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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 811-07538
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LORD ABBETT SECURITIES TRUST
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(Exact name of Registrant as specified in charter)
90 Hudson Street, Jersey City, NJ 07302
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(Address of principal executive offices) (zip code)
Christina T. Simmons, Vice President & Assistant Secretary
90 Hudson Street, Jersey City, NJ 07302
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(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 201-6984
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Date of fiscal year end: 10/31
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Date of reporting period: 10/31/2004
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ITEM 1: REPORT TO SHAREHOLDERS.
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[LORD ABBETT LOGO]
2004
ANNUAL
REPORT
LORD ABBETT
ALL VALUE FUND
ALPHA FUND
INTERNATIONAL CORE EQUITY
FUND
INTERNATIONAL OPPORTUNITIES
FUND
LARGE-CAP VALUE FUND
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2004
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LORD ABBETT SECURITIES TRUST
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2004
DEAR SHAREHOLDERS: We are pleased to provide you with this overview of the Lord
Abbett Securities Trust's strategies and performance for the fiscal year ended
October 31, 2004. On this and the following pages, we discuss the major factors
that influenced performance.
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,
/s/ Robert S. Dow
ROBERT S. DOW
CHAIRMAN
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Q: WHAT WERE THE OVERALL MARKET CONDITIONS OF THE REPORTING PERIOD?
A: Overall, the U.S. economy showed signs of continued improvement during the
twelve-month period from October 31, 2003 through October 31, 2004. The
employment rate continued to trend up in November 2003, and the unemployment
rate, at 5.9%, was essentially unchanged from October. While the unemployment
rate dropped to 5.6% in January 2004, the data also showed lower-than-expected
job creation in December 2003 and January 2004. GDP grew at a 4.1% annual pace
in the fourth quarter of 2003 and, although this was slightly below
expectations, the data continued to support expectations for an improving
economy. Furthermore, in the face of a strengthening equity market, debates over
the direction of interest rates intensified.
A positive trend continued in the first half of calendar 2004, largely due
to strong consumer and capital spending. Corporate profits rose, triggered by a
rise in industrial production. In January and February, inflation and short-term
interest rates continued to remain stable. However, somewhat disappointing
employment reports and higher energy prices weighed on consumer sentiment. In
March and April, the U.S. housing market remained strong and there were
improvements in durable goods spending. But, retail sales dropped 0.5% in April
after a 2% gain in March.
Beginning in April and continuing through July, unemployment stabilized.
The Producer Price Index (PPI) rose 0.1% in July, seasonally adjusted, after a
decrease of 0.3% in June and a 0.8% rise in May. (The PPI measures wholesale
prices of goods, i.e. before they are sold through retailers. It is sometimes
used to predict movements in the Consumer Price Index, which is a measure of
retail prices and commonly used as a measure of inflation.) Equity prices, as
measured by the S&P 500(R) Index(1), were roughly flat in April, May and June.
On June 30, the Federal Reserve Board (the Fed) raised its
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fed funds rate from 1% to 1.25%, and stocks responded positively to the widely
expected Fed action. (The fed funds rate is the rate at which banks lend to each
other overnight.) However, equity prices declined slightly in July as investors
continued to respond to uncertainties surrounding future interest-rate hikes,
the continued war in Iraq, the upcoming presidential election and record-high
energy prices.
After slowing during a summer "soft patch," the economy regained some
traction in the third quarter of 2004. Over much of the period, however, stocks
ignored the strength of the economy, finishing the third quarter down slightly.
One of the key drivers of stocks during most of the summer seemed to be the
direction of oil prices, with stocks falling as oil prices rose. This negative
correlation lasted until mid-August when crude oil broke through the $45 per
barrel price level. From mid-August through mid-September, stocks benefited from
declining gasoline prices at the pump, a favorable turn of events for consumers.
Equities gathered momentum until a string of hurricanes on the Gulf Coast forced
production disruptions at one of the nation's largest oil-refining facilities,
causing oil prices to rise again as the quarter ended.
The combination of declining gasoline prices during much of the third
quarter and the addition of 300,000-400,000 jobs, while lower than expected,
contributed to a pick up in consumer spending in the third quarter. Third
quarter unemployment declined to 5.4%. On August 10, the Fed again raised the
fed funds rate from 1.25% to 1.50%. This was followed by another quarter point
increase to 1.75% on September 21.
In October 2004, employment increased by 337,000 jobs and unemployment
remained virtually unchanged. The Consumer Price Index increased 0.5% in
October. In addition, the S&P 500 gained 1.4% in October, as the technology
sector outperformed all other industries and crude oil prices fell sharply from
record highs. As this one-year period ended, investors waited to learn the
outcome of the U.S. presidential election.
Looking at the world economy, for most of the twelve-month period ended
October 31, 2004 there was a near global synchronization of economic recovery.
During the first six months of the period, the increasing likelihood of a
sustainable economic recovery in the United States, continuing strong growth in
China and generally low inflation worldwide combined to improve both consumer
and business sentiment in international markets. Continental Europe provided
the strongest performance, even in local currency terms, in the first three
months of the fiscal year, followed by Asia ex-Japan. However, in February,
March and April, Japanese equity markets took the
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lead, an encouraging turn of events given that nation's decade-long period of
stagnation and deflation. Meanwhile, a stronger pound contributed to positive
returns in United Kingdom equities, when measured in U.S. dollars.
After a bullish June, markets fell through mid-August, compounded by a
sharp rebound in oil prices, causing concern about the impact of higher energy
costs. By September, despite the high price of oil, the equity markets rallied
once again. Although the Japanese market declined, Asia ex-Japan reported strong
performance in U.S. dollar terms followed by Canada, during the third calendar
quarter of 2004.
For the fiscal year, regional performance in the non-U.S., developed world,
small-cap universe was led by Canada, Continental Europe and Asia ex-Japan.
Despite stronger performance earlier in the fiscal year, Japan sharply
underperformed for the year. Outperformance in natural resource-rich Canada was
driven by rising metal and oil prices. Continental Europe was a strong performer
in spite of poor performance in Germany and France. The region benefited from
its smaller markets including Ireland, Spain, Portugal, Austria and Italy. Asia
ex-Japan gained due to a buoyant Australian economy as well as rising metal and
oil prices.
LORD ABBETT ALL VALUE FUND
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2004?
A: For the fiscal year ended October 31, 2004, the Fund returned 13.8%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmark, the Russell 3000(R) Value
Index,(2) which returned 15.6% over the same period. Standardized Average Annual
Total Returns, which reflect performance at the maximum 5.75% sales charge
applicable to Class A share investments and include the reinvestment of all
distributions are 1 Year: 7.21%, 5 Years: 4.74% and Since Inception (July 15,
1996): 11.57%. Class A shares purchased subject to a front-end sales charge have
no contingent deferred sales charge (CDSC). However, certain purchases of Class
A shares made without a front-end sales charge may be subject to a CDSC of 1% if
the shares are redeemed within 12 months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
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Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: Stock selection within the consumer discretionary sector was the greatest
detractor to performance relative to the benchmark for the twelve-month period.
This sector includes stocks in the consumer durables, apparel, media, hotel and
leisure industries. Three large-cap media stocks underperformed, as did a number
of retail holdings, including a small-cap importer of gifts and home
furnishings. An underweight position in integrated oils for the period hurt
performance relative to the benchmark. However, when the portfolio's weighting
in integrated oils is combined with its weighting within the other energy
sectors, the Fund's best performing sector, the total energy weighting was
nearly neutral, offsetting much of the negative impact from the integrated oils
underweight. An underweight position and stock selection within utilities also
detracted from performance as did an overweight position within healthcare, the
Fund's worst performing sector for the fiscal year. Some of the negative impact
of the healthcare overweight was offset by strong stock selection among some
small-cap and mid-cap healthcare holdings.
Strong stock selection within the technology sector was the greatest
contributor to performance relative to the Index. An overweight position in
materials and processing also contributed favorably. In addition, a
substantially underweight position within the lagging financial services sector
produced a positive result. For the year, good performance by the Fund's
small-cap and mid-cap holdings helped to offset weaker performance by some of
its large-cap holdings.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
LORD ABBETT ALPHA FUND
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2004?
A: The Alpha Fund uses a "fund of funds" approach, which currently divides
assets among Lord Abbett Developing Growth Fund, Lord Abbett Securities Trust -
International Opportunities Fund and Lord Abbett Research Fund, Inc. - Small-Cap
Value Fund. As a result, the Fund's performance is directly related to the
performance of its underlying funds.
For the fiscal year ended October 31, 2004, the Alpha Fund returned 11.0%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmark, the S&P/Citigroup Small
Cap World Index,(3) which returned 18.3% over the same period. Standardized
Average Annual Total Returns, which reflect performance at the maximum 5.75%
sales charge applicable to Class A share investments and include the
reinvestment of all distributions are 1 Year: 4.59%, 5 Years: 2.06% and Since
Inception (March 18, 1998): 1.22%.
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Class A shares purchased subject to a front-end sales charge have no contingent
deferred sales charge (CDSC). However, certain purchases of Class A shares made
without a front-end sales charge may be subject to a CDSC of 1% if the shares
are redeemed within 12 months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
LORD ABBETT DEVELOPING GROWTH FUND COMPONENT
(APPROXIMATELY 27.7% OF ALPHA FUND PORTFOLIO)
Q: HOW DID THE FUND PERFORM OVER THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 2004?
A: For the twelve-month period ended October 31, 2004, the Fund returned -3.0%,
reflecting performance at the Net Asset Value (NAV) of Class Y shares with all
distributions reinvested, compared with its benchmark, the Russell 2000(R)
Growth Index,(4) which returned 5.5% over the same period. Standardized Average
Annual Total Returns, which reflect performance of Class Y share investments and
include the reinvestment of all distributions are 1 Year: 2.99%, 5 Years: -1.33%
and Since Inception (December 30, 1997): 1.98%.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: The greatest detractor from the Fund's performance for the twelve-month
period relative to the benchmark was stock selection and an overweight position
within the materials and processing sector. A company in the semiconductor
capital equipment industry suffered due to growing competition from an Asian
provider. In addition, a fundamentally strong company that manufactures
batteries underperformed due to a delay in the awarding of a government
contract. Stock selection and an overweight within technology also hurt
performance, as holdings in the semiconductor industry were negatively impacted
by industry-wide inventory problems. Within the healthcare sector, stock
selection took away from performance, as two holdings in the
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hospice industry underperformed when Medicare insurance reimbursements were
insufficient to allow them profitability. Also detracting from performance was
stock selection in consumer discretionary.
The strongest positive contribution to performance relative to the
benchmark was stock selection within the auto and transportation sector, as a
freight forwarding company and a trucking company benefited from increased
volume in their businesses. The Fund gained from positive stock selection within
integrated oils and energy due to strong performance from oil and gas producers
and oil services holdings. Selection of an online retailer of closed out
merchandise within the consumer discretionary sector also boosted performance.
This sector includes consumer durables, apparel, media, hotel and leisure
industries.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND COMPONENT
(APPROXIMATELY 40.0% OF ALPHA FUND PORTFOLIO)
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2004?
A: For the fiscal year ended October 31, 2004, the Fund returned 16.7%,
reflecting performance at the Net Asset Value (NAV) of Class Y shares with all
distributions reinvested, compared with its benchmark, the S&P/Citigroup U.S.
$500 Million - U.S. $2.5 Billion World ex-U.S. Index,(5) which returned 22.1%,
and the MSCI Europe, Australasia, Far East (EAFE) Index,(7) which returned
19.3%, over the same period. Standardized Average Annual Total Returns, which
reflect performance of Class Y shares and include the reinvestment of all
distributions are 1 Year: 16.73%, 5 Years: -4.99% and Since Inception: (December
30, 1997): -0.47%.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
SEE DISCUSSION ABOUT LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND ON PAGES
9-10.
LORD ABBETT SMALL-CAP VALUE FUND COMPONENT
(APPROXIMATELY 31.5% OF ALPHA FUND PORTFOLIO)
Q: HOW DID THE FUND PERFORM OVER THE TWELVE-MONTH PERIOD ENDED OCTOBER 31, 2004?
A: For the twelve-month period ended October 31, 2004, the Fund returned 18.8%,
reflecting performance at the Net Asset
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Value (NAV) of Class Y shares with all distributions reinvested, compared with
its benchmark, the Russell 2000(R) Value Index(6) which returned 18.0% over the
same period. Standardized Average Annual Total Returns, which reflect
performance of Class Y share and include the reinvestment of all distributions
are 1 Year: 18.80%, 5 Years: 18.19% and Since Inception Y shares (December 30,
1997): 11.46%.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: A significant overweight position and strong stock selection within the
materials and processing sector were the greatest contributors to the Fund's
outperformance relative to its benchmark for the year. Many of the portfolio's
holdings within this sector were firms that have been restructured, have
undergone cost-cutting and are now benefiting from an improving economy.
Holdings in chemical manufacturing contributed to our favorable performance. One
produces advanced structural materials used primarily by the aerospace industry,
while the two others focus on the manufacturing of vinyl and vinyl-related
products. All performed well during the period. Stock selection within the
healthcare sector also helped performance. An HMO reported strong performance
due to restructuring, its dominant market position in its state and its
attractiveness as an acquisition candidate. Two other companies that do drug
testing research for pharmaceutical companies also did well, as pharmaceutical
companies increasingly find it more cost effective to outsource research to
third parties. Stock selection in technology also contributed to performance.
Stock selection within the consumer discretionary sector hindered
performance. This sector includes stocks in the consumer durables, apparel,
media, hotel and leisure industries. Two holdings, an importer of gifts and home
furnishings and a designer, distributor and licenser of men's and women's
apparel and accessories, disappointed when their turnaround efforts stalled.
Although the Fund benefited from its overweight position within the Energy
sector, a strong sector for the period, stock selection hurt performance
relative to the Fund's benchmark. A number of the Fund's holdings focus on oil
services and natural gas.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
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LORD ABBETT INTERNATIONAL CORE EQUITY FUND
Q: HOW DID THE FUND PERFORM DURING THE FISCAL PERIOD ENDED OCTOBER 31, 2004?
A: The Fund became available to the public on December 31, 2003. For the period
from December 31, 2003 to October 31, 2004, Lord Abbett International Core
Equity Fund returned 2.7%, reflecting performance at the Net Asset Value (NAV)
of Class A shares with all distributions reinvested, compared with its
benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index,(7) which
returned 8.2% over the same period. Standardized Average Annual Total Return,
which reflects performance at the maximum 5.75% sales charge applicable to Class
A share investments and includes the reinvestment of all distributions since
inception (December 31, 2003) is -3.25%. Class A shares purchased subject to a
front-end sales charge have no contingent deferred sales charge (CDSC). However,
certain purchases of Class A shares made without a front-end sales charge may be
subject to a CDSC of 1% if the shares are redeemed within 12 months of the
purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: Overall, the Fund showed positive contributions from stock selection and
negative contributions from sector allocation relative to its benchmark. The
Fund's stock picking within the energy sector over the period was a negative
contributor despite strong returns in the energy sector. In addition, poor stock
selection within the sector furthered the underperformance. The healthcare and
information technology sectors were also negative contributors, primarily due to
poor stock selection within the sectors. European healthcare stocks were hurt by
drug safety issues and were generally poor performers. Asian technology stocks
and European telecommunications equipment stocks were the worst performers in
the information technology sector.
The Fund had a positive contribution from the telecommunications services
sector. Despite weak returns in the sector overall, the Fund had very strong
stock selection within the sector, which yielded gains. Outstanding stock
selection also provided positive contributions to the Fund from the consumer
discretionary and consumer staples sectors. Spanish media and Asian auto
producers lead the consumer discretionary sector, while Asian consumer goods and
U.K. food
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retailers were the strongest performers in the consumer staples sector.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2004?
A: For the fiscal year ended October 31, 2004, the Fund returned 16.3%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmarks, the S&P/Citigroup U.S.
$500 Million - U.S. $2.5 Billion World ex-U.S. Index,(5) and The MSCI EAFE
Index(7) which returned 22.1% and 19.3% respectively, over the same period.
Standardized Average Annual Total Returns, which reflect performance at the
maximum 5.75% sales charge applicable to Class A share investments and include
the reinvestment of all distributions are 1 Year: 9.66%, 5 Years: -6.43% and
Since Inception: (December 13, 1996): 0.84%. Class A shares purchased subject to
a front-end sales charge have no contingent deferred sales charge (CDSC).
However, certain purchases of Class A shares made without a front-end sales
charge may be subject to a CDSC of 1% if the shares are redeemed within 12
months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: Canada, which had a 12% weighting in the Fund's benchmark at October 31,
2004, was the best performing region in U.S. dollars during the twelve-month
period. However, the Fund's underweight position and stock selection in Canada
had the biggest negative impact on performance. The Fund's Canadian holdings,
with an emphasis on faster-growing consumer-related companies, underperformed
the natural resources sector that is heavily represented in Canada.
The Fund benefited from its overweight position in Continental Europe,
which, in U.S. dollars, was the second best performing region. Stock selection
in this region detracted from the Fund's performance, as information
technology-related holdings sharply underperformed. Investors fled this sector
due to a slowing in the technology cycle and the perception that the
semi-conductor cycle may have peaked.
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Although Japan was the weakest regional performer over the twelve-month
period in U.S. dollar terms, stock selection and an underweight position in
Japan was the largest positive contributor to the Fund's performance. The Fund's
strongest performing holdings in Japan included real estate companies benefiting
from a rebound in the Japanese real estate market as well as media companies
with solid growth. Strong stock selection and an overweight in Asia ex-Japan
also boosted relative performance. Mining, including gold stocks, in this region
performed well as did oil and oil-related stocks. Asia ex-Japan financial
companies, including Hong Kong property companies, also did well during the
period.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
LORD ABBETT LARGE-CAP VALUE FUND
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2004?
A: For the fiscal year ended October 31, 2004, the Fund returned 10.7%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmark, the Russell 1000(R) Value
Index,(8) which returned 15.5% over the same period. Standardized Average Annual
Total Returns, which reflect performance at the maximum 5.75% sales charge
applicable to Class A share investments and include the reinvestment of all
distributions are 1 Year: 4.41% and Since Inception (June 30, 2003): 9.69%.
Class A shares purchased subject to a front-end sales charge have no contingent
deferred sales charge (CDSC). However, certain purchases of Class A shares made
without a front-end sales charge may be subject to a CDSC of 1% if the shares
are redeemed within 12 months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE
RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED.
THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL
FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE
MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR
WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: The greatest detractor from the Fund's performance for the twelve-month
period was stock selection within the utilities sector. A cable and Internet
services provider was hurt by the failure of a major acquisition bid. Stock
selection in healthcare also had a negative impact. A pharmaceutical holding was
hurt when new research data prompted the company to voluntarily withdraw a
leading arthritis
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and acute pain medication from the worldwide market.
Stock selection within the technology sector was the greatest positive
contributor to the Fund's performance for the period. A personal computer
company outperformed due to its outstanding research and development efforts and
its strong pipeline of products. Another technology holding, a global provider
of communications and electronic products, contributed favorably based on a
reengineering of the company including a new CEO as well as the introduction of
a superior product portfolio in 2004. Stock selection in producer durables,
which includes capital goods and industrials, also helped performance.
Separately, a global, diversified provider of products and services related to
fire and security, electronics, healthcare, engineered products and services,
plastics and adhesives performed well because of a company restructuring and a
renewed focus on core business. A technology and business services company
benefited as well from refocusing on its core business. The Fund also benefited
from an underweight position in financial services.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
THE PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT EACH FUND, INCLUDING THE
FUND'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND ONGOING EXPENSES, THAT AN
INVESTOR SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON
THESE FUNDS OR ANY LORD ABBETT MUTUAL FUND, PLEASE CONTACT YOUR INVESTMENT
PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 800-874-3733 OR VISIT
www.LordAbbett.com. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
(1) The S&P 500(R) Index is widely regarded as the standard for measuring
large-cap U.S. stock market performance. This popular index includes a
representative sample of leading companies in leading industries. Indices are
unmanaged, do not reflect the deduction of fees or expenses and are not
available for direct investment.
(2) The Russell 3000(R) Value Index measures the performance of those Russell
3000 companies with lower price-to-book ratios and lower forecasted growth
values. The stocks in this index are also members of either the Russell 1000(R)
Value or the Russell 2000(R) Value indices. Indices are unmanaged, do not
reflect the deduction of fees or expenses and are not available for direct
investment.
(3) The S&P/Citigroup Small Cap World Index is a subset of the Global Citigroup
Broad Market Index (BMI).
(4) The Russell 2000(R) Growth Index measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth
values. Indices are unmanaged, do not reflect the deduction of fees or expenses
and are not available for direct investment.
(5) S&P/Citigroup Global Equity Index System(SM) and the names of each of the
indices and subindices which it comprises (GEIS and such indices and subindices,
each an "Index" and collectively, the "Indices") are service marks of Citigroup.
The S&P/Citigroup U.S. $500 Million - U.S. $2.5 Billion World ex-U.S. Index is
a subset of the Global S&P/Citigroup Broad Market Index (BMI). The
11
<Page>
- --------------------------------------------------------------------------------
World ex-U.S. composite includes all developed countries except the United
States. Indices are unmanaged, do not reflect the deduction of fees or expenses
and are not available for direct investment.
(6) The Russell 2000(R) Value Index measures the performance of those Russell
2000 companies with lower price-to-book ratios and lower forecasted growth
values. Indices are unmanaged, do not reflect the deduction of fees or expenses
and are not available for direct investment.
(7) The MSCI EAFE(R) Index MSCI Europe, Australasia and Far East (EAFE) Index is
an unmanaged capitalization index representing the industry composition and a
sampling of small, medium and large capitalization companies from the
aforementioned global markets. It is a Morgan Stanley International Index that
includes stocks traded on 21 exchanges in Europe, Australasia and the Far East.
Indices are unmanaged, do not reflect the deduction of fees or expenses and are
not available for direct investment.
(8) The Russell 1000(R) Value Index measures the performance of those Russell
1000 companies with lower price-to-book ratios and lower forecasted growth
values. Indices are unmanaged, do not reflect the deduction of fees or expenses
and are not available for direct investment.
IMPORTANT PERFORMANCE AND OTHER INFORMATION
The views of each Fund's management and the portfolio holdings described in this
report are as of October 31, 2004; these views and portfolio holdings may have
changed subsequent to this date and they do not guarantee the future performance
of the markets or each Fund. Information provided in this report should not be
considered a recommendation to purchase or sell securities.
A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of
investment risks. For a more detailed discussion of the risks associated with
each Fund, please see the Funds' Prospectus.
PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, EACH FUND'S PERFORMANCE MAY
BE SUBJECT TO SUBSTANTIAL FLUCTUATION. Except where noted, comparative fund
performance does not account for the deduction of sales charges and would be
different if sales charges were included. Each Fund offers additional classes of
shares with distinct pricing options. For a full description of the differences
in pricing alternatives, please see each Fund's Prospectus.
MUTUAL FUNDS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR OTHER OBLIGATIONS
OF, OR GUARANTEED BY BANKS, AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
12
<Page>
ALL VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class C shares with the same
investment in the Russell 3000(R) Value Index, and S&P 500/Barra Value Index
assuming reinvestment of all dividends and distributions. The performance of
other classes will be greater than or less than the performance shown in the
graph below due to different sales loads and expenses applicable to such
classes. The graph and performance table below do not reflect the deduction of
taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS C SHARES)
AT NET ASSET VALUE RUSSELL 3000(R) VALUE INDEX(1) S&P 500/BARRA VALUE INDEX(1)
Oct-1994 $ 10,000 $ 10,000 $ 10,000
1995 $ 12,183 $ 12,378 $ 12,302
1996 $ 14,623 $ 15,260 $ 15,330
1997 $ 18,418 $ 20,384 $ 19,884
1998 $ 20,433 $ 22,950 $ 22,218
1999 $ 25,132 $ 26,457 $ 26,442
2000 $ 27,832 $ 28,126 $ 29,002
2001 $ 25,689 $ 25,148 $ 23,659
2002 $ 23,526 $ 22,774 $ 19,926
2003 $ 28,866 $ 28,253 $ 24,872
2004 $ 32,624 $ 32,672 $ 28,468
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2004
<Table>
<Caption>
1 YEAR 5 YEARS 10 YEARS LIFE OF CLASS
CLASS A(2) 7.21% 4.74% -- 11.57%
CLASS B(3) 8.98% 5.15% -- 9.01%
CLASS C(4) 13.02% 5.36% 12.55% --
CLASS P(5) 13.71% -- -- 5.02%
CLASS Y(6) 14.18% -- -- 26.44%
</Table>
(1) Performance for each unmanaged index does not reflect any transaction costs,
management fees or sales charges. The performance of each index is not
necessarily representative of the Fund's performance.
(2) Class A shares commenced operations on July 15, 1996. Total return, which is
the percentage change in net asset value, after deduction of the maximum initial
sales charge of 5.75% applicable to Class A Shares, with all dividends and
distributions reinvested for the periods shown ended October 31, 2004, is
calculated using the SEC-required uniform method to compute such return.
(3) Class B shares commenced operations on June 5, 1997. Performance reflects
the deduction of a CDSC of 4% for 1 year, 1% for 5 years, and 0% for the life of
the class.
(4) Class C shares commenced operations on January 3, 1994. The 1% CDSC for
Class C shares normally applies before the first anniversary of the purchase
date. Performance is at net asset value.
(5) Class P shares commenced operations on August 15, 2001. Performance is at
net asset value.
(6) Class Y shares commenced operations on March 31, 2003. Performance is at net
asset value.
13
<Page>
ALPHA FUND
- --------------------------------------------------------------------------------
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class A shares with the same
investment in the S&P/Citigroup Small-Cap World Index and Lipper Global Small
Cap Funds Average assuming reinvestment of all dividends and distributions. The
performance of other classes will be greater than or less than the performance
shown in the graph below due to different sales loads and expenses applicable to
such classes. The graph and performance table below do not reflect the deduction
of taxes that a shareholder would pay on fund distributions or the redemption of
fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES) S&P/CITIGROUP SMALL-CAP LIPPER GLOBAL
AT NET ASSET VALUE AT MAXIMUM OFFERING PRICE(1) WORLD INDEX(2) SMALL-CAP AVERAGE(2)
Mar-1998 $ 10,000 $ 9,425 $ 10,000 $ 10,000
Oct-1998 $ 8,308 $ 7,830 $ 8,484 $ 8,095
1999 $ 9,788 $ 9,226 $ 10,140 $ 10,538
2000 $ 11,463 $ 10,804 $ 10,983 $ 13,411
2001 $ 8,865 $ 8,355 $ 9,572 $ 9,889
2002 $ 7,587 $ 7,151 $ 9,069 $ 8,699
2003 $ 10,363 $ 9,767 $ 13,112 $ 12,050
2004 $ 11,502 $ 10,841 $ 15,514 $ 13,605
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2004
<Table>
<Caption>
1 YEAR 5 YEARS LIFE OF CLASS
CLASS A(3) 4.59% 2.06% 1.22%
CLASS B(4) 6.27% 2.43% 1.47%
CLASS C(5) 10.27% 2.62% 1.47%
CLASS Y(6) -- -- 2.18%
</Table>
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for each unmanaged index and average does not reflect
transaction costs, management fees or sales charges. The performance of each
index and average is not necessarily representative of the Fund's performance.
Performance for each index and average begins on March 31, 1998.
(3) Class A shares commenced operations on March 18, 1998. Total return, which
is the percentage change in net asset value, after deduction of the maximum
initial sales charge of 5.75% applicable to Class A Shares, with all dividends
and distributions reinvested for the periods shown ended October 31, 2004, is
calculated using the SEC-required uniform method to compute such return.
(4) Class B shares commenced operations on March 18, 1998. Performance reflects
the deduction of a CDSC of 4% for 1 year, 1% for 5 years, and 0% for the life of
the class.
(5) Class C shares commenced operations on March 18, 1998. The 1% CDSC for Class
C shares normally applies before the first anniversary of the purchase date.
Performance is at net asset value.
(6) Class Y shares commenced operations on October 19, 2004. Performance is at
net asset value.
14
<Page>
INTERNATIONAL CORE EQUITY FUND
- --------------------------------------------------------------------------------
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class A shares with the same
investment in the Morgan Stanley Capital International (MSCI(R)) Europe,
Australasia, Far East (EAFE(R)) Index, assuming reinvestment of all dividends
and distributions. The performance of other classes will be greater than or less
than the performance shown in the graph below due to different sales loads and
expenses applicable to such classes. The graph and performance table below do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES)
AT NET ASSET VALUE AT MAXIMUM OFFERING PRICE(1) MSCI EAFE(R) INDEX(2)
12/31/2003 $ 10,000 $ 9,425 $ 10,000
3/31/2004 $ 10,108 $ 9,527 $ 10,440
6/30/2004 $ 10,010 $ 9,434 $ 10,486
9/30/2004 $ 9,941 $ 9,369 $ 10,462
10/31/2004 $ 10,266 $ 9,676 $ 10,820
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2004
<Table>
<Caption>
LIFE OF CLASS
CLASS A(3) (3.25)%
CLASS B(4) (2.93)%
CLASS C(5) 1.17%
CLASS P(6) 2.56%
CLASS Y(7) 2.96%
</Table>
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for the unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of the index is not
necessarily representative of the Fund's performance. Performance for the index
begins on January 1, 2004.
(3) Class A shares commenced operations on December 15, 2003. Performance for
the class begins on December 31, 2003, the SEC effective date for the Fund.
Total return, which is the percentage change in net asset value, after deduction
of the maximum initial sales charge of 5.75% applicable to Class A shares, with
all dividends and distributions reinvested for the periods shown ended October
31, 2004, is calculated using the SEC-required uniform method to compute such
return.
(4) Class B shares commenced operations on December 15, 2003. Performance for
the class begins on December 31, 2003, the SEC effective date for the Fund.
Performance reflects the deduction of a CDSC of 5% for the life of the class.
(5) Class C shares commenced operations on December 15, 2003. Performance for
the class begins on December 31, 2003, the SEC effective date for the Fund. The
1% CDSC for Class C shares normally applies before the first anniversary of the
purchase date.
(6) Class P shares commenced operations on December 15, 2003. Performance for
the class begins on December 31, 2003, the SEC effective date for the Fund.
Performance is at net asset value.
(7) Class Y shares commenced operations on December 15, 2003. Performance for
the class begins on December 31, 2003, the SEC effective date for the Fund.
Performance is at net asset value.
15
<Page>
INTERNATIONAL OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class A shares with the same
investment in the MSCI(R) EAFE(R) and S&P/Citigroup U.S. $500 Million - U.S.
$2.5 Billion World ex-U.S. Index, assuming reinvestment of all dividends and
distributions. The Fund is adding the performance of the MSCI(R) EAFE(R) Index
and is removing the S&P/Citigroup U.S. $500 Million - U.S. $2.5 Billion World
ex-U.S. Index because the Fund believes that the MSCI(R) EAFE(R) Index is more
widely available. The performance of other classes will be greater than or less
than the performance shown in the graph below due to different sales loads and
expenses applicable to such classes. The graph and performance table below do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
S&P/CITIGROUP U.S. $500 MILLION -
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES) AT MSCI(R) EAFE(R) U.S. $2.5 BILLION WORLD EX-U.S.
AT NET ASSET VALUE MAXIMUM OFFERING PRICE(1) INDEX(2) INDEX(2)
Dec 13, 1996 $ 10,000 $ 9,425 $ 10,000 $ 10,000
Oct-1997 $ 11,516 $ 10,854 $ 10,217 $ 9,300
1998 $ 13,169 $ 12,411 $ 11,234 $ 8,800
1999 $ 14,902 $ 14,045 $ 13,859 $ 10,728
2000 $ 16,536 $ 15,585 $ 13,490 $ 10,417
2001 $ 8,943 $ 8,429 $ 10,161 $ 8,754
2002 $ 7,219 $ 6,804 $ 8,847 $ 8,418
2003 $ 9,750 $ 9,190 $ 11,286 $ 12,660
2004 $ 11,340 $ 10,688 $ 13,461 $ 15,461
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2004
<Table>
<Caption>
1 YEAR 5 YEARS LIFE OF CLASS
CLASS A(3) 9.66% (6.43)% 0.84%
CLASS B(4) 11.61% (6.09)% (0.12)%
CLASS C(5) 15.61% (5.84)% (0.07)%
CLASS P(6) 16.37% (5.23)% (3.09)%
CLASS Y(7) 16.73% (4.99)% (0.47)%
</Table>
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for each unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of each index is not
necessarily representative of the Fund's performance. Performance for each index
begins on December 31, 1996.
(3) Class A shares commenced operations on December 13, 1996. Total return,
which is the percentage change in net asset value, after deduction of the
maximum initial sales charge of 5.75% applicable to Class A shares, with all
dividends and distributions reinvested for the periods shown ended October 31,
2004, is calculated using the SEC-required uniform method to compute such
return.
(4) Class B shares commenced operations on June 2, 1997. Performance reflects
the deduction of a CDSC of 4% for 1 year, 1% for 5 years, and 0% for the life of
the class.
(5) Class C shares commenced operations on June 2, 1997. The 1% CDSC for Class C
shares normally applies before the first anniversary of the purchase date.
Performance is at net asset value.
(6) Class P shares commenced operations on March 8, 1999. Performance is at net
asset value.
(7) Class Y shares commenced operations on December 30, 1997. Performance is at
net asset value.
16
<Page>
LARGE-CAP VALUE FUND
- --------------------------------------------------------------------------------
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class A shares with the same
investment in the Russell 1000(R) Value Index, the S&P 500(R) Index and the S&P
500/Barra Value Index, assuming reinvestment of all dividends and distributions.
The performance of other classes will be greater than or less than the
performance shown in the graph below due to different sales loads and expenses
applicable to such classes. The graph and performance table below do not reflect
the deduction of taxes that a shareholder would pay on fund distributions or the
redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND THE FUND RUSSELL 1000(R) S&P 500/
AT NET ASSET VALUE AT MAXIMUM OFFERING PRICE(1) VALUE INDEX(2) S&P 500(R) Index(2) Barra Value Index(2)
Jul 1, 2003 $ 10,000 $ 9,425 $ 10,000 $ 10,000 $ 10,000
Sep-2003 $ 10,201 $ 9,614 $ 10,142 $ 10,265 $ 10,254
Dec-2003 $ 11,570 $ 10,905 $ 11,505 $ 11,514 $ 11,736
Mar-2004 $ 11,813 $ 11,134 $ 11,786 $ 11,709 $ 12,129
Jun-2004 $ 11,955 $ 11,267 $ 11,820 $ 11,910 $ 12,226
Sep-2004 $ 11,701 $ 11,028 $ 11,929 $ 11,688 $ 12,353
Oct-2004 $ 11,965 $ 11,277 $ 12,104 $ 11,866 $ 12,540
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2004
<Table>
<Caption>
1 YEAR LIFE OF CLASS
CLASS A(3) 4.41% 9.69%
CLASS B(4) 6.02% 10.88%
CLASS C(5) 10.07% 13.88%
CLASS P(6) 10.65% 14.56%
CLASS Y(7) 11.09% 15.05%
</Table>
(1) Reflects the deduction of the maximum initial sales charge of 5.75%.
(2) Performance for each unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of each index, particularly
that of the S&P 500 Index, is not necessarily representative of the Fund's
performance. Performance for each index begins on June 30, 2003.
(3) Class A shares commenced operations on June 23, 2003. Performance for the
class begins on June 30, 2003, the SEC effective date for the Fund. Total
return, which is the percentage change in net asset value, after deduction of
the maximum initial sales charge of 5.75% applicable to Class A shares, with all
dividends and distributions reinvested for the periods shown ended October 31,
2004, is calculated using the SEC-required uniform method to compute such
return.
(4) Class B shares commenced operations on June 23, 2003. Performance for the
class begins on June 30, 2003, the SEC effective date for the Fund. Performance
reflects the deduction of a CDSC of 4% for 1 year, and 4% for the life of the
class.
(5) Class C shares commenced operations on June 23, 2003. Performance for the
class begins on June 30, 2003, the SEC effective date for the Fund. The 1% CDSC
for Class C shares normally applies before the first anniversary of the purchase
date. Performance is at net asset value.
(6) Class P shares commenced operations on June 23, 2003. Performance for the
class begins on June 30, 2003, the SEC effective date for the Fund. Performance
is at net asset value.
(7) Class Y shares commenced operations on June 23, 2003. Performance for the
class begins on June 30, 2003, the SEC effective date for the Fund. Performance
is at net asset value.
17
<Page>
- --------------------------------------------------------------------------------
EXPENSE EXAMPLES
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs, including sales charges on purchase payments (these charges vary among
the share classes) and redemption fees (International Core Equity Fund and
International Opportunties Fund only); and (2) ongoing costs, including
management fees; distribution and service (12b-1) fees (these charges vary among
the share classes); and other Fund expenses. These Examples are intended to help
you understand your ongoing costs (in dollars) of investing in each Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The Examples are based on an investment of $1,000 invested at the beginning
of the period and held for the entire period (May 1, 2004 through October 31,
2004).
ACTUAL EXPENSES
For each class of the Fund, the first line of the table on the following
page provides information about actual account values and actual expenses. You
may use the information in this line, together with the amount you invested, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
entitled "Expenses Paid During the Period 5/1/04 - 10/31/04" 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 each 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.
18
<Page>
ALL VALUE FUND
- --------------------------------------------------------------------------------
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.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE THE PERIOD+
----- ----- -----------
5/1/04 -
5/1/04 10/31/04 10/31/04
------ -------- --------
CLASS A
Actual $ 1,000.00 $ 1,051.70 $ 6.24
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,019.05 $ 6.14
CLASS B
Actual $ 1,000.00 $ 1,048.40 $ 9.53
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.84 $ 9.38
CLASS C
Actual $ 1,000.00 $ 1,048.50 $ 9.53
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.84 $ 9.38
CLASS P
Actual $ 1,000.00 $ 1,052.00 $ 6.71
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.60 $ 6.60
CLASS Y
Actual $ 1,000.00 $ 1,053.50 $ 4.39
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.86 $ 4.32
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (1.21% for Class A, 1.85% for Class B, 1.85% for Class C, 1.30%
for Class P and 0.85% for Class Y) multiplied by the average account value over
the period, multiplied by 184/366 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
OCTOBER 31, 2004
<Table>
<Caption>
SECTOR %*
Auto & Transportation 3.83%
Consumer Discretionary 10.96%
Consumer Staples 3.25%
Financial Services 14.82%
Healthcare 7.00%
Integrated Oils 6.09%
Materials & Processing 15.07%
Other 6.43%
Other Energy 4.11%
Producer Durables 7.40%
Short-Term Investment 5.79%
Technology 10.15%
Utilities 5.10%
Total 100.00%
</Table>
* Represents percent of total investments.
19
<Page>
ALPHA FUND
- --------------------------------------------------------------------------------
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.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE THE PERIOD+
----- ----- -----------
5/1/04 -
5/1/04 10/31/04 10/31/04
------ -------- --------
CLASS A
Actual $ 1,000.00 $ 1,024.40 $ 1.83
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,023.33 $ 1.83
CLASS B
Actual $ 1,000.00 $ 1,021.10 $ 5.03
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.16 $ 5.03
CLASS C
Actual $ 1,000.00 $ 1,021.10 $ 5.03
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.16 $ 5.03
CLASS Y*
Actual $ 1,000.00 $ 1,021.80 $ 0.00
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,025.14 $ 0.00
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class ( 0.36% for Class A, 1.00% for Class B, 1.00% for Class C, and
0.00% for Class Y) multiplied by the average account value over the period,
multiplied by 184/366 (to reflect one-half year period).
* For the period 10/20/04 (commencement of offering of class shares) to
10/31/04.
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY INVESTMENT OBJECTIVE
OCTOBER 31, 2004
<Table>
<Caption>
INVESTMENT OBJECTIVE %*
Long-term growth of capital+ 27.70%
Long-term capital appreciation+ 71.49%
Short-term investment 0.81%
Total 100.00%
</Table>
* Represents percent of total investments.
+ Alpha Fund invests in other funds ("Underlying Funds") managed by Lord, Abbett
& Co. LLC. The category shown represents the investment objective of these
Underlying Funds.
20
<Page>
INTERNATIONAL CORE EQUITY FUND
- --------------------------------------------------------------------------------
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 or redemption fees. 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.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE THE PERIOD+
----- ----- -----------
5/1/04 -
5/1/04 10/31/04 10/31/04
------ -------- --------
CLASS A
Actual $ 1,000.00 $ 1,039.90 $ 8.62
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.69 $ 8.52
CLASS B
Actual $ 1,000.00 $ 1,037.00 $ 11.72
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,013.62 $ 11.59
CLASS C
Actual $ 1,000.00 $ 1,037.00 $ 11.72
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,013.62 $ 11.59
CLASS P
Actual $ 1,000.00 $ 1,040.00 $ 8.92
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.39 $ 8.82
CLASS Y
Actual $ 1,000.00 $ 1,041.90 $ 6.67
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.60 $ 6.60
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (1.68% for Class A, 2.30% for Class B, 2.30% for Class C, 1.75%
for Class P and 1.30% for Class Y) multiplied by the average account value over
the period, multiplied by 184/366 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
OCTOBER 31, 2004
<Table>
<Caption>
SECTOR %*
Basic Industry 3.57%
Capital Goods 2.57%
Consumer Cyclicals 1.55%
Consumer Services 5.07%
Consumer Staples 7.71%
Energy 3.46%
Financial Services 28.91%
Health Care 7.69%
Integrated Oils 4.06%
Materials and Processing 9.29%
Other 2.84%
Producer Durables 4.88%
Short-Term Investment 1.06%
Technology 5.00%
Telecommunications 8.72%
Transportation 1.01%
Utilities 2.61%
Total 100.00%
</Table>
21
<Page>
INTERNATIONAL OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
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 or redemption fees. 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.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE THE PERIOD+
----- ----- -----------
5/1/04 -
5/1/04 10/31/04 10/31/04
------ -------- --------
CLASS A
Actual $ 1,000.00 $ 1,005.20 $ 9.17
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.99 $ 9.23
CLASS B
Actual $ 1,000.00 $ 1,003.20 $ 12.44
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,012.72 $ 12.50
CLASS C
Actual $ 1,000.00 $ 1,003.20 $ 12.44
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,012.72 $ 12.50
CLASS P
Actual $ 1,000.00 $ 1,006.20 $ 9.63
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.53 $ 9.68
CLASS Y
Actual $ 1,000.00 $ 1,007.20 $ 7.47
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,017.70 $ 7.51
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (1.82% for Class A, 2.48% for Class B, 2.48% for Class C, 1.93%
for Class P and 1.48% for Class Y) multiplied by the average account value over
the period, multiplied by 184/366 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
OCTOBER 31, 2004
<Table>
<Caption>
SECTOR %*
Basic Materials 7.25%
Conglomerates 0.79%
Consumer Cyclicals 18.03%
Consumer Non-Cyclicals 8.48%
Diversified Financials 1.39%
Energy 3.57%
Healthcare 4.60%
Industrial Goods & Services 8.66%
Non-Property Financials 8.66%
Property and Property Services 4.48%
Short-Term Investments 18.44%
Technology 6.69%
Telecommunications 2.91%
Transportation 3.53%
Utilities 2.52%
Total 100.00%
</Table>
* Represents percent of total investments.
22
<Page>
LARGE-CAP VALUE FUND
- --------------------------------------------------------------------------------
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.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE THE PERIOD+
----- ----- -----------
5/1/04 -
5/1/04 10/31/04 10/31/04
------ -------- --------
CLASS A
Actual $ 1,000.00 $ 1,036.00 $ 4.86
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.36 $ 4.83
CLASS B
Actual $ 1,000.00 $ 1,032.70 $ 8.17
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,017.09 $ 8.11
CLASS C
Actual $ 1,000.00 $ 1,032.70 $ 8.17
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,017.09 $ 8.11
CLASS P
Actual $ 1,000.00 $ 1,036.00 $ 5.37
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,019.86 $ 5.33
CLASS Y
Actual $ 1,000.00 $ 1,037.70 $ 3.07
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,022.12 $ 3.05
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (0.95% for Class A, 1.60% for Class B, 1.60% for Class C, 1.05%
for Class P and 0.60% for Class Y) multiplied by the average account value over
the period, multiplied by 184/366 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
OCTOBER 31, 2004
<Table>
<Caption>
SECTOR %*
Consumer Discretionary 11.04%
Consumer Staples 9.77%
Energy 8.15%
Financials 16.55%
Healthcare 10.72%
Industrials 16.86%
Information Technology 11.29%
Materials 9.30%
Short-Term Investment 2.54%
Telecommunication Services 3.23%
Utilities 0.55%
Total 100.00%
</Table>
* Represents percent of total investments.
23
<Page>
SCHEDULE OF INVESTMENTS
ALL VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 93.87%
ADVERTISING AGENCY 0.17%
Interpublic Group of
Cos., Inc.* 250,000 $ 3,065
------------
AEROSPACE 0.28%
Moog, Inc. Class A* 140,000 5,254
------------
AGRICULTURE FISHING & RANCHING 0.31%
Monsanto Co. 135,000 5,771
------------
AIR TRANSPORTATION 0.12%
Frontier Airlines, Inc.* 275,000 2,299
------------
ALUMINUM 1.36%
Alcoa, Inc. 775,000 25,187
------------
AUTO PARTS: AFTER MARKET 0.36%
Genuine Parts Co. 165,000 6,582
------------
AUTO PARTS: ORIGINAL EQUIPMENT 0.59%
Dana Corp. 730,000 10,884
------------
BANKS: NEW YORK CITY 1.60%
Bank of New York Co.,
Inc. (The) 185,000 6,005
JPMorgan Chase & Co. 613,800 23,693
------------
TOTAL 29,698
------------
BANKS: OUTSIDE NEW YORK CITY 6.77%
Bank of America Corp. 600,086 26,878
Cullen/Frost Bankers, Inc. 435,000 21,315
Doral Financial Corp. 598,200 25,112
Mellon Financial Corp. 400,000 11,560
Wachovia Corp. 480,000 23,621
Wells Fargo & Co. 280,000 16,722
------------
TOTAL 125,208
------------
BEVERAGE: SOFT DRINKS 1.47%
PepsiCo, Inc. 550,000 27,269
------------
BIOTECHNOLOGY RESEARCH &
PRODUCTION 0.80%
Baxter Int'l., Inc. 480,000 $ 14,765
------------
CHEMICALS 2.95%
Cytec Industries, Inc. 276,300 12,851
E.I. du Pont de
Nemours & Co. 270,000 11,575
Eastman Chemical Co. 160,000 7,595
Georgia Gulf Corp. 90,000 4,074
OM Group, Inc.* 151,200 4,988
Praxair, Inc. 245,000 10,339
Rohm & Haas Co. 75,000 3,179
------------
TOTAL 54,601
------------
COMMUNICATIONS TECHNOLOGY 3.46%
Avaya, Inc.* 500,000 7,200
McAfee, Inc.* 760,000 18,392
Motorola, Inc. 2,120,000 36,591
Nortel Networks
Corp.*(a) 550,000 1,865
------------
TOTAL 64,048
------------
COMPUTER SERVICES SOFTWARE &
SYSTEMS 1.45%
Cadence Design
Systems, Inc.* 295,000 3,670
Microsoft Corp. 825,000 23,092
------------
TOTAL 26,762
------------
COMPUTER TECHNOLOGY 3.45%
Apple Computer, Inc.* 658,900 34,612
EMC Corp.* 1,833,700 23,600
UNOVA, Inc.* 365,100 5,604
------------
TOTAL 63,816
------------
CONSUMER PRODUCTS 0.60%
Gillette Co. 190,000 7,881
Yankee Candle Co.* 115,000 3,186
------------
TOTAL 11,067
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
ALL VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING: PAPER &
PLASTIC 0.96%
Pactiv Corp.* 750,000 $ 17,768
------------
COPPER 0.29%
Mueller Industries, Inc. 203,400 5,423
------------
DIVERSIFIED FINANCIAL SERVICES 2.88%
Citigroup, Inc. 800,000 35,496
Merrill Lynch & Co., Inc. 330,000 17,800
------------
TOTAL 53,296
------------
DRUG & GROCERY STORE CHAINS 1.10%
CVS Corp. 214,600 9,326
Kroger Co.* 725,000 10,955
------------
TOTAL 20,281
------------
DRUGS & PHARMACEUTICALS 5.25%
Abbott Laboratories 86,947 3,707
Merck & Co., Inc. 285,000 8,923
Mylan Laboratories, Inc. 500,000 8,610
Novartis AG ADR 535,000 25,685
Pfizer, Inc. 205,000 5,935
Schering-Plough Corp. 1,600,000 28,976
Wyeth 385,000 15,265
------------
TOTAL 97,101
------------
ELECTRICAL EQUIPMENT &
COMPONENTS 1.12%
Emerson Electric Co. 325,000 20,816
------------
ELECTRONICS 0.70%
Vishay Intertechnology,
Inc.* 1,000,000 12,930
------------
ELECTRONICS: MEDICAL SYSTEMS 0.15%
Haemonetics Corp.* 84,700 2,782
------------
ELECTRONICS: TECHNOLOGY 0.82%
Cubic Corp. 131,220 2,887
Solectron Corp.* 2,336,400 12,196
------------
TOTAL 15,083
------------
ENTERTAINMENT 2.97%
Viacom, Inc. Class B 540,000 $ 19,705
Walt Disney Co. (The) 1,400,000 35,308
------------
TOTAL 55,013
------------
FERTILIZERS 0.84%
Potash Corp. of
Saskatchewan, Inc.(a) 233,100 15,569
------------
FOODS 0.67%
Kraft Foods, Inc. Class A 370,035 12,326
------------
FOREST PRODUCTS 0.66%
Georgia-Pacific Corp. 355,000 12,279
------------
GOLD 2.12%
Newmont Mining Corp. 824,500 39,180
------------
HEALTHCARE FACILITIES 0.32%
Pharmaceutical Product
Development, Inc.* 140,000 5,912
------------
IDENTIFICATION CONTROL & FILTER
DEVICES 1.47%
Hubbell, Inc. 175,000 8,001
IDEX Corp. 85,000 3,136
Parker Hannifin Corp. 175,000 12,360
Roper Industries, Inc. 60,000 3,700
------------
TOTAL 27,197
------------
INSURANCE: MULTI-LINE 2.25%
American Int'l. Group,
Inc. 179,600 10,903
CIGNA Corp. 75,000 4,759
Lincoln National Corp. 55,000 2,409
Markel Corp.* 30,100 9,572
Safeco Corp. 245,000 11,329
St. Paul Travelers Cos.,
Inc. (The) 79,818 2,711
------------
TOTAL 41,683
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
ALL VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
MACHINERY: AGRICULTURAL 1.68%
Deere & Co. 520,000 $ 31,086
------------
MACHINERY: ENGINES 0.64%
Briggs & Stratton Corp. 100,000 7,181
Cummins, Inc. 65,400 4,583
------------
TOTAL 11,764
------------
MACHINERY: INDUSTRIAL/SPECIALTY 0.83%
Illinois Tool Works, Inc. 110,000 10,151
Woodward Governor Co. 85,000 5,147
------------
TOTAL 15,298
------------
MACHINERY: OIL WELL EQUIPMENT &
SERVICES 3.12%
Baker Hughes, Inc. 225,000 9,637
FMC Technologies, Inc.* 130,000 3,930
Grant Prideco, Inc.* 360,000 7,402
Halliburton Co. 200,000 7,408
Helmerich & Payne, Inc. 182,470 5,209
Key Energy Services, Inc.* 650,000 7,475
Schlumberger Ltd.(a) 265,000 16,679
------------
TOTAL 57,740
------------
MACHINERY: SPECIALTY 0.13%
JLG Industries, Inc. 150,000 2,502
------------
MEDICAL & DENTAL INSTRUMENTS &
SUPPLIES 0.46%
Bausch & Lomb, Inc. 140,000 8,534
------------
METAL FRABRICATING 1.70%
Quanex Corp. 340,000 17,238
Timken Co. (The) 590,000 14,160
------------
TOTAL 31,398
------------
METALS & MINERALS MISCELLANEOUS 0.62%
Graftech Int'l., Ltd.* 660,000 6,112
Minerals Technologies,
Inc. 88,500 5,319
------------
TOTAL 11,431
------------
MILLING: FRUIT AND GRAIN PROCESSING 0.98%
Archer-Daniels-
Midland Co. 935,000 $ 18,111
------------
MISCELLANEOUS EQUIPMENT 0.63%
W.W. Grainger, Inc. 198,100 11,607
------------
MISCELLANEOUS MATERIALS &
PROCESSING 0.22%
Rogers Corp.* 95,000 4,077
------------
MULTI-SECTOR COMPANIES 6.41%
Eaton Corp. 342,700 21,916
General Electric Co. 1,500,000 51,180
Trinity Industries, Inc. 420,000 13,087
Tyco Int'l. Ltd.(a) 1,040,000 32,396
------------
TOTAL 118,579
------------
OFFICE FURNITURE & BUSINESS
EQUIPMENT 0.49%
Xerox Corp.* 615,000 9,083
------------
OIL: CRUDE PRODUCERS 0.97%
Chesapeake Energy
Corp. 100,000 1,608
EOG Resources, Inc. 90,000 5,990
Grey Wolf, Inc.* 2,000,000 10,360
------------
TOTAL 17,958
------------
OIL: INTEGRATED DOMESTIC 0.92%
GlobalSantaFe Corp. 575,000 16,963
------------
OIL: INTEGRATED INTERNATIONAL 5.15%
ChevronTexaco Corp. 130,000 6,898
Exxon Mobil Corp. 1,795,012 88,350
------------
TOTAL 95,248
------------
PAPER 2.00%
International Paper Co. 690,064 26,574
MeadWestvaco Corp. 330,000 10,405
------------
TOTAL 36,979
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
ALL VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.10%
ATMI, Inc.* 79,300 $ 1,852
------------
PUBLISHING: MISCELLANEOUS 1.13%
R.R. Donnelley & Sons Co. 665,000 20,914
------------
PUBLISHING: NEWSPAPERS 0.82%
Journal Register Co.* 34,200 643
Tribune Co. 337,600 14,584
------------
TOTAL 15,227
------------
RAILROADS 1.85%
CSX Corp. 530,000 19,345
Union Pacific Corp. 235,000 14,798
------------
TOTAL 34,143
------------
REAL ESTATE INVESTMENT TRUSTS 0.37%
Host Marriott Corp.* 475,000 6,911
------------
RESTAURANTS 0.98%
Wendy's Int'l., Inc. 435,000 14,516
Yum! Brands, Inc. 83,400 3,628
------------
TOTAL 18,144
------------
RETAIL 2.92%
Barnes & Noble, Inc.* 205,000 6,820
Federated Department
Stores, Inc. 173,000 8,728
Foot Locker, Inc. 40,000 976
J.C. Penney Co., Inc. 145,000 5,016
Limited Brands, Inc. 465,000 11,523
May Department
Stores Co. 345,000 8,991
Pier 1 Imports, Inc. 315,000 5,654
Target Corp. 125,000 6,252
------------
TOTAL 53,960
------------
SAVINGS & LOAN 0.89%
W Holding Co., Inc. 384,800 7,692
Webster Financial Corp. 182,000 8,700
------------
TOTAL 16,392
------------
SCIENTIFIC EQUIPMENT &
SUPPLIES 0.24%
Varian, Inc.* 120,005 $ 4,378
------------
SERVICES: COMMERCIAL 0.87%
Waste Management, Inc. 565,000 16,091
------------
SHOES 0.47%
NIKE, Inc. Class B 106,000 8,619
------------
TRANSPORTATION MISCELLANEOUS 0.90%
United Parcel Service,
Inc. Class B 211,500 16,747
------------
UTILITIES: CABLE TV & RADIO 1.15%
Comcast Corp. Class A* 685,075 19,894
Cox Communications,
Inc. Class A* 40,000 1,378
------------
TOTAL 21,272
------------
UTILITIES: ELECTRICAL 0.92%
Ameren Corp. 180,000 8,640
CMS Energy Corp.* 560,000 5,242
NiSource, Inc. 150,000 3,217
------------
TOTAL 17,099
------------
UTILITIES: TELECOMMUNICATIONS 2.69%
SBC Communications,
Inc. 305,000 7,704
Verizon
Communications, Inc. 1,075,000 42,033
------------
TOTAL 49,737
------------
UTILITIES: WATER 0.31%
Aqua America, Inc. 265,050 5,794
------------
TOTAL COMMON STOCKS
(Cost $1,526,046,663) 1,736,553
============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<Page>
SCHEDULE OF INVESTMENTS (CONCLUDED)
ALL VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 5.77%
REPURCHASE AGREEMENT 5.77%
Repurchase Agreement
dated 10/29/2004,
1.44% due 11/1/2004
with State Street
Bank & Trust Co.
collateralized by
$13,175,000 of
United States
Treasury Bond at
7.25% due 5/15/2016
and $92,150,000 of
Federal National
Mortgage Assoc. at zero
coupon due 1/5/2005;
value: $108,882,531;
proceeds: $106,755,489
(Cost $106,742,680) $ 106,743 $ 106,743
============
TOTAL INVESTMENTS IN
SECURITIES 99.64%
(Cost $1,632,789,343) 1,843,296
------------
CASH AND OTHER ASSETS
IN EXCESS OF LIABILITIES 0.36% 6,570
------------
NET ASSETS 100.00% $ 1,849,866
============
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
ADR American Depository Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
28
<Page>
SCHEDULE OF INVESTMENTS
ALPHA FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
INVESTMENTS IN UNDERLYING FUNDS 99.30%
Lord Abbett Developing
Growth Fund, Inc. -
Class Y*(a) 2,598,664 $ 38,772
Lord Abbett Research
Fund, Inc. Small-Cap
Value Fund - Class Y(b) 1,588,357 44,141
Lord Abbett Securities
Trust-International
Opportunities Fund -
Class Y(b) 5,724,770 55,931
------------
TOTAL INVESTMENTS IN
UNDERLYING FUNDS
(Cost $133,899,505) 138,844
============
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 0.81%
REPURCHASE AGREEMENT 0.81%
Repurchase Agreement
dated 10/29/2004,
1.44% due 11/1/2004
with State Street
Bank & Trust Co.
collateralized by
$1,085,000 of
United States
Treasury Note at
2.00% due 1/15/2014;
value: $1,158,912;
proceeds: $1,131,392
(Cost $1,131,257) $ 1,131 $ 1,131
============
TOTAL INVESTMENTS IN
SECURITIES 100.11%
(Cost $135,030,762) 139,975
============
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS (0.11%) (148)
------------
NET ASSETS 100.00% $ 139,827
============
</Table>
* Non-income producing security.
(a) Fund investment objective is long-term growth of capital through a
diversified and actively managed portfolio consisting of developing growth
companies, many of which are traded over the counter.
(b) Fund investment objective is long-term capital appreciation.
SEE NOTES TO FINANCIAL STATEMENTS.
29
<Page>
SCHEDULE OF INVESTMENTS
INTERNATIONAL CORE EQUITY FUND OCTOBER 31, 2004
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCK 95.10%
AUSTRALIA 2.19%
Qantas Airways Ltd. 289,552 $ 718
Zinifex Ltd.* 571,146 896
------------
TOTAL 1,614
------------
AUSTRIA 2.45%
Bank Austria
Creditanstalt 18,897 1,394
Erste Bank der
Oesterreichischen
Sparkassen AG 9,263 $ 411
------------
TOTAL 1,805
------------
BRAZIL 1.43%
Companhia de Bebidas das
Americas ADR 42,700 1,059
------------
CANADA 0.96%
Opti Canada, Inc.* 47,600 710
------------
CZECH REPUBLIC 1.49%
Komercni Banka AS 8,756 1,101
------------
DENMARK 1.00%
Tele Danmark AS 20,100 741
------------
FINLAND 4.09%
Nokia Oyj 31,800 489
Stora Enso Oyj-R Shares 89,400 1,273
UPM-Kymmene Oyj 63,800 1,258
------------
TOTAL 3,020
------------
FRANCE 12.59%
AXA 27,628 593
BNP Paribas S.A. 16,312 1,107
Credit Agricole S.A. 40,573 1,186
France Telecom S.A. 13,484 385
Lafarge S.A. 8,111 738
Sanofi-Aventis 10,532 768
Schneider Electric S.A. 15,548 1,026
Thomson 41,174 $ 929
Total S.A. 7,679 1,592
Vinci S.A. 8,172 970
------------
TOTAL 9,294
------------
GERMANY 3.21%
BASF AG 25,812 1,606
Deutsche Telekom AG
Registered Shares* 39,883 762
------------
TOTAL 2,368
------------
HONG KONG 1.38%
Texwinca Holdings Ltd. 1,122,700 1,017
------------
ISRAEL 1.26%
Teva Pharmaceutical
Industries Ltd. ADR 35,800 931
------------
ITALY 4.43%
Enel S.p.A. 82,950 748
Saipem S.p.A. 54,004 621
Telecom Italia S.p.A. 344,038 1,142
Telecom Italia (RNC)
S.p.A. 304,930 756
------------
TOTAL 3,267
------------
JAPAN 17.02%
Bank of Yokohama
Ltd. (The) 184,000 1,099
Credit Saison Co. Ltd. 38,500 1,229
East Japan Railway Co. 137 719
Fanuc Ltd. 10,000 603
Konica Minolta Holdings,
Inc. 51,500 686
Lawson, Inc. 33,000 1,100
Mitsubishi Tokyo Financial
Group, Inc. 78 661
Murata Manufacturing
Co., Ltd. 14,800 704
ORIX Corp. 8,671 1,015
Sumitomo Corp. 175,000 1,300
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL CORE EQUITY FUND OCTOBER 31, 2004
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
Takefuji Corp. 24,390 $ 1,539
Toshiba Corp. 198,128 797
Yamanouchi
Pharmaceutical Co., Ltd. 30,300 1,110
------------
TOTAL 12,562
------------
NETHERLANDS 4.83%
Euronext N.V. 25,735 743
IHC Caland, N.V. 19,647 1,122
ING Groep N.V. CVA 46,170 1,219
Royal Dutch Petroleum Co. 8,885 481
------------
TOTAL 3,565
------------
SINGAPORE 1.09%
DBS Group Holdings Ltd. 86,100 807
------------
SOUTH KOREA 1.57%
KT&G Corp. 22,000 609
Samsung Electronics Co.,
Ltd. 1,400 550
------------
TOTAL 1,159
------------
SPAIN 3.70%
ACS Actividades de
Construccion y
Servicios, S.A. 70,559 1,363
Gestevision Telecinco S.A.* 71,908 1,369
------------
TOTAL 2,732
------------
SWEDEN 2.18%
Atlas Copco AB A Shares 13,200 545
Skandia Forsakrings AB 286,800 1,064
------------
TOTAL 1,609
------------
SWITZERLAND 4.85%
Nestle S.A. Registered
Shares 2,638 622
Novartis AG Registered
Shares 29,397 1,397
UBS AG Registered Shares 21,681 1,557
------------
TOTAL 3,576
------------
TAIWAN 2.54%
Chinatrust Financial
Holding Co., Ltd. 736,118 $ 840
Mediatek, Inc. 80,429 539
Siliconware Precision
Industries Co., Ltd. 102,000 77
Taiwan Semiconductor
Manufacturing Co.,
Ltd. ADR 55,565 421
------------
TOTAL 1,877
------------
THAILAND 0.66%
Thai Oil Public Co., Ltd.* 481,700 484
------------
UNITED KINGDOM 20.18%
AstraZeneca plc 15,392 630
BP plc 83,497 807
British Aerospace North
America plc 292,300 1,276
Cadbury Schweppes plc 127,384 1,056
Diageo plc 55,898 746
GlaxoSmithKline plc 29,663 623
HSBC Holdings plc 70,362 1,134
National Grid Transco plc 126,902 1,101
Prudential plc 93,167 684
Reed Elsevier plc 145,487 1,297
Royal Bank of Scotland
Group plc 37,570 1,105
Tesco plc 264,179 1,389
Tullow Oil plc 249,523 642
Virgin Mobile Holdings
(UK) plc* 132,360 451
Vodafone Group plc 763,544 1,952
------------
TOTAL 14,893
------------
TOTAL COMMON STOCKS
(Cost $66,384,540) 70,191
============
RIGHT 0.04%
PRUDENTIAL PLC NP*
(Cost $0) 18,455 31
============
TOTAL LONG-TERM INVESTMENTS
(Cost $66,384,540) 70,222
============
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL CORE EQUITY FUND OCTOBER 31, 2004
<Table>
<Caption>
PRINCIPAL U.S. $
AMOUNT VALUE
(000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 1.01%
REPURCHASE AGREEMENT 1.01%
Repurchase Agreement
dated 10/29/2004,
1.44% due 11/1/2004
with State Street
Bank & Trust Co.
collateralized by
$755,000 of Federal
Home Loan Bank at
3.875% due 12/15/2004;
value: $767,269;
proceeds: $749,053
(Cost $748,962) $ 749 $ 749
============
TOTAL INVESTMENTS IN
SECURITIES 96.15%
(Cost $67,133,502) 70,971
============
CASH AND OTHER ASSETS
IN EXCESS OF LIABILITIES 3.85% 2,843
------------
NET ASSETS 100.00% $ 73,814
============
</Table>
* Non-income producing security.
ADR American Depository Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<Page>
SCHEDULE OF INVESTMENTS (CONCLUDED)
INTERNATIONAL CORE EQUITY FUND OCTOBER 31, 2004
SECURITIES PRESENTED BY INDUSTRY (UNAUDITED):
- --------------------------------------------------------------------------------
<Table>
Aerospace/Defense 1.73%
Air Transport 0.97
Banks: Money Center 10.79
Banks: Regional 4.51
Beverages 3.88
Broadcasting 1.86
Building Materials 1.00
Chemicals 2.18
Construction/Home Building 1.85
Drugs 5.89
Electric Power 2.51
Electric: Equipment/Components 1.77
Electrical Equipment 2.47
Electronics 0.93
Electronics: Semi-Conductors/Components 2.15
Engineering/Contractor Services 1.31
Financial Services 8.27
Financial: Miscellaneous 1.01
Food 2.72%
Healthcare Products 1.50
Insurance 3.21
Machinery: Industrial/Specialty 2.26
Media 1.26
Metals & Mineral Miscellaneous 1.21
Miscellaneous 2.74
Oil 3.33
Oil: Integrated International 3.90
Paper and Forest Products 3.43
Publishing 1.76
Repurchase Agreement 1.01
Retail 1.49
Telecommunications Equipment 0.66
Telecommunications 7.86
Telephone-Long Distance 0.52
Textiles Products 1.38
Tobacco 0.83
======
TOTAL 96.15%
------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<Page>
SCHEDULE OF INVESTMENTS
INTERNATIONAL OPPORTUNITIES FUND OCTOBER 31, 2004
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 92.77%
AUSTRALIA 5.13%
Newcrest Mining Ltd. 204,700 $ 2,547
Oil Search Ltd. 880,700 1,145
Promina Group Ltd. 757,600 2,569
Santos Ltd. 306,400 1,900
------------
TOTAL 8,161
------------
BELGIUM 1.47%
Colruyt S.A. 16,200 2,341
------------
CANADA 2.24%
Cott Corp.* 77,200 2,025
RONA, Inc.* 55,500 1,547
------------
TOTAL 3,572
------------
FRANCE 5.40%
Imerys S.A.^ 33,100 2,320
IPSOS S.A.^ 20,300 1,893
Neopost S.A. 37,000 2,560
SR. Teleperformance
Group^ 82,369 1,814
------------
TOTAL 8,587
------------
GERMANY 4.13%
AWD Holding AG^ 62,700 2,185
Continental AG 37,300 2,031
Puma AG 9,400 2,347
------------
TOTAL 6,563
------------
GREECE 1.58%
Piraeus Bank S.A. 189,200 2,517
------------
HONG KONG 8.25%
China Merchants
Holdings Int'l., Co. Ltd.^ 984,000 1,454
Dah Sing Financial Group 273,422 1,967
Hong Kong Exchanges &
Clearing Ltd.^ 940,900 2,140
Hong Kong Land
Holdings Ltd. 813,981 $ 1,677
Orient Overseas Int'l.
Ltd. 480,000 1,745
Sino Land Co.^ 2,346,000 2,004
Techtronic Industries
Co., Ltd.^ 1,076,000 2,143
------------
TOTAL 13,130
------------
INDIA 1.60%
ICICI Bank Ltd. ADR 161,600 2,547
------------
IRELAND 0.87%
ICON plc ADR* 41,700 1,377
------------
ITALY 5.96%
Davide Campari-Milano
S.p.A. 42,300 2,392
e.Biscom S.p.A.*^ 39,100 2,149
Hera S.p.A. 969,600 2,670
Milano Assicurazioni
S.p.A. 535,800 2,283
------------
TOTAL 9,494
------------
JAPAN 23.95%
Aeon Mall Co., Ltd. 33,100 2,113
Amada Co., Ltd. 348,500 1,851
Arisawa Manufacturing
Co., Ltd.^ 54,100 2,344
Arrk Corp. 27,600 1,024
Casio Computer Co., Ltd.^ 105,900 1,256
Diamond City Co., Ltd.^ 55,500 1,539
Don Quijote Co. Ltd.^ 26,200 1,569
Global Media Online, Inc.^ 75,200 1,326
Japan Cash Machines
Co. Ltd.^ 42,400 1,697
Joint Corp. 39,900 894
KOSE Corp. 56,400 2,199
Matsumotokiyoshi Co.
Ltd.^ 68,000 1,707
Misumi Corp.^ 53,400 1,458
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND OCTOBER 31, 2004
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
Mitsui Mining & Smelting
Co., Ltd. 470,200 $ 1,855
Nitori Co. Ltd. 34,300 1,857
OBIC Business Consultants
Co. Ltd. 19,100 989
Park24 Co. Ltd.*(a) 75,200 1,273
Park24 Co. Ltd. 75,200 1,273
Rengo Co., Ltd.^ 381,000 1,690
Rinnai Corp. 68,600 1,864
Shinko Electric Industries
Co. Ltd.^ 47,500 1,369
Sumitomo Rubber
Industries Ltd. 241,700 2,055
Take and Give Needs Co.,
Ltd.*^ 90 97
Take and Give Needs Co.,
Ltd.*(a) 810 870
Yamaha Motor Co., Ltd.^ 128,750 1,956
------------
TOTAL 38,125
------------
LUXEMBOURG 1.31%
Gemplus International
S.A.*^ 1,000,000 2,086
------------
NETHERLANDS 1.46%
Oce N.V. 36,686 508
(Royal) P&O Nedlloyd N.V. 41,900 1,820
------------
TOTAL 2,328
------------
NEW ZEALAND 0.45%
Warehouse Group
Ltd. (The) 255,400 713
------------
RUSSIA 2.00%
Uralsvyazinform ADR^ 71,500 579
Vimpel - Communications
ADR* 22,900 2,611
------------
TOTAL 3,190
------------
SINGAPORE 0.54%
Want Want Holdings Ltd. 877,000 859
------------
SOUTH KOREA 1.08%
NHN Corp. 22,200 $ 1,723
------------
SPAIN 7.62%
Corporacion Mapfre S.A.^ 176,399 2,222
Fadesa Inmobiliaria, S.A.* 72,400 1,090
Gestevision Telecinco S.A.* 98,276 1,871
Grupo Empresarial ENCE
S.A.^ 42,500 1,213
Iberia, Lineas Aereas de
Espana, S.A. ^ 577,800 1,632
Indra Sistemas, S.A. 160,500 2,372
Prosegur Compania de
Seguridad S.A. 100,500 1,726
------------
TOTAL 12,126
------------
SWEDEN 1.70%
Getinege AB Class B 177,900 1,982
Oriflame Cosmetics S.A.*^ 36,000 729
------------
TOTAL 2,711
------------
SWITZERLAND 5.07%
Actelion Ltd.*^ 21,350 2,434
Geberit AG 3,350 2,175
Nobel Biocare Holding AB^ 16,250 2,648
Sez Holdings AG
Registered Shares* 34,956 818
------------
TOTAL 8,075
------------
UNITED KINGDOM 10.96%
AWG plc* 146,400 1,953
Cairn Energy plc* 87,000 2,346
CSR plc* 176,950 1,087
Intertek Group plc 183,700 2,316
Kesa Electricals plc 379,700 1,892
Michael Page
International plc 536,800 1,692
NEXT plc 74,500 2,280
Northgate plc 20,522 280
Paladin Resources plc 383,600 1,154
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND OCTOBER 31, 2004
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
Peter Hambro Mining plc* 132,000 $ 1,327
William Hill plc 124,500 1,116
------------
TOTAL 17,443
------------
TOTAL COMMON STOCKS
(Cost $116,292,553) 147,668
============
PREFERRED STOCK 1.23%
GERMANY 1.23%
ProsiebenSat.1 Media AG
(Cost $1,627,151) 109,900 1,963
============
TOTAL LONG-TERM INVESTMENTS
(Cost $117,919,704) 149,631
============
SHORT-TERM INVESTMENTS 21.25%
COLLATERAL FOR SECURITIES ON LOAN 21.07%
State Street Navigator
Securities Lending Prime
Portfolio, 1.72%(b) 33,549,380 33,549
------------
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT 0.18%
Repurchase Agreement
dated 10/29/2004,
1.44% due 11/1/2004
with State Street
Bank & Trust Co.
collateralized by
$260,000 of Federal
Home Loan Mortgage
Corp. at 5.75% due
1/15/2012;
value: $290,225;
proceeds: $279,907 $ 280 $ 280
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $33,829,254) 33,829
============
TOTAL INVESTMENTS IN
SECURITIES 115.25%
(Cost $151,748,958) 183,460
============
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS (15.25%) (24,274)
------------
NET ASSETS 100.00% $ 159,186
============
</Table>
* Non-income producing security.
^ Security (or a portion of security) on loan. See Note 5.
(a) Securities purchased on a when-issued basis.
(b) Rate shown reflects 7 day yield as of October 31, 2004.
ADR American Depository Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
36
<Page>
SCHEDULE OF INVESTMENTS (CONCLUDED)
INTERNATIONAL OPPORTUNITIES FUND OCTOBER 31, 2004
Securities presented by industry (unaudited):
- --------------------------------------------------------------------------------
<Table>
Air Transportation 1.03%
Autos & Auto Parts 3.80
Chemicals 1.47
Collateral for Securities on Loan 21.08
Communication Equipment 1.99
Comprehensive 0.91
Computer Services 1.49
Computer Software 0.62
Construction Materials 1.46
Consumer Building 2.05
Consumer Durables 3.31
Consumer Non-Durables 5.92
Diversified Consumer Non-Cyclicals 0.55
Diversified Financials 1.60
Diversified Transportation 0.80
Electronics 1.37
Engineering & Capital Goods 3.84
Food & Drink 3.31
General Manufacturing & Services 6.14%
Healthcare Facilities 0.86
Healthcare Products & Supplies 4.44
Internet Companies 1.91
Leisure & Recreation 0.70
Media 4.74
Mining & Metals 3.60
Non-Property Financials 9.98
Office Equipment 0.32
Oil & Gas 4.11
Paper & Forest Products 1.82
Property 5.17
Repurchase Agreement 0.18
Retail 6.19
Surface Transportation 2.24
Telecommunications Services 3.35
Utilities & Infrastructure 2.90
======
TOTAL 115.25%
------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<Page>
SCHEDULE OF INVESTMENTS
LARGE-CAP VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 96.91%
AEROSPACE & DEFENSE 0.63%
Honeywell International,
Inc. 2,810 $ 95
------------
AIR FREIGHT & COURIERS 1.07%
United Parcel Service, Inc.
Class B 2,040 162
------------
BEVERAGES 2.04%
Coca-Cola Co. (The) 350 14
Diageo plc ADR 945 51
PepsiCo, Inc. 4,894 243
------------
TOTAL 308
------------
BIOTECHNOLOGY 0.26%
MedImmune, Inc.* 1,370 39
------------
CHEMICALS 4.14%
E.I. du Pont de
Nemours & Co. 5,179 222
Monsanto Co. 2,638 113
Potash Corp. of
Saskatchewan, Inc.(a) 1,634 109
Praxair, Inc. 4,288 181
------------
TOTAL 625
------------
COMMERCIAL BANKS 6.73%
Bank of America Corp. 3,310 148
Bank of New York Co.,
Inc. (The) 6,429 209
Marshall & Ilsley Corp. 1,550 65
Mellon Financial Corp. 7,682 222
U.S. Bancorp 2,580 74
Wachovia Corp. 2,777 137
Wells Fargo & Co. 2,683 160
------------
TOTAL 1,015
------------
COMMERCIAL SERVICES & SUPPLIES 0.93%
Waste Management, Inc. 4,955 141
------------
COMMUNICATIONS EQUIPMENT 3.23%
Corning, Inc.* 4,967 $ 57
Motorola, Inc. 20,811 359
Nortel Networks Corp.*(a) 21,310 72
------------
TOTAL 488
------------
COMPUTERS & PERIPHERALS 3.83%
Apple Computer, Inc.* 5,098 268
EMC Corp.* 24,094 310
------------
TOTAL 578
------------
DIVERSIFIED FINANCIALS 7.26%
Citigroup, Inc. 6,466 287
Goldman Sachs Group,
Inc. (The) 880 87
JPMorgan Chase & Co. 11,015 425
MBNA Corp. 2,470 63
Merrill Lynch & Co., Inc. 4,321 233
------------
TOTAL 1,095
------------
DIVERSIFIED TELECOMMUNICATION
SERVICES 3.21%
SBC Communications, Inc. 6,962 176
Verizon Communications,
Inc. 7,914 309
------------
TOTAL 485
------------
ELECTRIC UTILITIES 0.55%
Progress Energy, Inc. 2,016 83
------------
ELECTRICAL EQUIPMENT 0.79%
Emerson Electric Co. 1,851 119
------------
ELECTRONIC EQUIPMENT &
INSTRUMENTS 0.98%
Solectron Corp.* 28,430 148
------------
ENERGY EQUIPMENT & SERVICES 3.09%
Baker Hughes, Inc. 4,991 214
GlobalSantaFe Corp. 2,065 61
Schlumberger Ltd.(a) 3,054 192
------------
TOTAL 467
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<Page>
SCHEDULE OF INVESTMENTS (CONTINUED)
LARGE-CAP VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
FOOD & STAPLES RETAILING 1.37%
CVS Corp. 1,760 $ 77
Kroger Co.* 8,535 129
------------
TOTAL 206
------------
FOOD PRODUCTS 3.93%
Archer-Daniels-Midland Co. 2,670 52
H.J. Heinz Co. 2,135 78
Kellogg Co. 3,274 141
Kraft Foods, Inc. Class A 9,685 323
------------
TOTAL 594
------------
HEALTHCARE EQUIPMENT &
SUPPLIES 1.44%
Baxter Int'l., Inc. 6,633 204
Guidant Corp. 210 14
------------
TOTAL 218
------------
HEALTHCARE PROVIDERS & SERVICES 1.73%
Cardinal Health, Inc. 3,148 147
CIGNA Corp. 1,795 114
------------
TOTAL 261
------------
HOUSEHOLD DURABLES 0.57%
Newell Rubbermaid, Inc. 4,003 86
------------
HOUSEHOLD PRODUCTS 1.52%
Clorox Co. (The) 1,530 83
Kimberly Clark Corp. 2,440 146
------------
TOTAL 229
------------
INDUSTRIAL CONGLOMERATES 3.82%
General Electric Co. 10,400 355
Tyco Int'l. Ltd.(a) 7,113 221
------------
TOTAL 576
------------
INSURANCE 2.47%
American Int'l. Group, Inc. 3,728 226
Hartford Financial Group,
Inc. 1,166 68
St. Paul Travelers Cos.,
Inc. (The) 2,320 $ 79
------------
TOTAL 373
------------
MACHINERY 6.50%
Caterpillar, Inc. 1,070 86
Deere & Co. 6,521 390
Eaton Corp. 3,276 210
Illinois Tool Works, Inc. 1,378 127
Parker Hannifin Corp. 2,385 168
------------
TOTAL 981
------------
MEDIA 7.35%
Clear Channel
Communications, Inc. 5,050 169
Comcast Corp. Class A* 8,965 260
Tribune Co. 3,977 172
Viacom, Inc. Class B 3,429 125
Walt Disney Co. (The) 15,229 384
------------
TOTAL 1,110
------------
METALS & MINING 2.74%
Alcoa, Inc. 6,741 219
Newmont Mining Corp. 4,092 194
------------
TOTAL 413
------------
MULTI-LINE RETAIL 0.85%
Federated Department
Stores, Inc. 240 12
Target Corp. 2,339 117
------------
TOTAL 129
------------
OFFICE ELECTRONICS 1.50%
Xerox Corp.* 15,329 226
------------
OIL & GAS 5.01%
Exxon Mobil Corp. 15,363 756
------------
PAPER & FOREST PRODUCTS 2.37%
International Paper Co. 9,265 357
------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<Page>
SCHEDULE OF INVESTMENTS (CONCLUDED)
LARGE-CAP VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS 0.87%
Gillette Co. 3,165 $ 131
------------
PHARMACEUTICALS 7.23%
Abbott Laboratories 1,088 46
Bristol-Myers Squibb Co. 2,870 67
Merck & Co., Inc. 4,764 149
Novartis AG ADR 4,593 221
Pfizer, Inc. 4,130 120
Schering-Plough Corp. 11,096 201
Wyeth 7,233 287
------------
TOTAL 1,091
------------
ROAD & RAIL 3.02%
Canadian National
Railway(a) 3,114 168
CSX Corp. 2,830 103
Union Pacific Corp. 2,930 185
------------
TOTAL 456
------------
SEMICONDUCTOR EQUIPMENT &
PRODUCTS 0.25%
Teradyne, Inc.* 2,211 37
------------
SOFTWARE 1.44%
Microsoft Corp. 7,750 217
------------
SPECIALTY RETAIL 1.25%
Gap, Inc. (The) 9,468 189
------------
TEXTILES & APPAREL 0.94%
NIKE, Inc. Class B 1,750 142
------------
TOTAL COMMON STOCKS
(Cost $14,222,230) 14,626
============
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 2.53%
REPURCHASE AGREEMENT 2.53%
Repurchase Agreement
dated 10/29/2004,
1.44% due 11/1/2004
with State Street
Bank & Trust Co.
collateralized by
$395,000 of
Federal National
Mortgage Assoc. at
5.50% due 7/14/2028;
value: $392,531;
proceeds: $380,918
(Cost $380,873) $ 381 $ 381
============
TOTAL INVESTMENTS IN
SECURITIES 99.44%
(Cost $14,603,103) 15,007
============
CASH AND OTHER ASSETS
IN EXCESS OF LIABILITIES 0.56% 85
------------
NET ASSETS 100.00% $ 15,092
============
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
ADR American Depository Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
40
<Page>
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
<Table>
<Caption>
INTERNATIONAL
ALL VALUE ALPHA CORE EQUITY
FUND FUND FUND
ASSETS:
Investments in securities, at cost $ 1,632,789,343 $ 135,030,762 $ 67,133,502
- ---------------------------------------------------------------------------------------------------------------
Investments in securities, at value $ 1,843,295,884 $ 139,974,770 $ 70,971,335
Foreign cash, at value (cost $3,480,218) - - 3,484,569
Receivables:
Interest and dividends 1,629,142 136 82,576
Investment securities sold 6,746,193 - 3,451,207
Capital shares sold 9,817,419 201,261 1,053,851
From affiliates - 77,143 -
From advisor - - 23,516
Deferred offering costs - - 12,152
Prepaid expenses and other assets 197,237 7,936 25,423
- ---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 1,861,685,875 140,261,246 79,104,629
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 7,377,927 - 4,933,868
Capital shares reacquired 1,685,759 191,820 134,585
Management fees 828,576 - 43,942
12b-1 distribution fees 962,969 88,835 31,341
Fund administration 60,194 - 2,344
Trustees' fees 162,090 6,367 315
To advisor - - 10,069
Accrued expenses and other liabilities 742,626 147,550 134,410
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 11,820,141 434,572 5,290,874
===============================================================================================================
NET ASSETS $ 1,849,865,734 $ 139,826,674 $ 73,813,755
===============================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $ 1,617,097,901 $ 145,000,725 $ 71,738,937
Undistributed net investment income 3,921,898 452,060 61,958
Accumulated net realized gain (loss) on investments
and foreign currency related transactions 18,339,394 (10,570,119) (1,828,660)
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 210,506,541 4,944,008 3,841,520
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,849,865,734 $ 139,826,674 $ 73,813,755
===============================================================================================================
NET ASSETS BY CLASS:
Class A Shares $ 1,268,285,207 $ 69,957,403 $ 58,484,096
Class B Shares $ 185,774,763 $ 41,770,499 $ 2,936,833
Class C Shares $ 389,160,935 $ 27,700,722 $ 9,291,054
Class P Shares $ 4,895,012 - $ 10,411
Class Y Shares $ 1,749,817 $ 398,050 $ 3,091,361
OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF
AUTHORIZED SHARES OF BENEFICIAL INTEREST):
Class A Shares 113,489,381 4,384,315 5,610,807
Class B Shares 17,137,059 2,701,661 283,364
Class C Shares 36,000,255 1,791,326 896,027
Class P Shares 440,377 - 1,000
Class Y Shares 155,987 24,945 295,774
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
SHARE (NET ASSETS DIVIDED BY OUTSTANDING SHARES):
Class A Shares-Net asset value $ 11.18 $ 15.96 $ 10.42
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 11.86 $ 16.93 $ 11.06
Class B Shares-Net asset value $ 10.84 $ 15.46 $ 10.36
Class C Shares-Net asset value $ 10.81 $ 15.46 $ 10.37
Class P Shares-Net asset value $ 11.12 - $ 10.41
Class Y Shares-Net asset value $ 11.22 $ 15.96 $ 10.45
===============================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<Page>
STATEMENTS OF ASSETS AND LIABILITIES (CONCLUDED)
OCTOBER 31, 2004
<Table>
<Caption>
INTERNATIONAL
OPPORTUNITIES LARGE-CAP
FUND VALUE FUND
ASSETS:
Investments in securities, at cost $ 151,748,958 $ 14,603,103
- ---------------------------------------------------------------------------------------------------------------
Investments in securities, at value $ 183,460,078 $ 15,006,594
Foreign cash, at value (cost $8,239,774) 8,498,316 -
Receivables:
Interest and dividends 279,882 20,730
Investment securities sold 6,483,073 79,367
Capital shares sold 238,469 133,217
From advisor - 19,415
Prepaid expenses and other assets 6,525 1,207
- ---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 198,966,343 15,260,530
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable upon return of securities on loan 33,549,380 -
Payables:
Investment securities purchased 5,781,294 95,742
Capital shares reacquired 54,241 20,888
Management fees 99,065 4,904
12b-1 distribution fees 58,463 5,077
Fund administration 5,239 490
Trustees' fees 11,550 825
To affiliate 28,800 -
Accrued expenses and other liabilities 191,816 40,253
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 39,779,848 168,179
===============================================================================================================
NET ASSETS $ 159,186,495 $ 15,092,351
===============================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $ 240,987,078 $ 14,404,974
Undistributed net investment income 28,433 86,064
Accumulated net realized gain (loss) on investments and foreign
currency related transactions (113,820,824) 197,822
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 31,991,808 403,491
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 159,186,495 $ 15,092,351
===============================================================================================================
NET ASSETS BY CLASS:
Class A Shares $ 67,313,620 $ 10,102,236
Class B Shares $ 21,962,223 $ 1,445,019
Class C Shares $ 12,766,414 $ 1,489,704
Class P Shares $ 928.15 $ 11,873
Class Y Shares $ 57,143,310 $ 2,043,519
OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF
AUTHORIZED SHARES OF BENEFICIAL INTEREST):
Class A Shares 7,005,149 855,825
Class B Shares 2,345,130 123,812
Class C Shares 1,370,337 127,461
Class P Shares 95.56 1,006
Class Y Shares 5,848,672 172,377
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY OUTSTANDING SHARES):
Class A Shares-Net asset value $ 9.61 $ 11.80
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 10.20 $ 12.52
Class B Shares-Net asset value $ 9.37 $ 11.67
Class C Shares-Net asset value $ 9.32 $ 11.69
Class P Shares-Net asset value $ 9.71 $ 11.80
Class Y Shares-Net asset value $ 9.77 $ 11.85
===============================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<Page>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2004
<Table>
<Caption>
INTERNATIONAL
ALL VALUE ALPHA CORE EQUITY
FUND FUND FUND*
INVESTMENT INCOME:
Dividends $ 23,523,762 $ 1,416,349 $ 921,021
Interest and other 799,020 16,815 22,340
Foreign withholding tax (72,984) - (105,123)
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 24,249,798 1,433,164 838,238
- ---------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees 7,794,331 327,809 288,617
12b-1 distribution plan-Class A 3,395,507 240,920 121,078
12b-1 distribution plan-Class B 1,466,888 428,366 13,975
12b-1 distribution plan-Class C 3,012,496 295,010 48,686
12b-1 distribution plan-Class P 12,845 - 40
Shareholder servicing 2,816,513 501,411 75,107
Professional 153,912 30,570 20,679
Reports to shareholders 275,948 18,144 7,434
Fund administration 547,546 16,808 15,393
Custody 61,731 5,763 246,349
Trustees' fees 19,646 2,646 723
Registration 182,533 42,188 6,835
Offering - - 86,686
Other 87,029 16,006 44,068
- ---------------------------------------------------------------------------------------------------------------
Gross expenses 19,826,925 1,925,641 975,670
Expense reductions (9,752) (1,104) (236)
Expenses assumed by advisor - - (278,740)
Expenses assumed by Underlying Funds - (615,624) -
Management fee waived - (327,809) -
- ---------------------------------------------------------------------------------------------------------------
NET EXPENSES 19,817,173 981,104 696,694
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 4,432,625 452,060 141,544
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN:
Capital gains received from Underlying Funds - 2,192,549 -
Net realized gain (loss) on investments
and foreign currency related transactions 19,574,189 (2,072,933) (1,992,691)
Net change in unrealized appreciation
(depreciation) on investments and translation
of assets and liabilities denominated in
foreign currencies 126,594,624 13,375,938 3,841,520
===============================================================================================================
NET REALIZED AND UNREALIZED GAIN 146,168,813 13,495,554 1,848,829
===============================================================================================================
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 150,601,438 $ 13,947,614 $ 1,990,373
===============================================================================================================
</Table>
*For the period December 15, 2003 (commencement of investment operations) to
October 31, 2004.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<Page>
STATEMENTS OF OPERATIONS (CONCLUDED)
FOR THE YEAR ENDED OCTOBER 31, 2004
<Table>
<Caption>
INTERNATIONAL
OPPORTUNITIES LARGE-CAP
FUND VALUE FUND
INVESTMENT INCOME:
Dividends $ 3,165,236 $ 161,855
Interest and other 42,882 8,694
Securities lending-net 238,840 -
Foreign withholding tax (234,897) (552)
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 3,212,061 169,997
- ---------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees 1,151,880 39,896
12b-1 distribution plan-Class A 225,119 27,728
12b-1 distribution plan-Class B 206,757 8,560
12b-1 distribution plan-Class C 118,824 7,364
12b-1 distribution plan-Class P 4 51
Shareholder servicing 580,998 11,308
Professional 34,165 15,346
Reports to shareholders 22,312 1,032
Fund administration 61,434 3,990
Custody 97,926 47,104
Trustees' fees 2,755 85
Registration 55,869 40,527
Offering - 62,748
Subsidy (see Note 3) 260,396 -
Other 5,980 2,502
- ---------------------------------------------------------------------------------------------------------------
Gross expenses 2,824,419 268,241
Expense reductions (1,200) (84)
Expenses assumed by advisor - (164,455)
- ---------------------------------------------------------------------------------------------------------------
NET EXPENSES 2,823,219 103,702
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 388,842 66,295
- ---------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments and foreign
currency related transactions 18,816,479 198,549
Net change in unrealized appreciation on investments
and translation of assets and liabilities denominated
in foreign currencies 3,110,081 275,213
===============================================================================================================
NET REALIZED AND UNREALIZED GAIN 21,926,560 473,762
===============================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 22,315,402 $ 540,057
===============================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 2004
<Table>
<Caption>
INTERNATIONAL
ALL VALUE ALPHA CORE EQUITY
INCREASE IN NET ASSETS FUND FUND FUND*
OPERATIONS:
Net investment income $ 4,432,625 $ 452,060 $ 141,544
Capital gains received from Underlying Funds - 2,192,549 -
Net realized gain (loss) on investment and
foreign currency related transactions 19,574,189 (2,072,933) (1,992,691)
Net change in unrealized appreciation
(depreciation) on investments and translation
of assets and liabilities denominated in
foreign currencies 126,594,624 13,375,938 3,841,520
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 150,601,438 13,947,614 1,990,373
===============================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (564,577) - -
Class P (791) - -
Class Y (36) - -
Net realized gain
Class A (5,324,535) - -
Class B (1,049,372) - -
Class C (2,125,180) - -
Class P (13,578) - -
Class Y (123) - -
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (9,078,192) - -
===============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 1,104,267,626 20,645,973 79,753,827
Reinvestment of distributions 7,831,700 - -
Cost of shares reacquired (157,444,389) (28,461,786) (7,930,445)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS 954,654,937 (7,815,813) 71,823,382
===============================================================================================================
NET INCREASE IN NET ASSETS 1,096,178,183 6,131,801 73,813,755
===============================================================================================================
NET ASSETS:
Beginning of year 753,687,551 133,694,873 -
- ---------------------------------------------------------------------------------------------------------------
END OF YEAR $ 1,849,865,734 $ 139,826,674 $ 73,813,755
===============================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $ 3,921,898 $ 452,060 $ 61,958
===============================================================================================================
</Table>
*For the period December 15, 2003 (commencement of investment operations) to
October 31, 2004.
SEE NOTES TO FINANCIAL STATEMENTS.
45
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
YEAR ENDED OCTOBER 31, 2004
<Table>
<Caption>
INTERNATIONAL
OPPORTUNITIES LARGE-CAP
INCREASE IN NET ASSETS FUND VALUE FUND
OPERATIONS:
Net investment income $ 388,842 $ 66,295
Net realized gain on investment and foreign
currency related transactions 18,816,479 198,549
Net change in unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 3,110,081 275,213
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 22,315,402 540,057
===============================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (964,614) (19,175)
Class B (207,009) (1,026)
Class C (160,464) (1,139)
Class P (12) (67)
Class Y (992,387) (83)
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (2,324,486) (21,490)
===============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 29,640,763 15,420,584
Reinvestment of distributions 2,290,948 20,347
Cost of shares reacquired (29,504,937) (3,419,287)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 2,426,774 12,021,644
===============================================================================================================
NET INCREASE IN NET ASSETS 22,417,690 12,540,211
===============================================================================================================
NET ASSETS:
Beginning of year 136,768,805 2,552,140
- ---------------------------------------------------------------------------------------------------------------
END OF YEAR $ 159,186,495 $ 15,092,351
===============================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $ 28,433 $ 86,064
===============================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 2003
<Table>
<Caption>
ALL VALUE ALPHA
INCREASE IN NET ASSETS FUND FUND
OPERATIONS:
Net investment loss $ (49,294) $ (241,018)
Capital gains received from Underlying Funds - 2,224,496
Net realized gain (loss) on investment 8,709,355 (12,911,153)
Net change in unrealized appreciation (depreciation)
on investments 98,646,882 47,133,769
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 107,306,943 36,206,094
===============================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain
Class A (4,249,997) (455,060)
Class B (1,079,982) (307,761)
Class C (2,554,556) (213,341)
Class P (8,336) -
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (7,892,871) (976,162)
===============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 380,083,034 19,941,639
Reinvestment of distributions 6,853,029 793,168
Cost of shares reacquired (82,203,980) (35,741,742)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 304,732,083 (15,006,935)
===============================================================================================================
NET INCREASE IN NET ASSETS 404,146,155 20,222,997
===============================================================================================================
NET ASSETS:
Beginning of year 349,541,396 113,471,876
- ---------------------------------------------------------------------------------------------------------------
END OF YEAR $ 753,687,551 $ 133,694,873
===============================================================================================================
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME $ (168,235) $ -
===============================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
YEAR ENDED OCTOBER 31, 2003
<Table>
<Caption>
INTERNATIONAL
OPPORTUNITIES LARGE-CAP
INCREASE IN NET ASSETS FUND VALUE FUND*
OPERATIONS:
Net investment income $ 1,328,106 $ 4,577
Net realized gain (loss) on investment and
foreign currency related transactions (7,252,730) 10,221
Net change in unrealized appreciation (depreciation)
on investments and translation of assets and liabilities
denominated in foreign currencies 41,544,219 128,278
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 35,619,595 143,076
===============================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (382,666) -
Class B (12,235) -
Class C (48,712) -
Class P (4) -
Class Y (572,917) -
- ---------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,016,534) -
===============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 49,149,289 2,562,220
Reinvestment of distributions 996,745 -
Cost of shares reacquired (59,701,584) (153,156)
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS (9,555,550) 2,409,064
===============================================================================================================
NET INCREASE IN NET ASSETS 25,047,511 2,552,140
===============================================================================================================
NET ASSETS:
Beginning of year 111,721,294 -
- ---------------------------------------------------------------------------------------------------------------
END OF YEAR $ 136,768,805 $ 2,552,140
===============================================================================================================
UNDISTRIBUTED NET INVESTMENT INCOME $ 1,706,625 $ 6,045
===============================================================================================================
</Table>
*For the period June 23, 2003 (commencement of investment operations) to October
31, 2003.
SEE NOTES TO FINANCIAL STATEMENTS.
48
<Page>
FINANCIAL HIGHLIGHTS
ALL VALUE FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 9.93 $ 8.22 $ 9.83 $ 11.53 $ 10.87
============ ============ ============ ============ ============
Investment operations:
Net investment income(a) .06 .02 .01 .04 .05
Net realized and unrealized gain (loss) 1.30 1.87 (.67) (.83) 1.17
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.36 1.89 (.66) (.79) 1.22
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (.01) - (.02) (.03) -
Net realized gain (.10) (.18) (.93) (.88) (.56)
------------ ------------ ------------ ------------ ------------
Total distributions (.11) (.18) (.95) (.91) (.56)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 11.18 $ 9.93 $ 8.22 $ 9.83 $ 11.53
============ ============ ============ ============ ============
Total Return(b) 13.80% 23.46% (7.95)% (7.26)% 11.44%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.24% 1.38% 1.42% 1.42% 1.35%
Expenses, excluding expense
reductions 1.24% 1.38% 1.42% 1.43% 1.36%
Net investment income .53% .25% .13% .40% .48%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 1,268,285 $ 452,098 $ 189,698 $ 166,406 $ 136,038
Portfolio turnover rate 21.92% 36.39% 79.39% 103.11% 65.06%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALL VALUE FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 9.69 $ 8.07 $ 9.70 $ 11.42 $ 10.85
============ ============ ============ ============ ============
Investment operations:
Net investment loss(a) (.01) (.03) (.04) (.03) (.02)
Net realized and unrealized gain (loss) 1.26 1.83 (.66) (.81) 1.15
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.25 1.80 (.70) (.84) 1.13
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income - - - -(e) -
Net realized gain (.10) (.18) (.93) (.88) (.56)
------------ ------------ ------------ ------------ ------------
Total distributions (.10) (.18) (.93) (.88) (.56)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 10.84 $ 9.69 $ 8.07 $ 9.70 $ 11.42
============ ============ ============ ============ ============
Total Return(b) 12.98% 22.77% (8.51)% (7.86)% 10.80%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.87% 2.00% 2.03% 2.03% 2.00%
Expenses, excluding expense
reductions 1.87% 2.00% 2.03% 2.04% 2.01%
Net investment loss (.10)% (.37)% (.48)% (.27)% (.17)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 185,775 $ 100,272 $ 47,423 $ 39,188 $ 17,453
Portfolio turnover rate 21.92% 36.39% 79.39% 103.11% 65.06%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALL VALUE FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 9.66 $ 8.05 $ 9.67 $ 11.38 $ 10.81
============ ============ ============ ============ ============
Investment operations:
Net investment loss(a) (.01) (.03) (.03) (.01) (.02)
Net realized and unrealized gain (loss) 1.26 1.82 (.66) (.82) 1.15
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.25 1.79 (.69) (.83) 1.13
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income - - - -(e) -
Net realized gain (.10) (.18) (.93) (.88) (.56)
------------ ------------ ------------ ------------ ------------
Total distributions (.10) (.18) (.93) (.88) (.56)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 10.81 $ 9.66 $ 8.05 $ 9.67 $ 11.38
============ ============ ============ ============ ============
Total Return(b) 13.02% 22.70% (8.42)% (7.70)% 10.74%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.87% 2.00% 1.89% 1.98% 2.00%
Expenses, excluding expense
reductions 1.87% 2.00% 1.89% 1.99% 2.01%
Net investment loss (.10)% (.37)% (.34)% (.14)% (.17)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 389,161 $ 200,025 $ 112,052 $ 112,299 $ 112,776
Portfolio turnover rate 21.92% 36.39% 79.39% 103.11% 65.06%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALL VALUE FUND
<Table>
<Caption>
YEAR ENDED 10/31 8/15/2001(c)
------------------------------------------------ TO
2004 2003 2002 10/31/2001
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.88 $ 8.19 $ 9.83 $ 10.85
============= ============= ============= =============
Investment operations:
Net investment income (loss)(a) .05 .01 -(e) -(e)
Net realized and unrealized gain (loss) 1.30 1.86 (.66) (1.02)
------------- ------------- ------------- -------------
Total from investment operations 1.35 1.87 (.66) (1.02)
------------- ------------- ------------- -------------
Distributions to shareholders from:
Net investment income (.01) - (.05) -
Net realized gain (.10) (.18) (.93) -
------------- ------------- ------------- -------------
Total distributions (.11) (.18) (.98) -
------------- ------------- ------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.12 $ 9.88 $ 8.19 $ 9.83
============= ============= ============= =============
Total Return(b) 13.71% 23.30% (8.04)% (9.40)%(d)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions 1.32%+ 1.45% 1.48% .31%(d)
Expenses, excluding expense reductions 1.32%+ 1.45% 1.48% .31%(d)
Net investment income (loss) .45%+ .18% .07% (.01)%(d)
<Caption>
YEAR ENDED 10/31 8/15/2001(c)
------------------------------------------------ TO
SUPPLEMENTAL DATA: 2004 2003 2002 10/31/2001
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 4,895 $ 1,280 $ 368 $ 1
Portfolio turnover rate 21.92% 36.39% 79.39% 103.11%
=====================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
ALL VALUE FUND
<Table>
<Caption>
3/31/2003(c)
YEAR ENDED TO
10/31/2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.95 $ 7.83
============= =============
Investment operations:
Net investment income(a) .10 .03
Net realized and unrealized gain 1.30 2.09
------------- -------------
Total from investment operations 1.40 2.12
------------- -------------
Distributions to shareholders from:
Net investment income (.03) -
Net realized gain (.10) -
------------- -------------
Total distributions (.13) -
------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.22 $ 9.95
============= =============
Total Return(b) 14.18% 27.08%(d)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions .87%+ 1.00%(d)+
Expenses, excluding expense reductions .87%+ 1.00%(d)+
Net investment income .90%+ .63%(d)+
<Caption>
3/31/2003(c)
YEAR ENDED TO
SUPPLEMENTAL DATA: 10/31/2004 10/31/2003
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 1,750 $ 13
Portfolio turnover rate 21.92% 36.39%
=====================================================================================================================
</Table>
+ The ratios have been determined on a Fund basis.
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Commencement of offering of class shares.
(d) Not annualized.
(e) Amount is less than $.01.
SEE NOTES TO FINANCIAL STATEMENTS.
53
<Page>
FINANCIAL HIGHLIGHTS
ALPHA FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 14.38 $ 10.62 $ 12.96 $ 17.46 $ 15.21
============ ============ ============ ============ ============
Investment operations:
Net investment income (loss)(b) .10 .02 (.05) (.05) (.03)
Net realized and unrealized gain (loss) 1.48 3.83 (1.70) (3.82) 2.60
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.58 3.85 (1.75) (3.87) 2.57
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income - - - (.30) (.21)
Net realized gain - (.09) (.59) (.33) (.11)
------------ ------------ ------------ ------------ ------------
Total distributions - (.09) (.59) (.63) (.32)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 15.96 $ 14.38 $ 10.62 $ 12.96 $ 17.46
============ ============ ============ ============ ============
Total Return(c) 10.99% 36.59% (14.41)% (22.67)% 17.10%
RATIOS TO AVERAGE NET ASSETS*
Expenses, including expense
reductions .36% .39% .37% .36% .40%
Expenses, excluding expense
reductions 1.03% 1.45% 1.37% 1.34% 1.33%
Net investment income (loss) .63% .13% (.34)% (.32)% (.16)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 69,957 $ 62,383 $ 53,121 $ 70,785 $ 96,652
Portfolio turnover rate 2.59% 2.47% 1.75% 15.34% 1.54%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALPHA FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 14.02 $ 10.43 $ 12.81 $ 17.27 $ 15.05
============ ============ ============ ============ ============
Investment operations:
Net investment income (loss)(b) .01 (.06) (.12) (.14) (.13)
Net realized and unrealized gain (loss) 1.43 3.74 (1.67) (3.79) 2.58
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.44 3.68 (1.79) (3.93) 2.45
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income - - - (.20) (.12)
Net realized gain - (.09) (.59) (.33) (.11)
------------ ------------ ------------ ------------ ------------
Total distributions - (.09) (.59) (.53) (.23)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 15.46 $ 14.02 $ 10.43 $ 12.81 $ 17.27
============ ============ ============ ============ ============
Total Return(c) 10.27% 35.62% (14.91)% (23.21)% 16.40%
RATIOS TO AVERAGE NET ASSETS*
Expenses, including expense
reductions 1.01% 1.04% 1.00% 1.00% 1.00%
Expenses, excluding expense
reductions 1.68% 2.10% 2.00% 1.98% 1.93%
Net investment income (loss) .03% (.52)% (.97)% (.96)% (.75)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 41,771 $ 42,342 $ 35,661 $ 50,377 $ 70,300
Portfolio turnover rate 2.59% 2.47% 1.75% 15.34% 1.54%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALPHA FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 14.02 $ 10.43 $ 12.80 $ 17.25 $ 15.04
============ ============ ============ ============ ============
Investment operations:
Net investment income (loss)(b) .01 (.06) (.10) (.14) (.12)
Net realized and unrealized gain (loss) 1.43 3.74 (1.68) (3.78) 2.56
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.44 3.68 (1.78) (3.92) 2.44
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income - - - (.20) (.12)
Net realized gain - (.09) (.59) (.33) (.11)
------------ ------------ ------------ ------------ ------------
Total distributions - (.09) (.59) (.53) (.23)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 15.46 $ 14.02 $ 10.43 $ 12.80 $ 17.25
============ ============ ============ ============ ============
Total Return(c) 10.27% 35.62% (14.77)% (23.25)% 16.34%
RATIOS TO AVERAGE NET ASSETS*
Expenses, including expense
reductions 1.01% 1.04% .89% 1.00% 1.00%
Expenses, excluding expense
reductions 1.68% 2.10% 1.89% 1.98% 1.93%
Net investment income (loss) .03% (.52)% (.86)% (.97)% (.70)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 27,701 $ 28,970 $ 24,690 $ 35,395 $ 44,977
Portfolio turnover rate 2.59% 2.47% 1.75% 15.34% 1.54%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
ALPHA FUND
<Table>
<Caption>
10/20/2004(a)
TO
10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.65
=============
Investment operations:
Net investment income(b) -(e)
Net realized and unrealized gain .31
-------------
Total from investment operations .31
-------------
NET ASSET VALUE, END OF PERIOD $ 15.96
=============
Total Return(c) 2.18%(d)
RATIOS TO AVERAGE NET ASSETS*
Expenses, including expense reductions .00%(d)
Expenses, excluding expense reductions .00%(d)
Net investment income .00%(d)(f)
<Caption>
10/20/2004(a)
TO
SUPPLEMENTAL DATA: 10/31/2004
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 398
Portfolio turnover rate 2.59%
=================================================================================================
</Table>
* Does not include expenses of the underlying funds in which the Fund
invests.
(a) Commencement of offering of class shares.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(d) Not annualized.
(e) Amount is less than $.01.
(f) Amount is less than .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
57
<Page>
FINANCIAL HIGHLIGHTS
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
12/15/2003(a)
TO
10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
=============
Unrealized appreciation on investments .15
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15
=============
Investment operations:
Net investment income(b) .04
Net realized and unrealized gain .23
-------------
Total from investment operations .27
-------------
NET ASSET VALUE, END OF PERIOD $ 10.42
=============
Total Return(c) 1.50%(d)(e)
Total Return(c) 2.66%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed 1.50%(d)
Expenses, excluding expense reductions and expenses assumed 2.13%(d)
Net investment income .40%(d)
<Caption>
12/15/2003(a)
TO
SUPPLEMENTAL DATA: 10/31/2004
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 58,484
Portfolio turnover rate 142.16%
=================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
12/15/2003(a)
TO
10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
=============
Unrealized appreciation on investments .15
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15
=============
Investment operations:
Net investment loss(b) (.01)
Net realized and unrealized gain .22
-------------
Total from investment operations .21
-------------
NET ASSET VALUE, END OF PERIOD $ 10.36
=============
Total Return(c) 1.50%(d)(e)
Total Return(c) 2.07%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed 2.04%(d)
Expenses, excluding expense reductions and expenses assumed 2.67%(d)
Net investment loss (.14)%(d)
<Caption>
12/15/2003(a)
TO
SUPPLEMENTAL DATA: 10/31/2004
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 2,937
Portfolio turnover rate 142.16%
=================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
12/15/2003(a)
TO
10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
=============
Unrealized appreciation on investments .15
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15
=============
Investment operations:
Net investment loss(b) (.01)
Net realized and unrealized gain .23
-------------
Total from investment operations .22
-------------
NET ASSET VALUE, END OF PERIOD $ 10.37
=============
Total Return(c) 1.50%(d)(e)
Total Return(c) 2.17%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed 2.04%(d)
Expenses, excluding expense reductions and expenses assumed 2.67%(d)
Net investment loss (.14)%(d)
<Caption>
12/15/2003(a)
TO
SUPPLEMENTAL DATA: 10/31/2004
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 9,291
Portfolio turnover rate 142.16%
=================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
12/15/2003(a)
TO
10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
=============
Unrealized appreciation on investments .15
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15
=============
Investment operations:
Net investment income(b) .04
Net realized and unrealized gain .22
-------------
Total from investment operations .26
-------------
NET ASSET VALUE, END OF PERIOD $ 10.41
=============
Total Return(c) 1.50%(d)(e)
Total Return(c) 2.56%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed 1.55%(d)+
Expenses, excluding expense reductions and expenses assumed 2.18%(d)+
Net investment income .35%(d)+
<Caption>
12/15/2003(a)
TO
SUPPLEMENTAL DATA: 10/31/2004
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 11
Portfolio turnover rate 142.16%
=================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
12/15/2003(a)
TO
10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
=============
Unrealized appreciation on investments .15
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15
=============
Investment operations:
Net investment income(b) .08
Net realized and unrealized gain .22
-------------
Total from investment operations .30
-------------
NET ASSET VALUE, END OF PERIOD $ 10.45
=============
Total Return(c) 1.50%(d)(e)
Total Return(c) 2.96%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed 1.16%(d)
Expenses, excluding expense reductions and expenses assumed 1.79%(d)
Net investment income .74%(d)
<Caption>
12/15/2003(a)
TO
SUPPLEMENTAL DATA: 10/31/2004
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 3,091
Portfolio turnover rate 142.16%
=================================================================================================
</Table>
+ The ratios have been determined on a Fund basis.
(a) Commencement of investment operations is December 15, 2003; SEC effective
date is December 31, 2003; date shares first became available to the public
is January 2, 2004.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(d) Not annualized.
(e) Total return for the period 12/15/2003 through 12/31/2003.
(f) Total return for the period 12/31/2003 through 10/31/2004.
SEE NOTES TO FINANCIAL STATEMENTS.
62
<Page>
FINANCIAL HIGHLIGHTS
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 8.41 $ 6.29 $ 7.78 $ 14.48 $ 13.90
============ ============ ============ ============ ============
Investment operations:
Net investment income (loss)(a) .02 .08 .03 (.06) (.08)
Net realized and unrealized gain (loss) 1.33 2.09 (1.52) (6.56) 1.54
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.35 2.17 (1.49) (6.62) 1.46
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (.15) (.05) - - (.06)
Net realized gain - - - (.08) (.82)
------------ ------------ ------------ ------------ ------------
Total distributions (.15) (.05) - (.08) (.88)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 9.61 $ 8.41 $ 6.29 $ 7.78 $ 14.48
============ ============ ============ ============ ============
Total Return(b) 16.31% 35.07% (19.16)% (45.92)% 10.97%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.83% 2.11% 1.89% 2.07% 1.80%
Expenses, excluding expense
reductions 1.83% 2.11% 1.89% 2.08% 1.80%
Net investment income (loss) .26% 1.11% .50% (.55)% (.53)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 67,314 $ 55,230 $ 44,975 $ 71,591 $ 135,701
Portfolio turnover rate 75.56% 72.36% 82.38% 65.26% 35.14%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 8.20 $ 6.13 $ 7.65 $ 14.31 $ 13.75
============ ============ ============ ============ ============
Investment operations:
Net investment income (loss)(a) (.04) .03 (.02) (.11) (.17)
Net realized and unrealized gain (loss) 1.30 2.05 (1.50) (6.47) 1.55
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.26 2.08 (1.52) (6.58) 1.38
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (.09) (.01) - - -(c)
Net realized gain - - - (.08) (.82)
------------ ------------ ------------ ------------ ------------
Total distributions (.09) (.01) - (.08) (.82)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 9.37 $ 8.20 $ 6.13 $ 7.65 $ 14.31
============ ============ ============ ============ ============
Total Return(b) 15.61% 33.89% (19.87)% (46.19)% 10.42%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 2.48% 2.73% 2.69% 2.59% 2.35%
Expenses, excluding expense
reductions 2.48% 2.73% 2.69% 2.60% 2.36%
Net investment income (loss) (.39)% .49% (.30)% (1.07)% (1.09)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 21,962 $ 17,978 $ 13,174 $ 17,743 $ 33,124
Portfolio turnover rate 75.56% 72.36% 82.38% 65.26% 35.14%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
64
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 8.19 $ 6.12 $ 7.61 $ 14.30 $ 13.75
============ ============ ============ ============ ============
Investment operations:
Net investment income (loss)(a) (.04) .07 -(e) (.13) (.17)
Net realized and unrealized gain (loss) 1.30 2.04 (1.49) (6.48) 1.54
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.26 2.11 (1.49) (6.61) 1.37
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (.13) (.04) - - -(c)
Net realized gain - - - (.08) (.82)
------------ ------------ ------------ ------------ ------------
Total distributions (.13) (.04) - (.08) (.82)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 9.32 $ 8.19 $ 6.12 $ 7.61 $ 14.30
============ ============ ============ ============ ============
Total Return(b) 15.61% 34.67% (19.58)% (46.43)% 10.35%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 2.48% 2.73% 2.36% 2.83% 2.35%
Expenses, excluding expense
reductions 2.48% 2.73% 2.36% 2.84% 2.36%
Net investment income (loss) (.39)% .99% .03% (1.32)% (1.10)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 12,766 $ 10,323 $ 7,823 $ 11,399 $ 25,546
Portfolio turnover rate 75.56% 72.36% 82.38% 65.26% 35.14%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
65
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 8.47 $ 6.31 $ 7.82 $ 14.51 $ 13.91
============ ============ ============ ============ ============
Investment operations:
Net investment income (loss)(a) .01 .10 .03 (.06) (.08)
Net realized and unrealized gain (loss) 1.35 2.10 (1.54) (6.55) 1.55
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.36 2.20 (1.51) (6.61) 1.47
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (.12) (.04) - - (.05)
Net realized gain - - - (.08) (.82)
------------ ------------ ------------ ------------ ------------
Total distributions (.12) (.04) - (.08) (.87)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 9.71 $ 8.47 $ 6.31 $ 7.82 $ 14.51
============ ============ ============ ============ ============
Total Return(b) 16.37% 35.17% (19.31)% (45.75)% 11.03%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.93%+ 2.18%+ 2.14% 2.04% 1.80%
Expenses, excluding expense
reductions 1.93%+ 2.18%+ 2.14% 2.05% 1.80%
Net investment income (loss) .16%+ 1.00%+ .25% (.55)% (.51)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 1 $ 1 $ 1 $ 1 $ 1
Portfolio turnover rate 75.56% 72.36% 82.38% 65.26% 35.14%
================================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 8.53 $ 6.39 $ 7.90 $ 14.61 $ 14.00
============ ============ ============ ============ ============
Investment operations:
Net investment income (loss)(a) .06 .10 .06 (.01) (.01)
Net realized and unrealized gain (loss) 1.34 2.12 (1.57) (6.62) 1.54
------------ ------------ ------------ ------------ ------------
Total from investment operations 1.40 2.22 (1.51) (6.63) 1.53
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income (.16) (.08) - - (.10)
Net realized gain - - - (.08) (.82)
------------ ------------ ------------ ------------ ------------
Total distributions (.16) (.08) - (.08) (.92)
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF YEAR $ 9.77 $ 8.53 $ 6.39 $ 7.90 $ 14.61
============ ============ ============ ============ ============
Total Return(b) 16.73% 35.22% (19.11)% (45.58)% 11.45%
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense
reductions 1.48% 1.74% 1.69% 1.59% 1.35%
Expenses, excluding expense
reductions 1.48% 1.74% 1.69% 1.60% 1.37%
Net investment income (loss) .61% 1.47% .70% (.06)% (.09)%
<Caption>
YEAR ENDED 10/31
----------------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 57,143 $ 53,237 $ 45,748 $ 60,227 $ 79,833
Portfolio turnover rate 75.56% 72.36% 82.38% 65.26% 35.14%
================================================================================================================================
</Table>
+ The ratios have been determined on a Fund basis.
(a) Calculated using average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Amount is less than $.01.
SEE NOTES TO FINANCIAL STATEMENTS.
67
<Page>
FINANCIAL HIGHLIGHTS
LARGE-CAP VALUE FUND
<Table>
<Caption>
6/23/2003(a)
YEAR ENDED TO
10/31/2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.73 $ 10.00
============= =============
Unrealized depreciation on investments (.10)
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90
=============
Investment operations:
Net investment income(b) .09 .03
Net realized and unrealized gain 1.05 .80
------------- -------------
Total from investment operations 1.14 .83
------------- -------------
Distributions to shareholders from net investment income (.07) -
------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.80 $ 10.73
============= =============
Total Return(c) (1.00)%(d)(e)
Total Return(c) 10.74% 8.38%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed .95% .33%(d)+
Expenses, excluding expense reductions and expenses assumed 2.59% 7.12%(d)+
Net investment income .75% .27%(d)+
<Caption>
6/23/2003(a)
YEAR ENDED TO
SUPPLEMENTAL DATA: 10/31/2004 10/31/2003
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 10,102 $ 2,271
Portfolio turnover rate 30.53% 8.87%
- ---------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP VALUE FUND
<Table>
<Caption>
6/23/2003(a)
YEAR ENDED TO
10/31/2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.68 $ 10.00
============= =============
Unrealized depreciation on investments (.11)
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.89
=============
Investment operations:
Net investment income(b) .01 -(g)
Net realized and unrealized gain 1.05 .79
------------- -------------
Total from investment operations 1.06 .79
------------- -------------
Distributions to shareholders from net investment income (.07) -
------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.67 $ 10.68
============= =============
Total Return(c) (1.10)%(d)(e)
Total Return(c) 10.02% 7.99%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed 1.60% .56%(d)+
Expenses, excluding expense reductions and expenses assumed 3.24% 7.35%(d)+
Net investment income .10% .04%(d)+
<Caption>
6/23/2003(a)
YEAR ENDED TO
SUPPLEMENTAL DATA: 10/31/2004 10/31/2003
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 1,445 $ 111
Portfolio turnover rate 30.53% 8.87%
=====================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP VALUE FUND
<Table>
<Caption>
6/23/2003(a)
YEAR ENDED TO
10/31/2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.69 $ 10.00
============= =============
Unrealized depreciation on investments (.11)
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.89
=============
Investment operations:
Net investment income(b) .01 -(g)
Net realized and unrealized gain 1.06 .80
------------- -------------
Total from investment operations 1.07 .80
------------- -------------
Distributions to shareholders from net investment income (.07) -
------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.69 $ 10.69
============= =============
Total Return(c) (1.10)%(d)(e)
Total Return(c) 10.07% 8.09%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed 1.60% .56%(d)+
Expenses, excluding expense reductions and expenses assumed 3.24% 7.35%(d)+
Net investment income .10% .04%(d)+
<Caption>
6/23/2003(a)
YEAR ENDED TO
SUPPLEMENTAL DATA: 10/31/2004 10/31/2003
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 1,490 $ 148
Portfolio turnover rate 30.53% 8.87%
=====================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP VALUE FUND
<Table>
<Caption>
6/23/2003(a)
YEAR ENDED TO
10/31/2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.73 $ 10.00
============= =============
Unrealized depreciation on investments (.10)
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90
=============
Investment operations:
Net investment income(b) .07 .02
Net realized and unrealized gain 1.07 .81
------------- -------------
Total from investment operations 1.14 .83
------------- -------------
Distributions to shareholders from net investment income (.07) -
------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.80 $ 10.73
============= =============
Total Return(c) (1.00)%(d)(e)
Total Return(c) 10.65% 8.38%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed 1.05% .37%(d)+
Expenses, excluding expense reductions and expenses assumed 2.69% 7.16%(d)+
Net investment income .65% .23%(d)+
<Caption>
6/23/2003(a)
YEAR ENDED TO
SUPPLEMENTAL DATA: 10/31/2004 10/31/2003
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 12 $ 11
Portfolio turnover rate 30.53% 8.87%
=====================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
LARGE-CAP VALUE FUND
<Table>
<Caption>
6/23/2003(a)
YEAR ENDED TO
10/31/2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.75 $ 10.00
============= =============
Unrealized depreciation on investments (.10)
-------------
NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90
=============
Investment operations:
Net investment income(b) .13 .04
Net realized and unrealized gain 1.05 .81
------------- -------------
Total from investment operations 1.18 .85
------------- -------------
Distributions to shareholders from net investment income (.08) -
------------- -------------
NET ASSET VALUE, END OF PERIOD $ 11.85 $ 10.75
============= =============
Total Return(c) (1.00)%(d)(e)
Total Return(c) 11.09% 8.59%(d)(f)
RATIOS TO AVERAGE NET ASSETS
Expenses, including expense reductions and expenses assumed .60% .21%(d)+
Expenses, excluding expense reductions and expenses assumed 2.24% 7.00%(d)+
Net investment income 1.10% .39%(d)+
<Caption>
6/23/2003(a)
YEAR ENDED TO
SUPPLEMENTAL DATA: 10/31/2004 10/31/2003
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 2,043 $ 11
Portfolio turnover rate 30.53% 8.87%
=====================================================================================================================
</Table>
+ The ratios have been determined on a Fund basis.
(a) Commencement of investment operations; SEC effective date and date shares
first became available to the public is June 30, 2003.
(b) Calculated using average shares outstanding during the period.
(c) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(d) Not annualized.
(e) Total return for the period 6/23/2003 through 6/30/2003.
(f) Total return for the period 6/30/2003 through 10/31/2003.
(g) Amount is less than $.01
SEE NOTES TO FINANCIAL STATEMENTS.
72
<Page>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Lord Abbett Securities Trust (the "Trust") is registered under the Investment
Company Act of 1940 (the "Act") as a diversified open-end management investment
company organized as a Delaware business trust on February 26, 1993. The Trust
currently consists of seven funds. This report covers the following five funds
and their respective classes (separately, a "Fund" and collectively, the
"Funds"): Lord Abbett All Value Fund ("All Value Fund"), Class A, B, C, P and Y
shares; Alpha Series ("Alpha Fund"), Class A, B, C and Y shares; Lord Abbett
International Core Equity Fund ("International Core Equity Fund"), Class A, B,
C, P and Y shares; Lord Abbett International Opportunities Fund ("International
Opportunities Fund"), Class A, B, C, P, and Y shares; and Lord Abbett Large-Cap
Value Fund ("Large-Cap Value Fund"), Class A, B, C, P and Y shares.
International Core Equity Fund commenced investment operations on December 15,
2003 and was capitalized with a $5,040,000 investment from Lord, Abbett & Co.
LLC ("Lord Abbett"). Shares first became available to the public on January 2,
2004.
All Value Fund's investment objective is long-term growth of capital and income
without excessive fluctuations in market value. Alpha Fund's, International
Opportunities Fund's, and International Core Equity Fund's investment objective
is long-term capital appreciation. Alpha Fund invests in other funds
("Underlying Funds") managed by Lord Abbett. Large-Cap Value Fund's investment
objective is to seek a high level of total return.
Each class of shares has different expenses and dividends. A front-end sales
charge is normally added to the Net Asset Value ("NAV") for Class A shares.
There is no front-end sales charge in the case of the Class B, C, P and Y
shares, although there may be a contingent deferred sales charge ("CDSC") as
follows: certain redemptions of Class A shares made within 24 months (12 months
if shares were purchased on or after November 1, 2004) following certain
purchases made without a sales charge; Class B shares redeemed before the sixth
anniversary of purchase; and Class C shares redeemed before the first
anniversary of purchase. Class B shares will convert to Class A shares on the
eighth anniversary of the original purchase of Class B shares.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) INVESTMENT VALUATION-Securities traded on any recognized U.S. or non-U.S.
exchange or on NASDAQ, Inc. are valued at the last sale price or official
closing price on the exchange or system on which they are principally
traded. Unlisted equity securities are valued at last quoted sale price or,
if no sale price is available, at the mean between the most recently quoted
bid and asked prices. Fixed income securities are valued at the mean
between the bid and asked price on the basis of prices supplied by
independent pricing services, which reflect broker/dealer supplied
valuations and electronic data processing techniques. Exchange-traded
options and futures contracts are valued at the last sale price in the
market where they are principally traded. If no sale has occurred, the mean
between the most recently quoted bid and asked price is used. Securities
for which market quotations are not readily
73
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
available are valued at fair value as determined by management and approved
in good faith by the Board of Trustees. Short-term securities with 60 days
or less remaining to maturity are valued using the amortized cost method,
which approximates current market value.
(b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date
that the securities are purchased or sold (trade date). Realized gains and
losses on sales of portfolio securities are calculated using the
identified-cost method. Realized and unrealized gains or losses are
allocated to each class of shares based upon the relative proportion of net
assets at the beginning of the day.
(c) INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Discounts are accreted
and premiums are amortized using the effective interest method. Investment
income is allocated to each class of shares based upon the relative
proportion of net assets at the beginning of the day.
(d) FEDERAL TAXES-It is the policy of each Fund to meet the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its taxable net
investment income and capital gains to its shareholders. Therefore, no
Federal income tax provision is required.
(e) EXPENSES-Expenses incurred by the Trust that do not specifically relate to
an individual fund are generally allocated to the Funds within the Trust on
a pro rata basis. 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 A, B, C and P shares bear all
expenses and fees relating to their respective 12b-1 Distribution Plans.
(f) FOREIGN TRANSACTIONS-The books and records of International Opportunities
Fund and International Core Equity Fund are maintained in U.S. dollars and
transactions denominated in foreign currencies are recorded in each Fund's
records at the rate prevailing when earned or recorded. Asset and liability
accounts that are denominated in foreign currencies are adjusted to reflect
current exchange rates. The resultant exchange gains and losses are
included as net realized gain (loss) on investments and foreign currency
related transactions on each Fund's Statement of Operations. Each Fund does
not isolate that portion of the results of operations arising as a result
of changes in the foreign exchange rates from the changes in market prices
of the securities.
(g) OFFERING COSTS-Lord Abbett incurred initial offering costs on behalf of
Large-Cap Value Fund and International Core Equity Fund which are
reimbursed by each Fund in the full amount thereof. Such expenses were
deferred and amortized on the straight-line method over a period of one
year from the commencement of investment operations.
(h) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS-International Opportunities
Fund and International Core Equity Fund may enter into forward foreign
currency exchange contracts in order to reduce their exposure to changes in
foreign currency exchange rates on their foreign portfolio holdings and to
lock in the U.S. dollar cost of firm purchase and sale commitments for
securities denominated in foreign currencies. A forward foreign currency
exchange contract is a commitment to purchase or sell a foreign currency at
a future date at a negotiated rate. The contracts are valued daily at
forward exchange rates and any unrealized gain or loss is included in net
unrealized appreciation (depreciation) on investments and translation of
assets and liabilities denominated in foreign currencies on
74
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
each Fund's Statement of Operations. The gain or loss arising from the
difference between the U.S. dollar cost of the original contract and the
value of the foreign currency in U.S. dollars upon closing of such
contracts is included in net realized gain or loss on investments and
foreign currency related transactions on each Fund's Statement of
Operations. As of October 31, 2004, there were no forward foreign currency
exchange contracts outstanding.
(i) SECURITIES LENDING-Each Fund may lend securities to member banks of the
Federal Reserve System and to registered broker/dealers approved by the
Fund. The loans are collateralized at all times by cash and/or U.S.
Treasury securities in an amount at least equal to 102% of the market value
of domestic securities loaned (105% in the case of foreign securities
loaned). The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
Lending portfolio securities could result in a loss or delay in recovering
the Fund's securities if the borrower defaults.
(j) REPURCHASE AGREEMENTS-Each Fund may enter into repurchase agreements with
respect to securities. A repurchase agreement is a transaction in which the
Fund acquires a security and simultaneously commits to resell that security
to the seller (a bank or securities dealer) at an agreed-upon price on an
agreed-upon date. Each Fund requires at all times that the repurchase
agreement be collateralized by cash, or by securities of the U.S.
Government, its agencies, its instrumentalities, or U.S. Government
sponsored enterprises having a value equal to, or in excess of, the value
of the repurchase agreement (including accrued interest). If the seller of
the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, the
Fund may incur a loss upon disposition of the securities.
(k) WHEN-ISSUED OR FORWARD TRANSACTIONS-Each Fund may purchase portfolio
securities on a when-issued or forward basis. When-issued or forward
transactions involve a commitment by the Fund to purchase securities, with
payment and delivery ("settlement") to take place in the future, in order
to secure what is considered to be an advantageous price at the time of
entering the transaction. During the period between purchase and
settlement, the value of the securities will fluctuate and assets
consisting of cash and/or marketable securities (normally short-term U.S.
Government or U.S. Government sponsored enterprises securities) marked to
market daily in an amount sufficient to make payment at settlement will be
segregated at the Fund's custodian in order to pay for the commitment. At
the time the Fund makes the commitment to purchase a security on a
when-issued basis, it will record the transaction and reflect the liability
for the purchase and the value of the security in determining its net asset
value. Each Fund, generally, has the ability to close out a purchase
obligation on or before the settlement date rather than take delivery of
the security. Under no circumstances will settlement for such securities
take place more than 120 days after the purchase date.
(l) REDEMPTION FEES-International Opportunities Fund and International Core
Equity Fund impose a redemption fee of 2.00% of the NAV of the shares being
redeemed or exchanged, if the redemption or exchange occurs within ten
business days after such shares were acquired. This does not include shares
acquired through the reinvestment of dividends or other distributions or
certain automatic or systematic investment, exchange or withdrawal plans.
The fees are retained by each Fund and are included in Paid-in Capital on
each Fund's Statement of Assets and Liabilities and are included in Net
Proceeds From Sales of Shares on
75
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
each Fund's Statement of Changes in Net Assets. During the year ended October
31, 2004, redemption fees were received as follows:
<Table>
<Caption>
REDEMPTION FEES
------------------------------------------------------------------------
International Core Equity Fund $ 8,258
International Opportunities Fund 1,825
</Table>
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES
The Trust has a management agreement with Lord Abbett pursuant to which Lord
Abbett supplies the Trust with investment management services and executive and
other personnel, pays the remuneration of officers, provides office space and
pays for ordinary and necessary office and clerical expenses relating to
research and statistical work and supervision of the Trust's investment
portfolios.
The management fees are based on average daily net assets at the following
annual rates:
<Table>
<Caption>
MANAGEMENT VOLUNTARY
FEES WAIVER
- --------------------------------------------------------------------------------
All Value Fund .57%(1) -
Alpha Fund .10%(2) .10%(2)
International Core Equity Fund .75%(3) -
International Opportunities Fund .75% -
Large-Cap Value Fund .40%(4) -
</Table>
(1) The management fee for All Value Fund is based on average daily net assets
at the following annual rates:
<Table>
First $200 million .75%
Next $300 million .65%
Over $500 million .50%
</Table>
(2) Rate changed effective March 1, 2004. Prior to March 1, 2004, the management
fee and voluntary waiver rates were at annual rates of .50% and .50% of average
daily net assets, respectively.
(3) The management fee for International Core Equity Fund is based on average
daily net assets at the following annual rates:
<Table>
First $1 billion .75%
Next $1 billion .70%
Over $2 billion .65%
</Table>
(4) The management fee for Large-Cap Value Fund is based on average daily net
assets at the following annual rates:
<Table>
First $2 billion .40%
Next $3 billion .375%
Over $5 billion .35%
</Table>
Lord Abbett may stop waiving all or a portion of its management fee at any time.
Lord Abbett is currently reimbursing expenses for International Core Equity Fund
to the extent necessary to maintain total operating expenses for Class A at
1.75%, for Class B and C at 2.40%, Class P at 1.85% and Class Y at 1.40% of
average daily net assets. Lord Abbett may stop reimbursing such expenses at any
time.
Lord Abbett is currently reimbursing expenses for Large-Cap Value Fund to the
extent necessary to maintain total operating expenses for Class A at .95%, for
Class B and C at 1.60%, Class P at 1.05%, and Class Y at .60% of average daily
net assets. Lord Abbett may stop reimbursing such expenses at any time.
76
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Lord Abbett provides certain administrative services to the Funds pursuant to an
Administrative Services Agreement at an annual rate of .04% of each Fund's
average daily net assets. Effective March 1, 2004, Alpha Fund is no longer
charged the fund administration fee.
Alpha Fund has entered into a Servicing Agreement with the Underlying Funds
pursuant to which each Underlying Fund will pay a portion of the expenses
(excluding management fee, fund administration fees and distribution and service
fees) of Alpha Fund in proportion to the average daily value of total Underlying
Fund shares owned by Alpha Fund. Each Underlying Fund's expense is reflected in
Subsidy on the respective Statement of Operations.
12b-1 DISTRIBUTION PLANS
Each Fund has adopted a distribution plan with respect to one or more classes of
shares pursuant to Rule 12b-1 of the Act, which provides for the payment of
ongoing distribution and service fees to Lord Abbett Distributor LLC
("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at
annual rates based upon average daily net assets as follows:
<Table>
<Caption>
FEES CLASS A CLASS B CLASS C CLASS P(2)
- --------------------------------------------------------------------------------
Service .25% .25% .25% .20%
Distribution .10%(1) .75% .75% .25%
</Table>
(1) In addition, until September 30, 2004, each Fund paid a one-time
distribution fee of up to 1.00% on certain qualifying purchases of Class A
shares. Effective October 1, 2004, Distributor will pay such one-time
distribution fee. The unamortized balance of these distribution fees as of
September 30, 2004 was as follows:
<Table>
<Caption>
UNAMORTIZED
BALANCE
- ---------------------------------------------------------------
All Value Fund $ 186,511
Alpha Fund 6,447
International Core Equity Fund 24,621
International Opportunities Fund 17,040
Large-Cap Value Fund 1,104
</Table>
These amounts will continue to be amortized by each Fund, generally over a
two-year period.
The amount of CSDC collected during the fiscal year ended October 31, 2004 was
as follows:
<Table>
<Caption>
CDSC
COLLECTED
- ---------------------------------------------------------------
All Value Fund $ 15,146
Alpha Fund 205
International Core Equity Fund 1,387
International Opportunities Fund 844
</Table>
(2) All Value Fund, International Core Equity Fund, International Opportunities
Fund and Large-Cap Value Fund only.
Class Y does not have a distribution plan.
COMMISSIONS
Distributor received the following commissions on sales of Class A shares of the
Funds, after concessions were paid to authorized dealers, for the year ended
October 31, 2004:
<Table>
<Caption>
DISTRIBUTOR DEALERS'
COMMISSIONS CONCESSIONS
- --------------------------------------------------------------------------------
All Value Fund $ 3,021,766 $ 16,429,141
Alpha Fund 50,627 275,146
International Core Equity Fund 164,409 882,699
International Opportunities Fund 62,375 334,503
Large-Cap Value Fund 28,934 154,060
</Table>
One Trustee and certain of the Trust's officers have an interest in Lord Abbett.
77
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARD
Dividends from net investment income, if any, are declared and paid
semi-annually for All Value Fund, and annually for Alpha Fund, International
Core Equity Fund, International Opportunities Fund, and Large-Cap Value Fund.
Taxable net realized gains from investment transactions, reduced by capital loss
carryforwards, if any, are declared and distributed to shareholders at least
annually. The capital loss carryforward amount is available to offset future net
capital gains. Dividends and distributions to shareholders are recorded on the
ex-dividend date. The amount of dividends and distributions from net investment
income and net realized capital gains are determined in accordance with Federal
income tax regulations which may differ from accounting principles generally
accepted in the United States of America. These book/tax differences are either
considered temporary or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the components of net
assets based on their federal tax basis treatment; temporary differences do not
require reclassification. Dividends and distributions which exceed earnings and
profits for tax purposes are reported as distributions of paid-in capital.
The following distributions were declared on November 19, 2004, and paid on
November 23, 2004 to shareholders of record on November 22, 2004:
<Table>
<Caption>
ORDINARY SHORT-TERM LONG-TERM
INCOME CAPITAL GAIN CAPITAL GAIN
- ----------------------------------------------------------------------------------
All Value Fund $ 8,710,897 $ - $ 19,576,951
International Opportunities Fund 39,983 - -
Large-Cap Value Fund 135,952 107,290 98,180
</Table>
The following distributions were declared on December 9, 2004, and paid on
December 21, 2004 to shareholders of record on December 20, 2004:
<Table>
<Caption>
ORDINARY
INCOME
- ------------------------------------------------
Alpha Fund $ 458,427
International Core Equity Fund 62,273
</Table>
The tax character of distributions paid during the years ended October 31, 2004
and October 31, 2003 are as follows:
<Table>
<Caption>
ALL VALUE FUND ALPHA FUND
- -----------------------------------------------------------------------------------------
10/31/2004 10/31/2003 10/31/2004 10/31/2003
- -----------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 565,404 $ - $ - $ -
Net long-term capital gains 8,512,788 7,892,871 - 976,162
- -----------------------------------------------------------------------------------------
Total distributions paid $ 9,078,192 $ 7,892,871 $ - $ 976,162
- -----------------------------------------------------------------------------------------
<Caption>
INTERNATIONAL LARGE-CAP
OPPORTUNITIES FUND VALUE FUND
- -----------------------------------------------------------------------------------------
10/31/2004 10/31/2003 10/31/2004 10/31/2003
- -----------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 2,324,486 $ 1,016,534 $ 21,490 $ -
- -----------------------------------------------------------------------------------------
Total distributions paid $ 2,324,486 $ 1,016,534 $ 21,490 $ -
- -----------------------------------------------------------------------------------------
</Table>
78
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of October 31, 2004, the components of accumulated earnings (losses) on a tax
basis are as follows:
<Table>
<Caption>
ALL VALUE FUND ALPHA FUND
- ------------------------------------------------------------------------------------------
Undistributed ordinary income - net $ 4,083,988 $ 458,427
Undistributed long-term capital gains 19,576,951 -
- ------------------------------------------------------------------------------------------
Total undistributed earnings $ 23,660,939 $ 458,427
Capital loss carryforwards* - (9,866,764)
Temporary differences (162,090) (6,367)
Unrealized gains - net 209,268,984 4,240,653
- ------------------------------------------------------------------------------------------
Total accumulated earnings (losses) - net $ 232,767,833 $ (5,174,051)
==========================================================================================
<Caption>
INTERNATIONAL INTERNATIONAL
CORE EQUITY FUND OPPORTUNITIES FUND
- ------------------------------------------------------------------------------------------
Undistributed ordinary income - net $ 62,273 $ 39,983
- ------------------------------------------------------------------------------------------
Total undistributed earnings $ 62,273 $ 39,983
Capital loss carryforwards* (955,918) (113,804,106)
Temporary differences (315) (11,550)
Unrealized gains - net 2,968,778 31,975,090
- ------------------------------------------------------------------------------------------
Total accumulated earnings (losses) - net $ 2,074,818 $ (81,800,583)
==========================================================================================
<Caption>
LARGE-CAP
VALUE FUND
- -------------------------------------------------------------------
Undistributed ordinary income - net $ 194,152
Undistributed long-term capital gains 98,180
- -------------------------------------------------------------------
Total undistributed earnings $ 292,332
Temporary differences (825)
Unrealized gains - net 395,870
- -------------------------------------------------------------------
Total accumulated earnings - net $ 687,377
===================================================================
</Table>
*As of October 31,2004, the capital loss carryforwards, along with the related
expiration dates, are as follows:
<Table>
<Caption>
2009 2010 2011 2012 TOTAL
- -----------------------------------------------------------------------------------------------------------
Alpha Fund $ - $ - $ 9,866,764 $ - $ 9,866,764
International Core Equity Fund - - - 955,918 955,918
International Opportunities Fund 67,925,466 37,966,698 7,911,942 - 113,804,106
</Table>
As of October 31, 2004, the aggregate unrealized security gains and losses based
on cost for U.S. Federal income tax purposes are as follows:
<Table>
<Caption>
INTERNATIONAL
ALL VALUE FUND ALPHA FUND CORE EQUITY FUND
- -------------------------------------------------------------------------------------------
Tax cost $ 1,634,026,900 $ 135,734,117 $ 68,006,244
- -------------------------------------------------------------------------------------------
Gross unrealized gain 244,775,280 18,116,229 3,945,185
Gross unrealized loss (35,506,296) (13,875,576) (980,094)
- -------------------------------------------------------------------------------------------
Net unrealized security gain $ 209,268,984 $ 4,240,653 $ 2,965,091
===========================================================================================
</Table>
79
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<Table>
<Caption>
INTERNATIONAL
OPPORTUNITIES FUND LARGE-CAP VALUE FUND
- -------------------------------------------------------------------------------------------
Tax cost $ 151,765,676 $ 14,610,724
- -------------------------------------------------------------------------------------------
Gross unrealized gain 35,441,503 902,787
Gross unrealized loss (3,747,101) (506,917)
- -------------------------------------------------------------------------------------------
Net unrealized security gain $ 31,694,402 $ 395,870
===========================================================================================
</Table>
The difference between book-basis and tax-basis unrealized gains (losses) is
attributable primarily to wash sales and other temporary tax adjustments.
Permanent items identified during the year ended October 31, 2004 have been
reclassified among the components of net assets based on their tax basis
treatment as follows:
<Table>
<Caption>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME GAIN (LOSS) PAID-IN CAPITAL
- -------------------------------------------------------------------------------------------
All Value Fund $ 222,912 $ (222,912) $ -
International Core Equity Fund (79,586) 164,031 (84,445)
International Opportunities Fund 257,452 (257,452) -
Large Cap Value Fund 35,214 (10,948) (24,266)
</Table>
The permanent differences are primarily attributable to the tax treatment of
short-term capital gains, foreign currency transactions and certain expenses.
5. PORTFOLIO SECURITIES TRANSACTIONS
As of October 31, 2004, the value of securities loaned for International
Opportunities Fund was $31,837,841. These loans are collateralized by cash of
$33,549,380, which is invested in a restricted money market account. In
connection with the securities lending program, State Street Bank and Trust
Company ("SSB") received fees of $102,360 for the year ended October 31, 2004,
which are netted against securities lending income on the Statement of
Operations. At their October 21, 2004 meeting, the Board of Trustees voted to
discontinue, as soon as practicable, each Fund's participation in the SSB
securities lending program.
Purchases and sales of investment securities (excluding short-term investments)
for the year ended October 31, 2004 were as follows:
<Table>
<Caption>
PURCHASES SALES
- ---------------------------------------------------------------------------------------
All Value Fund $ 1,176,823,125 $ 285,965,214
Alpha Fund 3,608,897 9,000,000
International Core Equity Fund 126,988,746 58,775,065
International Opportunities Fund 109,493,743 109,644,608
Large-Cap Value Fund 14,674,380 2,854,685
</Table>
There were no purchases or sales of U.S. Government securities for the year
ended October 31, 2004.
6. TRUSTEES' REMUNERATION
The Trust's officers and the one Trustee who are associated with Lord Abbett do
not receive any compensation from the Trust for serving in such capacities.
Outside Trustees' fees are allocated
80
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
among all Lord Abbett-sponsored funds based on the net assets of each fund.
There is an equity based plan available to all outside Trustees under which
outside Trustees must defer receipt of a portion of, and may elect to defer
receipt of an additional portion of Trustees' fees. The deferred amounts are
treated as though equivalent dollar amounts have been invested proportionately
in the funds. Such amounts and earnings accrued thereon are included in
Trustees' Fees on the Statements of Operations and in Trustees' Fees Payable on
the Statements of Assets and Liabilities and are not deductible for U.S. Federal
income tax purposes until such amounts are paid.
7. EXPENSE REDUCTIONS
The Trust has entered into arrangements with its transfer agent and custodian
whereby credits realized as a result of uninvested cash balances are used to
reduce a portion of each Fund's expenses.
8. LINE OF CREDIT
All Value Fund, International Core Equity Fund, International Opportunities Fund
and Large-Cap Value Fund along with certain other funds managed by Lord Abbett,
have available a $200,000,000 unsecured revolving credit facility ("Facility")
from a consortium of banks, to be used for temporary or emergency purposes as an
additional source of liquidity to fund redemptions of investor shares. Any
borrowings under this Facility will bear interest at current market rates as
defined in the agreement. During the fiscal year ended October 31, 2004, the fee
for this Facility was at an annual rate of .09%. Effective December 10, 2004,
the Facility was renewed at an annual fee rate of .08%. As of October 31, 2004,
there were no loans outstanding pursuant to this Facility nor was the Facility
utilized at any time during the fiscal year ended October 31, 2004.
9. CUSTODIAN AND ACCOUNTING AGENT
SSB is the Trust's custodian and accounting agent. SSB performs custodian
functions and accounting and recordkeeping functions relating to portfolio
transactions and calculating each Fund's NAV.
10. INVESTMENT RISKS
Each Fund is subject to the general risks and considerations associated with
investing in equity securities. The value of an investment will fluctuate in
response to movements in the stock market in general, and to the changing
prospects of individual companies in which the Funds invest.
Large company value stocks, in which All Value Fund and Large-Cap Value Fund
invest, may perform differently than the market as a whole and other types of
stocks, such as small company stocks and growth stocks. This is because
different types of stocks tend to shift in and out of favor depending on market
and economic conditions. The market may fail to recognize the intrinsic value of
a particular value stock for a long time. In addition, if a Fund's assessment of
a company's value or prospects for exceeding earnings expectations or market
conditions is wrong, the Fund could suffer losses or produce poor performance
relative to other funds, even in a rising market.
In addition, although All Value Fund invests a significant portion of its assets
in large-cap company stocks, it also invests in mid-cap and small-cap company
stocks which may be more volatile and less liquid than large-cap stocks.
International Core Equity Fund is subject to the risks of investing in foreign
securities and in the securities of large foreign companies. Foreign securities
may pose greater risks than domestic securities, including greater price
fluctuations and higher transaction costs. Foreign investments also may be
affected by changes in currency rates or currency controls.
81
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
International Opportunities Fund is also subject to the risks of investing in
foreign securities and in the securities of small-cap companies. Foreign
securities may pose greater risks than domestic securities, including greater
price fluctuations and higher transaction costs. Foreign investments also may be
affected by changes in currency rates or currency controls. Investing in
small-cap companies generally involves greater risks than investing in the
stocks of large-cap companies, including more volatility and less liquidity.
Alpha Fund's investments are concentrated in the Underlying Funds and, as a
result, the Fund's performance is directly related to their performance and
subject to their risks, including those associated with foreign investments and
small-cap companies.
These factors can affect the Funds' performance.
11. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
<Table>
<Caption>
ALL VALUE FUND
- ------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 77,238,255 $ 820,475,828 27,768,543 $ 249,660,107
Reinvestment of distributions 551,426 5,492,414 479,325 3,949,635
Shares reacquired (9,831,040) (105,162,568) (5,801,553) (49,453,926)
- ------------------------------------------------------------------------------------------------------
Increase 67,958,641 $ 720,805,674 22,446,315 $ 204,155,816
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 8,518,633 $ 88,599,964 5,556,058 $ 48,455,739
Reinvestment of distributions 89,021 865,287 111,869 903,903
Shares reacquired (1,823,012) (18,892,791) (1,192,893) (10,010,179)
- ------------------------------------------------------------------------------------------------------
Increase 6,784,642 $ 70,572,460 4,475,034 $ 39,349,463
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 18,336,210 $ 189,969,707 9,254,889 $ 81,004,246
Reinvestment of distributions 150,641 1,459,709 246,867 1,991,155
Shares reacquired (3,196,194) (33,142,806) (2,717,580) (22,518,068)
- ------------------------------------------------------------------------------------------------------
Increase 15,290,657 $ 158,286,610 6,784,176 $ 60,477,333
- ------------------------------------------------------------------------------------------------------
CLASS P SHARES
Shares sold 332,094 $ 3,537,085 109,104 $ 952,942
Reinvestment of distributions 1,424 14,131 1,017 8,336
Shares reacquired (22,700) (246,224) (25,508) (221,807)
- ------------------------------------------------------------------------------------------------------
Increase 310,818 $ 3,304,992 84,613 $ 739,471
- ------------------------------------------------------------------------------------------------------
<Caption>
PERIOD ENDED
OCTOBER 31, 2003*
- ------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Shares sold 154,694 $ 1,685,042 1,277 $ 10,000
Reinvestment of distributions 16 159 - -
- ------------------------------------------------------------------------------------------------------
Increase 154,710 $ 1,685,201 1,277 $ 10,000
- ------------------------------------------------------------------------------------------------------
</Table>
*For the period March 31, 2003 (commencement of offering of class shares) to
October 31, 2003.
82
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<Table>
<Caption>
ALPHA FUND
- ------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 842,543 $ 12,914,133 1,246,461 $ 14,036,440
Reinvestment of distributions - - 40,092 423,777
Shares reacquired (796,821) (12,237,203) (1,949,873) (21,553,883)
- ------------------------------------------------------------------------------------------------------
Increase (decrease) 45,722 $ 676,930 (663,320) $ (7,093,666)
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 250,831 $ 3,761,163 263,430 $ 2,978,159
Reinvestment of distributions - - 21,207 219,918
Shares reacquired (568,522) (8,525,182) (685,817) (7,733,583)
- ------------------------------------------------------------------------------------------------------
Decrease (317,691) $ (4,764,019) (401,180) $ (4,535,506)
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 237,978 $ 3,579,134 256,016 $ 2,927,040
Reinvestment of distributions - - 14,414 149,473
Shares reacquired (512,272) (7,699,401) (572,517) (6,454,276)
- ------------------------------------------------------------------------------------------------------
Decrease (274,294) $ (4,120,267) (302,087) $ (3,377,763)
- ------------------------------------------------------------------------------------------------------
<Caption>
PERIOD ENDED
OCTOBER 31, 2004**
- --------------------------------------------------------------------
CLASS Y SHARES
Shares sold 24,945 $ 391,543
- --------------------------------------------------------------------
Increase 24,945 $ 391,543
- --------------------------------------------------------------------
</Table>
** For the period October 20, 2004 (commencement of offering of share class) to
October 31, 2004.
<Table>
<Caption>
INTERNATIONAL CORE EQUITY FUND
- --------------------------------------------------------------------
PERIOD ENDED
OCTOBER 31, 2004+
- --------------------------------------------------------------------
SHARES AMOUNT
- --------------------------------------------------------------------
CLASS A SHARES
Shares sold 6,334,498 $ 64,068,547
Shares reacquired (723,691) (7,319,356)
- --------------------------------------------------------------------
Increase 5,610,807 $ 56,749,191
- --------------------------------------------------------------------
CLASS B SHARES
Shares sold 310,399 $ 3,147,471
Shares reacquired (27,035) (269,461)
- --------------------------------------------------------------------
Increase 283,364 $ 2,878,010
- --------------------------------------------------------------------
CLASS C SHARES
Shares sold 930,102 $ 9,477,115
Shares reacquired (34,075) (341,628)
- --------------------------------------------------------------------
Increase 896,027 $ 9,135,487
- --------------------------------------------------------------------
CLASS P SHARES
Shares sold 1,000 $ 10,000
- --------------------------------------------------------------------
Increase 1,000 $ 10,000
- --------------------------------------------------------------------
CLASS Y SHARES
Shares sold 295,774 $ 3,050,694
- --------------------------------------------------------------------
Increase 295,774 $ 3,050,694
- --------------------------------------------------------------------
</Table>
+ For the period December 15, 2003 (commencement of investment operations) to
October 31, 2004.
83
<Page>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<Table>
<Caption>
INTERNATIONAL OPPORTUNITIES FUND
- ------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
- ------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 2,068,789 $ 18,950,733 6,041,513 $ 39,688,836
Reinvestment of distributions 116,074 951,166 58,932 367,146
Shares reacquired (1,744,796) (15,957,567) (6,681,759) (44,022,341)
- ------------------------------------------------------------------------------------------------------
Increase (decrease) 440,067 $ 3,944,332 (581,314) $ (3,966,359)
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 629,605 $ 5,630,954 537,533 $ 3,511,769
Reinvestment of distributions 24,183 194,187 1,854 11,365
Shares reacquired (500,148) (4,480,281) (497,425) (3,213,964)
- ------------------------------------------------------------------------------------------------------
Increase 153,640 $ 1,344,860 41,962 $ 309,170
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 430,000 $ 3,865,434 817,450 $ 5,148,118
Reinvestment of distributions 19,174 153,200 7,441 45,314
Shares reacquired (338,548) (3,057,232) (842,797) (5,298,381)
- ------------------------------------------------------------------------------------------------------
Increase (decrease) 110,626 $ 961,402 (17,906) $ (104,949)
- ------------------------------------------------------------------------------------------------------
CLASS P SHARES
Shares sold 1.36 $ 13 - $ -
Reinvestment of distributions 1.35 11 .625 4
- ------------------------------------------------------------------------------------------------------
Increase 2.71 $ 24 .625 $ 4
- ------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Shares sold 123,690 $ 1,193,629 132,176 $ 800,566
Reinvestment of distributions 119,564 992,384 90,651 572,916
Shares reacquired (632,072) (6,009,857) (1,143,976) (7,166,898)
- ------------------------------------------------------------------------------------------------------
Decrease (388,818) $ (3,823,844) (921,149) $ (5,793,416)
- ------------------------------------------------------------------------------------------------------
</Table>
84
<Page>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
<Table>
<Caption>
LARGE-CAP VALUE FUND
- ------------------------------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003++
- ------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 908,712 $ 10,502,711 226,357 $ 2,290,607
Reinvestment of distributions 1,753 18,773 - -
Shares reacquired (266,208) (3,056,762) (14,789) (153,156)
- ------------------------------------------------------------------------------------------------------
Increase 644,257 $ 7,464,722 211,568 $ 2,137,451
- ------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 123,718 $ 1,405,471 10,429 $ 108,006
Reinvestment of distributions 63 673 - -
Shares reacquired (10,398) (118,370) - -
- ------------------------------------------------------------------------------------------------------
Increase 113,383 $ 1,287,774 10,429 $ 108,006
- ------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 134,831 $ 1,533,110 13,881 $ 143,607
Reinvestment of distributions 70 751 - -
Shares reacquired (21,321) (244,155) - -
- ------------------------------------------------------------------------------------------------------
Increase 113,580 $ 1,289,706 13,881 $ 143,607
- ------------------------------------------------------------------------------------------------------
CLASS P SHARES
Shares sold - $ - 1,000 $ 10,000
Reinvestment of distributions 6 67 - -
- ------------------------------------------------------------------------------------------------------
Increase 6 $ 67 1,000 $ 10,000
- ------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Shares sold 171,369 $ 1,979,292 1,000 $ 10,000
Reinvestment of distributions 8 83 - -
- ------------------------------------------------------------------------------------------------------
Increase 171,377 $ 1,979,375 1,000 $ 10,000
- ------------------------------------------------------------------------------------------------------
</Table>
++ For the period June 23, 2003 (commencement of investment operations) to
October 31, 2003.
85
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF TRUSTEES AND SHAREHOLDERS,
LORD ABBETT SECURITIES TRUST - LORD ABBETT ALL VALUE FUND, ALPHA SERIES, LORD
ABBETT INTERNATIONAL CORE EQUITY FUND, LORD ABBETT INTERNATIONAL OPPORTUNITIES
FUND, AND LORD ABBETT LARGE-CAP VALUE FUND:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of Lord Abbett Securities Trust - Lord Abbett All
Value Fund, Alpha Series, Lord Abbett International Core Equity Fund, Lord
Abbett International Opportunities Fund, and Lord Abbett Large-Cap Value Fund
(the "Funds"), as of October 31, 2004, and the related statements of operations,
the statements of changes in net assets and the financial highlights for each of
the periods presented. These financial statements and financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 2004 by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Lord
Abbett Securities Trust - Lord Abbett All Value Fund, Alpha Series, Lord Abbett
International Core Equity Fund, Lord Abbett International Opportunities Fund,
and Lord Abbett Large-Cap Value Fund as of October 31, 2004, the results of
their operations, the changes in their net assets and the financial highlights
for each of the periods presented, in conformity with accounting principles
generally accepted in the United States of America.
Deloitte & Touche LLP
New York, New York
December 22, 2004
86
<Page>
UNDERLYING FUND INFORMATION (UNAUDITED)
Alpha Fund invests in other funds ("Underlying Funds") managed by Lord Abbett.
As of October 31, 2004, Alpha Fund's investments were allocated among the
Underlying Funds as follows:
<Table>
<Caption>
UNDERLYING FUND NAME % OF INVESTMENTS
-------------------------------------------------------------------------------------------
Lord Abbett Developing Growth Fund, Inc. - Class Y 27.70%
Lord Abbett Research Fund, Inc. - Small-Cap Value Fund - Class Y 31.53%
Lord Abbett Securities Trust - International Opportunities Fund - Class Y 39.96%
</Table>
The ten largest holdings and the holdings by sector, as of October 31, 2004, for
Lord Abbett Developing Growth Fund, Inc. and Lord Abbett Research Fund, Inc. -
Small-Cap Value Fund, in which Alpha Fund held a significant concentration of
its investments, are as follows:
LORD ABBETT DEVELOPING GROWTH FUND, INC.
<Table>
<Caption>
TEN LARGEST HOLDINGS % OF INVESTMENTS
- -----------------------------------------------------------------
Kronos, Inc. 1.70%
Amerigroup Corp. 1.59%
Varian Semiconductor Equipment Associates, Inc. 1.46%
Dycom Industries, Inc. 1.43%
Fossil, Inc. 1.33%
Cal Dive Int'l., Inc. 1.32%
Corporate Executive Board Co. 1.31%
Landstar System Inc. 1.29%
Sapient Corp. 1.22%
Cathay General Bancorp 1.18%
<Caption>
HOLDINGS BY SECTOR % OF INVESTMENTS
- -----------------------------------------------------------------
Auto & Transportation 4.26%
Consumer Discretionary 23.40%
Consumer Staples 0.92%
Financial Services 9.21%
Healthcare 19.27%
Integrated Oils 0.66%
Materials & Processing 7.92%
Other Energy 3.18%
Producer Durables 7.69%
Short-Term Investment 1.96%
Technology 21.53%
- -----------------------------------------------------------------
Total 100.00%
- -----------------------------------------------------------------
</Table>
87
<Page>
UNDERLYING FUND INFORMATION (UNAUDITED) (CONCLUDED)
LORD ABBETT RESEARCH FUND, INC. - SMALL-CAP VALUE FUND
<Table>
<Caption>
TEN LARGEST HOLDINGS % OF INVESTMENTS
- -----------------------------------------------------------------
Quanex Corp. 3.04%
Trinity Industries, Inc. 2.31%
Rogers Corp. 2.26%
School Specialty, Inc. 1.92%
Cytec Industries, Inc. 1.89%
Curtiss-Wright Corp. 1.83%
MICROS Systems, Inc. 1.74%
W Holding Co., Inc. 1.64%
Key Energy Services, Inc. 1.52%
Grey Wolf, Inc. 1.51%
<Caption>
HOLDINGS BY SECTOR % OF INVESTMENTS
- -----------------------------------------------------------------
Auto & Transportation 7.95%
Consumer Discretionary 11.95%
Consumer Staples 0.87%
Financial Services 14.57%
Healthcare 4.64%
Integrated Oils 0.63%
Materials & Processing 21.89%
Other 2.31%
Other Energy 8.38%
Producer Durables 12.17%
Short-Term Investment 8.26%
Technology 6.17%
Utilities 0.21%
- -----------------------------------------------------------------
Total 100.00%
- -----------------------------------------------------------------
</Table>
The Schedule of Investments and the holdings by sector of Lord Abbett Securities
Trust - International Opportunities Fund, also an Underlying Fund of Alpha Fund,
have been presented earlier in this Annual Report to Shareholders.
88
<Page>
BASIC INFORMATION ABOUT MANAGEMENT
The Board of Trustees (the "Board") is responsible for the management of the
business and affairs of each Fund in accordance with the laws of the State of
Delaware. The Board appoints officers who are responsible for the day-to-day
operations of each Fund and who execute policies authorized by the Board. The
Board also approves an investment adviser to each Fund and continues to monitor
the cost and quality of the services provided by the investment adviser, and
annually considers whether to renew the contract with the adviser. Generally,
each Trustee holds office until his/her successor is elected and qualified or
until his/her earlier resignation or removal, as provided in the Trust's
organizational documents.
Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is
the Funds' investment adviser.
INTERESTED TRUSTEE
The following Trustee is the Managing Partner of Lord Abbett and is an
"interested person" as defined in the Act. Mr. Dow is also an officer, director,
or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of
50 portfolios or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS
- ---------------------------------------------------------------------------------------------------
ROBERT S. DOW Trustee since Managing Partner and N/A
Lord, Abbett & Co. LLC 1993; Chairman Chief Investment Officer
90 Hudson Street since 1996 of Lord Abbett since
Jersey City, NJ 1996.
Date of Birth:
3/8/1945
</Table>
------------------
INDEPENDENT TRUSTEES
The following independent or outside Trustees are also directors or trustees of
each of the fourteen Lord Abbett-sponsored funds, which consist of 50 portfolios
or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS
- -----------------------------------------------------------------------------------------------------
E. THAYER BIGELOW Trustee since 1994 Managing General Partner, Currently serves as
Emmerling Bigelow Media, LLC (from director of Adelphia
Communications 2000); Senior Adviser, Communications, Inc.,
41 Madison Ave., Time Warner Inc. (1998 - Crane Co., and Huttig
Suite 3810 2000); Acting Chief Building Products Inc.
New York, NY Executive Officer of
Date of Birth: 10/22/1941 Courtroom Television
Network (1997 - 1998);
President and Chief
Executive Officer of Time
Warner Cable Programming,
Inc. (1991 - 1997).
WILLIAM H.T. BUSH Trustee since 1998 Co-founder and Chairman of Currently serves as
Bush-O'Donnell & Co., Inc. the Board of the financial director of Wellpoint
101 South Hanley Road advisory firm of Health Networks Inc.
Suite 1250 Bush-O'Donnell & Company (since 2002), and
St. Louis, MO (since 1986). Engineered Support
Date of Birth: 7/14/1938 Systems, Inc. (since
2000).
</Table>
89
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS
- -------------------------------------------------------------------------------------------------------
ROBERT B. CALHOUN, JR. Trustee since 1998 Managing Director of Currently serves as
Monitor Clipper Partners Monitor Clipper Partners director of Avondale,
Two Canal Park (since 1997) and President Inc. and Interstate
Cambridge, MA of Clipper Asset Management Bakeries Corp.
Date of Birth: 10/25/1942 Corp. (since 1991), both
private equity investment
funds.
JULIE A. HILL Trustee since 2004 Owner and CEO of the Currently serves as
1280 Bison Hillsdale Companies, a director of Wellpoint
Newport Coast, CA business consulting firm Health Networks Inc.;
Date of Birth: 7/16/1946 (1998 - present); Founder, Resources Connection
President and Owner of the Inc. & Holcim (U.S.)
Hiram-Hill and Hillsdale Inc.
Development Companies
(1998 - 2000).
FRANKLIN W. HOBBS Trustee since 2001 Former Chief Executive Currently serves as
One Equity Partners Officer of Houlihan Lokey director of Adolph
320 Park Ave. Howard & Zukin, an Coors Company.
New York, NY investment bank (January
Date of Birth: 7/30/1947 2002 - April 2003);
Chairman of Warburg Dillon
Read (1999 - 2001); Global
Head of Corporate Finance
of SBC Warburg Dillon Read
(1997 - 1999); Chief
Executive Officer of
Dillon, Read & Co. (1994 -
1997).
C. ALAN MACDONALD Trustee since 1993 Retired - General Business Currently serves as
P.O. Box 4393 and Governance Consulting director of H.J. Baker
Greenwich, CT (since 1992); formerly (since 2003).
Date of Birth: 5/19/1933 President and CEO of
Nestle Foods.
THOMAS J. NEFF Trustee since 1993 Chairman of Spencer Stuart Currently serves as
Spencer Stuart (U.S.), an executive director of Ace, Ltd.
277 Park Avenue search consulting firm (since 1997) and Hewitt
New York, NY (since 1996); President of Associates, Inc.
Date of Birth: 10/2/1937 Spencer Stuart
(1979 - 1996).
</Table>
90
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
OFFICERS
None of the officers listed below have received compensation from the Trust. All
the officers of the Trust may also be officers of the other Lord
Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, NJ
07302.
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------
ROBERT S. DOW Chief Executive Elected in 1993 Managing Partner and
(3/8/1945) Officer and President Chief Investment
Officer of Lord Abbett
(since 1996).
SHOLOM DINSKY Executive Vice Elected in 2003 Partner and Large Cap
(3/24/1944) President Value Investment
Manager, joined Lord
Abbett in 2000,
formerly Managing
Director of Prudential
Asset Management, prior
thereto Director of
Equity Research and
Senior Vice President
at Mitchell Hutchins
Asset
LESLEY-JANE DIXON Executive Vice Elected in 1999 Partner and Investment
(1/1/1964) President Manager, joined Lord
Abbett in 1995.
ROBERT P. FETCH Executive Vice Elected in 1999 Partner and Small-Cap
(2/18/1953) President Value Senior Investment
Manager, joined Lord
Abbett in 1995.
KENNETH G. FULLER Executive Vice Elected in 2003 Investment Manager -
(4/22/1945) President Large Cap Value, joined
Lord Abbett in 2002,
formerly Portfolio
Manager and Senior Vice
President at Pioneer
Investment Management,
Inc. (1999 - 2002),
prior thereto
Principal, Manley,
Fuller Asset
Management.
HOWARD E. HANSEN Executive Vice Elected in 2003 Partner and Investment
(10/13/1961) President Manager, joined Lord
Abbett in 1995.
GERARD S. E. Executive Vice Elected in 1999 Partner and Research
HEFFERNAN, JR. President Analyst, joined Lord
(9/7/1963) Abbett in 1998.
INGRID C. HOLM Executive Vice Elected in 2001 Investment Manager -
(3/21/1959) President Global Equity, joined
Lord Abbett in 2001,
formerly International
Portfolio Manager at
Batterymarch Financial
Management, Inc.
(2000 - 2001), formerly
held various positions
at the Prudential
Insurance Company of
America.
</Table>
91
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
- -----------------------------------------------------------------------------------------------------
VINCENT J. MCBRIDE Executive Vice Elected in 2003 Senior Investment
(5/8/1964) President Manager, International
Core Equity, joined
Lord Abbett in 2003,
formerly Managing
Director and Portfolio
Manager at Warburg
Pincus Asset Management
and Credit-Suisse Asset
Management.
ROBERT G. MORRIS Executive Vice Elected in 1998 Partner and Director of
(11/6/1944) President Equity Investments,
joined Lord Abbett in
1991.
ELI M. SALZMANN Executive Vice Elected in 2003 Partner and Director of
(3/24/1964) President Institutional Equity
Investments, joined
Lord Abbett in 1997.
HAROLD E. SHARON Executive Vice Elected in 2003 Investment Manager and
(9/23/1960) President Director, International
Core Equity, joined
Lord Abbett in 2003,
formerly Financial
Industry Consultant for
Venture Capitalist
(2001 - 2003), prior
thereto Managing
Director of Warburg
Pincus Asset Management
and Credit-Suisse Asset
Management.
TRACIE E. AHERN Vice President Elected in 1999 Partner and Director of
(1/12/1968) Portfolio Accounting
and Operations, joined
Lord Abbett in 1999.
YAREK ARANOWICZ Vice President Elected in 2004 Investment Manager,
(5/8/1963) joined Lord Abbett in
2003, prior thereto
Vice President, Head of
Global Emerging Markets
Funds of Warburg Pincus
Asset Management and
Credit-Suisse Asset
Management.
DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined
(1/4/1954) Lord Abbett in 1998.
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord
(1/22/1952) Abbett in 1979.
</Table>
92
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------
JOHN J. DICHIARO Vice President Elected in 2000 Partner and Senior
(7/30/1957) Strategy
Coordinator-Small-Cap
Growth, joined Lord
Abbett in 2000, prior
thereto Vice
President- Securities
Group of Wafra Investment
Advisory Group.
DANIEL H. FRASCARELLI Vice President Elected in 2001 Partner and Investment
(3/11/1954) Manager, joined Lord
Abbett in 1990.
TODD D. JACOBSON Vice President Elected in 2003 Investment Manager,
(10/28/1966 ) International Core
Equity, joined Lord
Abbett in 2003,
formerly Director and
Portfolio Manager at
Warburg Pincus Asset
Management and
Credit-Suisse Asset
Management (2002 -
2003); prior thereto
Associate Portfolio
Manager of
Credit-Suisse Asset
Management.
F. THOMAS O'HALLORAN Vice President Elected in 2003 Partner and Investment
(2/19/1955) Manager, joined Lord
Abbett in 2001,
formerly Executive
Director/Senior
Research Analyst at
Dillon Read/UBS
Warburg.
A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of
(12/21/1959) Equity Trading, joined
Lord Abbett in 1983.
TODOR PETROV Vice President Elected in 2003 Investment Manager,
(5/18/1974) joined Lord Abbett in
2003, formerly
Associate Portfolio
Manager of
Credit-Suisse Asset
Management (1999 -
2003); prior thereto
Summer Associate of
Warburg Pincus Funds.
JAMES BERNAICHE Chief Compliance Elected in 2004 Chief Compliance
(7/28/1956) Officer Officer, joined Lord
Abbett in 2001;
formerly Chief
Compliance Officer
with Credit-Suisse
Asset Management (from
1998).
JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief
(3/4/1954) Officer and Vice Operations Officer,
President joined Lord Abbett in
1999.
</Table>
93
<Page>
BASIC INFORMATION ABOUT MANAGEMENT (CONCLUDED)
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------
PAUL A. HILSTAD Vice President and Elected in 1996 Partner and General
(12/13/1942) Secretary Counsel, joined Lord
Abbett in 1995.
LAWRENCE H. KAPLAN Vice President and Elected in 1997 Partner and Deputy
(1/16/1957) Assistant Secretary General Counsel, joined
Lord Abbett in 1997.
CHRISTINA T. SIMMONS Vice President and Elected in 2000 Assistant General
(11/12/1957) Assistant Secretary Counsel, joined Lord
Abbett in 1999,
formerly Assistant
General Counsel of
Prudential Investments
(1998 - 1999), prior
thereto Counsel of
Drinker, Biddle & Reath
LLP, a law firm.
BERNARD J. GRZELAK Treasurer Elected in 2003 Director of Fund
(6/12/1971) Administration, joined
Lord Abbett in 2003,
formerly Vice
President, Lazard Asset
Management LLC (2000 -
2003), prior thereto
Manager of Deloitte &
Touche LLP.
</Table>
Please call 888-522-2388 for a copy of the Statement of Additional Information
(SAI), which contains further information about the Trust's Trustees. It is
available free upon request.
94
<Page>
HOUSEHOLDING
The Trust has adopted a policy that allows it to send only one copy of the
Funds' Prospectus, proxy material, annual report and semi-annual report to
certain shareholders residing at the same "household." This reduces Trust
expenses, which benefits you and other shareholders. If you need additional
copies or do not want your mailings to be "householded," please call Lord Abbett
at 800-821-5129 or send a written request with your name, the name of your fund
or funds and your account number or numbers to Lord Abbett Family of Funds, P.O.
Box 219336, Kansas City, MO 64121.
PROXY VOTING POLICIES, PROCEDURES AND RECORD
A description of the policies and procedures that Lord Abbett uses to vote
proxies related to the Funds' portfolio securities, and information on how Lord
Abbett voted each Fund's proxies during the 12-month period ended June 30, 2004
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 Funds are required to file their complete schedule of portfolio holdings
with the SEC for their first and third fiscal quarters on Form N-Q for fiscal
quarters ending on or after July 9, 2004. Once filed, the Funds' Forms N-Q will
be available without charge, upon request on the SEC's website at www.sec.gov
and may be available by calling Lord Abbett at 800-821-5129. You can also obtain
copies of Form N-Q by (i) visiting the SEC's Public Reference Room in
Washington, DC (information on the operation of the Public Reference Room may be
obtained by calling 800-SEC-0330); (ii) sending your request and duplicating fee
to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending
your request electronically to publicinfo@sec.gov.
TAX INFORMATION
100%, 78.46% and 65.12% of the ordinary income distribution paid by the All
Value Fund, International Opportunities Fund and Large-Cap Value Fund,
respectively, during fiscal 2004 is qualifying dividend income. For corporate
shareholders, 100%, 0% and 64.84% of the All Value Fund, International
Opportunities Fund and Large-Cap Value Fund's ordinary income distribution
qualified for the dividends received deduction.
Additionally, of the distributions paid to shareholders during the fiscal
year ended October 31, 2004 for All Value Fund, $8,512,788 represents
long-term capital gains.
95
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This page is intentionally left blank.
<Page>
[LORD ABBETT(R) LOGO]
<Table>
This report when not used for the general Lord Abbett Securities Trust
information of shareholders of the Fund, is to Lord Abbett All Value Fund
be distributed only if preceded or accompanied Lord Abbett Alpha Fund
by a current Fund Prospectus. Lord Abbett International Core Equity Fund
Lord Abbett International Opportunities Fund
Lord Abbett Mutual Fund shares are distributed by Lord Abbett Large-Cap Value Fund LST-2-1004
LORD ABBETT DISTRIBUTOR LLC (12/04)
</Table>
<Page>
[LORD ABBETT LOGO]
2004
ANNUAL REPORT
LORD ABBETT
MICRO-CAP GROWTH FUND
MICRO-CAP VALUE FUND
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2004
<Page>
LORD ABBETT MICRO-CAP GROWTH FUND AND
MICRO-CAP VALUE FUND
ANNUAL REPORT
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2004
DEAR SHAREHOLDERS: We are pleased to provide you with this overview of Lord
Abbett Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value Fund's (the Funds)
strategies and performance for the fiscal year ended October 31, 2004. On this
and the following pages, we discuss the major factors that influenced
performance.
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,
/s/ Robert S. Dow
ROBERT S. DOW
CHAIRMAN
Q: WHAT WERE THE OVERALL MARKET CONDITIONS OF THE REPORTING PERIOD?
A: Overall, the U.S. economy showed signs of continued improvement during the
twelve-month period from October 31, 2003 through October 31, 2004. The
employment rate continued to trend higher as the fiscal year began. By January
2004, the unemployment rate had declined to 5.6%, but the data also showed
lower-than-expected job creation in December 2003 and January 2004. Gross
domestic product (GDP) grew at a 4.1% annual pace in the fourth quarter of 2003
and, although this was slightly below expectations, the data continued to
support expectations for an improving economy. In the face of a strengthening
equity market, concern about the extent of any interest rate rise by the Federal
Reserve Board (the Fed) intensified.
The positive trend continued in the first half of calendar 2004, largely due
to strong consumer and capital spending. Corporate profits rose, triggered by a
rise in industrial production. As the year began, inflation and short-term rates
remained stable. However, somewhat disappointing employment reports and higher
energy prices weighed on consumer sentiment. In March and April, the U.S.
housing market remained strong, and there were improvements in durable goods
spending. But, retail sales dropped 0.5% in April after a 2% gain in March.
Beginning in April and continuing through July, unemployment stabilized. The
Producer Price Index (PPI) rose 0.1% in July, seasonally adjusted, after a
decrease of 0.3% in June and a 0.8% rise in May. (The PPI measures wholesale
prices of goods, i.e. before they are sold through retailers. It is sometimes
used to predict movements in the Consumer Price Index, which is a measure of
retail prices and is commonly used as a measure of
1
<Page>
inflation.) Equity prices, as measured by the S&P 500(R) Index(1) , were roughly
flat in April, May and June. On June 30, the Fed raised the fed funds rate from
1% to 1.25%, and stocks responded positively to the widely-expected Fed action.
(The fed funds rate is the rate at which banks lend to each other overnight.)
However, equity prices declined slightly in July, as investors continued to
respond to uncertainties surrounding future interest rate hikes, the continued
war in Iraq, the upcoming presidential election and record-high energy prices.
After slowing during a summer "soft patch," the economy regained some
traction in the third quarter of 2004. Despite indicators of renewed economic
strength, however, stocks finished the third quarter down slightly. One of the
key drivers of stocks during most of the summer seemed to be the direction of
oil prices, with stocks falling as oil prices rose. This negative correlation
lasted until mid-August when crude oil broke through the $45 per barrel price
level. From mid-August through mid-September, stocks benefited from declining
gasoline prices at the pump, a favorable turn of events for consumers. Equities
gathered momentum until a string of hurricanes on the Gulf Coast forced
production disruptions at one of the nation's largest oil-refining facilities,
causing oil prices to rise again as the quarter ended.
The combination of declining gasoline prices during much of the third
quarter and the addition of 300,000-400,000 jobs, while lower than expected,
contributed to a pick up in consumer spending in the third-quarter. Third
quarter unemployment declined to 5.4%. On August 10, the Fed again raised the
fed funds rate from 1.25% to 1.50%. This was followed by another increase to
1.75% on September 21.
In October 2004, employment increased by 337,000 jobs and unemployment
remained virtually unchanged. The Consumer Price Index increased 0.5% in
October. In addition, the S&P 500(R) gained 1.4% in October as the technology
sector outperformed all other industries and crude oil prices fell sharply from
record highs.
LORD ABBETT MICRO-CAP GROWTH FUND
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2004?
A: For the fiscal year ended October 31, 2004, the Fund returned 9.3%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmark, the Russell 2000(R)
Growth Index,(2) which returned 5.5% over the same period. Standardized Average
Annual Total Returns, which reflect performance at the maximum 5.75% sales
charge applicable to Class A share investments and include the reinvestment of
all distributions are 1 Year: 3.04% and Since Inception (May 1, 2000): -4.22%.
Class A shares purchased subject to a front-end sales charge have no
2
<Page>
contingent deferred sales charge (CDSC). However, certain purchases of Class A
shares made without a front-end sales charge may be subject to a CDSC of 1% if
the shares are redeemed within 12 months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT
TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING
TO OUR WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: Stock selection within the technology sector was the largest contributor to
the Fund's outperformance of its benchmark for the year. The portfolio benefited
from its focus on software and internet security, as protection from computer
viruses became an increasing concern among businesses and consumers. Portfolio
performance was also helped by its holding of a measurement specialist company
that offers systems support for industrial weighing and measuring requirements.
The company performed well due to an acceleration in the sensor business, as
well as improved cost efficiencies realized from its recent move to off-shore
manufacturing. The financial services sector also outperformed relative to its
benchmark.
Stock selection within the consumer discretionary sector hindered
performance. This sector includes consumer durables, such as televisions,
refrigerators and other appliances, as well as apparel, media, hotel and
leisure. Three underperforming holdings within this sector had an internet
component to them. These included an Internet media company, an online jewelry
dealer and an online European travel agency that was hurt by decreased leisure
travel due to the continued war in Iraq. Also, stock selection within the
materials and processing sector detracted from performance, as a fundamentally
strong company that manufactures batteries underperformed based on a delay in
the awarding of a government contract. Ultimately, the contract was awarded to
the firm.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
3
<Page>
LORD ABBETT MICRO-CAP VALUE FUND
Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2004?
A: For the fiscal year ended October 31, 2004, the Fund returned 20.1%,
reflecting performance at the Net Asset Value (NAV) of Class A shares with all
distributions reinvested, compared with its benchmark, the Russell 2000(R) Value
Index,(3) which returned 18.0% over the same period. Standardized Average Annual
Total Returns, which reflect performance at the maximum 5.75% sales charge
applicable to Class A share investments and include the reinvestment of all
distributions are 1 Year: 13.16% and Since Inception (May 1, 2000): 21.52%.
Class A shares purchased subject to a front-end sales charge have no contingent
deferred sales charge (CDSC). However, certain purchases of Class A shares made
without a front-end sales charge may be subject to a CDSC of 1% if the shares
are redeemed within 12 months of the purchase.
PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE
QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND
WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT
TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING
TO OUR WEBSITE AT www.LordAbbett.com.
Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE?
A: Stock selection was the main reason for the Fund's outperformance relative to
its benchmark for the year. Within the consumer discretionary sector, stock
selection made the most significant positive contribution. This sector includes
stocks within the consumer durables, such as televisions, refrigerators and
dishwashers, as well as apparel, media, hotel and leisure. The portfolio's
holdings in a shoe company benefited performance when the firm was acquired by
another company. Also contributing to performance were portfolio holdings in a
fundamentally strong company that runs trips abroad for students, a golf
clothing company with new management and a shoe company making a comeback.
Performance was also boosted by stock selection within the technology sector. A
company whose primary business includes the production of magnets and associated
equipment for MRI machines performed well, as it won market share and grew
through the acquisition of another company. The portfolio also benefited from
its holdings in two software companies, one that provides software for
restaurants and the leisure industry and another that makes software for the
plastics industry.
The selection of stocks within the producer durables sector worked against
4
<Page>
performance as two companies involved in the production of switch gear equipment
for the utilities segment underperformed due to an unanticipated delay in the
determination of a domestic energy upgrade program by the Federal Energy
Regulatory Commission. In addition, two holdings in the auto and transportation
sector had a negative impact. An airline company was hurt as the rising cost of
crude oil added to operating costs and an auto replacement parts firm's stock
price was influenced by regulatory concerns.
THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND
WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF
PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES.
THE PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUNDS, INCLUDING THE
FUNDS' INVESTMENT OBJECTIVES, RISKS, CHARGES AND ONGOING EXPENSES, THAT YOU
SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON THESE
FUNDS OR ANY LORD ABBETT MUTUAL FUND, PLEASE CONTACT YOUR INVESTMENT
PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 800-874-3733 OR VISIT
www.LordAbbett.com. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
(1) The S&P 500(R) Index is widely regarded as the standard for measuring
large-cap U.S. stock market performance, this popular index includes a
representative sample of leading companies in leading industries. Indices are
unmanaged, do not reflect the deduction of fees or expenses and are not
available for direct investment.
(2) The Russell 2000(R) Growth Index measures the performance of those Russell
2000 companies with higher price-to-book ratios and higher forecasted growth
values. Indices are unmanaged, do not reflect the deduction of fees or expenses
and are not available for direct investment.
(3) The Russell 2000(R) Value Index measures the performance of those Russell
2000 companies with lower price-to-book ratios and lower forecasted growth
values. Indices are unmanaged, do not reflect the deduction of fees or expenses
and are not available for direct investment.
IMPORTANT PERFORMANCE AND OTHER INFORMATION
The views of each Fund's management and the portfolio holdings described in this
report are as of October 31, 2004; these views and portfolio holdings may have
changed subsequent to this date and they do not guarantee the future performance
of the markets or the Funds. Information provided in this report should not be
considered a recommendation to purchase or sell securities.
A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of
investment risks. For a more detailed discussion of the risks associated with
the Funds, please see the Funds' Prospectus.
PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, THE FUNDS' PERFORMANCE MAY BE
SUBJECT TO SUBSTANTIAL FLUCTUATION. Except where noted, comparative funds'
performance does not account for the deduction of sales charges and would be
different if sales charges were included. The Funds offer additional classes of
shares with distinct pricing options. For a full description of the differences
in pricing alternatives, please see the Prospectus.
MUTUAL FUNDS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR OTHER OBLIGATIONS
OF, OR GUARANTEED BY BANKS, AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
5
<Page>
MICRO-CAP GROWTH FUND
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class Y shares with
the same investment in the Center for Research Security Prices Index ("CRSP 9-10
Index") and the Russell 2000(R) Growth Index, assuming reinvestment of all
dividends and distributions. The performance of the other class will be greater
than or less than the performance shown in the graph below due to different
sales loads and expenses applicable to such classes. The graph and performance
table below do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS Y SHARES) RUSSELL 2000(R)
AT NET ASSET VALUE CRSP 9-10 INDEX(1) GROWTH INDEX(1)
Jul 9, 99 $ 10,000 $ 10,000 $ 10,000
9/30/99 $ 9,372 $ 9,588 $ 9,812
12/31/99 $ 11,998 $ 11,444 $ 13,088
3/31/2000 $ 15,186 $ 13,395 $ 14,303
6/30/2000 $ 12,014 $ 12,196 $ 13,249
9/30/2000 $ 11,449 $ 12,425 $ 12,723
12/31/2000 $ 9,250 $ 10,005 $ 10,153
3/31/2001 $ 9,475 $ 10,586 $ 8,610
6/30/2001 $ 10,624 $ 12,654 $ 10,157
9/30/2001 $ 8,395 $ 10,427 $ 7,305
12/31/2001 $ 10,857 $ 13,432 $ 9,216
3/31/2002 $ 10,857 $ 14,053 $ 9,036
6/30/2002 $ 9,478 $ 13,194 $ 7,617
9/30/2002 $ 7,419 $ 10,298 $ 5,978
12/31/2002 $ 7,527 $ 11,536 $ 6,427
3/31/2003 $ 7,271 $ 11,313 $ 6,177
6/30/2003 $ 9,252 $ 15,154 $ 7,669
9/30/2003 $ 10,345 $ 17,553 $ 8,472
12/31/2003 $ 11,271 $ 20,530 $ 9,547
3/31/2004 $ 12,670 $ 22,007 $ 10,079
6/30/2004 $ 12,886 $ 21,701 $ 10,088
9/30/2004 $ 11,468 $ 20,587 $ 9,482
10/31/2004 $ 11,822 $ 20,955 $ 9,712
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2004
<Table>
<Caption>
1 YEAR 5 YEARS LIFE OF CLASS
CLASS A(2) 3.04% -- (4.22)%
CLASS Y(3) 9.49% 5.20% 3.21%
</Table>
(1) Performance for each unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of each index is not
necessarily representative of the Fund's performance. Performance for each index
begins on July 31, 1999.
(2) Class A shares commenced operations on May 1, 2000. Total Return, which is
the percent change in net asset value, after deduction of the maximum initial
sales charge of 5.75% applicable to Class A shares, with all dividends and
distributions reinvested for the periods shown ended October 31, 2004 is
calculated using the SEC-required uniform method to compute such return.
(3) Class Y shares commenced operations on July 9, 1999. Total Return, with all
dividends and distributions reinvested for the periods shown ended October 31,
2004, is at net asset value.
6
<Page>
MICRO-CAP VALUE FUND
INVESTMENT COMPARISON
Below is a comparison of a $10,000 investment in Class Y shares with the same
investment in the Center for Research Security Prices Index ("CRSP 9-10 Index")
and the Russell 2000(R) Value Index, assuming reinvestment of all dividends and
distributions. The performance of the other class will be greater than or less
than the performance shown in the graph below due to different sales loads and
expenses applicable to such classes. The graph and performance table below do
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[CHART]
<Table>
<Caption>
THE FUND (CLASS Y SHARES) RUSSELL 2000(R)
AT NET ASSET VALUE CRSP 9-10 INDEX(1) GROWTH INDEX(1)
Jul 9, 99 $ 10,000 $ 10,000 $ 10,000
9/30/99 $ 9,309 $ 9,588 $ 9,442
12/31/99 $ 10,387 $ 11,444 $ 9,586
3/31/2000 $ 11,010 $ 13,395 $ 9,953
6/30/2000 $ 12,787 $ 12,196 $ 10,147
9/30/2000 $ 13,872 $ 12,425 $ 10,892
12/31/2000 $ 14,124 $ 10,005 $ 11,775
3/31/2001 $ 14,633 $ 10,586 $ 11,889
6/30/2001 $ 17,764 $ 12,654 $ 13,273
9/30/2001 $ 15,364 $ 10,427 $ 11,502
12/31/2001 $ 18,063 $ 13,432 $ 13,425
3/31/2002 $ 20,639 $ 14,053 $ 14,712
6/30/2002 $ 20,864 $ 13,194 $ 14,400
9/30/2002 $ 17,123 $ 10,298 $ 11,334
12/31/2002 $ 17,452 $ 11,536 $ 11,892
3/31/2003 $ 16,063 $ 11,313 $ 11,288
6/30/2003 $ 20,286 $ 15,154 $ 13,852
9/30/2003 $ 22,223 $ 17,553 $ 14,922
12/31/2003 $ 25,590 $ 20,530 $ 17,364
3/31/2004 $ 27,742 $ 22,007 $ 18,566
6/30/2004 $ 28,746 $ 21,701 $ 18,724
9/30/2004 $ 28,275 $ 20,587 $ 18,752
10/31/2004 $ 29,024 $ 20,955 $ 19,042
</Table>
AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE
SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2004
<Table>
<Caption>
1 YEAR 5 YEARS LIFE OF CLASS
CLASS A(2) 13.16% -- 21.52%
CLASS Y(3) 20.36% 26.21% 22.21%
</Table>
(1) Performance for each unmanaged index does not reflect transaction costs,
management fees or sales charges. The performance of each index is not
necessarily representative of the Fund's performance. Performance for each index
begins on July 31, 1999.
(2) Class A shares commenced operations on May 1, 2000. Total Return, which is
the percent change in net asset value, after deduction of the maximum initial
sales charge of 5.75% applicable to Class A shares, with all dividends and
distributions reinvested for the periods shown ended October 31, 2004 is
calculated using the SEC-required uniform method to compute such return.
(3) Class Y shares commenced operations on July 9, 1999. Total Return, with all
dividends and distributions reinvested for the periods shown ended October 31,
2004, is at net asset value.
7
<Page>
EXPENSE EXAMPLES
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs, including sales charges on purchase payments (these charges vary among
the share classes); and (2) ongoing costs, including management fees;
distribution and service (12b-1) fees (these charges vary among the share
classes); and other Fund expenses. The Examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Funds 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 (May 1, 2004 through October 31,
2004).
ACTUAL EXPENSES
For each class of the Fund, the first line of the table on the following
page provides information about actual account values and actual expenses. You
may use the information in this line, together with the amount you invested, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
entitled "Expenses Paid During the Period 5/1/04 - 10/31/04" 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 each 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.
8
<Page>
MICRO-CAP GROWTH FUND
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.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE THE PERIOD+
----- ----- -----------
5/1/04 -
5/1/04 10/31/04 10/31/04
------ -------- --------
CLASS A
Actual $ 1,000.00 $ 955.00 $ 10.32
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,014.58 $ 10.63
CLASS Y
Actual $ 1,000.00 $ 955.40 $ 9.09
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.84 $ 9.38
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (2.10% for Class A, and 1.85% for Class Y) multiplied by the
average account value over the period, multiplied by 182/366 (to reflect
one-half year period).
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
OCTOBER 31, 2004
<Table>
<Caption>
SECTOR %*
Consumer Discretionary 26.29%
Financial Services 7.04%
Healthcare 31.40%
Integrated Oils 1.84%
Materials & Processing 4.51%
Producer Durables 5.77%
Short-Term Investment 6.87%
Technology 16.28%
Total 100.00%
</Table>
* Represents percent of total investments.
9
<Page>
MICRO-CAP VALUE FUND
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.
<Table>
<Caption>
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT PAID DURING
VALUE VALUE THE PERIOD+
----- ----- -----------
5/1/04 -
5/1/04 10/31/04 10/31/04
------ -------- --------
CLASS A
Actual $ 1,000.00 $ 1,065.60 $ 10.90
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,014.58 $ 10.63
CLASS Y
Actual $ 1,000.00 $ 1,066.70 $ 9.61
Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.84 $ 9.38
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense ratio
for such class (2.10% for Class A, and 1.85% for Class Y) multiplied by the
average account value over the period, multiplied by 182/366 (to reflect
one-half year period).
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
OCTOBER 31, 2004
<Table>
<Caption>
SECTOR %*
Auto & Transportation 11.86%
Consumer Discretionary 26.32%
Consumer Staples 1.80%
Financial Services 17.39%
Healthcare 5.76%
Integrated Oils 1.46%
Materials & Processing 9.71%
Other Energy 1.49%
Producer Durables 11.26%
Short-Term Investment 4.33%
Technology 6.59%
Utilities 2.03%
Total 100.00%
</Table>
* Represents percent of total investments.
10
<Page>
SCHEDULE OF INVESTMENTS
MICRO-CAP GROWTH FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS 93.65%
BANKS 2.28%
Online Resources Corp.* 18,000 $ 131
-----------
BANKS: OUTSIDE NEW YORK CITY 2.16%
Heritage Commerce Corp.* 7,100 124
-----------
BIOTECHNOLOGY RESEARCH &
PRODUCTION 7.78%
Matrixx Initiatives, Inc.* 10,600 133
Regeneration
Technologies, Inc.* 8,700 67
Vion Pharmaceuticals, Inc.* 52,900 247
-----------
TOTAL 447
-----------
CASINOS & GAMBLING 6.39%
Mikohn Gaming Corp.* 34,900 248
Youbet.com, Inc.* 37,000 119
-----------
TOTAL 367
-----------
CHEMICALS 4.53%
Medis Technologies Ltd.* 9,500 122
Ultralife Batteries, Inc.* 12,500 138
-----------
TOTAL 260
-----------
COMPUTER SERVICES SOFTWARE &
SYSTEMS 12.19%
Aladdin Knowledge
Systems Ltd.*(a) 7,400 186
Digitas, Inc.* 19,600 177
eCollege.com, Inc.* 9,300 85
Electronic Clearing
House, Inc.* 21,400 171
KANA Software, Inc.* 46,400 81
-----------
TOTAL 700
-----------
COMPUTER TECHNOLOGY 1.34%
Digital Recorders, Inc.* 18,400 77
-----------
DRUGS & PHARMACEUTICALS 7.97%
Bone Care International,
Inc.* 3,900 $ 90
Bradley Pharmaceuticals,
Inc.* 6,800 113
Flamel Technologies
S.A. ADR* 4,600 75
SFBC Int'l., Inc.* 6,500 180
-----------
TOTAL 458
-----------
ELECTRONICS 1.31%
II-VI, Inc.* 2,200 75
-----------
ELECTRONICS: INSTRUMENTS, GAUGES &
METERS 4.02%
Measurement Specialties,
Inc.* 8,900 231
-----------
ELECTRONICS: MEDICAL SYSTEMS 1.67%
Rita Medical Systems, Inc.* 29,700 96
-----------
ELECTRONICS: OTHER 1.53%
International DisplayWorks,
Inc.* 16,350 88
-----------
FINANCE COMPANIES 2.65%
Asta Funding, Inc. 8,400 152
-----------
HEALTHCARE FACILITIES 4.13%
Psychiatric Solutions, Inc.* 9,300 237
-----------
HEALTHCARE MANAGEMENT SERVICES 1.86%
World Health Alternatives,
Inc.* 29,800 107
-----------
IDENTIFICATION CONTROL & FILTER
DEVICES 1.79%
Sun Hydraulics Corp. 8,800 103
-----------
JEWELRY WATCHES & GEMSTONES 1.55%
LJ International, Inc.*(a) 38,200 89
-----------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<Page>
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -------------------------------------------------------------------------------
MEDICAL & DENTAL INSTRUMENTS &
SUPPLIES 7.07%
BriteSmile, Inc.* 11,800 $ 105
Medtox Scientific, Inc.* 7,800 55
Molecular Devices Corp.* 6,100 122
Neogen Corp.* 6,650 124
-----------
TOTAL 406
-----------
MISCELLANEOUS HEALTHCARE 1.08%
Hartville Group, Inc.* 19,900 62
-----------
OIL: INTEGRATED DOMESTIC 1.84%
Gasco Energy, Inc.* 31,900 106
-----------
PRINTING & COPYING SERVICES 1.86%
TRM Corp.* 6,100 107
-----------
RETAIL 6.53%
Bon-Ton Stores, Inc. (The) 10,300 124
Charlotte Russe Holding,
Inc.* 9,800 129
Design Within Reach, Inc.* 7,600 122
-----------
TOTAL 375
-----------
SERVICES: COMMERCIAL 5.26%
Exponent, Inc.* 4,200 113
Gevity HR, Inc. 6,500 116
Opinion Research Corp.* 11,700 73
-----------
TOTAL 302
-----------
TEXTILES APPAREL MANUFACTURERS 4.86%
Oxford Industries, Inc. 4,400 163
True Religion Apparel, Inc.* 36,700 116
-----------
TOTAL 279
-----------
TOTAL COMMON STOCKS
(Cost $4,858,956) 5,379
===========
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 6.91%
REPURCHASE AGREEMENT 6.91%
Repurchase Agreement
dated 10/29/2004,
1.44% due 11/1/2004
with State Street
Bank & Trust Co.
collateralized by
$415,000 of Federal
Home Loan Bank at
zero coupon due
8/29/2005;
value: $407,269;
proceeds: $397,017
(cost $396,970) $ 397 $ 397
===========
TOTAL INVESTMENTS IN SECURITIES 100.56%
(Cost $5,255,926) $ 5,776
===========
LIABILITIES IN EXCESS OF CASH AND
OTHER ASSETS (0.56%) (32)
===========
NET ASSETS 100.00% $ 5,744
===========
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
ADR American Depository Receipt.
SEE NOTES TO FINANCIAL STATEMENTS.
12
<Page>
SCHEDULE OF INVESTMENTS
MICRO-CAP VALUE FUND OCTOBER 31, 2004
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -------------------------------------------------------------------------------
COMMON STOCKS 95.57%
AEROSPACE 2.55%
Allied Defense Group, Inc.* 7,800 $ 153
Ladish Co., Inc.* 16,700 168
-----------
TOTAL 321
-----------
AIR TRANSPORTATION 3.55%
Frontier Airlines, Inc.* 19,800 166
Offshore Logistics, Inc.* 7,800 282
-----------
TOTAL 448
-----------
AUTO COMPONENTS 0.64%
Wabash National Corp.* 3,300 81
-----------
AUTO PARTS: AFTER MARKET 1.55%
Keystone Automotive
Industries, Inc.* 10,800 195
-----------
BANKS: OUTSIDE NEW YORK CITY 8.20%
CoBiz, Inc. 13,550 269
Columbia Bancorp 9,300 166
Dearborn Bancorp, Inc.* 5,500 148
Franklin Bank Corp.* 10,600 175
Hanmi Financial Corp. 6,858 208
Pennsylvania Commerce
Bancorp, Inc.* 1,200 68
-----------
TOTAL 1,034
-----------
CHEMICALS 2.56%
NuCo2 Inc.* 8,200 174
Quaker Chemical Corp. 6,600 149
-----------
TOTAL 323
-----------
COMMUNICATIONS TECHNOLOGY 1.65%
Bel Fuse, Inc. Class A 7,200 208
-----------
COMPUTER SERVICES SOFTWARE &
SYSTEMS 2.82%
MICROS Systems, Inc.* 2,200 130
Moldflow Corp.* 18,200 226
-----------
TOTAL 356
-----------
COMPUTER TECHNOLOGY 1.58%
Fargo Electronics, Inc.* 15,200 $ 199
-----------
CONSTRUCTION 1.49%
Modtech Holdings, Inc.* 24,900 188
-----------
CONTAINERS & PACKAGING: METAL &
GLASS 1.53%
Mobile Mini, Inc.* 6,800 193
-----------
DIVERSIFIED FINANCIAL SERVICES 0.73%
American Physicians
Services Group, Inc. 9,500 92
-----------
ELECTRICAL EQUIPMENT &
COMPONENTS 2.13%
AZZ, Inc.* 7,700 103
Powell Industries, Inc.* 10,200 165
-----------
TOTAL 268
-----------
ELECTRONICS: TECHNOLOGY 0.52%
Intermagnetics General
Corp.* 2,550 65
-----------
FINANCIAL MISCELLANEOUS 0.98%
Financial Federal Corp.* 3,300 123
-----------
FOODS 0.83%
Tasty Baking Co. 13,100 105
-----------
FUNERAL PARLORS & CEMETERY 2.75%
Carriage Services, Inc.* 44,000 207
Rock of Ages Corp. 19,200 140
-----------
TOTAL 347
-----------
HEALTHCARE FACILITIES 1.15%
Capital Senior Living Corp.* 27,300 145
-----------
HEALTHCARE MANAGEMENT SERVICES 2.67%
American Dental Partners,
Inc.* 17,800 336
-----------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<Page>
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -------------------------------------------------------------------------------
HOTEL/MOTEL 1.52%
Marcus Corp. (The) 9,000 $ 191
-----------
HOUSEHOLD EQUIPMENT &
PRODUCTS 0.63%
Craftmade Int'l., Inc. 3,800 79
-----------
HOUSEHOLD FURNISHINGS 0.44%
Haverty Furniture Cos., Inc. 3,300 56
-----------
IDENTIFICATION CONTROL & FILTER
DEVICES 0.50%
Robbins & Myers, Inc. 3,000 63
-----------
INSURANCE: PROPERTY-CASUALTY 2.97%
Donegal Group, Inc. 9,800 212
Navigators Group, Inc.
(The)* 5,500 162
-----------
TOTAL 374
-----------
MACHINERY: INDUSTRIAL/SPECIALTY 3.05%
Tennant Co. 3,900 159
Twin Disc, Inc. 9,300 226
-----------
TOTAL 385
-----------
MACHINERY: OIL WELL EQUIPMENT &
SERVICES 1.49%
Lufkin Industries, Inc. 5,300 188
-----------
MACHINERY: SPECIALTY 1.04%
Quipp, Inc.* 9,800 131
-----------
MEDICAL & DENTAL INSTRUMENTS &
SUPPLIES 1.94%
ICU Medical, Inc.* 4,100 92
Meridian Bioscience, Inc. 11,400 153
-----------
TOTAL 245
-----------
METAL FABRICATING 0.69%
NN, Inc. 7,900 87
-----------
METALS & MINERALS MISCELLANEOUS 1.75%
Castle (A.M.) & Co.* 19,600 221
-----------
OIL: INTEGRATED DOMESTIC 1.46%
Pioneer Drilling Co.* 22,700 $ 184
-----------
POLLUTION CONTROL &
ENVIRONMENTAL SERVICES 1.98%
Team, Inc.* 15,800 250
-----------
RAILROADS 1.21%
Genesee & Wyoming Inc.
Class A* 5,987 152
-----------
REAL ESTATE INVESTMENT TRUSTS 2.67%
Agree Realty Corp. 4,400 126
LaSalle Hotel Properties 7,300 210
-----------
TOTAL 336
-----------
RENTAL & LEASING SERVICES:
COMMERCIAL 1.83%
McGrath Rent Corp. 5,900 230
-----------
RETAIL 2.11%
Rush Enterprises, Inc.
Class B* 17,700 265
-----------
SERVICES: COMMERCIAL 11.92%
Ambassadors Int'l., Inc. 5,300 166
Exponent, Inc.* 10,400 281
Hudson Highland Group,
Inc.* 5,300 151
Integrated Alarm Services
Group, Inc.* 40,700 180
Monro Muffler Brake, Inc.* 12,600 307
SM&A* 28,900 233
World Fuel Services 5,400 184
-----------
TOTAL 1,502
-----------
SHOES 1.21%
Skechers USA, Inc. Class A* 13,800 152
-----------
STEEL 1.09%
Steel Technologies, Inc. 5,700 137
-----------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<Page>
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- -------------------------------------------------------------------------------
TEXTILE PRODUCTS 0.59%
Quaker Fabric Corp. 13,200 $ 74
-----------
TEXTILES APPAREL MANUFACTURERS 5.71%
Cutter & Buck, Inc. 27,500 333
Hartmarx Corp.* 26,400 221
Phillips-Van Heusen Corp. 7,300 166
-----------
TOTAL 720
-----------
TOBACCO 0.96%
Dimon, Inc. 14,300 83
Standard Commercial Corp. 2,400 38
-----------
TOTAL 121
-----------
TRANSPORTATION MISCELLANEOUS 2.17%
Hub Group, Inc. Class A* 6,800 273
-----------
TRUCKERS 2.73%
Covenant Transport, Inc.
Class A* 8,800 152
P.A.M. Transportation
Services, Inc.* 10,200 192
-----------
TOTAL 344
-----------
UTILITIES: GAS DISTRIBUTORS 0.38%
Chesapeake Utilities Corp. 1,900 48
-----------
UTILITIES: MISCELLANEOUS 1.55%
Waste Industries USA, Inc. 17,700 195
-----------
UTILITIES: WATER 0.10%
Consolidated Water Co.
Ordinary Shares(a) 600 13
-----------
TOTAL COMMON STOCKS
(Cost $9,218,371) 12,043
===========
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 4.33%
REPURCHASE AGREEMENT 4.33%
Repurchase Agreement
dated 10/29/2004,
1.44% due 11/1/2004
with State Street
Bank & Trust Co.
collateralized by
$560,000 of Federal
National Mortgage
Assoc. at zero coupon
due 2/2/2005;
value: $557,200;
proceeds: $544,915
(cost $544,849) $ 545 $ 545
===========
TOTAL INVESTMENTS IN SECURITIES 99.90%
(Cost $9,763,220) $ 12,588
===========
CASH AND OTHER ASSETS
IN EXCESS OF LIABILITIES 0.10% 13
===========
NET ASSETS 100.00% $ 12,601
===========
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<Page>
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2004
<Table>
<Caption>
MICRO-CAP MICRO-CAP
GROWTH FUND VALUE FUND
ASSETS:
Investments in securities, at cost $ 5,255,926 $ 9,763,220
- ---------------------------------------------------------------------------------------------------------------
Investments in securities, at value $ 5,776,432 $ 12,587,895
Cash - 5,611
Receivables:
Interest and dividends 342 3,287
Investment securities sold - 128,389
Capital shares sold 3,195 7,545
From advisor 4,005 106
Prepaid expenses and other assets 59 128
- ---------------------------------------------------------------------------------------------------------------
Total assets 5,784,033 12,732,961
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased - 94,522
Management fees 7,097 15,543
12b-1 distribution fees 1,396 3,246
Fund administration 189 414
Trustees' fees 326 76
Accrued expenses and other liabilities 31,515 18,265
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 40,523 132,066
===============================================================================================================
NET ASSETS $ 5,743,510 $ 12,600,895
===============================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $ 5,049,124 $ 8,317,772
Accumulated net investment loss (326) (76)
Accumulated net realized gain on investments 174,206 1,458,524
Net unrealized appreciation on investments 520,506 2,824,675
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 5,743,510 $ 12,600,895
===============================================================================================================
NET ASSETS BY CLASS:
Class A Shares $ 4,725,353 $ 10,838,425
Class Y Shares $ 1,018,157 $ 1,762,470
OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF AUTHORIZED
SHARES OF BENEFICIAL INTEREST):
Class A Shares 397,856 453,726
Class Y Shares 84,872 73,441
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY OUTSTANDING SHARES):
Class A Shares-Net asset value $ 11.88 $ 23.89
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 12.60 $ 25.35
Class Y Shares-Net asset value $ 12.00 $ 24.00
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
16
<Page>
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2004
<Table>
<Caption>
MICRO-CAP MICRO-CAP
GROWTH FUND VALUE FUND
INVESTMENT INCOME:
Dividends $ 7,397 $ 90,204
Interest 3,327 5,730
- -------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 10,724 95,934
- -------------------------------------------------------------------------------------------------------------
EXPENSES:
Management fees 82,459 162,882
12b-1 distribution plan-Class A 13,660 26,973
Shareholder servicing 5,100 6,725
Professional 20,336 20,157
Reports to shareholders 6,055 13,444
Fund administration 2,199 4,343
Custody 3,375 5,414
Trustees' fees 138 227
Registration 4,877 5,654
Other 379 334
- -------------------------------------------------------------------------------------------------------------
Gross expenses 138,578 246,153
Expense reductions (137) (91)
Expenses assumed by advisor (23,073) (18,197)
- -------------------------------------------------------------------------------------------------------------
NET EXPENSES 115,368 227,865
- -------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (104,644) (131,931)
- -------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 595,487 1,589,792
Net change in unrealized appreciation (depreciation) on investments (66,499) 457,431
=============================================================================================================
NET REALIZED AND UNREALIZED GAIN 528,988 2,047,223
=============================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 424,344 $ 1,915,292
=============================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED OCTOBER 31, 2004
<Table>
<Caption>
MICRO-CAP MICRO-CAP
INCREASE IN NET ASSETS GROWTH FUND VALUE FUND
OPERATIONS:
Net investment loss $ (104,644) $ (131,931)
Net realized gain on investments 595,487 1,589,792
Net change in unrealized appreciation (depreciation) on investments (66,499) 457,431
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 424,344 1,915,292
=============================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A - (122,771)
Class Y - (351)
Net realized gain
Class A - (532,495)
Class Y - (1,280)
- -------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS - (656,897)
=============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 1,784,611 3,926,178
Reinvestment of distributions - 656,897
Cost of shares reacquired (1,128,485) (2,153,835)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 656,126 2,429,240
=============================================================================================================
NET INCREASE IN NET ASSETS 1,080,470 3,687,635
=============================================================================================================
NET ASSETS:
Beginning of year 4,663,040 8,913,260
- -------------------------------------------------------------------------------------------------------------
END OF YEAR $ 5,743,510 $ 12,600,895
=============================================================================================================
ACCUMULATED NET INVESTMENT LOSS $ (326) $ (76)
=============================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<Page>
<Table>
<Caption>
MICRO-CAP MICRO-CAP
INCREASE IN NET ASSETS GROWTH FUND VALUE FUND
OPERATIONS:
Net investment loss $ (55,992) $ (56,735)
Net realized gain on investments 175,560 713,072
Net change in unrealized appreciation on investments 1,242,069 1,944,037
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,361,637 2,600,374
=============================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A - (18,897)
Class Y - (107)
Net realized gain
Class A - (222,077)
Class Y - (596)
- -------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS - (241,677)
=============================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 990,181 1,066,841
Reinvestment of distributions - 239,810
Cost of shares reacquired (392,729) (208,835)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 597,452 1,097,816
=============================================================================================================
NET INCREASE IN NET ASSETS 1,959,089 3,456,513
=============================================================================================================
NET ASSETS:
Beginning of year 2,703,951 5,456,747
- -------------------------------------------------------------------------------------------------------------
END OF YEAR $ 4,663,040 $ 8,913,260
=============================================================================================================
ACCUMULATED NET INVESTMENT LOSS $ - $ (75)
=============================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<Page>
FINANCIAL HIGHLIGHTS
MICRO-CAP GROWTH FUND
<Table>
<Caption>
YEAR ENDED 10/31 5/1/2000(C)
-------------------------------------------------------- TO
2004 2003 2002 2001 10/31/2000
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.87 $ 7.51 $ 9.49 $ 13.18 $ 16.76
=========== =========== =========== =========== ===========
Investment operations:
Net investment income (loss)(a) (.23) (.14) (.02) -(e) (.01)
Net realized and unrealized gain (loss) 1.24 3.50 (1.95) (1.34) (3.57)
----------- ----------- ----------- ----------- -----------
Total from investment operations 1.01 3.36 (1.97) (1.34) (3.58)
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income - - (.01) (.01) -
Net realized gain - - - (2.34) -
----------- ----------- ----------- ----------- -----------
Total distributions - - (.01) (2.35) -
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.88 $ 10.87 $ 7.51 $ 9.49 $ 13.18
=========== =========== =========== =========== ===========
Total Return(b) 9.29% 44.74% (20.81)% (11.30)% (21.36)%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and
expense reductions 2.10% 1.75% .38% .38% .18%(d)
Expenses, excluding waiver and
expense reductions 2.52% 2.84% 2.99% 4.02% 1.36%(d)
Net investment income (loss) (1.91)% (1.60)% (.24)% .04% (.04)%(d)
</Table>
<Table>
<Caption>
YEAR ENDED 10/31 5/1/2000(C)
-------------------------------------------------------- TO
SUPPLEMENTAL DATA: 2004 2003 2002 2001 10/31/2000
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 4,726 $ 4,655 $ 2,698 $ 2,266 $ 2,160
Portfolio turnover rate 79.07% 126.71% 34.08% 80.17% 103.33%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<Page>
<Table>
<Caption>
YEAR ENDED 10/31
-----------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 10.96 $ 7.55 $ 9.52 $ 13.21 $ 12.57
=========== =========== =========== =========== ===========
Investment operations:
Net investment income (loss)(a) (.20) (.11) .01 .04 .04
Net realized and unrealized gain (loss) 1.24 3.52 (1.95) (1.35) 1.73
----------- ----------- ----------- ----------- -----------
Total from investment operations 1.04 3.41 (1.94) (1.31) 1.77
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income - - (.03) (.04) (.02)
Net realized gain - - - (2.34) (1.11)
----------- ----------- ----------- ----------- -----------
Total distributions - - (.03) (2.38) (1.13)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR $ 12.00 $ 10.96 $ 7.55 $ 9.52 $ 13.21
=========== =========== =========== =========== ===========
Total Return(b) 9.49% 45.17% (20.42)% (11.00)% 14.48%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and
expense reductions 1.85%+ 1.42% .00% .00% .00%
Expenses, excluding waiver and
expense reductions 2.27%+ 2.51% 2.61% 3.64% 2.33%
Net investment income (loss) (1.66)%+ (1.27)% .14% .42% .22%
</Table>
<Table>
<Caption>
YEAR ENDED 10/31
-----------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 1,018 $ 8 $ 6 $ 7 $ 8
Portfolio turnover rate 79.07% 126.71% 34.08% 80.17% 103.33%
</Table>
+ The ratios have been determined on a Fund basis.
(a) Calculated using average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Commencement of offering of class shares.
(d) Not annualized.
(e) Amount is less than $.01.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<Page>
FINANCIAL HIGHLIGHTS
MICRO-CAP VALUE FUND
<Table>
<Caption>
YEAR ENDED 10/31 5/1/2000(C)
-------------------------------------------------------- TO
2004 2003 2002 2001 10/31/2000
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
Net asset value, beginning of period $ 21.43 $ 15.56 $ 15.68 $ 15.90 $ 13.13
=========== =========== =========== =========== ===========
Investment operations:
Net investment income (loss)(a) (.27) (.14) .05 .10 .07
Net realized and unrealized gain 4.31 6.69 .60 2.20 2.70
----------- ----------- ----------- ----------- -----------
Total from investment operations 4.04 6.55 .65 2.30 2.77
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income (.30) (.05) (.05) (.14) -
Net realized gain (1.28) (.63) (.72) (2.38) -
----------- ----------- ----------- ----------- -----------
Total distributions (1.58) (.68) (.77) (2.52) -
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 23.89 $ 21.43 $ 15.56 $ 15.68 $ 15.90
=========== =========== =========== =========== ===========
Total Return(b) 20.08% 43.80% 4.12% 17.16% 21.10%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and
expense reductions 2.10% 1.73% .38% .38% .17%(d)
Expenses, excluding waiver and
expense reductions 2.27% 2.18% 2.76% 3.08% 1.50%(d)
Net investment income (loss) (1.22)% (.84)% .31% .64% .49%(d)
</Table>
<Table>
<Caption>
YEAR ENDED 10/31 5/1/2000(C)
-------------------------------------------------------- TO
SUPPLEMENTAL DATA: 2004 2003 2002 2001 10/31/2000
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 10,838 $ 8,892 $ 5,442 $ 4,889 $ 2,032
Portfolio turnover rate 36.97% 48.55% 36.02% 52.63% 82.02%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<Page>
<Table>
<Caption>
YEAR ENDED 10/31
-----------------------------------------------------------------------
2004 2003 2002 2001 2000
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF YEAR $ 21.53 $ 15.63 $ 15.72 $ 15.92 $ 10.75
=========== =========== =========== =========== ===========
Investment operations:
Net investment income (loss)(a) (.22) (.09) .12 .16 .14
Net realized and unrealized gain 4.32 6.73 .59 2.19 5.19
----------- ----------- ----------- ----------- -----------
Total from investment operations 4.10 6.64 .71 2.35 5.33
----------- ----------- ----------- ----------- -----------
Distributions to shareholders from:
Net investment income (.35) (.11) (.08) (.17) (.09)
Net realized gain (1.28) (.63) (.72) (2.38) (.07)
----------- ----------- ----------- ----------- -----------
Total distributions (1.63) (.74) (.80) (2.55) (.16)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR $ 24.00 $ 21.53 $ 15.63 $ 15.72 $ 15.92
=========== =========== =========== =========== ===========
Total Return(b) 20.36% 44.35% 4.51% 17.48% 50.12%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including waiver and
expense reductions 1.85%+ 1.41% .00% .00% .00%
Expenses, excluding waiver and
expense reductions 2.02%+ 1.86% 2.38% 2.70% 2.50%
Net investment income (loss) (.97)%+ (.52)% .69% 1.02% 1.15%
</Table>
<Table>
<Caption>
YEAR ENDED 10/31
-----------------------------------------------------------------------
SUPPLEMENTAL DATA: 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $ 1,763 $ 21 $ 15 $ 14 $ 12
Portfolio turnover rate 36.97% 48.55% 36.02% 52.63% 82.02%
</Table>
+ The ratios have been determined on a Fund basis.
(a) Calculated using average shares outstanding during the year.
(b) Total return does not consider the effects of sales loads and assumes the
reinvestment of all distributions.
(c) Commencement of offering of class shares.
(d) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<Page>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Lord Abbett Securities Trust (the "Trust") is registered under the Investment
Company Act of 1940 (the "Act") as an open-end management investment company
organized as a Delaware business trust on February 26, 1993. The Trust currently
consists of seven funds. This report covers the following two funds and their
respective classes (separately, a "Fund" and collectively, the "Funds"): Lord
Abbett Micro-Cap Growth Fund ("Micro-Cap Growth Fund"), Class A and Y shares and
Lord Abbett Micro-Cap Value Fund ("Micro-Cap Value Fund"), Class A and Y shares.
The investment objective of both Micro-Cap Growth Fund and Micro-Cap Value Fund
is long-term capital appreciation.
Each class of shares has different expenses and dividends. A front-end sales
charge is normally added to the Net Asset Value ("NAV") for Class A shares.
There is no front-end sales charge in the case of Class Y shares, although there
may be a contingent deferred sales charge ("CDSC") for certain redemptions of
Class A shares made within 24 months (12 months if shares were purchased on or
after November 1, 2004) following certain purchases made without a sales charge.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) INVESTMENT VALUATION-Securities traded on any recognized U.S. or non-U.S.
exchange or on NASDAQ, Inc. are valued at the last sale price or official
closing price on the exchange or system on which they are principally
traded. Unlisted equity securities are valued at the last quoted sale price
or, if no sale price is available, at the mean between the most recently
quoted bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and
approved in good faith by the Board of Trustees. Short-term securities with
60 days or less remaining to maturity are valued using the amortized cost
method, which approximates current market value.
(b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date
that the securities are purchased or sold (trade date). Realized gains and
losses on sales of portfolio securities are calculated using the
identified-cost method. Realized and unrealized gains or losses are
allocated to each class of shares based upon the relative proportion of net
assets at the beginning of the day.
(c) INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date.
Interest income is recorded on the accrual basis. Discounts are accreted
and premiums are amortized using the effective interest method. Investment
income is allocated to each class of shares based upon the relative
proportion of net assets at the beginning of the day.
(d) FEDERAL TAXES-It is the policy of each Fund to meet the requirements of
Subchapter M of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all taxable income and
capital gains to its shareholders. Therefore, no federal income tax
provision is required.
24
<Page>
(e) EXPENSES-Expenses incurred by the Trust that do not specifically relate to
an individual fund are generally allocated to the Funds within the Trust on
a pro rata basis. 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 A shares bear all expenses and
fees relating to the Class A 12b-1 Distribution Plan.
(f) REPURCHASE AGREEMENTS-Each Fund may enter into repurchase agreements with
respect to securities. A repurchase agreement is a transaction in which the
Fund acquires a security and simultaneously commits to resell that security
to the seller (a bank or securities dealer) at an agreed-upon price on an
agreed-upon date. Each Fund requires at all times that the repurchase
agreement be collateralized by cash or by securities of the U.S.
Government, its agencies, its instrumentalities, or U.S. Government
sponsored enterprises having a value equal to, or in excess of, the value
of the repurchase agreement (including accrued interest). If the seller of
the agreement defaults on its obligation to repurchase the underlying
securities at a time when the value of these securities has declined, the
Fund may incur a loss upon disposition of the securities.
3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES
The Trust has a management agreement with Lord, Abbett & Co. LLC ("Lord Abbett")
pursuant to which Lord Abbett supplies the Trust with investment management
services and executive and other personnel, pays the remuneration of officers,
provides office space and pays for ordinary and necessary office and clerical
expenses relating to research and statistical work and supervision of the
Trust's investment portfolios.
The management fee is based on average daily net assets at an annual rate of
1.50%.
Lord Abbett is currently reimbursing expenses for each Fund to the extent
necessary to maintain total operating expenses for Class A at 2.10% and Class Y
at 1.85% of average daily net assets. Lord Abbett may stop reimbursing such
expenses at any time.
Lord Abbett provides certain administrative services to the Funds pursuant to an
Administrative Services Agreement at an annual rate of .04% of each Fund's
average daily net assets.
12b-1 DISTRIBUTION PLANS
Each Fund has adopted a distribution plan with respect to the Class A shares of
the Micro-Cap Growth Fund and Micro-Cap Value Fund pursuant to Rule 12b-1 of the
Act, which provides for the payment of ongoing distribution and service fees to
Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The
service fees are accrued daily based upon the average daily net assets
attributable to Class A at an annual rate of .25%. Each Fund's Class A shares
are no longer assessed the distribution fee, which had been charged at the
annual rate of .10%.
Class Y does not have a distribution plan.
One Trustee and certain of the Trust's officers have an interest in Lord Abbett.
25
<Page>
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARDS
Dividends from net investment income, if any, are declared and paid at least
annually. Taxable net realized gains from investment transactions, reduced by
capital loss carryforwards, if any, are distributed to shareholders at least
annually. The capital loss carryforward amount, if any, is available to offset
future net capital gains. Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions from
net investment income and net realized capital gains are determined in
accordance with federal income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These book/tax
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the components of net assets based on their federal tax basis treatment;
temporary differences do not require reclassification. Dividends and
distributions, which exceed earnings and profits for tax purposes, are reported
as distributions of paid-in capital.
On November 19, 2004, long-term capital gain distributions of $174,238 and
$1,187,279; and short-term capital gain distributions of $0 and $276,855 were
declared for Micro-Cap Growth Fund and Micro-Cap Value Fund, respectively. The
distributions were paid on November 23, 2004 to shareholders of record on
November 22, 2004.
The tax character of distributions paid during the years ended October 31, 2004
and 2003 were as follows:
<Table>
<Caption>
MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------------
10/31/2004 10/31/2003 10/31/2004 10/31/2003
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ - $ - $ 123,122 $ 241,677
Net long-term capital gains - - 533,775 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions paid $ - $ - $ 656,897 $ 241,677
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
As of October 31, 2004, the components of accumulated earnings (losses) on a tax
basis were as follows:
<Table>
<Caption>
MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income - net $ - $ 274,631
Undistributed long-term capital gains 174,206 1,187,254
- ---------------------------------------------------------------------------------------------------------------------------------
Total undistributed earnings $ 174,206 $ 1,461,885
Temporary differences (326) (76)
Unrealized gains - net 520,506 2,821,314
- ---------------------------------------------------------------------------------------------------------------------------------
Total accumulated earnings - net $ 694,386 $ 4,283,123
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
As of October 31, 2004, the aggregate unrealized security gains and losses based
on cost for U.S. Federal income tax purposes are as follows:
<Table>
<Caption>
MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND
- ---------------------------------------------------------------------------------------------------------------------------------
Tax cost $ 5,255,926 $ 9,766,581
- ---------------------------------------------------------------------------------------------------------------------------------
Gross unrealized gain 983,461 3,057,956
Gross unrealized loss (462,955) (236,642)
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized security gain $ 520,506 $ 2,821,314
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
26
<Page>
The difference between book-basis and tax-basis unrealized gains (losses) is
primarily attributable to wash sales and other temporary tax adjustments.
Permanent items identified during the year ended October 31, 2004, have been
reclassified among the components of net assets based on their tax basis
treatment as follows:
<Table>
<Caption>
ACCUMULATED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
LOSS GAIN CAPITAL
- --------------------------------------------------------------------------------------------------------------
Micro-Cap Growth Fund $ 104,318 $ - $ (104,318)
Micro-Cap Value Fund 255,052 (255,052) -
</Table>
The permanent differences are primarily attributable to the tax treatment of net
operating losses and short-term capital gains.
5. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
are as follows for the year ended October 31, 2004:
<Table>
<Caption>
PURCHASES SALES
- -------------------------------------------------------------------------------------------
Micro-Cap Growth Fund $ 4,350,631 $ 4,153,702
Micro-Cap Value Fund 5,531,978 3,866,946
</Table>
There were no purchases or sales of U.S. Government securities for the year
ended October 31, 2004.
6. TRUSTEES' REMUNERATION
The Trust's officers and the one Trustee who are associated with Lord Abbett do
not receive any compensation from the Trust for serving in such capacities.
Outside Trustees' fees are allocated among all Lord Abbett-sponsored funds based
on the net assets of each fund. There is an equity based plan available to all
outside Trustees under which outside Trustees must defer receipt of a portion
of, and may elect to defer receipt of an additional portion of Trustees' fees.
The deferred amounts are treated as though equivalent dollar amounts have been
invested proportionately in the funds. Such amounts and earnings accrued thereon
are included in Trustees' Fees on the Statements of Operations and in Trustees'
Fees Payable on the Statements of Assets and Liabilities and are not deductible
for U.S. Federal income tax purposes until such amounts are paid.
7. EXPENSE REDUCTIONS
The Trust has entered into arrangements with its transfer agent and custodian
whereby credits realized as a result of uninvested cash balances are used to
reduce a portion of each Fund's expenses.
8. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank and Trust Company ("SSB") is the Trust's custodian and
accounting agent. SSB performs custodian, accounting and recordkeeping functions
relating to portfolio transactions and calculating each Fund's NAV.
27
<Page>
9. INVESTMENT RISKS
Each Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with micro-cap and
growth or value stocks. The value of an investment will fluctuate in response to
movements in the stock market in general, and to the changing prospects of
individual companies in which the Funds invest. Micro-cap companies may be
subject to greater risks and may be more sensitive to changes in economic
conditions than larger, more established companies. There may be less liquidity
in micro-cap company stocks, subjecting them to greater price fluctuations than
larger company stocks. In the case of Micro-Cap Growth Fund, the growth stocks
in which it generally invests may add to the Fund's volatility. In the case of
the Micro-Cap Value Fund, the intrinsic value of particular value stocks may not
be recognized for a long time. These factors can affect the Funds' performance.
10. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
MICRO-CAP GROWTH FUND
<Table>
<Caption>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2004 OCTOBER 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 66,459 $ 794,315 112,263 $ 990,181
Shares reacquired (96,743) (1,128,485) (43,307) (392,729)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) (30,284) $ (334,170) 68,956 $ 597,452
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Shares sold 84,132 $ 990,296 - $ -
- ---------------------------------------------------------------------------------------------------------------------------------
Increase 84,132 $ 990,296 - $ -
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
MICRO-CAP VALUE FUND
<Table>
<Caption>
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A SHARES
Shares sold 99,668 $ 2,225,860 61,900 $ 1,066,841
Reinvestment of distributions 32,042 655,266 15,556 239,107
Shares reacquired (92,812) (2,153,835) (12,443) (208,835)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase 38,898 $ 727,291 65,013 $ 1,097,113
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS Y SHARES
Shares sold 72,362 $ 1,700,318 - $ -
Reinvestment of distributions 80 1,631 46 703
- ---------------------------------------------------------------------------------------------------------------------------------
Increase 72,442 $ 1,701,949 46 $ 703
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
28
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE BOARD OF TRUSTEES AND SHAREHOLDERS,
LORD ABBETT SECURITIES TRUST - LORD ABBETT MICRO-CAP GROWTH FUND AND LORD ABBETT
MICRO-CAP VALUE FUND:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of Lord Abbett Securities Trust - Lord Abbett
Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value Fund (the "Funds"), as of
October 31, 2004, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 2004 by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Lord
Abbett Securities Trust - Lord Abbett Micro-Cap Growth Fund and Lord Abbett
Micro-Cap Value Fund as of October 31, 2004, the results of their operations for
the year then ended, the changes in their net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
New York, New York
December 22, 2004
29
<Page>
BASIC INFORMATION ABOUT MANAGEMENT
The Board of Trustees (the "Board") is responsible for the management of the
business and affairs of each Fund in accordance with the laws of the State of
Delaware. The Board appoints officers who are responsible for the day-to-day
operations of each Fund and who execute policies authorized by the Board. The
Board also approves an investment adviser to each Fund and continues to monitor
the cost and quality of the services provided by the investment adviser, and
annually considers whether to renew the contract with the adviser. Generally,
each Trustee holds office until his/her successor is elected and qualified or
until his/her earlier resignation or removal, as provided in the Trust's
organizational documents.
Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is
the Funds' investment adviser.
INTERESTED TRUSTEE
The following Trustee is the Managing Partner of Lord Abbett and is an
"interested person" as defined in the Act. Mr. Dow is also an officer, director,
or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of
50 portfolios or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS
- -----------------------------------------------------------------------------------------------------------------
ROBERT S. DOW Trustee since Managing Partner and Chief N/A
Lord, Abbett & Co. LLC 1993; Chairman Investment Officer of
90 Hudson Street since 1996 Lord Abbett since 1996.
Jersey City, NJ
Date of Birth: 3/8/1945
</Table>
INDEPENDENT TRUSTEES
The following independent or outside Trustees are also directors or trustees of
each of the fourteen Lord Abbett-sponsored funds, which consist of 50 portfolios
or series.
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS
- -----------------------------------------------------------------------------------------------------------------
E. THAYER BIGELOW Trustee since 1994 Managing General Partner, Currently serves as
Emmerling Communications Bigelow Media, LLC (since director of Adelphia
41 Madison Ave., 2000); Senior Adviser, Time Communications, Inc.,
Suite 3810 Warner Inc. (1998 - 2000); Crane Co., and Huttig
New York, NY Acting Chief Executive Officer Building Products Inc.
Date of Birth: 10/22/1941 of Courtroom Television
Network (1997 - 1998);
President and Chief Executive
Officer of Time Warner Cable
Programming, Inc. (1991 -
1997).
WILLIAM H.T. BUSH Trustee since 1998 Co-founder and Chairman Currently serves as
Bush-O'Donnell & Co., Inc. of the Board of the financial director of Wellpoint
101 South Hanley Road advisory firm of Bush- Health Networks Inc.
Suite 1250 O'Donnell & Company (since (since 2002), and
St. Louis, MO 1986). Engineered Support
Date of Birth: 7/14/1938 Systems, Inc. (since
2000).
</Table>
30
<Page>
<Table>
<Caption>
CURRENT POSITION
NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS
- -----------------------------------------------------------------------------------------------------------------
ROBERT B. CALHOUN, JR. Trustee since 1998 Managing Director of Currently serves as
Monitor Clipper Partners Monitor Clipper Partners director of Avondale,
Two Canal Park (since 1997) and President Inc. and Interstate
Cambridge, MA of Clipper Asset Bakeries Corp.
Date of Birth: 10/25/1942 Management Corp.
(since 1991), both private
equity investment funds.
JULIE A. HILL Trustee since 2004 Owner and CEO of the Hillsdale Currently serves as
1280 Bison Companies, a business director of Wellpoint
Newport Coast, CA consulting firm (1998 - Health Networks Inc.;
Date of Birth: 7/16/1946 present); Founder, President Resources Connection
and Owner of the Hiram-Hill Inc. & Holcim (U.S.)
and Hillsdale Development Inc.
Companies (1998 - 2000).
FRANKLIN W. HOBBS Trustee since 2001 Former Chief Executive Officer Currently serves as
One Equity Partners of Houlihan Lokey Howard & director of Adolph
320 Park Ave. Zukin, an investment bank Coors Company.
New York, NY (January 2002 - April 2003);
Date of Birth: 7/30/1947 Chairman of Warburg Dillon
Read (1999 - 2001); Global
Head of Corporate Finance of
SBC Warburg Dillon Read (1997
- 1999); Chief Executive
Officer of Dillon, Read & Co.
(1994 - 1997).
C. ALAN MACDONALD Trustee since 1993 Retired - General Business Currently serves as
P.O. Box 4393 and Governance Consulting director of H.J. Baker
Greenwich, CT (since 1992); formerly (since 2003).
Date of Birth: 5/19/1933 President and CEO of Nestle
Foods.
THOMAS J. NEFF Trustee since 1993 Chairman of Spencer Stuart Currently serves as
Spencer Stuart (U.S.), an executive search director of Ace, Ltd.
277 Park Avenue consulting firm (since 1996); (since 1997) and
New York, NY President of Spencer Stuart Hewitt Associates, Inc.
Date of Birth: 10/2/1937 (1979 - 1996).
</Table>
31
<Page>
OFFICERS
None of the officers listed below have received compensation from the Trust. All
the officers of the Trust may also be officers of the other Lord
Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, NJ
07302.
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
ROBERT S. DOW Chief Executive Elected in 1993 Managing Partner and
(3/8/1945) Officer and President Chief Investment Officer of
Lord Abbett (since 1996).
SHOLOM DINSKY Executive Vice Elected in 2003 Partner and Large Cap
(3/24/1944) President Value Investment
Manager, joined Lord
Abbett in 2000, formerly
Managing Director of
Prudential Asset
Management, prior thereto
Director of Equity Research
and Senior Vice President
at Mitchell Hutchins Asset
Management.
LESLEY-JANE DIXON Executive Vice Elected in 1999 Partner and Investment
(1/1/1964) President Manager, joined Lord
Abbett in 1995.
ROBERT P. FETCH Executive Vice Elected in 1999 Partner and Small-Cap
(2/18/1953) President Value Senior Investment
Manager, joined Lord
Abbett in 1995.
KENNETH G. FULLER Executive Vice Elected in 2003 Investment Manager -
(4/22/1945) President Large Cap Value, joined
Lord Abbett in 2002,
formerly Portfolio
Manager and Senior Vice
President at Pioneer
Investment Management,
Inc. (1999 - 2002;) prior
thereto Principal, Manley,
Fuller Asset Management.
HOWARD E. HANSEN Executive Vice Elected in 2003 Partner and Investment
(10/13/1961) President Manager, joined Lord
Abbett in 1995.
GERARD S. E. Executive Vice Elected in 1999 Partner and Research
HEFFERNAN, JR. President Analyst, joined Lord
(9/7/1963) Abbett in 1998.
</Table>
32
<Page>
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
INGRID C. HOLM Executive Vice Elected in 2001 Investment Manager -
(3/21/1959) President Global Equity, joined Lord
Abbett in 2001, formerly
International Portfolio
Manager at Batterymarch
Financial Management,
Inc. (2000 - 2001),
formerly held various
positions at the Prudential
Insurance Company of
America.
VINCENT J. MCBRIDE Executive Vice Elected in 2003 Senior Investment
(5/8/1964) President Manager, International
Core Equity, joined Lord
Abbett in 2003, formerly
Managing Director and
Portfolio Manager at
Warburg Pincus Asset
Management and Credit-Suisse
Asset Management.
ROBERT G. MORRIS Executive Vice Elected in 1998 Partner and Director of
(11/6/1944) President Equity Investments, joined
Lord Abbett in 1991.
ELI M. SALZMANN Executive Vice Elected in 2003 Partner and Director of
(3/24/1964) President Institutional Equity
Investments, joined Lord
Abbett in 1997.
HAROLD E. SHARON Executive Vice Elected in 2003 Investment Manager and
(9/23/1960) President Director, International
Core Equity Management,
joined Lord Abbett in
2003, formerly Financial
Industry Consultant for
Venture Capitalist from
(2001 - 2003), prior
thereto Managing Director
of Warburg Pincus Asset
Management and Credit-Suisse
Asset Management.
TRACIE E. AHERN Vice President Elected in 1999 Partner and Director of
(1/12/1968) Portfolio Accounting and
Operations, joined Lord
Abbett in 1999.
YAREK ARANOWICZ Vice President Elected in 2004 Investment Manager,
(5/8/1963) joined Lord Abbett in 2003,
prior thereto Vice
President, Head of Global
Emerging Markets Funds
of Warburg Pincus Asset
Management and Credit-Suisse
Asset Management.
</Table>
33
<Page>
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined
(1/4/1954) Lord Abbett in 1998.
DANIEL E. CARPER Vice President Elected in 1993 Partner, joined
(1/22/1952) Lord Abbett in 1979.
JOHN J. DICHIARO Vice President Elected in 2000 Partner and Senior
(7/30/1957) Strategy Coordinator -
Small Cap Growth, joined
Lord Abbett in 2000, prior
thereto Vice President -
Securities Group of Wafra
Investment Advisory
Group.
DANIEL H. FRASCARELLI Vice President Elected in 2001 Partner and Investment
(3/11/1954) Manager, joined Lord
Abbett in 1990.
TODD D. JACOBSON Vice President Elected in 2003 Investment Manager,
(10/28/1966) International Core Equity,
joined Lord Abbett in
2003, formerly Director
and Portfolio Manager at
Warburg Pincus Asset
Management and Credit-Suisse
Asset Management
(2002 - 2003); prior
thereto Associate Portfolio
Manager of Credit-Suisse
Asset Management.
F. THOMAS O'HALLORAN Vice President Elected in 2003 Partner and Investment
(2/19/1955) Manager, joined Lord
Abbett in 2001,
formerly Executive
Director/Senior
Research Analyst at
Dillon Read/UBS Warburg
A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of
(12/21/1959) Equity Trading, joined Lord
Abbett in 1983.
TODOR PETROV Vice President Elected in 2003 Investment Manager,
(5/18/1974) joined Lord Abbett in
2003, formerly Associate
Portfolio Manager of
Credit-Suisse Asset
Management (1999 - 2003),
prior thereto Summer
Associate of Warburg Pincus
Funds.
JAMES BERNAICHE Chief Compliance Elected in 2004 Chief Compliance Officer;
(7/28/1956) Officer joined Lord Abbett in
2001; formerly Chief
Compliance Officer with
Credit-Suisse Asset
Management (since 1998).
</Table>
34
<Page>
<Table>
<Caption>
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION
(DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief
(3/4/1954) Officer and Vice Operations Officer, joined
President Lord Abbett in 1999.
PAUL A. HILSTAD Vice President and Elected in 1996 Partner and General
(12/13/1942) Secretary Counsel, joined Lord
Abbett in 1995.
LAWRENCE H. KAPLAN Vice President and Elected in 1997 Partner and Deputy
(1/16/1957) Assistant Secretary General Counsel, joined
Lord Abbett in 1997.
CHRISTINA T. SIMMONS Vice President and Elected in 2000 Assistant General Counsel,
(11/12/1957) Assistant Secretary joined Lord Abbett in
1999, formerly Assistant
General Counsel of
Prudential Investments
(1998 - 1999), prior
thereto Counsel of Drinker,
Biddle & Reath LLP, a law
firm.
BERNARD J. GRZELAK Treasurer Elected in 2003 Director of Fund
(6/12/1971) Administration, joined
Lord Abbett in 2003,
formerly Vice President,
Lazard Asset Management
LLC (2000 - 2003), prior
thereto Manager of
Deloitte & Touche LLP.
</Table>
Please call 888-522-2388 for a copy of the Statement of Additional Information
(SAI), which contains further information about the Trust's Trustees. It is
available free upon request.
35
<Page>
HOUSEHOLDING
The Trust has adopted a policy that allows it to send only one copy of the
Funds' Prospectus, proxy material, annual report and semi-annual report to
certain shareholders residing at the same "household." This reduces Trust
expenses, which benefits you and other shareholders. If you need additional
copies or do not want your mailings to be "householded," please call Lord Abbett
at 800-821-5129 or send a written request with your name, the name of your fund
or funds and your account number or numbers to Lord Abbett Family of Funds, P.O.
Box 219100, Kansas City, MO 64121.
PROXY VOTING POLICIES, PROCEDURES AND RECORD
A description of the policies and procedures that Lord Abbett uses to vote
proxies related to the Funds' portfolio securities, and information on how Lord
Abbett voted each Fund's proxies during the 12-month period ended June 30, 2004
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 Funds are required to file their complete schedule of portfolio holdings
with the SEC for their first and third fiscal quarters on Form N-Q for fiscal
quarters ending on or after July 9, 2004. Once filed, the Funds' Forms N-Q will
be available without charge, upon request on the SEC's website at www.sec.gov
and may be available by calling Lord Abbett at 800-821-5129. You can also obtain
copies of Form N-Q by (i) visiting the SEC's Public Reference Room in
Washington, DC (information on the operation of the Public Reference Room may be
obtained by calling 800-SEC-0330); (ii) sending your request and duplicating fee
to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending
your request electronically to publicinfo@sec.gov.
TAX INFORMATION
28.06% of the ordinary income distribution paid by the Micro-Cap Value Fund
during fiscal 2004 is qualifying dividend income. For corporate shareholders,
44% of Micro-Cap Value Fund's ordinary income distribution qualified for the
dividends received deduction.
Additionally, of the distributions paid by the Micro-Cap Value Fund to
shareholders during the fiscal year ended October 31, 2004, $533,775
represents long-term capital gains.
36
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[LORD ABBETT (R) LOGO]
<Table>
This report when not used for the general Lord Abbett Securities Trust
information of shareholders of the Fund, is to Lord Abbett Micro-Cap Growth Fund
be distributed only if preceded or accompanied Lord Abbett Micro-Cap Value Fund
by a current Fund Prospectus.
Lord Abbett Mutual Fund shares are distributed by LAMC-2-1004
LORD ABBETT DISTRIBUTOR LLC 12/04
</Table>
<Page>
ITEM 2: CODE OF ETHICS.
(a) In accordance with applicable requirements, the Registrant adopted a
Sarbanes-Oxley Code of Ethics on June 19, 2003 that applies to the
principal executive officer and senior financial officers of the
Registrant ("Code of Ethics"). The Code of Ethics was in effect during
the fiscal year ended October 31, 2004 (the "Period").
(b) Not applicable.
(c) The Registrant has not amended the Code of Ethics as described in Form
N-CSR during the Period.
(d) The Registrant has not granted any waiver, including an implicit
waiver, from a provision of the Code of Ethics as described in Form
N-CSR during the Period.
(e) Not applicable.
(f) See Item 11(a) concerning the filing of the Code of Ethics. The
Registrant will provide a copy of the Code of Ethics to any person
without charge, upon request. To obtain a copy, please call Lord
Abbett at 800-821-5129.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Directors has determined that each of the
following independent Directors who are members of the audit committee
are audit committee financial experts: E. Thayer Bigelow, Robert B.
Calhoun, and Franklin W. Hobbs. Each of these persons is independent
within the meaning of the Form N-CSR.
ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES.
In response to sections (a), (b), (c) and (d) of Item 4, the aggregate fees
billed to the Registrant for the fiscal years ended October 31, 2004 and 2003 by
the Registrant's principal accounting firm, Deloitte & Touche LLP, the member
firms of Deloitte Touche Tohmatsu and their respective affiliates (collectively,
"Deloitte") were as follows:
<Table>
<Caption>
FISCAL YEAR ENDED:
2004 2003
Audit Fees {a} $ 212,000 $ 183,000
Audit-Related Fees {b} 194 163
------------------------------
Total audit and audit-related fees 212,194 183,163
------------------------------
</Table>
<Page>
<Table>
Tax Fees {c} 41,169 34,467
All Other Fees {d} -0- 253
------------------------------
Total Fees $ 253,363 $ 217,883
------------------------------
</Table>
{a} Consists of fees for audits of the Registrant's annual financial
statements.
{b} Consists of the Registrant's proportionate share of fees for
performing certain agreed-upon procedures regarding compliance with the
provisions of Rule 17a-7 of the Investment Company Act of 1940 and
related Board approved procedures.
{c} Fees for the fiscal year ended October 31, 2004 and 2003 consist of
fees for preparing the U.S. Income Tax Return for Regulated Investment
Companies, New Jersey Corporation Business Tax Return, New Jersey Annual
Report Form, U.S. Return of Excise Tax on Undistributed Income of
Investment Companies, IRS Forms 1099-MISC and 1096 Annual Summary and
Transmittal of U.S. Information Returns.
{d} Consists of the Registrant's proportionate share of fees for testing
of Anti-Money Laundering Compliance.
(e) (1) Pursuant to Rule 2-01(c) (7) of Regulation S-X, the Registrant's Audit
Committee has adopted pre-approval policies and procedures. Such policies and
procedures generally provide that the Audit Committee must pre-approve:
- any audit, audit-related, tax, and other services to be
provided to the Lord Abbett Funds, including the Registrant,
and
- any audit-related, tax, and other services to be provided to
the Registrant's investment adviser and any entity
controlling, controlled by or under common control with the
investment adviser that provides ongoing services to one or
more Funds comprising the Registrant if the engagement
relates directly to operations and financial reporting of a
Fund, by the independent auditor to assure that the
provision of such services does not impair the auditor's
independence.
The Audit Committee has delegated pre-approval authority to its Chairman,
subject to a fee limit of $10,000 per event, and not to exceed $25,000 annually.
The Chairman will report any pre-approval decisions to the Audit Committee at
its next scheduled meeting. Unless a type of service to be provided by the
independent auditor has received general pre-approval, it must be pre-approved
by the Audit Committee. Any proposed services exceeding pre-approved cost levels
will require specific pre-approval by the Audit Committee.
(e) (2) The Registrant's Audit Committee has approved 100% of the services
described in this Item 4 (b) through (d).
<Page>
(f) Not applicable.
(g) The aggregate non-audit fees billed by Deloitte for services rendered to the
Registrant are shown above in the response to Item 4 (a), (b), (c) and (d) as
"All Other Fees".
The aggregate non-audit fees billed by Deloitte for services rendered to the
Registrant's investment adviser, Lord, Abbett & Co. LLC ("Lord Abbett"), for the
fiscal years ended October 31, 2004 and 2003 were:
<Table>
<Caption>
FISCAL YEAR ENDED:
2004 2003
All Other Fees {a} $ 81,900 $ 75,000
</Table>
{a} Fees for the fiscal years ended October 31, 2004 and 2003 consist of
fees of $81,900 and $75,000, respectively, for Independent Services
Auditors' Report on Controls Placed in Operation and Tests of Operating
Effectiveness related to Lord Abbett's Asset Management Services ("SAS
70 Report").
The aggregate non-audit fees billed by Deloitte for services rendered to
entities under the common control of Lord Abbett (i.e., Lord Abbett Distributor
LLC, the Registrant's principal underwriter) for the fiscal years ended October
31, 2004 and 2003 were:
<Table>
<Caption>
FISCAL YEAR ENDED:
2004 2003
All Other Fees {b} $ -0- $ 11,378
</Table>
{b} Fees for the fiscal year ended October 31, 2003 represent fees for
testing of Anti-Money Laundering Compliance.
(h) The Registrant's Audit Committee has considered the provision of non-audit
services that were rendered to the Registrant's investment adviser, and any
entity controlling, controlled by or under common control with the investment
adviser that provides ongoing services to the Registrant, that were not
pre-approved pursuant to Rule 2-01 (c)(7)(ii) of Regulation S-X and has
determined that the provision of such services is compatible with maintaining
Deloitte's independence.
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
<Page>
ITEM 6: SCHEDULE OF INVESTMENTS.
NOT APPLICABLE.
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable
ITEM 10: CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the Registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company
Act of 1940) as of a date within 90 days prior to the filing date of
this report the Chief Executive Officer and Chief Financial Officer
of the Registrant have concluded that such disclosure controls and
procedures are reasonably designed and effective to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to them by others within
those entities.
(b) There were no significant changes in the Registrant's internal
control over financial reporting (as defined in Rule 30a-3(d) under
the Investment Company Act of 1940) that occurred during the
Registrant's last fiscal half-year that have materially affected, or
are reasonably likely to materially affect, the Registrant's internal
control over financial reporting.
ITEM 11: EXHIBITS.
(a)(1) Amendments to Code of Ethics - Not applicable.
(a)(2) Certification of each principal executive officer and principal
financial officer of the Registrant as required by Rule 30a-2 under
the Act (17 CFR 270.30a-2) is attached hereto as a part of
EX-99.CERT.
(a)(3) Certification of each principal executive officer and principal
financial officer of the Registrant as required by Section 906 of
the Sarbanes-Oxley Act of 2002 is attached hereto as a part of
EX-99.906CERT.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities and 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 SECURITIES TRUST
/s/ Robert S. Dow
-----------------
Robert S. Dow
Chief Executive Officer,
Chairman and President
/s/Joan A. Binstock
-------------------
Joan A. Binstock
Chief Financial Officer and Vice President
Date: December 22, 2004
<Page>
Pursuant to the requirements of the Securities and Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
LORD ABBETT SECURITIES TRUST
/s/ Robert S. Dow
-----------------
Robert S. Dow
Chief Executive Officer,
Chairman and President
/s/ Joan A. Binstock
--------------------
Joan A. Binstock
Chief Financial Officer and Vice President
Date: December 22, 2004