-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q3ZRzQgRzDQm2CzZ06Ltv6YAOD49aeFn60bm1NPSIklg7D36jp/+oK6zAofRgTTq dsc/NlLdaQL5sFb+b2RBEg== 0001047469-04-000038.txt : 20040105 0001047469-04-000038.hdr.sgml : 20040105 20040105101847 ACCESSION NUMBER: 0001047469-04-000038 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20040105 EFFECTIVENESS DATE: 20040105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORD ABBETT SECURITIES TRUST CENTRAL INDEX KEY: 0000898031 IRS NUMBER: 133712440 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07538 FILM NUMBER: 04502158 BUSINESS ADDRESS: STREET 1: 90 HUDSON STREET STREET 2: 11TH FLOOR CITY: JERSEY CITY STATE: NJ ZIP: 07302 BUSINESS PHONE: 201-395-2000 MAIL ADDRESS: STREET 1: 90 HUDSON STREET STREET 2: 11TH FLOOR CITY: JERSEY CITY STATE: NJ ZIP: 07302 N-CSR 1 a2125749zn-csr.txt N-CSR 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 811-7538 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: October 31, 2003 ---------------- ITEM 1: Report to Shareholders. [LORD ABBETT LOGO] 2003 ANNUAL REPORT LORD ABBETT ALL VALUE FUND ALPHA FUND INTERNATIONAL OPPORTUNITIES FUND LARGE-CAP VALUE FUND FOR THE YEAR ENDED OCTOBER 31, 2003 - -------------------------------------------------------------------------------- LORD ABBETT SECURITIES TRUST ANNUAL REPORT FOR THE FISCAL YEAR ENDED OCTOBER 31, 2003 DEAR SHAREHOLDERS: We are pleased to provide you with this twelve-month overview of the Lord Abbett Securities Trust's strategies and performance for the fiscal year ended October 31, 2003. On this and the following pages, we discuss the major factors that influenced performance. Thank you for investing in Lord Abbett Mutual Funds. We value the trust that you place in us and look forward to serving your investment needs in the years to come. BEST REGARDS, /s/ Robert S. Dow ROBERT S. DOW CHAIRMAN - -------------------------------------------------------------------------------- Q: WHAT WERE THE OVERALL MARKET CONDITIONS OF THE REPORTING PERIOD? A: War and general geopolitical concerns had a negative effect on the psyche of businesses and consumers during the first part of the period. Corporations entered the first quarter of 2003 cautiously and remained wary, selling existing inventories and implementing layoffs, as the economy continued to decelerate. The unemployment rate rose during the period, reaching 6.4% by June 2003. But, as the coalition's war effort made clear progress in the early spring, the fog of global uncertainty lifted, and broad equity indices experienced meaningful advances. In June, the Federal Reserve Board (the "Fed") cut interest rates 25 basis points to 1%, in a continued attempt to spark the economy. With interest rates at levels not seen for over 40 years, the Fed is attempting a variety of measures to promote and sustain growth. Over the past year, the U.S. dollar weakened versus the euro. A weaker dollar translates into more competitive pricing for U.S. goods overseas. Additionally, imports became more expensive and less attractive to the U.S. consumer, resulting in higher sales of American-made goods within the U.S.-providing further stimulus for economic growth. During the second quarter of 2003, President Bush signed into law a tax reform/economic stimulus package with accelerated tax cuts and dividend exclusions. The U.S. economy continued to show signs of improvement during the third quarter of 2003, as domestic growth prospects and corporate profits improved. Further evidence of an economic recovery sparked the equity markets, adding to the market gains experienced in the second quarter. For the period, major indices advanced, but concerns over future growth grew as the summer ended. 1 - -------------------------------------------------------------------------------- As the economy entered the final months of 2003, early gross domestic product (GDP) numbers showed that the U.S. economy expanded by an 8.2% rate in the third quarter, well ahead of expectations and up from 3.3% growth in the second quarter. In addition, productivity data, an important gauge for inflation, remained strong and can be an important signal that interest rates may remain low in the near-term. As the period came to a close, October's employment report showed an increase of 126,000 jobs and a lower unemployment rate of 6.0%-an encouraging sign as the economy enters 2004. LORD ABBETT ALL VALUE FUND Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2003? A: For the fiscal year ended October 31, 2003, Lord Abbett All Value Fund returned 23.5%(1), underperforming the Russell 3000(R) Value Index(2), which returned 24.1% over the same period. The Fund, however, outperformed the S&P 500 Index(3), which returned 20.8% for the same period. PLEASE REFER TO PAGE 6 FOR AVERAGE ANNUAL TOTAL RETURNS. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: The Fund's underweight in the financial services sector hurt performance during the last twelve months, as companies within the sector experienced strong performance as general economic activity increased with an improving economy. Stock selection, combined with a sector overweight within the materials and processing sector, aided relative performance for the year. Certain stocks of mining companies performed well, as the price of gold appreciated during the period. In addition, stock selection within the healthcare sector helped performance, as stocks of certain companies engaged in the development and distribution of generic and brand pharmaceutical products appreciated due to record earnings. LORD ABBETT ALPHA FUND Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2003? A: The Alpha Series uses a "fund of funds" approach, which currently divides assets among the Lord Abbett Developing Growth Fund, Lord Abbett Securities Trust-Lord Abbett International Opportunities Fund (formerly International Series) and Lord Abbett Small-Cap Value Fund. For the fiscal year ended October 31, 2003, Lord Abbett Securities Trust-Alpha Series returned 36.6%,(1) underperforming its benchmark, the Citigroup Small-Cap World Index(4), which returned 44.6% for the same period. PLEASE REFER TO PAGE 7 FOR AVERAGE ANNUAL TOTAL RETURNS. 2 - -------------------------------------------------------------------------------- LORD ABBETT DEVELOPING GROWTH FUND COMPONENT (APPROXIMATELY 30.0% OF ALPHA SERIES) Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: Stock selection within the healthcare sector was the primary detractor from relative performance. Within the sector, certain holdings underperformed after posting lower revenue and net income. Stock selection within materials and processing also detracted from performance, as some holdings reported losses from lower commodity prices. In addition, while absolute performance in the Lord Abbett Developing Growth Fund was strong, stock selection in the technology sector hurt relative performance. During the period, the Lord Abbett Developing Growth Fund gained from stock selection in the consumer discretionary sector, as certain holdings within the retail and apparel industry benefited from renewed optimism over consumer spending and strong earnings. In addition, the Fund benefited from an underweight in the financial services sector, as the sector failed to keep pace with the rest of the index. LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND COMPONENT (APPROXIMATELY 40.0% OF ALPHA SERIES) See discussion below about Lord Abbett International Opportunities Fund. LORD ABBETT SMALL-CAP VALUE FUND COMPONENT (APPROXIMATELY 30.0% OF ALPHA SERIES) Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: During the period, the Lord Abbett Small-Cap Value Fund was negatively impacted by stock selection in the consumer discretionary sector. While the Fund's absolute return in this sector was strong, the performance lagged the Fund's benchmark, the Russell 2000(R) Value Index.(5) Stock selection in the energy sector also contributed negatively to the Fund's performance, as certain holdings experienced greater-than-expected losses. The largest positive contributor to performance during the fiscal year was stock selection within the materials & processing sector, where certain holdings benefited from lower expenses and improving margins. In addition, the Fund benefited from holdings in the auto and transportation sector, as strong earnings outlooks propelled certain Fund holdings. An underweight and stock selection in the financial services sector also helped the Fund's performance. LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND (FORMERLY INTERNATIONAL SERIES) Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2003? A: For the fiscal year ended October 31, 2003, Lord Abbett International 3 - -------------------------------------------------------------------------------- Opportunities Fund returned 35.1%(1), outperforming the MSCI-EAFE Index(6), which returned 27.6% over the same period. Please refer to page 8 for Average Annual Total Returns. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: Stock selection in the financial sector benefited Fund performance, as stocks of companies in Australian and European insurers and banks outperformed. Stock selection in the materials sector was also a positive, as higher gold prices drove certain holdings. The Fund's performance was hurt from poor stock selection in the information technology and consumer discretionary sectors. While certain of the Fund's technology holdings performed well in absolute terms, the Fund held higher quality names that rallied less than the sector. In the consumer discretionary sector, the Fund's performance was hurt by holdings in European retailers whose growth prospects disappointed investors. LORD ABBETT LARGE-CAP VALUE FUND Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2003? A: The Fund became available to the public on June 30, 2003. For the period from June 30, 2003 to October 31, 2003, Lord Abbett Large-Cap Value Fund returned 8.4%(1), underperforming the S&P 500/Barra Value Index (7), which returned 9.6% over the same period. The Fund, however, outperformed the Lipper Large-Cap Value Average(8), which returned 7.6% for the period. Standardized Average Annual Total Return for the period ended October 31, 2003 is 2.19% (since June 30, 2003). This reflects performance of Class A shares at the maximum sales charge of 5.75% with all distributions reinvested. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: Stock selection in the healthcare sector detracted from performance, as lower earnings and sales guidance negatively impacted Fund holdings. In addition, stock selection in the consumer staples sector hurt the Fund's performance. Certain stocks in the sector declined as popular culture moved away from some food products into healthier snack alternatives. Stock selection in the energy sector also detracted from performance. For the period, the Fund's overweight exposure to the materials sector added to performance, as rising gold prices and a better economic environment created optimism in the stocks of materials companies. The Fund's stock selection in the industrial sector also benefited performance for the period, as certain holdings experienced stronger earnings in an improving economy. In addition, stock selection in the financial section added to performance. 4 - -------------------------------------------------------------------------------- (1) Reflects performance at the Net Asset Value (NAV) of Class A shares, with all distributions reinvested, for the fiscal year ended October 31, 2003. (2) The Russell 3000(R) Value Index measures the performance of those Russell 3000(R) Index companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this index are also members of either the Russell 1000(R) Value or the Russell 2000(R) Value indices. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. (3) The S&P 500 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. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. (4) The Citigroup Small-Cap World Index is a subset of the Global Citigroup Broad Market Index (BMI). (5) The Russell 2000(R) Value Index measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. (6) The Morgan Stanley Capital International (MSCI) - Europe, Australasia and Far East (EAFE) Index is an unmanaged capitalization index representing the industry composition and a sampling of small, medium and large capitalization companies from the aforementioned global markets. It is a Morgan Stanley International Index that includes stocks traded on 21 exchanges in Europe, Australasia and the Far East. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. (7) The S&P 500/Barra Growth and Value Indices are constructed by dividing the stocks in an index according to a single attribute: price-to-book ratios. This splits the S&P 500 Index into two mutually exclusive indices designed to track two of the predominant investment styles in the U.S. equity market. The Value Index contains companies with lower price-to-book ratios; conversely, the Growth Index containing firms with higher price-to-book ratios. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. (8) Lipper Inc. is a nationally recognized organization that reports on mutual fund total return performance and calculates fund rankings. Peer averages are based on universes of funds with similar investment objectives. Peer group averages include reinvested dividends and capital gains, if any, and exclude sales charges. IMPORTANT PERFORMANCE AND OTHER INFORMATION The views of each Fund's management and the portfolio holdings described in this report are as of October 31, 2003; 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 Funds' Prospectus. PERFORMANCE: PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. BECAUSE OF ONGOING MARKET VOLATILITY, FUND PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL FLUCTUATION. The investment return and principal value of an investment in each Fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. Except where noted, comparative fund performance does not account for the deduction of sales charges and would be different if sales charges were included. Each Fund offers additional classes of shares with distinct pricing options. For a full description of the differences in pricing alternatives, please see the Prospectus. Each Fund is actively managed and, as a result, asset allocation may change. Sectors may include many industries. 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. FOR FURTHER UPDATED PERFORMANCE INFORMATION, PLEASE CALL LORD ABBETT AT 800-821-5129 OR REFER TO OUR WEBSITE AT www.lordabbett.com. FOR MORE COMPLETE INFORMATION ABOUT THIS OR ANY LORD ABBETT MUTUAL FUND, INCLUDING RISKS, INVESTMENT OBJECTIVES, CHARGES AND ONGOING EXPENSES, PLEASE CALL YOUR INVESTMENT PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 888-522-2388 FOR A PROSPECTUS. AN INVESTOR SHOULD READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 5 ALL VALUE FUND - -------------------------------------------------------------------------------- INVESTMENT COMPARISON Below is a comparison of a $10,000 investment in Class C shares with the same investment in the S&P 500/Barra Value Index and Russell 3000(R) Value Index, assuming reinvestment of all dividends and distributions. The performance of other classes will be greater than or less than the performance shown in the graph below due to different sales loads and expenses applicable to such classes. The graph and performance table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. [CHART]
THE FUND (CLASS C SHARES) AT NET ASSET VALUE(1) S&P 500/BARRA VALUE INDEX(2) RUSSELL 3000 VALUE INDEX(2) Jan-1994 $ 10,000 $ 10,000 $ 10,000 Oct-1994 $ 10,262 $ 10,231 $ 10,083 Oct-1995 $ 12,502 $ 12,586 $ 12,481 Oct-1996 $ 15,006 $ 15,684 $ 15,386 Oct-1997 $ 18,901 $ 20,343 $ 20,553 Oct-1998 $ 20,968 $ 22,732 $ 23,141 Oct-1999 $ 25,791 $ 27,053 $ 26,676 Oct-2000 $ 28,561 $ 29,672 $ 28,360 Oct-2001 $ 26,362 $ 24,206 $ 25,356 Oct-2002 $ 24,142 $ 20,386 $ 22,963 Oct-2003 $ 29,622 $ 25,446 $ 28,488
FISCAL YEAR-END 10/31 AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2003
1 YEAR 5 YEARS LIFE OF CLASS CLASS A(3) 16.38% 6.50% 11.27% CLASS B(4) 18.77% 7.00% 8.40% CLASS C(5) 22.70% 7.16% 11.69% CLASS P(6) 23.30% - 1.31%
(1) This shows total return applicable to Class C shares, with all dividends and distributions reinvested for the periods shown ended October 31, 2003, using the SEC-required uniform method to compute such return. (2) Performance of the unmanaged indices does not reflect any transaction costs, management fees or sales charges. The performance of the indices is not necessarily representative of the Fund's performance. Performance for the Indices begins on December 31, 1993. (3) Class A shares commenced operations on July 15, 1996. Total Return, which is the percentage change in net asset value, after deduction of the maximum initial sales charge of 5.75% applicable to Class A Shares, with all dividends and distributions reinvested for the periods shown ended October 31, 2003, using the SEC-required uniform method to compute such return. (4) Class B shares commenced operations on June 5, 1997. Performance reflects the deduction of a CDSC of 4% for 1 year, 1% for 5 years, and 0% for the life of the class. (5) Class C shares commenced operations on January 3, 1994. Performance is at net asset value. The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. (6) Class P shares commenced operations on August 15, 2001. Performance is at net asset value. 6 ALPHA FUND - -------------------------------------------------------------------------------- INVESTMENT COMPARISON Below is a comparison of a $10,000 investment in Class A shares with the same investment in the Citigroup Small-Cap World Index assuming reinvestment of all dividends and distributions. The performance of other classes will be greater than or less than the performance shown in the graph below due to different sales loads and expenses applicable to such classes. The graph and performance table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. [CHART]
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES) AT NET ASSET VALUE AT MAXIMUM OFFERING PRICE(1) CITIGROUP SMALL-CAP WORLD INDEX(2) 3/18/98 $ 10,000 $ 9,425 $ 10,000 10/31/98 $ 8,308 $ 7,830 $ 8,484 10/31/99 $ 9,788 $ 9,226 $ 10,140 10/31/2000 $ 11,463 $ 10,804 $ 10,983 10/31/2001 $ 8,865 $ 8,355 $ 9,572 10/31/2002 $ 7,587 $ 7,151 $ 9,069 10/31/2003 $ 10,363 $ 9,767 $ 13,112
FISCAL YEAR-END 10/31 AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2003
1 YEAR 5 YEAR LIFE OF CLASS CLASS A(3) 28.71% 3.29% -.42% CLASS B(4) 31.62% 3.68% -.18% CLASS C(5) 35.62% 3.84% -.02%
(1) Reflects the deduction of the maximum initial sales charge of 5.75%. (2) Performance of the unmanaged Index does not reflect transaction costs, management fees or sales charges. The performance of the Index is not necessarily representative of the Fund's performance. Performance for the Index begins on March 31, 1998. (3) Class A shares commenced operations on March 18, 1998. Total Return, which is the percentage change in net asset value, after deduction of the maximum initial sales charge of 5.75% applicable to Class A Shares, with all dividends and distributions reinvested for the periods shown ended October 31, 2003, using the SEC-required uniform method to compute such return. (4) Class B shares commenced operations on March 18, 1998. Performance reflects the deduction of a CDSC of 4% for 1 year and 1% for the life of the class. (5) Class C shares commenced operations on March 18, 1998. The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance is at net asset value. 7 INTERNATIONAL OPPORTUNITIES FUND - -------------------------------------------------------------------------------- INVESTMENT COMPARISON Below is a comparison of a $10,000 investment in Class A shares with the same investment in the Citigroup Small-Cap World ex-US Index, assuming reinvestment of all dividends and distributions. The performance of other classes will be greater than or less than the performance shown in the graph below due to different sales loads and expenses applicable to such classes. The graph and performance table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. [CHART]
THE FUND (CLASS A SHARES) THE FUND (CLASS A SHARES) AT NET ASSET VALUE AT MAXIMUM OFFERING PRICE(1) CITIGROUP SMALL CAP WORLD EX-U.S. INDEX(2) Dec 13, 96 $ 10,000 $ 9,425 $ 10,000 Oct 31, 97 $ 11,516 $ 10,854 $ 9,300 Oct 31, 98 $ 13,169 $ 12,411 $ 8,800 Oct 31, 99 $ 14,902 $ 14,045 $ 10,728 Oct 31, 2000 $ 16,536 $ 15,585 $ 10,417 Oct 31, 2001 $ 8,943 $ 8,429 $ 8,754 Oct 31, 2002 $ 7,219 $ 6,804 $ 8,418 Oct 31, 2003 $ 9,750 $ 9,190 $ 12,660
FISCAL YEAR-END 10/31 AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2003
1 YEAR 5 YEAR LIFE OF CLASS CLASS A(3) 27.36% -6.95% -1.23% CLASS B(4) 29.89% -6.64% -2.38% CLASS C(5) 34.67% -6.38% -2.31% CLASS P(6) 35.17% - -6.83% CLASS Y(7) 35.22% -5.49% -3.15%
(1) Reflects the deduction of the maximum initial sales charge of 5.75%. (2) Performance of the unmanaged Index does not reflect transaction costs, management fees or sales charges. The performance of the Index is not necessarily representative of the Fund's performance. Performance for the Index begins on December 31, 1996. (3) Class A shares commenced operations on December 13, 1996. Total Return, which is the percentage change in net asset value, after deduction of the maximum initial sales charge of 5.75% applicable to Class A shares, with all dividends and distributions reinvested for the periods shown ended October 31, 2003, using the SEC-required uniform method to compute such return. (4) Class B shares commenced operations on June 2, 1997. Performance reflects the deduction of a CDSC of 4% for 1 year, 1% for 5 years, and 0% for the life of the class. (5) Class C shares commenced operations on June 2, 1997. The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance is at net asset value. (6) Class P shares commenced operations on March 9, 1999. Performance is at net asset value. (7) Class Y shares commenced operations on December 30, 1997. Performance is at net asset value. 8 SCHEDULE OF INVESTMENTS ALL VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- COMMON STOCKS 92.81% ADVERTISING AGENCY 0.63% Interpublic Group of Cos., Inc.* 320,000 $ 4,762 ---------- AGRICULTURE FISHING & RANCHING 0.76% Delta & Pine Land Co. 137,000 3,132 Monsanto Co. 104,000 2,605 ---------- TOTAL 5,737 ---------- AIR TRANSPORTATION 0.30% Alaska Air Group, Inc.* 36,100 1,039 AMR Corp.* 25,000 332 Southwest Airlines Co. 45,300 879 ---------- TOTAL 2,250 ---------- ALUMINUM 1.70% Alcoa, Inc. 407,000 12,849 ---------- AUTO PARTS: AFTER MARKET 0.64% Genuine Parts Co. 152,000 4,837 ---------- AUTO PARTS: ORIGINAL EQUIPMENT 1.40% American Axle & Mfg Holdings* 110,000 3,806 Borg Warner, Inc. 52,000 4,138 Dana Corp. 160,000 2,605 ---------- TOTAL 10,549 ---------- BANKS: OUTSIDE NEW YORK CITY 6.73% Bank One Corp. 280,000 11,886 Cullen/Frost Bankers, Inc. 194,000 7,519 Doral Financial Corp.(a) 147,700 7,459 FleetBoston Financial Corp. 46,000 1,858 MBNA Corp. 119,460 $ 2,957 Wachovia Corp. 194,600 8,926 Wells Fargo & Co. 180,000 10,138 ---------- TOTAL 50,743 ---------- BEVERAGE: SOFT DRINKS 1.65% PepsiCo, Inc. 259,900 12,428 ---------- CABLE TELEVISION SERVICES 1.43% Viacom, Inc. 270,000 10,765 ---------- CHEMICALS 3.09% E.I. du Pont de Nemours & Co. 155,000 6,262 Eastman Chemical Co. 85,000 2,759 OM Group, Inc.* 194,500 3,481 Praxair, Inc. 110,000 7,654 Rohm & Haas Co. 80,000 3,144 ---------- TOTAL 23,300 ---------- COMPUTER SERVICES SOFTWARE & SYSTEMS 1.27% Cadence Design Systems, Inc.* 235,000 3,617 Electronics for Imaging, Inc.* 81,800 2,217 Reynolds & Reynolds 138,000 3,748 ---------- TOTAL 9,582 ---------- COMPUTER TECHNOLOGY 3.42% Apple Computer, Inc.* 675,000 15,451 EMC Corp.* 414,900 5,742 Zebra Technologies Corp. Class A* 81,150 4,621 ---------- TOTAL 25,814 ---------- CONSUMER ELECTRONICS 0.29% Take-Two Interactive Software, Inc.* 55,000 2,175 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 9 SCHEDULE OF INVESTMENTS (CONTINUED) ALL VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- CONSUMER PRODUCTS 0.52% Yankee Candle Co.* 140,000 $ 3,917 ---------- CONTAINERS & PACKAGING: PAPER & PLASTIC 0.75% Pactiv Corp.* 255,000 5,623 ---------- COPPER 0.21% Mueller Industries, Inc.* 50,000 1,578 ---------- DIVERSIFIED FINANCIAL SERVICES 3.19% Citigroup, Inc. 350,000 16,590 Merrill Lynch & Co., Inc. 125,500 7,430 ---------- TOTAL 24,020 ---------- DIVERSIFIED MANUFACTURING 1.01% Georgia-Pacific Corp. 290,000 7,621 ---------- DRUGS & PHARMACEUTICALS 3.91% Merck & Co., Inc. 108,000 4,779 Mylan Laboratories, Inc. 40,700 983 Novartis AG-ADR 215,900 8,284 Schering-Plough Corp. 635,000 9,696 Wyeth 130,000 5,738 ---------- TOTAL 29,480 ---------- ELECTRICAL EQUIPMENT & COMPONENTS 0.68% Emerson Electric Co. 60,000 3,405 Technitrol, Inc.* 79,000 1,722 ---------- TOTAL 5,127 ---------- ELECTRONICS 0.65% Vishay Intertechnology, Inc.* 262,300 4,918 ---------- ELECTRONICS: INSTRUMENTS GAUGES & METERS 0.38% Dionex Corp.* 67,000 2,850 ---------- ELECTRONICS: MEDICAL SYSTEMS 0.27% Haemonetics Corp.* 89,500 $ 2,064 ---------- ELECTRONICS: TECHNOLOGY 2.14% Intermagnetics General Corp.* 40,000 942 Motorola, Inc. 1,120,000 15,153 ---------- TOTAL 16,095 ---------- ENTERTAINMENT 2.31% The Walt Disney Co. 768,800 17,406 ---------- FERTILIZERS 0.63% Potash Corp. of Saskatchewan(a) 60,000 4,724 ---------- FINANCE COMPANIES 1.57% Mellon Financial Corp. 309,400 9,242 Quanta Capital Holdings* 260,000 2,626 ---------- TOTAL 11,868 ---------- FOODS 2.42% General Mills, Inc. 120,500 5,404 Kraft Foods, Inc. Class A 167,935 4,887 Smithfield Foods, Inc.* 374,400 7,960 ---------- TOTAL 18,251 ---------- FOREST PRODUCTS 0.14% Weyerhaeuser Co. 18,000 1,084 ---------- GOLD 1.70% Newmont Mining Corp. 292,000 12,784 ---------- HEALTHCARE FACILITIES 0.49% Manor Care, Inc. 110,000 3,661 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 10 SCHEDULE OF INVESTMENTS (CONTINUED) ALL VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- HEALTHCARE MANAGEMENT SERVICES 0.48% Caremark Rx, Inc.* 27,780 $ 696 Sierra Health Services, Inc.* 125,000 2,911 ---------- TOTAL 3,607 ---------- IDENTIFICATION CONTROL & FILTER DEVICES 0.99% Hubbell, Inc. 135,000 5,784 IDEX Corp. 46,000 1,710 ---------- TOTAL 7,494 ---------- INSURANCE: MULTI-LINE 2.17% American Int'l Group, Inc. 115,000 6,995 Markel Corp.* 19,800 4,997 SAFECO Corp. 118,500 4,349 ---------- TOTAL 16,341 ---------- INSURANCE: PROPERTY-CASUALTY 1.54% Odyssey Re Holdings Corp. 255,900 5,369 XL Capital Ltd. Class A(a) 89,500 6,220 ---------- TOTAL 11,589 ---------- MACHINERY: AGRICULTURAL 2.66% Deere & Co. 331,300 20,083 ---------- MACHINERY: ENGINES 1.16% Briggs & Stratton Corp. 81,000 5,266 Cummins, Inc. 73,500 3,484 ---------- TOTAL 8,750 ---------- MACHINERY: INDUSTRIAL/ SPECIALTY 0.94% Illinois Tool Works, Inc. 74,100 5,450 Woodward Governor Co. 36,000 1,665 ---------- TOTAL 7,115 ---------- MACHINERY: OIL WELL EQUIPMENT & SERVICES 2.31% Baker Hughes, Inc. 60,000 $ 1,696 Grant Prideco, Inc.* 190,000 2,155 Grey Wolf, Inc.* 800,000 2,568 Halliburton Co. 130,000 3,104 Helmerich & Payne, Inc. 85,000 2,253 Pride Int'l., Inc.* 241,700 3,959 Schlumberger Ltd. 35,000 1,644 ---------- TOTAL 17,379 ---------- MACHINERY: SPECIALTY 0.13% JLG Industries, Inc. 83,700 999 ---------- MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 0.99% Bausch & Lomb, Inc. 126,300 6,083 ICU Medical, Inc.* 42,000 1,419 ---------- TOTAL 7,502 ---------- MEDICAL SERVICES 0.27% Covance, Inc.* 77,400 2,015 ---------- METAL FABRICATING 1.61% Quanex Corp. 167,100 6,692 The Timken Co. 325,000 5,454 ---------- TOTAL 12,146 ---------- METALS & MINERALS MISCELLANEOUS 0.46% Graftech Int'l Ltd.* 332,100 3,451 ---------- MILLING: FRUIT AND GRAIN PROCESSING 0.72% Archer-Daniels- Midland Co. 380,000 5,453 ---------- MISCELLANEOUS EQUIPMENT 0.92% W.W. Grainger, Inc. 152,300 6,972 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 11 SCHEDULE OF INVESTMENTS (CONTINUED) ALL VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- MISCELLANEOUS MATERIALS & PROCESSING 0.19% Rogers Corp.* 35,000 $ 1,399 ---------- MULTI-SECTOR COMPANIES 2.70% 3M Co. 31,200 2,461 Eaton Corp. 92,000 9,222 Tyco Int'l., Ltd.(a) 415,000 8,665 ---------- TOTAL 20,348 ---------- OFFICE FURNITURE & BUSINESS EQUIPMENT 0.86% Xerox Corp.* 615,000 6,458 ---------- OIL: CRUDE PRODUCERS 0.94% Chesapeake Energy Corp. 115,000 1,372 EOG Resources, Inc. 77,400 3,262 Westport Resources Corp.* 101,400 2,427 ---------- TOTAL 7,061 ---------- OIL: INTEGRATED INTERNATIONAL 4.45% ChevronTexaco Corp. 39,200 2,912 Exxon Mobil Corp. 837,012 30,618 ---------- TOTAL 33,530 ---------- PAPER 1.51% International Paper Co. 165,064 6,495 Meadwestvaco Corp. 190,000 4,925 ---------- TOTAL 11,420 ---------- PUBLISHING: NEWSPAPERS 1.78% Journal Register Co.* 107,800 2,159 Tribune Co. 230,000 11,282 ---------- TOTAL 13,441 ---------- RADIO & TV BROADCASTERS 0.99% Clear Channel Communications, Inc. 182,500 7,450 ---------- RAILROADS 0.94% CSX Corp. 222,000 $ 7,064 ---------- REAL ESTATE INVESTMENT TRUSTS 0.43% Host Marriott Corp.* 306,800 3,206 ---------- RESTAURANTS 0.41% Yum! Brands, Inc.* 90,000 3,073 ---------- RETAIL 4.02% Barnes & Noble, Inc.* 90,000 2,682 Foot Locker, Inc. 60,000 1,074 J.C. Penney Co., Inc. 152,000 3,595 Limited Brands, Inc. 470,000 8,272 Pier 1 Imports, Inc. 300,000 6,930 Target Corp. 194,200 7,717 ---------- TOTAL 30,270 ---------- SAVINGS & LOAN 0.12% Webster Financial Corp. 21,000 939 ---------- SERVICES: COMMERCIAL 0.43% Waste Management, Inc. 125,000 3,240 ---------- SHOES 0.90% NIKE, Inc. Class B 106,000 6,773 ---------- SOAPS & HOUSEHOLD CHEMICALS 1.21% Gillette Co. 285,000 9,092 ---------- TELECOMMUNICATIONS EQUIPMENT 0.32% Arris Group, Inc.* 103,000 618 C-Cor.Net Corp.* 175,300 1,767 ---------- TOTAL 2,385 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 12 SCHEDULE OF INVESTMENTS (CONTINUED) ALL VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- TOYS 0.51% Hasbro, Inc. 177,500 $ 3,870 ---------- UTILITIES: CABLE TV & RADIO 1.43% Comcast Corp.* 329,975 10,764 ---------- UTILITIES: ELECTRICAL 2.01% Ameren Corp. 112,200 5,010 CMS Energy Corp.* 420,000 3,410 Progress Energy, Inc. 156,000 6,724 ---------- TOTAL 15,144 ---------- UTILITIES: TELECOMMUNICATIONS 2.47% SBC Communications, Inc. 240,000 5,755 Verizon Communications, Inc. 382,000 12,835 ---------- TOTAL 18,590 ---------- UTILITIES: WATER 0.56% Philadelphia Suburban Corp. 180,000 4,252 ---------- TOTAL COMMON STOCKS (Cost $615,614,746) 699,527 ========== PRINCIPAL AMOUNT VALUE INVESTMENTS (000) (000) - -------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT 6.45% REPURCHASE AGREEMENT 6.45% Repurchase Agreement dated 10/31/2003, 0.99% due 11/3/2003 with State Street Bank & Trust Co. collateralized by $1,635,000 of Federal Home Loan Mortgage Corp. at 1.20% due 8/6/2004 and $46,590,000 of Federal Home Loan Bank at 3.25% due 8/15/2005; value: $49,584,069; proceeds: $48,608,425 (Cost $48,604,415) $ 48,604 $ 48,604 ========== TOTAL INVESTMENTS 99.26% (Cost $664,219,161) $ 748,131 ==========
* Non-income producing security. (a) Foreign security traded in U.S. dollars. SEE NOTES TO FINANCIAL STATEMENTS. 13 SCHEDULE OF INVESTMENTS ALPHA FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- INVESTMENTS IN UNDERLYING FUNDS 99.43% Lord Abbett Developing Growth Fund, Inc. - Class Y*(a) 2,598,664 $ 39,968 Lord Abbett Research Fund, Inc. Small-Cap Value Fund - Class Y*(b) 1,594,581 39,769 Lord Abbett Securities Trust-International Opportunities Fund - Class Y(b) 6,236,260 53,195 ---------- TOTAL INVESTMENTS IN UNDERLYING FUNDS (Cost $141,363,542) 132,932 ========== PRINCIPAL AMOUNT VALUE INVESTMENTS (000) (000) - -------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT 0.66% REPURCHASE AGREEMENT 0.66% Repurchase Agreement dated 10/31/2003, 0.99% due 11/3/2003 with State Street Bank & Trust Co. collateralized by $905,000 of Federal Home Loan Mortgage Corp. at 1.25% due 8/27/2004; value: $907,702; proceeds: $888,300 (Cost $888,227) $ 888 $ 888 ========== TOTAL INVESTMENTS 100.09% (Cost $142,251,769) $ 133,820 ==========
* 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. SCHEDULE OF INVESTMENTS INTERNATIONAL OPPORTUNITIES FUND+ OCTOBER 31, 2003
U.S.$ VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- COMMON STOCKS 93.87% AUSTRALIA 8.71% Amcor Ltd. 300,700 $ 1,814 James Hardie Industries N.V.* 336,500 1,712 Newcrest Mining Ltd. 354,900 3,042 Promina Group Ltd. 1,001,400 2,359 QBE Insurance Group Ltd.^ 256,100 1,872 Santos Ltd. 255,900 1,109 ---------- TOTAL 11,908 ---------- BELGIUM 1.35% Colruyt N.V. 20,400 $ 1,850 ---------- CANADA 3.00% Cognos, Inc.* 60,500 2,089 Cott Corp.* 77,200 2,011 ---------- TOTAL 4,100 ---------- CHINA 1.22% People's Food Holdings Ltd.^ 1,294,000 825 United Food Holdings Ltd.^ 2,580,531 837 ---------- TOTAL 1,662 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 14 SCHEDULE OF INVESTMENTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND+ OCTOBER 31, 2003
U.S.$ VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- FRANCE 9.18% Imerys S.A.^ 10,700 $ 2,052 IPSOS^ 27,800 2,346 Neopost S.A. 48,550 2,411 Publicis Groupe^ 59,300 1,854 SR Teleperformance 100,369 1,908 Zodiac S.A. 67,300 1,989 ---------- TOTAL 12,560 ---------- GERMANY 6.21% Continental AG 70,400 2,398 Eigner US*~ 997,900 --(a) Medion AG^ 43,400 1,937 Prosieben Sat.1 Media AG-Pfd 95,800 1,459 Puma AG 18,650 2,693 ---------- TOTAL 8,487 ---------- GREECE 2.40% Opap 138,200 1,703 Vodafone Panafon S.A. 226,300 1,578 ---------- TOTAL 3,281 ---------- HONG KONG 5.23% Dah Sing Financial 273,422 1,910 Esprit Holdings Ltd. 620,700 1,950 Hong Kong Exchanges & Clear 750,800 1,634 Smartone Telecommunications 1,021,500 1,657 ---------- TOTAL 7,151 ---------- IRELAND 1.97% Anglo Irish Bank Corp. plc 224,800 2,700 ---------- ITALY 4.74% Alleanza Assicurazioni^ 116,825 1,169 Credito Emiliano S.P.A. 255,500 1,702 Davide Campari-Milano S.P.A. 42,300 $ 1,819 Merloni Elettrodomestici 106,500 1,795 ---------- TOTAL 6,485 ---------- JAPAN 23.17% Alps Electric Co. Ltd.^ 93,200 1,562 Arisawa Mfg Co. Ltd. 35,200 1,406 Casio Computer Co. Ltd.^ 205,700 1,832 Daikin Industries Ltd. 81,100 1,730 Don Quijote Co. Ltd.^ 34,000 1,828 Goodwill Group, Inc. 212 1,527 KOSE Corp.^ 44,800 1,430 Matsumotokiyoshi Co. Ltd.^ 34,000 1,710 Misumi Corp. 30,600 1,394 Mitsui Mining & Smelting Co. 350,000 1,401 Nikon Corp.* 158,200 2,402 Nitori Co. Ltd.^ 24,700 1,575 Nitto Denko Corp. 50,070 2,628 Park24 Co. Ltd. 94,100 2,011 Stanley Electronic Co. Ltd. 118,700 2,527 THK Co. Ltd.^ 67,300 1,365 Uni-Charm Corp. 33,250 1,552 Yamaha Motor Co., Ltd.^ 159,800 1,813 ---------- TOTAL 31,693 ---------- RUSSIA 1.68% Vimpelcom - SP ADR*^ 35,300 2,298 ---------- SINGAPORE 2.46% Great Eastern Holdings, Ltd.^ 234,400 1,495 Venture Corp. 172,000 1,867 ---------- TOTAL 3,362 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 15 SCHEDULE OF INVESTMENTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND+ OCTOBER 31, 2003
U.S.$ VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- SOUTH KOREA 0.31% NHN Corp. 3,300 $ 422 ---------- SPAIN 6.96% Corporacion Mapfre S.A. 165,550 2,063 Grupo Ferrovial S.A.^ 59,100 1,687 Iberia Lineas Aereas de Espana S.A.^ 903,700 2,206 Indra Sistemas, S.A. 148,800 1,675 Prosegur, Compania de Seguridad S.A. 115,802 1,885 ---------- TOTAL 9,516 ---------- SWEDEN 1.38% Getinge AG 51,500 1,885 ---------- SWITZERLAND 2.61% Geberit AG* 4,815 1,983 Nobel Biocare Hldgs. AG 17,900 1,589 ---------- TOTAL 3,572 ---------- UNITED KINGDOM 11.29% Aegis Group plc 1,065,500 1,804 Cattles plc 308,100 1,668 Close Brothers Group plc 154,650 1,896 HIT Entertainment plc 393,500 1,830 ICAP plc 80,000 1,878 Jarvis plc 148,000 609 Lastminute.com plc* 275,300 1,385 Man Group plc 82,300 2,024 Michael Page Int'l 119,180 372 Next plc 98,500 1,972 ---------- TOTAL 15,438 ---------- TOTAL COMMON STOCKS (Cost $99,511,542) 128,370 ========== SHORT-TERM INVESTMENTS 18.62% COLLATERAL FOR SECURITIES ON LOAN 18.35% State Street Navigator Securities Lending Prime Portfolio, 1.04%(b) 25,100 $ 25,100 ---------- PRINCIPAL AMOUNT (000) ----- REPURCHASE AGREEMENT 0.27% Repurchase Agreement dated 10/31/2003, 0.99% due 11/3/2003 with State Street Bank & Trust Co. collateralized by $380,000 of Federal Home Loan Mortgage Corp. at zero coupon due 12/18/2003; value: $379,525; proceeds: $370,906 $ 371 371 TOTAL SHORT-TERM INVESTMENTS (Cost $25,471,269) 25,471 ========== TOTAL INVESTMENTS 112.49% (Cost $124,982,811) $ 153,841 ==========
+ Formerly International Series. * Non-income producing security. ^ Security (or a portion of security) on loan. See note 5. ~ Fair valued security. See note 2a. (a) Value is less than $1,000. (b) Rate shown reflects 7 day yield as of October 31, 2003. Pfd-Preferred Shares. ADR-American Depository Receipt. SEE NOTES TO FINANCIAL STATEMENTS. 16 SCHEDULE OF INVESTMENTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND+ OCTOBER 31, 2003 - -------------------------------------------------------------------------------- SECURITIES PRESENTED BY INDUSTRY (UNAUDITED): Aerospace & Defense 1.45% Air Transportation 1.61 Autos & Auto Parts 4.93 Banks & Financial Services 1.97 Chemicals 2.95 Computer Hardware 1.42 Computer Services 1.22 Computer Software 1.53 Construction Materials 2.75 Consumer Building 1.45 Consumer Durables 1.34 Consumer Non-Durables 6.75 Electronics 4.26 Engineering & Capital Goods 3.08 Engineering & Construction 2.94 Food & Drink 4.02 General Manufacturing & Services 7.58 Healthcare Products & Supplies 2.54 Internet Companies 0.31 Leisure & Recreation 1.25 Media 8.19 Mining & Metals 3.25 Non-Property Financials 15.85 Oil & Gas 0.81 Retail 6.37 Telecommunications Services 4.05 Collateral for Securities on Loan 18.35 Repurchase Agreement 0.27 ------ TOTAL 112.49% ------
+ Formerly International Series SEE NOTES TO FINANCIAL STATEMENTS. 17 SCHEDULE OF INVESTMENTS LARGE-CAP VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- COMMON STOCKS 91.42% AIRLINES 0.86% AMR Corp.* 766 $ 10 Delta Air Lines, Inc.* 932 12 ---------- TOTAL 22 ---------- BEVERAGES 2.16% Diageo plc ADR 170 8 PepsiCo, Inc. 984 47 ---------- TOTAL 55 ---------- CHEMICALS 4.55% E.I. du Pont de Nemours & Co. 749 30 Monsanto Co. 668 17 Potash Corp. of Saskatchewan(a) 227 18 Praxair, Inc. 404 28 Rohm & Haas Co. 592 23 ---------- TOTAL 116 ---------- COMMERCIAL BANKS 9.91% Bank of America Corp. 200 15 Bank of New York Co., Inc. 504 16 Bank One Corp. 1,186 51 FleetBoston Financial Corp. 752 30 Mellon Financial Corp. 1,412 42 U.S. Bancorp 815 22 Wachovia Corp. 962 44 Wells Fargo & Co. 578 33 ---------- TOTAL 253 ---------- COMMERCIAL SERVICES & SUPPLIES 1.02% Waste Management, Inc. 980 26 ---------- COMMUNICATIONS EQUIPMENT 2.59% Corning, Inc.* 1,302 $ 14 Motorola, Inc. 3,851 52 ---------- TOTAL 66 ---------- COMPUTERS & PERIPHERALS 4.74% Apple Computer, Inc.* 2,798 64 EMC Corp.* 4,084 57 ---------- TOTAL 121 ---------- DIVERSIFIED FINANCIALS 5.05% Citigroup, Inc. 1,466 69 J.P. Morgan Chase & Co. 549 20 MBNA Corp. 245 6 Merrill Lynch & Co., Inc. 576 34 ---------- TOTAL 129 ---------- DIVERSIFIED TELECOMMUNICATION SERVICES 3.53% BellSouth Corp. 366 10 SBC Communications, Inc. 1,042 25 Verizon Communications, Inc. 1,649 55 ---------- TOTAL 90 ---------- ELECTRIC UTILITIES 1.88% Constellation Energy Group, Inc. 316 11 FPL Group, Inc. 192 12 Progress Energy, Inc. 571 25 ---------- TOTAL 48 ---------- ELECTRICAL EQUIPMENT 0.51% Emerson Electric Co. 226 13 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 18 SCHEDULE OF INVESTMENTS (CONTINUED) LARGE-CAP VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.78% Agilent Technologies, Inc.* 563 $ 14 Solectron Corp.* 975 6 ---------- TOTAL 20 ---------- ENERGY EQUIPMENT & SERVICES 2.74% Baker Hughes, Inc. 1,376 39 Schlumberger Ltd. 654 31 ---------- TOTAL 70 ---------- FOOD PRODUCTS 4.04% Archer-Daniels- Midland Co. 1,175 17 General Mills, Inc. 823 37 Kellogg Co. 494 16 Kraft Foods, Inc. Class A 1,135 33 ---------- TOTAL 103 ---------- HEALTHCARE EQUIPMENT & SUPPLIES 0.31% Baxter Int'l., Inc. 308 8 ---------- HEALTHCARE PROVIDERS & SERVICES 0.98% Cardinal Health, Inc. 298 18 Tenet Healthcare Corp.* 546 7 ---------- TOTAL 25 ---------- HOUSEHOLD DURABLES 0.55% Newell Rubbermaid, Inc. 588 14 ---------- INDUSTRIAL CONGLOMERATES 1.29% Tyco Int'l., Ltd.(a) 1,598 33 ---------- INSURANCE 3.10% American Int'l. Group, Inc. 1,023 62 Hartford Financial Group, Inc. 301 17 ---------- TOTAL 79 ---------- MACHINERY 5.37% Deere & Co. 1,191 $ 72 Eaton Corp. 338 34 Illinois Tool Works, Inc. 328 24 Parker - Hannifin Corp. 130 7 ---------- TOTAL 137 ---------- MEDIA 8.46% Clear Channel Communications, Inc. 865 35 Comcast Corp.* 1,515 49 The Walt Disney Co. 2,559 58 Tribune Co. 687 34 Viacom, Inc. 989 40 ---------- TOTAL 216 ---------- METALS & MINING 3.45% Alcoa, Inc. 1,551 49 Newmont Mining Corp. 882 39 ---------- TOTAL 88 ---------- MULTI-LINE RETAIL 1.65% Target Corp. 1,069 42 ---------- OFFICE ELECTRONICS 1.53% Xerox Corp.* 3,704 39 ---------- OIL & GAS 5.06% BP plc ADR 301 13 Exxon Mobil Corp. 3,188 116 ---------- TOTAL 129 ---------- PAPER & FOREST PRODUCTS 2.55% Bowater, Inc. 187 8 International Paper Co. 1,070 42 Weyerhaeuser Co. 257 15 ---------- TOTAL 65 ----------
SEE NOTES TO FINANCIAL STATEMENTS. 19 SCHEDULE OF INVESTMENTS (CONCLUDED) LARGE-CAP VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - -------------------------------------------------------------------------------------- PERSONAL PRODUCTS 0.74% Gillette Co. 580 $ 19 ---------- PHARMACEUTICALS 5.37% Abbott Laboratories 353 15 Merck & Co., Inc. 559 25 Novartis AG-ADR 603 23 Schering-Plough Corp. 2,371 36 Wyeth 858 38 ---------- TOTAL 137 ---------- ROAD & RAIL 1.21% Canadian National Railway(a) 141 8 CSX Corp. 720 23 ---------- TOTAL 31 ---------- SEMICONDUCTOR EQUIPMENT & PRODUCTS 0.51% Teradyne, Inc.* 551 13 ---------- SPECIALTY RETAIL 3.17% Limited Brands, Inc. 1,543 27 Staples, Inc.* 532 14 The Gap, Inc. 2,098 40 ---------- TOTAL 81 ---------- TEXTILES & APPAREL 1.76% NIKE, Inc. Class B 520 33 V.F. Corp. 272 12 ---------- TOTAL 45 ---------- TOTAL COMMON STOCKS (Cost $2,203,978) 2,333 ========== PRINCIPAL AMOUNT VALUE INVESTMENTS (000) (000) - -------------------------------------------------------------------------------------- SHORT-TERM INVESTMENT 5.84% REPURCHASE AGREEMENT 5.84% Repurchase Agreement dated 10/31/2003, 0.99% due 11/3/2003 with State Street Bank & Trust Co. collateralized by $155,000 of Federal National Mortgage Assoc. at 1.875% due 2/15/2005; value: $156,001; proceeds: $149,377 (Cost $149,365) $ 149 $ 149 ========== TOTAL INVESTMENTS 97.26% (Cost $2,353,343) $ 2,482 ==========
* Non-income producing security. (a) Foreign security traded in U.S. dollars. ADR-American Depository Receipt. SEE NOTES TO FINANCIAL STATEMENTS. 20 STATEMENTS OF ASSETS AND LIABILITIES October 31, 2003
ALL VALUE FUND ALPHA FUND ASSETS: Investment in securities, at cost $ 664,219,161 $ 142,251,769 - ------------------------------------------------------------------------------------------------- Investment in securities, at value $ 748,131,078 $ 133,819,839 Receivables: Interest and dividends 707,472 24 Capital shares sold 16,163,386 207,886 From affiliates - 37,691 Prepaid expenses and other assets 108,888 689 - ------------------------------------------------------------------------------------------------- TOTAL ASSETS 765,110,824 134,066,129 - ------------------------------------------------------------------------------------------------- LIABILITIES: Payables: Investment securities purchased 9,704,484 - Capital shares reacquired 491,429 147,073 Management fees 372,541 - 12b-1 distribution fees 409,259 86,380 Fund administration 23,659 4,441 Trustees' fees 168,235 6,803 To Lord, Abbett & Co. LLC 11,699 - Accrued expenses and other liabilities 241,967 126,559 - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 11,423,273 371,256 ================================================================================================= NET ASSETS $ 753,687,551 $ 133,694,873 ================================================================================================= COMPOSITION OF NET ASSETS: Paid-in capital $ 662,442,964 $ 152,816,538 Distributions in excess of net investment income (168,235) - Accumulated net realized gain (loss) on investments 7,500,905 (10,689,735) Net unrealized appreciation (depreciation) on investments 83,911,917 (8,431,930) - ------------------------------------------------------------------------------------------------- NET ASSETS $ 753,687,551 $ 133,694,873 ================================================================================================= NET ASSETS BY CLASS: Class A Shares $ 452,098,182 $ 62,382,871 Class B Shares $ 100,271,879 $ 42,341,682 Class C Shares $ 200,024,670 $ 28,970,320 Class P Shares $ 1,280,116 - Class Y Shares $ 12,704 - OUTSTANDING SHARES BY CLASS: Class A Shares 45,530,740 4,338,593 Class B Shares 10,352,417 3,019,352 Class C Shares 20,709,598 2,065,620 Class P Shares 129,559 - Class Y Shares 1,277 - NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (NET ASSETS DIVIDED BY OUTSTANDING SHARES): Class A Shares-Net asset value $ 9.93 $ 14.38 Class A Shares-Maximum offering price (Net asset value plus sales charge of 5.75%) $ 10.54 $ 15.26 Class B Shares-Net asset value $ 9.69 $ 14.02 Class C Shares-Net asset value $ 9.66 $ 14.02 Class P Shares-Net asset value $ 9.88 - Class Y Shares-Net asset value $ 9.95 - =================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 21 STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) October 31, 2003
INTERNATIONAL OPPORTUNITIES LARGE-CAP FUND+ VALUE FUND ASSETS: Investment in securities, at cost $ 124,982,811 $ 2,353,343 - ------------------------------------------------------------------------------------------------- Investment in securities, at value $ 153,841,334 $ 2,481,621 Cash, at value (cost $5,205,147, $0, respectively) 5,229,137 - Receivables: Interest and dividends 283,864 3,044 Investment securities sold 3,408,578 3,481 Capital shares sold 235,079 157,031 From Lord, Abbett & Co. LLC - 33,345 Deferred offering expense - 51,464 - ------------------------------------------------------------------------------------------------- TOTAL ASSETS 162,997,992 2,729,986 - ------------------------------------------------------------------------------------------------- LIABILITIES: Payable upon return of securities on loan 25,100,394 - Payables: Investment securities purchased 559,407 43,690 Capital shares reacquired 41,578 - Management fees 85,809 760 12b-1 distribution fees 47,955 577 Fund administration 4,533 76 Trustees' fees 12,072 864 To Lord, Abbett & Co. LLC - 51,464 Accrued expenses and other liabilities 377,439 80,415 - ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 26,229,187 177,846 ================================================================================================= NET ASSETS $ 136,768,805 $ 2,552,140 ================================================================================================= COMPOSITION OF NET ASSETS: Paid-in capital $ 238,560,304 $ 2,407,596 Undistributed net investment income 1,706,625 6,045 Accumulated net realized gain (loss) on investments and foreign currency related transactions (132,379,851) 10,221 Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 28,881,727 128,278 - ------------------------------------------------------------------------------------------------- NET ASSETS $ 136,768,805 $ 2,552,140 ================================================================================================= NET ASSETS BY CLASS: Class A Shares $ 55,229,698 $ 2,270,860 Class B Shares $ 17,978,389 $ 111,404 Class C Shares $ 10,323,331 $ 148,394 Class P Shares $ 787 $ 10,732 Class Y Shares $ 53,236,600 $ 10,750 OUTSTANDING SHARES BY CLASS: Class A Shares 6,565,082 211,568 Class B Shares 2,191,490 10,429 Class C Shares 1,259,711 13,881 Class P Shares 92.85 1,000 Class Y Shares 6,237,490 1,000 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (NET ASSETS DIVIDED BY OUTSTANDING SHARES): Class A Shares-Net asset value $ 8.41 $ 10.73 Class A Shares-Maximum offering price (Net asset value plus sales charge of 5.75%) $ 8.92 $ 11.38 Class B Shares-Net asset value $ 8.20 $ 10.68 Class C Shares-Net asset value $ 8.19 $ 10.69 Class P Shares-Net asset value $ 8.47 $ 10.73 Class Y Shares-Net asset value $ 8.53 $ 10.75 =================================================================================================
+Formerly International Series SEE NOTES TO FINANCIAL STATEMENTS. 22 STATEMENTS OF OPERATIONS For the Year Ended October 31, 2003
ALL VALUE ALPHA FUND FUND INVESTMENT INCOME: Dividends $ 7,362,651 $ 572,817 Interest 323,202 25,496 Foreign withholding tax (17,113) - - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 7,668,740 598,313 - ------------------------------------------------------------------------------------------------- EXPENSES: Management fees 3,191,937 573,839 12b-1 distribution plan-Class A 1,009,570 192,004 12b-1 distribution plan-Class B 646,162 364,316 12b-1 distribution plan-Class C 1,369,767 249,814 12b-1 distribution plan-Class P 3,236 - Shareholder servicing 985,767 517,855 Market data 2,418 1,200 Professional 111,733 36,520 Reports to shareholders 78,499 31,132 Fund accounting 9,161 2,053 Fund administration 159,477 38,788 Custody 28,816 4,449 Trustees' fees 7,345 4,477 Registration 87,694 36,646 Organization - 1,411 Other 31,433 2,691 - ------------------------------------------------------------------------------------------------- Gross expenses 7,723,015 2,057,195 Expense reductions (4,981) (1,344) Expenses assumed by Underlying Funds - (642,681) Management fee waived - (573,839) - ------------------------------------------------------------------------------------------------- NET EXPENSES 7,718,034 839,331 - ------------------------------------------------------------------------------------------------- NET INVESTMENT LOSS (49,294) (241,018) - ------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Capital gains received from Underlying Funds - 2,224,496 Net realized gain (loss) on investments 8,709,355 (12,911,153) Net change in unrealized appreciation/depreciation on investments 98,646,882 47,133,769 ================================================================================================= NET REALIZED AND UNREALIZED GAIN 107,356,237 36,447,112 ================================================================================================= NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 107,306,943 $ 36,206,094 =================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 23 STATEMENTS OF OPERATIONS (CONTINUED) For the Year Ended October 31, 2003
INTERNATIONAL OPPORTUNITIES LARGE-CAP FUND+ VALUE FUND* INVESTMENT INCOME: Dividends $ 2,530,652 $ 10,390 Interest and other 1,226,904 573 Securities lending 148,332 - Foreign withholding tax (235,557) (41) - ------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 3,670,331 10,922 - ------------------------------------------------------------------------------------------------- EXPENSES: Management fees 845,895 2,566 12b-1 distribution plan-Class A 174,839 2,096 12b-1 distribution plan-Class B 142,253 136 12b-1 distribution plan-Class C 81,986 216 12b-1 distribution plan-Class P 3 16 Shareholder servicing 562,159 7,318 Market data 7,676 458 Professional 41,198 43,050 Reports to shareholders 30,726 7,477 Fund accounting 1,805 - Fund administration 38,429 257 Custody 78,693 9,838 Trustees' fees 4,941 868 Registration 68,597 22,257 Offering - 28,051 Subsidy (see Note 3) 238,185 - Securities lending 26,116 - Other - 4,977 - ------------------------------------------------------------------------------------------------- Gross expenses 2,343,501 129,581 Expense reductions (1,276) - Expenses assumed by Lord, Abbett & Co. LLC - (123,236) - ------------------------------------------------------------------------------------------------- NET EXPENSES 2,342,225 6,345 - ------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 1,328,106 4,577 - ------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on investments and foreign currency related transactions (7,252,730) 10,221 Net change in unrealized appreciation/depreciation on investments and translation of assets and liabilities denominated in foreign currencies 41,544,219 128,278 ================================================================================================= NET REALIZED AND UNREALIZED GAIN 34,291,489 138,499 ================================================================================================= NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 35,619,595 $ 143,076 =================================================================================================
+Formerly International Series *For the period June 23, 2003 (commencement of investment operations) to October 31, 2003. SEE NOTES TO FINANCIAL STATEMENTS. 24 STATEMENTS OF CHANGES IN NET ASSETS Year Ended October 31, 2003
ALL VALUE ALPHA INCREASE IN NET ASSETS FUND FUND OPERATIONS: Net investment loss $ (49,294) $ (241,018) Capital gains received from Underlying Funds - 2,224,496 Net realized gain (loss) on investments 8,709,355 (12,911,153) Net change in unrealized appreciation/depreciation on investments 98,646,882 47,133,769 - ------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 107,306,943 36,206,094 ================================================================================================= DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain Class A (4,249,997) (455,060) Class B (1,079,982) (307,761) Class C (2,554,556) (213,341) Class P (8,336) - - ------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (7,892,871) (976,162) ================================================================================================= CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 380,083,034 19,941,639 Reinvestment of distributions 6,853,029 793,168 Cost of shares reacquired (82,203,980) (35,741,742) - ------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 304,732,083 (15,006,935) ================================================================================================= NET INCREASE IN NET ASSETS 404,146,155 20,222,997 ================================================================================================= NET ASSETS: Beginning of year 349,541,396 113,471,876 - ------------------------------------------------------------------------------------------------- END OF YEAR $ 753,687,551 $ 133,694,873 ================================================================================================= DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME $ (168,235) $ - =================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 25 STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED) Year Ended October 31, 2003
INTERNATIONAL OPPORTUNITIES LARGE-CAP INCREASE IN NET ASSETS FUND+ VALUE FUND* OPERATIONS: Net investment income $ 1,328,106 $ 4,577 Net realized gain (loss) on investments and foreign currency related transactions (7,252,730) 10,221 Net change in unrealized appreciation/depreciation on investments and translation of assets and liabilities denominated in foreign currencies 41,544,219 128,278 - ------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 35,619,595 143,076 ================================================================================================= DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (382,666) - Class B (12,235) - Class C (48,712) - Class P (4) - Class Y (572,917) - - ------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,016,534) - ================================================================================================= CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 49,149,289 2,562,220 Reinvestment of distributions 996,745 - Cost of shares reacquired (59,701,584) (153,156) - ------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS (9,555,550) 2,409,064 ================================================================================================= NET INCREASE IN NET ASSETS 25,047,511 2,552,140 ================================================================================================= NET ASSETS: Beginning of year 111,721,294 - - ------------------------------------------------------------------------------------------------- END OF YEAR $ 136,768,805 $ 2,552,140 ================================================================================================= UNDISTRIBUTED NET INVESTMENT INCOME $ 1,706,625 $ 6,045 =================================================================================================
+Formerly International Series *For the period June 23, 2003 (commencement of investment operations) to October 31, 2003. SEE NOTES TO FINANCIAL STATEMENTS. 26 STATEMENTS OF CHANGES IN NET ASSETS Year Ended October 31, 2002
INTERNATIONAL ALL VALUE ALPHA OPPORTUNITIES INCREASE (DECREASE) IN NET ASSETS FUND FUND FUND+ OPERATIONS: Net investment income (loss) $ (401,829) $ (972,906) $ 659,700 Capital gains received from Underlying Funds - 2,542,308 - Net realized gain (loss) on investment transactions and foreign currency related transactions 6,735,080 (1,388,205) (37,731,158) Net change in unrealized appreciation/depreciation on investments and translation of assets and liabilities denominated in foreign currencies (40,555,786) (19,816,047) 10,796,886 - -------------------------------------------------------------------------------------------------------------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (34,222,535) (19,634,850) (26,274,572) ==================================================================================================================== DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (385,009) - - Class P (4) - - Net realized gain Class A (15,776,939) (3,180,149) - Class B (3,836,088) (2,286,945) - Class C (10,890,143) (1,598,309) - Class P (86) - - - -------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (30,888,269) (7,065,403) - ==================================================================================================================== CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 139,953,179 24,517,901 114,711,502 Reinvestment of distributions 27,031,403 5,468,702 - Cost of shares reacquired (70,226,400) (46,371,528) (137,676,731) - -------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 96,758,182 (16,384,925) (22,965,229) ==================================================================================================================== NET INCREASE (DECREASE) IN NET ASSETS 31,647,378 (43,085,178) (49,239,801) ==================================================================================================================== NET ASSETS: Beginning of year 317,894,018 156,557,054 160,961,095 - -------------------------------------------------------------------------------------------------------------------- END OF YEAR $ 349,541,396 $ 113,471,876 $ 111,721,294 ==================================================================================================================== UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME $ (169,600) $ - $ 642,963 ====================================================================================================================
+Formerly International Series SEE NOTES TO FINANCIAL STATEMENTS. 27 FINANCIAL HIGHLIGHTS ALL VALUE FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 8.22 $ 9.83 $ 11.53 $ 10.87 $ 9.15 =========== =========== =========== =========== =========== Investment operations: Net investment income(a) .02 .01 .04 .05 .04 Net realized and unrealized gain (loss) 1.87 (.67) (.83) 1.17 2.06 ----------- ----------- ----------- ----------- ----------- Total from investment operations 1.89 (.66) (.79) 1.22 2.10 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income - (.02) (.03) - (.05) Net realized gain (.18) (.93) (.88) (.56) (.33) ----------- ----------- ----------- ----------- ----------- Total distributions (.18) (.95) (.91) (.56) (.38) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 9.93 $ 8.22 $ 9.83 $ 11.53 $ 10.87 =========== =========== =========== =========== =========== Total Return(b) 23.46% (7.95)% (7.26)% 11.44% 23.77% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 1.38% 1.42% 1.42% 1.35% 1.30% Expenses, excluding expense reductions 1.38% 1.42% 1.43% 1.36% 1.30% Net investment income .25% .13% .40% .48% .36% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 452,098 $ 189,698 $ 166,406 $ 136,038 $ 102,329 Portfolio turnover rate 36.39% 79.39% 103.11% 65.06% 37.68% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 28 FINANCIAL HIGHLIGHTS (CONTINUED) ALL VALUE FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 8.07 $ 9.70 $ 11.42 $ 10.85 $ 9.13 =========== =========== =========== =========== =========== Investment operations: Net investment loss(a) (.03) (.04) (.03) (.02) (.04) Net realized and unrealized gain (loss) 1.83 (.66) (.81) 1.15 2.10 ----------- ----------- ----------- ----------- ----------- Total from investment operations 1.80 (.70) (.84) 1.13 2.06 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income - - -(e) - (.01) Net realized gain (.18) (.93) (.88) (.56) (.33) ----------- ----------- ----------- ----------- ----------- Total distributions (.18) (.93) (.88) (.56) (.34) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 9.69 $ 8.07 $ 9.70 $ 11.42 $ 10.85 =========== =========== =========== =========== =========== Total Return(b) 22.77% (8.51)% (7.86)% 10.80% 23.17% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 2.00% 2.03% 2.03% 2.00% 1.98% Expenses, excluding expense reductions 2.00% 2.03% 2.04% 2.01% 1.98% Net investment loss (.37)% (.48)% (.27)% (.17)% (.38)% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 100,272 $ 47,423 $ 39,188 $ 17,453 $ 9,739 Portfolio turnover rate 36.39% 79.39% 103.11% 65.06% 37.68% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 29 FINANCIAL HIGHLIGHTS (CONTINUED) ALL VALUE FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 8.05 $ 9.67 $ 11.38 $ 10.81 $ 9.11 =========== =========== =========== =========== =========== Investment operations: Net investment loss(a) (.03) (.03) (.01) (.02) (.03) Net realized and unrealized gain (loss) 1.82 (.66) (.82) 1.15 2.07 ----------- ----------- ----------- ----------- ----------- Total from investment operations 1.79 (.69) (.83) 1.13 2.04 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income - - -(e) - (.01) Net realized gain (.18) (.93) (.88) (.56) (.33) ----------- ----------- ----------- ----------- ----------- Total distributions (.18) (.93) (.88) (.56) (.34) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 9.66 $ 8.05 $ 9.67 $ 11.38 $ 10.81 =========== =========== =========== =========== =========== Total Return(b) 22.70% (8.42)% (7.70)% 10.74% 23.00% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 2.00% 1.89% 1.98% 2.00% 1.98% Expenses, excluding expense reductions 2.00% 1.89% 1.99% 2.01% 1.98% Net investment loss (.37)% (.34)% (.14)% (.17)% (.31)% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 200,025 $ 112,052 $ 112,299 $ 112,776 $ 104,984 Portfolio turnover rate 36.39% 79.39% 103.11% 65.06% 37.68% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 30 FINANCIAL HIGHLIGHTS (CONTINUED) ALL VALUE FUND
YEAR ENDED 10/31 8/15/2001(c) --------------------------- TO 2003 2002 10/31/2001 PER SHARE OPERATING PERFORMANCE (CLASS P SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 8.19 $ 9.83 $ 10.85 =========== =========== =========== Investment operations: Net investment income (loss)(a) .01 -(e) -(e) Net realized and unrealized gain (loss) 1.86 (.66) (1.02) ----------- ----------- ----------- Total from investment operations 1.87 (.66) (1.02) ----------- ----------- ----------- Distributions to shareholders from: Net investment income - (.05) - Net realized gain (.18) (.93) - ----------- ----------- ----------- Total distributions (.18) (.98) - ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 9.88 $ 8.19 $ 9.83 =========== =========== =========== Total Return(b) 23.30% (8.04)% (9.40)%(d) RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 1.45% 1.48% .31%(d) Expenses, excluding expense reductions 1.45% 1.48% .31%(d) Net investment income (loss) .18% .07% (.01)%(d) YEAR ENDED 10/31 8/15/2001(c) --------------------------- TO SUPPLEMENTAL DATA: 2003 2002 10/31/2001 - ----------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 1,280 $ 368 $ 1 Portfolio turnover rate 36.39% 79.39% 103.11% ===============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 31 FINANCIAL HIGHLIGHTS (CONTINUED) ALL VALUE FUND
3/31/2003(c) TO 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 7.83 =========== Investment operations: Net investment income(a) .03 Net realized and unrealized gain 2.09 ----------- Total from investment operations 2.12 ----------- NET ASSET VALUE, END OF PERIOD $ 9.95 =========== Total Return(b) 27.08%(d) RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 1.00%(d)+ Expenses, excluding expense reductions 1.00%(d)+ Net investment income .63%(d)+ 3/31/2003(c) TO SUPPLEMENTAL DATA: 10/31/2003 - -------------------------------------------------------------------------------- Net assets, end of period (000) $ 13 Portfolio turnover rate for the year ended October 31, 2003 36.39% ================================================================================
+ The ratios have been determined on a Fund basis. (a) Calculated using average shares outstanding during the period. (b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions. (c) Commencement of offering of class shares. (d) Not annualized. (e) Amount is less than $.01. SEE NOTES TO FINANCIAL STATEMENTS. 32 FINANCIAL HIGHLIGHTS ALPHA FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 10.62 $ 12.96 $ 17.46 $ 15.21 $ 12.91 =========== =========== =========== =========== =========== Investment operations: Net investment income (loss)(a) .02 (.05) (.05) (.03) .07 Net realized and unrealized gain (loss) 3.83 (1.70) (3.82) 2.60 2.23 ----------- ----------- ----------- ----------- ----------- Total from investment operations 3.85 (1.75) (3.87) 2.57 2.30 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income - - (.30) (.21) - Net realized gain (.09) (.59) (.33) (.11) - ----------- ----------- ----------- ----------- ----------- Total distributions (.09) (.59) (.63) (.32) - ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 14.38 $ 10.62 $ 12.96 $ 17.46 $ 15.21 =========== =========== =========== =========== =========== Total Return(b) 36.59% (14.41)% (22.67)% 17.10% 17.82% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions .39% .37% .36% .40% .33% Expenses, excluding expense reductions 1.45% 1.37% 1.34% 1.33% .83% Net investment income (loss) .13% (.34)% (.32)% (.16)% .15% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 62,383 $ 53,121 $ 70,785 $ 96,652 $ 75,136 Portfolio turnover rate 2.47% 1.75% 15.34% 1.54% 1.67% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 33 FINANCIAL HIGHLIGHTS (CONTINUED) ALPHA FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 10.43 $ 12.81 $ 17.27 $ 15.05 $ 12.85 =========== =========== =========== =========== =========== Investment operations: Net investment loss(a) (.06) (.12) (.14) (.13) (.03) Net realized and unrealized gain (loss) 3.74 (1.67) (3.79) 2.58 2.23 ----------- ----------- ----------- ----------- ----------- Total from investment operations 3.68 (1.79) (3.93) 2.45 2.20 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income - - (.20) (.12) - Net realized gain (.09) (.59) (.33) (.11) - ----------- ----------- ----------- ----------- ----------- Total distributions (.09) (.59) (.53) (.23) - ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 14.02 $ 10.43 $ 12.81 $ 17.27 $ 15.05 =========== =========== =========== =========== =========== Total Return(b) 35.62% (14.91)% (23.21)% 16.40% 17.12% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 1.04% 1.00% 1.00% 1.00% 1.00% Expenses, excluding expense reductions 2.10% 2.00% 1.98% 1.93% 1.50% Net investment loss (.52)% (.97)% (.96)% (.75)% (.83)% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 42,342 $ 35,661 $ 50,377 $ 70,300 $ 52,280 Portfolio turnover rate 2.47% 1.75% 15.34% 1.54% 1.67% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 34 FINANCIAL HIGHLIGHTS (CONTINUED) ALPHA FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 10.43 $ 12.80 $ 17.25 $ 15.04 $ 12.86 =========== =========== =========== =========== =========== Investment operations: Net investment loss(a) (.06) (.10) (.14) (.12) (.04) Net realized and unrealized gain (loss) 3.74 (1.68) (3.78) 2.56 2.22 ----------- ----------- ----------- ----------- ----------- Total from investment operations 3.68 (1.78) (3.92) 2.44 2.18 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income - - (.20) (.12) - Net realized gain (.09) (.59) (.33) (.11) - ----------- ----------- ----------- ----------- ----------- Total distributions (.09) (.59) (.53) (.23) - ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 14.02 $ 10.43 $ 12.80 $ 17.25 $ 15.04 =========== =========== =========== =========== =========== Total Return(b) 35.62% (14.77)% (23.25)% 16.34% 16.95% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 1.04% .89% 1.00% 1.00% 1.00% Expenses, excluding expense reductions 2.10% 1.89% 1.98% 1.93% 1.50% Net investment loss (.52)% (.86)% (.97)% (.70)% (.84)% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 28,970 $ 24,690 $ 35,395 $ 44,977 $ 34,667 Portfolio turnover rate 2.47% 1.75% 15.34% 1.54% 1.67% ==============================================================================================================================
(a) Calculated using average shares outstanding during the year. (b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions. SEE NOTES TO FINANCIAL STATEMENTS. 35 FINANCIAL HIGHLIGHTS INTERNATIONAL OPPORTUNITIES FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 6.29 $ 7.78 $ 14.48 $ 13.90 $ 12.39 =========== =========== =========== =========== =========== Investment operations: Net investment income (loss)(a) .08 .03 (.06) (.08) .07 Net realized and unrealized gain (loss) 2.09 (1.52) (6.56) 1.54 1.55 ----------- ----------- ----------- ----------- ----------- Total from investment operations 2.17 (1.49) (6.62) 1.46 1.62 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income (.05) - - (.06) (.09) Net realized gain - - (.08) (.82) (.02) ----------- ----------- ----------- ----------- ----------- Total distributions (.05) - (.08) (.88) (.11) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 8.41 $ 6.29 $ 7.78 $ 14.48 $ 13.90 =========== =========== =========== =========== =========== Total Return(b) 35.07% (19.16)% (45.92)% 10.97% 13.16% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 2.11% 1.89% 2.07% 1.80% 1.51% Expenses, excluding expense reductions 2.11% 1.89% 2.08% 1.80% 1.51% Net investment income (loss) 1.11% .50% (.55)% (.53)% .52% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 55,230 $ 44,975 $ 71,591 $ 135,701 $ 104,885 Portfolio turnover rate 72.36% 82.38% 65.26% 35.14% 75.15% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 36 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 6.13 $ 7.65 $ 14.31 $ 13.75 $ 12.28 =========== =========== =========== =========== =========== Investment operations: Net investment income (loss)(a) .03 (.02) (.11) (.17) (.02) Net realized and unrealized gain (loss) 2.05 (1.50) (6.47) 1.55 1.53 ----------- ----------- ----------- ----------- ----------- Total from investment operations 2.08 (1.52) (6.58) 1.38 1.51 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income (.01) - - -(e) (.02) Net realized gain - - (.08) (.82) (.02) ----------- ----------- ----------- ----------- ----------- Total distributions (.01) - (.08) (.82) (.04) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 8.20 $ 6.13 $ 7.65 $ 14.31 $ 13.75 =========== =========== =========== =========== =========== Total Return(b) 33.89% (19.87)% (46.19)% 10.42% 12.31% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 2.73% 2.69% 2.59% 2.35% 2.19% Expenses, excluding expense reductions 2.73% 2.69% 2.60% 2.36% 2.19% Net investment income (loss) .49% (.30)% (1.07)% (1.09)% (.16)% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 17,978 $ 13,174 $ 17,743 $ 33,124 $ 22,928 Portfolio turnover rate 72.36% 82.38% 65.26% 35.14% 75.15% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 37 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 6.12 $ 7.61 $ 14.30 $ 13.75 $ 12.28 =========== =========== =========== =========== =========== Investment operations: Net investment income (loss)(a) .07 -(e) (.13) (.17) (.02) Net realized and unrealized gain (loss) 2.04 (1.49) (6.48) 1.54 1.53 ----------- ----------- ----------- ----------- ----------- Total from investment operations 2.11 (1.49) (6.61) 1.37 1.51 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income (.04) - - -(e) (.02) Net realized gain - - (.08) (.82) (.02) ----------- ----------- ----------- ----------- ----------- Total distributions (.04) - (.08) (.82) (.04) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 8.19 $ 6.12 $ 7.61 $ 14.30 $ 13.75 =========== =========== =========== =========== =========== Total Return(b) 34.67% (19.58)% (46.43)% 10.35% 12.31% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 2.73% 2.36% 2.83% 2.35% 2.19% Expenses, excluding expense reductions 2.73% 2.36% 2.84% 2.36% 2.19% Net investment income (loss) .99% .03% (1.32)% (1.10)% (.15)% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 10,323 $ 7,823 $ 11,399 $ 25,546 $ 20,111 Portfolio turnover rate 72.36% 82.38% 65.26% 35.14% 75.15% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 38 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND
YEAR ENDED 10/31 3/9/1999(c) ----------------------------------------------------------- TO 2003 2002 2001 2000 10/31/1999 PER SHARE OPERATING PERFORMANCE (CLASS P SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 6.31 $ 7.82 $ 14.51 $ 13.91 $ 12.70 =========== =========== =========== =========== =========== Investment operations: Net investment income (loss)(a) .10 .03 (.06) (.08) .08 Net realized and unrealized gain (loss) 2.10 (1.54) (6.55) 1.55 1.13 ----------- ----------- ----------- ----------- ----------- Total from investment operations 2.20 (1.51) (6.61) 1.47 1.21 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income (.04) - - (.05) - Net realized gain - - (.08) (.82) - ----------- ----------- ----------- ----------- ----------- Total distributions (.04) - (.08) (.87) - ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF PERIOD $ 8.47 $ 6.31 $ 7.82 $ 14.51 $ 13.91 =========== =========== =========== =========== =========== Total Return(b) 35.17% (19.31)% (45.75)% 11.03% 9.53%(d) RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 2.18%+ 2.14% 2.04% 1.80% .98%(d) Expenses, excluding expense reductions 2.18%+ 2.14% 2.05% 1.80% .98%(d) Net investment income (loss) 1.00%+ .25% (.55)% (.51)% .60%(d) YEAR ENDED 10/31 3/9/1999(c) ----------------------------------------------------------- TO SUPPLEMENTAL DATA: 2003 2002 2001 2000 10/31/1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (000) $ 1 $ 1 $ 1 $ 1 $ 1 Portfolio turnover rate 72.36% 82.38% 65.26% 35.14% 75.15% ==============================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 39 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND
YEAR ENDED 10/31 --------------------------------------------------------------------------- 2003 2002 2001 2000 1999 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF YEAR $ 6.39 $ 7.90 $ 14.61 $ 14.00 $ 12.41 =========== =========== =========== =========== =========== Investment operations: Net investment income (loss)(a) .10 .06 (.01) (.01) .12 Net realized and unrealized gain (loss) 2.12 (1.57) (6.62) 1.54 1.56 ----------- ----------- ----------- ----------- ----------- Total from investment operations 2.22 (1.51) (6.63) 1.53 1.68 ----------- ----------- ----------- ----------- ----------- Distributions to shareholders from: Net investment income (.08) - - (.10) (.07) Net realized gain - - (.08) (.82) (.02) ----------- ----------- ----------- ----------- ----------- Total distributions (.08) - (.08) (.92) (.09) ----------- ----------- ----------- ----------- ----------- NET ASSET VALUE, END OF YEAR $ 8.53 $ 6.39 $ 7.90 $ 14.61 $ 14.00 =========== =========== =========== =========== =========== Total Return(b) 35.22% (19.11)% (45.58)% 11.45% 13.65% RATIOS TO AVERAGE NET ASSETS Expenses, including expense reductions 1.74% 1.69% 1.59% 1.35% 1.20% Expenses, excluding expense reductions 1.74% 1.69% 1.60% 1.37% 1.20% Net investment income (loss) 1.47% .70% (.06)% (.09)% .86% YEAR ENDED 10/31 --------------------------------------------------------------------------- SUPPLEMENTAL DATA: 2003 2002 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Net assets, end of year (000) $ 53,237 $ 45,748 $ 60,227 $ 79,833 $ 64,810 Portfolio turnover rate 72.36% 82.38% 65.26% 35.14% 75.15% ==============================================================================================================================
+ The ratios have been determined on a Fund basis. (a) Calculated using average shares outstanding during the period. (b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions. (c) Commencement of offering of class shares. (d) Not annualized. (e) Amount is less than $.01. SEE NOTES TO FINANCIAL STATEMENTS. 40 FINANCIAL HIGHLIGHTS LARGE-CAP VALUE FUND
6/23/2003(a) TO 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 =========== Unrealized depreciation on investments (.10) ----------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90 =========== Investment operations: Net investment income(b) .03 Net realized and unrealized gain .80 ----------- Total from investment operations .83 ----------- NET ASSET VALUE, END OF PERIOD $ 10.73 =========== Total Return(c) (1.00)%(d)(e) Total Return(c) 8.38%(d)(f) RATIOS TO AVERAGE NET ASSETS Expenses, including expenses assumed .33%(d)+ Expenses, excluding expenses assumed 7.12%(d)+ Net investment income .27%(d)+ 6/23/2003(a) TO SUPPLEMENTAL DATA: 9/30/2003 - ---------------------------------------------------------------------- Net assets, end of period (000) $ 2,271 Portfolio turnover rate 8.87% ======================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 41 FINANCIAL HIGHLIGHTS (CONTINUED) LARGE-CAP VALUE FUND
6/23/2003(a) TO 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 =========== Unrealized depreciation on investments (.11) ----------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.89 =========== Investment operations: Net investment income(b) -(g) Net realized and unrealized gain .79 ----------- Total from investment operations .79 ----------- NET ASSET VALUE, END OF PERIOD $ 10.68 =========== Total Return(c) (1.10)%(d)(e) Total Return(c) 7.99%(d)(f) RATIOS TO AVERAGE NET ASSETS Expenses, including expenses assumed .56%(d)+ Expenses, excluding expenses assumed 7.35%(d)+ Net investment loss .04%(d)+ 6/23/2003(a) TO SUPPLEMENTAL DATA: 9/30/2003 - ---------------------------------------------------------------------- Net assets, end of period (000) $ 111 Portfolio turnover rate 8.87% ======================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 42 FINANCIAL HIGHLIGHTS (CONTINUED) LARGE-CAP VALUE FUND
6/23/2003(a) TO 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 =========== Unrealized depreciation on investments (.11) ----------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.89 =========== Investment operations: Net investment income(b) -(g) Net realized and unrealized gain .80 ----------- Total from investment operations .80 ----------- NET ASSET VALUE, END OF PERIOD $ 10.69 =========== Total Return(c) (1.10)%(d)(e) Total Return(c) 8.09%(d)(f) RATIOS TO AVERAGE NET ASSETS Expenses, including expenses assumed .56%(d)+ Expenses, excluding expenses assumed 7.35%(d)+ Net investment loss .04%(d)+ 6/23/2003(a) TO SUPPLEMENTAL DATA: 9/30/2003 - ---------------------------------------------------------------------- Net assets, end of period (000) $ 148 Portfolio turnover rate 8.87% ======================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 43 FINANCIAL HIGHLIGHTS (CONTINUED) LARGE-CAP VALUE FUND
6/23/2003(a) TO 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS P SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 =========== Unrealized depreciation on investments (.10) ----------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90 =========== Investment operations: Net investment income(b) .02 Net realized and unrealized gain .81 ----------- Total from investment operations .83 ----------- NET ASSET VALUE, END OF PERIOD $ 10.73 =========== Total Return(c) (1.00)%(d)(e) Total Return(c) 8.38%(d)(f) RATIOS TO AVERAGE NET ASSETS Expenses, including expenses assumed .37%(d)+ Expenses, excluding expenses assumed 7.16%(d)+ Net investment income .23%(d)+ 6/23/2003(a) TO SUPPLEMENTAL DATA: 9/30/2003 - ---------------------------------------------------------------------- Net assets, end of period (000) $ 11 Portfolio turnover rate 8.87% ======================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 44 FINANCIAL HIGHLIGHTS (CONCLUDED) LARGE-CAP VALUE FUND
6/23/2003(a) TO 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 =========== Unrealized depreciation on investments (.10) ----------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90 =========== Investment operations: Net investment income(b) .04 Net realized and unrealized gain .81 ----------- Total from investment operations .85 ----------- NET ASSET VALUE, END OF PERIOD $ 10.75 =========== Total Return(c) (1.00)%(d)(e) Total Return(c) 8.59%(d)(f) RATIOS TO AVERAGE NET ASSETS Expenses, including expenses assumed .21%(d)+ Expenses, excluding expenses assumed 7.00%(d)+ Net investment income .39%(d)+ 6/23/2003(a) TO SUPPLEMENTAL DATA: 9/30/2003 - ---------------------------------------------------------------------- Net assets, end of period (000) $ 11 Portfolio turnover rate 8.87% ======================================================================
+ The ratios have been determined on a Fund basis. (a) Commencement of investment operations; SEC effective date and date shares first became available to the public is June 30, 2003. (b) Calculated using average shares outstanding during the period. (c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions. (d) Not annualized. (e) Total return for the period 6/23/2003 through 6/30/2003. (f) Total return for the period 6/30/2003 through 10/31/2003. (g) Amount is less than $.01. SEE NOTES TO FINANCIAL STATEMENTS. 45 NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION Lord Abbett Securities Trust (the "Trust") is registered under the Investment Company Act of 1940 (the "Act") as a diversified open-end management investment company organized as a Delaware business trust on February 26, 1993. The Trust currently consists of seven funds. This report covers the following four funds and their respective classes (separately, a "Fund" and collectively, the "Funds"): Lord Abbett All Value Series ("All Value Fund"), Class A, B, C, P and Y shares; Alpha Series ("Alpha Fund"), Class A, B and C shares; Lord Abbett International Opportunities Fund ("International Opportunities Fund"- formerly known as International Series), Class A, B, C, P and Y shares, and Lord Abbett Large-Cap Value Fund ("Large-Cap Value Fund"), Class A, B, C, P, and Y shares. Large-Cap Value Fund commenced investment operations on June 23, 2003 and was capitalized with a $1,040,000 investment from Lord, Abbett & Co. LLC ("Lord Abbett"). Shares first became available to the public on June 30, 2003 All Value Fund's investment objective is long-term growth of capital and income without excessive fluctuations in market value. Alpha Fund's and International Opportunities Fund's investment objective is long-term capital appreciation. Alpha Fund invests in other funds ("Underlying Funds") managed by Lord Abbett. Large-Cap Value Fund's investment objective is to seek a high level of total return. Each class of shares has different expenses and dividends. A front-end sales charge is normally added to the 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 following any purchases made without a sales charge; Class B shares redeemed before the sixth anniversary of purchase; and Class C shares redeemed before the first anniversary of purchase. Class B shares will convert to Class A shares on the eighth anniversary of the original purchase of Class B shares. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 2. SIGNIFICANT ACCOUNTING POLICIES (a) INVESTMENT VALUATION-Securities traded on any recognized U.S. or non-U.S. exchange or on NASDAQ, Inc. are valued at the last sale price or official closing price on the exchange or system on which they are principally traded. Unlisted equity securities are valued at last quoted sales price or, if no sales price is available, at the mean between the most recently quoted bid and asked prices. Fixed income securities are valued at the mean between the bid and asked prices on the basis of prices supplied by independent pricing services, which reflect broker/dealer supplied valuations and electronic data processing techniques. Exchange-traded options and futures contracts are valued at the last sale price in the market where they are principally traded. If no sale has occurred, the mean between the most recently quoted bid and asked prices is used. 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. 46 NOTES TO FINANCIAL STATEMENTS (CONTINUED) (b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date that the securities are purchased or sold (trade date). Realized gains and losses on sales of portfolio securities are calculated using the identified-cost method. Realized and unrealized gains or losses are allocated to each class of shares, based upon the relative proportion of net assets at the beginning of the day. (c) INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis and discounts are accreted and premiums are amortized using the effective interest method. Investment income is allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. (d) FEDERAL TAXES-It is the policy of each Fund to meet the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable net investment income and capital gains to its shareholders. Therefore, no federal income tax provision is required. (e) EXPENSES-Expenses incurred by the Trust that do not specifically relate to an individual fund are 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, Class B, Class C and Class P shares bear all expenses and fees relating to their respective 12b-1 Distribution Plans. (f) FOREIGN TRANSACTIONS-The books and records of International Opportunities Fund are maintained in U.S. dollars and transactions denominated in foreign currencies are recorded in the Fund's records at the rate prevailing when earned or recorded. Asset and liability accounts that are denominated in foreign currencies are adjusted to reflect current exchange rates. The resultant exchange gains and losses are included as net realized gain(loss) on investments and foreign currency related transactions on the Statements of Operations. The Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in market prices of the securities. (g) OFFERING COSTS-Lord Abbett incurred initial offering costs on behalf of Large-Cap Value Fund that will be reimbursed by the Fund in the full amount thereof. Such expenses were deferred and are being amortized on the straight-line method over a period of one year from the commencement of investment operations. (h) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS-International Opportunities Fund may enter into forward foreign currency exchange contracts in order to reduce its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to lock in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in foreign currencies. A forward foreign currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. The contracts are valued daily at forward exchange rates and any unrealized gain or loss is included in net unrealized appreciation/depreciation on investments and translation of assets and liabilities denominated in foreign currencies on the Statement of Operations. The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing of such contracts is included in net realized gain or loss 47 NOTES TO FINANCIAL STATEMENTS (CONTINUED) on investments and foreign currency related transactions on the Statement of Operations. As of October 31, 2003, there are no forward foreign currency exchange contracts outstanding. (i) SECURITIES LENDING-Each Fund may lend securities to member banks of the Federal Reserve System and to registered broker/dealers approved by the Fund. The loans are collateralized at all times by cash and/or U.S. Treasury securities in an amount at least equal to 102% of the market value of domestic securities loaned (105% in the case of foreign securities loaned). The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. Lending portfolio securities could result in a loss or delay in recovering the Fund's securities if the borrower defaults. For the period ended October 31, 2003 only International Opportunities Fund had securities lending activity. (j) REPURCHASE AGREEMENTS-Each Fund may enter into repurchase agreements with respect to securities. A repurchase agreement is a transaction in which the Fund acquires a security and simultaneously commits to resell that security to the seller (a bank or securities dealer) at an agreed-upon price on an agreed-upon date. Each Fund requires at all times that the repurchase agreement be collateralized by cash, U.S. Government securities or U.S. Government sponsored enterprises securities having a value equal to, or in excess of, the value of the repurchase agreement. 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 them. 3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES The Trust has a management agreement with Lord Abbett pursuant to which Lord Abbett supplies the Trust with investment management services and executive and other personnel, pays the remuneration of officers, provides office space and pays for ordinary and necessary office and clerical expenses relating to research and statistical work and supervision of the Trust's investment portfolios. The management fee is based on average daily net assets at the following annual rates:
MANAGEMENT VOLUNTARY FEES WAIVER - -------------------------------------------------------------- All Value Fund .70%(1) - Alpha Fund .50% .50% International Opportunities Fund .75% - Large-Cap Value Fund .40%(2) -
(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%
(2) The management fee for Large-Cap Value Fund is based on average daily net assets at the following annual rates: First $2 billion .40% Next $3 billion .375% Over $5 billion .35%
48 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Lord Abbett may stop waiving all or a portion of its management fee at any time. Lord Abbett is currently reimbursing expenses for Large-Cap Value Fund to the extent necessary to maintain total annual operating expenses for Class A at ..95%, Class B and C at 1.60%, Class P at 1.05%, and Class Y at .60% of average daily net assets. Lord Abbett may stop reimbursing such expenses at any time. In addition, effective January 1, 2003, Lord Abbett began providing certain administrative services to each Fund pursuant to an Administrative Services Agreement at an annual rate of .04% of the Fund's average daily net assets. This results in Lord Abbett paying Fund Accounting expenses that were previously charged to the Funds. Alpha Fund has entered into a Servicing Agreement with the Underlying Funds pursuant to which each Underlying Fund will pay a portion of the expenses (excluding management fee, administration fees, and distribution and service fees) of Alpha Fund in proportion to the average daily value of total Underlying Fund shares owned by Alpha Fund. 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:
FEE CLASS A CLASS B CLASS C CLASS P(3) - -------------------------------------------------------------------------------- Service .25% .25% .25% .20% Distribution .10%(1)(2) .75% .75% .25%
(1) In addition, each Fund pays a one-time distribution fee of up to 1% on certain qualifying purchases, which is generally amortized over a two-year period. All Value Fund, Alpha Fund and International Opportunities Fund collected $209,643, $98,847 and $48,007, respectively, of CDSCs during the year. (2) In addition, until January 1, 2003, each Fund paid an incremental marketing expense of approximately .03% of the average daily net assets attributable to Class A. (3) All Value Fund, International Opportunities Fund and Large-Cap Value Fund only. Class Y does not have a distribution plan. COMMISSIONS Distributor received the following commissions on sales of Class A shares of the Funds after concessions were paid to authorized dealers for the year ended October 31, 2003:
DISTRIBUTOR DEALERS' COMMISSIONS CONCESSIONS - -------------------------------------------------------------------------------- All Value Fund $ 814,999 $ 4,531,951 Alpha Fund 48,253 271,915 International Opportunities Fund 24,105 127,915 Large-Cap Value Fund 2,753 15,035
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 semi-annually for All Value Fund, and annually for Alpha Fund, International Opportunities Fund, and Large-Cap Value Fund. 49 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Taxable net realized gains from investment transactions, reduced by capital loss carryforwards, if any, are declared and distributed to shareholders at least annually. The capital loss carryforward amount is available to offset future net capital gains. Dividends and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the components of net assets based on their federal tax basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as distributions of paid-in capital. On November 21, 2003, net investment income distributions of $565,000, $2,330,000, $21,500 and long-term capital gain distributions of $8,508,999, $0, $0 were declared for All Value Fund, International Opportunities Fund and Large-Cap Value Fund, respectively. The distributions were paid on November 25, 2003 to shareholders of record on November 24, 2003. The tax character of distributions paid during the years ended October 31, 2003 and October 31, 2002 are as follows:
ALL VALUE FUND ALPHA FUND - ------------------------------------------------------------------------------------------ 10/31/2003 10/31/2002 10/31/2003 10/31/2002 - ------------------------------------------------------------------------------------------ Distributions paid from: Ordinary income $ - $ 385,013 $ - $ 95,687 Net long-term capital gains 7,892,871 30,503,256 976,162 6,969,716 - ------------------------------------------------------------------------------------------ Total distributions paid $ 7,892,871 $ 30,888,269 $ 976,162 $ 7,065,403 - ------------------------------------------------------------------------------------------ INTERNATIONAL OPPORTUNITIES FUND - ------------------------------------------------------------ 10/31/2003 10/31/2002 - ------------------------------------------------------------ Distributions paid from: Ordinary income $ 1,016,534 $ - - ------------------------------------------------------------ Total distributions paid $ 1,016,534 $ - - ------------------------------------------------------------
As of October 31, 2003, the components of accumulated earnings (losses) on a tax basis are as follows:
ALL VALUE FUND ALPHA FUND - -------------------------------------------------------------------------------------------------- Undistributed ordinary income - net $ 222,912 $ - Undistributed long-term capital gains 8,508,789 - - -------------------------------------------------------------------------------------------------- Total undistributed earnings $ 8,731,701 $ - Capital loss carryforwards* - (9,986,380) Temporary differences (168,235) - Unrealized gains - net 82,681,121 (9,135,285) - -------------------------------------------------------------------------------------------------- Total accumulated earnings (losses) - net $ 91,244,587 $ (19,121,665) ================================================================================================== INTERNATIONAL OPPORTUNITIES FUND LARGE-CAP VALUE FUND - -------------------------------------------------------------------------------------------------- Undistributed ordinary income - net $ 1,718,491 $ 17,091 - -------------------------------------------------------------------------------------------------- Total undistributed earnings $ 1,718,491 $ 17,091 Capital loss carryforwards* (132,284,598) - Temporary differences (11,866) (44) Unrealized gains - net 28,786,474 127,497 - -------------------------------------------------------------------------------------------------- Total accumulated earnings (losses) - net $ (101,791,499) $ 144,544 ==================================================================================================
50 NOTES TO FINANCIAL STATEMENTS (CONTINUED) * As of October 31,2003, the capital loss carryforwards along with the related expiration dates are as follows:
2009 2010 2011 TOTAL - -------------------------------------------------------------------------------------------- Alpha Fund $ - $ - $ 9,986,380 $ 9,986,380 International Opportunities Fund 86,405,958 37,966,698 7,911,942 132,284,598
As of October 31, 2003, the aggregate unrealized security gains and losses based on cost for U.S. federal income tax purposes are as follows:
ALL VALUE FUND ALPHA FUND - -------------------------------------------------------------------------------------------------- Tax cost $ 665,449,957 $ 142,955,124 - -------------------------------------------------------------------------------------------------- Gross unrealized gain 92,311,931 15,919,968 Gross unrealized loss (9,630,810) (25,055,253) - -------------------------------------------------------------------------------------------------- Net unrealized security gain (loss) $ 82,681,121 $ (9,135,285) ================================================================================================== INTERNATIONAL OPPORTUNITIES FUND LARGE-CAP VALUE FUND - -------------------------------------------------------------------------------------------------- Tax cost $ 125,078,064 $ 2,354,124 - -------------------------------------------------------------------------------------------------- Gross unrealized gain 32,353,335 165,741 Gross unrealized loss (3,566,861) (38,244) - -------------------------------------------------------------------------------------------------- Net unrealized security gain $ 28,786,474 $ 127,497 ==================================================================================================
The difference between book-basis and tax-basis unrealized gains (losses) is primarily attributable to wash sales and other temporary tax adjustments. Permanent items identified during the year ended October 31, 2003 have been reclassified among the components of net assets based on their tax basis treatment as follows:
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) ACCUMULATED NET INVESTMENT NET REALIZED INCOME GAIN (LOSS) PAID-IN CAPITAL - ------------------------------------------------------------------------------------------------- All Value Fund $ 50,659 $ (50,659) $ - Alpha Fund 241,018 99 (241,117) International Opportunities Fund 752,090 (751,189) (901) Large-Cap Value Fund 1,468 - (1,468)
5. PORTFOLIO SECURITIES TRANSACTIONS As of October 31, 2003, the value of securities loaned for International Opportunities Fund was $23,845,337. These loans are collateralized by cash of $25,100,394, which is invested in a restricted money market account. In connection with the securities lending program, State Street Bank and Trust Company ("SSB") received fees of $67,302 for the year ended October 31, 2003. For financial statement presentation purposes, fees of $41,186 for the period January 1, 2003 to October 31, 2003 have been netted against securities lending income on the Statement of Operations. 51 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Purchases and sales of investment securities (other than short-term investments) for the year ended October 31, 2003 are as follows:
PURCHASES SALES - --------------------------------------------------------------------- All Value Fund $ 430,233,440 $ 161,839,007 Alpha Fund 2,797,313 16,000,000 International Opportunities Fund 75,975,527 83,391,635 Large-Cap Value Fund 2,346,037 152,280
There were no purchases or sales of U.S. Government securities for the year ended October 31, 2003. 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 Statements of Operations and in Trustees' fees payable on the Statements of Assets and Liabilities and are not deductible for 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 the Funds' expenses. 8. LINE OF CREDIT All Value Fund, International Opportunities Fund and Large-Cap Value Fund, along with certain other funds managed by Lord Abbett, have available a $200,000,000 unsecured revolving credit facility ("Facility"), from a consortium of banks, to be used for temporary or emergency purposes as an additional source of liquidity to fund redemptions of investor shares. Any borrowings under this Facility will bear interest at current market rates as defined in the agreement. The fee for this Facility is an annual rate of 0.09%. At October 31, 2003, there are no loans outstanding pursuant to this Facility nor was the Facility utilized at any time during the fiscal year. 9. CUSTODIAN AND ACCOUNTING AGENT SSB is the Trust's custodian and accounting agent. SSB performs custodian functions and accounting and recordkeeping functions relating to portfolio transactions and calculating each Fund's net asset values. 10. INVESTMENT RISKS Each Fund is subject to the general risks and considerations associated with investing in equity securities. The value of an investment will fluctuate in response to movements in the stock market in general and to the changing prospects of individual companies in which the Funds invest. 52 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Large company value stocks, in which Large-Cap Value Fund and All Value Fund invest, may perform differently than the market as a whole and other types of stocks, such as small company stocks and growth stocks. This is because different types of stocks tend to shift in and out of favor depending on market and economic conditions. The market may fail to recognize the intrinsic value of a particular value stock for a long time. In addition, if the 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 Opportunities Fund is subject to the risks of investing in foreign securities and in the securities of small-cap companies. Foreign securities may pose greater risks than domestic securities, including greater price fluctuations and higher transaction costs. Foreign investments also may be affected by changes in currency rates or currency controls. Investing in small-cap companies generally involves greater risks than investing in the stocks of large-cap companies, including more volatility and less liquidity. Alpha Fund's investments are concentrated in the Underlying Funds and, as a result, the Fund's performance is directly related to their performance and subject to their risks, including those associated with foreign investments and small-cap companies. These factors can affect Fund performance. 11. SUMMARY OF CAPITAL TRANSACTIONS The Trust has an unlimited number of authorized shares of beneficial interest. ALL VALUE FUND - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 - ---------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES SHARES AMOUNT SHARES AMOUNT - ---------------------------------------------------------------------------------------------------------------------------- Shares Sold 27,768,543 $ 249,660,107 9,028,388 $ 82,077,095 Reinvestment of Distributions 479,325 3,949,635 1,585,734 14,985,188 Shares Reacquired (5,801,553) (49,453,926) (4,449,635) (39,993,514) - ---------------------------------------------------------------------------------------------------------------------------- Increase 22,446,315 $ 204,155,816 6,164,487 $ 57,068,769 - ---------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Shares Sold 5,556,058 $ 48,455,739 2,524,101 $ 22,912,055 Reinvestment of Distributions 111,869 903,903 339,730 3,169,677 Shares Reacquired (1,192,893) (10,010,179) (1,024,461) (8,863,956) - ---------------------------------------------------------------------------------------------------------------------------- Increase 4,475,034 $ 39,349,463 1,839,370 $ 17,217,776 - ---------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Shares Sold 9,254,889 $ 81,004,246 3,775,176 $ 34,514,834 Reinvestment of Distributions 246,867 1,991,155 955,484 8,876,448 Shares Reacquired (2,717,580) (22,518,068) (2,420,871) (21,316,561) - ---------------------------------------------------------------------------------------------------------------------------- Increase 6,784,176 $ 60,477,333 2,309,789 $ 22,074,721 - ----------------------------------------------------------------------------------------------------------------------------
53 NOTES TO FINANCIAL STATEMENTS (CONTINUED) CLASS P SHARES - ---------------------------------------------------------------------------------------------------------------------------- Shares sold 109,104 $ 952,942 50,921 $ 449,195 Reinvestment of distributions 1,017 8,336 10 90 Shares reacquired (25,508) (221,807) (6,077) (52,369) - ---------------------------------------------------------------------------------------------------------------------------- Increase 84,613 $ 739,471 44,854 $ 396,916 - ----------------------------------------------------------------------------------------------------------------------------
PERIOD ENDED OCTOBER 31, 2003* - -------------------------------------------------------------------------------------- CLASS Y SHARES - -------------------------------------------------------------------------------------- Shares sold 1,277 $ 10,000 - -------------------------------------------------------------------------------------- Increase 1,277 $ 10,000 - --------------------------------------------------------------------------------------
* For the period March 31, 2003 (commencement of offering of class shares) to October 31, 2003. ALPHA FUND - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 - ---------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES SHARES AMOUNT SHARES AMOUNT - ---------------------------------------------------------------------------------------------------------------------------- Shares sold 1,246,461 $ 14,036,440 1,259,523 $ 16,229,854 Reinvestment of distributions 40,092 423,777 217,763 2,887,537 Shares reacquired (1,949,873) (21,553,883) (1,937,993) (24,663,884) - ---------------------------------------------------------------------------------------------------------------------------- Decrease (663,320) $ (7,093,666) (460,707) $ (5,546,493) - ---------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES - ---------------------------------------------------------------------------------------------------------------------------- Shares sold 263,430 $ 2,978,159 338,313 $ 4,292,317 Reinvestment of distributions 21,207 219,918 116,826 1,529,252 Shares reacquired (685,817) (7,733,583) (967,442) (11,847,822) - ---------------------------------------------------------------------------------------------------------------------------- Decrease (401,180) $ (4,535,506) (512,303) $ (6,026,253) - ---------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES - ---------------------------------------------------------------------------------------------------------------------------- Shares sold 256,016 $ 2,927,040 313,141 $ 3,995,730 Reinvestment of distributions 14,414 149,473 80,483 1,051,913 Shares reacquired (572,517) (6,454,276) (791,152) (9,859,822) - ---------------------------------------------------------------------------------------------------------------------------- Decrease (302,087) $ (3,377,763) (397,528) $ (4,812,179) - ----------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL OPPORTUNITIES FUND - --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED OCTOBER 31, 2003 OCTOBER 31, 2002 - ---------------------------------------------------------------------------------------------------------------------------- CLASS A SHARES SHARES AMOUNT SHARES AMOUNT - ---------------------------------------------------------------------------------------------------------------------------- Shares sold 6,041,513 $ 39,688,836 13,459,848 $ 100,658,102 Reinvestment of distributions 58,932 367,146 - - Shares reacquired (6,681,759) (44,022,341) (15,511,892) (117,292,594) - ---------------------------------------------------------------------------------------------------------------------------- Decrease (581,314) $ (3,966,359) (2,052,044) $ (16,634,492) - ---------------------------------------------------------------------------------------------------------------------------- CLASS B SHARES - ---------------------------------------------------------------------------------------------------------------------------- Shares sold 537,533 $ 3,511,769 564,618 $ 4,098,278 Reinvestment of distributions 1,854 11,365 - - Shares reacquired (497,425) (3,213,964) (734,680) (5,319,485) - ---------------------------------------------------------------------------------------------------------------------------- Increase (decrease) 41,962 $ 309,170 (170,062) $ (1,221,207) - ---------------------------------------------------------------------------------------------------------------------------- CLASS C SHARES - ---------------------------------------------------------------------------------------------------------------------------- Shares sold 817,450 $ 5,148,118 1,392,701 $ 9,955,122 Reinvestment of distributions 7,441 45,314 - - Shares reacquired (842,797) (5,298,381) (1,611,969) (11,645,242) - ---------------------------------------------------------------------------------------------------------------------------- Decrease (17,906) $ (104,949) (219,268) $ (1,690,120) - ----------------------------------------------------------------------------------------------------------------------------
54 NOTES TO FINANCIAL STATEMENTS (CONCLUDED) CLASS P SHARES - ---------------------------------------------------------------------------------------------------------------------------- Reinvestment of distributions .625 $ 4 - $ - - ---------------------------------------------------------------------------------------------------------------------------- Increase .625 $ 4 - $ - - ---------------------------------------------------------------------------------------------------------------------------- CLASS Y SHARES - ---------------------------------------------------------------------------------------------------------------------------- Shares sold 132,176 $ 800,566 - $ - Reinvestment of distributions 90,651 572,916 - - Shares reacquired (1,143,976) (7,166,898) (469,370) (3,419,410) - ---------------------------------------------------------------------------------------------------------------------------- Decrease (921,149) $ (5,793,416) (469,370) $ (3,419,410) - ----------------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE FUND - --------------------------------------------------------------------------------
PERIOD ENDED OCTOBER 31, 2003 * - -------------------------------------------------------------------------------------- CLASS A SHARES SHARES AMOUNT - -------------------------------------------------------------------------------------- Shares sold 226,357 $ 2,290,607 Shares reacquired (14,789) (153,156) - -------------------------------------------------------------------------------------- INCREASE 211,568 $ 2,137,451 - -------------------------------------------------------------------------------------- CLASS B SHARES - -------------------------------------------------------------------------------------- Shares sold 10,429 $ 108,006 - -------------------------------------------------------------------------------------- Increase 10,429 $ 108,006 - -------------------------------------------------------------------------------------- CLASS C SHARES - -------------------------------------------------------------------------------------- Shares sold 13,881 $ 143,607 - -------------------------------------------------------------------------------------- Increase 13,881 $ 143,607 - -------------------------------------------------------------------------------------- CLASS P SHARES - -------------------------------------------------------------------------------------- Shares sold 1,000 $ 10,000 - -------------------------------------------------------------------------------------- Increase 1,000 $ 10,000 - -------------------------------------------------------------------------------------- CLASS Y SHARES - -------------------------------------------------------------------------------------- Shares sold 1,000 $ 10,000 - -------------------------------------------------------------------------------------- Increase 1,000 $ 10,000 - --------------------------------------------------------------------------------------
* For the period June 23, 2003 (commencement of investment operations) to October 31, 2003. 12. SUBSEQUENT EVENTS On December 15, 2003, Lord Abbett International Core Equity Fund, a new Fund of the Trust, commenced investment operations and was capitalized with a $5,040,000 investment from Lord Abbett. Shares are currently available to partners and employees of Lord Abbett and will become available to the public on January 2, 2004. Effective January 1, 2004, a redemption fee of 2.00% of the NAV of the shares being redeemed will be charged on redemptions or exchanges of shares of International Opportunities Fund held ten business days or less, other than shares acquired through the reinvestment of dividends or other distributions or certain automatic or systematic investment, exchange or withdrawal plans. The redemption fee is retained by the Fund and is intended to discourage short-term investment in the Fund in order to avoid transaction and other expenses caused by short-term investments, and to facilitate implementation of the Fund's portfolio management strategies and techniques. 55 INDEPENDENT AUDITORS' REPORT THE BOARD OF TRUSTEES AND SHAREHOLDERS, LORD ABBETT SECURITIES TRUST - LORD ABBETT ALL VALUE SERIES, ALPHA SERIES, LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND AND LORD ABBETT LARGE-CAP VALUE FUND: We have audited the accompanying statements of assets and liabilities, including the schedules of investments of Lord Abbett Securities Trust - Lord Abbett All Value Series, Alpha Series, Lord Abbett International Opportunities Fund (formerly known as International Series), and Lord Abbett Large-Cap Value Fund (the "Funds") as of October 31, 2003, and the related statements of operations, the statements of changes in net assets and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Lord Abbett Securities Trust - Lord Abbett All Value Series, Alpha Series, Lord Abbett International Opportunities Fund and Lord Abbett Large-Cap Value Fund as of October 31, 2003, the results of their operations, the changes in their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP New York, New York December 22, 2003 56 BASIC INFORMATION ABOUT MANAGEMENT The Board of Trustees (the "Board") is responsible for the management of the business and affairs of each Fund in accordance with the laws of the State of Delaware. The Board appoints officers who are responsible for the day-to-day operations of each Fund and who execute policies authorized by the Board. The Board also approves an investment adviser to each Fund and continues to monitor the cost and quality of the services provided by the investment adviser, and annually considers whether to renew the contract with the adviser. Generally, each Trustee holds office until his successor is elected and qualified or until his earlier resignation or removal, as provided in the Trust's organizational documents. Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is the Funds' investment adviser. INTERESTED TRUSTEE The following Trustee is the Managing Partner of Lord Abbett and is an "interested person" as defined in the Act. Mr. Dow is also an officer, director, or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of 49 portfolios or series.
CURRENT POSITION NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------ ROBERT S. DOW Trustee since; Managing Partner and Chief N/A Lord, Abbett & Co. LLC 1993 and Chairman since 1996 Investment Officer of Lord 90 Hudson Street Abbett since 1996. Jersey City, NJ Date of Birth: 3/8/1945
------------ INDEPENDENT TRUSTEES The following independent or outside Trustees are also directors or trustees of each of the fourteen Lord Abbett-sponsored funds, which consist of 49 portfolios or series.
CURRENT POSITION NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------ E. THAYER BIGELOW Trustee since 1994 Managing General Partner, Currently serves as Bigelow Media, LLC 41 Bigelow Media, LLC (since director of Adelphia Madison Ave., Suite 3810 2000); Senior Adviser, Time Communications, Inc., New York, NY Date of Warner Inc. (1998 - 2000); Crane Co., and Huttig Birth: 10/22/1941 Acting Chief Executive Officer Building Products of Courtroom Television Inc. Network (1997 - 1998); President and Chief Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997). WILLIAM H.T. BUSH Trustee since 1998 Co-founder and Chairman of the Currently serves as Bush-O'Donnell & Co., Inc. Board of the financial director of Wellpoint 101 South Hanley Rd, advisory firm of Health Network, Inc., Suite 1260 Bush-O'Donnell & Company DT Industries Inc., St. Louis, MO (since 1986). and Engineered Date of Birth: 7/14/1938 Support Systems, Inc.
57 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
CURRENT POSITION NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------------ ROBERT B. CALHOUN, JR. Trustee since 1998 Managing Director of Monitor Currently serves as Monitor Clipper Partners Clipper Partners (since 1997) director of Avondale, 650 Madison Ave., and President of Clipper Asset Inc. and Interstate 9th Fl. New York, NY Management Corp. (since 1991), Bakeries Corp. Date of Birth: 10/25/1942 both private equity investment funds. STEWART S. DIXON Trustee since 1993; retired Partner in the law firm of N/A Wildman, Harrold, 12/31/2002 Wildman, Harrold, Allen & Allen & Dixon Dixon (since 1967) 225 W. Wacker Drive, Suite 2800 Chicago, IL Date of Birth: 11/5/1930 FRANKLIN W. HOBBS Trustee since 2001 Senior Advisor (since April Currently serves as Houlihan Lokey 2003) and Former Chief director of Adolph Howard & Zukin Executive Officer of Houlihan Coors Company. 685 Third Ave. Lokey Howard & Zukin, an New York, NY investment bank (January 2002 Date of Birth: 7/30/1947 - April 2003); Chairman of Warburg Dillon Read (1999 - 2001); Global Head of Corporate Finance of SBC Warburg Dillon Read (1997 - 1999); Chief Executive Officer of Dillon, Read & Co. (1994 - 1997) C. ALAN MacDONALD Trustee since 1993 Retired - General Business and Currently serves as 415 Round Hill Road Governance Consulting (since director of Greenwich, CT 1992); formerly President and Fountainhead Water Date of Birth: 5/19/1933 CEO of Nestle Foods. Company, Lincoln Snacks, H.J. Baker, and Seix Fund, Inc.* THOMAS J. NEFF Trustee since 1993 Chairman of Spencer Stuart, an Currently serves as Spencer Stuart executive search consulting director of Ace, Ltd. 277 Park Avenue firm (since 1996); President and Exult, Inc. New York, NY of Spencer Stuart (1979 - Date of Birth: 10/2/1937 1996). JAMES F. ORR, III Trustee since 2002; retired President and CEO of Currently serves as 80 Pinckney Street 3/3/2003 LandingPoint Capital (since Chairman of Boston, MA 2002); Chairman and CEO of Rockefeller Date of Birth: 3/5/1943 United Asset Management Foundation, Director Corporation (2000 to 2001); of Nashua Corp. and Chairman and CEO of UNUM SteelPoint Provident Corporation (1999 - Technologies. merger); Chairman and CEO of UNUM Corporation (1988 - 1999).
- ----------- * Seix Fund, Inc. is a registered investment company that is advised by Seix Investment Advisors Inc. Seix Investment Advisors Inc.'s Chairman, CEO, and Chief Investment Officer is married to Robert Dow, the Trust's Chairman, CEO, and President and the Managing Partner of Lord Abbett. ----------- 58 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED) OFFICERS None of the officers listed below have received compensation from the Trust. All the officers of the Trust may also be officers of the other Lord Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, NJ 07302.
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------------------------------- ROBERT S. DOW Chief Executive Elected in 1993 Managing Partner and Chief (3/8/1945) Officer and President Investment Officer of Lord Abbett since 1996. SHOLOM DINSKY Executive Elected in 2003 Partner and Large Cap Value (3/24/1944) Vice President Investment Manager, joined Lord Abbett in 2000, formerly Managing Director of Prudential Asset Management, prior thereto Director of Equity Research and Senior Vice President at Mitchell Hutchins Asset Management. ROBERT P. FETCH Executive Elected in 1999 Partner and Small-Cap Value (2/18/1953) Vice President Senior Investment Manager, joined Lord Abbett in 1995. KENNETH G. FULLER Executive Elected in 2003 Investment Manager - Large (4/22/1945) Vice President Cap Value, joined Lord Abbett in 2002, formerly Portfolio Manager and Senior Vice President at Pioneer Investment Management, Inc. from 1999 to 2002; prior thereto Principal, Manley, Fuller Asset Management. HOWARD E. HANSEN Vice President Elected in 2003 Partner and Investment (10/13/1961) Manager, joined Lord Abbett in 1995.
59 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------------------------------- INGRID C. HOLM Executive Elected in 2001 Investment Manager - Global (3/21/1959) Vice President Equity, joined Lord Abbett in 2001, formerly International Portfolio Manager at Batterymarch Financial Management, Inc. from 2000 to 2001, prior thereto held various positions at the Prudential Insurance Company of America. VINCENT J. MCBRIDE Executive Elected in 2003 Senior Investment Manager, (5/8/1964) Vice President International Core Equity, joined Lord Abbett in 2003, formerly Managing Director and Portfolio Manager at Warburg Pincus Asset Management and Credit Suisse Asset Management. ROBERT G. MORRIS Executive Elected in 1998 Partner and Director of (11/6/1944) Vice President Equity Investments, joined Lord Abbett in 1991. F. THOMAS O'HALLORAN Executive Elected in 2003 Partner and Investment (2/19/1955) Vice President Manager, joined Lord Abbett in 2001, formerly Executive Director/Senior Research Analyst at Dillon Read/UBS Warburg. ELI M. SALZMANN Executive Elected in 2003 Partner and Director of (3/24/1964) Vice President Institutional Equity Investments, joined Lord Abbett in 1997.
60 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------------------------------- HAROLD E. SHARON Executive Elected in 2003 Investment Manager and (9/23/1960) Vice President Director, International Core Equity, joined Lord Abbett in 2003, formerly Financial Industry Consultant for Venture Capitalist from 2001 to 2003, prior thereto Managing Director of Warburg Pincus Asset Management and Credit Suisse Asset Management. TRACIE E. AHERN Vice President and Treasurer Elected in 1999 Partner and Director of (1/12/1968) Portfolio Accounting and Operations, joined Lord Abbett in 1999, prior thereto Vice President - Head of Fund Administration of Morgan Grenfell. JOAN A. BINSTOCK Chief Financial Officer and Elected in 1999 Partner and Chief Operations (3/4/1954) Vice President Officer, joined Lord Abbett in 1999, prior thereto Chief Operating Officer of Morgan Grenfell. DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined Lord (1/4/1954) Abbett in 1998,. DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord Abbett (1/22/1952) in 1979. JOHN J. DICHIARO Vice President Elected in 2000 Partner and Senior Strategy (7/30/1957) Coordinator - Small Cap Growth, joined Lord Abbett in 2000, prior thereto Vice President - Securities Group of Wafra Investment Advisory Group. LESLEY-JANE DIXON Vice President Elected in 1999 Partner and Senior Research (1/1/1964) Analyst, joined Lord Abbett in 1995.
61 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------------------------------- DANIEL H. FRASCARELLI Vice President Elected in 2001 Partner and Investment (3/11/1954) Manager, joined Lord Abbett in 1990. GERARD S. E. Vice President Elected in 1999 Research Analyst, joined Lord HEFFERNAN, JR. Abbett in 1998. (9/7/1963) PAUL A. HILSTAD Vice President and Secretary Elected in 1996 Partner and General Counsel, (12/13/1942) joined Lord Abbett in 1995. TODD D. JACOBSON Vice President Elected in 2003 Investment Manager, (10/28/1966 ) International Core Equity, joined Lord Abbett in 2003, formerly Director and Portfolio Manager at Warburg Pincus Asset Management and Credit Suisse Asset Management from 2002 to 2003; prior thereto Associate Portfolio Manager of Credit Suisse Asset Management. LAWRENCE H. KAPLAN Vice President and Assistant Elected in 1997 Partner and Deputy General (1/16/1957) Secretary Counsel, joined Lord Abbett in 1997. A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of Equity (12/21/1959) Trading, joined Lord Abbett in 1983. TODOR PETROV Vice President Elected in 2003 Investment Manager, joined (5/18/1974) Lord Abbett in 2003, formerly Associate Portfolio Manager of Credit Suisse Asset Management from 1999 to 2003; prior thereto Summer Associate of Warburg Pincus Funds.
62 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------------------------------- CHRISTINA T. SIMMONS Vice President and Assistant Elected in 2000 Assistant General Counsel, (11/12/1957) Secretary joined Lord Abbett in 1999, formerly Assistant General Counsel of Prudential Investments from 1998 to 1999, prior thereto Counsel of Drinker, Biddle & Reath LLP, a law firm. BERNARD J. GRZELAK Assistant Treasurer Elected in 2003 Director of Fund (6/12/1971) Administration, joined Lord Abbett in 2003, formerly Vice President, Lazard Asset Management from 2000 to 2003, prior thereto Manager of Deloitte & Touche LLP.
Please call 1-888-522-2388 for a copy of the Statement of Additional Information (SAI), which contains further information about the Trust's Trustees. It is available free upon request. 63 HOUSEHOLDING The Trust has adopted a policy that allows them to send only one copy of the Funds' Prospectus, proxy material, annual report and semi-annual report to certain shareholders residing at the same "household." This reduces Trust expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be "householded," please call Lord Abbett at 800-821-5129 or send a written request with your name, the name of your fund or funds and your account number or numbers to Lord Abbett Family of Funds, P.O. Box 219336, Kansas City, MO 64121. PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that Lord Abbett uses to vote proxies related to the Fund's portfolio securities is available without charge, upon request, by calling 888-522-2388 or on Lord Abbett's web site at www.LordAbbett.com. TAX INFORMATION None of the ordinary income distribution paid by the International Opportunities Fund during fiscal 2003 is qualifying dividend income. For corporate shareholders, none of the International Opportunities Fund's ordinary income distribution qualified for the dividends received deduction. Additionally, all the distributions paid to shareholders during the fiscal year ended October 31, 2003 for All Value Fund and Alpha Fund represent long-term capital gains. 64 [LORD ABBETT(R) 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 Securities Trust Lord Abbett All Value Fund Lord Abbett Mutual Fund shares are distributed by: International Opportunities Series LORD ABBETT DISTRIBUTOR LLC: Alpha Series LST-2-10-03 90 Hudson Street - Jersey City, New Jersey 07302-3973 Large-Cap Value Fund (12/03)
LORD ABBETT [LORD ABBETT LOGO] 2003 ANNUAL REPORT LORD ABBETT MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND FOR THE YEAR ENDED OCTOBER 31, 2003 - -------------------------------------------------------------------------------- LORD ABBETT MICRO-CAP GROWTH FUND AND MICRO-CAP VALUE FUND ANNUAL REPORT FOR THE FISCAL YEAR ENDED OCTOBER 31, 2003 DEAR SHAREHOLDERS: We are pleased to provide you with this twelve-month overview of the Lord Abbett Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value Fund's strategies and performance for the fiscal year ended October 31, 2003. On this and the following pages, we discuss the major factors that influenced performance. Thank you for investing in Lord Abbett Mutual Funds. We value the trust that you place in us and look forward to serving your investment needs in the years to come. BEST REGARDS, /s/ Robert S. Dow ROBERT S. DOW CHAIRMAN - -------------------------------------------------------------------------------- Q: WHAT WERE THE OVERALL MARKET CONDITIONS OF THE REPORTING PERIOD? A: War and general geopolitical concerns had a negative effect on the psyche of businesses and consumers during the first part of the period. Corporations entered the first quarter of 2003 cautiously and remained wary, selling existing inventories and implementing layoffs, as the economy continued to decelerate. The unemployment rate rose during the period, reaching 6.4% by June 2003. But, as the coalition's war effort made clear progress in the early spring, the fog of global uncertainty lifted, and broad equity indices experienced meaningful advances. In June, the Federal Reserve Board (the "Fed") cut interest rates 25 basis points to 1%, in a continued attempt to spark the economy. With interest rates at levels not seen for over 40 years, the Fed is attempting a variety of measures to promote and sustain growth. Over the past year, the U.S. dollar weakened versus the euro. A weaker dollar can translate into more competitive pricing for U.S. goods overseas. Additionally, imports can become more expensive and less attractive to the U.S. consumer, resulting in higher sales of American-made goods within the U.S.--providing further stimulus for economic growth. During the second quarter of 2003, President Bush signed into law a tax reform/economic stimulus package with accelerated tax cuts and dividend exclusions. The U.S. economy continued to show signs of improvement during the third quarter of 2003, as domestic growth prospects and corporate profits improved. Further evidence of an economic recovery sparked the equity 1 - -------------------------------------------------------------------------------- markets, adding to the market gains experienced in the second quarter. For the period, major indices advanced, but concerns over future growth grew as the summer ended. As the economy entered the final months of 2003, early gross domestic product (GDP) numbers showed that the U.S. economy expanded by an 8.2% rate in the third quarter, well ahead of expectations and up from 3.3% growth in the second quarter. In addition, productivity data, an important gauge for inflation, remained strong and can be an important signal that interest rates may remain low in the near-term. As the period came to a close, October's employment report showed an increase of 126,000 jobs and a lower unemployment rate of 6.0%--an encouraging sign as the economy enters 2004. LORD ABBETT MICRO-CAP GROWTH FUND Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2003? A: For the fiscal year ended October 31, 2003, Lord Abbett Micro-Cap Growth Fund returned 44.7%,(1) underperforming the Russell 2000(R) Growth Index, (2) which returned 46.6% over the same period. PLEASE REFER TO PAGE 4 FOR AVERAGE ANNUAL TOTAL RETURNS. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: Stock selection in the materials and processing sector hurt the Fund's performance for the period, as certain holdings suffered from lower margins and net income. Stock selection in the healthcare sector also hurt performance, as companies experienced higher expenses hurting stock performance. In addition, stock selection in the producer durables sector, relative to the stocks in the Fund's index, detracted from the Fund's performance. For the period, strong stock selection in the technology sector was the largest benefactor to Fund performance. In particular, certain companies that offer online educational services experienced strong gains from increased revenue growth. In addition, stock selection in the consumer discretionary sector added to performance, where increased sales and stronger consumer spending helped sector holdings. Stock selection in the financial services sector also added to performance, relative to the Fund's index. LORD ABBETT MICRO-CAP VALUE FUND Q: HOW DID THE FUND PERFORM OVER THE FISCAL YEAR ENDED OCTOBER 31, 2003? A: For the fiscal year ended October 31, 2003, Lord Abbett Micro-Cap Value Fund returned 43.8%,(1) outperforming the Russell 2000(R) Value Index,(3) which returned 40.3% over the same period. PLEASE REFER TO PAGE 5 FOR AVERAGE ANNUAL TOTAL RETURNS. 2 - -------------------------------------------------------------------------------- Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: The Fund's largest contributor to its performance, relative to the index, was stock selection in the auto and transportation sector where holdings in the trucking industry appreciated, as the companies positioned themselves for the anticipated economic rebound. Stock selection in the healthcare sector also added to performance, as strong revenue growth in certain small biotech companies helped the Fund. In addition, stock selection and an overweight position in the technology sector added to the Fund's performance. The Fund's performance was hurt from stock selection in the consumer discretionary sector. Stock selection in the producer durables sector also hurt the Fund's performance, as lower revenues in some companies slowed performance. In addition, stock selection in the materials and processing sector detracted from the Fund's performance. (1) Reflects performance at the Net Asset Value (NAV) of Class A shares, with all distributions reinvested, for the fiscal year ended October 31, 2003. (2) The Russell 2000(R) Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. (3) The Russell 2000(R) Value Index measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. IMPORTANT PERFORMANCE AND OTHER INFORMATION The views of each Fund's management and the portfolio holdings described in this report are as of October 31, 2003; these views and portfolio holdings may have changed subsequent to this date and they do not guarantee the future performance of the markets or the Funds. Information provided in this report should not be considered a recommendation to purchase or sell securities. A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with the Fund, please see the Funds' Prospectus. PERFORMANCE: PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. BECAUSE OF ONGOING MARKET VOLATILITY, FUND PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL FLUCTUATION. The investment return and principal value of an investment in each Fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. Except where noted, comparative fund performance does not account for the deduction of sales charges and would be different if sales charges were included. Each Fund is actively managed and, as a result, asset allocation may change. Sectors may include many industries. 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. FOR FURTHER UPDATED PERFORMANCE INFORMATION, PLEASE CALL LORD ABBETT AT 800-821-5129 OR REFER TO OUR WEBSITE AT www.LordAbbett.com. FOR MORE COMPLETE INFORMATION ABOUT THIS OR ANY LORD ABBETT MUTUAL FUND, INCLUDING RISKS, INVESTMENT OBJECTIVES, CHARGES AND ONGOING EXPENSES, PLEASE CALL YOUR INVESTMENT PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 888-522-2388 FOR A PROSPECTUS. AN INVESTOR SHOULD READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 3 MICRO-CAP GROWTH FUND - -------------------------------------------------------------------------------- INVESTMENT COMPARISON Below is a comparison of a $10,000 investment in Class Y shares with the same investment in the Center for Research Security Prices Index "CRSP 9-10 Index" and the Russell 2000(R) Growth Index, assuming reinvestment of all dividends and distributions. The performance of other class will be greater than or less than the performance shown in the graph below due to different sales loads and expenses applicable to such classes. The graph and performance table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. [CHART]
THE FUND (CLASS Y SHARES) AT NET ASSET VALUE(1) CRSP 9-10 INDEX(2) RUSSELL 2000(R) GROWTH INDEX(2) 7/9/1999 $ 10,000 $ 10,000 $ 10,000 9/30/1999 $ 9,372 $ 9,588 $ 9,812 12/31/1999 $ 11,998 $ 11,444 $ 13,088 3/31/2000 $ 15,186 $ 13,395 $ 14,303 6/30/2000 $ 12,014 $ 12,196 $ 13,249 9/30/2000 $ 11,449 $ 12,425 $ 12,723 12/31/2000 $ 9,250 $ 10,005 $ 10,153 3/31/2001 $ 9,475 $ 10,586 $ 8,610 6/30/2001 $ 10,624 $ 12,654 $ 10,157 9/30/2001 $ 8,395 $ 10,427 $ 7,305 12/31/2001 $ 10,857 $ 13,432 $ 9,216 3/31/2002 $ 10,857 $ 14,053 $ 9,036 6/30/2002 $ 9,478 $ 13,194 $ 7,617 9/30/2002 $ 7,419 $ 10,298 $ 5,978 12/31/2002 $ 7,527 $ 11,536 $ 6,427 3/31/2003 $ 7,271 $ 11,313 $ 6,177 6/30/2003 $ 9,252 $ 15,154 $ 7,669 9/30/2003 $ 10,345 $ 17,553 $ 8,472 10/31/2003 $ 10,798 $ 19,048 $ 9,204
FISCAL YEAR-END 10/31 AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2003
1 YEAR LIFE OF CLASS CLASS A(3) 36.39% -7.76% CLASS Y(4) 45.17% 1.80%
(1) Total Return applicable to Class Y shares with all dividends and distributions reinvested for the periods shown ended October 31, 2003 using the SEC-required uniform method to compute such return. (2) Performance of each unmanaged indices does not reflect transaction costs, management fees or sales charges. The performance of the Index is not necessarily representative of the Fund's performance. Performance for each Index begins on July 31, 1999. (3) Class A shares commenced operations on May 1, 2000. Total Return, which is the percent change in net asset value, after deduction of the maximum initial sales charge of 5.75% applicable to Class A shares, with all dividends and distributions reinvested for the periods shown ended October 31, 2003 using the SEC-required uniform method to compute such return. (4) Class Y shares commenced operations on July 9, 1999. Total Return, with all dividends and distributions reinvested for the periods shown ended October 31, 2003, is at net asset value. 4 MICRO-CAP VALUE FUND - -------------------------------------------------------------------------------- INVESTMENT COMPARISON Below is a comparison of a $10,000 investment in Class Y shares with the same investment in the Center for Research Security Prices Index "CRSP 9-10 Index" and the Russell 2000(R) Value Index, assuming reinvestment of all dividends and distributions. The performance of other class will be greater than or less than the performance shown in the graph below due to different sales loads and expenses applicable to such classes. The graph and performance table below do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. [CHART]
THE FUND (CLASS Y SHARES) AT NET ASSET VALUE(1) CRSP 9-10 INDEX(2) RUSSELL 2000(R) VALUE INDEX(2) 7/9/1999 $ 10,000 $ 10,000 $ 10,000 9/30/1999 $ 9,309 $ 9,588 $ 9,442 12/31/1999 $ 10,387 $ 11,444 $ 9,586 3/31/2000 $ 11,010 $ 13,395 $ 9,953 6/30/2000 $ 12,787 $ 12,196 $ 10,147 9/30/2000 $ 13,872 $ 12,425 $ 10,892 12/31/2000 $ 14,124 $ 10,005 $ 11,775 3/31/2001 $ 14,633 $ 10,586 $ 11,889 6/30/2001 $ 17,764 $ 12,654 $ 13,273 9/30/2001 $ 15,364 $ 10,427 $ 11,502 12/31/2001 $ 18,063 $ 13,432 $ 13,425 3/31/2002 $ 20,639 $ 14,053 $ 14,712 6/30/2002 $ 20,864 $ 13,194 $ 14,400 9/30/2002 $ 17,123 $ 10,298 $ 11,334 12/31/2002 $ 17,452 $ 11,536 $ 11,892 3/31/2003 $ 16,063 $ 11,313 $ 11,288 6/30/2003 $ 20,286 $ 15,154 $ 13,852 9/30/2003 $ 22,223 $ 17,553 $ 14,922 10/31/2003 $ 24,117 $ 19,048 $ 16,138
FISCAL YEAR-END 10/31 AVERAGE ANNUAL TOTAL RETURN AT MAXIMUM APPLICABLE SALES CHARGE FOR THE PERIODS ENDED OCTOBER 31, 2003
1 YEAR LIFE OF CLASS CLASS A(3) 35.53% 21.93% CLASS Y(4) 44.35% 22.65%
(1) Total Return applicable to Class Y shares with all dividends and distributions reinvested for the periods shown ended October 31, 2003 using the SEC-required uniform method to compute such return. (2) Performance of each unmanaged Index does not reflect transaction costs, management fees or sales charges. The performance of the indices is not necessarily representative of the Fund's performance. Performance for each Index begins on July 31, 1999. (3) Class A shares commenced operations on May 1, 2000. Total Return, which is the percent change in net asset value, after deduction of the maximum initial sales charge of 5.75% applicable to Class A shares, with all dividends and distributions reinvested for the periods shown ended October 31, 2003 using the SEC-required uniform method to compute such return. (4) Class Y shares commenced operations on July 9, 1999. Total Return, with all dividends and distributions reinvested for the periods shown ended October 31, 2003, is at net asset value. 5 SCHEDULE OF INVESTMENTS MICRO-CAP GROWTH FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - ----------------------------------------------------------------------- COMMON STOCKS 99.79% BANKS 1.87% Online Resources Corp.* 13,500 $ 87 -------- BANKS: OUTSIDE NEW YORK CITY 3.50% Nara Bancorp, Inc. 7,200 163 -------- BIOTECHNOLOGY RESEARCH & PRODUCTION 7.31% Regeneration Technologies, Inc.* 8,700 104 Sequenom, Inc.* 31,700 102 Vion Pharmaceuticals, Inc.* 75,500 135 -------- TOTAL 341 -------- CASINOS & GAMBLING 2.25% Mikohn Gaming Corp.* 17,900 105 -------- CHEMICALS 3.99% Ultralife Batteries, Inc.* 10,700 186 -------- COMMUNICATIONS TECHNOLOGY 3.54% KVH Industries, Inc.* 3,700 103 Seachange Int'l, Inc.* 4,000 62 -------- TOTAL 165 -------- COMPUTER SERVICES SOFTWARE & SYSTEMS 16.75% Aladdin Knowledge Systems*(a) 18,000 147 Concur Technologies, Inc.* 9,600 110 Digitas, Inc.* 16,900 147 eCollege.com, Inc.* 7,700 167 Electronic Clearing House* 17,900 125 Intervideo, Inc.* 5,000 85 -------- TOTAL 781 -------- CONSUMER ELECTRONICS 1.50% Euniverse, Inc.* 35,700 $ 70 -------- DIVERSIFIED MANUFACTURING 1.80% Armor Holdings, Inc.* 4,300 84 -------- DRUGS & PHARMACEUTICALS 8.96% Bradley Pharmaceuticals, Inc.* 3,200 86 D&K Healthcare Resources, Inc. 7,500 97 Flamel Technologies ADR* 4,600 116 Parexel Int'l Corp.* 7,100 119 -------- TOTAL 418 -------- ELECTRONICS 3.07% CompuDyne Corp.* 6,200 50 II-VI, Inc.* 3,900 93 -------- TOTAL 143 -------- ELECTRONICS: INSTRUMENTS GAUGES & METERS 3.09% Measurement Specialties, Inc.* 11,700 144 -------- ELECTRONICS: MEDICAL SYSTEMS 1.89% Rita Medical Systems, Inc.* 23,000 88 -------- ELECTRONICS: SEMI-CONDUCTORS / COMPONENTS 3.41% Microsemi Corp.* 7,700 159 -------- ELECTRONICS: TECHNOLOGY 1.01% Identix, Inc.* 8,218 47 -------- FINANCE COMPANIES 1.71% Asta Funding, Inc. 2,700 80 -------- HEALTHCARE MANAGEMENT SERVICES 2.79% Psychiatric Solutions, Inc.* 8,700 130 --------
SEE NOTES TO FINANCIAL STATEMENTS. 6 SCHEDULE OF INVESTMENTS (CONTINUED) MICRO-CAP GROWTH FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - ----------------------------------------------------------------------- JEWELRY WATCHES & GEMSTONES 2.36% LJ International, Inc.*(a) 26,200 $ 110 -------- MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 8.23% BioSource Int'l., Inc.* 17,300 124 Conceptus, Inc.* 7,500 92 Molecular Devices Corp.* 6,100 108 Neogen Corp.* 3,000 60 -------- TOTAL 384 -------- OFFICE FURNITURE & BUSINESS EQUIPMENT 1.01% Insignia Systems, Inc.* 13,100 47 -------- RETAIL 7.12% Casual Male Retail Group, Inc.* 18,500 165 The Sports Authority, Inc.* 4,500 167 -------- TOTAL 332 -------- SERVICES: COMMERCIAL 9.11% Ebookers.com plc ADR* 9,900 158 Exponent, Inc.* 4,200 89 Gevity HR, Inc. 7,100 107 Opinion Research Corp.* 11,700 71 -------- TOTAL 425 -------- TEXTILES APPAREL MANUFACTURERS 3.52% Oxford Industries, Inc. 2,400 164 -------- TOTAL COMMON STOCKS (Cost $4,066,541) 4,653 ======== PRINCIPAL AMOUNT VALUE INVESTMENTS (000) (000) - ----------------------------------------------------------------------- SHORT-TERM INVESTMENT 0.64% REPURCHASE AGREEMENT 0.64% Repurchase Agreement dated 10/31/2003, 0.99% due 11/3/2003 with State Street Bank & Trust Co. collateralized by $35,000 of Federal Home Loan Bank at 1.25% due 7/2/2004; value: $35,170; proceeds: $29,663 (Cost $29,660) $ 30 $ 30 ======== TOTAL INVESTMENTS 100.43% (Cost $4,096,201) $ 4,683 ========
* Non-income producing security. (a) Foreign security traded in U.S. dollars. ADR-American Depository Receipt. SEE NOTES TO FINANCIAL STATEMENTS. 7 SCHEDULE OF INVESTMENTS MICRO-CAP VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - ----------------------------------------------------------------------- COMMON STOCKS 93.47% AIR TRANSPORTATION 2.70% Frontier Airlines, Inc.* 8,200 $ 132 Offshore Logistics, Inc.* 5,000 109 -------- TOTAL 241 -------- AUTO COMPONENTS 1.22% Wabash National Corp.* 4,700 108 -------- AUTO PARTS: AFTER MARKET 3.72% Keystone Automotive Industries, Inc. * 9,500 235 Standard Motor Products, Inc. 8,700 97 -------- TOTAL 332 -------- BANKS 1.46% Hanmi Financial Corp. 6,158 131 -------- BANKS: OUTSIDE NEW YORK CITY 1.43% Cobiz, Inc. 7,600 127 -------- CHEMICALS 3.52% NuCo2, Inc.* 17,600 221 Quaker Chemical Corp. 3,500 93 -------- TOTAL 314 -------- COMMUNICATIONS TECHNOLOGY 1.28% Bel Fuse, Inc. Class A 4,500 114 -------- COMPUTER SERVICES SOFTWARE & SYSTEMS 3.34% Datastream Systems, Inc.* 7,000 54 MICROS Systems, Inc.* 6,000 243 OpticNet, Inc.* ~ 300 --(b) -------- TOTAL 297 -------- COMPUTER TECHNOLOGY 3.84% Concurrent Computer Corp.* 31,000 144 Fargo Electronics * 14,400 $ 198 -------- TOTAL 342 -------- CONSTRUCTION 1.05% Modtech Holdings, Inc.* 11,900 93 -------- CONTAINERS & PACKAGING: METAL & GLASS 0.95% Mobile Mini, Inc.* 4,000 84 -------- ELECTRICAL EQUIPMENT & COMPONENTS 1.30% Powell Industries, Inc.* 6,000 116 -------- ELECTRONICS 1.35% BEI Technologies, Inc. 6,500 120 -------- ELECTRONICS: TECHNOLOGY 2.11% Intermagnetics General Corp.* 8,000 188 -------- FINANCIAL MISCELLANEOUS 1.24% Financial Federal Corp.* 3,300 111 -------- FOODS 2.25% Sanderson Farms, Inc. 3,500 123 Tasty Baking Co. 10,100 78 -------- TOTAL 201 -------- FUNERAL PARLORS & CEMETERY 2.03% Carriage Services, Inc.* 30,300 99 Rock of Ages Corp. 14,500 82 -------- TOTAL 181 -------- HEALTHCARE MANAGEMENT SERVICES 2.76% American Dental Partners, Inc.* 12,000 116 Sierra Health Services, Inc.* 5,600 130 -------- TOTAL 246 --------
SEE NOTES TO FINANCIAL STATEMENTS. 8 SCHEDULE OF INVESTMENTS (CONTINUED) MICRO-CAP VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - ----------------------------------------------------------------------- HOTEL/MOTEL 1.51% The Marcus Corp. 9,000 $ 135 -------- HOUSEHOLD EQUIPMENT & PRODUCTS 1.61% Craftmade Int'l., Inc. 6,000 143 -------- HOUSEHOLD FURNISHINGS 0.77% Haverty Furniture Cos., Inc. 3,300 68 -------- IDENTIFICATION CONTROL & FILTER DEVICES 0.64% Robbins & Myers, Inc. 2,700 57 -------- INSURANCE: PROPERTY-CASUALTY 2.75% Donegal Group, Inc. 6,000 118 The Navigators Group, Inc.* 4,000 127 -------- TOTAL 245 -------- MACHINERY: INDUSTRIAL/SPECIALTY 2.33% Tennant Co. 2,000 79 Twin Disc, Inc. 6,800 129 -------- TOTAL 208 -------- MACHINERY: OIL WELL EQUIPMENT & SERVICES 1.57% Lufkin Industries, Inc. 4,000 96 Universal Compression Hldgs., Inc.* 2,000 44 -------- TOTAL 140 -------- MACHINERY: SPECIALTY 1.20% Quipp, Inc.* 8,700 107 -------- MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 1.36% ICU Medical, Inc.* 3,600 122 -------- METAL FABRICATING 0.94% NN, Inc. 7,000 84 -------- MISCELLANEOUS MATERIALS & PROCESSING 0.67% Rogers Corp.* 1,500 $ 60 -------- OFFSHORE DRILLING 1.21% TMBR/Sharp Drilling, Inc.* 6,000 108 -------- OIL: INTEGRATED DOMESTIC 1.08% Pioneer Drilling Co.* 26,000 96 -------- POLLUTION CONTROL AND ENVIRONMENTAL SERVICES 2.04% Headwaters, Inc.* 3,000 56 Team, Inc.* 14,000 126 -------- TOTAL 182 -------- RAILROADS 1.32% Genesee & Wyoming, Inc. Class A* 4,825 117 -------- REAL ESTATE INVESTMENT TRUSTS 2.64% Agree Realty Corp. 3,900 101 Lasalle Hotel Properties 8,000 135 -------- TOTAL 236 -------- RENTAL & LEASING SERVICES: COMMERCIAL 1.70% Interpool, Inc. 4,500 66 McGrath Rent Corp. 3,000 85 -------- TOTAL 151 -------- RETAIL 4.38% Hibbett Sporting Goods, Inc.* 3,600 98 Mothers Work, Inc.* 4,400 124 Sharper Image Corp.* 3,500 101 Ultimate Electronics, Inc.* 7,500 67 -------- TOTAL 390 --------
SEE NOTES TO FINANCIAL STATEMENTS. 9 SCHEDULE OF INVESTMENTS (CONCLUDED) MICRO-CAP VALUE FUND OCTOBER 31, 2003
VALUE INVESTMENTS SHARES (000) - ----------------------------------------------------------------------- SERVICES: COMMERCIAL 7.42% Ambassadors Int'l., Inc.* 5,300 $ 101 Exponent, Inc.* 8,100 171 Monro Muffler Brake, Inc.* 8,000 263 World Fuel Services 4,400 126 -------- TOTAL 661 -------- SHOES 1.26% Vans, Inc.* 10,000 112 -------- TELECOMMUNICATIONS EQUIPMENT 3.84% Arris Group, Inc.* 18,500 111 C-Cor.Net Corp.* 22,900 231 -------- TOTAL 342 -------- TEXTILE PRODUCTS 1.18% Quaker Fabric Corp. 13,200 106 -------- TEXTILES APPAREL MANUFACTURERS 3.54% Cutter & Buck, Inc.* 25,100 191 Phillips-Van Heusen Corp. 7,300 125 -------- TOTAL 316 -------- TOBACCO 1.16% Dimon, Inc. 14,300 103 -------- TRUCKERS 2.68% Covenant Transport, Inc.* 5,600 107 Heartland Express, Inc. 2,956 73 P.A.M. Transportation Svcs.* 3,100 59 -------- TOTAL 239 -------- UTILITIES: GAS DISTRIBUTORS 1.37% Chesapeake Utilities Corp. 5,000 122 -------- UTILITIES: MISCELLANEOUS 1.24% Waste Industries USA, Inc.* 12,200 111 -------- UTILITIES: WATER 2.51% Consolidated Water Co. Ord Sh(a) 11,200 $ 224 -------- TOTAL COMMON STOCKS (Cost $5,964,222) 8,331 ======== PRINCIPAL AMOUNT (000) ------------ SHORT-TERM INVESTMENT 6.38% REPURCHASE AGREEMENT 6.38% Repurchase Agreement dated 10/31/2003 0.99% due 11/3/2003 with State Street Bank & Trust Co. collateralized by $545,000 of Federal National Mortgage Assoc. at 6.5% due 8/15/2004; value: $584,078; proceeds: $568,556 (Cost $568,509) $ 569 569 ======== TOTAL INVESTMENTS 99.85% (Cost $6,532,731) $ 8,900 ========
* Non-income producing security. ~ Fair valued security. See Note 2a. (a) Foreign security traded in U.S. dollars. (b) Value is less than $1,000. SEE NOTES TO FINANCIAL STATEMENTS. 10 STATEMENTS OF ASSETS AND LIABILITIES October 31, 2003
MICRO-CAP MICRO-CAP GROWTH FUND VALUE FUND ASSETS: Investment in securities, at cost $ 4,096,201 $ 6,532,731 - -------------------------------------------------------------------------------------------- Investment in securities, at value $ 4,683,206 $ 8,899,975 Receivables: Interest and dividends 136 2,366 Investment securities sold - 40,106 Capital shares sold 2,106 5,080 From affiliates 6,484 - Prepaid expenses and other assets 2 49 - -------------------------------------------------------------------------------------------- TOTAL ASSETS 4,691,934 8,947,576 - -------------------------------------------------------------------------------------------- LIABILITIES: Payables: Capital shares reacquired - 430 Management fees 5,973 11,035 12b-1 distribution fees 1,403 2,740 Fund administration 159 294 Trustees' fees - 75 To Lord, Abbett & Co. LLC 7,227 6,116 Accrued expenses and other liabilities 14,132 13,626 - -------------------------------------------------------------------------------------------- TOTAL LIABILITIES 28,894 34,316 ============================================================================================ NET ASSETS $ 4,663,040 $ 8,913,260 ============================================================================================ COMPOSITION OF NET ASSETS: Paid-in capital $ 4,497,316 $ 5,888,532 Distributions in excess of net investment income - (75) Accumulated net realized gain (loss) on investments (421,281) 657,559 Net unrealized appreciation on investments 587,005 2,367,244 - -------------------------------------------------------------------------------------------- NET ASSETS $ 4,663,040 $ 8,913,260 ============================================================================================ NET ASSETS BY CLASS: Class A Shares $ 4,654,939 $ 8,891,757 Class Y Shares $ 8,101 $ 21,503 OUTSTANDING SHARES BY CLASS: Class A Shares 428,140 414,828 Class Y Shares 739.40 998.76 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (NET ASSETS DIVIDED BY OUTSTANDING SHARES): Class A Shares-Net asset value $ 10.87 $ 21.43 Class A Shares-Maximum offering price (Net asset value plus sales charge of 5.75%) $ 11.53 $ 22.74 Class Y Shares-Net asset value $ 10.96 $ 21.53 ============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 11 STATEMENTS OF OPERATIONS For the Year Ended October 31, 2003
MICRO-CAP MICRO-CAP GROWTH FUND VALUE FUND INVESTMENT INCOME: Dividends $ 2,773 $ 54,956 Interest 2,566 4,482 - -------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 5,339 59,438 - -------------------------------------------------------------------------------------------- EXPENSES: Management fees 52,559 100,462 12b-1 distribution plan-Class A 10,802 20,855 Shareholder servicing 4,186 3,364 Market data 20 35 Professional 5,863 4,348 Reports to shareholders 8,155 6,586 Fund accounting 1,445 1,485 Fund administration 988 2,274 Custody 3,384 2,530 Trustees' fees 53 100 Registration 9,773 4,143 Other 1,707 - - -------------------------------------------------------------------------------------------- Gross expenses 98,935 146,182 Expense reductions (54) (74) Management fees waived (11,688) (23,365) Expenses assumed by Lord, Abbett & Co. LLC (25,862) (6,570) - -------------------------------------------------------------------------------------------- NET EXPENSES 61,331 116,173 - -------------------------------------------------------------------------------------------- NET INVESTMENT LOSS (55,992) (56,735) - -------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments 175,560 713,072 Net change in unrealized appreciation on investments 1,242,069 1,944,037 ============================================================================================ NET REALIZED AND UNREALIZED GAIN 1,417,629 2,657,109 ============================================================================================ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,361,637 $ 2,600,374 ============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 12 STATEMENTS OF CHANGES IN NET ASSETS Year Ended October 31, 2003
MICRO-CAP MICRO-CAP INCREASE IN NET ASSETS GROWTH FUND VALUE FUND OPERATIONS: Net investment loss $ (55,992) $ (56,735) Net realized gain on investments 175,560 713,072 Net change in unrealized appreciation on investments 1,242,069 1,944,037 - -------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,361,637 2,600,374 ============================================================================================ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A - (18,897) Class Y - (107) Net realized gain Class A - (222,077) Class Y - (596) - -------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS - (241,677) ============================================================================================ CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 990,181 1,066,841 Reinvestment of distributions - 239,810 Cost of shares reacquired (392,729) (208,835) - -------------------------------------------------------------------------------------------- Net increase in net assets resulting from capital share transactions 597,452 1,097,816 ============================================================================================ NET INCREASE IN NET ASSETS 1,959,089 3,456,513 ============================================================================================ NET ASSETS: Beginning of year 2,703,951 5,456,747 - -------------------------------------------------------------------------------------------- End of year $ 4,663,040 $ 8,913,260 ============================================================================================ Undistributed (distributions in excess of) net investment income $ - $ (75) ============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 13 STATEMENTS OF CHANGES IN NET ASSETS Year Ended October 31, 2002
MICRO-CAP MICRO-CAP INCREASE IN NET ASSETS GROWTH FUND VALUE FUND OPERATIONS: Net investment income (loss) $ (7,717) $ 19,032 Net realized gain (loss) on investments (469,113) 222,672 Net change in unrealized appreciation/depreciation on investments (320,647) (60,598) - -------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (797,477) 181,106 ============================================================================================ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (1,960) (14,974) Class Y (25) (71) Net realized gain Class A - (223,636) Class Y - (650) - -------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (1,985) (239,331) ============================================================================================ CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 1,617,928 1,842,286 Reinvestment of distributions 1,547 237,716 Cost of shares reacquired (388,684) (1,468,390) - -------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 1,230,791 611,612 ============================================================================================ NET INCREASE IN NET ASSETS 431,329 553,387 ============================================================================================ NET ASSETS Beginning of year 2,272,622 4,903,360 - -------------------------------------------------------------------------------------------- END OF YEAR $ 2,703,951 $ 5,456,747 ============================================================================================ UNDISTRIBUTED NET INVESTMENT INCOME $ - $ 20,416 ============================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 14 FINANCIAL HIGHLIGHTS MICRO-CAP GROWTH FUND
YEAR ENDED 10/31 5/1/2000(c) ---------------------------------------- TO 2003 2002 2001 10/31/2000 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 7.51 $ 9.49 $ 13.18 $ 16.76 ========== ========== ========== ========== Investment operations Net investment income (loss)(a) (.14) (.02) -(f) (.01) Net realized and unrealized gain (loss) 3.50 (1.95) (1.34) (3.57) ---------- ---------- ---------- ---------- Total from investment operations 3.36 (1.97) (1.34) (3.58) ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income - (.01) (.01) - Net realized gain - - (2.34) - ---------- ---------- ---------- ---------- Total distributions - (.01) (2.35) - ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.87 $ 7.51 $ 9.49 $ 13.18 ========== ========== ========== ========== Total Return(b) 44.74% (20.81)% (11.30)% (21.36)%(e) RATIOS TO AVERAGE NET ASSETS Expenses, including waiver and expense reductions 1.75% .38% .38% .18%(e) Expenses, excluding waiver and expense reductions 2.84% 2.99% 4.02% 1.36%(e) Net investment income (loss) (1.60)% (.24)% .04% (.04)%(e) YEAR ENDED 10/31 5/1/2000(c) ---------------------------------------- TO SUPPLEMENTAL DATA: 2003 2002 2001 10/31/2000 =============================================================================================================== Net assets, end of period (000) $ 4,655 $ 2,698 $ 2,266 $ 2,160 Portfolio turnover rate 126.71% 34.08% 80.17% 103.33% ===============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 15 FINANCIAL HIGHLIGHTS (CONTINUED) MICRO-CAP GROWTH FUND
YEAR ENDED 10/31 12/15/1998(d) ------------------------------------------------- TO 2003 2002 2001 2000 10/31/1999 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 7.55 $ 9.52 $ 13.21 $ 12.57 $ 10.00 ========== ========== ========== ========== ========== Investment operations Net investment income (loss)(a) (.11) .01 .04 .04 .02 Net realized and unrealized gain (loss) 3.52 (1.95) (1.35) 1.73 2.55 ---------- ---------- ---------- ---------- ---------- Total from investment operations 3.41 (1.94) (1.31) 1.77 2.57 ---------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income - (.03) (.04) (.02) - Net realized gain - - (2.34) (1.11) - ---------- ---------- ---------- ---------- ---------- Total distributions - (.03) (2.38) (1.13) - ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.96 $ 7.55 $ 9.52 $ 13.21 $ 12.57 ========== ========== ========== ========== ========== Total Return(b) 45.17% (20.42)% (11.00)% 14.48% 25.70%(e) RATIOS TO AVERAGE NET ASSETS Expenses, including waiver and expense reductions 1.42% .00% .00% .00% .00%(e) Expenses, excluding waiver and expense reductions 2.51% 2.61% 3.64% 2.33% 1.71%(e) Net investment income (loss) (1.27)% .14% .42% .22% .19%(e) YEAR ENDED 10/31 12/15/1998(d) ------------------------------------------------- TO SUPPLEMENTAL DATA: 2003 2002 2001 2000 10/31/1999 ======================================================================================================================= Net assets, end of period (000) $ 8 $ 6 $ 7 $ 8 $ 1,404 Portfolio turnover rate 126.71% 34.08% 80.17% 103.33% 41.18% =======================================================================================================================
(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) Commencement of investment operations. (e) Not annualized. (f) Amount is less than $.01. SEE NOTES TO FINANCIAL STATEMENTS. 16 FINANCIAL HIGHLIGHTS MICRO-CAP VALUE FUND
YEAR ENDED 10/31 5/1/2000(c) ---------------------------------------- TO 2003 2002 2001 10/31/2000 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.56 $ 15.68 $ 15.90 $ 13.13 ========== ========== ========== ========== Investment operations Net investment income (loss)(a) (.14) .05 .10 .07 Net realized and unrealized gain 6.69 .60 2.20 2.70 ---------- ---------- ---------- ---------- Total from investment operations 6.55 .65 2.30 2.77 ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income (.05) (.05) (.14) - Net realized gain (.63) (.72) (2.38) - ---------- ---------- ---------- ---------- Total distributions (.68) (.77) (2.52) - ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 21.43 $ 15.56 $ 15.68 $ 15.90 ========== ========== ========== ========== Total Return(b) 43.80% 4.12% 17.16% 21.10%(e) RATIOS TO AVERAGE NET ASSETS Expenses, including waiver and expense reductions 1.73% .38% .38% .17%(e) Expenses, excluding waiver and expense reductions 2.18% 2.76% 3.08% 1.50%(e) Net investment income (loss) (.84)% .31% .64% .49%(e) YEAR ENDED 10/31 5/1/2000(c) ---------------------------------------- TO SUPPLEMENTAL DATA: 2003 2002 2001 10/31/2000 ============================================================================================================== Net assets, end of period (000) $ 8,892 $ 5,442 $ 4,889 $ 2,032 Portfolio turnover rate 48.55% 36.02% 52.63% 82.02% ===============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 17 FINANCIAL HIGHLIGHTS (CONCLUDED) MICRO-CAP VALUE FUND
YEAR ENDED 10/31 12/15/1998(d) ------------------------------------------------- TO 2003 2002 2001 2000 10/31/1999 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.63 $ 15.72 $ 15.92 $ 10.75 $ 10.00 ========== ========== ========== ========== ========== Investment operations Net investment income (loss)(a) (.09) .12 .16 .14 .12 Net realized and unrealized gain 6.73 .59 2.19 5.19 .63 ---------- ---------- ---------- ---------- ---------- Total from investment operations 6.64 .71 2.35 5.33 .75 ---------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income (.11) (.08) (.17) (.09) - Net realized gain (.63) (.72) (2.38) (.07) - ---------- ---------- ---------- ---------- ---------- Total distributions (.74) (.80) (2.55) (.16) - ---------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 21.53 $ 15.63 $ 15.72 $ 15.92 $ 10.75 ========== ========== ========== ========== ========== Total Return(b) 44.35% 4.51% 17.48% 50.12% 7.60%(e) RATIOS TO AVERAGE NET ASSETS Expenses, including waiver and expense reductions 1.41% .00% .00% .00% .00%(e) Expenses, excluding waiver and expense reductions 1.86% 2.38% 2.70% 2.50% 1.80%(e) Net investment income (loss) (.52)% .69% 1.02% 1.15% 1.08%(e) YEAR ENDED 10/31 12/15/1998(d) ------------------------------------------------- TO SUPPLEMENTAL DATA: 2003 2002 2001 2000 10/31/1999 ====================================================================================================================== Net assets, end of period (000) $ 21 $ 15 $ 14 $ 12 $ 1,152 Portfolio turnover rate 48.55% 36.02% 52.63% 82.02% 30.38% ======================================================================================================================
(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) Commencement of investment operations. (e) Not annualized. SEE NOTES TO FINANCIAL STATEMENTS. 18 NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION Lord Abbett Securities Trust (the "Trust") is registered under the Investment Company Act of 1940 (the "Act") as an open-end management investment company organized as a Delaware business trust on February 26, 1993. The Trust currently consists of seven funds. This report covers the following two Funds and their respective classes (separately, a "Fund" and collectively, the "Funds"): Lord Abbett Micro-Cap Growth Fund ("Micro-Cap Growth Fund"), Class A and Y shares and Lord Abbett Micro-Cap Value Fund ("Micro-Cap Value Fund"), Class A and Y shares. The investment objective of both Micro-Cap Growth Fund and Micro-Cap Value Fund is long-term capital appreciation. Each class of shares has different expenses and dividends. A front-end sales charge is normally added to the NAV for Class A shares. There is no front-end sales charge in the case of Class Y shares. There may be a contingent deferred sales charge ("CDSC") for certain redemptions of Class A shares made within 24 months following any 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 sales price or, if no sales price is available, at the mean between the most recently quoted bid and asked prices. Securities for which market quotations are not readily available are valued at fair value as determined by management and approved in good faith by the Board of Trustees. Short-term securities with 60 days or less remaining to maturity are valued using the amortized cost method, which approximates current market value. (b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date that the securities are purchased or sold (trade date). Realized gains and losses on sales of portfolio securities are calculated using the identified-cost method. Realized and unrealized gains or losses are allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. (c) INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Discounts are accreted and premiums are amortized using the effective interest method. Investment income is allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. (d) FEDERAL TAXES-It is the policy of each Fund to meet the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all taxable income and capital gains to its shareholders. Therefore, no federal income tax provision is required. 19 NOTES TO FINANCIAL STATEMENTS (CONTINUED) (e) EXPENSES-Expenses incurred by the Trust that do not specifically relate to an individual fund are 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, U.S. Government securities or U.S. government sponsored enterprises securities having a value equal to, or in excess of, the value of the repurchase agreement. 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 them. 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%. For the year ended October 31, 2003, Lord Abbett voluntarily waived a portion of its management fees and assumed other expenses, at the annual rate set forth below as a percentage of average daily net assets:
VOLUNTARY MANAGEMENT OTHER FEE WAIVER EXPENSES ASSUMED - --------------------------------------------------------------------------- Micro-Cap Growth Fund .33% .74% Micro-Cap Value Fund .35% .10%
Lord Abbett may stop waiving its management fee and assuming other expenses at any time. In addition, on January 1, 2003, Lord Abbett began providing certain administrative services to the Funds pursuant to an Administrative Services Agreement at an annual rate of .04% of the Funds' average daily net assets. This results in Lord Abbett paying fund accounting expenses that were previously charged to the Funds. 12b-1 DISTRIBUTION PLANS Each Fund has adopted a distribution plan with respect to the Class A shares of 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 fees are accrued daily based upon the average daily net assets attributable to Class A at an annual rate of .25% and .10%, respectively. In addition, until January 1, 2003, the Trust paid an incremental marketing expense of approximately .03% of average daily net assets attributable to Class A. 20 NOTES TO FINANCIAL STATEMENTS (CONTINUED) Class Y does not have a distribution plan. One Trustee and certain of the Trust's officers have an interest in Lord Abbett. 4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARDS Dividends from net investment income, if any, are declared and paid at least annually. Taxable net realized gains from investment transactions, reduced by capital loss carryforwards, if any, are distributed to shareholders at least annually. The capital loss carryforward amount 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 net investment income and net realized capital gains for tax purposes, are reported as distributions of paid-in capital. The tax character of distributions paid during the years ended October 31, 2003 and October 31, 2002 are as follows:
MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND - ------------------------------------------------------------------------------------------- 10/31/2003 10/31/2002 10/31/2003 10/31/2002 - ------------------------------------------------------------------------------------------- Distributions paid from: Ordinary income $ - $ 1,985 $ 241,677 $ 165,092 Net long-term capital gains - - - 74,239 - ------------------------------------------------------------------------------------------- Total distributions paid $ - $ 1,985 $ 241,677 $ 239,331 ===========================================================================================
As of October 31, 2003, the components of accumulated earnings on a tax basis are as follows:
MICRO-CAP GROWTH MICRO-CAP VALUE - ------------------------------------------------------------------------------------------- Undistributed ordinary income - net $ - $ 122,748 Undistributed long-term capital gains - 533,755 - ------------------------------------------------------------------------------------------- Total undistributed earnings $ - $ 656,503 Capital loss carryforwards* (421,281) - Temporary differences - (75) Unrealized gains - net 587,005 2,368,300 - ------------------------------------------------------------------------------------------- Total accumulated earnings - net $ 165,724 $ 3,024,728 ===========================================================================================
* At October 31, 2003, the capital loss carryforward along with the related expiration date is as follows:
AMOUNT YEAR OF EXPIRATION - ------------------------------------------------------------ Micro-Cap Growth $ 421,281 2010
21 NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of October 31, 2003, the aggregate unrealized security gains and losses based on cost for U.S. Federal income tax purposes are as follows:
MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND - ----------------------------------------------------------------------------- Tax Cost $ 4,096,201 $ 6,531,675 - ----------------------------------------------------------------------------- Gross unrealized gain 858,245 2,461,434 Gross unrealized loss (271,240) (93,134) - ----------------------------------------------------------------------------- Net unrealized security gain $ 587,005 $ 2,368,300 =============================================================================
The difference between book-basis and tax-basis unrealized gains (losses) is primarily attributable to wash sales and other temporary tax adjustments. Permanent items identified during the year ended October 31, 2003, have been reclassified among the components of net assets based on their tax basis treatment as follows:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED INCOME GAIN (LOSS) PAID-IN CAPITAL - ----------------------------------------------------------------------------- Micro-Cap Growth Fund $ 55,992 $ - $ (55,992) Micro-Cap Value Fund 55,248 (55,484) 236
5. PORTFOLIO SECURITIES TRANSACTIONS Purchases and sales of investment securities (other than short-term investments) are as follows for the year ended October 31, 2003:
PURCHASES SALES - ----------------------------------------------------------- Micro-Cap Growth $ 4,924,483 $ 4,218,191 Micro-Cap Value 3,597,693 2,989,089
There were no purchases or sales of U.S. Government securities for the year ended October 31, 2003. 6. TRUSTEES' REMUNERATION The Trust's officers and the one Trustee who are associated with Lord Abbett do not receive any compensation from the Trust for serving in such capacities. Outside Trustees' fees are allocated among all Lord Abbett-sponsored funds based on the net assets of each fund. There is an equity based plan available to all outside Trustees under which outside Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of Trustees' fees. The deferred amounts are treated as though equivalent dollar amounts have been invested proportionately in the Funds. Such amounts and earnings accrued thereon are included in Trustees' fees on the Statements of Operations and in Trustees' fees payable on the Statements of Assets and Liabilities and are not deductible for U.S. federal income tax purposes until such amounts are paid. 7. EXPENSE REDUCTIONS The Trust has entered into arrangements with its transfer agent and custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds' expenses. 22 NOTES TO FINANCIAL STATEMENTS (CONCLUDED) 8. CUSTODIAN AND ACCOUNTING AGENT State Street Bank and Trust Company ("SSB") is the Trust's custodian and accounting agent. SSB performs custodian, accounting and record keeping functions relating to portfolio transactions and calculating each Fund's net asset values. 9. INVESTMENT RISKS Each Fund is subject to the general risks and considerations associated with equity investing, and the particular risks associated with micro-cap and growth or value stocks. The value of your 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 Micro-Cap Value Fund, the intrinsic value of particular value stocks may not be recognized for a long time. These factors can affect the Funds' performance. 10. SUMMARY OF CAPITAL TRANSACTIONS The Trust has an unlimited number of authorized shares of beneficial interest.
YEAR ENDED YEAR ENDED MICRO-CAP GROWTH OCTOBER 31, 2003 OCTOBER 31, 2002 - ----------------------------------------------------------------------------------------- CLASS A SHARES SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------- Shares sold 112,263 $ 990,181 160,649 $ 1,617,928 Reinvestment of distributions - - 151 1,522 Shares reacquired (43,307) (392,729) (40,426) (388,684) - ----------------------------------------------------------------------------------------- Increase 68,956 $ 597,452 120,374 $ 1,230,766 - ----------------------------------------------------------------------------------------- CLASS Y SHARES - ----------------------------------------------------------------------------------------- Reinvestment of distributions - $ - 2.51 $ 25 - ----------------------------------------------------------------------------------------- Increase - $ - 2.51 $ 25 - ----------------------------------------------------------------------------------------- MICRO-CAP VALUE - ----------------------------------------------------------------------------------------- CLASS A SHARES SHARES AMOUNT SHARES AMOUNT - ----------------------------------------------------------------------------------------- Shares sold 61,900 $ 1,066,841 111,635 $ 1,842,286 Reinvestment of distributions 15,556 239,107 15,261 237,001 Shares reacquired (12,443) (208,835) (88,986) (1,468,390) - ----------------------------------------------------------------------------------------- Increase 65,013 $ 1,097,113 37,910 $ 610,897 - ----------------------------------------------------------------------------------------- CLASS Y SHARES - ----------------------------------------------------------------------------------------- Reinvestment of distributions 46 $ 703 46 $ 715 - ----------------------------------------------------------------------------------------- Increase 46 $ 703 46 $ 715 - -----------------------------------------------------------------------------------------
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. 11. SUBSEQUENT EVENT On December 15, 2003, Lord Abbett International Core Equity Fund, a new Fund of the Trust, commenced investment operations and was capitalized with a $5,040,000 investment from Lord Abbett. Shares are currently available to partners and employees of Lord Abbett and will become available to the public on January 2, 2004. 23 INDEPENDENT AUDITORS' REPORT THE BOARD OF TRUSTEES AND SHAREHOLDERS, LORD ABBETT SECURITIES TRUST -- LORD ABBETT MICRO-CAP GROWTH FUND AND LORD ABBETT MICRO-CAP VALUE FUND: We have audited the accompanying statements of assets and liabilities, including the schedules of investments of Lord Abbett Securities Trust - Lord Abbett Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value Fund (the "Funds") as of October 31, 2003, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2003 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Lord Abbett Securities Trust - Lord Abbett Micro-Cap Growth Fund and Lord Abbett Micro-Cap Value Fund as of October 31, 2003, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP New York, New York December 22, 2003 24 BASIC INFORMATION ABOUT MANAGEMENT The Board of Trustees (the "Board") is responsible for the management of the business and affairs of each Fund in accordance with the laws of the State of Delaware. The Board appoints officers who are responsible for the day-to-day operations of each Fund and who execute policies authorized by the Board. The Board also approves an investment adviser to each Fund and continues to monitor the cost and quality of the services provided by the investment adviser, and annually considers whether to renew the contract with the adviser. Generally, each Trustee holds office until his successor is elected and qualified or until his earlier resignation or removal, as provided in the Trust's organizational documents. Lord, Abbett & Co. LLC ("Lord Abbett"), a Delaware limited liability company, is the Funds' investment adviser. INTERESTED TRUSTEE The following Trustee is the Managing Partner of Lord Abbett and is an "interested person" as defined in the Act. Mr. Dow is also an officer, director, or trustee of each of the fourteen Lord Abbett-sponsored funds, which consist of 49 portfolios or series.
CURRENT POSITION NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS - -------------------------------------------------------------------------------------------- ROBERT S. DOW Trustee since; Managing Partner and N/A Lord Abbett & Co. LLC 1993 and Chairman Chief Investment 90 Hudson Street since 1996 Officer of Lord Abbett Jersey City, NJ since 1996. Date of Birth: 3/8/1945
--------------- INDEPENDENT TRUSTEES The following independent or outside Trustees are also directors or trustees of each of the fourteen Lord Abbett-sponsored funds, which consist of 49 portfolios or series.
CURRENT POSITION NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------ E. THAYER BIGELOW Trustee since 1994 Managing General Partner, Currently serves as Bigelow Media, LLC Bigelow Media, LLC (since 2000); director of Adelphia 41 Madison Ave., Senior Adviser, Time Warner Inc. Communications, Inc., Suite 3810 (1998 - 2000); Acting Chief Crane Co., and Huttig New York, NY Executive Officer of Courtroom Building Products Inc. Date ofBirth: 10/22/1941 Television Network (1997 - 1998); President and Chief Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997). WILLIAM H.T. BUSH Trustee since 1998 Co-founder and Chairman of the Currently serves as Bush O'Donnell & Board of the financial advisory director of Wellpoint Co., Inc. firm of Bush-O'Donnell & Company Health Network, Inc., DT 101 South Hanley Road (since 1986). Industries Inc., and Suite 1250 St. Louis, MO Engineered Support Date of Birth: 7/14/1938 Systems, Inc.
25 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
CURRENT POSITION NAME, ADDRESS AND LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER DATE OF BIRTH WITH TRUST DURING PAST FIVE YEARS DIRECTORSHIPS - ------------------------------------------------------------------------------------------------------------------ ROBERT B. CALHOUN, JR. Trustee since 1998 Managing Director of Monitor Currently serves as Monitor Clipper Partners Clipper Partners (since 1997) director of Avondale, 650 Madison Ave., and President of Clipper Asset Inc. and Interstate 9th Fl. New York, NY Management Corp. (since 1991), Bakeries Corp. Date of Birth: 10/25/1942 both private equity investment funds. STEWART S. DIXON Trustee since 1993; Partner in the law firm of N/A Wildman, Harrold, retired 12/31/2002 Wildman, Harrold, Allen & Dixon Allen & Dixon (since 1967). 225 W. Wacker Drive, Suite 2800 Chicago, IL Date of Birth: 11/5/1930 FRANKLIN W. HOBBS Trustee since 2001 Senior Advisor (since April Currently serves as Houlihan Lokey 2003) and Former Chief Executive director of Adolph Howard & Zukin Officer of Houlihan Lokey Howard Coors Company. 685 Third Ave. & Zukin, an investment bank New York, NY (January 2002 - April 2003); Date of Birth: 7/30/1947 Chairman of Warburg Dillon Read (1999 - 2001); Global Head of Corporate Finance of SBC Warburg Dillon Read (1997 - 1999); Chief Executive Officer of Dillon, Read & Co. (1994 - 1997). C. ALAN MacDONALD Trustee since 1993 Retired - General Business and Currently serves as 415 Round Hill Road Governance Consulting (since director of Fountainhead Greenwich, CT 1992); formerly President and Water Company, Lincoln Date of Birth: 5/19/1933 CEO of Nestle Foods. Snacks, H.J. Baker, and Seix Fund, Inc.* THOMAS J. NEFF Trustee since 1993 Chairman of Spencer Stuart, an Currently serves as Spencer Stuart executive search consulting firm director of Ace, Ltd. and 277 Park Avenue (since 1996); President of Exult, Inc. New York, NY Spencer Stuart (1979 - 1996). Date of Birth: 10/2/1937 JAMES F. ORR, III Trustee since 2002; President and CEO of Currently serves as 80 Pinckney Street retired 3/3/2003 LandingPoint Capital (since Chairman of Rockefeller Boston, MA 2002); Chairman and CEO of Foundation, Director of Date of Birth: 3/5/1943 United Asset Management Nashua Corp. and Corporation (2000 to 2001); SteelPoint Technologies. Chairman and CEO of UNUM Provident Corporation (1999 - merger); Chairman and CEO of UNUM Corporation (1988 - 1999).
- ---------- * Seix Fund, Inc. is a registered investment company that is advised by Seix Investment Advisors Inc. Seix Investment Advisors Inc.'s Chairman, CEO, and Chief Investment Officer is married to Robert Dow, the Trust's Chairman, CEO, and President and the Managing Partner of Lord Abbett. 26 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED) OFFICERS None of the officers listed below have received compensation from the Trust. All the officers of the Trust may also be officers of the other Lord Abbett-sponsored funds and maintain offices at 90 Hudson Street, Jersey City, NJ 07302.
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- ROBERT S. DOW Chief Executive Elected in 1993 Managing Partner and Chief (3/8/1945) Officer and Investment Officer of Lord President Abbett since 1996. SHOLOM DINSKY Executive Vice Elected in 2003 Partner and Large Cap Value (3/24/1944) President Investment Manager, joined Lord Abbett in 2000, formerly Managing Director of Prudential Asset Management, prior thereto Director of Equity Research and Senior Vice President at Mitchell Hutchins Asset Management. ROBERT P. FETCH Executive Vice Elected in 1999 Partner and Small-Cap Value (2/18/1953) President Senior Investment Manager, joined Lord Abbett in 1995. KENNETH G. FULLER Executive Vice Elected in 2003 Investment Manager - Large Cap (4/22/1945) President Value, joined Lord Abbett in 2002, formerly Portfolio Manager and Senior Vice President at Pioneer Investment Management, Inc. from 1999 to 2002; prior thereto Principal, Manley, Fuller Asset Management. HOWARD E. HANSEN Vice President Elected in 2003 Partner and Investment (10/13/1961) Manager, joined Lord Abbett in 1995. INGRID C. HOLM Executive Vice Elected in 2001 Investment Manager - Global (3/21/1959) President Equity, joined Lord Abbett in 2001, formerly International Portfolio Manager at Batterymarch Financial Management, Inc. from 2000 to 2001, prior thereto held various positions at the Prudential Insurance Company of America.
27 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- VINCENT J. McBRIDE Executive Vice Elected in 2003 Senior Investment Manager, (5/8/1964) President International Core Equity, joined Lord Abbett in 2003, formerly Managing Director and Portfolio Manager at Warburg Pincus Asset Management and Credit Suisse Asset Management. ROBERT G. MORRIS Executive Vice Elected in 1998 Partner and Director of Equity (11/6/1944) President Investments, joined Lord Abbett in 1991. F. THOMAS O'HALLORAN Executive Vice Elected in 2003 Partner and Investment (2/19/1955) President Manager, joined Lord Abbett in 2001, formerly Executive Director/Senior Research Analyst at Dillon Read/UBS Warburg. ELI M. SALZMANN Executive Vice Elected in 2003 Partner and Director of (3/24/1964) President Institutional Equity Investments, joined Lord Abbett in 1997. HAROLD E. SHARON Executive Vice Elected in 2003 Investment Manager and (9/23/1960) President Director, International Core Equity, joined Lord Abbett in 2003, formerly Financial Industry Consultant for Venture Capitalist from 2001 to 2003, prior thereto Managing Director of Warburg Pincus Asset Management and Credit Suisse Asset Management. TRACIE E. AHERN Vice President and Elected in 1999 Partner and Director of (1/12/1968) Treasurer Portfolio Accounting and Operations, joined Lord Abbett in 1999, prior thereto Vice President - Head of Fund Administration of Morgan Grenfell. JOAN A. BINSTOCK Chief Financial Elected in 1999 Partner and Chief Operations (3/4/1954) Officer and Vice Officer, joined Lord Abbett in President 1999, prior thereto Chief Operating Officer of Morgan Grenfell.
28 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- DAVID G. BUILDER Vice President Elected in 2001 Equity Analyst, joined Lord (1/4/1954) Abbett in 1998,. DANIEL E. CARPER Vice President Elected in 1993 Partner, joined Lord Abbett in (1/22/1952) 1979. JOHN J. DiCHIARO Vice President Elected in 2000 Partner and Senior Strategy (7/30/1957) Coordinator - Small Cap Growth, joined Lord Abbett in 2000, prior thereto Vice President - Securities Group of Wafra Investment Advisory Group. LESLEY-JANE DIXON Vice President Elected in 1999 Partner and Senior Research (1/1/1964) Analyst, joined Lord Abbett in 1995. DANIEL H. FRASCARELLI Vice President Elected in 2001 Partner and Investment (3/11/1954) Manager, joined Lord Abbett in 1990. GERARD S. E. HEFFERNAN, JR. Vice President Elected in 1999 Research Analyst, joined Lord (9/7/1963) Abbett in 1998. PAUL A. HILSTAD Vice President and Elected in 1996 Partner and General Counsel, (12/13/1942) Secretary joined Lord Abbett in 1995. TODD D. JACOBSON Vice President Elected in 2003 Investment Manager, (10/28/1966 ) International Core Equity, joined Lord Abbett in 2003, formerly Director and Portfolio Manager at Warburg Pincus Asset Management and Credit Suisse Asset Management from 2002 to 2003; prior thereto Associate Portfolio Manager of Credit Suisse Asset Management. LAWRENCE H. KAPLAN Vice President and Elected in 1997 Partner and Deputy General (1/16/1957) Assistant Secretary Counsel, joined Lord Abbett in 1997. A. EDWARD OBERHAUS, III Vice President Elected in 1993 Partner and Manager of Equity (12/21/1959) Trading, joined Lord Abbett in 1983.
29 BASIC INFORMATION ABOUT MANAGEMENT (CONTINUED)
NAME AND CURRENT POSITION LENGTH OF SERVICE PRINCIPAL OCCUPATION (DATE OF BIRTH) WITH TRUST OF CURRENT POSITION DURING PAST FIVE YEARS - -------------------------------------------------------------------------------------------------------- TODOR PETROV Vice President Elected in 2003 Investment Manager, joined (5/18/1974) Lord Abbett in 2003, formerly Associate Portfolio Manager of Credit Suisse Asset Management from 1999 to 2003; prior thereto Summer Associate of Warburg Pincus Funds. CHRISTINA T. SIMMONS Vice President and Elected in 2000 Assistant General Counsel, (11/12/1957) Assistant Secretary joined Lord Abbett in 1999, formerly Assistant General Counsel of Prudential Investments from 1998 to 1999, prior thereto Counsel of Drinker, Biddle & Reath LLP, a law firm. BERNARD J. GRZELAK Assistant Treasurer Elected in 2003 Director of Fund (6/12/1971) Administration, joined Lord Abbett in 2003, formerly Vice President, Lazard Asset Management from 2000 to 2003, prior thereto Manager of Deloitte & Touche LLP.
Please call 888-522-2388 for a copy of the Statement of Additional Information (SAI), which contains further information about the Trust's Trustees. It is available free upon request. 30 HOUSEHOLDING The Trust has adopted a policy that allows it to send only one copy of the Funds' Prospectus, proxy material, annual report and semi-annual report to certain shareholders residing at the same "household." This reduces Trust expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be "householded," please call Lord Abbett at 800-821-5129 or send a written request with your name, the name of your fund or funds and your account number or numbers to Lord Abbett Family of Funds, P.O. Box 219336, Kansas City, MO 64121. PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that Lord Abbett uses to vote proxies related to the Funds' portfolio securities is available without charge, upon request, by calling 888-522-2388 or on Lord Abbett's web site at www.LordAbbett.com. - ------------------------------------------------------------------------------- TAX INFORMATION None of the ordinary income distribution paid by the Micro-Cap Value Fund during fiscal 2003 is qualifying dividend income. For corporate shareholders only 12.07% of the Micro-Cap Value Fund's ordinary income distribution qualified for the dividends received deduction. - ------------------------------------------------------------------------------- 31 LORD ABBETT [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 Securities Trust Lord Abbett Micro-Cap Growth Fund Lord Abbett Mutual Fund shares are distributed by: Lord Abbett Micro-Cap Value Fund LORD ABBETT DISTRIBUTOR LLC LMAC-2-1003 90 Hudson Street - Jersey City, New Jersey 07302-3973 12/03
ITEM 2: Code of Ethics. (a) In accordance with applicable requirements, the Registrant adopted a Sarbanes-Oxley Code of Ethics on June 19, 2003 that applies to the principal executive officer and senior financial officers of the Registrant ("Code of Ethics"). The Code of Ethics was in effect from June 19, 2003 through the end of the reporting period on October 31, 2003 (the "Period"). (b) Not applicable. (c) The Registrant has not amended the Code of Ethics as described in Form N-CSR during the Period. (d) The Registrant has not granted any waiver, including an implicit waiver, from a provision of the Code of Ethics as described in Form N-CSR during the Period. (e) Not applicable. (f) See Item 10(a) concerning the filing of the Code of Ethics. ITEM 3: Audit Committee Financial Expert. The Registrant's Board of Trustees has determined that each of the independent Trustees who comprise the audit committee are audit committee financial experts. The members of the audit committee are E. Thayer Bigelow, Robert B. Calhoun, and Franklin W. Hobbs. Each audit committee member is independent within the meaning of the Form N-CSR. ITEM 4: Principal Accountant Fees and Services. Not applicable. ITEM 5: Audit Committee of Listed Registrants Not applicable. ITEM 6: [Reserved] ITEM 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. ITEM 8: [Reserved] ITEM 9: 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 December 22, 2003, the Chief Executive Officer and Chief Financial Officer of the Registrant have concluded that such disclosure controls and procedures are reasonably designed and effective to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to them by others within those entities. (b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 10: Exhibits. ITEM 10(a): Code of Ethics, as required by Item 2, is attached hereto as part of EX-99.CODEETH. ITEM 10(b): (i) Certification of each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2) is attached hereto as a part of EX-99.CERT. (ii) Certification of each principal executive officer and principal financial officer of the Registrant as required by Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as a part of EX-99.906CERT. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LORD ABBETT SECURITIES TRUST /s/ ROBERT S. DOW ----------------- Robert S. Dow Chief Executive Officer, Chairman and President /s/ JOAN A. BINSTOCK -------------------- Joan A. Binstock Chief Financial Officer and Vice President Date: December 22, 2003 Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. LORD ABBETT SECURITIES TRUST /s/ ROBERT S. DOW ----------------- Robert S. Dow Chief Executive Officer, Chairman and President /s/ JOAN A. BINSTOCK -------------------- Joan A. Binstock Chief Financial Officer and Vice President Date: December 22, 2003 EX-99.CERT 3 a2125749zex-99_cert.txt EX-99.CERT Exhibit 99.cert CERTIFICATIONS Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Robert S. Dow, certify that: 1. I have reviewed this report on Form N-CSR of Lord Abbett Securities Trust; 2. Based on my knowledge, this report does not contain any untrue statements of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the Registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and b) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; 5. The Registrant's other certifying officer and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of trustees (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: December 22, 2003 ----------------- /s/ ROBERT S. DOW ----------------- Robert S. Dow Chief Executive Officer, Chairman and President CERTIFICATIONS Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Joan A. Binstock, certify that: 1. I have reviewed this report on Form N-CSR of Lord Abbett Securities Trust; 2. Based on my knowledge, this report does not contain any untrue statements of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the Registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and b. evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; 5. The Registrant's other certifying officer and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of trustees (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: December 22, 2003 ----------------- /s/ JOAN A. BINSTOCK -------------------- Joan A. Binstock Chief Financial Officer and Vice President EX-99.906CERT 4 a2125749zex-99_906cert.txt EX-99.906CERT Exhibit 99.906cert CERTIFICATIONS Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Each of the undersigned below certifies that: 1. This report on Form N-CSR of LORD ABBETT SECURITIES TRUST (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the issuer. Date: December 22, 2003 ----------------- By: /s/ Robert S. Dow -------------------------- Robert S. Dow Chief Executive Officer, Chairman and President By: /s/ Joan A. Binstock -------------------------- Joan A. Binstock Chief Financial Officer and Vice President A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN THE ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO THE REGISTRANT AND WILL BE RETAINED BY THE REGISTRANT AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. EX-99 5 a2118975zex-99_codeeth.txt THE LORD ABBETT FAMILY OF FUNDS SARBANES-OXLEY CODE OF ETHICS FOR THE PRINCIPAL EXECUTIVE OFFICER AND SENIOR FINANCIAL OFFICERS I. COVERED OFFICERS/PURPOSE OF THE CODE THE LORD ABBETT FAMILY OF FUNDS' code of ethics (the "Code") for the investment companies within the complex (collectively, "Funds" and each individually a "Fund"), applies to each Fund's Principal Executive Officer and Senior Financial Officers (the "Covered Officers", each of whom is set forth in Exhibit A) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the SEC and in other public communications made by the Funds; - compliance with applicable laws and governmental rules and regulations; - the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ANY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his/her service to, a Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his/her family, receives improper personal benefits as a result of his/her position with a Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and a Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 and the Investment Advisers Act of 1940. For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" of the investment adviser to each of the Funds. The compliance programs and procedures of Lord, Abbett & Co. LLC ("Lord Abbett") are designed to prevent, or identify and correct, violations of such requirements. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. 1 Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between each of the Funds and Lord Abbett of which the Covered Officers are also members. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for a Fund or for Lord Abbett, or for both), be involved in establishing policies and implementing decisions which will have different effects on Lord Abbett and each of the Funds. The participation of the Covered Officers in such activities is inherent in the contractual relationship between each of the Funds and Lord Abbett and is consistent with the performance by the Covered Officers of their duties as officers of one or more Funds and, if addressed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, will be deemed to have been handled ethically. In addition, it is recognized by the Boards of Directors/Trustees of the Funds that the Covered Officers are also officers of the other Lord Abbett investment companies covered by this and by a separate code of ethics. Other conflicts of interest are covered by this Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. In reading the following examples of conflicts of interest under this Code, Covered Officers should keep in mind that such a list cannot ever be exhaustive by covering every possible scenario. It follows that the overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of a Fund. * * * * Each Covered Officer must: - not use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by a Fund whereby the Covered Officer would benefit personally to the detriment of the Fund; and - not cause a Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund. There are some potential conflict of interest situations that should be discussed with Lord Abbett's General Counsel if material. Examples of these include: - service as a director on the board of any public company; - any direct ownership interest in, or any consulting or employment relationship with, any of the Funds' service providers, other than Lord Abbett or any affiliated person of Lord Abbett; - a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares, other than an interest arising from the Covered Officer's employment, such as compensation or as a member of Lord Abbett. 2 III. DISCLOSURE & COMPLIANCE - Each Covered Officer should familiarize him/herself with the disclosure requirements generally applicable to the Funds; - each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about a Fund to others, whether within or outside Lord Abbett or a Fund, including to a Fund's independent directors/trustees and auditors, and to governmental regulators and self-regulatory organizations; - each Covered Officer should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Funds and Lord Abbett with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: - upon adoption of the Code, affirm in writing to the Audit Committee (the "Committee") of a Fund that he/she has received, read, and understands the Code; - annually thereafter affirm to the Committee that he/she has complied with the requirements of the Code; - report at least annually such affiliations or other relationships related to conflicts of interest as covered by the Funds' Annual Directors & Officers Questionnaire; - not retaliate against any employee or member of Lord Abbett for reports of potential violations that are made in good faith; and - notify Lord Abbett's General Counsel promptly if he/she alleges any violation of this Code. Failure to do so is itself a violation of this Code. Lord Abbett's General Counsel is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. The General Counsel may consult, as appropriate, with the Committee, and/or counsel to the Independent Directors, and is encouraged to do so. However, any approvals or waivers sought by the Covered Persons will be considered by the Committee. 3 Each of the Funds will follow these procedures in investigating and enforcing this Code: - Lord Abbett's General Counsel will take all appropriate action to investigate any potential violations reported to him; - if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action, but he shall discuss with the Committee at its next regularly scheduled meeting his investigation and conclusion; - any matter that the General Counsel believes is a violation will be reported to the Committee; - if the Committee concurs that a violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of Lord Abbett; or a recommendation to dismiss the Covered Officer; - the Committee will be responsible for granting waivers, as appropriate; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superceded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and Lord Abbett's codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Except as to the individuals listed in Exhibit A, this Code may not be amended except in written form, which is specifically approved or ratified by a majority vote of a Fund's independent directors/trustees. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as 4 otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Committee and its counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by each of the Funds and does not constitute an admission, by or on behalf of any Fund, as to any fact, circumstance, or legal conclusion. Date: June 19, 2003 5 EXHIBIT A
Persons Covered by this Code of Ethics Position With Funds - -------------------------------------- ------------------- Robert S. Dow Principal Executive Officer Chief Executive Officer and President; Chairman of the Boards of Directors/Trustees Joan A. Binstock Principal Financial Officer Chief Financial Officer and Vice President Tracie E. Ahern Principal Accounting Officer Treasurer and Vice President Bernard J. Grzelak Principal Accounting Officer Assistant Treasurer
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