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)
John T. Fitzgerald, 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:(888) 522-2388
Date of fiscal year end: 6/30
Date of reporting period: 12/31/2019
Item 1: | Report(s) to Shareholders. |
LORD ABBETT
SEMIANNUAL REPORT
Lord Abbett
U.S. Government & Government Sponsored Enterprises Money Market Fund
For the six-month period ended December 31, 2019
Important Information on Paperless Delivery
Beginning in February 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports from the Fund or from your financial intermediary, such as a broker-dealer, investment advisor or bank. Instead, the reports will be made available on Lord Abbett’s website and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. Shareholders who hold accounts directly with the Fund may elect to receive shareholder reports and other communications from the Fund electronically by signing into your Lord Abbett online account at lordabbett.com and selecting “Log In.” For further information, you may also contact the Fund at (800) 821-5129. Shareholders who hold accounts through a financial intermediary should contact them directly.
You may elect to receive all future reports in paper free of charge by contacting the Fund at (800) 821-5129. Your election to receive reports in paper will apply to all funds held with Lord Abbett. If your fund shares are held through a financial intermediary please contact them directly. Your election applies to all funds held with that intermediary.
Table of Contents
Lord Abbett U.S. Government&Government Sponsored Enterprises Money Market Fund
Semiannual Report
For the six-month period ended December 31, 2019
From left to right: James L.L. Tullis, Independent Chairman of the Lord Abbett Funds and Douglas B. Sieg, Director, President, and Chief Executive Officer 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, 2019. For additional information about the Fund, please visit our website at www.lordabbett.com. General information about Lord Abbett mutual funds, as well as in-depth discussions of market trends and investment strategies, is also provided inLord 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,
Douglas B. Sieg
Director, President, and Chief Executive Officer
1
As a shareholder of the Fund you incur ongoing costs, including management fees 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, 2019 through December 31, 2019).
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 titled “Expenses Paid During Period 7/1/19 – 12/31/19” 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 Account Value | Ending Account Value | Expenses Paid During Period† | ||||||||||
7/1/19 | 12/31/19 | 7/1/19 – 12/31/19 | ||||||||||
Class A | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.20 | $ | 1.67 | ||||||
Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,023.48 | $ | 1.68 | ||||||
Class C | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.20 | $ | 1.67 | ||||||
Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,023.48 | $ | 1.68 | ||||||
Class I | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,008.20 | $ | 1.67 | ||||||
Hypothetical (5% Return Before Expenses) | $ | 1,000.00 | $ | 1,023.48 | $ | 1.68 |
† | For each class of the Fund, net expenses are equal to the annualized expense ratio for such class (0.33% for Class A, C and Class I) 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, 2019
Days | %* | |
1 – 30 days | 66.34 | % |
91 – 120 days | 33.66 | % |
Total | 100.00 | % |
* | Represents percent of total investments. |
3
Schedule of Investments (unaudited)
December 31, 2019
Investments | Yield(1) | Maturity Date | Principal Amount (000) | Fair Value | ||||||||||
GOVERNMENT SPONSORED ENTERPRISES SECURITIES 33.61% | ||||||||||||||
Federal Home Loan Bank Discount Notes | 1.53 | % | 2/13/2020 | $ | 75,000 | $ | 74,861,146 | |||||||
Federal Home Loan Bank Discount Notes | 1.53 | % | 2/19/2020 | 26,020 | 25,964,432 | |||||||||
Total Government Sponsored Enterprises Securities (cost $100,825,578) | 100,825,578 | |||||||||||||
U.S. TREASURY OBLIGATION 11.99% | ||||||||||||||
U.S. Treasury Bill (cost $35,970,187) | 1.41 | % | 1/16/2020 | 36,000 | 35,970,187 | |||||||||
REPURCHASE AGREEMENTS 54.24% | ||||||||||||||
Repurchase Agreement dated 12/31/2019, 0.85% due 1/2/2020 with Fixed Income Clearing Corp. collateralized by $13,600,000 of U.S. Treasury Note at 2.75% due 8/15/2021; value: $13,987,641; proceeds: $13,709,757 | 13,709 | 13,709,110 | ||||||||||||
Repurchase Agreement dated 12/31/2019, 1.50% due 1/2/2020 with J.P. Morgan Chase & Co. collateralized by $78,470,000 of U.S. Treasury Note 2.625% due 2/28/2023; value: $81,574,847; proceeds: $80,006,667 | 80,000 | 80,000,000 | ||||||||||||
Repurchase Agreement dated 12/31/2019, 1.50% due 1/2/2020 with Toronto Dominion Grand Cayman collateralized by $65,250,000 of U.S. Treasury Note at 2.875% due 8/15/2023; value: $71,046,035; proceeds: $69,005,750 | 69,000 | 69,000,000 | ||||||||||||
Total Repurchase Agreements (cost $162,709,110) | 162,709,110 | |||||||||||||
Total Investments in Securities and Repurchase Agreements 99.84% (cost $299,504,875)* | 299,504,875 | |||||||||||||
Other Assets in Excess of Liabilities 0.16% | 486,782 | |||||||||||||
Net Assets 100.00% | $ | 299,991,657 |
(1) | Represents annualized yield at date of purchase for discount securities, and coupon for coupon- bearing securities. | |
* | Cost for Federal income tax purposes is $299,504,875. Weighted average maturity of investments: 18 days. |
4 | See Notes to Financial Statements. |
Schedule of Investments (unaudited)(concluded)
December 31, 2019
The following is a summary of the inputs used as of December 31, 2019 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 | $ | – | $ | 100,825,578 | $ | – | $ | 100,825,578 | ||||||||
U.S. Treasury Obligation | – | 35,970,187 | – | 35,970,187 | ||||||||||||
Repurchase Agreements | – | 162,709,110 | – | 162,709,110 | ||||||||||||
Total | $ | – | $ | 299,504,875 | $ | – | $ | 299,504,875 |
(1) | Refer to Note 2(g) for a description of fair value measurements and the three-tier hierarchy of inputs. | |
(2) | See Schedule of Investments for fair values in each industry and identification of foreign issuers and/or geography. |
See Notes to Financial Statements. | 5 |
Statement of Assets and Liabilities (unaudited)
December 31, 2019
ASSETS: | ||||
Investments in securities, at cost and fair value | $ | 136,795,765 | ||
Investments in repurchase agreements, at cost and fair value | 162,709,110 | |||
Receivables: | ||||
Capital shares sold | 1,446,146 | |||
Interest | 6,208 | |||
Prepaid expenses | 21,922 | |||
Total assets | 300,979,151 | |||
LIABILITIES: | ||||
Payables: | ||||
Capital shares reacquired | 677,658 | |||
Directors’ fees | 104,538 | |||
12b-1 distribution plan | 66,110 | |||
Management fee | 39,026 | |||
Fund administration | 10,407 | |||
Distributions payable | 19,008 | |||
Accrued expenses | 70,747 | |||
Total liabilities | 987,494 | |||
Commitments and contingent liabilities | ||||
NET ASSETS | $ | 299,991,657 | ||
COMPOSITION OF NET ASSETS: | ||||
Paid-in capital | $ | 299,984,399 | ||
Total distributable earnings (loss) | 7,258 | |||
Net Assets | $ | 299,991,657 | ||
Net assets by class: | ||||
Class A Shares | $ | 274,100,068 | ||
Class C Shares | $ | 19,233,878 | ||
Class I Shares | $ | 6,657,711 | ||
Outstanding shares by class: | ||||
Class A Shares (2.8 billion shares of common stock authorized, $.001 par value) | 274,093,526 | |||
Class C Shares (500 million shares of common stock authorized, $.001 par value) | 19,233,350 | |||
Class I Shares (437.5 million shares of common stock authorized, $.001 par value) | 6,657,587 | |||
Net asset value, offering and redemption price per share (Net assets divided by outstanding shares): | ||||
Class A Shares-Net asset value | $1.00 | |||
Class C Shares-Net asset value | $1.00 | |||
Class I Shares-Net asset value | $1.00 |
6 | See Notes to Financial Statements. |
Statement of Operations (unaudited)
For the Six Months Ended December 31, 2019
Investment income: | ||||
Interest | $ | 3,376,427 | ||
Expenses: | ||||
Management fee | 258,776 | |||
Shareholder servicing | 118,517 | |||
Fund administration | 69,007 | |||
Registration | 43,339 | |||
Professional | 33,020 | |||
Reports to shareholders | 20,948 | |||
Directors’ fees | 3,581 | |||
Custody | 3,338 | |||
Other | 8,967 | |||
Gross expenses | 559,493 | |||
Net expenses | 559,493 | |||
Net investment income | 2,816,934 | |||
Net Increase in Net Assets Resulting From Operations | $ | 2,816,934 |
See Notes to Financial Statements. | 7 |
Statements of Changes in Net Assets
INCREASE (DECREASE) IN NET ASSETS | For the Six Months Ended December 31, 2019 (unaudited) | For the Year Ended June 30, 2019 | ||||||
Operations: | ||||||||
Net investment income | $ | 2,816,934 | $ | 5,309,698 | ||||
Net increase in net assets resulting from operations | 2,816,934 | 5,309,698 | ||||||
Distributions to shareholders: | ||||||||
Class A | (2,581,704 | ) | (4,668,939 | ) | ||||
Class C | (154,007 | ) | (396,515 | ) | ||||
Class I | (81,223 | ) | (244,244 | ) | ||||
Total distributions to shareholders | (2,816,934 | ) | (5,309,698 | ) | ||||
Capital share transactions (Net of share conversions) (See Note 12): | ||||||||
Net proceeds from sales of shares | 132,325,306 | 483,049,203 | ||||||
Reinvestment of distributions | 2,675,867 | 4,953,905 | ||||||
Cost of shares reacquired | (202,612,860 | ) | (484,062,921 | ) | ||||
Net increase (decrease) in net assets resulting from capital share transactions | (67,611,687 | ) | 3,940,187 | |||||
Net increase (decrease) in net assets | (67,611,687 | ) | 3,940,187 | |||||
NET ASSETS: | ||||||||
Beginning of period | $ | 367,603,344 | $ | 363,663,157 | ||||
End of period | $ | 299,991,657 | $ | 367,603,344 |
8 | See Notes to Financial Statements. |
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9
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 | ||||||||||||||||||||||||
12/31/2019(c) | $1.00 | $0.01 | $ | – | $0.01 | $(0.01 | ) | $1.00 | ||||||||||||||||
6/30/2019 | 1.00 | 0.02 | – | 0.02 | (0.02 | ) | 1.00 | |||||||||||||||||
6/30/2018 | 1.00 | 0.01 | – | 0.01 | (0.01 | ) | 1.00 | |||||||||||||||||
6/30/2017 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 | |||||||||||||||
6/30/2016 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 | |||||||||||||||
6/30/2015 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 | |||||||||||||||
Class C | ||||||||||||||||||||||||
12/31/2019(c) | 1.00 | 0.01 | – | 0.01 | (0.01 | ) | 1.00 | |||||||||||||||||
6/30/2019 | 1.00 | 0.02 | – | 0.02 | (0.02 | ) | 1.00 | |||||||||||||||||
6/30/2018 | 1.00 | 0.01 | – | 0.01 | (0.01 | ) | 1.00 | |||||||||||||||||
6/30/2017 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 | |||||||||||||||
6/30/2016 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 | |||||||||||||||
6/30/2015 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 | |||||||||||||||
Class I | ||||||||||||||||||||||||
12/31/2019(c) | 1.00 | 0.01 | – | 0.01 | (0.01 | ) | 1.00 | |||||||||||||||||
6/30/2019 | 1.00 | 0.02 | – | 0.02 | (0.02 | ) | 1.00 | |||||||||||||||||
6/30/2018 | 1.00 | 0.01 | – | 0.01 | (0.01 | ) | 1.00 | |||||||||||||||||
6/30/2017 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 | |||||||||||||||
6/30/2016 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 | |||||||||||||||
6/30/2015 | 1.00 | – | (f) | – | – | (f) | – | (f) | 1.00 |
(a) | Calculated using average shares outstanding during the period. |
(b) | Total return for Classes A 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) | Not annualized. |
(e) | Annualized. |
(f) | Amount less than $0.01. |
10 | See Notes to Financial Statements. |
Ratios to Average Net Assets: | Supplemental Data: | ||||||||||||||||||
Total return(b) (%) | Total expenses after waivers and/or reimburse- ments (%) | Total expenses (%) | Net investment income (%) | Net assets, end of period (000) | |||||||||||||||
0.82 | (d) | 0.33 | (e) | 0.33 | (e) | 1.64 | (e) | $274,100 | |||||||||||
1.67 | 0.56 | 0.56 | 1.67 | 335,394 | |||||||||||||||
0.65 | 0.62 | 0.62 | 0.62 | 332,486 | |||||||||||||||
0.04 | 0.45 | 0.65 | 0.03 | 456,316 | |||||||||||||||
0.02 | 0.22 | 0.65 | 0.02 | 649,660 | |||||||||||||||
0.02 | 0.06 | 0.68 | 0.02 | 522,385 | |||||||||||||||
0.82 | (d) | 0.33 | (e) | 0.33 | (e) | 1.63 | (e) | 19,234 | |||||||||||
1.67 | 0.57 | 0.57 | 1.66 | 19,383 | |||||||||||||||
0.65 | 0.62 | 0.62 | 0.62 | 22,994 | |||||||||||||||
0.04 | 0.44 | 0.65 | 0.03 | 40,401 | |||||||||||||||
0.02 | 0.22 | 0.65 | 0.02 | 65,708 | |||||||||||||||
0.02 | 0.06 | 0.68 | 0.02 | 65,596 | |||||||||||||||
0.82 | (d) | 0.33 | (e) | 0.33 | (e) | 1.66 | (e) | 6,658 | |||||||||||
1.67 | 0.58 | 0.58 | 1.64 | 12,826 | |||||||||||||||
0.65 | 0.62 | 0.62 | 0.62 | 8,183 | |||||||||||||||
0.04 | 0.43 | 0.65 | 0.03 | 12,989 | |||||||||||||||
0.02 | 0.22 | 0.65 | 0.02 | 26,026 | |||||||||||||||
0.02 | 0.06 | 0.68 | 0.02 | 23,111 |
See Notes to Financial Statements. | 11 |
Notes to Financial Statements (unaudited)
1. | ORGANIZATION |
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 three active classes of shares: Classes A, 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. Class C shares will convert automatically into 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 tenth anniversary of the month on which the purchase order was accepted.
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 amortized 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 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, 2016 through June 30, 2019. 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. |
(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 classification is determined based on the lowest level of inputs that is significant to the fair value measurement, and 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, 2019 and, if applicable, 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. 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 0.15% of the Fund’s daily average net assets.
For the six months ended December 31, 2019, the effective management fee, net of any applicable waivers, was at an annualized rate of 0.15 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.
12b-1 Distribution Plan
The Fund has adopted a distribution plan with respect to Class A and C 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 (the “Distributor”), an affiliate of Lord Abbett. The Board has not authorized any fees to date pursuant to the plan.
Class I shares do not have a distribution plan.
One Director and certain of the Fund’s officers have an interest in Lord Abbett.
4. | DISTRIBUTIONS |
Dividends from net investment income are declared daily and paid monthly.
The tax character of distributions paid during the six months ended December 31, 2019 and fiscal year ended June 30, 2019 was as follows:
Six Months Ended 12/31/2019 (unaudited) | Year Ended 6/30/2019 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $2,816,934 | $5,309,698 | ||||||
Total distributions paid | $2,816,934 | $5,309,698 |
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
14
Notes to Financial Statements (unaudited)(continued)
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:
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Assets Presented in the Statement of Assets and Liabilities | ||||||
Repurchase Agreements | $162,709,110 | $ | – | $162,709,110 | |||||
Total | $162,709,110 | $ | – | $162,709,110 |
Net Amounts of Assets Presented in | Amounts Not Offset in the Statement of Assets and Liabilities | ||||||||||||||||||
Counterparty | the Statement of Assets and Liabilities | Financial Instruments | Cash Collateral Received(a) | Securities Collateral Received(a) | Net Amount(b) | ||||||||||||||
Fixed Income Clearing Corp. | $ | 13,709,110 | $ | – | $ | – | $ | (13,709,110 | ) | $ | – | ||||||||
J.P. Morgan Chase & Co. | 80,000,000 | – | – | (80,000,000 | ) | – | |||||||||||||
Toronto Dominion Grand Cayman | 69,000,000 | – | – | (69,000,000 | ) | – | |||||||||||||
Total | $ | 162,709,110 | $ | – | $ | – | $ | (162,709,110 | ) | $ | – |
(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, 2019. |
6. | DIRECTORS’ REMUNERATION |
The Fund’s officers and one 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 fund. 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.
7. | EXPENSE REDUCTIONS |
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. | INTERFUND LENDING PROGRAM |
Pursuant to an exemptive order issued by the U.S. Securities and Exchange Commission (“SEC exemptive order”), certain registered open-end management investment companies managed by Lord Abbett, including the Fund, participate in a joint lending and borrowing program (the “Interfund Lending Program”). The SEC exemptive order allows the Funds to borrow money from
15
Notes to Financial Statements (unaudited)(continued)
and lend money to each other for temporary or emergency purposes subject to the limitations and conditions.
For the six months ended December 31, 2019, the Fund did not participate as a borrower or lender in the Interfund Lending Program.
9. | 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.
10. | SECURITIES LENDING AGREEMENT |
The Fund has established a securities lending agreement with Citibank, N.A. for the lending of securities to qualified brokers in exchange for securities or cash collateral equal to at least the market value of securities loaned, plus interest, if applicable. Cash collateral is invested in an approved money market fund. In accordance with the Fund’s securities lending agreement, the market value of securities on loan is determined each day at the close of business and any additional collateral required to cover the value of securities on loan is delivered to the Fund on the next business day. As with other extensions of credit, the Fund may experience a delay in the recovery of their securities or incur a loss should the borrower of the securities breach its agreement with the Fund or become insolvent at a time when the collateral is insufficient to cover the cost of repurchasing securities on loan. Any income earned from lending securities will be noted on the Statement of Operations.
For the six months ended December 31, 2019, the Fund did not loan any securities.
11. | INVESTMENT RISKS |
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.
These factors can affect the Fund’s performance.
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.
16
Notes to Financial Statements (unaudited)(concluded)
12. | SUMMARY OF CAPITAL TRANSACTIONS |
Transactions in shares of capital stock were as follows:
Six Months Ended December 31, 2019 (unaudited) | Year Ended June 30, 2019 | |||||||||||||||
Class A Shares | Shares | Amount | Shares | Amount | ||||||||||||
Shares sold | 125,175,855 | $ | 125,175,856 | 433,899,801 | $ | 433,899,801 | ||||||||||
Converted from Class C* | 654,109 | 654,109 | 817,859 | 817,859 | ||||||||||||
Reinvestment of distributions | 2,501,140 | 2,501,140 | 4,459,273 | 4,459,273 | ||||||||||||
Shares reacquired | (189,625,443 | ) | (189,625,446 | ) | (436,268,212 | ) | (436,268,213 | ) | ||||||||
Increase (decrease) | (61,294,339 | ) | $ | (61,294,341 | ) | 2,908,721 | $ | 2,908,720 | ||||||||
Class C Shares | ||||||||||||||||
Shares sold | 7,146,923 | $ | 7,146,923 | 34,114,039 | $ | 34,114,039 | ||||||||||
Reinvestment of distributions | 143,628 | 143,628 | 364,086 | 364,086 | ||||||||||||
Shares reacquired | (6,785,890 | ) | (6,785,891 | ) | (37,271,086 | ) | (37,271,085 | ) | ||||||||
Converted to Class A* | (654,109 | ) | (654,109 | ) | (817,859 | ) | (817,859 | ) | ||||||||
Decrease | (149,448 | ) | $ | (149,449 | ) | (3,610,820 | ) | $ | (3,610,819 | ) | ||||||
Class I Shares | ||||||||||||||||
Shares sold | 2,527 | $ | 2,527 | 15,035,363 | $ | 15,035,363 | ||||||||||
Reinvestment of distributions | 31,099 | 31,099 | 130,546 | 130,546 | ||||||||||||
Shares reacquired | (6,201,523 | ) | (6,201,523 | ) | (10,523,623 | ) | (10,523,623 | ) | ||||||||
Increase (decrease) | (6,167,897 | ) | $ | (6,167,897 | ) | 4,642,286 | $ | 4,642,286 |
* | Automatic conversion of Class C shares occurs on the 25th day of the month (or, if the 25th day was not a business day, the next business day thereafter) following the tenth anniversary of the day on which the purchase order was accepted. |
17
Supplemental Proxy Information (unaudited)
A joint special meeting of shareholders of the Fund was held on August 26, 2019. The joint special meeting was held for the purpose of electing members of the Fund’s Board of Directors. Shareholders elected the following ten (10) Directors at the joint special meeting:
• | Eric C. Fast |
• | Evelyn E. Guernsey |
• | Julie A. Hill |
• | Kathleen M. Lutito |
• | James M. McTaggart |
• | Charles O. Prince |
• | Karla M. Rabusch |
• | Mark A. Schmid |
• | Douglas B. Sieg |
• | James L.L. Tullis |
The results of the proxy solicitation on the preceding matter were as follows:
Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund, Inc.
Nominee Votes | Votes For | Votes Withheld |
Eric C. Fast | 264,167,831.453 | 7,568,464.630 |
Evelyn E. Guernsey | 264,762,483.823 | 6,973,812.260 |
Julie A. Hill | 263,419,854.223 | 8,316,441.860 |
Kathleen M. Lutito | 264,773,461.823 | 6,962,834.260 |
James M. McTaggart | 262,846,619.963 | 8,889,676.120 |
Charles O. Prince | 263,517,186.993 | 8,219,109.090 |
Karla M. Rabusch | 264,768,039.073 | 6,968,257.010 |
Mark A. Schmid | 264,196,372.053 | 7,539,924.030 |
Douglas B. Sieg | 264,193,300.903 | 7,542,995.180 |
James L.L. Tullis | 262,830,096.713 | 8,906,199.370 |
18
Approval of Advisory Contract
The Board, including all of the Directors who are not “interested persons” of the Fund or of Lord Abbett, as defined in the Investment Company Act of 1940, as amended (the “Independent Directors”), annually considers whether to approve the continuation of the existing management agreement between the Fund and Lord Abbett (the “Agreement”). In connection with its most recent approval, the Board reviewed materials relating specifically to the 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 a benchmark average of comparable funds. Before making its decision as to the Fund, the Board had the opportunity to ask questions and request further information, taking into account its knowledge of Lord Abbett gained through its meetings and discussions. These meetings and discussions included reviews of Fund performance 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 Directors also met with their independent legal counsel in various private sessions at which no representatives of management were present.
The materials received by the Board included, but were not limited to: (1) information provided by Broadridge Financial Solutions (“Broadridge”) regarding the investment performance of the Fund compared to the investment performance of certain funds with similar investment styles as determined by Broadridge, based, in part, on the Fund’s Morningstar category (the “performance peer group”), and the investment performance of a benchmark average of comparable funds; (2) information provided by Broadridge regarding the expense ratios, contractual and actual management fee rates, and other expense components for the Fund and certain funds in the same Morningstar category, with generally the same or similar share classes and operational characteristics, including asset size (the “expense peer group”); (3) certain supplemental investment performance information provided by Lord Abbett; (4) information provided by Lord Abbett on the expense ratios, management fee rates, and other expense components for the Fund; (5) sales and redemption information for the Fund; (6) information regarding Lord Abbett’s financial condition; (7) an analysis of the relative profitability of the Agreement to Lord Abbett; and (8) information regarding the personnel and other resources devoted by Lord Abbett to managing the Fund.
Investment Management and Related Services Generally. The Board considered the 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. After reviewing these and related factors, the Board concluded that the Fund was likely to continue to benefit from the nature, extent and quality of the investment services provided by Lord Abbett under the Agreement.
Investment Performance. The Board reviewed the Fund’s investment performance in relation to that of the performance peer group and a benchmark average of comparable funds as of various periods ended June 30, 2019. The Board observed that the Fund’s investment performance was below the median of the performance peer group for the one-, three-, five-, and ten-year periods, but that performance over these periods did not reflect fully the reduction in the Fund’s management fee, effective April 1, 2019. The Board further considered Lord Abbett’s performance
19
Approval of Advisory Contract (continued)
and reputation generally, the performance of other Lord Abbett-managed funds overseen by the Board, and the willingness of Lord Abbett to take steps intended to improve performance when appropriate. After reviewing these and related factors, the Board concluded that the Fund’s Agreement should be 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, and other services provided to the Fund by Lord Abbett. Among other things, the Board considered the size, experience, and turnover of Lord Abbett’s staff, Lord Abbett’s investment methodology and philosophy, and Lord Abbett’s approach to recruiting, training, and retaining personnel.
Nature and Quality of Other Services. The Board considered the nature, quality, 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, including the contractual and actual management fee rates, and the expense levels of the Fund’s expense peer group. It also considered how the expense level of the Fund related to those of the expense peer group and the amount and nature of the fees paid by shareholders. The Board observed that the net total expense ratio of the Fund was below the median of the expense peer group. The Board further considered that the Fund’s management fee was reduced, effective April 1, 2019. After reviewing these and related factors, the Board concluded, within the context of its overall approval of the Agreement, that the management fees paid by, and expense level of, the Fund were reasonable in light of all of the factors it considered and supported the continuation of the Agreement.
Profitability.The Board considered the level of Lord Abbett’s operating margin in managing the Fund, including a review of Lord Abbett’s methodology for allocating its costs to its management of the Fund. It considered whether the Fund was profitable to Lord Abbett in connection with the Fund’s operation, including the fee that Lord Abbett receives from the Fund for providing administrative services to 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 excluding Lord Abbett’s marketing and distribution expenses. The Board also considered Lord Abbett’s profit margins, without those exclusions, in comparison with available industry data and how those profit margins could affect Lord Abbett’s ability to recruit and retain personnel. The Board recognized that Lord Abbett’s overall profitability was a factor in enabling it to attract and retain qualified personnel to provide services to the Fund. After reviewing these and related factors, the Board concluded, within the context of its overall approval of the Agreement, that Lord Abbett’s profitability with respect 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’s shareholders 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 adequately addressed any economies of scale in managing the Fund.
Other Benefits to Lord Abbett. The Board considered the amount and nature of the fees paid by the Fund and the Fund’s shareholders to Lord Abbett for services other than investment advisory services, such as the fee that Lord Abbett receives from the Fund for providing administrative
20
Approval of Advisory Contract (concluded)
services to the Fund. 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 from sponsoring an affiliated money market 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 of the Lord Abbett Funds. 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 Lord Abbett Funds. The Board also took into consideration the investment research that Lord Abbett receives as a result of client brokerage transactions.
Alternative Arrangements. The Board considered whether, instead of approving continuation of the 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 Agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the Agreement. In considering whether to approve the continuation of the Agreement, the Board did not identify any single factor as paramount or controlling. Individual Directors may have evaluated the information presented differently from one another, giving different weights to various factors. 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 on Form N-MFP, which may be obtained 60 days after the end of the month to which the information pertains. 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.
22
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. | Lord Abbett U.S. Government & Government Sponsored Enterprises Money Market Fund, Inc. | LAMM-3 (02/20) |
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 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) | 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 ENTERPRISES MONEY MARKET FUND, INC. | ||
By: | /s/ Douglas B. Sieg | |
Douglas B. Sieg | ||
President and Chief Executive Officer | ||
Date: February 26, 2020 | ||
By: | /s/ Bernard J. Grzelak | |
Bernard J. Grzelak | ||
Chief Financial Officer and Vice President | ||
Date: February 26, 2020 |
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/ Douglas B. Sieg | |
Douglas B. Sieg | ||
President and Chief Executive Officer | ||
Date: February 26, 2020 | ||
By: | /s/ Bernard J. Grzelak | |
Bernard J. Grzelak | ||
Chief Financial Officer and Vice President | ||
Date: February 26, 2020 |