
| | | Gross Amounts of | | | Statement of Assets | | | in the Statement of |
| Description | | Recognized Assets | | | and Liabilities | | | Assets and Liabilities |
| Repurchase Agreements | | $ | 219,192,638 | | | $ | – | | | $ | 219,192,638 |
| Total | | $ | 219,192,638 | | | $ | – | | | $ | 219,192,638 |
| | | Net Amounts | | | | | | | | | | | | |
| | | of Assets | | | Amounts Not Offset in the | | | |
| | | Presented in | | | Statement of Assets and Liabilities | | | |
| | | the Statement | | | | | | Cash | | | Securities | | | |
| | | of Assets and | | | Financial | | | Collateral | | | Collateral | | | Net |
| Counterparty | | Liabilities | | | Instruments | | | Received(a) | | | Received(a) | | | Amount(b) |
| Fixed Income Clearing Corp. | | $ | 119,192,638 | | | $ | – | | | $ | – | | | $ | (119,192,638 | ) | | $ | – |
| J.P. Morgan Chase | | | 100,000,000 | | | | – | | | | – | | | | (100,000,000 | ) | | | – |
| Total | | $ | 219,192,638 | | | $ | – | | | $ | – | | | $ | (219,192,638 | ) | | $ | – |
| (a) | Collateral disclosed is limited to an amount not to exceed 100% of the net amount of assets presented in the Statement of Assets and Liabilities, for each respective counterparty. |
| (b) | Net amount represents the amount owed to the Fund by the counterparty as of December 31, 2015. |
15
Notes to Financial Statements (unaudited)(continued)
| 6. | DIRECTORS’ REMUNERATION |
The Fund’s officers and a Director, who are associated with Lord Abbett, do not receive any compensation from the Fund for serving in such capacities. Independent Directors’ 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 Independent Directors under which Independent Directors must defer receipt of a portion of, and may elect to defer receipt of an additional portion of Directors’ fees. The deferred amounts are treated as though equivalent dollar amounts had been invested in the funds. Such amounts and earnings accrued thereon are included in Directors’ fees on the Statement of Operations and in Directors’ 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.
The Fund has entered into an arrangement 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. | CUSTODIAN AND ACCOUNTING AGENT |
State Street Bank and 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 net asset value.
The Fund’s yield may vary in response to changes in interest rates and other market factors.
The Fund generally invests a substantial portion of its assets in money market securities issued by the U.S. Government and by various government-sponsored enterprises such as Federal Home Loan Mortgage Corporation, the Federal Home Loan Banks and Federal National Mortgage Association. Such securities are not guaranteed by the U.S. Government, but are supported only by the credit of the particular government-sponsored enterprises involved, and the discretionary authority of the U.S. Treasury to purchase the enterprise’s obligations. There is no assurance that the U.S. Government will provide financial support to enterprises that are not supported by the full faith and credit of the U.S. Government. The Fund also may invest in repurchase agreements involving the securities described herein.
An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in the Fund.
These factors can affect the Fund’s performance.
16
Notes to Financial Statements (unaudited)(concluded)
| 10. | SUMMARY OF CAPITAL TRANSACTIONS |
Transactions in shares of capital stock were as follows:
| | | | | Six Months Ended | | | | | | | |
| | | | | December 31, 2015 | | | | | | Year Ended | |
| | | | | | (unaudited) | | | | | | June 30, 2015 | |
| | | | | | | | | | | | | |
| Class A Shares | | Shares | | | Amount | | | Shares | | | Amount | |
| Shares sold | | | 581,538,259 | | | $ | 581,538,259 | | | | 831,946,974 | | | $ | 831,946,974 | |
| Converted from Class B* | | | 518,040 | | | | 518,040 | | | | 1,418,826 | | | | 1,418,826 | |
| Reinvestment of distributions | | | 57,018 | | | | 57,018 | | | | 96,534 | | | | 96,534 | |
| Shares reacquired | | | (389,330,425 | ) | | | (389,330,427 | ) | | | (796,876,161 | ) | | | (796,876,163 | ) |
| Increase | | | 192,782,892 | | | $ | 192,782,890 | | | | 36,586,173 | | | $ | 36,586,171 | |
| | | | | | | | | | | | | | | | | |
| Class B Shares | | | | | | | | | | | | | | | | |
| Shares sold | | | 1,373,652 | | | $ | 1,373,652 | | | | 2,699,012 | | | $ | 2,699,012 | |
| Shares reacquired | | | (1,842,915 | ) | | | (1,842,915 | ) | | | (4,088,015 | ) | | | (4,088,015 | ) |
| Converted to Class A* | | | (518,040 | ) | | | (518,040 | ) | | | (1,418,826 | ) | | | (1,418,826 | ) |
| Decrease | | | (987,303 | ) | | $ | (987,303 | ) | | | (2,807,829 | ) | | $ | (2,807,829 | ) |
| | | | | | | | | | | | | | | | | |
| Class C Shares | | | | | | | | | | | | | | | | |
| Shares sold | | | 56,733,843 | | | $ | 56,733,844 | | | | 83,692,249 | | | $ | 83,692,248 | |
| Reinvestment of distributions | | | 6,673 | | | | 6,673 | | | | 9,705 | | | | 9,705 | |
| Shares reacquired | | | (35,486,881 | ) | | | (35,486,881 | ) | | | (60,124,336 | ) | | | (60,124,336 | ) |
| Increase | | | 21,253,635 | | | $ | 21,253,636 | | | | 23,577,618 | | | $ | 23,577,617 | |
| | | | | | | | | | | | | | | | | |
| Class I Shares | | | | | | | | | | | | | | | | |
| Shares sold | | | 5,744,859 | | | $ | 5,744,859 | | | | 31,187,196 | | | $ | 31,187,196 | |
| Reinvestment of distributions | | | 100 | | | | 100 | | | | 173 | | | | 173 | |
| Shares reacquired | | | (4,771,456 | ) | | | (4,771,456 | ) | | | (28,010,247 | ) | | | (28,010,247 | ) |
| Increase | | | 973,503 | | | $ | 973,503 | | | | 3,177,122 | | | $ | 3,177,122 | |
| * | Automatic conversion of Class B shares occurs on the 25th day of the month (or, if the 25th day is not a business day, the next business day thereafter) following the eighth anniversary of the day on which the purchase order was accepted. |
| 11. | RECENT REGULATORY DEVELOPMENT |
On July 23, 2014, the U.S. Securities and Exchange Commission approved certain rule amendments that govern money market funds, which include the Fund. Among other things, the rule amendments generally permit (and under certain circumstances require) money market funds to impose a liquidity fee of up to 2% and to temporarily suspend redemptions (known as the “redemption gate”) if weekly liquidity levels fall below a required regulatory threshold. The applicability of certain of the rule amendments hinges on whether a money market fund meets the definition of a government money market fund or a retail money market fund. Under the rule amendments, a government money market fund is defined as a money market fund that invests 99.5% or more of its total assets in cash, U.S. government securities, and/or repurchase agreements collateralized fully in cash or U.S. government securities. The Fund currently intends to continue to invest, under normal circumstances, substantially all of its assets in a manner consistent with the rule amendments definition of a government money market fund. The Fund’s management currently is evaluating the amendments and the manner in which it intends to comply with any new applicable requirements prior to the mandatory compliance dates, which are staggered through 2016. The Fund’s management currently does not expect the rule amendments to have a significant impact on the Fund’s financial statements.
17
Supplemental Proxy Information (unaudited)
A special meeting of shareholders of the Fund was held on November 5, 2015. The special meeting was held for shareholders of the Fund to vote on the following matters:
| | 1. | To amend the Fund’s fundamental restrictions related to borrowing and lending to enable the Fund to participate in an interfund lending program; and |
| | | |
| | 2. | To ratify the selection of Deloitte & Touche LLP as independent registered public accounting firm for the Fund’s current fiscal year. |
The results of the proxy solicitation on the preceding matter were as follows:
| 1. | To approve the amendment to the fundamental investment restrictions of the Fund as described in the proxy statement: |
| | (a) | Amend the fundamental investment restriction with respect to Borrowing |
| | | | | Broker |
| | Votes For | Votes Against | Abstain | Non-Votes |
| | 272,058,637 | 24,987,308 | 19,580,284 | 69,239,357 |
| 1. | To approve the amendment to the fundamental investment restrictions of the Fund as described in the proxy statement: |
| | (b) | Amend the fundamental investment restriction with respect to Lending |
| | | | | Broker |
| | Votes For | Votes Against | Abstain | Non-Votes |
| | 273,107,712 | 24,303,496 | 19,215,021 | 69,239,357 |
| 2. | To ratify the selection of Deloitte & Touche LLP as the Fund’s independent registered public accounting firm for the Fund’s current fiscal year |
| | | | | Broker |
| | Votes For | Votes Against | Abstain | Non-Votes |
| | 356,196,163 | 10,942,965 | 18,726,458 | – |
18
Approval of Advisory Contract
The Board of Directors of the Fund, including all of the Directors who are not interested persons of the Fund or of Lord Abbett (the “Independent Board Members”), annually considers whether to approve the continuation of the existing management agreement between the Fund and Lord Abbett. In connection with its most recent approval, the Board reviewed materials relating specifically to the management agreement, as well as numerous materials received throughout the course of the year, including information about the Fund’s investment performance compared to the performance of its benchmark. Before making its decision as to the Fund, the Board had the opportunity to ask questions and request further information, taking into account its familiarity with Lord Abbett gained through its meetings and discussions. These meetings and discussions included the examination of the portfolio management team conducted by members of the Contract Committee, the deliberations of the Contract Committee, and discussions between the Contract Committee and Lord Abbett’s management. The Independent Board Members also discussed the materials described above with their independent legal counsel in a private session at which no representatives of management were present.
The materials received by the Board included, but were not limited to: (1) information provided by Morningstar Associates, LLC (“Morningstar”) regarding the investment performance of the Fund compared to the investment performance of a group of funds in the same Morningstar investment category (the “performance peer group”) and the investment performance of one or more appropriate benchmarks; (2) information provided by Morningstar regarding the expense ratios, contractual and effective management fee rates, and other expense components for the Fund and one or more groups of funds in the same Morningstar category, with the same share classes and operational characteristics, including asset size (the “expense peer group”); (3) information provided by Lord Abbett on the projected expense ratios, management fee rates, and other expense components for the Fund; (4) sales and redemption information for the Fund; (5) information regarding Lord Abbett’s financial condition; (6) an analysis of the relative profitability of the management agreement to Lord Abbett; (7) information provided by Lord Abbett regarding the investment management fees Lord Abbett receives from its other advisory clients maintaining accounts with a similar investment strategy as the Fund; and (8) information regarding the personnel and other resources devoted by Lord Abbett to managing the Fund.
Investment Management Services Generally. The Board considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading, and Lord Abbett’s commitment to compliance with all applicable legal requirements. The Board also observed that Lord Abbett was solely engaged in the investment management business and accordingly did not experience the conflicts of interest that may result from being engaged in other lines of business. The Board considered the investment advisory services provided by Lord Abbett to other clients, the fees charged for the services, and the differences in the nature of the services provided to the Fund and other Lord Abbett Funds, on the one hand, and the services provided to other clients, on the other.
Investment Performance. The Board reviewed the Fund’s investment performance in relation to that of the performance peer group as of various periods ended August 31, 2015. The Board observed that the Fund’s investment performance was below the median of the performance peer group for the one-year period and well below the median of the performance peer group for the three-year, five-year, and ten-year periods.
19
Approval of Advisory Contract (continued)
Lord Abbett’s Personnel and Methods. The Board considered the qualifications of the personnel providing investment management services to the Fund, in light of its investment objective and discipline. Among other things, the Board considered the size, experience, and turnover of Lord Abbett’s investment management staff, Lord Abbett’s investment methodology and philosophy, and Lord Abbett’s approach to recruiting, training, and retaining investment management personnel.
Nature and Quality of Other Services. The Board considered the nature, quality, costs, and extent of compliance, administrative, and other services performed by Lord Abbett and the nature and extent of Lord Abbett’s supervision of third party service providers, including the Fund’s transfer agent and custodian.
Expenses. The Board considered the expense level of the Fund and the expense levels of the expense peer group. It also considered the projected expense levels and how those levels would relate to those of the expense peer group and the amount and nature of the fees paid by shareholders. The Board observed that the overall expense level of the Fund was well below the median of the expense peer group.
Profitability. The Board considered the level of Lord Abbett’s profits in managing the Fund, including a review of Lord Abbett’s methodology for allocating its costs to its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was appropriate. It considered any profits realized by Lord Abbett in connection with the operation of the Fund, including the fee that Lord Abbett receives from the Fund for providing administrative services to the Fund, and whether the amount of profit was fair for the management of the Fund. The Board also considered the profits realized from other business segments of Lord Abbett, which may benefit from or be related to the Fund’s business. The Board considered Lord Abbett’s profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett’s ability to recruit and retain investment personnel. The Board recognized that Lord Abbett’s profitability was a factor in enabling it to attract and retain qualified investment management personnel to provide services to the Fund. The Board concluded that Lord Abbett’s profitability as to the Fund was not excessive.
Economies of Scale. The Board considered the extent to which there had been economies of scale in managing the Fund, whether the Fund had appropriately benefited from such economies of scale, and whether there was potential for realization of any further economies of scale. The Board concluded that the existing management fee schedule, with its breakpoint or breakpoints in the level of the management fee, adequately addressed any economies of scale in managing the Fund.
Other Benefits to Lord Abbett. The Board considered the character and amount of fees paid by the Fund and the Fund’s shareholders to Lord Abbett and the Distributor for services other than investment advisory services. The Board also considered the revenues and profitability of Lord Abbett’s investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund. The Board observed that the Distributor receives 12b-1 fees from certain of the Lord Abbett Funds as to shares held in accounts for which there is no other broker of record, may retain a portion of the 12b-1 fees it receives, and receives a portion of the sales charges on sales and redemptions of some classes of shares. In addition, the Board observed that Lord Abbett accrues certain benefits for its business of providing investment advice to clients other than the Lord Abbett Funds, but that business also benefits the Funds. The Board also noted that Lord Abbett, as disclosed in the prospectus of the Fund, has entered into revenue sharing arrangements with certain entities that distribute shares of the Fund.
20
Approval of Advisory Contract (concluded)
Alternative Arrangements. The Board considered whether, instead of approving continuation of the management agreement, it might be in the best interests of the Fund to implement one or more alternative arrangements, such as continuing to employ Lord Abbett, but on different terms. After considering all of the relevant factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the management agreement. In considering whether to approve the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered.
21
Householding
The Fund 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 888-522-2388 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 Records
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 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 Fund 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 888-522-2388. You can also obtain copies of Form N-Q by 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).
22
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| 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 U.S. Government & Government | |
Lord Abbett mutual fund shares are distributed by
LORD ABBETT DISTRIBUTOR LLC. | Sponsored Enterprises Money Market Fund, Inc. | LAMM-3
(02/16) |
| Item 2: | Code of Ethics. |
| | Not applicable. |
| | |
| Item 3: | Audit Committee Financial Expert. |
| | Not applicable. |
| | |
| Item 4: | Principal Accountant Fees and Services. |
| | Not applicable. |
| | |
| Item 5: | Audit Committee of Listed Registrants. |
| | Not applicable. |
| | |
| Item 6: | 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. |
| | Not applicable. |
| | |
| 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 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. |
| | (a)(1) | 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 Investment Company Act of 1940 is attached hereto as a part of EX-99.CERT. |
| | | |
| | (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 provided 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 U.S. GOVERNMENT &
GOVERNMENT SPONSORED ENTRPRISES
MONEY MARKET FUND, INC. |
| | | | |
| | By: | /s/ Daria L. Foster | |
| | | Daria L. Foster |
| | | President and Chief Executive Officer |
Date: February 26, 2016
| | By: | /s/ Joan A. Binstock | |
| | | Joan A. Binstock | |
| | | Chief Financial Officer and Vice President |
Date: February 26, 2016
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.
| | By: | /s/ Daria L. Foster | |
| | | Daria L. Foster |
| | | President and Chief Executive Officer |
Date: February 26, 2016
| | By: | /s/ Joan A. Binstock | |
| | | Joan A. Binstock |
| | | Chief Financial Officer and Vice President |
Date: February 26, 2016
