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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
LORD ABBETT SECURITIES TRUST
(Exact name of Registrant as specified in charter)
90 HUDSON STREET, JERSEY CITY, NJ 07302
(Address of principal executive offices) (zip code)
Christina T. Simmons, Vice President & Assistant Secretary
90 HUDSON STREET, JERSEY CITY, NJ 07302
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 201-6984
Date of fiscal year end: 10/31
Date of reporting period: 4/30/06
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Item 1: Report to Shareholders.
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[LORD ABBETT LOGO]
2006
SEMIANNUAL
REPORT
LORD ABBETT
ALL VALUE FUND
ALPHA STRATEGY FUND
INTERNATIONAL CORE EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
LARGE-CAP VALUE FUND
VALUE OPPORTUNITIES FUND
FOR THE FISCAL PERIOD ENDED APRIL 30, 2006
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LORD ABBETT SECURITIES TRUST
SEMIANNUAL REPORT
FOR THE FISCAL PERIOD ENDED APRIL 30, 2006
DEAR SHAREHOLDERS: We are pleased to provide you with this overview of Lord
Abbett Securities Trust's strategies and performance for the fiscal period ended
April 30, 2006. 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
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ROBERT S. DOW
CHAIRMAN
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Q: WHAT WERE THE OVERALL MARKET CONDITIONS DURING THE FISCAL PERIOD ENDED APRIL
30, 2006?
A: Domestic equities turned in a strong performance in the period, reflecting
the continued strength of the U.S. economy. The industrial sector showed
particular strength as industrial production surged.
In the six-month period ended April 30, 2006, the S&P 500(R),(1) Dow Jones
Industrial Average,(2) and NASDAQ,(3) all raced to five-year highs. The S&P
Super Composite 1500 Index,(4) the broadest market measure tracked by Standard &
Poor's, gained a total return of 10.4 percent.
Though the market's rally was broad, mid- and small-cap stocks outperformed
their larger-cap peers. As measured by the S&P/Citigroup Growth and Value
Indexes,(5) value-oriented equities generally turned in higher total return
gains than growth. Specifically, small-cap value stocks jumped 18.0 percent, on
a total return basis, versus the 15.7 percent turned in by small-cap growth
stocks. In the large-cap arena, value stocks were up twice that of growth, 13.2
percent versus 6.2 percent, respectively.
The top performing sectors in the market overall during the period included
energy, materials, and financials. The utilities, healthcare, and consumer
staples sectors underperformed.
Foreign equity markets also posted strong returns for the six-month period.
The MSCI EAFE(R) Index(6) rose 22.9 percent, outperforming the U.S. equity
markets, as measured by the S&P 500 Index, which rose 9.6 percent. Japan and
Europe, which make up the majority of the MSCI EAFE Index, gained 24.4 percent
and 22.6 percent, respectively. Global emerging markets also performed well: the
MSCI Emerging Market Index(7) returned 37.6 percent over the period. Foreign
small-cap stocks, up 30.1 percent as measured by the S&P/Citigroup EMI World
ex-US Index,(8) outperformed foreign large-cap stocks over the period.
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The global economic upswing continued through the end of 2005 and into
2006. Liquidity for business expansion and consumption was plentiful, inflation
was contained, and rate increases were modest. The increases in interest rates
outside the United States were from such a low level that they did not
significantly affect corporate earnings and economic growth.
Emerging markets have maintained their substantial growth and, although
some overseas markets are becoming relatively more expensive, there are still
good opportunities and some value to be found in the larger, liquid markets.
Continental Europe continued to benefit from stronger domestic growth and
presented many opportunities to find undervalued securities. Strong merger and
acquisition activity in the region also helped drive equity market returns and
benefited many industries over the last six months. The Japanese economy
continues to transition from deflation to reflation. With the end of
quantitative easing in Japan, the banking sector is strengthening, and both
foreign and domestic confidence in Japan are increasing. Despite higher energy
and raw material prices, coupled with regular monetary tightening in North
America, investors continue to pin their hopes on solid balance sheets and
continued upward earnings revisions.
LORD ABBETT ALL VALUE FUND
Q: HOW DID THE ALL VALUE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30,
2006?
A: The fund returned 15.3 percent, 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,(9) which returned 13.3 percent over
the same period. STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS, WHICH REFLECT
PERFORMANCE AT THE MAXIMUM 5.75 PERCENT SALES CHARGE APPLICABLE TO CLASS A SHARE
INVESTMENTS AND INCLUDE THE REINVESTMENT OF ALL DISTRIBUTIONS, ARE: 1 YEAR:
15.92 PERCENT, 5 YEARS: 7.17 PERCENT, AND SINCE INCEPTION (JULY 15, 1996): 12.43
PERCENT. 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
percent if the shares are redeemed within 12 months of the purchase. Please see
section "Your Investment - Purchases" in the prospectus for more information on
redemptions that may be subject to CDSC.
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
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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 materials sector was the fund's strongest performing sector, relative to
the benchmark, as an overweight position in this strong-performing sector proved
beneficial. Newmont Mining Co., a company that acquires, explores, and develops
gold and other mineral properties, was the fund's top contributor and second
largest holding at period-end. Steel Dynamics, Inc., a steel mill operator, was
the third best contributor. Archer-Daniels-Midland Co., a dealer in agricultural
commodities and products, and Georgia Pacific Corp., a manufacturer of tissue,
packaging, paper, building products, and related chemicals, also were
contributors to performance. (Georgia Pacific was acquired in December 2005 by
Koch Industries, Inc.)
The other sector also contributed to performance, relative to the fund's
benchmark, in the period. Trinity Industries, Inc. was the fund's second best
overall contributor for the period. Eaton Corp., a manufacturer of engineered
products, which serves industrial, vehicle, construction, commercial, and
aerospace markets, also was a strong contributor.
The producer durables sector also contributed to performance, relative to
the fund's benchmark, for the period. Parker-Hannifin Corp., a manufacturer of
motion control products, including fluid power systems and electromechanical
controls, also contributed to performance.
Three other holdings ranked among the top 10 contributors. The fund's
largest holding, ExxonMobil Corp., in the integrated oils sector, was the fund's
fourth largest contributor to performance in the period. ExxonMobil operates
petroleum and petrochemicals businesses on a worldwide basis. Technology sector
holding Tellabs, Inc., a provider of voice, data, and video transport and
network access systems, and U.S. department store operator Federated Department
Stores, Inc., in the consumer discretionary sector, were both strong
contributors.
Overall, the financial services sector was the biggest detractor to the
fund's performance relative to the benchmark. Automatic Data Processing, Inc., a
provider of computerized transaction processing, data communications, software,
and information services produced disappointing returns. SAFECO Corp., a
provider of property and casualty insurance and investment products, was also a
detractor.
The second largest relative detractor to the fund's performance on a sector
basis was health care. Detracting from performance in this sector was
Schering-Plough Corp., a
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pharmaceutical company that develops new therapies and treatment programs.
Other holdings that rated among the largest 10 detractors to performance
included two technology sector holdings: McAfee Inc., which develops computer
security solutions and was the fund's biggest detractor from performance, and
Microsoft Corp., which sells and supports software products. Two utilities
sector holdings also detracted from performance: CMS Energy Corp., which
provides energy services and operates energy facilities around the world, and
NiSource Inc., a holding company, whose operating companies engage in all phases
of the natural gas business. One materials and processing holding and two
consumer discretionary holdings also hurt performance: Cabot Corp., which has
businesses in chemicals, performance materials, and specialty fluids; Wal-Mart
Stores, Inc., an operator of discount stores and supercenters; and R.R.
Donnelley & Sons, which provides commercial printing and information 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.
LORD ABBETT ALPHA STRATEGY FUND
(FORMERLY LORD ABBETT ALPHA FUND)
Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2006?
A: The Alpha Strategy Fund is a strategic asset allocation fund using a fund of
funds approach. Assets are currently divided among Lord Abbett Developing Growth
Fund, Lord Abbett Securities Trust - International Opportunities Fund, and Lord
Abbett Research Fund - Small-Cap Value Fund. As a result, the Alpha Strategy
Fund's performance is directly related to the performance of its underlying
funds.
The Alpha Strategy Fund returned 27.2 percent, 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 ex-U.S. Index,(8)
which returned 28.7 percent over the same period. STANDARDIZED AVERAGE ANNUAL
TOTAL RETURNS, WHICH REFLECT PERFORMANCE AT THE MAXIMUM 5.75 PERCENT SALES
CHARGE APPLICABLE TO CLASS A SHARE INVESTMENTS AND INCLUDE THE REINVESTMENT OF
ALL DISTRIBUTIONS, ARE: 1 YEAR: 38.46 PERCENT, 5 YEARS: 9.88 PERCENT, AND SINCE
INCEPTION (MARCH 18, 1998): 6.44 PERCENT. DURING CERTAIN PERIODS
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SHOWN, EXPENSE REIMBURSEMENTS WERE IN PLACE. WITHOUT SUCH EXPENSE
REIMBURSEMENTS, THE FUND'S RETURN WOULD HAVE BEEN LOWER. 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 percent if the shares are
redeemed within 12 months of the purchase. Please see section "Your Investment -
Purchases" in the prospectus for more information on redemptions that may be
subject to CDSC. 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 29.4 PERCENT OF ALPHA STRATEGY FUND PORTFOLIO)
Q: HOW DID DEVELOPING GROWTH FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL
30, 2006?
A: The fund returned 25.2 percent, 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,(10) which returned 20.3 percent
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: 47.49 PERCENT, 5 YEARS: 7.77 PERCENT, AND SINCE
INCEPTION (DECEMBER 30, 1997): 6.20 PERCENT.
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 financial services sector was the greatest contributors to fund
performance, relative to the benchmark, for the six-month period. Three
financial services companies were among the fund's top 10 contributors.
Intercontinental Exchange Inc., which operates an electronic trading platform,
was the fund's second best contributor in the period and the fund's
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eighth largest holding. International Securities Exchange, Inc., a provider of a
fully electronic securities exchange for equity options, and Morningstar, Inc.,
an investment information and services company, also contributed to performance.
The second best performing sector relative to the fund's benchmark was
healthcare. Hologic, Inc., a provider of digital x-ray systems, was the fund's
best contributor to performance in the period. Illuminia, Inc., a developer of
tools for the analysis of genetic variation and function also was a strong
contributor. Intuitive Surgical, Inc., a manufacturer of the da Vinci Surgical
System, also helped performance.
The consumer discretionary sector was the third best performer relative to
the fund's benchmark. Zumiez Inc., a specialty retailer of teenager action
sports apparel and equipment, contributed to the fund's performance in this
sector.
Three technology holdings were among the fund's top 10 contributors:
Redback Networks Inc., which develops broadband networking systems; Trident
Microsystems, Inc., which makes graphics and multimedia integrated circuits for
wide-screen and digital televisions; and Webex Communications, Inc., which
provides Web-conferencing services for Websites. Webex Communications was the
fund's largest holding at the end of the period.
Overall, the producer durables sector was the biggest detractor to the
fund's performance relative to the benchmark, followed by the materials and
processing sector and the auto and transportation sector. An underweight
position in the strong-performing materials and processing sector detracted from
performance.
Four healthcare holdings were among the largest 10 detractors in the
period. Kos Pharmaceuticals, Inc. was the biggest detractor. The company
develops and commercializes proprietary prescription pharmaceutical products for
cardiovascular diseases. Another detractor was Somanetics Corp., which markets
medical devices that monitor oxygen levels in the brain during surgery. CV
Therapeutics, Inc., a biopharmaceutical company that discovers and develops new
small molecule drugs to treat cardiovascular disease, and PRA International, a
global contract research organization, also took away from performance.
Also detracting from performance were three technology companies: Synaptics
Inc. (the fund's second largest detractor), which develops custom-designed user
interface solutions; Power Integrations, Inc., which makes analog integrated
circuits for use in alternating current to direct current power conversion; and
iRobot Corp., which manufactures robots that vacuum and wash floors and perform
battlefield reconnaissance and bomb disposal.
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In addition, three consumer discretionary stocks ranked among the largest
10 detractors from performance: Traffic.com, Inc. (the third biggest detractor),
which provides real-time traffic information in the United States; Bright
Horizons Family Solutions, Inc., which offers employer-sponsored child care,
education, and consulting services; and Resources Connection, Inc., which is a
professional services firm.
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 39.2 PERCENT OF ALPHA STRATEGY FUND PORTFOLIO)
Q: HOW DID THE INTERNATIONAL OPPORTUNITIES FUND PERFORM OVER THE SIX-MONTH
PERIOD ENDED APRIL 30, 2006?
A: The fund returned 32.8 percent, reflecting performance at the net asset value
(NAV) of Class Y shares with all distributions reinvested, compared with its
benchmark, the S&P/Citigroup Extended Market World ex-U.S. Index,(8) which
returned 30.1 percent 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: 51.78 PERCENT, 5 YEARS: 9.49
PERCENT, AND SINCE INCEPTION (DECEMBER 30, 1997): 5.86 PERCENT.
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.
SEE THE DISCUSSION ABOUT LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND ON
PAGE 11.
LORD ABBETT SMALL-CAP VALUE FUND COMPONENT
(APPROXIMATELY 29.4 PERCENT OF ALPHA STRATEGY FUND PORTFOLIO)
Q: HOW DID THE SMALL-CAP VALUE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED
APRIL 30, 2006?
A: The fund returned 24.9 percent, reflecting performance at the net asset value
(NAV) of Class Y shares with all distributions reinvested, compared with its
benchmark, the Russell 2000(R) Value Index,(11) which returned 17.5 percent 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: 46.82 PERCENT,
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5 YEARS: 17.71 PERCENT, AND SINCE INCEPTION (DECEMBER 30, 1997): 14.99 PERCENT.
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 materials and processing sector, where the fund was overweight its
benchmark, made the greatest contribution to the fund's performance, relative to
the benchmark, for the period. Four of the fund's 10 largest holdings were
materials and processing companies. In particular, Steel Dynamics, Inc., a steel
mill operator, was the second best contributor and fourth largest holding. Five
other materials and processing companies were among the top 10 contributors:
Carpenter Technology Corp., which makes stainless steel, titanium, and specialty
metal alloys; NCI Building Systems, Inc., which produces metal engineered
building systems and products for the building industry; Rogers Corp., a
manufacturer of specialty materials and components for applications in the
communications, computer, imaging, consumer, and transportation markets; Hughes
Supply, Inc. (acquired by The Home Depot, Inc. in March 2006), a distributor of
construction, repair, and maintenance products; and Hexcel Corp., which develops
reinforcement products, composite materials, and engineered products primarily
for the aerospace industry.
Although the financial services sector ranked second in terms of sector
contribution to relative performance for the period, none of the fund's
financial services holdings were among the top 10 contributors. The fund's
underweight position in this sector during this period of overall relative
underperformance by financial services stocks had a positive impact.
The third best contributor to relative performance was the other sector,
where the fund was overweight its benchmark. This sector generally includes
diversified corporations. Trinity Industries, Inc. was the fund's best overall
contributor for the period and its largest holding. The company produces
transportation, construction, and industrial products.
Three additional holdings were among the fund's top 10 contributors:
Anixter International Inc., a technology stock and the fund's second largest
holding, distributes communications and specialty wire and cable products; Ethan
Allen
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Interiors Inc., an international home furnishings company and the fund's sixth
largest holding; and Tenneco Inc., which makes emission control and ride control
products and systems for the automotive industry.
Overall, the technology sector was the biggest detractor to the fund's
performance, relative to the benchmark, for the period. Dandrite International,
Inc., a supplier of sales force software products and support services to the
pharmaceutical industry, disappointed. FLIR Systems, Inc., a maker of thermal
imaging and broadcast camera systems, also detracted from performance.
The integrated oils sector and the consumer staples sector also took away
from the fund's relative performance. John B. Sanfilippo & Son, Inc., a consumer
staples sector company and a supplier of nuts and sesame sticks, hurt
performance.
Seven other holdings were among the fund's 10 largest detractors from
performance. The most disappointing returns were reported by consumer
discretionary holding Eddie Bauer Holdings, Inc., a retailer of casual clothing,
accessories, and home furnishings. Three auto and transportation companies were
included in the largest 10 detractors. Frontier Airlines Holdings, Inc., the
fund's second worst contributor, is a low-fare, full-service commercial airline.
Also detracting from performance were Modine Manufacturing Co., which
manufactures heat-transfer and heat storage technology products; American Axle &
Manufacturing Holdings, Inc., which supplies driveline systems for light trucks
and sport-utility vehicles; healthcare company SFBC International, Inc., a
contract research organization; Electro Scientific Industries, Inc., a producer
durables company that makes products used in electronics manufacturing; and
Commercial Capital Bancorp, Inc., a financial services holding company.
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 CORE EQUITY FUND
Q: HOW DID THE INTERNATIONAL CORE EQUITY FUND PERFORM OVER THE SIX-MONTH PERIOD
ENDED APRIL 30, 2006?
A: The fund returned 24.6 percent, reflecting performance at the net asset value
(NAV) of Class A shares with all distributions reinvested, compared with its
benchmark, the MSCI EAFE(R) with Net Returns Index,(6) which returned 22.9
percent over the same period. STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS, WHICH
REFLECT PERFORMANCE AT THE MAXIMUM 5.75 PERCENT SALES CHARGE APPLICABLE TO CLASS
A SHARE INVESTMENTS AND INCLUDE THE REINVESTMENT OF ALL DISTRIBUTIONS, ARE: 1
YEAR: 27.39 PERCENT
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AND SINCE INCEPTION (DECEMBER 31, 2003): 16.66 PERCENT. 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 percent if the shares are redeemed
within 12 months of the purchase. Please see section "Your Investment -
Purchases" in the prospectus for more information on redemptions that may be
subject to CDSC.
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 energy sector was the greatest contributor to the fund's performance
relative to the benchmark for the period. Oilfield services company Petroleum
Geo-Services ASA and oil and gas properties firm Tullow Oil plc were both strong
contributors.
Information technology was the second best sector in terms of contribution
to the fund's relative performance. However, no information technology holdings
were among the fund's top 10 contributors.
The third sector that made a strong contribution to relative performance
was telecommunications services. Millicom International Cellular S.A., a
cellular telephone systems provider, was the fund's number-one contributor.
Seven other companies were among the fund's top 10 contributors. Three of
them were financials holdings: Irish Life & Permanent plc, which operates a
retail financial services group; UBS AG, a wealth management, investment
banking, and asset management firm; and ING Groep, a global financial services
company. A materials and processing sector holding, Alcan Inc., an aluminum
industry company, also contributed strongly to performance.
In addition, industrials companies Sumitomo Corp., a general trading
company, and BAE Systems plc, a defense and aerospace industry holding, were
strong contributors. Consumer discretionary company ProSiebenSat.1 Media AG, a
television station operator, also contributed to performance in the period.
The financial sector as a whole was the largest detractor to the fund's
performance relative to the benchmark. Aiful Corp., a consumer financing firm,
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was the greatest detractor from performance in the period. Takefuji Corp., a
consumer loan company, and TMB Bank Public Co. Ltd. both disappointed.
The materials sector was the second largest detractor to the fund's
relative performance. While there were no materials holdings among the fund's
largest 10 detractors in this sector, an underweight position in this
strong-performing sector took away from fund performance.
The third area that detracted from the fund's relative performance was the
consumer discretionary sector. In particular, cable television broadcasting
services company Jupiter Telecommunications Co., Ltd. disappointed in the
period.
Other holdings that were among the fund's largest 10 detractors included
three telecommunication services companies: Vodafone Group plc, which sells a
range of mobile telecommunications services; Mobile Telesystems, a provider of
mobile telephone services in Russia and the former Soviet Union; and O2, a
wireless company based in the United Kingdom. (O2 was acquired by Telefonica
during the period.) Two energy companies also detracted from performance:
Sinolink Worldwide Holdings Ltd., a China-based gas conglomerate, and Thai Oil
plc, Thailand's major oil refiner. Thai Oil was the fund's third largest
detractor. Optimax Technology Corp., an information technology holding company,
also detracted from performance.
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 INTERNATIONAL OPPORTUNITIES FUND PERFORM OVER THE SIX-MONTH
PERIOD ENDED APRIL 30, 2006?
A: The fund returned 32.6 percent, reflecting performance at the net asset value
(NAV) of Class A shares with all distributions reinvested, compared with its
benchmark, the S&P/Citigroup Extended Market World ex-U.S. Index,(8) which
returned 30.1 percent over the same period. STANDARDIZED AVERAGE ANNUAL TOTAL
RETURNS, WHICH REFLECT PERFORMANCE AT THE MAXIMUM 5.75 PERCENT SALES CHARGE
APPLICABLE TO CLASS A SHARE INVESTMENTS AND INCLUDE THE REINVESTMENT OF ALL
DISTRIBUTIONS, ARE: 1 YEAR: 42.59 PERCENT, 5 YEARS: 7.88 PERCENT, AND SINCE
INCEPTION (DECEMBER 13, 1996): 6.24 PERCENT. 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 percent if the shares are redeemed within
12 months of the purchase. Please see section "Your Investment - Purchases" in
the prospectus
11
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- --------------------------------------------------------------------------------
for more information on redemptions that may be subject to CDSC.
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 information technology sector was the greatest contributor to the fund's
performance relative to the benchmark for the six-month period. Three
information technology companies were among the fund's top 10 contributors: CSR
plc, a maker of single-chip radio devices, and the fund's number-one
contributor; AAC Acoustic Technology Holdings Inc., a manufacturer of miniature
acoustic components used in mobile handsets, MP3 players, and other consumer
handheld devices; and NHN Corp., Korea's largest Internet search engine.
The financial sector was the second best contributor to relative
performance in the period. Strong performance in this sector was derived from
Unibanco-Uniao de Bancos Brasileiros S.A., which offers banking services in
Brazil and abroad, and Bank of Piraeus, a large Greek bank and the fund's second
largest holding.
The third area that made a strong contribution to relative performance was
an underweight position in the consumer discretionary sector.
Five other companies were among the fund's top 10 contributors. In
particular, Peter Hambro Mining plc, a gold mining company in Russia, was the
fund's second strongest contributor in the period. Other strong performers
included energy company Tullow Oil plc, a developer for oil and gas properties,
and three strong industrials holdings: Michael Page International plc, a
provider of recruitment consultancy services; The Geberit Group, a
Switzerland-based global provider of plumbing technology; and Vallourec S.A., a
manufacturer of steel and alloy tubing.
The materials sector, where the fund was underweight, and the
telecommunications services sector, where the fund was overweight, both
detracted from fund performance relative to the benchmark.
The third largest detractor to the fund's relative performance was the
healthcare sector. In particular, Actelion, a Switzerland-headquartered
biopharmaceutical company, was the fund's biggest detractor from performance in
the period.
12
<Page>
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The fund's second largest detractor from performance was Sinolink Worldwide
Holdings Ltd., a China-based conglomerate. Another energy stock, Thai Oil plc,
Thailand's major refiner, also detracted from performance. Consumer
discretionary holdings hurting performance in the period included Jupiter
Telecommunications Co., Ltd., a Japanese provider of cable television
broadcasting services, and Joint Corp., a Japanese real estate properties
company.
Other stocks detracting from performance were: Bangkok Bank, a financials
sector holding; Japan Cash Machine, a manufacturer of money-processing terminals
such as coin counters; and Italian-Thai Development, a road and highway
contractor in Thailand. China-based utilities holding, Enerchina Holdings
Limited, the electricity-generating arm of Sinolink Worldwide Holdings Ltd., and
information technology holding, Northgate Information Solutions plc, a developer
of computer software, also were among the fund's detractors.
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 LARGE-CAP VALUE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED
APRIL 30, 2006?
A: The fund returned 12.1 percent, 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,(12) which returned 12.9 percent over
the same period. STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS, WHICH REFLECT
PERFORMANCE AT THE MAXIMUM 5.75 PERCENT SALES CHARGE APPLICABLE TO CLASS A SHARE
INVESTMENTS AND INCLUDE THE REINVESTMENT OF ALL DISTRIBUTIONS, ARE: 1 YEAR: 9.15
PERCENT AND SINCE INCEPTION (JUNE 30, 2003): 11.48 PERCENT. DURING CERTAIN
PERIODS SHOWN, EXPENSE REIMBURSEMENTS WERE IN PLACE. WITHOUT SUCH EXPENSE
REIMBURSEMENTS, THE FUND'S RETURN WOULD HAVE BEEN LOWER. 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 percent if the shares are
redeemed within 12 months of the purchase. Please see section "Your Investment -
Purchases" in the prospectus for more information on redemptions that may be
subject to CDSC.
13
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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 healthcare sector was the biggest detractor to the fund's performance,
relative to the benchmark. Medtronic, Inc., the fund's second largest individual
detractor, provides device-based medical therapies. MedImmune, Inc., which
develops products in areas such as infectious diseases, transplantation
medicine, autoimmune diseases and cancer, detracted from performance. Johnson &
Johnson, a manufacturer of healthcare products, and Schering-Plough Corp., a
pharmaceutical company that develops new therapies and treatment programs, also
hurt performance.
The second largest detracting sector, relative to the benchmark, was
financial services. Automatic Data Processing, Inc., a provider of computerized
transaction processing, data communications, software, and information services,
produced disappointing returns, as did the government-sponsored enterprises
Freddie Mac and Fannie Mae.
The largest single holding detracting from fund performance was software
company Microsoft Corp.; the technology sector as a whole hurt relative
performance. Other holdings that hurt performance included two consumer
discretionary companies: Tribune Co., a media company, and Wal-Mart Stores,
Inc., an operator of discount stores and supercenters.
Stocks in the other energy sector made the greatest contribution to the
fund's performance relative to its benchmark in the period. Schlumberger Ltd.,
an oil services company, was the fund's largest contributor and its third
largest holding at period-end.
The producer durables sector was the second strongest contributor to fund
performance, relative to the benchmark. Three producer durables stocks were
among the fund's top 10 contributors: Emerson Electric Co., a manufacturer of
electrical, electromechanical, and electronic products and systems;
Parker-Hannifin Corp., which makes motion control products, including fluid
power systems, and electromechanical controls; and Deere & Co., a manufacturer
of a range of agricultural, construction, and commercial and consumer equipment.
The materials and processing sector was the third best contributor to fund
14
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performance relative to the benchmark, as an overweight position in this
strong-performing sector proved beneficial. Individual holdings added to
performance. These included: Newmont Mining Co., a company that acquires,
explores and develops gold and other mineral properties, and which was the
fund's second best contributor; International Paper Co., which produces printing
paper, packaging, forest products, and chemical products; and Fluor Corp., an
engineering and construction services company.
Three additional holdings were among the fund's top performance
contributors. In particular, integrated oils company ExxonMobil Corp., the
fund's largest holding, was the fund's third largest contributor. ExxonMobil
operates petroleum and petrochemicals businesses on a worldwide basis. Other
contributors included: Pfizer Inc., a research-based, global pharmaceutical
company that provides medicines for humans and animals, and financial services
company JPMorgan Chase & Co., which offers global financial services and retail
banking.
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 VALUE OPPORTUNITIES FUND
(LORD ABBETT VALUE OPPORTUNITIES FUND BEGAN OPERATIONS ON DECEMBER 20, 2005 AND
ITS PUBLIC PERFORMANCE BEGAN ON DECEMBER 30, 2005)
Q: HOW DID THE VALUE OPPORTUNITIES FUND PERFORM SINCE ITS INCEPTION ON DECEMBER
30, 2005, THROUGH APRIL 30, 2006?
A: The fund returned 19.7 percent, reflecting the performance at the net asset
value (NAV) of Class A shares with all distributions reinvested for the
four-month period ended April 30, 2006, outperforming its benchmark, the Russell
2500(R) Value Index,(13) which returned 10.9 percent for the same period.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN, WHICH REFLECTS PERFORMANCE AT THE
MAXIMUM 5.75 PERCENT SALES CHARGE APPLICABLE TO CLASS A SHARE INVESTMENTS AND
INCLUDE THE REINVESTMENT OF ALL DISTRIBUTIONS, AS OF APRIL 30, 2006, IS SINCE
INCEPTION (DECEMBER 30, 2005): 12.81 PERCENT. DURING CERTAIN PERIODS SHOWN,
EXPENSE REIMBURSEMENTS WERE IN PLACE. WITHOUT SUCH EXPENSE REIMBURSEMENTS, THE
FUND'S RETURN WOULD HAVE BEEN LOWER. Class A shares purchased subject to a
front-end sales charge have no contingent deferred sales charge (CDSC). However,
certain purchases of Class A shares made without a front-end sales charge may be
subject to a CDSC. Please refer to "Your Investment - Purchase" in the
prospectus for more information on redemptions that may be subject to a CDSC.
The CDSC is not reflected in the standard average annual returns.
15
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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 consumer discretionary sector was the greatest contributor to the fund's
performance, relative to the benchmark, for the period since inception. Among
the fund's top 10 contributors in this sector were Benihana Inc., a group of
Japanese restaurants in the United States, and Group 1 Automotive, Inc., which
operates auto dealerships.
The second best performing sector relative to the benchmark was producer
durables. Ladish Co., Inc., a producer of high-strength, high-technology forged
and cast metal components for a variety applications in the aerospace and
industrial markets, helped fund performance.
The financial services sector was the fund's third performer, relative to
its benchmark. United Rentals, Inc., an equipment rental company and the fund's
third largest holding at period-end, performed well.
Six additional holdings were among the fund's top contributors to
performance. Trinity Industries, Inc. and Carlisle Cos. Inc., both classified in
the other sector category, helped fund performance. The other sector generally
includes diversified corporations. Trinity Industries, Inc., the fund's
number-one contributor and second largest holding, manufactures transportation,
construction and industrial products. Carlisle Cos. Inc., the fund's fourth
largest holding and tenth best contributor, makes construction materials,
transportation products and general industry products.
Two technology holdings, Anixter International Inc. and CommScope, Inc.,
also contributed to performance. Anixter International Inc. is a distributor of
communications and specialty wire and cable products, and was the fund's largest
holding and second best contributor. CommScope, Inc. is a maker of coaxial
cables and other high-performance electronic and fiber optic cable products
primarily for communication applications. Materials and processing sector
holding Steel Dynamics, Inc. was the fund's third biggest contributor. The
company operates a flat-rolled steel mini-mill, as well as a cold mill. NCI
Building Systems, Inc., another contributing materials and processing sector
holding, manufactures metal engineered building systems and products for the
building industry.
16
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Overall, the healthcare sector was the largest detractor to the fund's
performance relative to its benchmark. SFBC International, Inc., a contract
research organization serving the pharmaceutical and biotechnology industries,
was the fund's largest detractor. LifePoint Hospitals, Inc., the fund's third
worst detractor, provides healthcare services through its hospitals. Merit
Medical Systems, Inc., a maker of products used in diagnostic and interventional
cardiology and radiology procedures, also took away from fund performance.
The second largest detracting sector, relative to the fund's benchmark, was
integrated oils. While the fund had no integrated oils holdings among its
biggest 10 detractors, its underweight position in this strong-performing sector
proved to be a negative factor.
Also detracting from relative performance was the consumer staples sector.
However, no consumer staples holdings were among the bottom 10 absolute
detractors.
Seven other holdings rated among the largest 10 detractors. Crown Holdings,
Inc., the fund's second biggest detractor, provides packaging products for
consumer goods. Technology holdings, Symbol Technologies, Inc., II-VI Inc., and
Comtech Telecommunications Corp., all took away from performance. Symbol
Technologies, Inc. manufactures and services scanner integrated mobile and
wireless information management systems. II-VI Inc. makes optical and
optoelectronic devices used in laser processing, fiber-optic telecommunication,
infrared missile guidance, and other applications. Comtech Telecommunications
Corp. provides technology electronic products and systems.
Automotive and transportation holding Wabash National Corp., a maker of
customized truck trailers, hurt fund performance. American Equity Investment
Life Holding Co., a financial services holding specializing in annuities and
life insurance products, and consumer discretionary holding The Interpublic
Group of Cos., Inc., an organization of advertising agencies and marketing
service companies, both also disappointed.
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.
A PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT A FUND, INCLUDING ITS
INVESTMENT OBJECTIVES, RISKS, CHARGES, AND ONGOING EXPENSES, WHICH AN INVESTOR
SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON ANY LORD
ABBETT MUTUAL FUND, PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL OR LORD ABBETT
DISTRIBUTOR LLC AT 800-874-3733 OR VISIT OUR WEBSITE AT www.LordAbbett.com. READ
THE PROSPECTUS CAREFULLY BEFORE INVESTING.
17
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(1) The S&P 500(R) Index is widely regarded as the standard for measuring
large-cap U.S. stock market performance and includes a representative sample of
leading companies in leading industries.
(2) The Dow Jones Industrial Average is an unmanaged index of common stocks
comprised of major industrial companies and assumes the reinvestment of
dividends and capital gains.
(3) The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based
common stocks listed on The NASDAQ stock exchange. The index is market value
weighted, meaning that each company's security affects the index in proportion
to its market value.
(4) The S&P Super Composite 1500 combines the S&P 500, S&P MidCap 400, and S&P
SmallCap 600 indexes and is an efficient way to create a broad market portfolio
representing 90% of U.S. equities.
(5) The S&P/Citigroup Growth and Value Indexes are split into two groups based
on price-to-book ratio to create growth and value indexes. The Growth Index
contains companies with higher price-to-book ratios and the Value Index contains
companies with lower price-to-book ratios.
(6) The MSCI EAFE(R) with Net Dividends Index and the MSCI EAFE(R) with Net
Returns Index are unmanaged indexes that reflect the stock markets of 22
countries, including Europe, Australasia, and the Far East, with values
expressed in U.S. dollars. The MSCI EAFE with Net Dividends Index approximates
the minimum possible dividend reinvestment. The dividend is reinvested after
deduction of withholding tax, applying the rate to nonresident individuals who
do not benefit from double taxation treaties. MSCI uses withholding tax rates
applicable to Luxembourg holding companies, as Luxembourg applies the highest
rates.
(7) The MSCI Emerging Markets Index is an unmanaged index reflecting
approximately 60% of the market capitalization, by industry, in each of 26
emerging market countries.
(8) S&P/Citigroup Global Equity Index System(SM) and the names of each of the
indexes and subindexes that it comprises (GEIS and such indexes and subindexes,
each an "Index" and collectively, the "Indexes") are service marks of Citigroup.
The S&P/Citigroup Small Cap World ex-U.S. Index is a subset of the Global
Citigroup Broad Market Index (BMI). The S&P/Citigroup Extended Market World
ex-U.S. Index is a subset of the Global Citigroup Extended Market Index (EMI).
(9) 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 indexes.
(10) 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.
(11) 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.
(12) 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.
(13) The Russell 2500(R) Value Index measures the performance of those Russell
2500 companies with lower price-to-book ratios and lower forecasted growth
values.
Indexes 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 the fund's management and the portfolio holdings described in this
report are as of April 30, 2006; these views and portfolio holdings may have
changed subsequent to this date, and they do not guarantee the future
performance of the markets or the fund. Information provided in this report
should not be considered a recommendation to purchase or sell securities.
A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of
investment risks. For a more detailed discussion of the risks associated with
the fund, please see the fund's prospectus.
PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, FUND PERFORMANCE MAY BE
SUBJECT TO SUBSTANTIAL FLUCTUATION. Except where noted, comparative fund
performance does not account for the deduction of sales charges and would be
different if sales charges were included. The fund offers additional classes of
shares with distinct pricing options. For a full description of the differences
in pricing alternatives, please see the fund's prospectus.
MUTUAL FUNDS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR OTHER OBLIGATIONS
OF, OR GUARANTEED BY, BANKS, AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
18
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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 (November 1, 2005 through April 30,
2006, except for Value Opportunities Fund for which the period is December 20,
2005 through April 30, 2006).
ACTUAL EXPENSES
For each class of the Fund, the first line of the table on the following
page provides information about actual account values and actual expenses. You
may use the information in this line, together with the amount you invested, to
estimate the expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number in the first line under the heading
entitled "Expenses Paid During the Period 11/1/05 - 4/30/06 (or "Expenses Paid
During the Period 12/20/05 - 4/30/06" for the Value Opportunities Fund)" 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.
19
<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 PERIOD+
--------- --------- -----------------
11/1/05 4/30/06 11/1/05 - 4/30/06
--------- --------- -----------------
CLASS A
Actual $1,000.00 $1,152.50 $6.03
Hypothetical (5% Return Before Expenses) $1,000.00 $1,019.21 $5.66
CLASS B
Actual $1,000.00 $1,148.60 $9.43
Hypothetical (5% Return Before Expenses) $1,000.00 $1,015.99 $8.85
CLASS C
Actual $1,000.00 $1,148.20 $9.43
Hypothetical (5% Return Before Expenses) $1,000.00 $1,015.99 $8.85
CLASS P
Actual $1,000.00 $1,152.00 $6.51
Hypothetical (5% Return Before Expenses) $1,000.00 $1,018.72 $6.11
CLASS Y
Actual $1,000.00 $1,154.60 $4.17
Hypothetical (5% Return Before Expenses) $1,000.00 $1,020.94 $3.91
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense
ratio for such class (1.13% for Class A, 1.77% for Classes B and C, 1.22%
for Class P and 0.78% for Class Y) multiplied by the average account value
over the period, multiplied by 181/365 (to reflect fiscal period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
APRIL 30, 2006
<Table>
<Caption>
SECTOR* %**
Auto & Transportation 2.61%
Consumer Discretionary 9.50%
Consumer Staples 6.48%
Financial Services 11.86%
Healthcare 7.51%
Integrated Oils 6.31%
Materials & Processing 14.15%
Other 8.45%
Other Energy 2.78%
Producer Durables 9.36%
Short-Term Investment 2.63%
Technology 11.10%
Utilities 7.26%
Total 100.00%
</Table>
* A sector may comprise several industries.
** Represents percent of total investments.
20
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ALPHA STRATEGY 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 PERIOD+
--------- --------- -----------------
11/1/05 4/30/06 11/1/05 - 4/30/06
--------- --------- -----------------
CLASS A
Actual $1,000.00 $1,271.60 $1.97
Hypothetical (5% Return Before Expenses) $1,000.00 $1,023.07 $1.76
CLASS B
Actual $1,000.00 $1,267.40 $5.62
Hypothetical (5% Return Before Expenses) $1,000.00 $1,019.85 $5.01
CLASS C
Actual $1,000.00 $1,268.00 $5.62
Hypothetical (5% Return Before Expenses) $1,000.00 $1,019.86 $5.01
CLASS Y
Actual $1,000.00 $1,274.10 $0.00
Hypothetical (5% Return Before Expenses) $1,000.00 $1,024.79 $0.00
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense
ratio for such class (0.35% for Class A, 1.00% for Classes B and C, and
0.00% for Class Y) multiplied by the average account value over the period,
multiplied by 181/365 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY INVESTMENT OBJECTIVE
APRIL 30, 2006
<Table>
<Caption>
INVESTMENT OBJECTIVE %*
Long-Term Growth of Capital** 29.42%
Long-Term Capital Appreciation** 68.64%
Short-Term Investment 1.94%
Total 100.00%
</Table>
* Represents percent of total investments.
** Alpha Strategy Fund invests in other funds ("Underlying Funds") managed by
Lord, Abbett & Co. LLC. The category shown represents the investment
objective of these Underlying Funds.
21
<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 PERIOD+
--------- --------- -----------------
11/1/05 4/30/06 11/1/05 - 4/30/06
--------- --------- -----------------
CLASS A
Actual $1,000.00 $1,246.10 $ 8.19
Hypothetical (5% Return Before Expenses) $1,000.00 $1,017.49 $ 7.35
CLASS B
Actual $1,000.00 $1,241.30 $11.78
Hypothetical (5% Return Before Expenses) $1,000.00 $1,014.29 $10.59
CLASS C
Actual $1,000.00 $1,241.30 $11.78
Hypothetical (5% Return Before Expenses) $1,000.00 $1,014.29 $10.59
CLASS P
Actual $1,000.00 $1,244.40 $ 8.68
Hypothetical (5% Return Before Expenses) $1,000.00 $1,017.04 $ 7.80
CLASS Y
Actual $1,000.00 $1,247.70 $ 6.30
Hypothetical (5% Return Before Expenses) $1,000.00 $1,019.21 $ 5.66
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense
ratio for such class (1.47% for Class A, 2.12% for Classes B and C, 1.56%
for Class P and 1.13% for Class Y) multiplied by the average account value
over the period, multiplied by 181/365 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
APRIL 30, 2006
<Table>
<Caption>
SECTOR* %**
Consumer Discretionary 13.78%
Consumer Staples 8.62%
Energy 6.67%
Financials 31.42%
Healthcare 8.78%
Industrials 14.90%
Information Technology 4.46%
Materials 3.48%
Short-Term Investment 1.41%
Telecommunication Services 5.87%
Utilities 0.61%
Total 100.00%
</Table>
* A sector may comprise several industries.
** Represents percent of total investments.
22
<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 PERIOD+
--------- --------- -----------------
11/1/05 4/30/06 11/1/05 - 4/30/06
--------- --------- -----------------
CLASS A
Actual $1,000.00 $1,325.80 $ 8.82
Hypothetical (5% Return Before Expenses) $1,000.00 $1,017.20 $ 7.65
CLASS B
Actual $1,000.00 $1,321.80 $12.55
Hypothetical (5% Return Before Expenses) $1,000.00 $1,013.98 $10.89
CLASS C
Actual $1,000.00 $1,320.60 $12.54
Hypothetical (5% Return Before Expenses) $1,000.00 $1,013.99 $10.89
CLASS P
Actual $1,000.00 $1,325.40 $ 9.05
Hypothetical (5% Return Before Expenses) $1,000.00 $1,017.01 $ 7.85
CLASS Y
Actual $1,000.00 $1,327.60 $ 6.81
Hypothetical (5% Return Before Expenses) $1,000.00 $1,018.93 $ 5.91
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense
ratio for such class (1.53% for Class A, 2.18% for Classes B and C, 1.57%
for Class P and 1.18% for Class Y) multiplied by the average account value
over the period, multiplied by 181/365 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
APRIL 30, 2006
<Table>
<Caption>
SECTOR* %**
Basic Materials 8.43%
Conglomerates 1.10%
Consumer Cyclicals 13.42%
Consumer Non-Cyclicals 5.55%
Diversified Financials 7.03%
Energy 8.18%
Healthcare 3.42%
Industrial Goods & Services 22.12%
Non-Property Financials 14.05%
Property & Property Services 2.65%
Short-Term Investment 1.95%
Technology 7.36%
Telecommunications 1.58%
Transportation 1.13%
Utilities 2.03%
Total 100.00%
</Table>
* A sector may comprise several industries.
** Represents percent of total investments.
23
<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 PERIOD+
--------- --------- -----------------
11/1/05 4/30/06 11/1/05 - 4/30/06
--------- --------- -----------------
CLASS A
Actual $1,000.00 $1,121.40 $5.00
Hypothetical (5% Return Before Expenses) $1,000.00 $1,020.09 $4.76
CLASS B
Actual $1,000.00 $1,118.30 $8.40
Hypothetical (5% Return Before Expenses) $1,000.00 $1,016.88 $8.00
CLASS C
Actual $1,000.00 $1,117.60 $8.40
Hypothetical (5% Return Before Expenses) $1,000.00 $1,016.87 $8.00
CLASS P
Actual $1,000.00 $1,120.70 $5.52
Hypothetical (5% Return Before Expenses) $1,000.00 $1,019.58 $5.26
CLASS Y
Actual $1,000.00 $1,123.30 $3.16
Hypothetical (5% Return Before Expenses) $1,000.00 $1,021.83 $3.01
</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 Classes B and C, 1.05%
for Class P and 0.60% for Class Y) multiplied by the average account value
over the period, multiplied by 181/365 (to reflect one-half year period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
APRIL 30, 2006
<Table>
<Caption>
SECTOR* %**
Auto & Transportation 1.85%
Consumer Discretionary 4.95%
Consumer Staples 13.87%
Financial Services 15.08%
Healthcare 16.23%
Integrated Oils 5.23%
Materials & Processing 9.50%
Other 2.80%
Other Energy 4.49%
Producer Durables 7.19%
Short-Term Investment 4.82%
Technology 5.72%
Utilities 8.27%
Total 100.00%
</Table>
* A sector may comprise several industries.
** Represents percent of total investments.
24
<Page>
VALUE 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. 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 PERIOD+
--------- --------- ------------------
12/20/05 4/30/06 12/20/05 - 4/30/06
--------- --------- ------------------
CLASS A
Actual $1,000.00 $1,189.00 $4.99
Hypothetical (5% Return Before Expenses) $1,000.00 $1,013.51 $4.59
CLASS B
Actual $1,000.00 $1,186.00 $7.47
Hypothetical (5% Return Before Expenses) $1,000.00 $1,011.26 $6.87
CLASS C
Actual $1,000.00 $1,186.00 $7.47
Hypothetical (5% Return Before Expenses) $1,000.00 $1,011.25 $6.87
CLASS P
Actual $1,000.00 $1,188.00 $5.50
Hypothetical (5% Return Before Expenses) $1,000.00 $1,013.04 $5.06
CLASS Y
Actual $1,000.00 $1,190.00 $3.64
Hypothetical (5% Return Before Expenses) $1,000.00 $1,014.75 $3.35
</Table>
+ For each class of the Fund, expenses are equal to the annualized expense
ratio for such class (1.26% for Class A, 1.89% for Classes B and C, 1.39%
for Class P and 0.92% for Class Y) multiplied by the average account value
over the period, multiplied by 132/365 (to reflect fiscal period).
- --------------------------------------------------------------------------------
PORTFOLIO HOLDINGS PRESENTED BY SECTOR
APRIL 30, 2006
<Table>
<Caption>
SECTOR* %**
Auto & Transportation 4.63%
Consumer Discretionary 11.17%
Consumer Staples 0.85%
Financial Services 14.75%
Healthcare 5.21%
Materials & Processing 9.17%
Other 6.42%
Other Energy 1.30%
Producer Durables 10.87%
Short-Term Investment 15.21%
Technology 14.28%
Utilities 6.14%
Total 100.00%
</Table>
* A sector may comprise several industries.
** Represents percent of total investments.
25
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
ALL VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 98.29%
AEROSPACE 0.24%
Moog Inc. Class A* 195,000 $ 7,303
--------
AIR TRANSPORTATION 0.09%
Frontier Airlines Holdings, Inc.* 400,000 2,712
--------
AUTO PARTS: AFTER MARKET 0.30%
Genuine Parts Co. 202,700 8,848
--------
BANKS: 4.22%
Bank of America Corp. 330,086 16,478
Bank of New York Co., Inc. (The) 935,000 32,865
Cullen/Frost Bankers, Inc. 835,000 48,330
Marshall & Ilsley Corp. 625,000 28,575
--------
TOTAL 126,248
--------
BEVERAGE: SOFT DRINKS 2.11%
PepsiCo, Inc. 1,085,000 63,190
--------
BUILDING: MATERIALS 0.27%
Simpson Manufacturing Co., Inc. 205,000 8,198
--------
CHEMICALS 2.35%
Eastman Chemical Co. 425,000 23,099
Praxair, Inc. 843,300 47,334
--------
TOTAL 70,433
--------
COMMUNICATIONS TECHNOLOGY 4.16%
ADC Telecommunications, Inc.* 300,020 6,717
Anixter Int'l., Inc. 464,300 23,605
Avaya, Inc.* 653,100 7,837
McAfee, Inc.* 1,420,000 37,048
Motorola, Inc. 607,100 12,962
Tellabs, Inc.* 2,293,654 36,354
--------
TOTAL 124,523
--------
COMPUTER SERVICES, SOFTWARE & SYSTEMS 3.30%
Cadence Design Systems, Inc.* 3,380,000 $ 63,983
Microsoft Corp. 1,446,500 34,933
--------
TOTAL 98,916
--------
COMPUTER TECHNOLOGY 1.44%
Sun Microsystems, Inc.* 4,375,000 21,875
Zebra Technologies Corp. Class A* 535,000 21,234
--------
TOTAL 43,109
--------
CONTAINERS & PACKAGING: METAL & GLASS 0.69%
Crown Holdings, Inc.* 1,284,800 20,595
--------
CONTAINERS & PACKAGING: PAPER & PLASTIC 0.55%
Sonoco Products Co. 530,000 16,600
--------
DIVERSIFIED FINANCIAL SERVICES 0.68%
Citigroup, Inc. 410,000 20,480
--------
DIVERSIFIED MANUFACTURING 0.99%
American Standard Cos., Inc. 134,800 5,868
Ball Corp. 484,500 19,370
Hexcel Corp.* 197,900 4,372
--------
TOTAL 29,610
--------
DIVERSIFIED PRODUCTION 1.25%
Dover Corp. 754,400 37,531
--------
DRUG & GROCERY STORE CHAINS 1.44%
Kroger Co. (The)* 2,126,300 43,079
--------
DRUGS & PHARMACEUTICALS 7.38%
GlaxoSmithKline plc ADR 650,971 37,027
Mylan Laboratories, Inc. 1,920,000 41,933
Novartis AG ADR 1,090,000 62,686
Pfizer, Inc. 240,100 6,082
Schering-Plough Corp. 583,800 11,279
Wyeth 1,275,000 62,054
--------
TOTAL 221,061
--------
</Table>
26 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
ALL VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT & COMPONENTS 2.99%
Cooper Industries, Ltd. Class A 480,040 $ 43,900
Emerson Electric Co. 535,496 45,490
--------
TOTAL 89,390
--------
ELECTRONICS 2.30%
AVX Corp. 1,794,900 31,949
Vishay Intertechnology, Inc.* 2,365,000 36,941
--------
TOTAL 68,890
--------
ENGINEERING & CONTRACTING SERVICES 0.20%
Jacobs Engineering Group Inc.* 73,000 6,037
--------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 2.02%
Automatic Data Processing, Inc. 1,240,000 54,659
Jack Henry & Assoc., Inc. 258,500 5,803
--------
TOTAL 60,462
--------
FOODS 0.97%
Campbell Soup Co. 903,800 29,048
--------
GOLD 4.10%
Barrick Gold Corp.(a) 940,000 28,651
Newmont Mining Corp. 1,610,000 93,960
--------
TOTAL 122,611
--------
HOUSEHOLD FURNISHINGS 0.95%
Ethan Allen Interiors Inc. 636,500 28,572
--------
IDENTIFICATION CONTROL & FILTER DEVICES 3.52%
Hubbell Inc. Class B 510,000 26,341
IDEX Corp. 221,900 11,273
Parker Hannifin Corp. 700,000 56,735
Waters Corp.* 240,000 10,877
--------
TOTAL 105,226
--------
INSURANCE: MULTI-LINE 2.59%
Aflac Inc. 545,000 $ 25,909
Cincinnati Financial Corp. 180,000 7,675
Genworth Financial, Inc. Class A 880,000 29,216
Markel Corp.* 42,000 14,669
--------
TOTAL 77,469
--------
INSURANCE: PROPERTY-CASUALTY 0.43%
ACE Ltd.(a) 230,500 12,802
--------
MACHINERY: AGRICULTURAL 0.38%
Deere & Co. 130,900 11,490
--------
MACHINERY: INDUSTRIAL/SPECIALTY 0.20%
Woodward Governor Co. 171,900 5,888
--------
MACHINERY: OIL WELL EQUIPMENT & SERVICES 1.96%
Halliburton Co. 400,000 31,260
Schlumberger Ltd.(a) 223,400 15,446
Superior Energy Services, Inc.* 372,300 11,969
--------
TOTAL 58,675
--------
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 0.20%
Boston Scientific Corp.* 257,700 5,989
--------
METAL FABRICATING 2.54%
Quanex Corp. 930,000 39,767
Shaw Group, Inc. (The)* 175,900 5,382
Timken Co. (The) 885,100 30,890
--------
TOTAL 76,039
--------
MILLING: FRUIT & GRAIN PROCESSING 0.85%
Archer Daniels Midland Co. 700,000 25,438
--------
MISCELLANEOUS: CONSUMER STAPLES 1.24%
Diageo plc ADR 560,000 37,100
--------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 27
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
ALL VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
MISCELLANEOUS: EQUIPMENT 0.87%
W.W. Grainger, Inc. 337,000 $ 25,922
--------
MISCELLANEOUS: MATERIALS & PROCESSING 0.20%
Rogers Corp.* 95,000 5,862
--------
MULTI-SECTOR COMPANIES 8.53%
3M Co. 142,900 12,208
Carlisle Cos., Inc. 498,400 42,115
Eaton Corp. 600,000 45,990
General Electric Co. 2,700,000 93,393
Honeywell Int'l., Inc. 180,000 7,650
Trinity Industries, Inc. 851,700 54,083
--------
TOTAL 255,439
--------
OIL: CRUDE PRODUCERS 0.09%
Range Resources Corp. 101,600 2,695
--------
OIL: INTEGRATED INTERNATIONAL 6.36%
BP plc ADR 150,000 11,058
Chevron Corp. 600,000 36,612
EnCana Corp.(a) 145,300 7,272
Exxon Mobil Corp. 2,149,312 135,579
--------
TOTAL 190,521
--------
PAINTS & COATINGS 0.20%
Valspar Corp. (The) 210,000 5,943
--------
PAPER 0.26%
MeadWestvaco Corp. 275,000 7,840
--------
PUBLISHING: MISCELLANEOUS 1.17%
R.R. Donnelley & Sons Co. 1,038,700 34,994
--------
RAILROADS 0.62%
Union Pacific Corp. 202,500 18,470
--------
REAL ESTATE INVESTMENT TRUSTS 1.19%
Host Hotels & Resorts Inc. 1,700,000 35,734
--------
RENTAL & LEASING SERVICES: COMMERCIAL 0.40%
GATX Financial Corp. 257,900 $ 12,070
--------
RESTAURANTS 1.43%
Brinker Int'l., Inc. 819,400 32,088
OSI Restaurant Partners, Inc. 253,400 10,820
--------
TOTAL 42,908
--------
RETAIL 3.44%
Federated Department Stores, Inc. 735,018 57,221
Foot Locker, Inc. 800,000 18,544
Pacific Sunwear of California, Inc.* 600,000 13,980
Wal-Mart Stores, Inc. 292,700 13,180
--------
TOTAL 102,925
--------
SAVINGS & LOAN 0.44%
Webster Financial Corp. 281,500 13,216
--------
SERVICES: COMMERCIAL 1.54%
Sabre Holdings Corp. Class A 1,003,000 23,159
Waste Management, Inc. 610,000 22,851
--------
TOTAL 46,010
--------
SHOES 0.19%
Timberland Co. (The)* 162,400 5,530
--------
SOAPS & HOUSEHOLD CHEMICALS 0.78%
Procter & Gamble Co. (The) 403,050 23,462
--------
STEEL 1.09%
Steel Dynamics, Inc. 520,000 32,469
--------
TEXTILES APPAREL MANUFACTURERS 0.87%
VF Corp. 426,700 26,110
--------
TRUCKERS 1.64%
Heartland Express, Inc. 855,000 20,785
Werner Enterprises, Inc. 1,470,000 28,195
--------
TOTAL 48,980
--------
</Table>
28 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED)
ALL VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
UTILITIES: CABLE TV & RADIO 1.06%
Comcast Corp. Special Class A* 1,028,775 $ 31,717
----------
UTILITIES: ELECTRICAL 2.67%
Ameren Corp. 439,500 22,138
Avista Corp. 117,600 2,471
CMS Energy Corp.* 1,650,000 21,978
NiSource Inc. 885,000 18,682
PNM Resources, Inc. 359,925 9,110
Southern Co. 170,000 5,479
----------
TOTAL 79,858
----------
UTILITIES: GAS DISTRIBUTORS 0.78%
AGL Resources Inc. 207,300 7,334
Nicor Inc. 153,100 6,065
UGI Corp. 448,000 10,035
----------
TOTAL 23,434
----------
UTILITIES: GAS PIPELINES 0.76%
El Paso Corp. 1,755,000 22,657
----------
UTILITIES: TELECOMMUNICATIONS 2.81%
AT&T Inc. 865,000 22,672
BellSouth Corp. 179,600 6,067
Qwest Communications Int'l., Inc.* 1,119,100 7,509
Sprint Nextel Corp. 580,400 14,394
Verizon Communications, Inc. 1,018,200 33,631
----------
TOTAL 84,273
----------
TOTAL COMMON STOCKS (cost $2,473,742,808) 2,942,601
==========
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 2.65%
REPURCHASE AGREEMENT 2.65%
Repurchase Agreement dated 4/28/2006,
4.13% due 5/1/2006 with State Street
Bank & Trust Co. collateralized by
$40,915,000 of Federal Home Loan Bank at
3.625% to 4.53% due from 1/15/2008 to
5/16/2008 and $41,480,000 of Federal National
Mortgage Assoc. at 4.72% due 3/15/2010;
value: $81,036,466; proceeds: $79,470,981
(cost $79,443,639) $79,444 $ 79,444
----------
TOTAL INVESTMENTS IN SECURITIES 100.94%
(cost $2,553,186,447) 3,022,045
==========
LIABILITIES IN EXCESS OF OTHER ASSETS (0.94%) (28,135)
----------
NET ASSETS 100.00% $2,993,910
==========
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
ADR American Depositary Receipt.
SEE NOTES TO FINANCIAL STATEMENTS. 29
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
ALPHA STRATEGY FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
INVESTMENTS IN UNDERLYING FUNDS 97.59%
Lord Abbett Developing Growth Fund, Inc. -
Class Y(a) 4,047,472 $ 86,171
Lord Abbett Research Fund, Inc. - Small-Cap
Value Fund - Class Y(b) 2,442,705 86,203
Lord Abbett Securities Trust-International
Opportunities Fund - Class Y*(b) 7,083,065 114,816
--------
TOTAL INVESTMENTS IN UNDERLYING FUNDS
(cost $211,066,905) $287,190
========
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 1.93%
REPURCHASE AGREEMENT 1.93%
Repurchase Agreement dated 4/28/2006, 4.13%
due 5/1/2006 with State Street Bank & Trust Co.
collateralized by $6,100,000 of
Federal Home Loan Mortgage Corp.
at 2.00% due 3/5/2019; value: $5,779,750;
proceeds: $5,667,959 (cost $5,666,009) $5,666 $ 5,666
--------
TOTAL INVESTMENTS IN SECURITIES 99.52%
(cost $216,732,914) 292,856
========
OTHER ASSETS IN EXCESS OF LIABILITIES 0.48% 1,427
--------
NET ASSETS 100.00% $294,283
========
</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.
30 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
INTERNATIONAL CORE EQUITY FUND APRIL 30, 2006
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS 96.33%
COMMON STOCKS 94.88%
AUSTRALIA 2.01%
Coca-Cola Amatil Ltd. 1,611,858 $ 8,915
Downer EDi Ltd. 852,130 5,620
-------
TOTAL 14,535
-------
AUSTRIA 0.98%
Erste Bank
der oesterreichischen
Sparkassen AG 116,800 7,088
-------
BELGIUM 0.82%
InBev NV/SA
117,442 5,924
-------
CANADA 3.82%
Addax Petroleum Corp.* 144,079 3,856
Alcan Inc. 204,010 10,661
Nexen Inc. 70,700 4,131
OPTI Canada Inc.* 140,700 5,389
Talisman Energy Inc. 64,000 3,614
-------
TOTAL 27,651
-------
FRANCE 11.11%
ALSTOM* 66,109 5,988
AXA* 246,865 9,060
BNP Paribas* 15,716 1,435
BNP Paribas 190,483 17,999
Casino
Guichard-Perrachon S.A. 122,815 9,785
France Telecom S.A. 124,682 2,912
PSA Peugeot Citroen S.A. 124,357 8,174
Sanofi-Aventis 97,271 9,173
Sanofi-Aventis S.A. ADR 36,200 1,703
VINCI S.A.* 11,492 1,124
VINCI S.A. 63,214 6,280
Zodiac S.A. 105,028 6,797
-------
TOTAL 80,430
-------
GERMANY 12.92%
adidas-Salomon AG 60,602 $12,795
Allianz AG Registered Shares 41,833 7,003
Deutsche Bank AG Registered Shares 104,830 12,871
Fresenius Medical Care AG & Co KGaA 78,774 9,452
Hannover Ruckversicherung AG 288,874 10,711
Henkel KGaA 97,788 10,781
IVG Immobilien AG 174,680 5,014
Siemens AG 73,642 6,968
Vivacon AG* 70,737 3,793
Wacker Chemie AG* 107,473 14,101
-------
TOTAL 93,489
-------
GREECE 1.75%
National Bank of Greece S. A. 185,836 9,228
Piraeus Bank S.A.* 110,480 3,482
-------
TOTAL 12,710
-------
HONG KONG 1.36%
China Unicom Ltd. 8,224,800 7,001
Sinolink Worldwide Holdings Ltd. 11,170,000 2,853
-------
TOTAL 9,854
-------
INDIA 1.34%
Hindalco Industries Ltd. 1,120,830 5,323
Reliance Capital Ventures Ltd.* 158,753 91
Reliance Communication Ventures Ltd.* 53 --(a)
Reliance Energy Ventures Ltd.* 158,753 152
Reliance Industries Ltd. 177,959 3,999
Reliance Natural Resources Ltd.* 158,753 104
-------
TOTAL 9,669
-------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 31
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
INTERNATIONAL CORE EQUITY FUND APRIL 30, 2006
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
IRELAND 1.10%
Irish Life & Permanent plc 313,400 $ 7,995
-------
ISRAEL 0.79%
Teva Pharmaceutical
Industries Ltd. ADR 141,400 5,727
-------
ITALY 2.35%
Capitalia S.p.A. 532,612 4,623
Mediobanca S.p.A. 572,597 12,403
-------
TOTAL 17,026
-------
JAPAN 16.87%
Aiful Corp. 68,700 4,103
Don Quijote Co., Ltd. 64,680 5,516
East Japan Railway Co. 895 6,988
Fanuc Ltd. 85,800 8,115
Jupiter Telecommunications Co., Ltd.* 8,782 6,394
Mizuho Financial Group, Inc. 1,035 8,826
Nissan Motors Co., Ltd. 729,800 9,595
NSK Ltd. 995,000 9,001
ORIX Corp. 15,931 4,785
Sumitomo Corp. 758,000 11,357
Sumitomo Electric Industries, Ltd. 510,588 8,107
Sumitomo Mitsui Financial Group Inc. 1,051 11,538
Sumitomo Realty & Development Co., Ltd. 222,360 5,897
Takeda Chemical Industries Ltd. 95,600 5,843
Takefuji Corp. 75,850 4,929
Thk Co., Ltd. 169,900 5,551
Yamada Denki Co., Ltd. 51,612 5,625
-------
TOTAL 122,170
-------
LUXEMBOURG 1.23%
Millicom Int'l. Cellular S.A.* 180,900 $ 8,897
-------
NETHERLANDS 2.32%
European Aeronautic Defence & Space Co. EADS N.V. 89,800 3,544
ING Groep N.V. 291,573 11,867
SBM Offshore N.V. 13,220 1,418
-------
TOTAL 16,829
-------
NORWAY 1.02%
Petroleum Geo-Services ASA* 131,750 7,415
-------
RUSSIA 0.93%
Mobile TeleSystems OJSC ADR* 205,900 6,725
-------
SOUTH KOREA 3.61%
Hana Financial Inc. 128,030 6,285
Kookmin Bank 106,610 9,551
LG Electronics Inc. 62,200 5,150
Samsung Electronics Co., Ltd. 7,560 5,162
-------
TOTAL 26,148
-------
SPAIN 1.77%
Cintra, Concesiones de Infraestructuras de
Transporte, S.A 421,511 5,717
Enagas, S.A 322,825 7,103
-------
TOTAL 12,820
-------
SWEDEN 0.47%
Tele2 AB 269,060 3,409
-------
SWITZERLAND 5.92%
Nestle S.A. Registered Shares 36,251 11,056
Novartis AG Registered Shares 179,972 10,325
Roche Holding AG 61,454 9,450
UBS AG Registered Shares 101,396 12,018
-------
TOTAL 42,849
-------
</Table>
32 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED)
INTERNATIONAL CORE EQUITY FUND APRIL 30, 2006
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
TAIWAN 2.22%
China Steel Corp. 8,852,720 $ 8,643
United Microelectronics Corp. 10,641,000 7,404
--------
TOTAL 16,047
--------
THAILAND 0.71%
TMB Bank Public Co., Ltd.* 46,124,337 5,162
--------
TURKEY 1.26%
Koc, Holdings A.S. 956,530 5,243
Turkiye Vakiflar Bankasi T.A.O.* 620,200 3,916
--------
TOTAL 9,159
--------
UNITED ARAB EMIRATES 0.85%
Investcom LLC GDR Registered Shares* 404,640 6,130
--------
UNITED KINGDOM 13.83%
BAE SYSTEMS plc 1,181,171 8,993
British American Tobacco plc 165,453 4,230
CSR plc* 223,065 4,918
Enterprise Inns plc 319,002 5,427
Kesa Electricals plc 1,635,048 9,452
National Grid plc 411,021 4,314
Prudential plc 399,076 4,683
Punch Taverns plc 363,698 5,810
Royal Bank of Scotland Group (The) plc 402,102 13,133
Shire plc 278,000 4,334
Smith & Nephew plc 737,011 6,095
Tesco plc 1,763,976 10,277
Tullow Oil plc 658,486 4,941
Vodafone Group plc 2,743,324 6,478
WPP Group plc 571,321 7,053
--------
TOTAL 100,138
--------
UNITED STATES 1.52%
Las Vegas Sands Corp.* 91,480 $ 5,929
Transocean Inc.* 62,630 5,077
--------
TOTAL 11,006
--------
TOTAL COMMON STOCKS (COST $604,951,785) 687,002
========
PREFERRED STOCK 1.45%
ProSiebenSat.1 Media AG (cost $8,072,146) 380,268 10,535
--------
TOTAL LONG-TERM INVESTMENTS (cost $613,023,931) 697,537
========
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENT 1.37%
REPURCHASE AGREEMENT 1.37%
Repurchase Agreement
dated 4/28/2006,
4.13% due 5/1/2006
with State Street
Bank & Trust Co.
collateralized by
$10,785,000 of Federal
National Mortgage Assoc.
at 5.70% due 3/27/2023;
value: $10,151,381;
proceeds: $9,955,059
(cost $9,951,634) $9,952 9,952
--------
TOTAL INVESTMENTS IN SECURITIES 97.70%
(cost $622,975,565) 707,489
========
FOREIGN CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES 2.30% 16,648
--------
NET ASSETS 100.00% $724,137
========
</Table>
* Non-income producing security.
(a) Value is less than $1,000.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
SEE NOTES TO FINANCIAL STATEMENTS. 33
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
INTERNATIONAL OPPORTUNITIES FUND APRIL 30, 2006
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 96.69%
AUSTRALIA 1.81%
Downer Edi Ltd. 511,469 $ 3,373
Newcrest Mining Ltd. 152,994 2,650
-------
TOTAL 6,023
-------
AUSTRIA 1.27%
Wienerberger AG 79,758 4,217
-------
CANADA 2.29%
Addax Petroleum Corp.* 77,014 2,061
Alcan Inc. 67,080 3,506
OPTI Canada Inc.* 53,618 2,053
-------
TOTAL 7,620
-------
CHINA 1.65%
Beauty China Holdings Ltd. 2,841,861 1,420
Celestial NutriFoods Ltd. 1,599,584 1,508
Suntech Power Holdings Co. ADR* 74,700 2,561
-------
TOTAL 5,489
-------
DENMARK 2.03%
GN Store Nord A/S 243,200 3,465
Topdanmark AS* 25,152 3,296
-------
TOTAL 6,761
-------
FINLAND 0.99%
KCI Konecranes plc 177,903 3,297
-------
FRANCE 5.76%
Casino Guichard-Perrachon S.A. 34,038 2,712
Ipsos S.A. 22,235 3,274
Neopost S.A. 50,468 5,708
Vallourec S.A. 3,321 4,315
Zodiac S.A. 48,957 3,169
-------
TOTAL 19,178
-------
GERMANY 13.83%
Arques Industries AG 16,150 $ 3,228
AWD Holding AG 105,200 3,731
Fresenius Medical Care AG & Co. KGaA ADR 96,600 3,865
Hannover Ruckversicherung AG 87,056 3,228
Hypo Real Estate Holding AG 71,239 4,981
IVG Immobilien AG 134,550 3,862
Patrizia Immobilien AG* 56,273 1,522
Puma AG Rudolf Dassler Sport 8,044 3,243
Rheinmetall AG 55,684 4,493
Techem AG 92,667 4,151
Vivacon Ag* 99,273 5,323
Wacker Chemie AG* 33,626 4,412
-------
TOTAL 46,039
-------
GREECE 1.63%
Piraeus Bank S.A.* 171,932 5,418
-------
HONG KONG 3.47%
AAC Acoustic Technology Holdings, Inc.* 3,814,909 4,330
EganaGoldpfeil (Holdings) Ltd. 9,079,421 3,806
Sinolink Worldwide Holdings Ltd. 13,353,500 3,410
-------
TOTAL 11,546
-------
IRELAND 4.12%
DEPFA BANK plc 107,913 2,026
FBD Holdings plc 69,555 3,334
Grafton Group plc Unit* 300,827 4,205
Irish Life & Permanent plc 163,151 4,162
-------
TOTAL 13,727
-------
</Table>
34 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND APRIL 30, 2006
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
ITALY 3.59%
Davide Campari-Milano S.p.A 447,945 $ 4,380
Hera S.p.A 1,066,410 3,444
Milano Assicurazioni S.p.A 535,800 4,134
-------
TOTAL 11,958
-------
JAPAN 15.26%
Avex Group Holdings Inc. 53,600 1,600
Diamond City Co., Ltd. 34,800 1,653
Don Quijote Co., Ltd. 23,100 1,970
Jupiter Telecommunications Co., Ltd.* 4,156 3,026
K.K. daVinci Advisors* 2,354 2,626
Meisei Industrial Co., Ltd.* 249,000 1,815
MISUMI Group Inc. 132,400 2,913
Mitsui Mining & Smelting Co., Ltd. 425,200 2,958
Nabtesco Corp. 271,088 3,435
NGK INSULATORS, LTD. 204,000 2,922
Nitori Co., Ltd. 61,350 3,319
Ryowa Life Create Co., Ltd. 114,700 1,043
Shinko Electric Industries Co., Ltd. 84,600 2,318
Sumitomo Rubber Industries, Ltd. 228,300 3,264
Thk Co., Ltd. 133,700 4,368
Tokuyama Corp. 262,900 4,338
Yamada Denki Co., Ltd. 34,900 3,804
ZEON Corp. 251,000 3,410
-------
TOTAL 50,782
-------
LUXEMBOURG 1.70%
Gemplus Int'l. S.A.* 1,086,744 3,277
Millicom Int'l Cellular S.A.* 48,407 2,380
-------
TOTAL 5,657
-------
NETHERLANDS 1.93%
Aalberts Industries N.V. 54,137 $ 4,412
LMA Int'l. N.V.* 3,767,621 2,002
-------
TOTAL 6,414
-------
NORWAY 2.99%
Det Norske Oljeselskap ASA 195,910 2,018
Petroleum Geo-Services ASA* 74,950 4,218
Songa Offshore ASA* 331,038 3,705
-------
TOTAL 9,941
-------
SINGAPORE 1.36%
Keppel Corp. Ltd. 374,000 3,619
Pearl Energy pte Ltd.* 739,104 912
-------
TOTAL 4,531
-------
SPAIN 4.37%
ACS, Actividades de
Construccion
y Servicios, S.A. 77,704 3,226
Enagas, S.A. 187,704 4,130
Prosegur Compania de
Seguridad, S.A. 179,936 4,778
Tubacex, S.A. 359,408 2,399
-------
TOTAL 14,533
-------
SWEDEN 2.46%
Getinge AB Class B 232,300 4,025
KappAhl Holding AB 528,335 4,146
-------
TOTAL 8,171
-------
SWITZERLAND 1.58%
Geberit AG* 3,350 3,909
Nobel Biocare
Holding AG 5,426 1,341
-------
TOTAL 5,250
-------
TAIWAN 0.77%
Yuanta Core Pacific
Securities Co., Ltd. 3,350,000 2,562
-------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 35
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED)
INTERNATIONAL OPPORTUNITIES FUND APRIL 30, 2006
<Table>
<Caption>
U.S. $
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
THAILAND 3.72%
Bangkok Bank plc 1,495,732 $ 4,743
Charoen Pokphand Foods plc 8,952,589 1,312
Italian-Thai Development Public Co. Ltd. 6,592,585 1,265
Siam Cement Public Co. Ltd. (The) 186,300 1,261
TMB Bank Public Co., Ltd.* 34,004,269 3,805
--------
TOTAL 12,386
--------
TURKEY 1.10%
Turkiye Is Bankasi A.S. (Isbank) Registered Shares GDR 211,200 1,775
Turkiye Vakiflar Bankasi T.A.O.* 299,820 1,893
--------
TOTAL 3,668
--------
UNITED ARAB EMIRATES 0.84%
Investcom LLC GDR* 184,477 2,795
--------
UNITED KINGDOM 15.12%
AWG plc 152,425 3,224
Balfour Beatty plc 555,142 3,634
CSR plc* 204,936 4,518
Intertek Group plc 320,825 4,824
Kensington Group plc 158,635 3,275
Man Group plc 89,606 4,129
Michael Page Int'l. plc 650,124 4,541
Northgate Information Solutions plc* 1,284,038 1,826
Northgate plc 72,398 1,452
Peter Hambro Mining plc* 139,984 4,207
Punch Taverns plc 263,734 4,213
RHM plc 738,941 3,652
Slough Estates plc 283,897 3,168
Tullow Oil plc 487,151 3,656
--------
TOTAL 50,319
--------
UNITED STATES 1.05%
Las Vegas Sands Corp.* 53,723 $ 3,482
--------
TOTAL COMMON STOCKS
(cost $241,822,925) 321,764
========
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(000)
---------
SHORT-TERM INVESTMENT 1.92%
REPURCHASE AGREEMENT 1.92%
Repurchase Agreement dated 4/28/2006, 4.13% due 5/1/2006
with State Street Bank & Trust Co. collateralized by
$6,935,000 of Federal National Mortgage Assoc. at 5.70%
due 3/27/2023; value: $6,527,569; proceeds: $6,400,493
(cost $6,398,291) $6,398 6,398
--------
TOTAL INVESTMENTS IN SECURITIES 98.61%
(cost $248,221,216) 328,162
========
FOREIGN CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES
1.39% 4,637
--------
NET ASSETS 100.00% $332,799
========
</Table>
* Non-income producing security.
ADR American Depositary Receipt.
GDR Global Depositary Receipt.
Unit More than one class of securities traded together.
36 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
LARGE-CAP VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 93.20%
AEROSPACE 1.04%
Boeing Co. (The) 2,660 $ 222
Lockheed Martin Corp. 1,130 86
Northrop Grumman Corp. 3,220 215
------
TOTAL 523
------
AGRICULTURE, FISHING & RANCHING 1.24%
Monsanto Co. 7,486 624
------
AUTOMOBILES 0.51%
Honda Motor Co., Ltd. ADR 7,220 256
------
BANKS 6.79%
Bank of America Corp. 14,250 711
Bank of New York Co., Inc. (The) 21,731 764
Commerce Bancorp, Inc. 160 7
JPMorgan Chase & Co. 22,040 1,000
Marshall & Ilsley Corp. 4,120 188
Mitsubishi UFJ Financial Group, Inc. ADR 18,620 292
PNC Financial Services Group, Inc. (The) 3,430 245
SunTrust Banks, Inc. 2,650 205
------
TOTAL 3,412
------
BEVERAGE: SOFT DRINKS 2.56%
Coca-Cola Co. (The) 10,970 460
Coca-Cola Enterprises, Inc. 9,730 190
PepsiCo, Inc. 10,952 638
------
TOTAL 1,288
------
BIOTECHNOLOGY RESEARCH & PRODUCTION 1.25%
Baxter Int'l., Inc. 16,623 627
------
CHEMICALS 1.06%
Praxair, Inc. 9,454 531
------
COMMUNICATIONS TECHNOLOGY 0.77%
Motorola, Inc. 18,075 $ 386
------
COMPUTER TECHNOLOGY 2.74%
Electronic Data Systems Corp. 16,650 451
Hewlett-Packard Co. 18,070 587
Sun Microsystems, Inc.* 67,560 338
------
TOTAL 1,376
------
CONSUMER PRODUCTS 1.08%
Kimberly-Clark Corp. 9,260 542
------
DIVERSIFIED FINANCIAL SERVICES 1.73%
Citigroup, Inc. 15,599 779
Morgan Stanley 1,380 89
------
TOTAL 868
------
DIVERSIFIED PRODUCTION 0.26%
Dover Corp. 2,680 133
------
DRUG & GROCERY STORE CHAINS 1.62%
Kroger Co. (The)* 40,075 812
------
DRUGS & PHARMACEUTICALS 12.71%
Abbott Laboratories 6,690 286
GlaxoSmithKline plc ADR 10,890 619
Johnson & Johnson 5,980 350
MedImmune, Inc.* 7,980 251
Merck & Co., Inc. 13,344 459
Novartis AG ADR 22,113 1,272
Pfizer, Inc. 43,450 1,101
Schering-Plough Corp. 13,916 269
Teva Pharmaceutical Industries Ltd. ADR 11,900 482
Wyeth 26,705 1,300
------
TOTAL 6,389
------
ELECTRICAL EQUIPMENT & COMPONENTS 2.07%
Emerson Electric Co. 12,241 1,040
------
ELECTRONICS: MEDICAL SYSTEMS 1.04%
Medtronic, Inc. 10,430 523
------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 37
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
LARGE-CAP VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
ELECTRONICS: TECHNOLOGY 2.10%
General Dynamics Corp. 5,740 $ 377
Raytheon Co. 15,320 678
------
TOTAL 1,055
------
ENGINEERING & CONTRACTING SERVICES 1.17%
Fluor Corp. 6,350 590
------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 1.64%
Automatic Data Processing, Inc. 18,650 822
------
FINANCIAL: MISCELLANEOUS 1.16%
Federal Home Loan Mortgage Corp. 5,160 315
Federal National Mortgage Assoc. 5,280 267
------
TOTAL 582
------
FOODS 3.61%
Campbell Soup Co. 22,350 718
Kraft Foods, Inc. Class A 35,115 1,097
------
TOTAL 1,815
------
GOLD 3.61%
Barrick Gold Corp.(a) 23,540 717
Newmont Mining Corp. 18,842 1,100
------
TOTAL 1,817
------
HEALTH & PERSONAL CARE 0.12%
Medco Health Solutions, Inc.* 1,120 60
------
IDENTIFICATION CONTROL & FILTER DEVICES 1.94%
Pall Corp. 7,790 235
Parker Hannifin Corp. 9,099 738
------
TOTAL 973
------
INSURANCE: MULTI-LINE 2.36%
Aflac, Inc. 12,160 578
American Int'l. Group, Inc. (The) 9,352 $ 610
------
TOTAL 1,188
------
INSURANCE: PROPERTY-CASUALTY 1.09%
ACE Ltd.(a) 5,240 291
XL Capital Ltd. Class A(a) 3,870 255
------
TOTAL 546
------
MACHINERY: AGRICULTURAL 0.91%
Deere & Co. 5,236 460
------
MACHINERY: CONSTRUCTION & HANDLING 0.81%
Caterpillar, Inc. 5,380 407
------
MACHINERY: OIL WELL EQUIPMENT & SERVICES 3.70%
Baker Hughes, Inc. 6,832 552
Schlumberger, Ltd.(a) 18,918 1,308
------
TOTAL 1,860
------
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 0.77%
Boston Scientific Corp.* 16,640 387
------
MISCELLANEOUS: CONSUMER STAPLES 1.46%
Diageo plc ADR 11,115 736
------
MULTI-SECTOR COMPANIES 2.74%
Eaton Corp. 3,302 253
General Electric Co. 24,360 843
Honeywell Int'l., Inc. 6,670 283
------
TOTAL 1,379
------
OIL: INTEGRATED INTERNATIONAL 5.12%
BP plc ADR 6,860 506
Exxon Mobil Corp. 32,751 2,066
------
TOTAL 2,572
------
PAPER 2.22%
International Paper Co. 30,675 1,115
------
</Table>
38 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED)
LARGE-CAP VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
PUBLISHING: NEWSPAPERS 0.44%
Tribune Co. 7,587 $ 219
-------
RAILROADS 1.31%
Union Pacific Corp. 7,200 657
-------
RETAIL 1.16%
Federated Department Stores, Inc. 1,320 103
Wal-Mart Stores, Inc. 10,690 481
-------
TOTAL 584
-------
SERVICES: COMMERCIAL 2.17%
IAC/InterActiveCorp* 11,545 333
Waste Management, Inc. 20,210 757
-------
TOTAL 1,090
-------
SOAPS & HOUSEHOLD CHEMICALS 4.33%
Clorox Co. (The) 7,590 487
Procter & Gamble Co. (The) 28,979 1,687
-------
TOTAL 2,174
-------
UTILITIES: CABLE TV & RADIO 1.70%
Comcast Corp. Class A* 27,678 853
-------
UTILITIES: ELECTRICAL 2.04%
Ameren Corp. 5,820 293
PG&E Corp. 11,580 461
Southern Co. 8,490 274
-------
TOTAL 1,028
-------
UTILITIES: GAS PIPELINES 0.69%
El Paso Corp. 26,925 348
-------
UTILITIES: TELECOMMUNICATIONS 4.36%
AT&T Inc. 37,090 972
BellSouth Corp. 14,360 485
Sprint Nextel Corp. 7,490 186
Verizon Communications, Inc. 16,575 547
-------
TOTAL 2,190
-------
TOTAL COMMON STOCKS (cost $41,617,671) 46,837
=======
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 4.72%
REPURCHASE AGREEMENT 4.72%
Repurchase Agreement dated 4/28/2006,
4.13% due 5/1/2006 with State Street Bank & Trust Co.
collateralized by $2,555,000 of Federal
Home Loan Mortgage Corp. at 2.00% due 3/5/2019;
value: $2,420,863; proceeds: $2,374,182
(cost $2,373,365) $2,373 $ 2,373
-------
TOTAL INVESTMENTS IN SECURITIES 97.92%
(cost $43,991,036) 49,210
=======
OTHER ASSETS IN EXCESS OF LIABILITIES 2.08% 1,047
-------
NET ASSETS 100.00% $50,257
=======
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
ADR American Depositary Receipt.
SEE NOTES TO FINANCIAL STATEMENTS. 39
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
VALUE OPPORTUNITIES FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 84.92%
ADVERTISING AGENCY 0.65%
Interpublic Group of Cos., Inc. (The)* 18,055 $ 173
------
AEROSPACE 0.99%
Alliant Techsystems Inc.* 1,970 158
Teledyne Technologies Inc.* 2,945 107
------
TOTAL 265
------
AUTO PARTS: ORIGINAL EQUIPMENT 0.75%
BorgWarner, Inc. 3,290 200
------
BANKS: 2.45%
Colonial BancGroup Inc. (The) 6,560 170
Cullen/Frost Bankers, Inc. 4,705 272
East West Bancorp, Inc. 5,370 213
------
TOTAL 655
------
BEVERAGE: BREWERS 0.86%
Molson Coors Brewing Co. 3,100 229
------
BIOTECHNOLOGY RESEARCH & PRODUCTION 0.61%
Invitrogen Corp.* 2,460 162
------
COMMUNICATIONS TECHNOLOGY 7.07%
Anixter Int'l. Inc. 20,260 1,030
CommScope, Inc.* 8,095 267
Comtech Telecommunications Corp.* 14,860 423
McAfee, Inc.* 6,470 169
------
TOTAL 1,889
------
COMPUTER SERVICES, SOFTWARE & SYSTEMS 1.55%
BearingPoint, Inc.* 13,585 126
CACI Int'l. Inc. Class A* 4,585 287
------
TOTAL 413
------
COMPUTER TECHNOLOGY 1.52%
Zebra Technologies Corp. Class A* 10,260 $ 407
------
CONSUMER PRODUCTS 0.82%
RC2 Corp.* 5,550 219
------
CONTAINERS & PACKAGING: PAPER & PLASTIC 1.48%
Sonoco Products Co. 12,645 396
------
DIVERSIFIED MANUFACTURING 1.87%
American Standard Cos. Inc. 6,520 284
Ashland, Inc. 3,285 216
------
TOTAL 500
------
DIVERSIFIED PRODUCTION 1.69%
Dover Corp. 9,055 450
------
DRUGS & PHARMACEUTICALS 2.34%
Hospira, Inc.* 11,440 441
Mylan Laboratories, Inc. 8,445 184
------
TOTAL 625
------
ELECTRICAL & ELECTRONICS 1.13%
Benchmark Electronics, Inc.* 11,055 302
------
ELECTRICAL EQUIPMENT & COMPONENTS 1.86%
Cooper Industries Ltd., Class A 3,810 349
General Cable Inc.* 4,680 148
------
TOTAL 497
------
ELECTRONICS 3.03%
Orbotech Ltd.*(a) 15,930 405
Vishay Intertechnology, Inc.* 25,920 405
------
TOTAL 810
------
ELECTRONICS: INSTRUMENTS, GAUGES & METERS 0.72%
Thermo Electron Corp.* 4,975 192
------
</Table>
40 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
VALUE OPPORTUNITIES FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
ENGINEERING & CONTRACTING SERVICES 1.74%
Quanta Services, Inc.* 24,940 $ 405
URS Corp.* 1,370 59
------
TOTAL 464
------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 0.88%
Alliance Data Systems Corp.* 4,285 236
------
FINANCIAL INFORMATION SERVICES 0.44%
Interactive Data Corp. 5,290 118
------
FINANCIAL: MISCELLANEOUS 1.10%
Financial Federal Corp. 10,325 293
------
HEALTH & PERSONAL CARE 0.69%
Amedisys, Inc.* 5,540 184
------
HEALTHCARE MANAGEMENT SERVICES 0.60%
IMS Health Inc. 5,915 161
------
HOUSEHOLD EQUIPMENT & PRODUCTS 0.73%
Stanley Works (The) 3,710 194
------
HOUSEHOLD FURNISHINGS 1.57%
Ethan Allen Interiors, Inc. 9,310 418
------
IDENTIFICATION CONTROL & FILTER DEVICES 2.24%
Parker Hannifin Corp. 2,140 173
Waters Corp.* 6,330 287
Watts Industries Inc. 4,010 137
------
TOTAL 597
------
INSURANCE: MULTI-LINE 1.64%
Assurant, Inc. 9,075 437
------
INSURANCE: PROPERTY-CASUALTY 1.40%
HCC Insurance
Holdings, Inc. 11,205 375
------
MACHINERY: OIL WELL EQUIPMENT & SERVICES 1.30%
Hanover Compressor Co.* 17,275 348
------
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 0.97%
Fisher Scientific Int'l. Inc.* 3,690 $ 260
------
METALS & MINERALS MISCELLANEOUS 0.88%
AMCOL Int'l., Corp. 8,200 236
------
MULTI-SECTOR COMPANIES 6.43%
Carlisle Cos., Inc. 8,550 723
Trinity Industries, Inc. 15,655 994
------
TOTAL 1,717
------
PAINTS & COATINGS 1.46%
Valspar Corp. (The) 13,760 389
------
REAL ESTATE INVESTMENT TRUSTS 1.66%
Highland Hospitality Corp. 13,393 173
Host Hotels & Resorts Inc. 12,920 271
------
TOTAL 444
------
RENTAL & LEASING SERVICES: COMMERCIAL 5.19%
GATX Financial Corp. 2,601 122
United Rentals, Inc.* 23,635 843
Williams Scotsman Int'l., Inc.* 17,145 421
------
TOTAL 1,386
------
RESTAURANTS 1.43%
Benihana Inc. Class A* 10,678 383
------
RETAIL 1.02%
Group 1 Automotive, Inc. 2,870 157
School Specialty, Inc.* 3,165 115
------
TOTAL 272
------
SERVICES: COMMERCIAL 4.97%
Allied Waste Industries, Inc.* 18,905 268
Cintas Corp. 4,175 175
Copart, Inc.* 11,420 307
CRA Int'l., Inc.* 6,645 324
Manpower Inc. 3,905 254
------
TOTAL 1,328
------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 41
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED)
VALUE OPPORTUNITIES FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
SHIPPING 0.67%
Horizon Lines Inc. Class A 13,015 $ 178
-------
STEEL 1.75%
Gibraltar Industries, Inc. 8,365 233
Steel Dynamics, Inc. 3,770 235
-------
TOTAL 468
-------
TELECOMMUNICATIONS EQUIPMENT 3.40%
Belden CDT Inc. 15,200 476
Crown Castle Int'l. Corp.* 12,850 432
-------
TOTAL 908
-------
TRUCKERS 3.22%
Con-way Inc. 6,560 366
Heartland Express, Inc. 5,710 139
Swift Transportation Co., Inc. 11,895 356
-------
TOTAL 861
-------
UTILITIES: ELECTRICAL 2.35%
Avista Corp. 4,255 89
IDACORP, Inc. 8,393 286
PNM Resources, Inc. 9,965 252
-------
TOTAL 627
-------
UTILITIES: GAS DISTRIBUTORS 3.80%
AGL Resources, Inc. 9,035 320
Piedmont Natural Gas Co., Inc. 12,905 317
UGI Corp. 16,855 378
-------
TOTAL 1,015
-------
TOTAL COMMON STOCKS
(cost $21,547,385) 22,681
=======
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT VALUE
INVESTMENTS (000) (000)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 15.23%
REPURCHASE AGREEMENT 15.23%
Repurchase Agreement dated 4/28/2006, 4.13% due 5/1/2006
with State Street Bank & Trust Co. collateralized by
$4,380,000 of Federal Home Loan Mortgage Corp. at 2.00%
due 3/5/2019; value: $4,150,050; proceeds: $4,069,722
(cost $4,068,322) $4,068 $ 4,068
-------
TOTAL INVESTMENTS IN SECURITIES 100.15%
(cost $25,615,707) 26,749
=======
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS (0.15%) (40)
-------
NET ASSETS 100.00% $26,709
=======
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
42 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2006
<Table>
<Caption>
INTERNATIONAL
ALL VALUE ALPHA STRATEGY CORE EQUITY
FUND FUND FUND
ASSETS:
Investments in securities, at cost $2,553,186,447 $216,732,914 $622,975,565
- ----------------------------------------------------------------------------------------------------------
Investments in securities, at value $3,022,044,749 $292,856,230 $707,488,504
Foreign cash, at value (cost $7,874,978) -- -- 7,884,732
Receivables:
Interest and dividends 2,122,777 1,950 1,829,105
Investment securities sold 42,074,386 -- 14,827,320
Capital shares sold 8,014,662 3,249,596 9,783,474
From affiliates -- 56,358 --
Prepaid expenses and other assets 155,988 46,756 116,661
- ----------------------------------------------------------------------------------------------------------
TOTAL ASSETS 3,074,412,562 296,210,890 741,929,796
- ----------------------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 73,375,956 1,289,070 16,238,671
Capital shares reacquired 2,981,158 388,714 656,668
Management fees 1,251,099 -- 399,199
12b-1 distribution fees 1,510,146 160,783 284,493
Fund administration 94,146 -- 21,291
Trustees' fees 294,835 15,616 12,624
To affiliate (See Note 3) -- -- 4,068
Accrued expenses and other liabilities 995,249 73,399 176,131
- ----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 80,502,589 1,927,582 17,793,145
==========================================================================================================
NET ASSETS $2,993,909,973 $294,283,308 $724,136,651
==========================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $2,388,798,670 $220,670,545 $608,218,843
Undistributed (distributions in excess of)
net investment income 2,786,353 (586,208) (200,897)
Accumulated net realized gain (loss) on investments
and foreign currency related transactions 133,466,648 (1,924,345) 31,552,194
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 468,858,302 76,123,316 84,566,511
- ----------------------------------------------------------------------------------------------------------
NET ASSETS $2,993,909,973 $294,283,308 $724,136,651
==========================================================================================================
NET ASSETS BY CLASS:
Class A Shares $2,097,599,972 $179,595,039 $520,510,790
Class B Shares $ 277,002,377 $ 57,982,348 $ 41,595,512
Class C Shares $ 596,178,011 $ 55,780,129 $114,480,295
Class P Shares $ 19,652,079 -- $ 54,421
Class Y Shares $ 3,477,534 $ 925,792 $ 47,495,633
OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF
AUTHORIZED SHARES OF BENEFICIAL INTEREST):
Class A Shares 161,362,483 7,389,712 34,805,126
Class B Shares 22,029,073 2,471,038 2,814,453
Class C Shares 47,566,506 2,376,842 7,745,804
Class P Shares 1,523,356 -- 3,640
Class Y Shares 266,499 38,010 3,160,315
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY OUTSTANDING SHARES):
Class A Shares-Net asset value $ 13.00 $ 24.30 $ 14.96
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 13.79 $ 25.78 $ 15.87
Class B Shares-Net asset value $ 12.57 $ 23.46 $ 14.78
Class C Shares-Net asset value $ 12.53 $ 23.47 $ 14.78
Class P Shares-Net asset value $ 12.90 -- $ 14.95
Class Y Shares-Net asset value $ 13.05 $ 24.36 $ 15.03
==========================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 43
<Page>
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)(CONCLUDED)
APRIL 30, 2006
<Table>
<Caption>
INTERNATIONAL VALUE
OPPORTUNITIES LARGE-CAP OPPORTUNITIES
FUND VALUE FUND FUND
ASSETS:
Investments in securities, at cost $248,221,216 $43,991,036 $25,615,707
- ------------------------------------------------------------------------------------------------------
Investments in securities, at value $328,161,895 $49,210,079 $26,749,557
Cash -- -- 10,238
Foreign cash, at value (cost $7,033,557) 7,210,053 -- --
Receivables:
Interest and dividends 643,791 77,589 5,411
Investment securities sold 1,500,321 1,181,259 1,706,290
Capital shares sold 1,124,069 69,215 1,407,514
From advisor -- 11,615 9,275
Prepaid expenses and other assets 53,238 39,248 8,341
- ------------------------------------------------------------------------------------------------------
TOTAL ASSETS 338,693,367 50,589,005 29,896,626
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 5,180,932 207,309 3,146,792
Capital shares reacquired 210,667 13,393 16,637
Management fees 189,122 15,374 12,666
12b-1 distribution fees 110,554 10,011 8,112
Fund administration 10,042 1,538 676
Trustees' fees 22,165 2,741 2
To affiliate (See Note 3) 22,543 -- --
Accrued expenses and other liabilities 148,338 81,166 2,297
- ------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,894,363 331,532 3,187,182
======================================================================================================
NET ASSETS $332,799,004 $50,257,473 $26,709,444
======================================================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $303,866,082 $44,907,938 $24,809,285
Undistributed (distributions in excess of)
net investment income (11,525) 222,825 5,254
Accumulated net realized gain (loss) on investments
and foreign currency related transactions (51,173,170) (92,333) 761,055
Net unrealized appreciation on investments
and translation of assets and liabilities
denominated in foreign currencies 80,117,617 5,219,043 1,133,850
- ------------------------------------------------------------------------------------------------------
NET ASSETS $332,799,004 $50,257,473 $26,709,444
======================================================================================================
NET ASSETS BY CLASS:
Class A Shares $144,677,270 $16,609,808 $20,408,443
Class B Shares $ 39,807,182 $ 2,359,354 $ 1,363,488
Class C Shares $ 29,036,040 $ 3,785,615 $ 2,992,866
Class P Shares $ 910,106 $ 14,252 $ 11,880
Class Y Shares $118,368,406 $27,488,444 $ 1,932,767
OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF
AUTHORIZED SHARES OF BENEFICIAL INTEREST):
Class A Shares 9,116,890 1,235,740 1,717,158
Class B Shares 2,598,661 177,837 114,964
Class C Shares 1,904,925 285,476 252,335
Class P Shares 56,696 1,059.274 1,000
Class Y Shares 7,301,363 2,036,935 162,406
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(NET ASSETS DIVIDED BY OUTSTANDING SHARES):
Class A Shares-Net asset value $ 15.87 $ 13.44 $ 11.89
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 16.84 $ 14.26 $ 12.62
Class B Shares-Net asset value $ 15.32 $ 13.27 $ 11.86
Class C Shares-Net asset value $ 15.24 $ 13.26 $ 11.86
Class P Shares-Net asset value $ 16.05 $ 13.45 $ 11.88
Class Y Shares-Net asset value $ 16.21 $ 13.49 $ 11.90
======================================================================================================
</Table>
44 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE PERIOD ENDED APRIL 30, 2006
<Table>
<Caption>
INTERNATIONAL
ALL VALUE ALPHA STRATEGY CORE EQUITY
FUND FUND FUND
INVESTMENT INCOME:
Dividends $ 22,535,990 $ -- $ 4,094,410
Interest and other 1,811,006 94,295 365,698
Foreign withholding tax (156,346) -- (325,660)
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 24,190,650 94,295 4,134,448
- ----------------------------------------------------------------------------------------------------
EXPENSES:
Management fees 7,350,652 106,972 1,820,876
12b-1 distribution plan-Class A 3,365,980 214,517 622,261
12b-1 distribution plan-Class B 1,290,762 256,909 137,616
12b-1 distribution plan-Class C 2,753,902 196,475 369,365
12b-1 distribution plan-Class P 36,945 -- 48
Shareholder servicing 2,232,309 225,356 451,915
Professional 39,161 13,287 23,875
Reports to shareholders 216,286 13,789 47,398
Fund administration 550,364 -- 97,113
Custody 66,521 3,340 206,031
Trustees' fees 65,672 4,436 8,189
Registration 197,813 35,598 77,526
Subsidy (See Note 3) -- -- 20,593
Other 19,124 2,186 4,476
- ----------------------------------------------------------------------------------------------------
Gross expenses 18,185,491 1,072,865 3,887,282
Expense reductions (See Note 7) (41,658) (2,675) (6,034)
Expenses assumed by Underlying Funds (See Note 3) -- (295,317) --
Management fee waived (See Note 3) -- (106,972) --
- ----------------------------------------------------------------------------------------------------
NET EXPENSES 18,143,833 667,901 3,881,248
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 6,046,817 (573,606) 253,200
- ----------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN:
Capital gains received from Underlying Funds -- 5,240,213 --
Net realized gain on investments
and foreign currency related transactions
(net of foreign capital gains tax of
$0, $0, and $112,114, respectively) 133,583,032 -- 32,227,708
Net change in unrealized appreciation
on investments and translation
of assets and liabilities denominated in
foreign currencies 248,670,675 46,379,199 70,201,300
====================================================================================================
NET REALIZED AND UNREALIZED GAIN 382,253,707 51,619,412 102,429,008
====================================================================================================
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $388,300,524 $51,045,806 $102,682,208
====================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 45
<Page>
STATEMENTS OF OPERATIONS (UNAUDITED)(CONCLUDED)
FOR THE PERIOD ENDED APRIL 30, 2006
<Table>
<Caption>
INTERNATIONAL VALUE
OPPORTUNITIES LARGE-CAP OPPORTUNITIES
FUND VALUE FUND FUND*
INVESTMENT INCOME:
Dividends $ 2,000,570 $ 474,502 $ 23,286
Interest and other 104,558 42,206 33,487
Foreign withholding tax (107,712) (3,681) --
- ---------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 1,997,416 513,027 56,773
- ---------------------------------------------------------------------------------------------
EXPENSES:
Management fees 956,214 91,043 28,589
12b-1 distribution plan-Class A 198,044 26,597 10,412
12b-1 distribution plan-Class B 164,212 10,332 1,532
12b-1 distribution plan-Class C 112,522 17,284 3,345
12b-1 distribution plan-Class P 323 30 18
Shareholder servicing 256,748 33,646 7,808
Professional 25,081 18,260 19,139
Reports to shareholders 15,010 15,186 10,882
Fund administration 50,998 9,104 1,525
Custody 59,121 12,478 8,770
Trustees' fees 5,406 984 29
Registration 36,281 39,898 2,221
Subsidy (See Note 3) 112,644 -- --
Other 1,990 595 2,692
- ---------------------------------------------------------------------------------------------
Gross expenses 1,994,594 275,437 96,962
Expense reductions (See Note 7) (4,581) (589) (83)
Expenses assumed by advisor (See Note 3) -- (84,041) (45,360)
- ---------------------------------------------------------------------------------------------
NET EXPENSES 1,990,013 190,807 51,519
- ---------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,403 322,220 5,254
- ---------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments
and foreign currency related transactions
(net of foreign capital gains tax of $13,962,
$0, and $0, respectively) 34,323,746 33,104 761,055
Net change in unrealized appreciation
on investments and translation
of assets and liabilities denominated in
foreign currencies 37,309,698 4,821,386 1,133,850
=============================================================================================
NET REALIZED AND UNREALIZED GAIN 71,633,444 4,854,490 1,894,905
=============================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $71,640,847 $5,176,710 $1,900,159
=============================================================================================
</Table>
* For the period December 20, 2005 (commencement of investment operations) to
April 30, 2006.
46 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE PERIOD ENDED APRIL 30, 2006
<Table>
<Caption>
ALPHA INTERNATIONAL
ALL VALUE STRATEGY CORE EQUITY
INCREASE IN NET ASSETS FUND FUND FUND
OPERATIONS:
Net investment income (loss) $ 6,046,817 $ (573,606) $ 253,200
Capital gains received from Underlying Funds -- 5,240,213 --
Net realized gain on investment and foreign
currency related transactions 133,583,032 -- 32,227,708
Net change in unrealized appreciation
on investments and translation of assets
and liabilities denominated in foreign
currencies 248,670,675 46,379,199 70,201,300
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 388,300,524 51,045,806 102,682,208
============================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (8,298,899) -- (1,151,991)
Class B -- -- (32,546)
Class C -- -- (83,865)
Class P (70,338) -- (45)
Class Y (20,815) -- (108,654)
Net realized gain
Class A (122,757,644) -- (7,353,570)
Class B (17,224,695) -- (568,199)
Class C (36,819,753) -- (1,470,008)
Class P (998,437) -- (453)
Class Y (182,163) -- (491,686)
- --------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (186,372,744) -- (11,261,017)
============================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 308,920,007 99,102,238 337,562,292
Reinvestment of distributions 165,079,477 -- 10,163,994
Cost of shares redeemed (223,790,155) (22,220,657) (24,252,745)
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS 250,209,329 76,881,581 323,473,541
============================================================================================
NET INCREASE IN NET ASSETS 452,137,109 127,927,387 414,894,732
============================================================================================
NET ASSETS:
Beginning of period 2,541,772,864 166,355,921 309,241,919
- --------------------------------------------------------------------------------------------
END OF PERIOD $2,993,909,973 $294,283,308 $724,136,651
============================================================================================
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME $ 2,786,353 $ (586,208) $ (200,897)
============================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 47
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)(CONCLUDED)
FOR THE PERIOD ENDED APRIL 30, 2006
<Table>
<Caption>
INTERNATIONAL VALUE
OPPORTUNITIES LARGE-CAP OPPORTUNITIES
INCREASE IN NET ASSETS FUND VALUE FUND FUND*
OPERATIONS:
Net investment income $ 7,403 $ 322,220 $ 5,254
Net realized gain on investment and foreign
currency related transactions 34,323,746 33,104 761,055
Net change in unrealized appreciation
on investments and translation of assets
and liabilities denominated in foreign
currencies 37,309,698 4,821,386 1,133,850
- ------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 71,640,847 5,176,710 1,900,159
==========================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A -- (129,227) --
Class B -- (6,435) --
Class C -- (13,656) --
Class P -- (101) --
Class Y -- (242,031) --
Net realized gain
Class A -- (330,265) --
Class B -- (45,427) --
Class C -- (75,035) --
Class P -- (304) --
Class Y -- (465,494) --
- ------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS -- (1,307,975) --
==========================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 77,984,957 9,633,993 25,660,595
Reinvestment of distributions -- 1,177,868 --
Cost of shares redeemed (18,541,062) (2,678,177) (851,310)
- ------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
CAPITAL SHARE TRANSACTIONS 59,443,895 8,133,684 24,809,285
==========================================================================================
NET INCREASE IN NET ASSETS 131,084,742 12,002,419 26,709,444
==========================================================================================
NET ASSETS:
Beginning of period 201,714,262 38,255,054 --
- ------------------------------------------------------------------------------------------
END OF PERIOD $332,799,004 $50,257,473 $26,709,444
==========================================================================================
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME $ (11,525) $ 222,825 $ 5,254
==========================================================================================
</Table>
* For the period December 20, 2005 (commencement of investment operations) to
April 30, 2006.
48 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
<Caption>
ALPHA INTERNATIONAL
INCREASE IN NET ASSETS ALL VALUE FUND STRATEGY FUND CORE EQUITY FUND
OPERATIONS:
Net investment income (loss) $ 9,918,516 $ (575,191) $ 1,153,063
Capital gains received from Underlying Funds -- 3,446,887 --
Net realized gain (loss) on investment and
foreign currency related transactions 179,115,531 (41,326) 10,807,813
Net change in unrealized appreciation
(depreciation) on investments and translation
of assets and liabilities denominated in
foreign currencies 9,681,086 24,800,109 10,523,691
- -------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 198,715,133 27,630,479 22,484,567
=======================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A (7,886,462) (454,589) (54,718)
Class B (231,659) -- --
Class C (543,840) -- --
Class P (33,338) -- --
Class Y (15,527) (3,899) (8,050)
Net realized gain
Class A (13,311,767) -- --
Class B (2,003,914) -- --
Class C (4,200,086) -- --
Class P (54,527) -- --
Class Y (18,323) -- --
- -------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (28,299,443) (458,488) (62,768)
=======================================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 819,312,378 31,360,997 230,154,419
Reinvestment of distributions 24,894,762 429,563 55,743
Cost of shares redeemed (322,715,700) (32,433,304) (17,203,797)
- -------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 521,491,440 (642,744) 213,006,365
=======================================================================================================
NET INCREASE IN NET ASSETS 691,907,130 26,529,247 235,428,164
=======================================================================================================
NET ASSETS:
Beginning of year 1,849,865,734 139,826,674 73,813,755
- -------------------------------------------------------------------------------------------------------
END OF YEAR $2,541,772,864 $166,355,921 $309,241,919
=======================================================================================================
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME $ 5,129,588 $ (12,602) $ 923,004
=======================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 49
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
<Caption>
INTERNATIONAL
OPPORTUNITIES LARGE-CAP
INCREASE IN NET ASSETS FUND VALUE FUND
OPERATIONS:
Net investment income (loss) $ (255,976) $ 341,914
Net realized gain (loss) on investment and foreign
currency related transactions 28,362,604 798,733
Net change in unrealized appreciation (depreciation)
on investments and translation of assets and liabilities
denominated in foreign currencies 10,816,111 (5,834)
- ------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 38,922,739 1,134,813
==========================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A -- (89,997)
Class B -- (9,409)
Class C -- (11,671)
Class P -- (89)
Class Y (39,769) (24,772)
Net realized gain
Class A -- (134,641)
Class B -- (20,541)
Class C -- (21,775)
Class P -- (161)
Class Y -- (28,334)
- ------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (39,769) (341,390)
==========================================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 36,796,502 28,634,282
Reinvestment of distributions 39,769 295,506
Cost of shares redeemed (33,191,474) (6,560,508)
- ------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 3,644,797 22,369,280
==========================================================================================
NET INCREASE IN NET ASSETS 42,527,767 23,162,703
==========================================================================================
NET ASSETS:
Beginning of year 159,186,495 15,092,351
- ------------------------------------------------------------------------------------------
END OF YEAR $201,714,262 $38,255,054
==========================================================================================
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME $ (18,928) $ 292,055
==========================================================================================
</Table>
50 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS
ALL VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 -------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.13 $11.18 $ 9.93 $ 8.22 $ 9.83 $11.53
====== ====== ====== ====== ====== ======
Investment operations:
Net investment income(a) .04 .07 .06 .02 .01 .04
Net realized and unrealized gain (loss) 1.73 1.06 1.30 1.87 (.67) (.83)
------ ------ ------ ------ ------ ------
Total from investment operations 1.77 1.13 1.36 1.89 (.66) (.79)
------ ------ ------ ------ ------ ------
Distributions to shareholders from:
Net investment income (.06) (.07) (.01) -- (.02) (.03)
Net realized gain (.84) (.11) (.10) (.18) (.93) (.88)
------ ------ ------ ------ ------ ------
Total distributions (.90) (.18) (.11) (.18) (.95) (.91)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.00 $12.13 $11.18 $ 9.93 $ 8.22 $ 9.83
====== ====== ====== ====== ====== ======
Total Return(b) 15.25%(d) 10.19% 13.80% 23.46% (7.95)% (7.26)%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions .56%(d) 1.17% 1.24% 1.38% 1.42% 1.42%
Expenses, excluding expense reductions .56%(d) 1.17% 1.24% 1.38% 1.42% 1.43%
Net investment income .31%(d) .62% .53% .25% .13% .40%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $2,097,600 $1,771,120 $1,268,285 $452,098 $189,698 $166,406
Portfolio turnover rate 30.13%(d) 52.24% 21.92% 36.39% 79.39% 103.11%
===========================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 51
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALL VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $11.74 $10.84 $ 9.69 $ 8.07 $ 9.70 $11.42
====== ====== ====== ====== ====== ======
Investment operations:
Net investment loss(a) --(e) --(e) (.01) (.03) (.04) (.03)
Net realized and unrealized gain (loss) 1.67 1.02 1.26 1.83 (.66) (.81)
------ ------ ------ ------ ------ ------
Total from investment operations 1.67 1.02 1.25 1.80 (.70) (.84)
------ ------ ------ ------ ------ ------
Distributions to shareholders from:
Net investment income -- (.01) -- -- -- --(e)
Net realized gain (.84) (.11) (.10) (.18) (.93) (.88)
------ ------ ------ ------ ------ ------
Total distributions (.84) (.12) (.10) (.18) (.93) (.88)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $12.57 $11.74 $10.84 $ 9.69 $ 8.07 $ 9.70
====== ====== ====== ====== ====== ======
Total Return(b) 14.86%(d) 9.52% 12.98% 22.77% (8.51)% (7.86)%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions .88%(d) 1.81% 1.87% 2.00% 2.03% 2.03%
Expenses, excluding expense reductions .88%(d) 1.81% 1.87% 2.00% 2.03% 2.04%
Net investment loss (.01)%(d) (.01)% (.10)% (.37)% (.48)% (.27)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000) $277,002 $240,977 $185,775 $100,272 $47,423 $39,188
Portfolio turnover rate 30.13%(d) 52.24% 21.92% 36.39% 79.39% 103.11%
==================================================================================================
</Table>
52 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALL VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $11.71 $10.81 $ 9.66 $ 8.05 $ 9.67 $11.38
====== ====== ====== ====== ====== ======
Investment operations:
Net investment loss(a) --(e) --(e) (.01) (.03) (.03) (.01)
Net realized and unrealized gain (loss) 1.66 1.02 1.26 1.82 (.66) (.82)
------ ------ ------ ------ ------ ------
Total from investment operations 1.66 1.02 1.25 1.79 (.69) (.83)
------ ------ ------ ------ ------ ------
Distributions to shareholders from:
Net investment income -- (.01) -- -- -- --(e)
Net realized gain (.84) (.11) (.10) (.18) (.93) (.88)
------ ------ ------ ------ ------ ------
Total distributions (.84) (.12) (.10) (.18) (.93) (.88)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $12.53 $11.71 $10.81 $ 9.66 $ 8.05 $ 9.67
====== ====== ====== ====== ====== ======
Total Return(b) 14.82%(d) 9.56% 13.02% 22.70% (8.42)% (7.70)%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions .88%(d) 1.81% 1.87% 2.00% 1.89% 1.98%
Expenses, excluding expense reductions .88%(d) 1.81% 1.87% 2.00% 1.89% 1.99%
Net investment loss (.01)%(d) (.01)% (.10)% (.37)% (.34)% (.14)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $596,178 $513,752 $389,161 $200,025 $112,052 $112,299
Portfolio turnover rate 30.13%(d) 52.24% 21.92% 36.39% 79.39% 103.11%
=======================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 53
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALL VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31 8/15/2001(c)
4/30/2006 ---------------------------------- TO
(UNAUDITED) 2005 2004 2003 2002 10/31/2001
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.05 $11.12 $ 9.88 $ 8.19 $ 9.83 $10.85
====== ====== ====== ====== ====== ======
Investment operations:
Net investment income(a) .03 .06 .05 .01 --(e) --(e)
Net realized and unrealized
gain (loss) 1.72 1.05 1.30 1.86 (.66) (1.02)
------ ------ ------ ------ ------ ------
Total from investment
operations 1.75 1.11 1.35 1.87 (.66) (1.02)
------ ------ ------ ------ ------ ------
Distributions to shareholders from:
Net investment income (.06) (.07) (.01) -- (.05) --
Net realized gain (.84) (.11) (.10) (.18) (.93) --
------ ------ ------ ------ ------ ------
Total distributions (.90) (.18) (.11) (.18) (.98) --
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $12.90 $12.05 $11.12 $ 9.88 $ 8.19 $ 9.83
====== ====== ====== ====== ====== ======
Total Return(b) 15.20%(d) 10.09% 13.71% 23.30% (8.04)% (9.40)%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense
reductions .61%(d) 1.26% 1.32%+ 1.45% 1.48% .31%(d)
Expenses, excluding expense
reductions .61%(d) 1.26% 1.32%+ 1.45% 1.48% .31%(d)
Net investment income (loss) .25%(d) .47% .45%+ .18% .07% (.01)%(d)
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31 8/15/2001(c)
4/30/2006 ---------------------------------- TO
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 10/31/2001
- -----------------------------------------------------------------------------------------------------
Net assets, end of period (000) $19,652 $13,279 $4,895 $1,280 $ 368 $ 1
Portfolio turnover rate 30.13%(d) 52.24% 21.92% 36.39% 79.39% 103.11%
=====================================================================================================
</Table>
54 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
ALL VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 3/31/2003(c)
4/30/2006 --------------- TO
(UNAUDITED) 2005 2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.19 $11.22 $ 9.95 $ 7.83
====== ====== ====== ======
Investment operations:
Net investment income(a) .06 .12 .10 .03
Net realized and unrealized gain 1.74 1.06 1.30 2.09
------ ------ ------ ------
Total from investment operations 1.80 1.18 1.40 2.12
------ ------ ------ ------
Distributions to shareholders from:
Net investment income (.10) (.10) (.03) --
Net realized gain (.84) (.11) (.10) --
------ ------ ------ ------
Total distributions (.94) (.21) (.13) --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.05 $12.19 $11.22 $ 9.95
====== ====== ====== ======
Total Return(b) 15.46%(d) 10.61% 14.18% 27.08%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense
reductions .39%(d) .81% .87%+ 1.00%(d)+
Expenses, excluding expense
reductions .39%(d) .81% .87%+ 1.00%(d)+
Net investment income .48%(d) .97% .90%+ .63%(d)+
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 3/31/2003(c)
4/30/2006 --------------- TO
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 10/31/2003
- ---------------------------------------------------------------------------------
Net assets, end of period (000) $3,478 $2,645 $1,750 $ 13
Portfolio turnover rate 30.13%(d) 52.24% 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 represents less than $.01.
SEE NOTES TO FINANCIAL STATEMENTS. 55
<Page>
FINANCIAL HIGHLIGHTS
ALPHA STRATEGY FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 -------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF
PERIOD $19.11 $15.96 $14.38 $10.62 $12.96 $ 17.46
====== ====== ====== ====== ====== =======
Investment operations:
Net investment income (loss)(b) (.03) (.01) .10 .02 (.05) (.05)
Net realized and unrealized gain
(loss) 5.22 3.26 1.48 3.83 (1.70) (3.82)
------ ------ ------ ------ ------ -------
Total from investment
operations 5.19 3.25 1.58 3.85 (1.75) (3.87)
------ ------ ------ ------ ------ -------
Distributions to shareholders from:
Net investment income -- (.10) -- -- -- (.30)
Net realized gain -- -- -- (.09) (.59) (.33)
------ ------ ------ ------ ------ -------
Total distributions -- (.10) -- (.09) (.59) (.63)
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $24.30 $19.11 $15.96 $14.38 $10.62 $ 12.96
====== ====== ====== ====== ====== =======
Total Return(c) 27.16%(d) 20.46% 10.99% 36.59% (14.41)% (22.67)%
RATIOS TO AVERAGE NET ASSETS:*
Expenses, including expense
reductions and expenses
assumed and waived .17%(d) .35% .36% .39% .37% .36%
Expenses, excluding expense
reductions and expenses
assumed and waived .36%(d) .83% 1.03% 1.45% 1.37% 1.34%
Net investment income (loss) (.13)%(d) (.08)% .63% .13% (.34)% (.32)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ------------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000) $179,595 $90,641 $69,957 $62,383 $53,121 $70,785
Portfolio turnover rate .00%(d) 6.94% 2.59% 2.47% 1.75% 15.34%
==================================================================================================
</Table>
56 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALPHA STRATEGY FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE,
BEGINNING OF PERIOD $18.51 $15.46 $14.02 $10.43 $12.81 $ 17.27
====== ====== ====== ====== ====== =======
Investment operations:
Net investment income (loss)(b) (.10) (.12) .01 (.06) (.12) (.14)
Net realized and
unrealized gain (loss) 5.05 3.17 1.43 3.74 (1.67) (3.79)
------ ------ ------ ------ ------ -------
Total from investment
operations 4.95 3.05 1.44 3.68 (1.79) (3.93)
------ ------ ------ ------ ------ -------
Distributions to shareholders from:
Net investment income -- -- -- -- -- (.20)
Net realized gain -- -- -- (.09) (.59) (.33)
------ ------ ------ ------ ------ -------
Total distributions -- -- -- (.09) (.59) (.53)
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $23.46 $18.51 $15.46 $14.02 $10.43 $ 12.81
====== ====== ====== ====== ====== =======
Total Return(c) 26.74%(d) 19.73% 10.27% 35.62% (14.91)% (23.21)%
RATIOS TO AVERAGE NET ASSETS:*
Expenses, including expense
reductions and expenses
assumed and waived .49%(d) 1.00% 1.01% 1.04% 1.00% 1.00%
Expenses, excluding expense
reductions and expenses
assumed and waived .68%(d) 1.47% 1.68% 2.10% 2.00% 1.98%
Net investment income (loss) (.45)%(d) (.71)% .03% (.52)% (.97)% (.96)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 -----------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000) $57,982 $45,179 $41,771 $42,342 $35,661 $50,377
Portfolio turnover rate .00%(d) 6.94% 2.59% 2.47% 1.75% 15.34%
==================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 57
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
ALPHA STRATEGY FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE,
BEGINNING OF PERIOD $18.51 $15.46 $14.02 $10.43 $12.80 $ 17.25
====== ====== ====== ====== ====== =======
Investment operations:
Net investment income (loss)(b) (.10) (.12) .01 (.06) (.10) (.14)
Net realized and unrealized gain (loss) 5.06 3.17 1.43 3.74 (1.68) (3.78)
------ ------ ------ ------ ------ -------
Total from investment operations 4.96 3.05 1.44 3.68 (1.78) (3.92)
------ ------ ------ ------ ------ -------
Distributions to shareholders from:
Net investment income -- -- -- -- -- (.20)
Net realized gain -- -- -- (.09) (.59) (.33)
------ ------ ------ ------ ------ -------
Total distributions -- -- -- (.09) (.59) (.53)
------ ------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $23.47 $18.51 $15.46 $14.02 $10.43 $ 12.80
====== ====== ====== ====== ====== =======
Total Return(c) 26.80%(d) 19.73% 10.27% 35.62% (14.77)% (23.25)%
RATIOS TO AVERAGE NET ASSETS:*
Expenses, including expense reductions and expenses
assumed and waived .49%(d) 1.00% 1.01% 1.04% .89% 1.00%
Expenses, excluding expense reductions and expenses
assumed and waived .68%(d) 1.47% 1.68% 2.10% 1.89% 1.98%
Net investment income (loss) (.45)%(d) (.71)% .03% (.52)% (.86)% (.97)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 -----------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000) $55,780 $29,998 $27,701 $28,970 $24,690 $35,395
Portfolio turnover rate .00%(d) 6.94% 2.59% 2.47% 1.75% 15.34%
==================================================================================================
</Table>
58 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
ALPHA STRATEGY FUND
<Table>
<Caption>
SIX MONTHS
ENDED 10/20/2004(a)
4/30/2006 YEAR ENDED TO
(UNAUDITED) 10/31/2005 10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $19.12 $15.96 $15.65
====== ====== ======
Investment operations:
Net investment income(b) .01 .05 --(e)
Net realized and unrealized gain 5.23 3.27 .31
------ ------ ------
Total from investment operations 5.24 3.32 .31
------ ------ ------
Distributions to shareholders from net investment income -- (.16) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $24.36 $19.12 $15.96
====== ====== ======
Total Return(c) 27.41%(d) 20.91% 2.18%(d)
RATIOS TO AVERAGE NET ASSETS:*
Expenses, including expense reductions and expenses
assumed and waived .00%(d) .00% .00%(d)
Expenses, excluding expense reductions and expenses
assumed and waived .19%(d) .48% .00%(d)
Net investment income .04%(d) .27% .00%(d)(f)
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED 10/20/2004(a)
4/30/2006 YEAR ENDED TO
SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2005 10/31/2004
- -----------------------------------------------------------------------------
Net assets, end of period (000) $926 $ 539 $ 398
Portfolio turnover rate .00%(d) 6.94% 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 represents less than $.01.
(f) Amount represents less than .01%.
SEE NOTES TO FINANCIAL STATEMENTS. 59
<Page>
FINANCIAL HIGHLIGHTS
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
(UNAUDITED) 10/31/2005 10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.37 $10.42 $10.00
====== ====== ======
Unrealized appreciation on investments .15
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $10.15
======
Investment operations:
Net investment income(b) .01 .09 .04
Net realized and unrealized gain 2.97 1.87 .23
------ ------ ------
Total from investment operations 2.98 1.96 .27
------ ------ ------
Distributions to shareholders from:
Net investment income (.05) (.01) --
Net realized gain (.34) -- --
------ ------ ------
Total distributions (.39) (.01) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.96 $12.37 $10.42
====== ====== ======
Total Return(c) 1.50%(d)(e)
Total Return(c) 24.61%(d) 18.80% 2.66%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .73%(d) 1.66% 1.50%(d)
Expenses, excluding expense reductions and expenses assumed .73%(d) 1.66% 2.13%(d)
Net investment income .10%(d) .79% .40%(d)
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2005 10/31/2004
- --------------------------------------------------------------------------
Net assets, end of period (000) $520,511 $235,563 $58,484
Portfolio turnover rate 54.92%(d) 100.87% 142.16%
==========================================================================
</Table>
60 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
(UNAUDITED) 10/31/2005 10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.24 $10.36 $10.00
====== ====== ======
Unrealized appreciation on investments .15
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $10.15
======
Investment operations:
Net investment income (loss)(b) (.03) .03 (.01)
Net realized and unrealized gain 2.93 1.85 .22
------ ------ ------
Total from investment operations 2.90 1.88 .21
------ ------ ------
Distributions to shareholders from:
Net investment income (.02) -- --
Net realized gain (.34) -- --
------ ------ ------
Total distributions (.36) -- --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.78 $12.24 $10.36
====== ====== ======
Total Return(c) 1.50%(d)(e)
Total Return(c) 24.13%(d) 18.15% 2.07%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed 1.05%(d) 2.30% 2.04%(d)
Expenses, excluding expense reductions and expenses assumed 1.05%(d) 2.30% 2.67%(d)
Net investment income (loss) (.21)%(d) .22% (.14)%(d)
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2005 10/31/2004
- --------------------------------------------------------------------------
Net assets, end of period (000) $41,596 $17,472 $ 2,937
Portfolio turnover rate 54.92%(d) 100.87% 142.16%
==========================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 61
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
(UNAUDITED) 10/31/2005 10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.24 $10.37 $10.00
====== ====== ======
Unrealized appreciation on investments .15
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $10.15
======
Investment operations:
Net investment income (loss)(b) (.03) .02 (.01)
Net realized and unrealized gain 2.93 1.85 .23
------ ------ ------
Total from investment operations 2.90 1.87 .22
------ ------ ------
Distributions to shareholders from:
Net investment income (.02) -- --
Net realized gain (.34) -- --
------ ------ ------
Total distributions (.36) -- --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.78 $12.24 $10.37
====== ====== ======
Total Return(c) 1.50%(d)(e)
Total Return(c) 24.13%(d) 18.03% 2.17%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed 1.05%(d) 2.30% 2.04%(d)
Expenses, excluding expense reductions and expenses assumed 1.05%(d) 2.30% 2.67%(d)
Net investment income (loss) (.20)%(d) .19% (.14)%(d)
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2005 10/31/2004
- --------------------------------------------------------------------------
Net assets, end of period (000) $114,480 $44,240 $ 9,291
Portfolio turnover rate 54.92%(d) 100.87% 142.16%
==========================================================================
</Table>
62 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
(UNAUDITED) 10/31/2005 10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.36 $10.41 $10.00
====== ====== ======
Unrealized appreciation on investments .15
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $10.15
======
Investment operations:
Net investment income(b) .02 .07 .04
Net realized and unrealized gain 2.94 1.88 .22
------ ------ ------
Total from investment operations 2.96 1.95 .26
------ ------ ------
Distributions to shareholders from:
Net investment income (.03) -- --
Net realized gain (.34) -- --
------ ------ ------
Total distributions (.37) -- --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $14.95 $12.36 $10.41
====== ====== ======
Total Return(c) 1.50%(d)(e)
Total Return(c) 24.44%(d) 18.73% 2.56%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .77%(d) 1.71% 1.55%(d)+
Expenses, excluding expense reductions and expenses assumed .78%(d) 1.71% 2.18%(d)+
Net investment income .12%(d) .63% .35%(d)+
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2005 10/31/2004
- -----------------------------------------------------------------------------
Net assets, end of period (000) $ 54 $ 16 $ 11
Portfolio turnover rate 54.92%(d) 100.87% 142.16%
=============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 63
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
INTERNATIONAL CORE EQUITY FUND
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
(UNAUDITED) 10/31/2005 10/31/2004
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.43 $10.45 $10.00
====== ====== ======
Unrealized appreciation on investments .15
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $10.15
======
Investment operations:
Net investment income(b) .05 .12 .08
Net realized and unrealized gain 2.97 1.89 .22
------ ------ ------
Total from investment operations 3.02 2.01 .30
------ ------ ------
Distributions to shareholders from:
Net investment income (.08) (.03) --
Net realized gain (.34) -- --
------ ------ ------
Total distributions (.42) (.03) --
------ ------ ------
NET ASSET VALUE, END OF PERIOD $15.03 $12.43 $10.45
====== ====== ======
Total Return(c) 1.50%(d)(e)
Total Return(c) 24.77%(d) 19.23% 2.96%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .56%(d) 1.30% 1.16%(d)
Expenses, excluding expense reductions and expenses assumed .56%(d) 1.30% 1.79%(d)
Net investment income .33%(d) 1.01% .74%(d)
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED 12/15/2003(a)
4/30/2006 YEAR ENDED TO
SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2005 10/31/2004
- -----------------------------------------------------------------------------
Net assets, end of period (000) $47,496 $11,952 $ 3,091
Portfolio turnover rate 54.92%(d) 100.87% 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 December 15, 2003 through December 31, 2003.
(f) Total return for the period December 31, 2003 through October 31, 2004.
64 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $11.97 $ 9.61 $ 8.41 $ 6.29 $ 7.78 $ 14.48
====== ====== ====== ====== ======= =======
Investment operations:
Net investment income (loss)(a) --(c) (.01) .02 .08 .03 (.06)
Net realized and unrealized gain (loss) 3.90 2.37 1.33 2.09 (1.52) (6.56)
------ ------ ------ ------ ------- -------
Total from investment operations 3.90 2.36 1.35 2.17 (1.49) (6.62)
------ ------ ------ ------ ------- -------
Distributions to shareholders from:
Net investment income -- -- (.15) (.05) -- --
Net realized gain -- -- -- -- -- (.08)
------ ------ ------ ------ ------- -------
Total distributions -- -- (.15) (.05) -- (.08)
------ ------ ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $15.87 $11.97 $ 9.61 $ 8.41 $ 6.29 $ 7.78
====== ====== ====== ====== ======= =======
Total Return(b) 32.58%(d) 24.56% 16.31% 35.07% (19.16)% (45.92)%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions .76%(d) 1.74% 1.83% 2.11% 1.89% 2.07%
Expenses, excluding expense reductions .76%(d) 1.74% 1.83% 2.11% 1.89% 2.08%
Net investment income (loss) .00%(d)(e) (.11)% .26% 1.11% .50% (.55)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 -----------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000) $144,677 $89,402 $67,314 $55,230 $44,975 $71,591
Portfolio turnover rate 41.92%(d) 78.65% 75.56% 72.36% 82.38% 65.26%
==================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 65
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $11.59 $ 9.37 $ 8.20 $ 6.13 $ 7.65 $ 14.31
====== ====== ====== ====== ======= =======
Investment operations:
Net investment income (loss)(a) (.05) (.08) (.04) .03 (.02) (.11)
Net realized and unrealized gain (loss) 3.78 2.30 1.30 2.05 (1.50) (6.47)
------ ------ ------ ------ ------- -------
Total from investment operations 3.73 2.22 1.26 2.08 (1.52) (6.58)
------ ------ ------ ------ ------- -------
Distributions to shareholders from:
Net investment income -- -- (.09) (.01) -- --
Net realized gain -- -- -- -- -- (.08)
------ ------ ------ ------ ------- -------
Total distributions -- -- (.09) (.01) -- (.08)
------ ------ ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $15.32 $11.59 $ 9.37 $ 8.20 $ 6.13 $ 7.65
====== ====== ====== ====== ======= =======
Total Return(b) 32.18%(d) 23.69% 15.61% 33.89% (19.87)% (46.19)%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions 1.08%(d) 2.38% 2.48% 2.73% 2.69% 2.59%
Expenses, excluding expense reductions 1.08%(d) 2.39% 2.48% 2.73% 2.69% 2.60%
Net investment income (loss) (.34)%(d) (.76)% (.39)% .49% (.30)% (1.07)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 -----------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000) $39,807 $27,115 $21,962 $17,978 $13,174 $17,743
Portfolio turnover rate 41.92%(d) 78.65% 75.56% 72.36% 82.38% 65.26%
===============================================================================================
</Table>
66 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $11.54 $ 9.32 $ 8.19 $ 6.12 $ 7.61 $14.30
====== ====== ====== ====== ======= =======
Investment operations:
Net investment income (loss)(a) (.04) (.08) (.04) .07 --(c) (.13)
Net realized and unrealized gain (loss) 3.74 2.30 1.30 2.04 (1.49) (6.48)
------ ------ ------ ------ ------- -------
Total from investment operations 3.70 2.22 1.26 2.11 (1.49) (6.61)
------ ------ ------ ------ ------- -------
Distributions to shareholders from:
Net investment income -- -- (.13) (.04) -- --
Net realized gain -- -- -- -- -- (.08)
------ ------ ------ ------ ------- -------
Total distributions -- -- (.13) (.04) -- (.08)
------ ------ ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $15.24 $11.54 $ 9.32 $ 8.19 $ 6.12 $ 7.61
====== ====== ====== ====== ======= =======
Total Return(b) 32.06%(d) 23.82% 15.61% 34.67% (19.58)% (46.43)%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions 1.08%(d) 2.38% 2.48% 2.73% 2.36% 2.83%
Expenses, excluding expense reductions 1.08%(d) 2.39% 2.48% 2.73% 2.36% 2.84%
Net investment income (loss) (.31)%(d) (.75)% (.39)% .99% .03% (1.32)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $29,036 $17,621 $12,766 $10,323 $7,823 $11,399
Portfolio turnover rate 41.92%(d) 78.65% 75.56% 72.36% 82.38% 65.26%
=================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 67
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE,
BEGINNING OF PERIOD $12.11 $ 9.71 $ 8.47 $ 6.31 $ 7.82 $ 14.51
====== ====== ====== ====== ======= =======
Investment operations:
Net investment income (loss)(a) .13 (.01) .01 .10 .03 (.06)
Net realized and unrealized gain (loss) 3.81 2.41 1.35 2.10 (1.54) (6.55)
------ ------ ------ ------ ------- -------
Total from investment operations 3.94 2.40 1.36 2.20 (1.51) (6.61)
------ ------ ------ ------ ------- -------
Distributions to shareholders from:
Net investment income -- -- (.12) (.04) -- --
Net realized gain -- -- -- -- -- (.08)
------ ------ ------ ------ ------- -------
Total distributions -- -- (.12) (.04) -- (.08)
------ ------ ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $16.05 $12.11 $ 9.71 $ 8.47 $ 6.31 $ 7.82
====== ====== ====== ====== ======= =======
Total Return(b) 32.54%(d) 24.72% 16.37% 35.17% (19.31)% (45.75)%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions .78%(d) 1.69% 1.93%+ 2.18%+ 2.14% 2.04%
Expenses, excluding expense reductions .78%(d) 1.69% 1.93%+ 2.18%+ 2.14% 2.05%
Net investment income (loss) .85%(d) (.06)% .16%+ 1.00%+ .25% (.55)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $ 910 $ 3 $ 1 $ 1 $ 1 $ 1
Portfolio turnover rate 41.92%(d) 78.65% 75.56% 72.36% 82.38% 65.26%
=================================================================================================
</Table>
68 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.21 $ 9.77 $ 8.53 $ 6.39 $ 7.90 $ 14.61
====== ====== ====== ====== ======= =======
Investment operations:
Net investment income (loss)(a) .03 .02 .06 .10 .06 (.01)
Net realized and unrealized gain (loss) 3.97 2.43 1.34 2.12 (1.57) (6.62)
------ ------ ------ ------ ------- -------
Total from investment operations 4.00 2.45 1.40 2.22 (1.51) (6.63)
------ ------ ------ ------ ------- -------
Distributions to shareholders from:
Net investment income -- (.01) (.16) (.08) -- --
Net realized gain -- -- -- -- -- (.08)
------ ------ ------ ------ ------- -------
Total distributions -- (.01) (.16) (.08) -- (.08)
------ ------ ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $16.21 $12.21 $ 9.77 $ 8.53 $ 6.39 $ 7.90
====== ====== ====== ====== ======= =======
Total Return(b) 32.76%(d) 25.06% 16.73% 35.22% (19.11)% (45.58)%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions .59%(d) 1.38% 1.48% 1.74% 1.69% 1.59%
Expenses, excluding expense reductions .59%(d) 1.39% 1.48% 1.74% 1.69% 1.60%
Net investment income (loss) .21%(d) .22% .61% 1.47% .70% (.06)%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 -----------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) $118,368 $67,574 $57,143 $53,237 $45,748 $60,227
Portfolio turnover rate 41.92%(d) 78.65% 75.56% 72.36% 82.38% 65.26%
=================================================================================================================
</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) Amount represents less than $.01.
(d) Not annualized.
(e) Amount represents less than .01%.
SEE NOTES TO FINANCIAL STATEMENTS. 69
<Page>
FINANCIAL HIGHLIGHTS
LARGE-CAP VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ---------------- TO
(UNAUDITED) 2005 2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.38 $11.80 $10.73 $10.00
====== ====== ====== ======
Unrealized depreciation on investments (.10)
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 9.90
Investment operations:
Net investment income(b) .08 .14 .09 .03
Net realized and unrealized gain 1.40 .71 1.05 .80
------ ------ ------ ------
Total from investment operations 1.48 .85 1.14 .83
------ ------ ------ ------
Distributions to shareholders from:
Net investment income (.12) (.11) (.07) --
Net realized gain (.30) (.16) -- --
------ ------ ------ ------
Total distributions (.42) (.27) (.07) --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.44 $12.38 $11.80 $10.73
====== ====== ====== ======
Total Return(c) (1.00)%(d)(e)
Total Return(c) 12.14%(d) 7.23% 10.74% 8.38%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and
expenses assumed .47%(d) .95% .95% .33%(d)+
Expenses, excluding expense reductions and
expenses assumed .65%(d) 1.50% 2.59% 7.12%(d)+
Net investment income .65%(d) 1.14% .75% .27%(d)+
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ----------------- TO
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 10/31/2003
- -------------------------------------------------------------------------------------------------
Net assets, end of period (000) $16,610 $13,763 $10,102 $2,271
Portfolio turnover rate 19.64%(d) 54.12% 30.53% 8.87%
=================================================================================================
</Table>
70 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ---------------- TO
(UNAUDITED) 2005 2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.19 $11.67 $10.68 $10.00
====== ====== ====== ======
Unrealized depreciation on investments (.11)
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 9.89
======
Investment operations:
Net investment income(b) .04 .06 .01 -(g)
Net realized and unrealized gain 1.38 .69 1.05 .79
------ ------ ------ ------
Total from investment operations 1.42 .75 1.06 .79
------ ------ ------ ------
Distributions to shareholders from:
Net investment income (.04) (.07) (.07) --
Net realized gain (.30) (.16) -- --
------ ------ ------ ------
Total distributions (.34) (.23) (.07) --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.27 $12.19 $11.67 $10.68
====== ====== ====== ======
Total Return(c) (1.10)%(d)(e)
Total Return(c) 11.83%(d) 6.49% 10.02% 7.99%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and
expenses assumed .79%(d) 1.60% 1.60% .56%(d)+
Expenses, excluding expense reductions and
expenses assumed .98%(d) 2.11% 3.24% 7.35%(d)+
Net investment income .32%(d) .49% .10% .04%(d)+
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ---------------- TO
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 10/31/2003
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000) $2,359 $1,749 $1,445 $111
Portfolio turnover rate 19.64%(d) 54.12% 30.53% 8.87%
===============================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 71
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ------------------ TO
(UNAUDITED) 2005 2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.20 $11.69 $10.69 $10.00
====== ====== ====== ======
Unrealized depreciation on investments (.11)
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 9.89
======
Investment operations:
Net investment income(b) .04 .06 .01 --(g)
Net realized and unrealized gain 1.37 .70 1.06 .80
------ ------ ------ ------
Total from investment operations 1.41 .76 1.07 .80
------ ------ ------ ------
Distributions to shareholders from:
Net investment income (.05) (.09) (.07) --
Net realized gain (.30) (.16) -- --
------ ------ ------ ------
Total distributions (.35) (.25) (.07) --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.26 $12.20 $11.69 $10.69
====== ====== ====== ======
Total Return(c) (1.10)%(d)(e)
Total Return(c) 11.76%(d) 6.50% 10.07% 8.09%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and
expenses assumed .79%(d) 1.60% 1.60% .56%(d)+
Expenses, excluding expense reductions and
expenses assumed .98%(d) 2.18% 3.24% 7.35%(d)+
Net investment income .32%(d) .46% .10% .04%(d)+
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ---------------- TO
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 10/31/2003
- ----------------------------------------------------------------------------------
Net assets, end of period (000) $3,786 $3,155 $1,490 $ 148
Portfolio turnover rate 19.64%(d) 54.12% 30.53% 8.87%
==================================================================================
</Table>
72 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
LARGE-CAP VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ------------------ TO
(UNAUDITED) 2005 2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.38 $11.80 $10.73 $10.00
====== ====== ====== ======
Unrealized depreciation on investments (.10)
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 9.90
======
Investment operations:
Net investment income(b) .08 .13 .07 .02
Net realized and unrealized gain 1.39 .70 1.07 .81
------ ------ ------ ------
Total from investment operations 1.47 .83 1.14 .83
------ ------ ------ ------
Distributions to shareholders from:
Net investment income (.10) (.09) (.07) --
Net realized gain (.30) (.16) -- --
------ ------ ------ ------
Total distributions (.40) (.25) (.07) --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.45 $12.38 $11.80 $10.73
====== ====== ====== ======
Total Return(c) (1.00)%(d)(e)
Total Return(c) 12.07%(d) 7.07% 10.65% 8.38%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and
expenses assumed .52%(d) 1.05% 1.05% .37%(d)+
Expenses, excluding expense reductions and
expenses assumed .70%(d) 1.52% 2.69% 7.16%(d)+
Net investment income .60%(d) 1.06% .65% .23%(d)+
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 --------------- TO
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 10/31/2003
- ---------------------------------------------------------------------------------
Net assets, end of period (000) $ 14 $ 13 $ 12 $ 11
Portfolio turnover rate 19.64%(d) 54.12% 30.53% 8.87%
=================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 73
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
LARGE-CAP VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ------------------ TO
(UNAUDITED) 2005 2004 10/31/2003
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $12.44 $11.85 $10.75 $10.00
====== ====== ====== ======
Unrealized depreciation on investments (.10)
------
NET ASSET VALUE ON SEC EFFECTIVE DATE $ 9.90
======
Investment operations:
Net investment income(b) .11 .17 .13 .04
Net realized and unrealized gain 1.39 .72 1.05 .81
------ ------ ------ ------
Total from investment operations 1.50 .89 1.18 .85
------ ------ ------ ------
Distributions to shareholders from:
Net investment income (.15) (.14) (.08) --
Net realized gain (.30) (.16) -- --
------ ------ ------ ------
Total distributions (.45) (.30) (.08) --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.49 $12.44 $11.85 $10.75
====== ====== ====== ======
Total Return(c) (1.00)%(d)(e)
Total Return(c) 12.33%(d) 7.58% 11.09% 8.59%(d)(f)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and
expenses assumed .30%(d) .60% .60% .21%(d)+
Expenses, excluding expense reductions and
expenses assumed .48%(d) 1.18% 2.24% 7.00%(d)+
Net investment income .82%(d) 1.37% 1.10% .39%(d)+
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 6/23/2003(a)
4/30/2006 ---------------- TO
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 10/31/2003
- ----------------------------------------------------------------------------------
Net assets, end of period (000) $27,488 $19,576 $2,043 $ 11
Portfolio turnover rate 19.64%(d) 54.12% 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 June 23, 2003 through June 30, 2003.
(f) Total return for the period June 30, 2003 through October 31, 2003.
(g) Amount represents less than $.01.
74 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS
VALUE OPPORTUNITIES FUND
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment operations:
Net investment income(a) .01
Net realized and unrealized gain 1.88
------
Total from investment operations 1.89
------
NET ASSET VALUE, END OF PERIOD $11.89
------
Total Return(b) 18.90%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .46%(d)
Expenses, excluding expense reductions and expenses assumed .88%(d)
Net investment income .07%(d)
</Table>
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
SUPPLEMENTAL DATA: (UNAUDITED)
- --------------------------------------------------------------------------------
Net assets, end of period (000) $20,408
Portfolio turnover rate 102.28%(d)
================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 75
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
VALUE OPPORTUNITIES FUND
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE (CLASS B SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------
Investment operations:
Net investment loss(a) (.02)
Net realized and unrealized gain 1.88
------
Total from investment operations 1.86
------
NET ASSET VALUE, END OF PERIOD $11.86
======
Total Return(b) 18.60%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .68%(d)
Expenses, excluding expense reductions and expenses assumed 1.00%(d)
Net investment loss (.22)%(d)
</Table>
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
SUPPLEMENTAL DATA: (UNAUDITED)
- --------------------------------------------------------------------------------
Net assets, end of period (000) $ 1,363
Portfolio turnover rate 102.28%(d)
================================================================================
</Table>
76 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
VALUE OPPORTUNITIES FUND
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE (CLASS C SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
Investment operations:
Net investment loss(a) (.03)
Net realized and unrealized gain 1.89
------
Total from investment operations 1.86
------
NET ASSET VALUE, END OF PERIOD $11.86
======
Total Return(b) 18.60%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .68%(d)
Expenses, excluding expense reductions and expenses assumed .98%(d)
Net investment loss (.25)%(d)
</Table>
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
SUPPLEMENTAL DATA: (UNAUDITED)
- --------------------------------------------------------------------------------
Net assets, end of period (000) $ 2,993
Portfolio turnover rate 102.28%(d)
================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 77
<Page>
FINANCIAL HIGHLIGHTS (CONTINUED)
VALUE OPPORTUNITIES FUND
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE (CLASS P SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
======
Investment operations:
Net investment income(a) .02
Net realized and unrealized gain 1.86
------
Total from investment operations 1.88
------
NET ASSET VALUE, END OF PERIOD $11.88
======
Total Return(b) 18.80%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .50%(d)
Expenses, excluding expense reductions and expenses assumed 1.93%(d)
Net investment income .16%(d)
</Table>
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
SUPPLEMENTAL DATA: (UNAUDITED)
- --------------------------------------------------------------------------------
Net assets, end of period (000) $ 12
Portfolio turnover rate 102.28%(d)
================================================================================
</Table>
78 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
VALUE OPPORTUNITIES FUND
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
======
Investment operations:
Net investment income(a) .03
Net realized and unrealized gain 1.87
------
Total from investment operations 1.90
------
NET ASSET VALUE, END OF PERIOD $11.90
======
Total Return(b) 19.00%(d)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .33%(d)
Expenses, excluding expense reductions and expenses assumed .91%(d)
Net investment income .24%(d)
</Table>
<Table>
<Caption>
12/20/2005(c)
TO
4/30/2006
SUPPLEMENTAL DATA: (UNAUDITED)
- --------------------------------------------------------------------------------
Net assets, end of period (000) $ 1,933
Portfolio turnover rate 102.28%(d)
================================================================================
</Table>
(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 investment operations and SEC effective date is December
20, 2005; date shares became available to the public is January 3, 2006.
(d) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS. 79
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 eight funds. This report covers the following six funds
and their respective classes (separately, a "Fund" and collectively, the
"Funds"): Lord Abbett All Value Fund ("All Value Fund"), Classes A, B, C, P, and
Y shares; Lord Abbett Alpha Strategy Fund ("Alpha Strategy Fund"), Classes A, B,
C, and Y shares; Lord Abbett International Core Equity Fund ("International Core
Equity Fund"), Classes A, B, C, P, and Y shares; Lord Abbett International
Opportunities Fund ("International Opportunities Fund"), Classes A, B, C, P, and
Y shares; Lord Abbett Large-Cap Value Fund ("Large-Cap Value Fund"), Classes A,
B, C, P, and Y shares; and Lord Abbett Value Opportunities Fund ("Value
Opportunities Fund"), Classes A, B, C, P, and Y shares. Value Opportunities Fund
commenced investment operations and was effective with the SEC on December 20,
2005. Shares first became available to the public on January 3, 2006.
All Value Fund's investment objective is to seek long-term growth of capital and
income without excessive fluctuations in market value. Alpha Strategy Fund's,
International Core Equity Fund's, International Opportunities Fund's, and Value
Opportunities Fund's investment objective are to seek long-term capital
appreciation. Alpha Strategy Fund invests in other funds ("Underlying Funds")
managed by Lord, Abbett & Co. LLC ("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 and C 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. Events occurring after the close of trading on non-U.S. exchanges
may result in adjustments to the valuation of foreign securities to more
accurately reflect their fair value as of the close of regular trading on
the New York Stock Exchange. Each Fund may rely on an independent fair
valuation service in adjusting the valuations of foreign securities.
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
80
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
prices. Securities for which market quotations are not readily available
are valued at fair value as determined by management and approved in good
faith by the Board of Trustees. Short-term securities with 60 days or less
remaining to maturity are valued using the amortized cost method, which
approximates current market value.
(b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date
that the securities are purchased or sold (trade date). Realized gains and
losses on sales of portfolio securities are calculated using the
identified-cost method. Realized and unrealized gains (losses) are
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.
(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
generally allocated to each class of shares based upon the relative
proportion of net assets at the beginning of the day. Classes A, B, C, and
P shares bear all expenses and fees relating to their respective 12b-1
Distribution Plans.
(f) FOREIGN TRANSACTIONS-The books and records of International Core Equity
Fund and International Opportunities 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 in 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) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS-International Core Equity Fund
and International Opportunities 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 (loss) is included in Net
Change in Unrealized Appreciation (Depreciation) on Investments and
Translation of Assets and Liabilities Denominated in Foreign Currencies on
each Fund's Statement of Operations. The gain (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 (Loss) on Investments and
Foreign Currency Related Transactions on each Fund's Statement of
Operations. As of April 30, 2006, there were no open forward foreign
currency exchange contracts outstanding.
81
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
(h) 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.
(i) 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 or yield at the
time of entering into 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 a 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.
3. MANAGEMENT FEES 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 .53%(1) --
Alpha Strategy Fund .10% .10%(2)
International Core Equity Fund .75%(3) --
International Opportunities Fund .75%(3) --
Large-Cap Value Fund .40%(4) --
Value Opportunities Fund .75%(3)
</Table>
(1) The management fee for All Value Fund is based on average daily net assets
at the following annual rates:
First $200 million .75%
Next $300 million .65%
Over $500 million .50%
82
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
(2) For the fiscal year ending October 31, 2006, Lord Abbett has contractually
agreed to waive its management fee.
(3) The management fee for International Core Equity Fund, International
Opportunities Fund and Value Opportunities 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>
For the fiscal year ending October 31, 2006, Lord Abbett has contractually
agreed to reimburse the International Core Equity Fund to the extent necessary
so that each class' total annual operating expenses do not exceed the following
annual rates:
<Table>
<Caption>
CLASS % OF AVERAGE DAILY NET ASSETS
- ------------------------------------------------
A 1.75%
B 2.40%
C 2.40%
P 1.85%
Y 1.40%
</Table>
For the fiscal year ending October 31, 2006, Lord Abbett has contractually
agreed to reimburse the Large Cap Value Fund to the extent necessary so that
each class' total annual operating expenses do not exceed the following annual
rates:
<Table>
<Caption>
CLASS % OF AVERAGE DAILY NET ASSETS
- ------------------------------------------------
A .95%
B 1.60%
C 1.60%
P 1.05%
Y .60%
</Table>
For the fiscal year ending October 31, 2006, Lord Abbett has contractually
agreed to reimburse the Value Opportunities Fund to the extent necessary so that
each class' total annual operating expenses do not exceed the following annual
rates:
<Table>
<Caption>
CLASS % OF AVERAGE DAILY NET ASSETS
- ------------------------------------------------
A 1.30%
B 1.95%
C 1.95%
P 1.40%
Y .95%
</Table>
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. This fee is not charged to the Alpha Strategy Fund.
Alpha Strategy Fund has entered into a Servicing Arrangement with the Underlying
Funds in which it invests (Lord Abbett Developing Growth Fund, Inc., Lord Abbett
Research Fund, Inc. -
83
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
Lord Abbett Small-Cap Value Fund and Lord Abbett Securities Trust - Lord Abbett
International Opportunities Fund) pursuant to which each Underlying Fund will
pay a portion of the expenses (excluding management fees and distribution and
service fees) of Alpha Strategy Fund in proportion to the average daily value of
total Underlying Fund shares owned by Alpha Strategy Fund. The expenses assumed
by the Underlying Funds are reflected in Expenses Assumed by Underlying Funds on
Alpha Strategy Fund's Statement of Operations.
In addition, Lord Abbett International Core Equity Fund and Lord Abbett
International Opportunities Fund, along with certain other funds managed by Lord
Abbett (the Underlying Funds) have entered into a Servicing Arrangement with
Lord Abbett World Growth & Income Strategy Fund and Lord Abbett Alpha Strategy
Fund, respectively (the "Fund of Funds"), pursuant to which each Underlying Fund
pays a portion of the expenses of the Fund of Funds in proportion to the average
daily value of Underlying Fund shares owned by the Fund of Funds. Amounts paid
pursuant to the Servicing Arrangement are included in Subsidy Expense on each
Fund's 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) Until October 1, 2004, each Fund, other than Value Opportunities Fund,paid
a one-time distribution fee of up to 1.00% on certain qualifying purchases
of Class A shares. Effective October1, 2004, the Distributor commenced
payment of such one- time distribution fee. The unamortized balance of
prepaid distribution fees, by each Fund, for the six months ended April 30,
2006 were as follows:
<Table>
<Caption>
UNAMORTIZED
BALANCE
- ----------------------------------------------
International Core Equity Fund $912
International Opportunities Fund 209
</Table>
These amounts will continue to be amortized by each Fund, generally over a
two-year period.
The amounts of CDSC collected by each Fund during the six months ended April 30,
2006 were as follows:
<Table>
<Caption>
CDSC
COLLECTED
- --------------------------------------------
All Value Fund $ 8,427
Alpha Strategy Fund 2,614
International Core Equity Fund 12,083
International Opportunities Fund 2,310
</Table>
(2) All Value Fund, International Core Equity Fund, International Opportunities
Fund, Large-Cap Value Fund, and Value Opportunities Fund only.
Class Y does not have a distribution plan.
84
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
COMMISSIONS
The Distributor received the following commissions on sales of Class A shares of
the Funds, after concessions were paid to authorized dealers, for the fiscal
period ended April 30, 2006:
<Table>
<Caption>
DISTRIBUTOR DEALERS'
COMMISSIONS CONCESSIONS
- ------------------------------------------------------------
All Value Fund $750,383 $4,048,755
Alpha Strategy Fund 169,911 953,945
International Core Equity Fund 807,497 4,371,791
International Opportunities Fund 83,982 461,893
Large-Cap Value Fund 12,298 64,515
Value Opportunities Fund 45,959 252,107
</Table>
Distributor received CDSCs for the fiscal period ended April 30, 2006, as
follows:
<Table>
<Caption>
CLASS A CLASS C
- ----------------------------------------------------
All Value Fund $ 2,288 $13,206
Alpha Strategy Fund 946 1,501
International Core Equity Fund 17,459 4,537
International Opportunities Fund 703 656
Large-Cap Value Fund -- 984
Value Opportunities Fund -- 99
</Table>
One Trustee and certain of the Trust's officers have an interest in Lord Abbett.
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARD
Dividends from net investment income, if any, are declared and paid semiannually
for All Value Fund, and annually for Alpha Strategy Fund, International Core
Equity Fund, International Opportunities Fund, Large-Cap Value Fund, and Value
Opportunities 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, 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 profit for tax purposes,
are reported as a tax return of capital.
85
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
The tax character of distributions paid during the six months ended April 30,
2006 and the fiscal year ended October 31, 2005 were as follows:
<Table>
<Caption>
ALL VALUE FUND ALPHA STRATEGY FUND
- -----------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
04/30/2006 ENDED 04/30/2006 ENDED
(UNAUDITED) 10/31/2005 (UNAUDITED) 10/31/2005
- -----------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 27,452,656 $ 8,710,826 $-- $458,488
Net long-term capital gains 158,920,088 19,588,617 -- --
- -----------------------------------------------------------------------------------
Total distributions paid $186,372,744 $28,299,443 $-- $458,488
===================================================================================
</Table>
<Table>
<Caption>
INTERNATIONAL INTERNATIONAL
CORE EQUITY FUND OPPORTUNITIES FUND
- --------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED YEAR
04/30/2006 ENDED 04/30/2006 ENDED
(UNAUDITED) 10/31/2005 (UNAUDITED) 10/31/2005
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 8,931,435 $62,768 $-- $39,769
Net long-term capital gains 2,329,582 -- --
- --------------------------------------------------------------------------------
Total distributions paid $11,261,017 $62,768 $-- $39,769
================================================================================
</Table>
<Table>
<Caption>
LARGE-CAP VALUE FUND
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR
04/30/2006 ENDED
(UNAUDITED) 10/31/2005
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $ 547,303 $243,210
Net long-term capital gains 760,672 98,180
- --------------------------------------------------------------------------------
Total distributions paid $1,307,975 $341,390
================================================================================
</Table>
As of October 31, 2005, the capital loss carryforwards, along with the related
expiration dates, are as follows:
<Table>
<Caption>
2009 2010 2011 TOTAL
- ---------------------------------------------------------------------------------------
Alpha Strategy Fund $ -- $ -- $6,445,723 $ 6,445,723
International Opportunities Fund 39,350,246 37,966,698 7,911,942 85,228,886
</Table>
As of April 30, 2006, the aggregate unrealized security gains and losses based
on cost for U.S. Federal income tax purposes are as follows:
<Table>
<Caption>
ALPHA INTERNATIONAL
ALL VALUE FUND STRATEGY FUND CORE EQUITY FUND
- -----------------------------------------------------------------------------------
Tax cost $2,553,286,165 $217,451,749 $624,094,704
- -----------------------------------------------------------------------------------
Gross unrealized gain 484,280,715 75,404,481 88,499,294
Gross unrealized loss (15,522,131) -- (5,105,494)
- -----------------------------------------------------------------------------------
Net unrealized security gain $ 468,758,584 $ 75,404,481 $ 83,393,800
===================================================================================
</Table>
86
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
<Table>
<Caption>
INTERNATIONAL LARGE-CAP VALUE
OPPORTUNITIES FUND VALUE FUND OPPORTUNITIES FUND
- ---------------------------------------------------------------------------------------
Tax cost $248,489,246 $44,116,339 $25,615,707
- ---------------------------------------------------------------------------------------
Gross unrealized gain 82,254,814 5,523,338 1,268,093
Gross unrealized loss (2,582,165) (429,598) (134,243)
- ---------------------------------------------------------------------------------------
Net unrealized security gain $ 79,672,649 $ 5,093,740 $ 1,133,850
=======================================================================================
</Table>
The difference between book-basis and tax-basis unrealized gains (losses) is
attributable primarily to wash sales and other temporary tax adjustments.
5. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and sales of investment securities (excluding short-term investments)
for the fiscal period ended April 30, 2006 were as follows:
<Table>
<Caption>
PURCHASES SALES
- --------------------------------------------------------------------------------
All Value Fund $887,052,590 $806,928,466
Alpha Strategy Fund 78,403,548 --
International Core Equity Fund 562,271,129 261,598,963
International Opportunities Fund 162,303,461 104,875,204
Large-Cap Value Fund 14,238,910 8,532,206
Value Opportunities Fund 31,466,291 10,679,962
</Table>
There were no purchases or sales of U.S. Government securities for the six
months ended April30, 2006.
6. TRUSTEES' REMUNERATION
The Trust's officers and the one Trustee who are associated with Lord Abbett do
not receive any compensation from the Trust for serving in such capacities.
Outside Trustees' fees are allocated among all Lord Abbett-sponsored funds based
on the net assets of each fund. There is an equity based plan available to all
outside Trustees under which outside Trustees must defer receipt of a portion
of, and may elect to defer receipt of an additional portion of Trustees' fees.
The deferred amounts are treated as though equivalent dollar amounts have been
invested proportionately in the Trust. Such amounts and earnings accrued thereon
are included in Trustees' Fees on the Statement of Operations and in Trustees'
Fees Payable on the Statement of Assets and Liabilities and are not deductible
for U.S. Federal income tax purposes until such amounts are paid.
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, Large-Cap Value Fund and Value Opportunities Fund, along with certain
other funds managed by Lord Abbett, has available a $250,000,000 unsecured
revolving credit facility ("Facility") from a consortium of banks, to be used
for temporary or emergency purposes as an additional source of
87
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
liquidity to fund redemptions of investor shares. Effective December 9, 2005,
the amount available to the funds under the Facility was increased from
$200,000,000 to $250,000,000. Any borrowings under this Facility will bear
interest at current market rates as defined in the agreement. The fee for this
Facility is at an annual rate of .08%. As of April 30, 2006, there were no loans
outstanding pursuant to this Facility nor was the Facility utilized at any time
during the fiscal period ended April 30, 2006.
9. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust ("SSB") is the Trust's custodian and accounting agent.
SSB performs custodial, 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
equity investing. 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. Small and mid-sized
company stocks, in which Value Opportunities Fund invests, may also perform
differently than the market as a whole and other types of stocks, such as
large-company 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. The small and mid-sized company stocks in which Value Opportunities
Fund invests may be less able to weather economic shifts or other adverse
developments than those of larger, more established companies. 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.
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.
88
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
Alpha Strategy 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.
Due to their investments in multinational companies, All Value Fund, Large-Cap
Value Fund, and Alpha Strategy Fund may experience increased market, liquidity,
currency, political, information and other risks.
These factors can affect each Fund's performance.
11. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
<Table>
<Caption>
ALL VALUE FUND
- --------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005
- --------------------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------
Shares sold 17,079,365 $ 210,933,817 49,755,701 $ 589,022,978
Reinvestment of distributions 10,511,006 124,660,261 1,706,988 19,800,667
Shares redeemed (12,264,471) (151,196,510) (18,915,487) (224,478,733)
- --------------------------------------------------------------------------------------------
Increase 15,325,900 $ 184,397,568 32,547,202 $ 384,344,912
- --------------------------------------------------------------------------------------------
CLASS B SHARES
- --------------------------------------------------------------------------------------------
Shares sold 2,066,811 $ 24,632,260 5,602,734 $ 64,321,570
Reinvestment of distributions 1,236,688 14,234,280 161,354 1,823,346
Shares redeemed (1,799,730) (21,500,380) (2,375,843) (27,464,066)
- --------------------------------------------------------------------------------------------
Increase 1,503,769 $ 17,366,160 3,388,245 $ 38,680,850
- --------------------------------------------------------------------------------------------
CLASS C SHARES
- --------------------------------------------------------------------------------------------
Shares sold 5,559,695 $ 65,966,504 13,636,576 $ 156,210,154
Reinvestment of distributions 2,172,380 24,917,196 279,805 3,150,601
Shares redeemed (4,056,964) (48,195,157) (6,025,241) (69,402,400)
- --------------------------------------------------------------------------------------------
Increase 3,675,111 $ 42,688,543 7,891,140 $ 89,958,355
- --------------------------------------------------------------------------------------------
CLASS P SHARES
- --------------------------------------------------------------------------------------------
Shares sold 548,782 $ 6,751,108 751,140 $ 8,846,473
Reinvestment of distributions 90,360 1,064,437 7,509 86,656
Shares redeemed (217,814) (2,655,833) (96,998) (1,151,912)
- --------------------------------------------------------------------------------------------
Increase 421,328 $ 5,159,712 661,651 $ 7,781,217
- --------------------------------------------------------------------------------------------
CLASS Y SHARES
- --------------------------------------------------------------------------------------------
Shares sold 52,247 $ 636,318 76,545 $ 911,203
Reinvestment of distributions 17,098 203,303 2,882 33,492
Shares redeemed (19,883) (242,275) (18,377) (218,589)
- --------------------------------------------------------------------------------------------
Increase 49,462 $ 597,346 61,050 $ 726,106
- --------------------------------------------------------------------------------------------
</Table>
89
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
<Table>
<Caption>
ALPHA STRATEGY FUND
- --------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005
- ---------------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------
Shares sold 3,137,651 $ 70,285,387 1,148,948 $ 20,637,437
Reinvestment of distributions -- -- 24,791 425,664
Shares redeemed (491,116) (10,698,466) (814,877) (14,436,194)
- ---------------------------------------------------------------------------------------
Increase 2,646,535 $ 59,586,921 358,862 $ 6,626,907
- ---------------------------------------------------------------------------------------
CLASS B SHARES
- ---------------------------------------------------------------------------------------
Shares sold 418,708 $ 9,049,459 310,878 $ 5,360,233
Shares redeemed (388,513) (8,451,219) (571,696) (9,858,951)
- ---------------------------------------------------------------------------------------
Increase (decrease) 30,195 $ 598,240 (260,818) $ (4,498,718)
- ---------------------------------------------------------------------------------------
CLASS C SHARES
- ---------------------------------------------------------------------------------------
Shares sold 901,500 $ 19,544,117 304,429 $ 5,259,619
Shares redeemed (145,165) (3,061,371) (475,248) (8,091,124)
- ---------------------------------------------------------------------------------------
Increase (decrease) 756,335 $ 16,482,746 (170,819) $ (2,831,505)
- ---------------------------------------------------------------------------------------
CLASS Y SHARES
- ---------------------------------------------------------------------------------------
Shares sold 10,305 $ 223,275 5,730 $ 103,708
Reinvestment of distributions -- -- 227 3,899
Shares redeemed (468) (9,601) (2,729) (47,035)
- ---------------------------------------------------------------------------------------
Increase 9,837 $ 213,674 3,228 $ 60,572
- ---------------------------------------------------------------------------------------
</Table>
90
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
<Table>
<Caption>
INTERNATIONAL CORE EQUITY FUND
- --------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005
- ------------------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------
Shares sold 16,542,072 $ 228,927,748 14,548,050 $ 172,536,589
Reinvestment of distributions 608,576 7,917,574 4,409 49,654
Shares redeemed (1,387,424) (19,095,750) (1,121,364) (13,202,915)
- ------------------------------------------------------------------------------------------
Increase 15,763,224 $ 217,749,572 13,431,095 $ 159,383,328
- ------------------------------------------------------------------------------------------
CLASS B SHARES
- ------------------------------------------------------------------------------------------
Shares sold 1,494,234 $ 20,480,815 1,227,027 $ 14,391,580
Reinvestment of distributions 38,906 501,508 -- --
Shares redeemed (146,513) (2,003,156) (82,565) (974,017)
- ------------------------------------------------------------------------------------------
Increase 1,386,627 $ 18,979,167 1,144,462 $ 13,417,563
- ------------------------------------------------------------------------------------------
CLASS C SHARES
- ------------------------------------------------------------------------------------------
Shares sold 4,242,569 $ 58,101,728 2,944,113 $ 34,662,208
Reinvestment of distributions 91,138 1,174,769 -- --
Shares redeemed (202,870) (2,777,314) (225,173) (2,640,273)
- ------------------------------------------------------------------------------------------
Increase 4,130,837 $ 56,499,183 2,718,940 $ 32,021,935
- ------------------------------------------------------------------------------------------
CLASS P SHARES
- ------------------------------------------------------------------------------------------
Shares sold 2,344 $ 33,619 359 $ 4,440
Reinvestment of distributions 32 405 -- --
Shares redeemed -- -- (95) (1,209)
- ------------------------------------------------------------------------------------------
Increase 2,376 $ 34,024 264 $ 3,231
- ------------------------------------------------------------------------------------------
CLASS Y SHARES
- ------------------------------------------------------------------------------------------
Shares sold 2,183,042 $ 30,018,382 697,220 $ 8,559,602
Reinvestment of distributions 43,625 569,738 540 6,089
Shares redeemed (27,864) (376,525) (32,022) (385,383)
- ------------------------------------------------------------------------------------------
Increase 2,198,803 $ 30,211,595 665,738 $ 8,180,308
- ------------------------------------------------------------------------------------------
</Table>
91
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
<Table>
<Caption>
INTERNATIONAL OPPORTUNITIES FUND
- ---------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005
- ---------------------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------
Shares sold 2,475,364 $ 35,159,629 1,978,216 $ 21,941,094
Shares redeemed (825,781) (11,538,139) (1,516,058) (16,761,499)
- ---------------------------------------------------------------------------------------------
Increase 1,649,583 $ 23,621,490 462,158 $ 5,179,595
- ---------------------------------------------------------------------------------------------
CLASS B SHARES
- ---------------------------------------------------------------------------------------------
Shares sold 576,167 $ 7,930,898 610,029 $ 6,542,545
Shares redeemed (316,033) (4,325,883) (616,632) (6,599,972)
- ---------------------------------------------------------------------------------------------
Increase (decrease) 260,134 $ 3,605,015 (6,603) $ (57,427)
- ---------------------------------------------------------------------------------------------
CLASS C SHARES
- ---------------------------------------------------------------------------------------------
Shares sold 567,314 $ 7,783,330 493,985 $ 5,258,334
Shares redeemed (189,802) (2,561,571) (336,909) (3,575,746)
- ---------------------------------------------------------------------------------------------
Increase 377,512 $ 5,221,759 157,076 $ 1,682,588
- ---------------------------------------------------------------------------------------------
CLASS P SHARES
- ---------------------------------------------------------------------------------------------
Shares sold 57,367 $ 871,099 185 $ 2,090
Shares redeemed (952) (12,913) -- --
- ---------------------------------------------------------------------------------------------
Increase 56,415 $ 858,186 185 $ 2,090
- ---------------------------------------------------------------------------------------------
CLASS Y SHARES
- ---------------------------------------------------------------------------------------------
Shares sold 1,773,548 $ 26,240,001 271,763 $ 3,052,439
Reinvestment of distributions -- -- 3,895 39,769
Shares redeemed (6,899) (102,556) (589,616) (6,254,257)
- ---------------------------------------------------------------------------------------------
Increase (decrease) 1,766,649 $ 26,137,445 (313,958) $ (3,162,049)
- ---------------------------------------------------------------------------------------------
</Table>
92
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
<Table>
<Caption>
LARGE-CAP VALUE FUND
- -----------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005
- -----------------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------
Shares sold 198,758 $ 2,552,231 552,637 $ 6,781,190
Reinvestment of distributions 34,254 427,832 17,676 213,347
Shares redeemed (109,161) (1,406,873) (314,249) (3,839,323)
- -----------------------------------------------------------------------------------------
Increase 123,851 $ 1,573,190 256,064 $ 3,155,214
- -----------------------------------------------------------------------------------------
CLASS B SHARES
- -----------------------------------------------------------------------------------------
Shares sold 43,493 $ 551,341 56,903 $ 689,423
Reinvestment of distributions 3,090 38,191 1,589 18,999
Shares redeemed (12,209) (155,135) (38,841) (471,694)
- -----------------------------------------------------------------------------------------
Increase 34,374 $ 434,397 19,651 $ 236,728
- -----------------------------------------------------------------------------------------
CLASS C SHARES
- -----------------------------------------------------------------------------------------
Shares sold 67,047 $ 847,403 202,061 $ 2,452,265
Reinvestment of distributions 5,552 68,625 1,894 22,678
Shares redeemed (45,808) (581,586) (72,732) (878,307)
- -----------------------------------------------------------------------------------------
Increase 26,791 $ 334,442 131,223 $ 1,596,636
- -----------------------------------------------------------------------------------------
CLASS P SHARES
- -----------------------------------------------------------------------------------------
Reinvestment of distributions 32 $ 405 21 $ 250
- -----------------------------------------------------------------------------------------
Increase 32 $ 405 21 $ 250
- -----------------------------------------------------------------------------------------
CLASS Y SHARES
- -----------------------------------------------------------------------------------------
Shares sold 452,628 $ 5,683,018 1,509,198 $18,711,404
Reinvestment of distributions 51,343 642,815 3,325 40,232
Shares redeemed (40,468) (534,583) (111,467) (1,371,184)
- -----------------------------------------------------------------------------------------
Increase 463,503 $ 5,791,250 1,401,056 $17,380,452
- -----------------------------------------------------------------------------------------
</Table>
93
<Page>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
<Table>
<Caption>
VALUE OPPORTUNITIES FUND
- --------------------------------------------------------------
PERIOD ENDED
APRIL 30, 2006
(UNAUDITED)*
- --------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT
- --------------------------------------------------------------
Shares sold 1,732,425 $19,082,695
Shares redeemed (15,267) (170,479)
- --------------------------------------------------------------
Increase 1,717,158 $18,912,216
- --------------------------------------------------------------
CLASS B SHARES
- --------------------------------------------------------------
Shares sold 116,682 $ 1,310,431
Shares redeemed (1,718) (18,799)
- --------------------------------------------------------------
Increase 114,964 $ 1,291,632
- --------------------------------------------------------------
CLASS C SHARES
- --------------------------------------------------------------
Shares sold 253,405 $ 2,852,755
Shares redeemed (1,070) (11,877)
- --------------------------------------------------------------
Increase 252,335 $ 2,840,878
- --------------------------------------------------------------
CLASS P SHARES
- --------------------------------------------------------------
Shares sold 1,000 $ 10,000
- --------------------------------------------------------------
Increase 1,000 $ 10,000
- --------------------------------------------------------------
CLASS Y SHARES
- --------------------------------------------------------------
Shares sold 222,393 $ 2,404,714
Shares redeemed (59,987) (650,155)
- --------------------------------------------------------------
Increase 162,406 $ 1,754,559
- --------------------------------------------------------------
</Table>
* For the period December 20, 2005 (commencement of investment operations) to
April 30, 2006.
94
<Page>
UNDERLYING FUND INFORMATION (UNAUDITED)
Alpha Strategy Fund invests in other funds ("Underlying Funds") managed by Lord
Abbett. As of April 30, 2006, Alpha Strategy Fund's long-term investments were
allocated among the Underlying Funds as follows:
<Table>
<Caption>
UNDERLYING FUND NAME % OF INVESTMENTS
--------------------------------------------------------------------------------
Lord Abbett Developing Growth Fund, Inc. - Class Y 30.00%
Lord Abbett Securities Trust - Lord Abbett International
Opportunities Fund - Class Y 39.98%
Lord Abbett Research Fund, Inc. - Lord Abbett Small-Cap Value
Fund - Class Y 30.02%
</Table>
The Ten Largest Holdings and the Holdings by Sector, as of April 30, 2006, for
each Underlying Fund are presented below. Each Underlying Fund's Annual and
Semiannual Reports, which are sent to shareholders and filed with the SEC,
contain information about the Fund's portfolio holdings, including a complete
schedule of holdings. A complete schedule of holdings for each Underlying Fund
is also filed with the SEC on the Form N-Q as of the end of each respective
Underlying Fund's first and third quarters. In addition, on or about the first
day of the second month following each calendar quarter-end, each Fund makes
publicly available a complete schedule of its portfolio holdings as of the last
day of each such quarter. The information for the most recently ended calendar
quarter may be viewed at www.LordAbbett.com or requested at no charge by calling
Lord Abbett at 800-821-5129.
LORD ABBETT DEVELOPING GROWTH FUND, INC.
<Table>
<Caption>
TEN LARGEST HOLDINGS % OF INVESTMENTS
- --------------------------------------------------------------------------------
Nektar Therapeutics 1.59%
WebEx Communications, Inc. 1.59%
Factset Research Systems Inc. 1.53%
Scientific Games Corp. Class A 1.47%
Redback Networks Inc. 1.45%
Coldwater Creek Inc. 1.40%
Morningstar, Inc. 1.36%
IntercontinentalExchange, Inc. 1.23%
Anixter Int'l., Inc. 1.20%
Sohu.com Inc. 1.17%
- --------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
HOLDINGS BY SECTOR % OF INVESTMENTS
- --------------------------------------------------------------------------------
Auto & Transportation 3.60%
Consumer Discretionary 19.45%
Financial Services 14.78%
Healthcare 15.54%
Materials & Processing 3.38%
Other 1.19%
Other Energy 8.62%
Producer Durables 7.84%
Short-Term Investment 3.29%
Technology 21.38%
Utilities 0.93%
- --------------------------------------------------------------------------------
Total 100.00%
- --------------------------------------------------------------------------------
</Table>
95
<Page>
UNDERLYING FUND INFORMATION (UNAUDITED)(CONTINUED)
LORD ABBETT SECURITIES TRUST - INTERNATIONAL OPPORTUNITIES FUND
<Table>
<Caption>
TEN LARGEST HOLDINGS % OF INVESTMENTS
- --------------------------------------------------------------------------------
Neopost S.A. 1.77%
Piraeus Bank S.A. 1.68%
Vivacon AG 1.65%
Hypo Real Estate Holding AG 1.55%
Intertek Group plc 1.50%
Prosegur Compania de Seguridad, S.A. 1.49%
Bangkok Bank Public Co. Ltd. 1.47%
Michael Page Int'l. plc 1.41%
CSR plc 1.40%
Rheinmetall AG 1.40%
- --------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
HOLDINGS BY SECTOR % OF INVESTMENTS
- --------------------------------------------------------------------------------
Basic Materials 8.43%
Conglomerates 1.10%
Consumer Cyclicals 13.42%
Consumer Non-Cyclicals 5.55%
Diversified Financials 7.03%
Energy 8.18%
Healthcare 3.42%
Industrial Goods & Services 22.12%
Non-Property Financials 14.05%
Property & Property Services 2.65%
Short-Term Investment 1.95%
Technology 7.36%
Telecommunications 1.58%
Transportation 1.13%
Utilities 2.03%
- --------------------------------------------------------------------------------
Total 100.00%
- --------------------------------------------------------------------------------
</Table>
96
<Page>
UNDERLYING FUND INFORMATION (UNAUDITED)(CONCLUDED)
LORD ABBETT RESEARCH FUND, INC. - SMALL-CAP VALUE FUND
<Table>
<Caption>
TEN LARGEST HOLDINGS % OF INVESTMENTS
- --------------------------------------------------------------------------------
Trinity Industries, Inc. 4.16%
Anixter Int'l. Inc. 3.30%
Quanex Corp. 3.02%
Steel Dynamics, Inc. 2.68%
PNM Resources, Inc. 2.61%
Ethan Allen Interiors Inc. 2.51%
Werner Enterprises, Inc. 2.28%
Hexcel Corp. 2.13%
Carpenter Technology Corp. 2.11%
Ruby Tuesday, Inc. 1.98%
- --------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
HOLDINGS BY SECTOR % OF INVESTMENTS
- --------------------------------------------------------------------------------
Auto & Transportation 8.77%
Consumer Discretionary 10.08%
Consumer Staples 0.98%
Financial Services 15.82%
Healthcare 2.75%
Integrated Oils 0.98%
Materials & Processing 20.81%
Other 5.69%
Other Energy 2.90%
Producer Durables 8.78%
Short-Term Investment 7.17%
Technology 7.69%
Utilities 7.58%
- --------------------------------------------------------------------------------
Total 100.00%
- --------------------------------------------------------------------------------
</Table>
97
<Page>
APPROVAL OF ADVISORY CONTRACTS
At meetings on December 7 and 8, 2005, the Board, including all Trustees who are
not interested persons, considered whether to approve the continuation of the
existing management agreements between each of the Funds, other than the Value
Opportunities Fund, and Lord Abbett. In addition to the materials the Board had
reviewed throughout the course of the year, the Board received materials
relating to the management agreement before the meeting and had the opportunity
to ask questions and request further information in connection with its
consideration. The Board also took into account its familiarity with Lord Abbett
gained through its previous meetings and discussions, and the examination of the
portfolio management team conducted by members of the Contract Committee during
the year.
The materials received by the Board as to each Fund included, but were not
limited to, (1) information provided by Lipper Analytical Services, Inc.
regarding the investment performance of the Fund compared to the investment
performance of a group of funds with substantially similar investment objectives
(the "performance universe") and to the investment performance of an appropriate
securities index (if such an index existed), for various time periods each
ending September 30, 2005, (2) information on the effective management fee rates
and expense ratios for funds with similar objectives and similar size (the "peer
group"), (3) sales and redemption information for the Fund, (4) information
regarding Lord Abbett's financial condition, (5) an analysis of the relative
profitability of the management agreement to Lord Abbett, (6) information
regarding the distribution arrangements of the Fund, and (7) information
regarding the personnel and other resources devoted by Lord Abbett to managing
the Fund.
The specific considerations as to each Fund are discussed below.
LARGE-CAP VALUE FUND
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment
management services provided by Lord Abbett to the Fund, including investment
research, portfolio management, and trading, and Lord Abbett's commitment to
compliance with all relevant legal requirements. The Board also observed that
Lord Abbett was solely engaged in the investment management business and
accordingly did not experience the conflicts of interest resulting from being
engaged in other lines of business. The Board noted that Lord Abbett did not use
brokerage commissions to purchase third-party research. The Board also
considered the investment advisory services provided by Lord Abbett to other
clients, the fees charged for the services, and the differences in the nature of
the services provided to the Fund and other Lord Abbett Funds, on the one hand,
and the services provided to other clients, on the other.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment
performance as well as the performance of the performance universe of funds,
both in terms of total return and in terms of other statistical measures. The
Board observed that the performance of the Class A shares of the Fund was in the
fifth quintile of its performance universe for the nine-month period and in the
fourth quintile for the one-year period and the period since the inception of
the fund (June 30, 2003). The Board also observed that the performance was below
that of the Lipper Large-Cap Value Index for each of those periods.
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of
the personnel providing investment management services to the Fund, in light of
its investment objective and discipline. Among other things, they considered the
size, experience, and turnover rates of Lord Abbett's investment management
staff, Lord Abbett's investment methodology and
98
<Page>
philosophy, and Lord Abbett's approach to recruiting, training, and retaining
investment management personnel. The Board determined that Lord Abbett had the
expertise and resources to manage the Fund effectively.
NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality,
costs, and extent of administrative and other services performed by Lord Abbett
and Lord Abbett Distributor and the nature and extent of Lord Abbett's
supervision of third party service providers, including the Fund's transfer
agent and custodian.
EXPENSES. The Board considered the expense ratio of the Fund and the expense
ratios of peer groups. It also considered the amount and nature of the fees paid
by shareholders. The Board observed that the contractual and actual management
and administrative services fees were approximately twenty-six basis points
below the median of the peer group. The Board also observed that, since the
Fund's inception, Lord Abbett had implemented an expense cap that limited the
Fund's total expense ratio of Class A to not more than 0.95%, the total expense
ratio of Classes B and C to not more than 1.60%, the total expense ratio of
Class P to not more than 1.05%, and the total expense ratio of Class Y to not
more than 0.60%. The Board observed that the total expense ratio of Class A was
approximately forty basis points below the median of the peer group, the total
expense ratios of Classes B and C were approximately fifty basis points below
the median of the peer group, the total expense ratio of Class P was
approximately the same as the median of the peer group, and the total expense
ratio of Class Y was approximately thirty-one basis points below the median of
the peer group.
PROFITABILITY. The Board considered the level of Lord Abbett's profits in
managing the Fund, including a review of Lord Abbett's methodology for
allocating its costs to its management of the Fund. The Board concluded that the
allocation methodology had a reasonable basis and was appropriate. It considered
the profits realized by Lord Abbett in connection with the operation of the Fund
and whether the amount of profit was fair for the management of the Fund. The
Board also considered the profits realized from other businesses of Lord Abbett,
which may benefit from or be related to the Fund's business. The Board
considered Lord Abbett's profit margins in comparison with available industry
data, both accounting for and ignoring marketing and distribution expenses, and
how those profit margins could affect Lord Abbett's ability to recruit and
retain investment personnel. The Board recognized that Lord Abbett's
profitability was a factor in enabling it to attract and retain qualified
investment management personnel to provide services to the Fund. The Board noted
that Lord Abbett's profitability had increased, in part due to an increase in
assets under management, but concluded that Lord Abbett's profitability overall
and with respect to the Fund was not excessive.
ECONOMIES OF SCALE. The Board considered whether there had been any economies of
scale in managing the Fund, whether the Fund had appropriately benefited from
any such economies of scale, and whether there was potential for realization of
any further economies of scale. The Board concluded that the existing advisory
fee schedule adequately addressed any economies of scale in managing the Fund.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of
fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett
Distributor for services other than investment advisory services. The Board also
considered the revenues and profitability of Lord Abbett's investment advisory
business apart from its mutual fund business, and the intangible benefits
enjoyed by Lord Abbett by virtue of its relationship with the Fund. The Board
observed that Lord Abbett Distributor receives 12b-1 fees from the Funds as to
shares held in
99
<Page>
accounts for which there is no other broker of record, may retain a portion of
the 12b-1 fees from the Fund, and receives a portion of the sales charges on
sales and redemptions of some classes of shares. In addition, Lord Abbett
accrues certain benefits for its business of providing investment advice to
clients other than the Fund, but that that business also benefits the Fund. The
Board also noted that Lord Abbett, as disclosed in the prospectus of the Fund,
has entered into revenue sharing arrangements with certain entities that
distribute shares of the Fund.
ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving
continuation of the management agreement, employing one or more alternative
arrangements might be in the best interests of the Fund, such as continuing to
employ Lord Abbett, but on different terms.
In considering whether to approve the continuation of the management agreement,
the Board did not identify any single factor as paramount or controlling. This
summary does not discuss in detail all matters considered. After considering all
of the relevant factors, the Board unanimously found that continuation of the
existing management agreement was in the best interests of the Fund and its
shareholders and voted unanimously to approve the continuation of the management
agreement.
ALL VALUE FUND
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment
management services provided by Lord Abbett to the Fund, including investment
research, portfolio management, and trading, and Lord Abbett's commitment to
compliance with all relevant legal requirements. The Board also observed that
Lord Abbett was solely engaged in the investment management business and
accordingly did not experience the conflicts of interest resulting from being
engaged in other lines of business. The Board noted that Lord Abbett did not use
brokerage commissions to purchase third-party research. The Board also
considered the investment advisory services provided by Lord Abbett to other
clients, the fees charged for the services, and the differences in the nature of
the services provided to the Fund and other Lord Abbett Funds, on the one hand,
and the services provided to other clients, on the other.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment
performance as well as the performance of the performance universe of funds,
both in terms of total return and in terms of other statistical measures. The
Board observed that the performance of the Class A shares of the Fund was in the
fourth quintile of its performance universe for the nine-month, one-year, and
three-year periods, in the third quintile for the five-year period, and in the
second quintile for the ten-year period. The Board also observed that the Fund's
performance was below that of the Lipper Multi-Cap Value Index for the
nine-month, one-year, three-year periods, but above that of the Index for the
ten-year period.
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of
the personnel providing investment management services to the Fund, in light of
its investment objective and discipline. Among other things, they considered the
size, experience, and turnover rates of Lord Abbett's investment management
staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's
approach to recruiting, training, and retaining investment management personnel.
The Board determined that Lord Abbett had the expertise and resources to manage
the Fund effectively.
NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality,
costs, and extent of administrative and other services performed by Lord Abbett
and Lord Abbett Distributor
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and the nature and extent of Lord Abbett's supervision of third party service
providers, including the Fund's transfer agent and custodian.
EXPENSES. The Board considered the expense ratio of the Fund and the expense
ratios of peer groups. It also considered the amount and nature of the fees paid
by shareholders. The Board observed that the contractual and actual management
and administrative services fees were approximately nine basis points below the
median of the peer group. The Board also observed that the total expense ratio
of Class A was approximately the same as the median of the peer group, the total
expense ratios of Classes B and C were approximately five basis points below the
median of the peer group, and the total expense ratio of Classes P and Y were
approximately the same as the median of the peer group.
PROFITABILITY. The Board considered the level of Lord Abbett's profits in
managing the Fund, including a review of Lord Abbett's methodology for
allocating its costs to its management of the Fund. The Board concluded that the
allocation methodology had a reasonable basis and was appropriate. It considered
the profits realized by Lord Abbett in connection with the operation of the Fund
and whether the amount of profit was fair for the management of the Fund. The
Board also considered the profits realized from other businesses of Lord Abbett,
which may benefit from or be related to the Fund's business. The Board
considered Lord Abbett's profit margins in comparison with available industry
data, both accounting for and ignoring marketing and distribution expenses, and
how those profit margins could affect Lord Abbett's ability to recruit and
retain investment personnel. The Board recognized that Lord Abbett's
profitability was a factor in enabling it to attract and retain qualified
investment management personnel to provide services to the Fund. The Board noted
that Lord Abbett's profitability had increased, in part due to an increase in
assets under management, but concluded that Lord Abbett's profitability overall
and with respect to the Fund was not excessive.
ECONOMIES OF SCALE. The Board considered whether there had been any economies of
scale in managing the Fund, whether the Fund had appropriately benefited from
any such economies of scale, and whether there was potential for realization of
any further economies of scale. The Board concluded that the existing advisory
fee schedule adequately addressed any economies of scale in managing the Fund.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of
fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett
Distributor for services other than investment advisory services. The Board also
considered the revenues and profitability of Lord Abbett's investment advisory
business apart from its mutual fund business, and the intangible benefits
enjoyed by Lord Abbett by virtue of its relationship with the Fund. The Board
observed that Lord Abbett Distributor receives 12b-1 fees from the Fund as to
shares held in accounts for which there is no other broker of record, may retain
a portion of the 12b-1 fees from the Fund, and receives a portion of the sales
charges on sales and redemptions of some classes of shares. In addition, Lord
Abbett accrues certain benefits for its business of providing investment advice
to clients other than the Fund, but that that business also benefits the Fund.
The Board also noted that Lord Abbett, as disclosed in the prospectus of the
Fund, has entered into revenue sharing arrangements with certain entities that
distribute shares of the Fund.
ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving
continuation of the management agreement, employing one or more alternative
arrangements might be in the best interests of the Fund, such as continuing to
employ Lord Abbett, but on different terms.
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In considering whether to approve the continuation of the management agreement,
the Board did not identify any single factor as paramount or controlling. This
summary does not discuss in detail all matters considered. After considering all
of the relevant factors, the Board unanimously found that continuation of the
existing management agreement was in the best interests of the Fund and its
shareholders and voted unanimously to approve the continuation of the management
agreement.
INTERNATIONAL CORE EQUITY FUND
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment
management services provided by Lord Abbett to the Fund, including investment
research, portfolio management, and trading, and Lord Abbett's commitment to
compliance with all relevant legal requirements. The Board also observed that
Lord Abbett was solely engaged in the investment management business and
accordingly did not experience the conflicts of interest resulting from being
engaged in other lines of business. The Board noted that Lord Abbett did not use
brokerage commissions to purchase third-party research. The Board also
considered the investment advisory services provided by Lord Abbett to other
clients, the fees charged for the services, and the differences in the nature of
the services provided to the Fund and other Lord Abbett Funds, on the one hand,
and the services provided to other clients, on the other.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment
performance as well as the performance of the performance universe of funds,
both in terms of total return and in terms of other statistical measures. The
Board observed that the Fund had only been in existence since December 31, 2003
and thus it was difficult to draw definitive conclusions regarding its relative
performance. The Board further observed that the performance of the Class A
shares of the Fund was in the third quintile of its performance universe for the
nine-month and one-year periods and in the fifth quintile for the period since
inception. The Board also observed that the performance was above that of the
Lipper International Multi-Cap Core Index for the nine-month and one-year
periods and below that of the Index for the period since inception.
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of
the personnel providing investment management services to the Fund, in light of
its investment objective and discipline. Among other things, they considered the
size, experience, and turnover rates of Lord Abbett's investment management
staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's
approach to recruiting, training, and retaining investment management personnel.
The Board determined that Lord Abbett had the expertise and resources to manage
the Fund effectively.
NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality,
costs, and extent of administrative and other services performed by Lord Abbett
and Lord Abbett Distributor and the nature and extent of Lord Abbett's
supervision of third party service providers, including the Fund's transfer
agent and custodian.
EXPENSES. The Board considered the expense ratio of the Fund and the expense
ratios of peer groups. It also considered the amount and nature of the fees paid
by shareholders. The Board observed that the contractual and actual management
and administrative services fees were approximately twenty-one basis points
below the median of the peer group. The Board observed that Lord Abbett had
implemented a total expense cap for the Fund that limited the total expense
ratio of Class A to not more than 1.75%, the total expense ratios of Classes B
and C to not more than 2.40%, the total expense ratio of Class P to not more
than 1.85%, and the total
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expense ratio of Class Y to not more than 1.40%, but that the total expense
ratio of each class was below that cap at September 30, 2005. The Board observed
that the total expense ratio of Class A was approximately three basis points
below the median of the peer group, the total expense ratios of Classes B and C
were approximately eight basis points below the median of the peer group, the
total expense ratio of Class P was approximately nine basis points above the
median of the peer group, and the total expense ratio of Class Y was
approximately five basis points above the median of the peer group.
PROFITABILITY. The Board considered the level of Lord Abbett's profits in
managing the Fund, including a review of Lord Abbett's methodology for
allocating its costs to its management of the Fund. The Board concluded that the
allocation methodology had a reasonable basis and was appropriate. It considered
the profits realized by Lord Abbett in connection with the operation of the Fund
and whether the amount of profit was fair for the management of the Fund. The
Board also considered the profits realized from other businesses of Lord Abbett,
which may benefit from or be related to the Fund's business. The Board
considered Lord Abbett's profit margins in comparison with available industry
data, both accounting for and ignoring marketing and distribution expenses, and
how those profit margins could affect Lord Abbett's ability to recruit and
retain investment personnel. The Board recognized that Lord Abbett's
profitability was a factor in enabling it to attract and retain qualified
investment management personnel to provide services to the Fund. The Board noted
that Lord Abbett's profitability had increased, in part due to an increase in
assets under management, but concluded that Lord Abbett's profitability overall
and with respect to the Fund was not excessive.
ECONOMIES OF SCALE. The Board considered whether there had been any economies of
scale in managing the Fund, whether the Fund had appropriately benefited from
any such economies of scale, and whether there was potential for realization of
any further economies of scale. The Board concluded that the existing advisory
fee schedule adequately addressed any economies of scale in managing the Fund.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of
fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett
Distributor for services other than investment advisory services. The Board also
considered the revenues and profitability of Lord Abbett's investment advisory
business apart from its mutual fund business, and the intangible benefits
enjoyed by Lord Abbett by virtue of its relationship with the Fund. The Board
observed that Lord Abbett Distributor receives 12b-1 fees from the Fund as to
shares held in accounts for which there is no other broker of record, may retain
a portion of the 12b-1 fees from the Fund, and receives a portion of the sales
charges on sales and redemptions of some classes of shares. In addition, Lord
Abbett accrues certain benefits for its business of providing investment advice
to clients other than the Fund, but that that business also benefits the Fund.
The Board also noted that Lord Abbett, as disclosed in the prospectus of the
Fund, has entered into revenue sharing arrangements with certain entities that
distribute shares of the Fund.
ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving
continuation of the management agreement, employing one or more alternative
arrangements might be in the best interests of the Fund, such as continuing to
employ Lord Abbett, but on different terms.
In considering whether to approve the continuation of the management agreement,
the Board did not identify any single factor as paramount or controlling. This
summary does not discuss in detail all matters considered. After considering all
of the relevant factors, the Board unanimously found that continuation of the
existing management agreement was in the best
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interests of the Fund and its shareholders and voted unanimously to approve the
continuation of the management agreement.
INTERNATIONAL OPPORTUNITIES FUND
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment
management services provided by Lord Abbett to the Fund, including investment
research, portfolio management, and trading, and Lord Abbett's commitment to
compliance with all relevant legal requirements. The Board also observed that
Lord Abbett was solely engaged in the investment management business and
accordingly did not experience the conflicts of interest resulting from being
engaged in other lines of business. The Board noted that Lord Abbett did not use
brokerage commissions to purchase third-party research. The Board also
considered the investment advisory services provided by Lord Abbett to other
clients, the fees charged for the services, and the differences in the nature of
the services provided to the Fund and other Lord Abbett Funds, on the one hand,
and the services provided to other clients, on the other.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment
performance as well as the performance of the performance universe of funds,
both in terms of total return and in terms of other statistical measures. the
Board observed that the performance of the Class A shares of the Fund was in the
third quintile of its performance universe for the nine-month period, in the
fourth quintile for the one-year period, and in the fifth quintile for the
three- and five-year periods. The Board also observed that the performance was
below that of the Lipper International Small/Mid-Cap Growth Index for each of
the nine-month, one-year, three-year, and five-year periods.
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of
the personnel providing investment management services to the Fund, in light of
its investment objective and discipline. Among other things, they considered the
size, experience, and turnover rates of Lord Abbett's investment management
staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's
approach to recruiting, training, and retaining investment management personnel.
The Board also observed that earlier in the year Lord Abbett had promoted Todd
Jacobson to be the portfolio manager of the Fund. The Board determined that Lord
Abbett had the expertise and resources to manage the Fund effectively.
NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality,
costs, and extent of administrative and other services performed by Lord Abbett
and Lord Abbett Distributor and the nature and extent of Lord Abbett's
supervision of third party service providers, including the Fund's transfer
agent and custodian.
EXPENSES. The Board considered the expense ratio of the Fund and the expense
ratios of peer groups. It also considered the amount and nature of the fees paid
by shareholders. The Board observed that the contractual management and
administrative services fees were approximately twenty-one basis points below
the median of the peer group and that the actual management and administrative
services fees were approximately fifteen basis points below the median of the
peer group. The Board observed that the total expense ratio of Class A was
approximately six basis points below the median of the peer group, the total
expense ratios of Classes B and C were approximately five basis points below the
median of the peer group, the total expense ratio of Class P was approximately
six basis points above the median of the peer group, and the total expense ratio
of Class Y was approximately the same as the median of the peer group.
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PROFITABILITY. The Board considered the level of Lord Abbett's profits in
managing the Fund, including a review of Lord Abbett's methodology for
allocating its costs to its management of the Fund. The Board concluded that the
allocation methodology had a reasonable basis and was appropriate. It considered
the profits realized by Lord Abbett in connection with the operation of the Fund
and whether the amount of profit was fair for the management of the Fund. The
Board also considered the profits realized from other businesses of Lord Abbett,
which may benefit from or be related to the Fund's business. The Board
considered Lord Abbett's profit margins in comparison with available industry
data, both accounting for and ignoring marketing and distribution expenses, and
how those profit margins could affect Lord Abbett's ability to recruit and
retain investment personnel. The Board recognized that Lord Abbett's
profitability was a factor in enabling it to attract and retain qualified
investment management personnel to provide services to the Fund. The Board noted
that Lord Abbett's profitability had increased, in part due to an increase in
assets under management, but concluded that Lord Abbett's profitability overall
and with respect to the Fund was not excessive.
ECONOMIES OF SCALE. The Board considered whether there had been any economies of
scale in managing the Fund, whether the Fund had appropriately benefited from
any such economies of scale, and whether there was potential for realization of
any further economies of scale. The Board concluded that the existing advisory
fee schedule adequately addressed any economies of scale in managing the Fund.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of
fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett
Distributor for services other than investment advisory services. The Board also
considered the revenues and profitability of Lord Abbett's investment advisory
business apart from its mutual fund business, and the intangible benefits
enjoyed by Lord Abbett by virtue of its relationship with the Fund. The Board
observed that Lord Abbett Distributor receives 12b-1 fees from the Fund as to
shares held in accounts for which there is no other broker of record, may retain
a portion of the 12b-1 fees from the Fund, and receives a portion of the sales
charges on sales and redemptions of some classes of shares. In addition, Lord
Abbett accrues certain benefits for its business of providing investment advice
to clients other than the Fund, but that that business also benefits the Fund.
The Board also noted that Lord Abbett, as disclosed in the prospectus of the
Fund, has entered into revenue sharing arrangements with certain entities that
distribute shares of the Fund.
ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving
continuation of the management agreement, employing one or more alternative
arrangements might be in the best interests of the Fund, such as continuing to
employ Lord Abbett, but on different terms.
In considering whether to approve the continuation of the management agreement,
the Board did not identify any single factor as paramount or controlling. This
summary does not discuss in detail all matters considered. After considering all
of the relevant factors, the Board unanimously found that continuation of the
existing management agreement was in the best interests of the Fund and its
shareholders and voted unanimously to approve the continuation of the management
agreement.
ALPHA STRATEGY FUND
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment
management services provided by Lord Abbett to the Fund, including investment
research, portfolio management, and trading, and Lord Abbett's commitment to
compliance with all relevant legal requirements. The Board also observed that
Lord Abbett was solely engaged in the
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investment management business and accordingly did not experience the conflicts
of interest resulting from being engaged in other lines of business. The Board
noted that Lord Abbett did not use brokerage commissions to purchase third-party
research. The Board also considered the investment advisory services provided by
Lord Abbett to other clients, the fees charged for the services, and the
differences in the nature of the services provided to the Fund and other Lord
Abbett Funds, on the one hand, and the services provided to other clients, on
the other.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment
performance as well as the performance of the performance universe of funds,
both in terms of total return and in terms of other statistical measures. The
Board observed that the performance of the Class A shares of the Fund was in the
second quintile of its performance universe for the nine-month and one-year
periods and in the third quintile for the three- and five-year periods. The
Board also observed that there was no Lipper index that would serve as an
appropriate comparison for the Fund.
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of
the personnel providing investment management services to the Fund, in light of
its investment objective and discipline. Among other things, they considered the
size, experience, and turnover rates of Lord Abbett's investment management
staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's
approach to recruiting, training, and retaining investment management personnel.
The Board determined that Lord Abbett had the expertise and resources to manage
the Fund effectively.
NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality,
costs, and extent of administrative and other services performed by Lord Abbett
and Lord Abbett Distributor and the nature and extent of Lord Abbett's
supervision of third party service providers, including the Fund's transfer
agent and custodian.
EXPENSES. The Board considered the expense ratio of the Fund and the expense
ratios of peer groups. It also considered the amount and nature of the fees paid
by shareholders. The Board observed that the contractual management fees were
approximately fifteen basis points below the median of the peer group and that
the actual management fees were approximately five basis points below the median
of the peer group. The Board also observed that the total expense ratio of Class
A was approximately twenty-three basis points below the median of the peer
group, the total expense ratios of Classes B and C were approximately the same
as the median of the peer group, and the total expense ratio of Class Y was six
basis points below the median of the peer group. The Board observed that, like
other funds in the peer group, the Fund indirectly pays the management fees and
other expenses of the underlying funds in which it invests. The Board also
observed that, taking into account these indirect expenses, the total expense
ratio of Class A was approximately three basis points below the median of the
peer group, the total expense ratios of Classes B and C were approximately five
basis points below the median of the peer group, and the total expense ratio of
Class Y was approximately one basis point above the median of the peer group.
PROFITABILITY. The Board considered the level of Lord Abbett's profits in
managing the Fund, including a review of Lord Abbett's methodology for
allocating its costs to its management of the Fund. The Board concluded that the
allocation methodology had a reasonable basis and was appropriate. It considered
the profits realized by Lord Abbett in connection with the operation of the Fund
and whether the amount of profit was fair for the management of the Fund. The
Board also considered the profits realized from other businesses of Lord Abbett,
which may benefit from
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or be related to the Fund's business. The Board considered Lord Abbett's profit
margins in comparison with available industry data, both accounting for and
ignoring marketing and distribution expenses, and how those profit margins could
affect Lord Abbett's ability to recruit and retain investment personnel. The
Board recognized that Lord Abbett's profitability was a factor in enabling it to
attract and retain qualified investment management personnel to provide services
to the Fund. The Board noted that Lord Abbett's profitability had increased, in
part due to an increase in assets under management, but concluded that Lord
Abbett's profitability overall and with respect to the Fund was not excessive.
ECONOMIES OF SCALE. The Board considered whether there had been any economies of
scale in managing the Fund, whether the Fund had appropriately benefited from
any such economies of scale, and whether there was potential for realization of
any further economies of scale. The Board concluded that the existing advisory
fee schedule adequately addressed any economies of scale in managing the Fund.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of
fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett
Distributor for services other than investment advisory services. The Board also
considered the revenues and profitability of Lord Abbett's investment advisory
business apart from its mutual fund business, and the intangible benefits
enjoyed by Lord Abbett by virtue of its relationship with the Fund. The Board
observed that Lord Abbett Distributor receives 12b-1 fees from the Fund as to
shares held in accounts for which there is no other broker of record, may retain
a portion of the 12b-1 fees from the Fund, and receives a portion of the sales
charges on sales and redemptions of some classes of shares. In addition, Lord
Abbett accrues certain benefits for its business of providing investment advice
to clients other than the Fund, but that that business also benefits the Fund.
The Board also noted that Lord Abbett, as disclosed in the prospectus of the
Fund, has entered into revenue sharing arrangements with certain entities that
distribute shares of the Fund.
ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving
continuation of the management agreement, employing one or more alternative
arrangements might be in the best interests of the Fund, such as continuing to
employ Lord Abbett, but on different terms.
In considering whether to approve the continuation of the management agreement,
the Board did not identify any single factor as paramount or controlling. This
summary does not discuss in detail all matters considered. After considering all
of the relevant factors, the Board unanimously found that continuation of the
existing management agreement was in the best interests of the Fund and its
shareholders and voted unanimously to approve the continuation of the management
agreement.
VALUE OPPORTUNITIES FUND
At a meeting on October 20, 2005, the Board, including all Trustees who are not
interested persons, considered whether to approve the existing management
agreement between the Fund and Lord Abbett. The Board received materials
relating to the management agreement before the meeting and had the opportunity
to ask questions and request further information in connection with its
consideration. The Board also took into account its familiarity with Lord Abbett
gained through its previous meetings and discussions.
The materials received by the Board included, but were not limited to, (1)
information on the effective management fee rates and expense ratios for funds
with similar objectives and similar size, (2) information regarding the proposed
distribution arrangements of the Fund, and
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(3) information regarding the personnel and other resources to be devoted by
Lord Abbett to managing the Fund.
The specific considerations are discussed below.
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment
management services to be provided by Lord Abbett to the Fund, including
investment research, portfolio management, and trading, and Lord Abbett's
commitment to compliance with all relevant legal requirements. The Board also
observed that Lord Abbett was solely engaged in the investment management
business and accordingly did not experience the conflicts of interest resulting
from being engaged in other lines of business. The Board noted that Lord Abbett
did not use brokerage commissions to purchase third-party research.
INVESTMENT PERFORMANCE AND COMPLIANCE. Because the Fund was new and had no
operating history, the Board could not consider its historical investment
performance.
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of
the personnel who would provide investment management services to the Fund, in
light of its investment objective and discipline. Among other things, they
considered the size, experience, and turnover rates of Lord Abbett's investment
management staff, Lord Abbett's investment methodology and philosophy, and Lord
Abbett's approach to recruiting, training, and retaining investment management
personnel. The Board determined that Lord Abbett had the expertise and resources
to manage the Fund effectively.
NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality,
costs, and extent of administrative and other services to be performed by Lord
Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett's
supervision of third party service providers, including the Fund's transfer
agent and custodian.
EXPENSES. The Board considered the projected expense ratios of each class and
the expense ratios of a peer group of funds. They also considered the amount and
nature of fees to be paid by shareholders.
PROFITABILITY. Because the Fund was new, the Board could not assess directly its
effect on Lord Abbett's Profitability. The Board noted that it had received
information on Lord Abbett's profitability in meetings in December 2004 and
August 2005 and would receive additional information at meetings in December
2005.
ECONOMIES OF SCALE. Because the Fund was new, the Board was not able to assess
whether there might be economies of scale in managing the Fund.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of
fees to be paid by the Fund and the Fund's shareholders to Lord Abbett and Lord
Abbett Distributor for services other than investment advisory services. The
Board also considered the revenues and profitability of Lord Abbett's investment
advisory business apart from its mutual fund business, and the intangible
benefits that would be enjoyed by Lord Abbett by virtue of its relationship with
the Fund. The Board observed that Lord Abbett Distributor receives 12b-1 fees
from the Fund as to shares held in accounts for which there is no other broker
of record, may retain a portion of the 12b-1 fees from the Fund, and receives a
portion of the sales charges on sales and redemptions of some classes of shares.
In addition, Lord Abbett accrues certain benefits for its business of providing
investment advice to clients other than the Fund, but that that business also
benefits the Fund. The Board also noted that Lord Abbett, as disclosed in the
prospectus of
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the Fund, has entered into revenue sharing arrangements with certain entities
that distribute shares of the Fund.
Because the Fund was new and had no operating history, the Board could not
consider matters such as the nature and quality of services provided in the past
to the Fund by Lord Abbett. The Board was able, however, to consider the nature
and quality of services provided by Lord Abbett to other Lord Abbett Funds. In
considering whether to approve the continuation of the management agreement, the
Board did not identify any single factor as paramount or controlling. This
summary does not discuss in detail all matters considered. After considering all
of the relevant factors, the Board unanimously found that the management
agreement was in the best interests of the Fund and its shareholders and voted
unanimously to approve the management agreement.
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HOUSEHOLDING
The Trust has adopted a policy that allows it to send only one copy of the
Funds' Prospectus, proxy material, annual report and semiannual 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 each Fund's portfolio securities, and information on as to
how Lord Abbett voted each Fund's proxies during the 12-month period ended June
30, 2005 are available without charge, upon request, (i) by calling
888-522-2388; (ii) or 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. Copies of
the filings are available without charge, upon request on the SEC's website at
www.sec.gov and may be available by calling Lord Abbett at 800-821-5129. You can
also obtain copies of Form N-Q by (i) visiting the SEC's Public Reference Room
in Washington, DC (information on the operation of the Public Reference Room may
be obtained by calling 800-SEC-0330); (ii) sending your request and duplicating
fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii)
sending your request electronically to publicinfo@sec.gov.
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[LORD ABBETT LOGO]
This report when not used for
the general information of
shareholders of the fund, is to be
distributed only if preceded or
accompanied by a current fund
prospectus.
Lord Abbett mutual fund shares
are distributed by
LORD ABBETT DISTRIBUTOR LLC
Lord Abbett Securities Trust
Lord Abbett All Value Fund
Lord Abbett Alpha Strategy Fund
Lord Abbett International Core Equity Fund
Lord Abbett International Opportunities Fund
Lord Abbett Large-Cap Value Fund
Lord Abbett Value Opportunities Fund
LST-3-0406
(0606)
<Page>
[LORD ABBETT LOGO]
2006
SEMIANNUAL
REPORT
LORD ABBETT
MICRO-CAP GROWTH FUND
MICRO-CAP VALUE FUND
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2006
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LORD ABBETT MICRO-CAP GROWTH FUND AND MICRO-CAP VALUE FUND
SEMIANNUAL REPORT
FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2006
DEAR SHAREHOLDERS: We are pleased to provide you with this overview of Lord
Abbett Micro-Cap Growth Fund's and Lord Abbett Micro-Cap Value Fund's
strategies and performance for the six-month period ended April 30, 2006. On
this and the following pages, we discuss the major factors that influenced the
funds' 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 DURING THE SIX-MONTH PERIOD ENDED
APRIL 30, 2006?
A: Domestic equities turned in a strong performance in the period, reflecting
the continued strength of the U.S. economy. The industrial sector showed
particular strength as industrial production surged.
In the six-month period ended April 30, 2006, the S&P 500(R) Index,(1) Dow
Jones Industrial Average(2), and NASDAQ(3) all raced to five-year highs. The S&P
Super Composite 1500 Index(4), the broadest market measure tracked by Standard &
Poor's, gained a total return of 10.4 percent.
Though the market's rally was broad, mid- and small-cap stocks outperformed
their larger-cap peers. As measured by the S&P/Citigroup Growth and Value
Indexes(5), value-oriented equities generally turned in higher total return
gains than growth. Specifically, small-cap value stocks jumped 18.0 percent,
on a total return basis, versus the 15.7 percent turned in by small-cap growth
stocks. In the large-cap arena, value stocks were up twice that of growth,
13.2 percent versus 6.2 percent, respectively.
The top performing sectors in the market overall during the period included
energy, materials, and financials. The utilities, healthcare, and consumer
staples sectors underperformed.
LORD ABBETT MICRO-CAP GROWTH FUND
Q: HOW DID THE MICRO-CAP GROWTH FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED
APRIL 30, 2006?
A: The fund returned 16.2 percent, 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(6), which returned 20.3 percent
over
1
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the same period. STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS, WHICH REFLECT
PERFORMANCE AT THE MAXIMUM 5.75 PERCENT SALES CHARGE APPLICABLE TO CLASS A
SHARE INVESTMENTS AND INCLUDE THE REINVESTMENT OF ALL DISTRIBUTIONS, ARE: 1
YEAR: 30.63 PERCENT, 5 YEARS: 10.77 PERCENT, AND SINCE INCEPTION (MAY 1,
2000): 2.79 PERCENT. DURING THE PERIODS SHOWN, EXPENSE REIMBURSEMENTS WERE IN
PLACE. WITHOUT SUCH EXPENSE REIMBURSEMENTS, THE FUND'S RETURN WOULD HAVE BEEN
LOWER. 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
percent if the shares are redeemed within 12 months of the purchase. Please
see section "Your Investment - Purchases" in the prospectus for more
information on redemptions that may be subject to CDSC.
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 technology sector was the largest detractor from fund performance
relative to the benchmark for the period. Also detracting from performance was
Zix Corp., a company that provides security solutions and professional
services that address organizations' electronic messaging needs. Three other
technology holdings that took away from performance included Nestor, Inc.,
Telkonet, Inc., and International Display Works, Inc. Nestor, Inc. offers
software solutions for mission-critical decision applications in real-time
environments. Telkonet, Inc. provides proprietary infrastructure application
products based upon power-line carrier technologies. International Display
Works, Inc. manufactures liquid crystal displays, modules, and assemblies.
Also detracting from fund performance, relative to the benchmark, was the
healthcare sector. SFBC International, Inc., a contract research organization
that conducts clinical research and provides drug development services, was
the largest detractor within the sector. Also detracting from performance was
NYMOX Pharmaceutical Corp., a biopharmaceutical company, and
2
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CardioTech International, Inc., a provider of synthetic blood vessels.
Three consumer discretionary companies also took away from performance:
Progressive Gaming International Corp., which makes progressive jackpot
systems for slot machines; TRM Corp., which provides self-service photocopying
and convenience automated teller machine services; and Youbet.com, which
facilitates live events.
Overall, however, the consumer discretionary sector was the strongest
contributor to the fund's performance, relative to the benchmark, for the six-
month period. Everlast Worldwide Inc., the fund's second best contributor to
performance during the period, makes sporting goods and apparel products. Two
retailers, United Retail Group, Inc. (the fund's fifth largest holding), and
Citi Trends Inc. were also strong contributors in this sector. The Knot, Inc.,
a provider of products and services to couples planning their weddings, was
another contributor.
The second best performing sector, relative to the benchmark, was producer
durables. DXP Enterprises, Inc. was the fund's top absolute contributor and
its third largest holding. The company provides maintenance, repair, and
operating products, equipment, and services to industrial customers.
Other holdings that were among the fund's top performance contributors
included materials and processing company Medis Technologies Ltd. Ranked third
for its contribution, this company focuses on direct liquid fuel cell
technology. Healthcare company Kendle International, a contract research
organization, and LivePerson, Inc., a provider of technology that facilitates
real-time sales and customer service for companies conducting business on the
Internet, both added to performance in the period. LivePerson, Inc. also was
the fund's largest holding during the period. Two financial services companies
aided performance: CyberSource Corp., which develops and provides real-time
and on-demand e-commerce transaction services, and Electronic Clearing House,
Inc., which offers credit and debit card processing, check guarantee, check
verification, and check conversion services.
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
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LORD ABBETT MICRO-CAP VALUE FUND
Q: HOW DID THE MICRO-CAP VALUE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED
APRIL 30, 2006?
A: The fund returned 15.3 percent, 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(7), which returned 17.5 percent
over the same period. STANDARDIZED AVERAGE ANNUAL TOTAL RETURNS, WHICH REFLECT
PERFORMANCE AT THE MAXIMUM 5.75 PERCENT SALES CHARGE APPLICABLE TO CLASS A
SHARE INVESTMENTS AND INCLUDE THE REINVESTMENT OF ALL DISTRIBUTIONS, ARE: 1
YEAR: 28.42 PERCENT, 5 YEARS: 20.09 PERCENT, AND SINCE INCEPTION (MAY 1,
2000): 23.26 PERCENT. DURING CERTAIN PERIODS SHOWN, EXPENSE REIMBURSEMENTS
WERE IN PLACE. WITHOUT SUCH EXPENSE REIMBURSEMENTS, THE FUND'S RETURN WOULD
HAVE BEEN LOWER. 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 percent if the shares are redeemed within 12 months of the purchase.
Please see section "Your Investment - Purchases" in the prospectus for more
information on redemptions that may be subject to CDSC.
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: Companies in the technology sector reported the weakest contribution to the
fund's performance relative to the benchmark for the period. Mobility
Electronics, Inc., a supplier of connectivity and remote peripheral component
interface technology and products, and COMSYS IT Partners Inc., a provider of
information technology staffing and complementary services, were detractors.
The second worst performing area, relative to the benchmark, was the
consumer discretionary sector. Holdings in this sector include those in the
consumer durables, apparel, media, hotel, and leisure industries. The fund's
largest detractor for the period was consumer discretionary company SM&A. SM&A
provides competition management services supporting industrial customers in
the aerospace, defense, and information
4
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technology sectors. Other consumer discretionary holdings that disappointed
included funeral home and cemetery operator Carriage Services, Inc.; global
recruitment and human capital consulting solutions specialist Hudson Highland
Group; and Rock of Ages Corp., a producer of granite memorials used primarily
in cemeteries.
The materials and processing sector ranked third for fund underperformance,
relative to the benchmark. Military batteries manufacturer Ultralife Batteries,
Inc. hurt fund performance.
Other stocks that rated among the largest 10 detractors to performance were
healthcare company American Dental Partners, Inc., a provider of dental practice
management, and Key Technology, Inc., a producer durables company that supplies
process automation systems for the food processing and other industries.
Financial services holding Pennsylvania Commerce Bancorp, Inc., the holding
company for Commerce Bank/Harrisburg, N.A., also hurt performance.
Overall, the producer durables sector was the greatest contributor to the
fund's relative performance for the period, followed by the healthcare and
financial services sectors. Producer durables company Ladish Inc. was the
strongest contributor and was the fund's largest holding. The company makes
metal components for a variety of load-bearing and fatigue-resisting
applications in the jet engine, aerospace, and industrial markets. Two other
strong-contributing producer durables holdings were Twin Disc, Inc., the fund's
second best contributor, and C-COR Inc. Twin Disc produces heavy-duty
off-highway power transmission equipment. C-COR offers broadband transport
products and systems for voice, video, and data delivery.
Two healthcare companies were among the top 10 contributors to performance:
Molecular Devices Corp., which develops bio-analytical measurement systems, and
Capital Senior Living Corp., which operates senior living communities in the
United States.
Although the financial services sector ranked third in terms of contribution
to fund performance, relative to the benchmark, for the period, none of the
fund's financial services holdings were among the top 10 contributors. The
fund's underweight position in this sector, during this period of relative
underperformance by financial services stocks, proved to be a positive factor.
In addition, materials and processing holdings A. M. Castle & Co., a
provider of highly engineered materials and value-added processing services, and
The Andersons, Inc., a company that operates grain elevator facilities and
distributes wholesale agricultural products, both helped fund performance. Solid
waste services company Waste Industries USA, Inc., in the consumer discretionary
sector, and auto and transportation sector holding
5
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Keystone Automotive Industries, Inc., a distributor of aftermarket collision
replacement parts, also contributed. SBS Technologies, Inc., a technology sector
holding that provides open architecture-embedded computer products for original
equipment manufacturers, contributed to fund performance.
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.
A PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT A FUND, INCLUDING ITS
INVESTMENT OBJECTIVES, RISKS, CHARGES, AND ONGOING EXPENSES, WHICH AN INVESTOR
SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON ANY LORD
ABBETT MUTUAL FUND, PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL OR LORD ABBETT
DISTRIBUTOR LLC AT 800-874-3733 OR VISIT OUR WEBSITE AT 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 and includes a representative sample of
leading companies in leading industries.
(2) The Dow Jones Industrial Average is an unmanaged index of common stocks
comprised of major industrial companies and assumes the reinvestment of
dividends and capital gains.
(3) The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based
common stocks listed on The NASDAQ stock exchange. The index is market value
weighted, meaning that each company's security affects the index in proportion
to its market value.
(4) The S&P Super Composite 1500 combines the S&P 500, S&P MidCap 400, and S&P
SmallCap 600 indexes and is an efficient way to create a broad market portfolio
representing 90% of U.S. equities.
(5) The S&P/Citigroup Growth and Value Indexes are split into two groups based
on price-to-book ratio to create growth and value indexes. The Growth Index
contains companies with higher price-to-book ratios and the Value Index contains
companies with lower price-to-book ratios.
(6) 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.
(7) 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.
Indexes 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 April 30, 2006; these views and portfolio holdings may
have changed subsequent to this date, and they do not guarantee the future
performance of the markets or the 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
a fund, please see the fund's prospectus.
PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, A FUND'S 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. Each fund offers 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.
6
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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 Examples are based on an investment of $1,000 invested at the beginning
of the period and held for the entire period (November 1, 2005 through April
30, 2006).
ACTUAL EXPENSES
For each class of each Fund, the first line of the tables on the following
pages 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 11/1/05 - 4/
30/06" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
For each class of each Fund, the second line of the tables on the following
pages 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 each 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 each 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.
7
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MICRO-CAP GROWTH FUND
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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 PERIOD+
--------- --------- -----------
11/1/05 -
11/1/05 4/30/06 4/30/06
--------- --------- -----------
CLASS A
Actual $1,000.00 $1,162.20 $11.26
Hypothetical (5% Return Before Expenses) $1,000.00 $1,014.40 $10.49
CLASS Y
Actual $1,000.00 $1,163.00 $ 9.92
Hypothetical (5% Return Before Expenses) $1,000.00 $1,015.64 $ 9.25
</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 181/365 (to
reflect one-half year period).
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PORTFOLIO HOLDINGS PRESENTED BY SECTOR
APRIL 30, 2006
<Table>
<Caption>
SECTOR* %**
Consumer Discretionary 18.59%
Consumer Staples 1.59%
Financial Services 13.31%
Healthcare 25.90%
Materials & Processing 11.32%
Other Energy 5.09%
Producer Durables 6.65%
Technology 17.55%
Total 100.00%
</Table>
* A sector may comprise several industries.
** Represents percent of total investments.
8
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MICRO-CAP VALUE FUND
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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 PERIOD+
--------- --------- -----------
11/1/05 -
11/1/05 4/30/06 4/30/06
--------- --------- -----------
CLASS A
Actual $1,000.00 $1,153.20 $11.21
Hypothetical (5% Return Before Expenses) $1,000.00 $1,014.41 $10.49
CLASS Y
Actual $1,000.00 $1,154.80 $ 9.88
Hypothetical (5% Return Before Expenses) $1,000.00 $1,015.65 $ 9.25
</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 181/365 (to
reflect one-half year period).
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PORTFOLIO HOLDINGS PRESENTED BY SECTOR
APRIL 30, 2006
<Table>
<Caption>
SECTOR* %**
Auto & Transportation 6.55%
Consumer Discretionary 22.02%
Consumer Staples 0.50%
Financial Services 16.27%
Healthcare 10.16%
Materials & Processing 11.96%
Other Energy 2.53%
Producer Durables 15.78%
Short-term Investment 4.53%
Technology 9.29%
Utilities 0.41%
Total 100.00%
</Table>
* A sector may comprise several industries.
** Represents percent of total investments.
9
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
MICRO-CAP GROWTH FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 90.77%
AEROSPACE 1.22%
LMI Aerospace, Inc.* 5,700 $100
----
BANKS: OUTSIDE NEW YORK CITY 1.95%
Community Bancorp* 4,900 160
----
BEVERAGE: BREWERS 1.45%
Castle Brands Inc.* 13,000 119
----
BIOTECHNOLOGY RESEARCH & PRODUCTION 2.06%
Kendle Int'l. Inc.* 4,500 169
----
BUILDING: CEMENT 2.25%
U.S. Concrete, Inc.* 13,500 185
----
CASINOS & GAMBLING 1.50%
Youbet.com, Inc.* 23,700 123
----
CHEMICALS 1.80%
Medis Technologies Ltd.* 5,000 148
----
COMMUNICATIONS TECHNOLOGY 3.78%
Anaren, Inc.* 6,800 140
NMS Communications
Corp.* 29,000 124
Telkonet, Inc.* 12,000 47
----
TOTAL 311
----
COMPUTER SERVICES, SOFTWARE & SYSTEMS 10.91%
Aladdin Knowledge Systems Ltd.*(a) 8,000 187
eCollege.com Inc.* 6,700 142
Knot, Inc. (The)* 12,160 224
LivePerson, Inc.* 40,730 280
TechTeam Global, Inc.* 6,400 64
----
TOTAL 897
----
COMPUTER TECHNOLOGY 1.24%
Stratasys, Inc.* 3,100 102
----
CONSUMER PRODUCTS 1.74%
Orange 21 Inc.* 32,700 $143
----
DRUGS & PHARMACEUTICALS 5.07%
CollaGenex
Pharmaceuticals, Inc.* 12,100 148
Medifast, Inc.* 10,500 124
Nymox Pharmaceutical Corp.*(a) 44,100 145
----
TOTAL 417
----
ELECTRICAL EQUIPMENT & COMPONENTS 1.66%
Ultralife Batteries, Inc.* 12,400 136
----
ELECTRONICS:MEDICAL SYSTEMS 8.37%
Cutera, Inc.* 4,900 129
IntraLase Corp.* 12,400 266
PhotoMedex, Inc.* 87,500 171
RITA Medical Systems, Inc.* 29,700 122
----
TOTAL 688
----
ENERGY EQUIPMENT 1.47%
Seitel, Inc.* 28,900 121
----
ENERGY: MISCELLANEOUS 3.15%
Canadian Superior
Energy Inc.*(a) 39,100 89
TGC Industries, Inc.* 11,970 170
----
TOTAL 259
----
FERTILIZERS 2.49%
LESCO, Inc.* 12,300 205
----
FINANCE COMPANIES 2.60%
Asta Funding, Inc. 5,900 214
----
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 4.42%
CyberSource Corp.* 21,200 198
Online Resources Corp.* 12,700 165
----
TOTAL 363
----
</Table>
10 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED)
MICRO-CAP GROWTH FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
FINANCIAL: MISCELLANEOUS 3.11%
Electronic Clearing House, Inc.* 17,200 $ 256
------
GOLD 2.08%
Orezone Resources Inc.*(a) 81,400 171
------
HEALTH & PERSONAL CARE 2.14%
NovaMed, Inc.* 25,000 176
------
JEWELRY WATCHES & GEMSTONES 1.90%
LJ Int'l., Inc.*(a) 44,200 156
------
MACHINERY: INDUSTRIAL/SPECIALTY 3.13%
DXP Enterprises, Inc.* 6,400 257
------
MACHINERY: SPECIALTY 1.70%
TurboChef Technologies, Inc.* 10,900 140
------
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 5.86%
CardioTech Int'l., Inc.* 47,600 124
Neogen Corp.* 6,650 161
Trinity Biotech plc ADR* 22,900 197
------
TOTAL 482
------
RETAIL 5.02%
Bon-Ton Stores, Inc. (The) 5,700 162
United Retail Group Inc.* 12,800 251
------
TOTAL 413
------
SERVICES: COMMERCIAL 2.25%
Barrett Business Services, Inc.* 7,000 185
------
TEXTILES APPAREL MANUFACTURERS 4.45%
Everlast Worldwide Inc.* 8,800 154
True Religion Apparel, Inc.* 10,900 212
------
TOTAL 366
------
TOTAL INVESTMENTS IN SECURITIES 90.77% (COST $6,032,357) 7,462
======
OTHER ASSETS IN EXCESS OF LIABILITIES 9.23% 759
======
NET ASSETS 100.00% $8,221
======
</Table>
* Non-income producing security.
(a) Foreign security traded in U.S. dollars.
ADR American Depositary Receipt.
SEE NOTES TO FINANCIAL STATEMENTS. 11
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)
MICRO-CAP VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
COMMON STOCKS 94.77%
AEROSPACE 4.42%
Allied Defense
Group, Inc. (The)* 11,600 $ 266
Ladish Co., Inc.* 20,930 746
------
TOTAL 1,012
------
AIR TRANSPORTATION 0.92%
Frontier Airlines
Holdings, Inc.* 31,100 211
------
AUTO PARTS: AFTER MARKET 1.66%
Keystone Automotive
Industries, Inc.* 9,200 380
------
AUTO PARTS: ORIGINAL EQUIPMENT 1.27%
STRATTEC SECURITY CORP.* 7,700 291
------
BANKS 7.09%
CoBiz, Inc. 10,650 210
Columbia Bancorp 13,660 304
Dearborn Bancorp, Inc.* 10,081 224
Franklin Bank Corp.* 15,500 301
North Bay Bancorp 3,675 107
Pennsylvania Commerce
Bancorp, Inc.* 5,900 178
Southwest Bancorp, Inc. 13,200 297
------
TOTAL 1,621
------
BIOTECHNOLOGY RESEARCH & PRODUCTION 1.56%
Kensey Nash Corp.* 11,800 356
------
BUILDING: MATERIALS 1.08%
Graham Corp. 11,830 247
------
CHEMICALS 3.22%
Landec Corp.* 32,000 280
NuCo2, Inc.* 8,400 240
Quaker Chemical Corp. 10,700 216
------
TOTAL 736
------
COMMUNICATIONS TECHNOLOGY 1.39%
Bel Fuse Inc. Class A 11,700 $ 319
------
COMPUTER SERVICES, SOFTWARE & SYSTEMS 4.05%
Applix, Inc.* 42,800 340
COMSYS IT Partners Inc.* 28,300 285
Moldflow Corp.* 21,400 302
------
TOTAL 927
------
COMPUTER TECHNOLOGY 3.77%
Fargo Electronics, Inc.* 16,400 303
Mobility Electronics, Inc.* 39,200 279
Rimage Corp.* 12,700 281
------
TOTAL 863
------
CONSTRUCTION 1.03%
Modtech Holdings, Inc.* 23,600 234
------
CONTAINERS & PACKAGING: METAL & GLASS 0.62%
Mobile Mini, Inc.* 4,300 142
------
DIVERSIFIED FINANCIAL SERVICES 0.55%
American Physicians
Services Group, Inc. 8,700 126
------
ELECTRICAL EQUIPMENT & COMPONENTS 4.76%
AZZ, Inc.* 17,300 415
Powell Industries, Inc.* 14,000 344
Ultralife Batteries, Inc.* 30,200 331
------
TOTAL 1,090
------
ELECTRICAL: HOUSEHOLD APPLIANCE 1.24%
Emerson Radio Corp.* 84,500 284
------
FINANCIAL: MISCELLANEOUS 1.48%
Federal Agricultural
Mortgage Corp. Class C 7,900 227
Financial Federal Corp. 3,950 112
------
TOTAL 339
------
</Table>
12 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED)
MICRO-CAP VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
FOODS 0.49%
Tasty Baking Co. 13,100 $ 113
------
FUNERAL PARLORS & CEMETERY 1.84%
Carriage Services, Inc.* 59,600 280
Rock of Ages Corp. 30,400 141
------
TOTAL 421
------
HEALTHCARE FACILITIES 1.04%
Capital Senior Living Corp.* 21,600 237
------
HEALTHCARE MANAGEMENT SERVICES 1.52%
American Dental
Partners, Inc.* 25,400 347
------
HOTEL/MOTEL 1.71%
Interstate Hotels &
Resorts, Inc.* 69,200 391
------
HOUSEHOLD FURNISHINGS 1.41%
Hooker Furniture Corp. 17,300 323
------
IDENTIFICATION CONTROL & FILTER DEVICES 0.73%
Robbins & Myers, Inc. 6,900 168
------
INSURANCE: PROPERTY-CASUALTY 3.13%
Donegal Group Inc. 22,533 418
Navigators Group, Inc. (The)* 6,300 298
TOTAL 716
------
MACHINERY: INDUSTRIAL/SPECIALTY 3.06%
Tennant Co. 3,500 178
Twin Disc, Inc. 15,600 521
TOTAL 699
------
MACHINERY: OIL WELL EQUIPMENT & SERVICES 1.40%
Lufkin Industries, Inc. 5,000 320
------
MACHINERY: SPECIALTY 1.22%
Key Technology, Inc.* 22,700 279
------
MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 4.45%
ICU Medical, Inc.* 3,000 124
Medical Action Industries, Inc* 16,980 406
Merit Medical Systems, Inc.* 26,700 312
Molecular Devices Corp.* 5,500 176
------
TOTAL 1,018
------
METAL FABRICATING 1.58%
NN, Inc. 28,300 361
------
METALS & MINERALS: MISCELLANEOUS 1.60%
A.M.Castle & Co. 10,100 365
------
MISCELLANEOUS: MATERIALS & COMMODITIES 0.92%
Lydall, Inc.* 22,700 211
------
MISCELLANEOUS: SERVICE 1.53%
Psychemedics Corp. 20,700 351
------
OIL: CRUDE PRODUCERS 1.11%
Bronco Drilling Co., Inc.* 4,000 108
Pioneer Drilling Co.* 9,000 146
------
TOTAL 254
------
POLLUTION CONTROL & ENVIRONMENTAL SERVICES 0.96%
Team, Inc.* 7,000 220
------
REAL ESTATE INVESTMENT TRUSTS 0.98%
Agree Realty Corp. 7,100 223
------
RENTAL & LEASING SERVICES: COMMERCIAL 1.66%
McGrath RentCorp 14,100 379
------
RETAIL 1.35%
Rush Enterprises, Inc.
Class B* 17,300 310
------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 13
<Page>
SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED)
MICRO-CAP VALUE FUND APRIL 30, 2006
<Table>
<Caption>
VALUE
INVESTMENTS SHARES (000)
- --------------------------------------------------------------------------------
SAVINGS & LOAN 1.27%
Beverly Hills Bancorp Inc. 27,900 $ 290
-------
SERVICES: COMMERCIAL 10.71%
Ambassadors Int'l., Inc. 7,500 200
Collectors Universe, Inc.* 24,100 391
Exponent, Inc.* 19,300 628
Integrated Alarm Services Group, Inc.* 45,000 168
Monro Muffler Brake, Inc. 14,400 524
RemedyTemp, Inc.* 18,200 229
SM&A* 22,800 147
Waste Industries USA, Inc. 8,100 164
-------
TOTAL 2,451
-------
STEEL 0.40%
Steel Technologies Inc. 3,900 91
-------
TELECOMMUNICATIONS EQUIPMENT 1.95%
C-COR Inc.* 54,600 447
-------
TEXTILES APPAREL MANUFACTURERS 3.59%
Hartmarx Corp.* 34,600 298
Lakeland Industries, Inc.* 28,000 523
-------
TOTAL 821
-------
TRANSPORTATION: MISCELLANEOUS 1.45%
Quixote Corp. 16,100 332
-------
TRUCKERS 1.20%
Frozen Food Express
Industries, Inc.* 26,900 275
-------
UTILITIES: GAS DISTRIBUTORS 0.40%
Chesapeake Utilities Corp. 3,100 92
-------
TOTAL COMMON STOCKS
(cost $16,600,182) 21,683
=======
SHORT-TERM INVESTMENT 4.49%
REPURCHASE AGREEMENT 4.49%
Repurchase Agreement dated 4/28/2006, 4.13% due 5/1/2006
with State Street Bank & Trust Co. collateralized by
$1,110,000 of Federal Home Loan Mortgage Corp. at 2.00%
due 3/5/2019;
value: $1,051,725;
proceeds: $1,028,556
(cost $1,028,202) $ 1,028 $ 1,028
-------
TOTAL INVESTMENTS IN SECURITIES 99.26%
(cost $17,628,384) 22,711
=======
OTHER ASSETS IN EXCESS OF LIABILITIES 0.74% 170
=======
NET ASSETS 100.00% $22,881
=======
</Table>
* Non-income producing security.
14 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
APRIL 30, 2006
<Table>
<Caption>
MICRO-CAP MICRO-CAP
GROWTH FUND VALUE FUND
- -------------------------------------------------------------------------------
ASSETS:
Investments in securities, at cost $6,032,357 $17,628,384
- -------------------------------------------------------------------------------
Investments in securities, at value $7,461,848 $22,711,353
Receivables:
Interest and dividends 412 3,848
Investment securities sold 1,494,990 385,112
Capital shares sold 10,058 15,024
From advisor 6,124 6,426
Prepaid expenses 10,190 19,212
- -------------------------------------------------------------------------------
TOTAL ASSETS 8,983,622 23,140,975
- -------------------------------------------------------------------------------
LIABILITIES:
Payables:
Investment securities purchased 624,993 184,701
Management fees 9,993 27,015
12b-1 distribution fees 1,592 4,573
Fund administration 267 721
Trustees' fees 709 1,256
To custodian 100,052 --
Accrued expenses and other liabilities 25,501 41,925
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 763,107 260,191
===============================================================================
NET ASSETS $8,220,515 $22,880,784
===============================================================================
COMPOSITION OF NET ASSETS:
Paid-in capital $6,145,023 $15,595,943
Accumulated net investment loss (67,634) (117,941)
Accumulated net realized gain on investments 713,635 2,319,813
Net unrealized appreciation on investments 1,429,491 5,082,969
- -------------------------------------------------------------------------------
NET ASSETS $8,220,515 $22,880,784
===============================================================================
NET ASSETS BY CLASS:
Class A Shares $6,482,656 $19,078,092
Class Y Shares $1,737,859 $ 3,802,692
OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF
AUTHORIZED SHARES OF BENEFICIAL INTEREST):
Class A Shares 449,715 692,879
Class Y Shares 118,665 136,737
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE (NET ASSETS DIVIDED BY
OUTSTANDING SHARES):
Class A Shares-Net asset value $ 14.42 $ 27.53
Class A Shares-Maximum offering price
(Net asset value plus sales charge of 5.75%) $ 15.30 $ 29.21
Class Y Shares-Net asset value $ 14.65 $ 27.81
===============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 15
<Page>
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2006
<Table>
<Caption>
MICRO-CAP MICRO-CAP
GROWTH FUND VALUE FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 4,692 $ 65,661
Interest 7,053 29,380
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 11,745 95,041
- -------------------------------------------------------------------------------
EXPENSES:
Management fees 57,656 154,839
12b-1 distribution plan-Class A 7,686 21,121
Shareholder servicing 2,881 6,056
Professional 16,868 15,252
Reports to shareholders 7,380 11,992
Fund administration 1,538 4,129
Custody 1,175 5,043
Trustees' fees 182 473
Registration 16,756 21,432
Other 428 1,599
- -------------------------------------------------------------------------------
Gross expenses 112,550 241,936
Expense reductions (See Note 7) (124) (274)
Expenses assumed by advisor (See Note 3) (33,630) (29,604)
- -------------------------------------------------------------------------------
NET EXPENSES 78,796 212,058
- -------------------------------------------------------------------------------
NET INVESTMENT LOSS (67,051) (117,017)
- -------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments 713,730 2,323,254
Net change in unrealized appreciation on
investments 520,279 791,917
===============================================================================
NET REALIZED AND UNREALIZED GAIN 1,234,009 3,115,171
===============================================================================
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,166,958 $2,998,154
===============================================================================
</Table>
16 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
FOR THE SIX MONTHS ENDED APRIL 30, 2006
<Table>
<Caption>
MICRO-CAP MICRO-CAP
INCREASE IN NET ASSETS GROWTH FUND VALUE FUND
- -------------------------------------------------------------------------------
OPERATIONS:
Net investment loss $ (67,051) $ (117,017)
Net realized gain on investments 713,730 2,323,254
Net change in unrealized appreciation on
investments 520,279 791,917
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS 1,166,958 2,998,154
===============================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain
Class A (782,351) (1,784,117)
Class Y (175,989) (403,319)
- -------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS (958,340) (2,187,436)
===============================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 638,538 2,520,222
Reinvestment of distributions 956,192 2,186,918
Cost of shares redeemed (741,745) (1,647,566)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM CAPITAL SHARE TRANSACTIONS 852,985 3,059,574
===============================================================================
NET INCREASE IN NET ASSETS 1,061,603 3,870,292
===============================================================================
NET ASSETS:
Beginning of period 7,158,912 19,010,492
- -------------------------------------------------------------------------------
END OF PERIOD $8,220,515 $22,880,784
===============================================================================
ACCUMULATED NET INVESTMENT LOSS $ (67,634) $ (117,941)
===============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 17
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 2005
<Table>
<Caption>
MICRO-CAP MICRO-CAP
INCREASE IN NET ASSETS GROWTH FUND VALUE FUND
- -------------------------------------------------------------------------------
OPERATIONS:
Net investment loss $ (126,716) $ (199,146)
Net realized gain on investments 1,084,736 2,387,903
Net change in unrealized appreciation on
investments 388,706 1,466,377
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,346,726 3,655,134
===============================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain
Class A (145,059) (1,261,565)
Class Y (29,179) (202,569)
- -------------------------------------------------------------------------------
Total distributions to shareholders (174,238) (1,464,134)
===============================================================================
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 709,557 3,061,628
Reinvestment of distributions 173,991 1,463,981
Cost of shares redeemed (640,634) (307,012)
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share transactions 242,914 4,218,597
- -------------------------------------------------------------------------------
Net increase in net assets 1,415,402 6,409,597
===============================================================================
NET ASSETS:
Beginning of year 5,743,510 12,600,895
- -------------------------------------------------------------------------------
End of year $7,158,912 $19,010,492
===============================================================================
Accumulated net investment loss $ (583) $ (924)
===============================================================================
</Table>
18 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS
MICRO-CAP GROWTH FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $14.24 $11.88 $10.87 $ 7.51 $ 9.49 $ 13.18
====== ====== ====== ====== ======= =======
Investment operations:
Net investment income (loss)(a) (.12) (.25) (.23) (.14) (.02) --(c)
Net realized and
unrealized gain (loss) 2.17 2.96 1.24 3.50 (1.95) (1.34)
------ ------ ------ ------ ------- -------
Total from investment operations 2.05 2.71 1.01 3.36 (1.97) (1.34)
------ ------ ------ ------ ------- -------
Distributions to shareholders from:
Net investment income -- -- -- -- (.01) (.01)
Net realized gain (1.87) (.35) -- -- -- (2.34)
------ ------ ------ ------ ------- -------
Total distributions (1.87) (.35) -- -- (.01) (2.35)
------ ------ ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $14.42 $14.24 $11.88 $10.87 $ 7.51 $ 9.49
====== ====== ====== ====== ======= =======
Total Return(b) 16.22%(d) 23.21% 9.29% 44.74% (20.81)% (11.30)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed 1.04%(d) 2.10% 2.10% 1.75% .38% .38%
Expenses, excluding expense reductions and expenses assumed 1.47%(d) 2.51% 2.52% 2.84% 2.99% 4.02%
Net investment income (loss) (.89)%(d) (1.92)% (1.91)% (1.60)% (.24)% .04%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
===========================================================================================================================
Net assets, end of period (000) $6,483 $5,938 $4,726 $ 4,655 $2,698 $2,266
Portfolio turnover rate 51.44%(d) 64.79% 79.07% 126.71% 34.08% 80.17%
===========================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 19
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
MICRO-CAP GROWTH FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $14.43 $12.00 $10.96 $ 7.55 $ 9.52 $ 13.21
====== ====== ====== ====== ======= =======
Investment operations:
Net investment income (loss)(a) (.11) (.22) (.20) (.11) .01 .04
Net realized and
unrealized gain (loss) 2.20 3.00 1.24 3.52 (1.95) (1.35)
------ ------ ------ ------ ------- -------
Total from investment operations 2.09 2.78 1.04 3.41 (1.94) (1.31)
------ ------ ------ ------ ------- -------
Distributions to shareholders from:
Net investment income -- -- -- -- (.03) (.04)
Net realized gain (1.87) (.35) -- -- -- (2.34)
------ ------ ------ ------ ------- -------
Total distributions (1.87) (.35) -- -- (.03) (2.38)
------ ------ ------ ------ ------- -------
NET ASSET VALUE, END OF PERIOD $14.65 $14.43 $12.00 $10.96 $ 7.55 $ 9.52
====== ====== ====== ====== ======= =======
Total Return(b) 16.30%(d) 23.57% 9.49% 45.17% (20.42)% (11.00)
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .92%(d) 1.85% 1.85%+ 1.42% .00% .00%
Expenses, excluding expense reductions and expenses assumed 1.35%(d) 2.25% 2.27%+ 2.51% 2.61% 3.64%
Net investment income (loss) (.77)%(d) (1.67)% (1.66)%+ (1.27)% .14% .42%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
===========================================================================================================================
Net assets, end of period (000) $1,738 $1,221 $1,018 $ 8 $ 6 $ 7
Portfolio turnover rate 51.44%(d) 64.79% 79.07% 126.71% 34.08% 80.17%
===========================================================================================================================
</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) Amount represents less than $.01.
(d) Not annualized.
20 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
FINANCIAL HIGHLIGHTS
MICRO-CAP VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS A SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $26.96 $23.89 $21.43 $15.56 $15.68 $15.90
====== ====== ====== ====== ====== ======
Investment operations:
Net investment income (loss)(a) (.15) (.32) (.27) (.14) .05 .10
Net realized and unrealized gain 3.85 6.12 4.31 6.69 .60 2.20
------ ------ ------ ------ ------ ------
Total from investment operations 3.70 5.80 4.04 6.55 .65 2.30
------ ------ ------ ------ ------ ------
Distributions to shareholders from:
Net investment income -- -- (.30) (.05) (.05) (.14)
Net realized gain (3.13) (2.73) (1.28) (.63) (.72) (2.38)
------ ------ ------ ------ ------ ------
Total distributions (3.13) (2.73) (1.58) (.68) (.77) (2.52)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $27.53 $26.96 $23.89 $21.43 $15.56 $15.68
====== ====== ====== ====== ====== ======
Total Return(b) 15.32%(c) 26.45% 20.08% 43.80% 4.12% 17.16%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed 1.04%(c) 2.10% 2.10% 1.73% .38% .38%
Expenses, excluding expense reductions and expenses assumed 1.18%(c) 2.35% 2.27% 2.18% 2.76% 3.08%
Net investment income (loss) (.58)%(c) (1.30)% (1.22)% (.84)% .31% .64%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 ----------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
=============================================================================================================================
Net assets, end of period (000) $19,078 $15,384 $10,838 $8,892 $5,442 $4,889
Portfolio turnover rate 25.33%(c) 34.59% 36.97% 48.55% 36.02% 52.63%
=============================================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS. 21
<Page>
FINANCIAL HIGHLIGHTS (CONCLUDED)
MICRO-CAP VALUE FUND
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
(UNAUDITED) 2005 2004 2003 2002 2001
PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES)
NET ASSET VALUE, BEGINNING OF PERIOD $27.17 $24.00 $21.53 $15.63 $15.72 $15.92
====== ====== ====== ====== ====== ======
Investment operations:
Net investment income (loss)(a) (.12) (.26) (.22) (.09) .12 .16
Net realized and unrealized gain 3.89 6.16 4.32 6.73 .59 2.19
------ ------ ------ ------ ------ ------
Total from investment operations 3.77 5.90 4.10 6.64 .71 2.35
------ ------ ------ ------ ------ ------
Distributions to shareholders from:
Net investment income -- -- (.35) (.11) (.08) (.17)
Net realized gain (3.13) (2.73) (1.28) (.63) (.72) (2.38)
------ ------ ------ ------ ------ ------
Total distributions (3.13) (2.73) (1.63) (.74) (.80) (2.55)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $27.81 $27.17 $24.00 $21.53 $15.63 $15.72
====== ====== ====== ====== ====== ======
Total Return(b) 15.48%(c) 26.78% 20.36% 44.35% 4.51% 17.48%
RATIOS TO AVERAGE NET ASSETS:
Expenses, including expense reductions and expenses assumed .91%(c) 1.85% 1.85%+ 1.41% .00% .00%
Expenses, excluding expense reductions and expenses assumed 1.06%(c) 2.11% 2.02%+ 1.86% 2.38% 2.70%
Net investment income (loss) (.47)%(c) (1.06)% (.97)%+ (.52)% .69% 1.02%
</Table>
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED 10/31
4/30/2006 --------------------------------------------
SUPPLEMENTAL DATA: (UNAUDITED) 2005 2004 2003 2002 2001
===========================================================================================================================
Net assets, end of period (000) $3,803 $3,627 $1,763 $ 21 $ 15 $ 14
Portfolio turnover rate 25.33%(c) 34.59% 36.97% 48.55% 36.02% 52.63%
===========================================================================================================================
</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) Not annualized.
22 SEE NOTES TO FINANCIAL STATEMENTS.
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 eight 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 (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.
23
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
(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 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.
For the fiscal year ending October 31, 2006, Lord Abbett has contractually
agreed to reimburse each Fund to the extent necessary so that each class'
annual net operating expenses do not exceed the following annualized rates:
<Table>
<Caption>
CLASS % OF AVERAGE DAILY NET ASSETS
- ----------------------------------------------
A 2.10%
Y 1.85%
</Table>
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%.
Class Y does not have a distribution plan.
One Trustee and certain of the Trust's officers have an interest in Lord
Abbett.
24
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
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 declared and distributed to
shareholders at least annually. The capital loss carryforward amount, if any,
is available to offset future net capital gains. Dividends and distributions
to shareholders are recorded on the ex-dividend date. The amount of dividends
and distributions from net investment income and net realized capital gains
are determined in accordance with Federal income tax regulations which may
differ from accounting principles generally accepted in the United States of
America. These book/tax differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the components of net assets based on
their federal tax basis treatment; temporary differences do not require
reclassification. Dividends and distributions, which exceed earnings and
profits for tax purposes, are reported as a tax return of capital.
The tax character of distributions paid during the six months ended April 30,
2006 and the fiscal year ended October 31, 2005 were as follows:
<Table>
<Caption>
MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND
- --------------------------------------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED 4/30/2006 YEAR ENDED ENDED 4/30/2006 YEAR ENDED
(UNAUDITED) 10/31/2005 (UNAUDITED) 10/31/2005
- --------------------------------------------------------------------------------------------------------------
Distributions paid from:
Ordinary income $303,170 -- $ 63,337 $ 276,855
Net long-term capital gains 655,170 $174,238 2,124,099 1,187,279
- --------------------------------------------------------------------------------------------------------------
Total distributions paid $958,340 $174,238 $2,187,436 $1,464,134
==============================================================================================================
</Table>
As of April 30, 2006, 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 $6,032,357 $17,631,745
- --------------------------------------------------------------------------------
Gross unrealized gain 1,725,976 5,523,428
Gross unrealized loss (296,485) (443,820)
- --------------------------------------------------------------------------------
Net unrealized security gain $1,429,491 $ 5,079,608
================================================================================
</Table>
The difference between book-basis and tax-basis unrealized gains (losses) is
primarily attributable to wash sales and other temporary tax adjustments.
5. PORTFOLIO SECURITIES TRANSACTIONS
Purchases and sales of investment securities (excluding short-term
investments) for the six months ended April 30, 2006 were as follows:
<Table>
<Caption>
PURCHASES SALES
- -----------------------------------------------
Micro-Cap Growth Fund $3,780,055 $4,429,414
Micro-Cap Value Fund 5,333,839 5,080,784
</Table>
There were no purchases or sales of U.S. Government securities for the six
months ended April 30, 2006.
25
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
6. TRUSTEES' REMUNERATION
The Trust's officers and the one Trustee who are associated with Lord Abbett
do not receive any compensation from the Trust for serving in such capacities.
Outside Trustees' fees are allocated among all Lord Abbett-sponsored funds
based on the net assets of each fund. There is an equity based plan available
to all outside Trustees under which outside Trustees must defer receipt of a
portion of, and may elect to defer receipt of an additional portion of
Trustees' fees. The deferred amounts are treated as though equivalent dollar
amounts have been invested proportionately in the funds. Such amounts and
earnings accrued thereon are included in Trustees' Fees on the Statement of
Operations and in Trustees' Fees Payable on the Statement of Assets and
Liabilities and are not deductible for U.S. Federal income tax purposes until
such amounts are paid.
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
The Funds, along with certain other funds managed by Lord Abbett, has
available a $250,000,000 unsecured revolving credit facility ("Facility") from
a consortium of banks, to be used for temporary or emergency purposes as an
additional source of liquidity to fund redemptions of investor shares.
Effective December 9, 2005, the amount available to the funds under the
Facility was increased from $200,000,000 to $250,000,000. Any borrowings under
this Facility will bear interest at current market rates as defined in the
agreement. The fee for this Facility is at an annual rate of .08%. As of April
30, 2006, there were no loans outstanding pursuant to this Facility nor was
the Facility utilized at any time during the six months ended April 30, 2006.
9. CUSTODIAN AND ACCOUNTING AGENT
State Street Bank & Trust Company ("SSB") is the Trust's custodian and
accounting agent. SSB performs custodial, 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
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 each Fund's performance.
26
<Page>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONCLUDED)
11. SUMMARY OF CAPITAL TRANSACTIONS
Transactions in shares of beneficial interest are as follows:
MICRO-CAP GROWTH FUND
<Table>
<Caption>
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2006 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2005
- -------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 13,656 $ 191,293 28,392 $ 365,550
Reinvestment of distributions 61,644 780,421 11,457 144,812
Shares redeemed (42,440) (570,966) (20,850) (268,526)
- -------------------------------------------------------------------------------
Increase 32,860 $ 400,748 18,999 $ 241,836
- -------------------------------------------------------------------------------
CLASS Y SHARES
- -------------------------------------------------------------------------------
Shares sold 32,616 $ 447,245 25,479 $ 344,007
Reinvestment of distributions 13,679 175,771 2,285 29,179
Shares redeemed (12,252) (170,779) (28,014) (372,108)
- -------------------------------------------------------------------------------
Increase (decrease) 34,043 $ 452,237 (250) $ 1,078
- -------------------------------------------------------------------------------
MICRO-CAP VALUE FUND
- -------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 59,928 $ 1,557,104 67,201 $1,619,376
Reinvestment of distributions 73,709 1,783,751 55,594 1,261,412
Shares redeemed (11,261) (290,921) (6,018) (142,627)
- -------------------------------------------------------------------------------
Increase 122,376 $ 3,049,934 116,777 $2,738,161
- -------------------------------------------------------------------------------
CLASS Y SHARES
- -------------------------------------------------------------------------------
Shares sold 37,730 $ 963,118 57,922 $1,442,252
Reinvestment of distributions 16,516 403,167 8,881 202,569
Shares redeemed (50,977) (1,356,645) (6,776) (164,385)
- -------------------------------------------------------------------------------
Increase 3,269 $ 9,640 60,027 $1,480,436
- -------------------------------------------------------------------------------
</Table>
All of the outstanding capital shares of Micro-Cap Growth Fund and Micro-Cap
Value Fund are held by Lord Abbett and partners and employees of Lord Abbett.
27
<Page>
APPROVAL OF ADVISORY CONTRACTS
At meetings on December 7 and 8, 2005, the Board, including all Trustees who
are not interested persons, considered whether to approve the continuation of
the existing management agreements between each of the Funds and Lord Abbett.
In addition to the materials the Board had reviewed throughout the course of
the year, the Board received materials relating to the management agreement
before the meeting and had the opportunity to ask questions and request
further information in connection with its consideration. The Board also took
into account its familiarity with Lord Abbett gained through its previous
meetings and discussions, and the examination of the portfolio management team
conducted by members of the Contract Committee during the year.
The materials received by the Board as to each Fund included, but were not
limited to, (1) information provided by Lipper Analytical Services, Inc.
regarding the investment performance of the Fund compared to the investment
performance of a group of funds with substantially similar investment
objectives (the "performance universe") and to the investment performance of
an appropriate securities index (if such an index existed), for various time
periods each ending September 30, 2005, (2) information on the effective
management fee rates and expense ratios for funds with similar objectives and
similar size (the "peer group"), (3) sales and redemption information for the
Fund, (4) information regarding Lord Abbett's financial condition, (5) an
analysis of the relative profitability of the management agreement to Lord
Abbett, (6) information regarding the distribution arrangements of the Fund,
and (7) information regarding the personnel and other resources devoted by
Lord Abbett to managing the Fund.
The specific considerations as to each Fund are discussed below.
MICRO-CAP GROWTH FUND
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment
management services provided by Lord Abbett to the Fund, including investment
research, portfolio management, and trading, and Lord Abbett's commitment to
compliance with all relevant legal requirements. The Board also observed that
Lord Abbett was solely engaged in the investment management business and
accordingly did not experience the conflicts of interest resulting from being
engaged in other lines of business. The Board noted that Lord Abbett did not
use brokerage commissions to purchase third-party research. The Board also
considered the investment advisory services provided by Lord Abbett to other
clients, the fees charged for the services, and the differences in the nature
of the services provided to the Fund and other Lord Abbett Funds, on the one
hand, and the services provided to other clients, on the other.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's
investment performance as well as the performance of the performance universe
of funds, both in terms of total return and in terms of other statistical
measures. The Board noted the difficulty of comparing the Fund to an
appropriate performance universe, given the limited number of registered
investment companies having a similar investment objective, and considered the
performance of the Fund compared to two different performance universes, the
first consisting of small-cap core funds and the second consisting of small-
cap growth funds. The Board observed that the performance of the Class Y
shares of the Fund was in the fourth quintile of the first performance
universe for the nine-month and five-year periods, in the first quintile for
the one-year period, and in the second quintile in the three-year period. The
Board also observed that the performance was below that of the Lipper Small-
Cap Core Index for the nine-month and five-year periods and above that of the
Index for the one- and three-year periods. The Board also
28
<Page>
observed that the performance was in the fourth quintile of the second
performance universe for the nine-month period ended, and in the first
quintile for the one-, three-, and five-year periods. The Board observed that
the performance was below that of the Lipper Small-Cap Growth Index for the
nine-month period and above that of the Index for the one-, three-, and five-
year periods.
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications
of the personnel providing investment management services to the Fund, in
light of its investment objective and discipline. Among other things, they
considered the size, experience, and turnover rates of Lord Abbett's
investment management staff, Lord Abbett's investment methodology and
philosophy, and Lord Abbett's approach to recruiting, training, and retaining
investment management personnel. The Board determined that Lord Abbett had the
expertise and resources to manage the Fund effectively.
NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature,
quality, costs, and extent of administrative and other services performed by
Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord
Abbett's supervision of third party service providers, including the Fund's
transfer agent and custodian.
EXPENSES. The Board considered the expense ratio of the Fund and the expense
ratios of peer groups. It also considered the amount and nature of the fees
paid by shareholders. The Board noted the difficulty in finding an appropriate
universe of funds for purposes of expense comparisons, given the limited
number of the registered investment companies having a similar investment
objective, and instead considered the relationship of the Fund's expenses to
those of a group of small-cap core funds. The Board observed that the
contractual management and administrative services fees were approximately
sixty-two basis points above the median of the peer group and the actual
management and administrative services fees were approximately sixty-one basis
points above the median of the peer group. The Board observed that Lord Abbett
had implemented an expense cap for the Fund that limited the total expense
ratio of Class A to not more than 2.10% and the total expense ratio of Class Y
to not more than 1.85%. The Board observed that the total expense ratio of
Class A was approximately fifty-nine basis points above the median of the peer
group and the total expense ratio of Class Y was approximately fifty-seven
basis points above the median of the peer group. The Board also observed the
Fund was offered only to institutional investors and to employees of Lord
Abbett.
PROFITABILITY. The Board considered the level of Lord Abbett's profits in
managing the Fund, including a review of Lord Abbett's methodology for
allocating its costs to its management of the Fund. The Board concluded that
the allocation methodology had a reasonable basis and was appropriate. It
considered the profits realized by Lord Abbett in connection with the
operation of the Fund and whether the amount of profit was fair for the
management of the Fund. The Board also considered the profits realized from
other businesses of Lord Abbett, which may benefit from or be related to the
Fund's business. The Board considered Lord Abbett's profit margins in
comparison with available industry data, both accounting for and ignoring
marketing and distribution expenses, and how those profit margins could affect
Lord Abbett's ability to recruit and retain investment personnel. The Board
recognized that Lord Abbett's profitability was a factor in enabling it to
attract and retain qualified investment management personnel to provide
services to the Fund. The Board noted that Lord Abbett's profitability had
increased, in part due to an increase in assets under management, but
concluded that Lord Abbett's profitability overall and with respect to the
Fund was not excessive.
29
<Page>
ECONOMIES OF SCALE. The Board considered whether there had been any economies
of scale in managing the Fund, whether the Fund had appropriately benefited
from any such economies of scale, and whether there was potential for
realization of any further economies of scale. The Board concluded that the
existing advisory fee schedule adequately addressed any economies of scale in
managing the Fund.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount
of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord
Abbett Distributor for services other than investment advisory services. The
Board also considered the revenues and profitability of Lord Abbett's
investment advisory business apart from its mutual fund business, and the
intangible benefits enjoyed by Lord Abbett by virtue of its relationship with
the Fund. The Board observed that Lord Abbett Distributor receives 12b-1 fees
from the Fund as to shares held in accounts for which there is no other broker
of record, may retain a portion of the 12b-1 fees from the Fund and receives a
portion of the sales charges on sales and redemptions of some classes of
shares. In addition, Lord Abbett accrues certain benefits for its business of
providing investment advice to clients other than the Funds, but that that
business also benefits the Fund. The Board also noted that Lord Abbett, as
disclosed in the prospectus of the Fund, has entered into revenue sharing
arrangements with certain entities that distribute shares of the Fund.
ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving
continuation of the management agreement, employing one or more alternative
arrangements might be in the best interests of the Fund, such as continuing to
employ Lord Abbett, but on different terms.
In considering whether to approve the continuation of the management
agreement, the Board did not identify any single factor as paramount or
controlling. This summary does not discuss in detail all matters considered.
After considering all of the relevant factors, the Board unanimously found
that continuation of the existing management agreement was in the best
interests of the Fund and its shareholders and voted unanimously to approve
the continuation of the management agreement.
MICRO-CAP VALUE FUND
INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment
management services provided by Lord Abbett to the Fund, including investment
research, portfolio management, and trading, and Lord Abbett's commitment to
compliance with all relevant legal requirements. The Board also observed that
Lord Abbett was solely engaged in the investment management business and
accordingly did not experience the conflicts of interest resulting from being
engaged in other lines of business. The Board noted that Lord Abbett did not
use brokerage commissions to purchase third-party research. The Board also
considered the investment advisory services provided by Lord Abbett to other
clients, the fees charged for the services, and the differences in the nature
of the services provided to the Fund and other Lord Abbett Funds, on the one
hand, and the services provided to other clients, on the other.
INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's
investment performance as well as the performance of the performance universe
of funds, both in terms of total return and in terms of other statistical
measures. The Board noted the difficulty of comparing the Fund to an
appropriate performance universe, given the limited number of registered
investment companies having a similar investment objective, and considered the
performance of the Fund in relation to to two different performance universes,
the first consisting of small-cap value funds and the second consisting of
small-cap core funds. The Board observed that the performance of the Class Y
shares of the Fund were in the first quintile of both
30
<Page>
performance universe for all periods. The Board also observed that the
performance was above that of the Lipper Small-Cap Core Index and the Lipper
Small-Cap Value Index in each period.
LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications
of the personnel providing investment management services to the Fund, in
light of its investment objective and discipline. Among other things, they
considered the size, experience, and turnover rates of Lord Abbett's
investment management staff, Lord Abbett's investment methodology and
philosophy, and Lord Abbett's approach to recruiting, training, and retaining
investment management personnel. The Board determined that Lord Abbett had the
expertise and resources to manage the Fund effectively.
NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature,
quality, costs, and extent of administrative and other services performed by
Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord
Abbett's supervision of third party service providers, including the Fund's
transfer agent and custodian.
EXPENSES. The Board considered the expense ratio of the Fund and the expense
ratios of peer groups. It also considered the amount and nature of the fees
paid by shareholders. The Board noted the difficulty in finding an appropriate
universe of funds for purposes of expense comparisons, given the limited
number of the registered investment companies having a similar investment
objective, and instead considered the relationship of the Fund's expenses to
those of a group of small-cap core funds. The Board observed that the
contractual management and administrative services fees were approximately
sixty-two basis points above the median of the peer group and the actual
advisory and administrative services fees were approximately seventy basis
points above the median of the peer group. The Board also observed that Lord
Abbett had implemented an expense cap that reduced the total expense ratio of
Class A to 2.10% and the total expense ratio of Class Y to 1.85%. The Board
observed that the total expense ratio of Class A was approximately fifty basis
points above the median of the peer group and the total expense ratio of Class
Y was approximately sixty-five basis points above the median of the peer
group. The Board also observed the Fund was only offered to institutional
investors and to employees of Lord Abbett.
PROFITABILITY. The Board considered the level of Lord Abbett's profits in
managing the Fund, including a review of Lord Abbett's methodology for
allocating its costs to its management of the Fund. The Board concluded that
the allocation methodology had a reasonable basis and was appropriate. It
considered the profits realized by Lord Abbett in connection with the
operation of the Fund and whether the amount of profit was fair for the
management of the Fund. The Board also considered the profits realized from
other businesses of Lord Abbett, which may benefit from or be related to the
Fund's business. The Board considered Lord Abbett's profit margins in
comparison with available industry data, both accounting for and ignoring
marketing and distribution expenses, and how those profit margins could affect
Lord Abbett's ability to recruit and retain investment personnel. The Board
recognized that Lord Abbett's profitability was a factor in enabling it to
attract and retain qualified investment management personnel to provide
services to the Fund. The Board noted that Lord Abbett's profitability had
increased, in part due to an increase in assets under management, but
concluded that Lord Abbett's profitability overall and with respect to the
Fund was not excessive.
ECONOMIES OF SCALE. The Board considered whether there had been any economies
of scale in managing the Fund, whether the Fund had appropriately benefited
from any such economies of scale, and whether there was potential for
realization of any further economies of scale.
31
<Page>
The Board concluded that the existing advisory fee schedule adequately
addressed any economies of scale in managing the Fund.
OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount
of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord
Abbett Distributor for services other than investment advisory services. The
Board also considered the revenues and profitability of Lord Abbett's
investment advisory business apart from its mutual fund business, and the
intangible benefits enjoyed by Lord Abbett by virtue of its relationship with
the Fund. The Board observed that Lord Abbett Distributor receives 12b-1 fees
from the Fund as to shares held in accounts for which there is no other broker
of record, may retain a portion of the 12b-1 fees from the Fund and receives a
portion of the sales charges on sales and redemptions of some classes of
shares. In addition, Lord Abbett accrues certain benefits for its business of
providing investment advice to clients other than the Funds, but that that
business also benefits the Fund. The Board also noted that Lord Abbett, as
disclosed in the prospectus of the Fund, has entered into revenue sharing
arrangements with certain entities that distribute shares of the Fund.
ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving
continuation of the management agreement, employing one or more alternative
arrangements might be in the best interests of the Fund, such as continuing to
employ Lord Abbett, but on different terms.
In considering whether to approve the continuation of the management
agreement, the Board did not identify any single factor as paramount or
controlling. This summary does not discuss in detail all matters considered.
After considering all of the relevant factors, the Board unanimously found
that continuation of the existing management agreement was in the best
interests of the Fund and its shareholders and voted unanimously to approve
the continuation of the management agreement.
32
<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 semiannual 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 each Fund's portfolio securities, and information on as to
how Lord Abbett voted each Fund's proxies during the 12-month period ended
June 30, 2005 are available without charge, upon request, (i) by calling 888-
522-2388; (ii) or 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. Copies of
the filings 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.
33
<Page>
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<Page>
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<Page>
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<Page>
[LORD ABBETT LOGO]
<Table>
<Caption>
This report when not used for the general
information of shareholders of the fund, is to
be distributed only if preceded or accompanied Lord Abbett Securities Trust
by a current fund prospectus. Lord Abbett Micro-Cap Growth Fund
Lord Abbett Micro-Cap Value Fund
Lord Abbett Mutual fund shares are distributed by LAMCVF-3-0406
LORD ABBETT DISTRIBUTOR LLC (0606)
</Table>
<Page>
ITEM 2: CODE OF ETHICS.
Not applicable.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6: SCHEDULE OF INVESTMENTS.
Not applicable.
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8: PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the June 22, 2006 meetings of the Nominating and Governance
Committees (the "Committee") of the Boards of each of the Lord Abbett
Funds, the Committee adopted policies and procedures for the nomination
of independent directors/trustees. The policies and procedures provide
criteria for the nomination of independent directors/trustees, as well
as a process for identifying and evaluating candidates. With respect to
shareholder recommendations, it is the Committee's policy to consider
director/trustee nominations recommended by shareholders using the same
criteria the Committee uses in considering potential director/trustee
nominations from other sources. The Committee believes that
directors/trustees must represent all shareholders and not just a
limited set of shareholders.
ITEM 11: CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the Registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) as of a date within 90 days prior to the filing date of
this report, the Chief Executive Officer and Chief Financial Officer
of the Registrant have concluded that such disclosure controls and
procedures are reasonably designed and effective to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to them by others within those
entities.
(b) There were no significant changes in the Registrant's internal control
over financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) that occurred during the second fiscal
quarter of the period covered by this report that have materially
affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12: EXHIBITS.
(a)(1) Amendments to Code of Ethics - Not applicable.
(a)(2) Certification of each principal executive officer and principal
financial officer of the Registrant as required by Rule 30a-2 under
the Act (17 CFR 270.30a-2) is attached hereto as a part of EX-99.CERT.
(a)(3) Not applicable.
(b) Certification of each principal executive officer and principal
financial officer of the Registrant as required by Section 906 of the
Sarbanes-Oxley Act of 2002 is attached hereto as a part of
EX-99.906CERT.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
LORD ABBETT 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: June 26, 2006
<Page>
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
LORD 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: June 26, 2006