N-CSRS 1 a2160356zn-csrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number: 811- 07538 LORD ABBETT SECURITIES TRUST ---------------------------- (Exact name of Registrant as specified in charter) 90 HUDSON STREET, JERSEY CITY, NJ 07302 --------------------------------------- (Address of principal executive offices) (zip code) Christina T. Simmons, Vice President & Assistant Secretary 90 HUDSON STREET, JERSEY CITY, NJ 07302 --------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (800) 201-6984 -------------- Date of fiscal year end: 10/31 Date of reporting period: 4/30/2005 --------- ITEM 1: REPORT TO SHAREHOLDERS. [LORD ABBETT LOGO] 2005 SEMI- ANNUAL REPORT LORD ABBETT ALL VALUE FUND ALPHA FUND INTERNATIONAL CORE EQUITY FUND INTERNATIONAL OPPORTUNITIES FUND LARGE-CAP VALUE FUND FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2005 -------------------------------------------------------------------------------- LORD ABBETT SECURITIES TRUST SEMI-ANNUAL REPORT FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2005 DEAR SHAREHOLDERS: We are pleased to provide you with this overview of Lord Abbett Securities Trust's strategies and performance for the six-month period ended April 30, 2005. 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: The U.S. economy began the six-month period ended April 30, 2005 with signs of healthy growth. However, by period end, investor optimism had waned as energy prices soared and the stock market relinquished some of its previous gains. Of greatest note, the Federal Reserve Board (the Fed) continued its measured pace of interest rate hikes, raising the fed funds rate in 0.25% increments in November, December, February and March, bringing the rate to 2.75% at the end of the six-month period. (The fed funds rate is the rate charged by banks with excess reserves at the Federal Reserve district bank to other banks needing overnight loans to meet reserve requirements.) The March interest rate hike marked the seventh quarter-point increase since June 2004. Broad stock indices finished calendar year 2004 strong, but stumbled out of the gate in early 2005. The S&P 500 Index(1) gained 4.1% in November 2004 and 3.4% in December 2004, finishing calendar year 2004 with a 10.9% gain. By the end of the first quarter of 2005, however, the Index had declined 2.2%, largely reflecting investors' concerns that rising oil and gas prices would hurt economic growth by cutting into corporate profits and dampening consumer spending. Even with an agreement among members of the Organization of Petroleum Exporting Countries (OPEC) to increase oil production, crude oil prices climbed to over $57 per barrel. Nonetheless, the U.S. economy continued to grow at a healthy pace during the first quarter of 2005 and, despite rising interest rates, corporate fundamentals remained positive. Improved profitability continued to generate excess cash, strengthening corporate balance sheets, and business spending picked up. Elsewhere, U.S. housing starts reached their highest reported level in 21 years, 1 -------------------------------------------------------------------------------- and the unemployment rate remained stable at 5.2%, except for a small uptick to 5.4% in February of 2005. By the end of the six-month period, however, investors had more to fret about than the price of oil when a warning on profits from General Motors triggered a flight out of equity and the Consumer Price Index (CPI) showed a slight upward bias. (The CPI is a commonly used measure of inflation, which reflects changes in the prices paid by urban consumers for a representative basket of goods and services.) In April, for the third consecutive month, the Consumer Confidence Index declined. (Based on a representative sample of 5,000 households, the Consumer Confidence Index measures consumer confidence about current business, employment and economic conditions as well as their expectations for the same six months hence.) As the six-month period ended April 30, 2005 came to a close, investors were cautious. Meanwhile, as in domestic markets, the international equity markets, as measured by the MSCI Europe, Australasia and Far East (EAFE)(R) Index,(2) began the six-month period with strong gains, but ended with a market slow down. The broad-based rally in foreign stocks in the beginning of the six-month period reflected better corporate earnings growth. Emerging markets also did exceptionally well as world economic growth reached a twenty-year high. This continued through December of 2004 and into January and February of 2005 as corporate earnings tracked positively with strong global growth. The trend ended abruptly, however, in March as higher energy prices, as well as interest-rate and credit-risk concerns in the United States and emerging markets prompted a widespread sell-off of "risky" assets. Despite the sharp market correction, most major international equity indexes finished the first quarter of calendar 2005 in positive territory when measured in local currencies. But, the U.S. dollar rose versus most major foreign currencies, eroding these gains by roughly 4.5% and leaving the overall MSCI EAFE(R) Index in U.S. dollars down slightly for the first quarter of calendar 2005. In April, market volatility and overall negative returns continued throughout the world's markets. On a regional basis, the Chinese economy, which had been growing strongly throughout much of 2004, began to slow due to economic controls put into place by the Chinese government. This caused many of the other Asian economies including Japan, Korea, and Taiwan to slow down as well. The European economies also slowed as corporations and consumers reduced spending. 2 -------------------------------------------------------------------------------- LORD ABBETT ALL VALUE FUND Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned 3.3%, reflecting performance at the Net Asset Value (NAV) of Class A shares with all distributions reinvested, compared with its benchmark, the Russell 3000(R) Value Index,(3) which returned 6.3% over the same period. Standardized Average Annual Total Returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, are 1 Year: 2.38%, 5 Years: 4.54% and Since Inception (July 15, 1996): 11.29%. Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1.0% if the shares are redeemed within 12 months of the purchase. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: The largest detractor to portfolio performance relative to the benchmark for the six-month period ended April 30, 2005 was stock selection within the materials and processing sector. Many basic materials underperformed in the six-month period. The materials and processing sector includes companies in the business of producing or refining goods usually derived from natural resources, including chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products companies. A gold company disappointed based on overall declining gold prices between November 2004 and February 2005. An aluminum products producer and a producer of paper, packaging and forest products also performed poorly because of slowing demand in the first quarter of 2005 as energy prices rose. In addition, poor performance by several holdings within the producer durables sector hurt performance. Producer durables include industrials and capital goods used in the production of other goods such as industrial buildings, machinery and equipment. A machinery manufacturer underperformed due to a 3 -------------------------------------------------------------------------------- slow down in orders. Also, a leading manufacturer of small engines suffered because of poor spring weather, the bankruptcy of one of its customers and rising energy costs. The Fund's underweight position within the strong-performing consumer staples sector also took away from performance for the six-month period. Consumer staples companies include those that produce or sell regularly consumed goods, such as food, beverages, tobacco, prescription drugs, and household products. A substantial underweight position within the poorly performing financial services sector was the largest positive contributor to relative Fund performance for the six-month period. Additionally, the other energy and integrated oil sectors made a strong contribution to the base return. Virtually every energy-related holding was up significantly due to the rising cost of oil and increases in oil and gas drilling, and the portfolio's overweight position within the other energy sector contributed favorably. Strong stock selection within the auto & transportation sector helped performance as did the choice of holdings within the consumer discretionary sector. The consumer discretionary sector includes stocks within the consumer durables, apparel, media, hotel and leisure industries. THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES. LORD ABBETT ALPHA FUND Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: The Alpha Fund uses a "fund of funds" approach, which currently divides assets among Lord Abbett Developing Growth Fund, Lord Abbett Securities Trust - International Opportunities Fund and Lord Abbett Research Fund, Inc. - Small-Cap Value Fund. As a result, the Fund's performance is directly related to the performance of its underlying funds. For the six-month period ended April 30, 2005, the Alpha Fund returned 4.3%, reflecting performance at the Net Asset Value (NAV) of Class A shares with all distributions reinvested, compared with its benchmark, the S&P/Citigroup Small Cap World Index,(4) which returned 7.9% over the same period. Standardized Average Annual Total Returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, are 1 Year: 0.66%, 5 Years: -0.20% and Since Inception (March 18, 1998): 1.73%. Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A 4 -------------------------------------------------------------------------------- shares made without a front-end sales charge may be subject to a CDSC of 1.0% if the shares are redeemed within 12 months of the purchase. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. LORD ABBETT DEVELOPING GROWTH FUND COMPONENT (APPROXIMATELY 27.7% OF ALPHA FUND'S PORTFOLIO) Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned -2.1%, reflecting performance at the Net Asset Value (NAV) of Class Y shares with all distributions reinvested, compared with its benchmark, the Russell 2000(R) Growth Index,(5) which returned -2.0% over the same period. Standardized Average Annual Total Returns, which reflect performance of Class Y share investments and include the reinvestment of all distributions, are 1 Year: -1.75%, 5 Years: -4.23% and Since Inception (December 30, 1997): 1.55%. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: The greatest detractor to the Fund's performance relative to the benchmark for the six-month period ended April 30, 2005 was stock selection within the consumer discretionary sector. This sector includes consumer durables, apparel, media, hotel and leisure industries. A producer of watches and related accessories suffered when reduced demand caused a build up of inventory resulting in a slow down in the company's growth. An online retailer of closed out merchandise underperformed when its expenses grew faster than anticipated offsetting expanded sales. Selection of stocks within the materials and processing sector also hurt portfolio performance. The materials and processing sector includes companies in the business of producing or refining goods usually derived from natural resources, including chemicals, construction materials, containers and 5 -------------------------------------------------------------------------------- packaging, metals and mining, and paper and forest products companies. Elsewhere, a service provider to the telecommunications industry performed poorly during the six-month period when a number of large telephone companies unexpectedly delayed the rollout of fiber-based, high-speed internet access to private homes. Stock selection within the healthcare sector was the largest positive contributor to portfolio performance. A manufacturer of DNA chip technology used for the discovery of genetic information needed to diagnose, monitor and treat disease reported greater-than-expected revenue and growth due to positive market reaction to a new product. Also, a provider of managed care organizations based in Nevada outperformed because of greater-than-anticipated patient enrollment. In addition, choice of holdings within the technology sector aided performance. A provider of technology services to the U.S. government outperformed when it was awarded some large federal government contracts. Another technology holding, a leading provider of Global Positioning System (GPS) technology, gained due to the success of its new products in the engineering, construction and agricultural markets. THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES. LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND COMPONENT (APPROXIMATELY 40.2% OF ALPHA FUND'S PORTFOLIO) Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned 9.4%, reflecting performance at the Net Asset Value (NAV) of Class Y shares with all distributions reinvested, compared with its benchmark, the S&P/Citigroup U.S. $500 Million - U.S. $2.5 Billion World ex-U.S. Index,(6) which returned 13.1% over the same period. Standardized Average Annual Total Returns, which reflect performance of Class Y shares and include the reinvestment of all distributions, are 1 Year: 10.18%, 5 Years: -6.56% and Since Inception (December 30, 1997): 0.79%. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. SEE DISCUSSION ABOUT LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND ON PAGE 9. 6 -------------------------------------------------------------------------------- LORD ABBETT SMALL-CAP VALUE FUND COMPONENT (APPROXIMATELY 29.7% OF ALPHA FUND'S PORTFOLIO) Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned 3.9%, reflecting performance at the Net Asset Value (NAV) of Class Y shares with all distributions reinvested, compared with its benchmark, the Russell 2000(R) Value Index(7) which returned 1.5% over the same period. Standardized Average Annual Total Returns, which reflect performance of Class Y share investments and include the reinvestment of all distributions, are 1 Year: 11.17%, 5 Years: 15.40% and Since Inception (December 30, 1997): 11.22%. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: Stock selection and an overweight position within the producer durables sector were the greatest contributors to the Fund's outperformance relative to its benchmark for the six-month period ended April 30, 2005. Producer durables include industrials and capital goods used in the production of other goods such as industrial buildings, machinery and equipment. A provider of equipment and software to electric, gas and water utilities was the best sector performer for the six-month period. The company is benefiting from public utility commission increases in budgets for utilities to upgrade utility meters and automated meter reading systems. In addition, three aerospace equipment manufacturing holdings reported gains. An underweight position and strong stock selection within the overall poorly performing technology sector also aided relative portfolio performance. A developer of enterprise applications serving the hospitality and specialty retail industries was a strong technology performer during the six-month period. Stock selection within the consumer discretionary sector was the largest detractor to Fund performance. The consumer discretionary sector includes companies that produce or sell goods typically consumed on an irregular or one-time basis, including automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing companies. A quality furniture retailer underperformed due to an increasingly competitive market 7 -------------------------------------------------------------------------------- environment and the company's introduction of a new, unproven retail strategy. Also, an importer of gifts and home furnishings disappointed when its turnaround efforts stalled. A provider of specialized management consulting and technical services in the areas of resource management, infrastructure and communications reported poor performance when a turnaround continued to fall behind expectations. An underweight position within the strong performing utilities sector also took away from relative performance. While selection of a large water utility company produced strong returns, the portfolio was negatively impacted by its very small position in this sector. THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES. LORD ABBETT INTERNATIONAL CORE EQUITY FUND Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned 9.5%, reflecting performance at the Net Asset Value (NAV) of Class A shares with all distributions reinvested, compared with its benchmark, the MSCI Europe, Australasia, Far East (EAFE)(R) Index,(2) which returned 9.0% over the same period. Standardized Average Annual Total Returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, are 1 Year: 7.32% and Since Inception (December 31, 2003): 4.42%. Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1.0% if the shares are redeemed within 12 months of the purchase. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: The primary contributor to Fund performance relative to its benchmark for the six-month period ended April 30, 2005 was stock selection within the 8 -------------------------------------------------------------------------------- telecommunication services sector. Higher dividends and increased buy-backs of shares led to strong stock prices among a number of large European telecommunications companies. Good stock selection and an overweight position within the energy sector also helped performance. Much of the energy outperformance can be attributed to strength among Asian energy companies and a European exploration and production company. In addition, stock selection and an overweight position within the consumer discretionary sector boosted Fund performance. The consumer discretionary sector includes companies that produce or sell goods typically consumed on an irregular or one-time basis. These include automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing companies. Strong performance in this sector was due to outstanding returns from a Spanish television station, a global publishing company and a Japanese retailer. The greatest detractor to performance relative to its benchmark for the six-month period ended April 30, 2005 was stock selection within healthcare. Two global pharmaceutical companies reported earnings below market expectations, as did a generic drug company and a medical equipment company both based in Eastern Europe. Stock selection in the financial services sector also took away from performance as Asian financial companies underperformed the period. Finally, an underweight position in the utilities sector also hurt relative performance as this sector produced strong returns for the six-month period. THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES. LORD ABBETT INTERNATIONAL OPPORTUNITIES FUND Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned 9.2%, reflecting performance at the Net Asset Value (NAV) of Class A shares with all distributions reinvested, compared with its benchmark, the S&P/Citigroup U.S. $500 Million - U.S. $2.5 Billion World ex-U.S. Index,(6) which returned 13.1% over the same period. Standardized Average Annual Total Returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, are 1 Year: 3.45%, 5 Years: -7.97% and Since Inception (December 13, 1996): 1.85%. Class A shares purchased subject to a front-end sales charge have no 9 -------------------------------------------------------------------------------- contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1.0% if the shares are redeemed within 12 months of the purchase. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: The largest detractor to portfolio performance relative to its benchmark for the six-month period ended April 30, 2005 was stock selection within the telecommunication services sector including significant underperformance by an Italian telecommunications provider. The company was considering a takeover perceived by the market to be very dilutive. They then executed a substantial equity offering equal to about 40% of its market capitalization. Market reaction to this strategy was not favorable during the period. Another holding that took away from performance was a Canadian soft drink producer within the consumer staples sector. Consumer staples companies include those that produce or sell regularly consumed goods, such as food, beverages, tobacco, prescription drugs, and household products. The soft drink company was hurt by higher-than-expected raw material prices including an increase in the price of plastics. Overall, stock selection within Japan and the United Kingdom negatively impacted portfolio return for the six-month period. The biggest positive contributor to portfolio performance was an underweight position within the materials sector. This sector includes companies in the business of producing or refining goods usually derived from natural resources, including chemicals, construction materials, containers and packaging, metals and mining, and paper and forest products companies. Valuations in materials were becoming extended compared to historical levels indicating the prudence of a smaller position at this time. Stock selection within the financials sector also helped performance, specifically in the real estate markets of Japan and Hong Kong. After 15 years of continuous price declines for Japanese real estate, there were finally signs of very strong demand for property and the first signs of improving rent. In Hong Kong, 10 -------------------------------------------------------------------------------- office rental space prices have nearly doubled. This is a significant change after several years of declining Hong Kong rental prices. THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES. LORD ABBETT LARGE-CAP VALUE FUND Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned 3.9%, reflecting performance at the Net Asset Value (NAV) of Class A shares with all distributions reinvested, compared with its benchmark, the Russell 1000(R) Value Index,(8) which returned 6.7% over the same period. Standardized Average Annual Total Returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, are 1 Year: 1.45% and Since Inception (June 30, 2003): 9.20%. Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1.0% if the shares are redeemed within 12 months of the purchase. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: The greatest detractor to the Fund's performance relative to its benchmark for the six-month period ended April 30, 2005 was stock selection within the producer durables sector. Producer durables include industrials and capital goods used in the production of other goods such as industrial buildings, machinery and equipment. A machinery manufacturer underperformed due to a slowdown in orders. Another machinery manufacturer holding underperformed due to expectations of a moderation in final demand in 2005 and higher material costs. In addition, a technology and business services company and a semiconductor testing equipment company were hurt by lower-than-expected corporate spending on technology-related capital goods throughout the first quarter of 2005. 11 -------------------------------------------------------------------------------- Stock selection within the consumer staples sector also hurt performance. Consumer staples companies include those that produce or sell regularly consumed goods, such as food, beverages, tobacco, prescription drugs, and household products. A producer of cereals and snack foods underperformed as investors reacted with uncertainty to the resignation of the company's CEO to become U.S. Secretary of Commerce. Another food company also reported poor performance due to investors' fears that increases in the costs of packaging and other commodities may undermine the company's cost saving program. An underweight position within the financial services sector was the greatest positive contributor to portfolio performance. An HMO health insurer was helped by the strong overall performance of the healthcare industry. Another financial services holding gained because of strong sales of variable annuities and better-than-expected underwriting results in its property and casualty insurance business. An overweight position within the healthcare sector was also a significant positive contributor to portfolio performance. Four drug industry holdings performed well as demand for drugs remained steady and a slowing economy shifted investor focus to less economically sensitive stocks. THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND THE WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES. A PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT A FUND, INCLUDING A FUND'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND ONGOING EXPENSES, THAT AN INVESTOR SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON ANY LORD ABBETT MUTUAL FUND, CONTACT YOUR INVESTMENT PROFESSIONAL, OR LORD ABBETT DISTRIBUTOR LLC AT (800) 874-3733 OR www.LordAbbett.com. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. 12 -------------------------------------------------------------------------------- (1) The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock market performance. This popular index includes a representative sample of leading companies in leading industries. The Index is unmanaged, does not reflect the deduction of fees or expenses and is not available for direct investment. (2) The MSCI Europe, Australasia and Far East (EAFE)(R) 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. The Index is unmanaged, does not reflect the deduction of fees or expenses and is not available for direct investment. (3) The Russell 3000(R) Value Index measures the performance of those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. The stocks in this Index are also members of either the Russell 1000(R) Value or the Russell 2000(R) Value indices. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. (4) The S&P/Citigroup Small Cap World Index is a subset of the Global Citigroup Broad Market Index (BMI). (5) 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. The Index is unmanaged, does not reflect the deduction of fees or expenses and is not available for direct investment. (6) S&P/Citigroup Global Equity Index System(SM) and the names of each of the indices and subindices which it comprises (GEIS and such indices and subindices, each an "Index" and collectively, the "Indices") are service marks of Citigroup. The S&P/Citigroup U.S. $500 Million - U.S. $2.5 Billion World ex-U.S. Index is a subset of the Global S&P/Citigroup Broad Market Index (BMI). The World ex-U.S. composite includes all developed countries except the United States. Indices are unmanaged, do not reflect the deduction of fees or expenses and are not available for direct investment. (7) The Russell 2000(R) Value Index measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The Index is unmanaged, does not reflect the deduction of fees or expenses and is not available for direct investment. (8) The Russell 1000(R) Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. The Index is unmanaged, does not reflect the deduction of fees or expenses and is not available for direct investment. IMPORTANT PERFORMANCE AND OTHER INFORMATION The views of each Fund's management and the portfolio holdings described in this report are as of April 30, 2005; these views and portfolio holdings may have changed subsequent to this date and they do not guarantee the future performance of the markets or each Fund. Information provided in this report should not be considered a recommendation to purchase or sell securities. A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with each Fund, please see each Fund's Prospectus. PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, A FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL FLUCTUATION. Except where noted, comparative fund performance does not account for the deduction of sales charges and would be different if sales charges were included. Each Fund offers additional classes of shares with distinct pricing options. For a full description of the differences in pricing alternatives, please see a Fund's Prospectus. MUTUAL FUNDS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY BANKS, AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. 13 -------------------------------------------------------------------------------- EXPENSE EXAMPLES As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges on purchase payments (these charges vary among the share classes) and redemption fees (International Core Equity Fund and International Opportunties Fund only); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (these charges vary among the share classes); and other Fund expenses. These Examples are intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period (November 1, 2004 through April 30, 2005). ACTUAL EXPENSES For each class of the Fund, the first line of the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period 11/1/04 - 4/30/05" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES For each class of the Fund, the second line of the table on the following page provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5.0% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5.0% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. 14 ALL VALUE FUND -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE PERIOD+ ----------- ----------- ----------- 11/1/04 - 11/1/04 4/30/05 4/30/05 ----------- ----------- ----------- CLASS A Actual $ 1,000.00 $ 1,032.90 $ 5.90 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.99 $ 5.86 CLASS B Actual $ 1,000.00 $ 1,029.90 $ 9.13 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.79 $ 9.07 CLASS C Actual $ 1,000.00 $ 1,030.20 $ 9.13 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.79 $ 9.07 CLASS P Actual $ 1,000.00 $ 1,032.40 $ 6.40 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.49 $ 6.36 CLASS Y Actual $ 1,000.00 $ 1,034.50 $ 4.07 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.79 $ 4.04
+ For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.17% for Class A, 1.81% for Classes B and C, 1.26% for Class P and 0.81% for Class Y) multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period). -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS PRESENTED BY SECTOR APRIL 30, 2005
SECTOR %* Auto & Transportation 2.92% Consumer Discretionary 10.10% Consumer Staples 2.96% Financial Services 13.51% Healthcare 8.06% Integrated Oils 7.38% Materials & Processing 15.64% Other 7.83% Other Energy 7.14% Producer Durables 8.07% Short-Term Investment 4.52% Technology 5.86% Utilities 6.01% Total 100.00%
* Represents percent of total investments. 15 ALPHA FUND -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE PERIOD+ ----------- ----------- ----------- 11/1/04 - 11/1/04 4/30/05 4/30/05 ----------- ----------- ----------- CLASS A Actual $ 1,000.00 $ 1,042.60 $ 1.79 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,023.04 $ 1.77 CLASS B Actual $ 1,000.00 $ 1,039.50 $ 5.05 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,019.84 $ 5.00 CLASS C Actual $ 1,000.00 $ 1,040.10 $ 5.05 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,019.84 $ 5.00 CLASS Y Actual $ 1,000.00 $ 1,044.70 $ 0.00 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,024.79 $ 0.00
+ For each class of the Fund, expenses are equal to the annualized expense ratio for such class (0.35% for Class A, 1.00% for Classes B and C, and 0.00% for Class Y) multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period). -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS PRESENTED BY INVESTMENT OBJECTIVE APRIL 30, 2005
INVESTMENT OBJECTIVE %* Long-Term Growth of Capital+ 27.67% Long-Term Capital Appreciation+ 69.87% Short-Term Investment 2.46% Total 100.00%
* Represents percent of total investments. + Alpha Fund invests in other funds ("Underlying Funds") managed by Lord, Abbett & Co. LLC. The category shown represents the investment objective of these Underlying Funds. 16 INTERNATIONAL CORE EQUITY FUND -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE PERIOD+ ----------- ----------- ----------- 11/1/04 - 11/1/04 4/30/05 4/30/05 ----------- ----------- ----------- CLASS A Actual $ 1,000.00 $ 1,094.90 $ 8.17 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.99 $ 7.86 CLASS B Actual $ 1,000.00 $ 1,091.70 $ 11.40 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,013.89 $ 10.97 CLASS C Actual $ 1,000.00 $ 1,091.60 $ 11.40 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,013.89 $ 10.97 CLASS P Actual $ 1,000.00 $ 1,095.10 $ 8.48 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.69 $ 8.17 CLASS Y Actual $ 1,000.00 $ 1,097.30 $ 6.29 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,018.79 $ 6.05
+ For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.58% for Class A, 2.22% for Classes B and C, 1.67% for Class P and 1.22% for Class Y) multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period). -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS PRESENTED BY SECTOR APRIL 30, 2005
SECTOR %* Auto 2.57% Basic Industry 1.77% Capital Goods 2.04% Consumer Cyclicals 2.31% Consumer Discretionary 1.54% Consumer Non-Cyclicals 0.52% Consumer Services 3.81% Consumer Staples 6.42% Energy 4.63% Financial Services 24.41% Healthcare 9.37% Integrated Oils 1.79% Materials & Processing 8.42% Other 3.63% Producer Durables 3.31% Short-Term Investment 3.28% Technology 6.42% Telecommunications 10.69% Transportation 1.13% Utilities 1.94% Total 100.00%
* Represents percent of total investments. 17 INTERNATIONAL OPPORTUNITIES FUND -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges or redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE PERIOD+ ----------- ----------- ----------- 11/1/04 - 11/1/04 4/30/05 4/30/05 ----------- ----------- ----------- CLASS A Actual $ 1,000.00 $ 1,091.60 $ 8.89 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.29 $ 8.57 CLASS B Actual $ 1,000.00 $ 1,088.60 $ 12.32 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,012.99 $ 11.88 CLASS C Actual $ 1,000.00 $ 1,088.00 $ 12.32 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,012.99 $ 11.88 CLASS P Actual $ 1,000.00 $ 1,093.70 $ 7.75 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,017.39 $ 7.46 CLASS Y Actual $ 1,000.00 $ 1,093.90 $ 7.12 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,017.99 $ 6.86
+ For each class of the Fund, expenses are equal to the annualized expense ratio for such class (1.72% for Class A, 2.37% for Classes B and C, 1.49% for Class P and 1.37% for Class Y) multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period). -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS PRESENTED BY SECTOR APRIL 30, 2005
SECTOR %* Basic Materials 5.32% Conglomerates 1.01% Consumer Cyclicals 16.19% Consumer Non-Cyclicals 6.04% Diversified Financials 1.91% Energy 5.88% Healthcare 8.19% Industrial Goods & Services 16.62% Non-Property Financials 12.28% Property & Property Services 6.72% Short-Term Investment 0.15% Technology 9.49% Telecommunications 2.23% Transportation 3.63% Utilities 4.34% Total 100.00%
* Represents percent of total investments. 18 LARGE-CAP VALUE FUND -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE PERIOD+ ----------- ----------- ----------- 11/1/04 - 11/1/04 4/30/05 4/30/05 ----------- ----------- ----------- CLASS A Actual $ 1,000.00 $ 1,038.60 $ 4.79 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,020.09 $ 4.75 CLASS B Actual $ 1,000.00 $ 1,035.20 $ 8.04 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.89 $ 7.97 CLASS C Actual $ 1,000.00 $ 1,034.50 $ 8.04 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,016.89 $ 7.97 CLASS P Actual $ 1,000.00 $ 1,037.90 $ 5.30 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,019.59 $ 5.25 CLASS Y Actual $ 1,000.00 $ 1,040.30 $ 2.96 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,021.89 $ 2.93
+ For each class of the Fund, expenses are equal to the annualized expense ratio for such class (0.95% for Class A, 1.60% for Classes B and C, 1.05% for Class P and 0.60% for Class Y) multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period). -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS PRESENTED BY SECTOR APRIL 30, 2005
SECTOR %* Consumer Discretionary 7.83% Consumer Staples 11.03% Energy 8.63% Financials 12.87% Healthcare 15.58% Industrials 17.00% Information Technology 6.48% Materials 10.93% Short-Term Investment 5.75% Telecommunication Services 3.49% Utilities 0.41% Total 100.00%
* Represents percent of total investments. 19 SCHEDULE OF INVESTMENTS (UNAUDITED) ALL VALUE FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ COMMON STOCKS 95.28% ADVERTISING AGENCY 0.07% Interpublic Group of Cos., Inc. (The)* 125,200 $ 1,610 -------------- AEROSPACE 0.27% Moog Inc. Class A* 202,500 6,036 -------------- AIR TRANSPORTATION 0.20% Frontier Airlines, Inc.* 470,000 4,564 -------------- ALUMINUM 0.78% Alcoa, Inc. 605,000 17,557 -------------- AUTO COMPONENTS 0.10% Modine Manufacturing Co. 85,000 2,302 -------------- AUTO PARTS: AFTER MARKET 0.29% Genuine Parts Co. 151,300 6,491 -------------- AUTO PARTS: ORIGINAL EQUIPMENT 0.39% Dana Corp. 765,800 8,745 -------------- BANKS: NEW YORK CITY 1.20% Bank of New York Co., Inc. (The) 570,000 15,926 JPMorgan Chase & Co. 315,000 11,179 -------------- TOTAL 27,105 -------------- BANKS: OUTSIDE NEW YORK CITY 5.33% Bank of America Corp. 644,186 29,014 Cullen/Frost Bankers, Inc. 585,000 25,342 Mellon Financial Corp. 774,900 21,457 TCF Financial Corp. 170,000 4,300 Wachovia Corp. 455,000 23,287 Wells Fargo & Co. 280,000 16,783 -------------- TOTAL 120,183 -------------- BEVERAGE: SOFT DRINKS 1.86% PepsiCo, Inc. 753,300 41,914 -------------- BIOTECHNOLOGY RESEARCH & PRODUCTION 0.73% Baxter Int'l., Inc. 445,000 $ 16,509 -------------- BUILDING: MATERIALS 0.17% Simpson Manufacturing Co., Inc. 137,800 3,721 -------------- CHEMICALS 4.51% Cytec Industries, Inc. 445,000 20,523 E.I. du Pont de Nemours & Co. 950,000 44,754 Eastman Chemical Co. 240,000 12,960 OM Group, Inc.* 155,000 3,401 Praxair, Inc. 427,500 20,020 -------------- TOTAL 101,658 -------------- COMMUNICATIONS TECHNOLOGY 2.45% Avaya Inc.* 930,200 8,074 McAfee, Inc.* 864,300 18,072 Motorola, Inc. 1,898,800 29,128 -------------- TOTAL 55,274 -------------- COMPUTER SERVICES SOFTWARE & SYSTEMS 2.28% Cadence Design Systems, Inc.* 1,825,000 25,550 Microsoft Corp. 1,021,100 25,834 -------------- TOTAL 51,384 -------------- COMPUTER TECHNOLOGY 0.42% UNOVA, Inc.* 530,000 9,413 -------------- CONSUMER PRODUCTS 0.42% Gillette Co. 180,000 9,295 Yankee Candle Co.* 6,400 178 -------------- TOTAL 9,473 -------------- CONTAINERS & PACKAGING: METAL & GLASS 0.33% Crown Holdings Inc* 500,000 7,525 --------------
SEE NOTES TO FINANCIAL STATEMENTS. 20 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED) ALL VALUE FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ CONTAINERS & PACKAGING: PAPER & PLASTIC 0.88% Pactiv Corp.* 930,000 $ 19,939 -------------- DIVERSIFIED FINANCIAL SERVICES 2.94% Citigroup, Inc. 935,000 43,908 Merrill Lynch & Co., Inc. 415,000 22,381 -------------- TOTAL 66,289 -------------- DIVERSIFIED MANUFACTURING 0.26% Ball Corp. 150,000 5,925 -------------- DRUG & GROCERY STORE CHAINS 1.10% CVS Corp. 214,600 11,069 Kroger Co.* 870,000 13,720 -------------- TOTAL 24,789 -------------- DRUGS & PHARMACEUTICALS 6.83% GlaxoSmithKline plc ADR 520,020 26,287 Mylan Laboratories, Inc. 1,185,000 19,553 Novartis AG ADR 635,000 30,944 Pfizer, Inc. 150,000 4,075 Schering-Plough Corp. 1,490,000 31,096 Wyeth 935,000 42,019 -------------- TOTAL 153,974 -------------- ELECTRICAL EQUIPMENT & COMPONENTS 0.96% Emerson Electric Co. 345,000 21,621 -------------- ELECTRONICS 0.70% Vishay Intertechnology, Inc.* 1,478,600 15,806 -------------- ELECTRONICS: INSTRUMENTS, GAUGES & METERS 0.24% Itron, Inc.* 148,400 5,353 -------------- ENTERTAINMENT 2.74% Viacom, Inc. Class B 675,000 23,368 Walt Disney Co. (The) 1,460,000 38,544 -------------- TOTAL 61,912 -------------- FERTILIZERS 0.12% Potash Corp. of Saskatchewan Inc.(a) 33,300 $ 2,802 -------------- FOREST PRODUCTS 0.77% Georgia-Pacific Corp. 510,000 17,478 -------------- GOLD 2.02% Newmont Mining Corp. 1,201,800 45,632 -------------- HEALTHCARE FACILITIES 0.13% Pharmaceutical Product Development, Inc.* 64,800 2,941 -------------- IDENTIFICATION CONTROL & FILTER DEVICES 2.22% Hubbell, Inc. 325,000 14,121 IDEX Corp. 67,000 2,496 Parker Hannifin Corp. 520,900 31,223 Roper Industries, Inc. 31,700 2,145 -------------- TOTAL 49,985 -------------- INSURANCE: MULTI-LINE 2.05% CIGNA Corp. 110,000 10,118 Lincoln National Corp. 55,000 2,473 Markel Corp.* 24,400 8,372 Safeco Corp. 480,000 25,281 -------------- TOTAL 46,244 -------------- MACHINERY: AGRICULTURAL 1.62% Deere & Co. 585,000 36,586 -------------- MACHINERY: ENGINES 0.84% Briggs & Stratton Corp. 447,000 14,470 Cummins, Inc. 65,400 4,447 -------------- TOTAL 18,917 -------------- MACHINERY: INDUSTRIAL/SPECIALTY 0.67% Illinois Tool Works, Inc. 110,000 9,220 Woodward Governor Co. 85,000 5,998 -------------- TOTAL 15,218 --------------
SEE NOTES TO FINANCIAL STATEMENTS. 21 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED) ALL VALUE FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ MACHINERY: OIL WELL EQUIPMENT & SERVICES 5.92% Baker Hughes Inc. 400,000 $ 17,648 FMC Technologies, Inc.* 82,600 2,505 Grant Prideco, Inc.* 725,000 16,059 Halliburton Co. 615,000 25,578 Helmerich & Payne, Inc. 535,070 20,568 Key Energy Services, Inc.* 870,000 9,788 Patterson-UTI Energy, Inc. 525,000 12,584 Schlumberger Ltd.(a) 420,000 28,732 -------------- TOTAL 133,462 -------------- MACHINERY: SPECIALTY 0.20% JLG Industries, Inc. 220,000 4,484 -------------- MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 0.36% Bausch & Lomb, Inc. 107,000 8,025 -------------- METAL FRABRICATING 2.44% Quanex Corp. 640,000 32,294 Shaw Group, Inc. (The)* 236,800 4,279 Timken Co. (The) 745,000 18,506 -------------- TOTAL 55,079 -------------- MILLING: FRUIT AND GRAIN PROCESSING 0.85% Archer Daniels Midland Co. 1,060,000 19,069 -------------- MISCELLANEOUS EQUIPMENT 0.68% W.W. Grainger, Inc. 276,000 15,260 -------------- MISCELLANEOUS MATERIALS & PROCESSING 0.15% Rogers Corp.* 95,000 3,281 -------------- MULTI-SECTOR COMPANIES 7.81% Carlisle Cos., Inc. 485,000 34,833 Eaton Corp. 420,000 24,633 General Electric Co. 1,860,000 67,332 Trinity Industries, Inc. 595,000 13,893 Tyco Int'l., Ltd.(a) 1,135,000 35,537 -------------- TOTAL 176,228 -------------- OFFICE FURNITURE & BUSINESS EQUIPMENT 0.36% Xerox Corp.* 615,000 $ 8,149 -------------- OIL: CRUDE PRODUCERS 1.21% EOG Resources, Inc. 268,800 12,781 Grey Wolf, Inc.* 2,400,000 14,400 -------------- TOTAL 27,181 -------------- OIL: INTEGRATED DOMESTIC 1.38% GlobalSantaFe Corp.(a) 925,000 31,080 -------------- OIL: INTEGRATED INTERNATIONAL 5.99% ChevronTexaco Corp. 290,000 15,080 Exxon Mobil Corp. 2,105,012 120,049 -------------- TOTAL 135,129 -------------- PAINTS & COATINGS 0.48% Valspar Corp. (The) 262,200 10,837 -------------- PAPER 1.72% Bowater, Inc. 117,000 3,801 International Paper Co. 765,064 26,234 MeadWestvaco Corp. 295,000 8,688 -------------- TOTAL 38,723 -------------- PUBLISHING: MISCELLANEOUS 1.12% R.R. Donnelley & Sons Co. 770,000 25,341 -------------- RADIO & TV BROADCASTERS 0.32% Westwood One, Inc.* 400,000 7,320 -------------- RAILROADS 1.12% CSX Corp. 305,000 12,240 Union Pacific Corp. 205,000 13,105 -------------- TOTAL 25,345 -------------- REAL ESTATE INVESTMENT TRUSTS 1.22% Host Marriott Corp. 1,640,000 27,585 --------------
SEE NOTES TO FINANCIAL STATEMENTS. 22 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED) ALL VALUE FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ RESTAURANTS 1.09% Brinker Int'l., Inc.* 610,000 $ 20,618 Yum! Brands, Inc. 83,400 3,916 -------------- TOTAL 24,534 -------------- RETAIL 3.01% Barnes & Noble, Inc.* 455,000 16,198 Federated Department Stores, Inc. 190,000 10,925 Foot Locker, Inc. 260,000 6,932 May Department Stores Co. 744,200 26,107 Pier 1 Imports, Inc. 372,900 5,414 Target Corp. 50,000 2,320 -------------- TOTAL 67,896 -------------- SAVINGS & LOAN 0.74% W Holding Co., Inc. 531,700 4,301 Webster Financial Corp. 275,000 12,499 -------------- TOTAL 16,800 -------------- SERVICES: COMMERCIAL 0.99% Sabre Holdings Corp. Class A 315,000 6,161 Waste Management, Inc. 565,000 16,097 -------------- TOTAL 22,258 -------------- SHOES 0.31% NIKE, Inc. Class B 91,300 7,013 -------------- STEEL 0.12% Steel Dynamics, Inc. 100,000 2,718 -------------- TRANSPORTATION MISCELLANEOUS 0.46% United Parcel Service, Inc. Class B 145,300 10,361 -------------- TRUCKERS 0.35% Heartland Express, Inc. 250,000 4,635 Werner Enterprises, Inc. 179,100 3,328 -------------- TOTAL 7,963 -------------- UTILITIES: CABLE TV & RADIO 2.07% Comcast Corp. Class A* 1,474,775 $ 46,795 -------------- UTILITIES: ELECTRICAL 1.48% Ameren Corp. 210,000 10,857 CMS Energy Corp.* 1,103,400 14,256 NiSource, Inc. 355,000 8,250 -------------- TOTAL 33,363 -------------- UTILITIES: TELECOMMUNICATIONS 2.13% Verizon Communications, Inc. 1,340,000 47,972 -------------- UTILITIES: WATER 0.31% Aqua America, Inc. 265,050 7,077 -------------- TOTAL COMMON STOCKS (Cost $1,957,150,780) 2,149,203 ============== PRINCIPAL AMOUNT (000) -------------- SHORT-TERM INVESTMENT 4.51% REPURCHASE AGREEMENT 4.51% Repurchase Agreement dated 4/29/2005, 2.22% due 5/2/2005 with State Street Bank & Trust Co. collateralized by $104,425,000 of Federal Home Loan Bank at 2.22% and 2.375% due 2/15/2006 and 6/9/2006; value: $103,801,813; proceeds: $101,780,982 (Cost $101,762,156) $ 101,762 101,762 ============== TOTAL INVESTMENTS IN SECURITIES 99.79% (Cost $2,058,912,936) 2,250,965 ============== OTHER ASSETS IN EXCESS OF LIABILITIES 0.21% 4,624 -------------- NET ASSETS 100.00% $ 2,255,589 ==============
* Non-income producing security. (a) Foreign security traded in U.S. dollars. ADR American Depository Receipt. SEE NOTES TO FINANCIAL STATEMENTS. 23 SCHEDULE OF INVESTMENTS (UNAUDITED) ALPHA FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ INVESTMENTS IN UNDERLYING FUNDS 94.79% Lord Abbett Developing Growth Fund, Inc. - Class Y*(a) 2,598,664 $ 37,941 Lord Abbett Research Fund, Inc. Small-Cap Value Fund - Class Y(b) 1,543,302 40,651 Lord Abbett Securities Trust-International Opportunities Fund - Class Y(b) 5,162,296 55,133 -------------- TOTAL INVESTMENTS IN UNDERLYING FUNDS (Cost $126,125,425) 133,725 ============== PRINCIPAL AMOUNT VALUE INVESTMENTS (000) (000) ------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT 2.39% REPURCHASE AGREEMENT 2.39% Repurchase Agreement dated 4/29/2005, 2.22% due 5/2/2005 with State Street Bank & Trust Co. collateralized by $3,490,000 of Federal National Mortgage Assoc. at 2.75% due 2/6/2007; value: $3,446,375; proceeds: $3,375,785 (Cost $3,375,161) $ 3,375 $ 3,375 ============== TOTAL INVESTMENTS IN SECURITIES 97.18% (Cost $129,500,586) 137,100 ============== OTHER ASSETS IN EXCESS OF LIABILITIES 2.82% 3,972 -------------- NET ASSETS 100.00% $ 141,072 ==============
* Non-income producing security. (a) Fund investment objective is long-term growth of capital through a diversified and actively managed portfolio consisting of developing growth companies, many of which are traded over the counter. (b) Fund investment objective is long-term capital appreciation. SEE NOTES TO FINANCIAL STATEMENTS. 24 SCHEDULE OF INVESTMENTS (UNAUDITED) INTERNATIONAL CORE EQUITY FUND APRIL 30, 2005
U.S. $ VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ COMMON STOCK 93.46% AUSTRALIA 1.84% Qantas Airways Ltd. 530,818 $ 1,339 Zinifex Ltd.* 666,902 1,562 -------------- TOTAL 2,901 -------------- AUSTRIA 3.28% Bank Austria Creditanstalt 21,095 1,948 Raiffeisen Int'l Bank-Holding AG* 4,716 243 Telekom Austria AG 155,507 2,985 -------------- TOTAL 5,176 -------------- CANADA 0.68% Opti Canada, Inc.* 56,200 1,079 -------------- FINLAND 1.71% Stora Enso Oyj Registered Shares 104,500 1,385 UPM-Kymmene Oyj 66,100 1,316 -------------- TOTAL 2,701 -------------- FRANCE 8.76% Air France-KLM Group 24,366 384 AXA 81,963 2,047 BNP Paribas S.A 34,235 2,259 Lafarge S.A 25,671 2,336 PSA Peugeot Citroen S.A 20,554 1,219 Sanofi-Aventis 23,525 2,083 Schneider Electric S.A 16,090 1,160 Total S.A 6,965 1,549 Vinci S.A 5,320 800 -------------- TOTAL 13,837 -------------- GERMANY 6.11% BASF AG 23,603 1,546 Deutsche Bank AG Registered Shares 27,491 2,231 Deutsche Telekom AG Registered Shares 82,400 1,557 Fresenius Medical Care AG 29,411 $ 2,364 METRO AG 14,947 789 Siemens AG 15,913 1,169 -------------- TOTAL 9,656 -------------- GREECE 1.68% National Bank of Greece S.A 79,000 2,656 -------------- HONG KONG 3.54% Bank of East Asia, Ltd. 397,900 1,167 China Mobile (Hong Kong) Ltd. 471,700 1,654 China Unicom Ltd. ADR 97,700 791 China Unicom Ltd. 1,266,000 1,027 Texwinca Holdings Ltd. 1,150,700 961 -------------- TOTAL 5,600 -------------- HUNGARY 1.35% Richter Gedeon Rt 17,559 2,132 -------------- INDIA 1.24% Reliance Industries Ltd. 162,545 1,966 -------------- IRELAND 1.50% DEPFA BANK plc* 154,029 2,373 -------------- ITALY 2.70% Enel S.p.A 91,025 864 Saipem S.p.A 112,618 1,411 Telecom Italia S.p.A 353,717 1,199 Telecom Italia (RNC) S.p.A 278,472 786 -------------- TOTAL 4,260 -------------- JAPAN 18.43% Astellas Pharma Inc. 56,700 2,053 Don Quijote Co., Ltd. 19,070 1,160 East Japan Railway Co. 265 1,379 Fanuc Ltd. 19,700 1,159 Gulliver Int'l. Co., Ltd. 5,320 759 HOYA Corp. 18,600 1,942
SEE NOTES TO FINANCIAL STATEMENTS. 25 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED) INTERNATIONAL CORE EQUITY FUND APRIL 30, 2005
U.S. $ VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ INPEX Corp. 216 $ 1,189 Japan Tobacco Inc. 99 1,275 Jupiter Telecommunications Co., Ltd.* 3,495 2,783 Mitsubishi Tokyo Financial Group, Inc. 134 1,158 Mitsui Chemicals, Inc. 139,604 791 Mizuho Financial Group, Inc. 325 1,526 OBIC Co., Ltd. 6,500 1,185 ORIX Corp. 18,171 2,467 Sony Corp. 31,400 1,159 Sumitomo Corp. 290,000 2,457 Sumitomo Electric Industries, Ltd. 186,988 1,945 Taiyo Yuden Co., Ltd. 151,000 1,559 Yamada Denki Co., Ltd. 24,362 1,164 -------------- TOTAL 29,110 -------------- NETHERLANDS 2.98% IHC Caland N.V 35,876 2,339 ING Groep N.V. CVA 85,682 2,361 -------------- TOTAL 4,700 -------------- SOUTH KOREA 1.47% Samsung Electronics Co., Ltd. 2,500 1,143 POSCO ADR 26,030 1,185 -------------- TOTAL 2,328 -------------- SPAIN 2.07% ACS, Actividades de Construccion y Servicios, S.A 69,975 1,706 Gestevision Telecinco, S.A.* 68,643 1,571 -------------- TOTAL 3,277 -------------- SWEDEN 1.06% AB Volvo Class B 19,200 777 Skandia Forsakrings AB 187,800 890 -------------- TOTAL 1,667 -------------- SWITZERLAND 5.27% Nestle S.A.-Registered Shares 9,218 $ 2,425 Novartis AG Registered Shares 48,817 2,376 UBS AG Registered Shares 44,135 3,529 -------------- TOTAL 8,330 -------------- TAIWAN 1.94% Chinatrust Financial Holding Co., Ltd. 1,332,118 1,532 Mediatek, Inc. 201,429 1,527 -------------- TOTAL 3,059 -------------- THAILAND 1.46% Thai Oil Co., Ltd. 1,402,700 2,299 -------------- TURKEY 0.93% Turkiye Garanti Bankasi A.S. ADR* 310,400 1,108 Turkiye Is Bankasi (Isbank) A.S. GDR Registered Shares 71,500 363 -------------- TOTAL 1,471 -------------- UNITED KINGDOM 23.46% Allied Domecq plc 105,147 1,379 AstraZeneca plc 43,059 1,884 BAE Systems plc 580,917 2,845 BP plc 115,339 1,176 Cadbury Schweppes plc 264,920 2,664 Diageo plc 58,324 864 GlaxoSmithKline plc 56,037 1,415 HSBC Holdings plc 127,867 2,044 National Grid Transco plc 213,712 2,101 O2 plc* 1,062,413 2,376 Prudential plc 257,633 2,322 Reed Elsevier plc 149,285 1,463 Royal Bank of Scotland Group plc 100,845 3,044
SEE NOTES TO FINANCIAL STATEMENTS. 26 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED) INTERNATIONAL CORE EQUITY FUND APRIL 30, 2005
U.S. $ VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ Smiths Group plc 103,792 $ 1,704 Tesco plc 202,080 1,193 Tullow Oil plc 353,391 1,084 Vodafone Group plc 1,509,477 3,945 Wm Morrison Supermarkets plc 635,437 2,364 WPP Group plc 109,052 1,185 -------------- TOTAL 37,052 -------------- TOTAL COMMON STOCKS (COST $143,771,101) 147,630 ============== PRINCIPAL U.S. $ AMOUNT VALUE INVESTMENTS (000) (000) ------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT 3.17% REPURCHASE AGREEMENT 3.17% Repurchase Agreement dated 4/29/2005, 2.22% due 5/2/2005 with State Street Bank & Trust Co. collateralized by $5,130,000 of Federal Home Loan Mortgage Corp. at zero coupon due 5/24/2005; value: $5,117,175; proceeds: $5,014,384 (Cost $5,013,457) $ 5,013 $ 5,013 ============== TOTAL INVESTMENTS IN SECURITIES 96.63% (Cost $148,784,558) 152,643 ============== FOREIGN CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES 3.37% 5,318 -------------- NET ASSETS 100.00% $ 157,961 ==============
* Non-income producing security. ADR American Depository Receipt. GDR Global Depository Receipt. SEE NOTES TO FINANCIAL STATEMENTS. 27 SCHEDULE OF INVESTMENTS (UNAUDITED) INTERNATIONAL OPPORTUNITIES FUND APRIL 30, 2005
U.S. $ VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ COMMON STOCK 97.72% AUSTRALIA 4.55% Newcrest Mining Ltd. 204,700 $ 2,386 Oil Search Ltd. 701,000 1,259 Promina Group Ltd. 586,200 2,352 Santos Ltd. 252,000 1,831 -------------- TOTAL 7,828 -------------- AUSTRIA 2.35% Raiffeisen Int'l. Bank - Holding AG* 5,839 301 Telekom Austria AG 90,000 1,728 Wienerberger AG 47,700 2,020 -------------- TOTAL 4,049 -------------- BRAZIL 1.39% Unibanco-Uniao de Bancos Brasileiros S.A. GDR 72,200 2,396 -------------- CANADA 1.24% RONA, Inc.* 111,000 2,132 -------------- CHINA 0.88% Weichai Power Co., Ltd. 439,000 1,521 -------------- DENMARK 1.40% GN Store Nord A/S 230,000 2,410 -------------- FRANCE 2.72% IPSOS S.A 15,500 1,577 Neopost S.A 37,000 3,101 -------------- TOTAL 4,678 -------------- GERMANY 5.19% AWD Holding AG 47,600 1,914 Fresenius Medical Care AG ADR 96,600 2,589 Puma AG 9,400 2,166 Techem AG* 54,718 2,259 -------------- TOTAL 8,928 -------------- GREECE 1.41% Piraeus Bank S.A 142,900 $ 2,423 -------------- HONG KONG 6.82% China Merchants Holdings Int'l. Co. Ltd. 870,800 1,701 China Travel Int'l Investment (Hong Kong) Ltd. 5,550,000 1,622 Dah Sing Financial Group 132,222 853 Hong Kong Exchanges & Clearing Ltd. 714,900 1,743 Hong Kong Land Holdings Ltd. 668,981 1,933 Sino Land Co., Ltd. 2,024,300 1,903 Techtronic Industries Co., Ltd. 890,500 1,980 -------------- TOTAL 11,735 -------------- HUNGARY 1.10% Richter Gedeon Ltd. GDR 15,350 1,884 -------------- INDIA 1.70% ICICI Bank Ltd. ADR 161,600 2,922 -------------- IRELAND 2.08% DEPFA BANK plc* 142,800 2,200 ICON plc ADR* 41,700 1,386 -------------- TOTAL 3,586 -------------- ITALY 7.56% Davide Campari-Milano S.p.A 36,700 2,603 Hera S.p.A 969,600 2,718 Milano Assicurazioni S.p.A 535,800 3,274 Pirelli & C. Real Estate S.p.A 44,200 2,437 Societa Iniziative Autostradali e Servizi S.p.A 142,000 1,978 -------------- TOTAL 13,010 --------------
SEE NOTES TO FINANCIAL STATEMENTS. 28 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED) INTERNATIONAL OPPORTUNITIES FUND APRIL 30, 2005
U.S. $ VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ JAPAN 23.35% Aeon Mall Co., Ltd. 34,600 $ 1,308 ARRK Corp. 32,800 1,282 Diamond City Co., Ltd. 28,200 847 Don Quijote Co., Ltd. 62,600 3,807 Global Media Online, Inc. 75,200 2,182 Gulliver Int'l. Co., Ltd. 13,060 1,862 Japan Cash Machine Co., Ltd. 63,600 1,640 Joint Corp. 53,100 1,369 Jupiter Telecommunications Co., Ltd.* 1,435 1,143 KOSE Corp. 52,140 1,923 Matsumotokiyoshi Co. Ltd. 68,000 1,922 MISUMI Group Inc. 53,400 1,594 Mitsui Mining & Smelting Co., Ltd. 470,200 2,019 Nitori Co., Ltd. 28,750 1,938 NOK Corp. 35,600 929 OBIC Business Consultants Co., Ltd. 37,900 1,870 Park24 Co., Ltd. 106,400 2,121 Rengo Co., Ltd. 381,000 1,924 Shinko Electric Industries Co., Ltd. 47,500 1,640 Sumitomo Real Estate Sales Co., Ltd. 31,500 1,507 Sumitomo Rubber Industries Ltd. 241,700 2,346 Take and Give Needs Co., Ltd.* 1,430 1,549 TIS Inc. 39,800 1,440 -------------- TOTAL 40,162 -------------- LUXEMBOURG 1.26% Gemplus Int'l. S.A.* 1,000,000 2,162 -------------- NETHERLANDS 3.90% Aalberts Industries N.V 45,300 2,153 Ihc Caland N.V 34,725 2,264 Royal P&O Nedlloyd N.V.* 46,900 $ 2,286 -------------- TOTAL 6,703 -------------- RUSSIA 1.18% Vimpel-Communications ADR* 61,900 2,025 -------------- SPAIN 7.61% ACS, Actividades de Construccion y Servicios, S.A 72,000 1,755 Corporacion Mapfre S.A 176,399 2,623 Fadesa Inmobiliaria, S.A.* 47,000 1,065 Grupo Empresarial ENCE, S.A 42,500 1,189 Iberia, Lineas Aereas de Espana, S.A 412,800 1,278 Indra Sistemas, S.A. 160,500 2,778 Prosegur Compania de Seguridad, S.A 109,800 2,412 -------------- TOTAL 13,100 -------------- SWEDEN 1.48% Getinge AB Class B 177,900 2,555 -------------- SWITZERLAND 4.43% Actelion Ltd.* 20,000 2,133 Geberit AG 3,350 2,242 Nobel Biocare Holding AG 15,150 3,243 -------------- TOTAL 7,618 -------------- THAILAND 0.90% Italian-Thai Development Public Co., Ltd. 6,560,600 1,542 -------------- TURKEY 0.52% Turkiye Is Bankasi (Isbank) A.S. GDR Registered Shares 176,000 894 -------------- UNITED KINGDOM 12.70% AWG plc 156,100 2,603 Balfour Beatty plc 317,074 1,851
SEE NOTES TO FINANCIAL STATEMENTS. 29 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED) INTERNATIONAL OPPORTUNITIES FUND APRIL 30, 2005
U.S. $ VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ Cairn Energy plc* 87,000 $ 1,928 CSR plc* 259,500 1,503 easyJet plc* 608,000 2,544 Intertek Group plc 183,700 2,667 McCarthy & Stone plc 103,595 1,080 Michael Page Int'l. plc 536,800 1,973 Northgate plc 105,100 1,631 Paladin Resources plc 752,400 2,619 Peter Hambro Mining plc* 132,000 1,448 -------------- TOTAL 21,847 -------------- TOTAL COMMON STOCKS (COST $133,668,432) 168,110 ============== PRINCIPAL U.S. $ AMOUNT VALUE INVESTMENTS (000) (000) ------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT 0.15% REPURCHASE AGREEMENT 0.15% Repurchase Agreement dated 4/29/2005, 2.22% due 5/2/2005 with State Street Bank & Trust Co. collateralized by $260,000 of Federal National Mortgage Assoc. at 2.75% due 2/6/2007; value: $256,750; proceeds: $248,684 (Cost $248,638) $ 249 $ 249 ============== TOTAL INVESTMENTS IN SECURITIES 97.87% (Cost $133,917,070) 168,359 ============== FOREIGN CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES 2.13% 3,671 -------------- NET ASSETS 100.00% $ 172,030 ==============
* Non-income producing security. ADR American Depository Receipt. GDR Global Depository Receipt. SEE NOTES TO FINANCIAL STATEMENTS. 30 SCHEDULE OF INVESTMENTS (UNAUDITED) LARGE CAP VALUE APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ COMMON STOCKS 94.40% AEROSPACE & DEFENSE 1.61% General Dynamics Corp. 2,240 $ 235 Honeywell Int'l., Inc. 6,760 242 Raytheon Co. 1,410 53 -------------- TOTAL 530 -------------- AIR FREIGHT & COURIERS 1.02% United Parcel Service, Inc. Class B 4,710 336 -------------- BEVERAGES 2.13% Diageo plc ADR 1,875 112 PepsiCo, Inc. 10,562 588 -------------- TOTAL 700 -------------- BIOTECHNOLOGY 0.66% MedImmune, Inc.* 8,560 217 -------------- CHEMICALS 5.28% E.I. du Pont de Nemours & Co. 15,417 726 Monsanto Co. 5,663 332 Potash Corp. of Saskatchewan Inc.(a) 2,736 230 Praxair, Inc. 9,614 450 -------------- TOTAL 1,738 -------------- COMMERCIAL BANKS 4.95% Bank of America Corp. 7,152 322 Bank of New York Co., Inc. (The) 14,851 415 Marshall & Ilsley Corp. 3,410 145 Mellon Financial Corp. 13,373 370 U.S. Bancorp 648 18 Wachovia Corp. 4,480 229 Wells Fargo & Co. 2,171 130 -------------- TOTAL 1,629 -------------- COMMERCIAL SERVICES & SUPPLIES 0.95% Waste Management, Inc. 10,950 $ 312 -------------- COMMUNICATIONS EQUIPMENT 1.56% Motorola, Inc. 33,395 512 -------------- COMPUTERS & PERIPHERALS 1.87% EMC Corp.* 25,820 339 Hewlett-Packard Co. 13,570 278 -------------- TOTAL 617 -------------- CONSTRUCTION & ENGINEERING 0.18% Fluor Corp. 1,160 60 -------------- DIVERSIFIED FINANCIALS 6.05% Citigroup, Inc. 11,059 519 Goldman Sachs Group, Inc. (The) 2,970 317 JPMorgan Chase & Co. 21,415 760 MBNA Corp. 5,830 115 Merrill Lynch & Co., Inc. 5,204 281 -------------- TOTAL 1,992 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES 3.49% SBC Communications, Inc. 16,115 384 Sprint Corp. 8,280 184 Verizon Communications, Inc. 16,245 582 -------------- TOTAL 1,150 -------------- ELECTRICAL EQUIPMENT 0.83% Emerson Electric Co. 4,371 274 -------------- ELECTRONIC EQUIPMENT & INSTRUMENTS 0.21% Solectron Corp.* 20,800 69 -------------- ENERGY EQUIPMENT & SERVICES 3.15% Baker Hughes, Inc. 10,602 468 Schlumberger Ltd.(a) 8,324 569 -------------- TOTAL 1,037 --------------
SEE NOTES TO FINANCIAL STATEMENTS. 31 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED) LARGE CAP VALUE APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ FOOD & STAPLES RETAILING 2.32% CVS Corp. 6,270 $ 324 Kroger Co.* 27,975 441 -------------- TOTAL 765 -------------- FOOD PRODUCTS 3.67% Archer Daniels Midland Co. 2,643 48 Campbell Soup Co. 7,230 215 H.J. Heinz Co. 5,615 207 Kraft Foods, Inc. Class A 22,745 737 -------------- TOTAL 1,207 -------------- GAS UTILITIES 0.41% El Paso Corp. 13,620 136 -------------- HEALTHCARE EQUIPMENT & SUPPLIES 1.97% Baxter Int'l., Inc. 16,043 595 Guidant Corp. 730 54 -------------- TOTAL 649 -------------- HEALTHCARE PROVIDERS & SERVICES 2.54% Cardinal Health, Inc. 9,658 537 CIGNA Corp. 3,245 298 -------------- TOTAL 835 -------------- HOUSEHOLD DURABLES 0.59% Newell Rubbermaid, Inc. 8,904 193 -------------- HOUSEHOLD PRODUCTS 1.70% Clorox Co. (The) 4,070 258 Kimberly-Clark Corp. 4,820 301 -------------- TOTAL 559 -------------- INDUSTRIAL CONGLOMERATES 4.29% General Electric Co. 28,260 1,023 Tyco Int'l. Ltd.(a) 12,403 388 -------------- TOTAL 1,411 -------------- INSURANCE 1.88% American Int'l. Group, Inc. 4,270 $ 217 Chubb Corp. 840 69 Hartford Financial Services Group, Inc. (The) 4,606 333 -------------- TOTAL 619 -------------- INTERNET SOFTWARE & SERVICES 0.40% Automatic Data Processing, Inc. 3,010 131 -------------- MACHINERY 5.78% Caterpillar, Inc. 2,300 203 Deere & Co. 13,256 829 Eaton Corp. 6,222 365 Illinois Tool Works, Inc. 281 24 Pall Corp. 3,300 89 Parker Hannifin Corp. 6,579 394 -------------- TOTAL 1,904 -------------- MEDIA 5.35% Clear Channel Communications, Inc. 5,131 164 Comcast Corp. Class A* 18,438 585 Tribune Co. 8,237 318 Viacom, Inc. Class B 4,790 166 Walt Disney Co. (The) 20,053 529 -------------- TOTAL 1,762 -------------- METALS & MINING 3.54% Alcoa, Inc. 11,206 325 Barrick Gold Corp.(a) 10,320 230 Newmont Mining Corp. 16,082 611 -------------- TOTAL 1,166 -------------- MULTI-LINE RETAIL 1.07% Federated Department Stores, Inc. 770 44 Target Corp. 1,809 84 Wal-Mart Stores, Inc. 4,760 225 -------------- TOTAL 353 --------------
SEE NOTES TO FINANCIAL STATEMENTS. 32 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED) LARGE CAP VALUE APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ------------------------------------------------------------------------------------ OFFICE ELECTRONICS 1.16% Xerox Corp.* 28,780 $ 381 -------------- OIL & GAS 5.50% Exxon Mobil Corp. 31,717 1,809 -------------- PAPER & FOREST PRODUCTS 2.12% International Paper Co. 20,345 698 -------------- PERSONAL PRODUCTS 1.24% Gillette Co. (The) 7,889 407 -------------- PHARMACEUTICALS 10.44% Bristol-Myers Squibb Co. 9,710 252 GlaxoSmithKline plc ADR 7,100 359 Merck & Co., Inc. 11,384 386 Novartis AG ADR 13,653 665 Pfizer, Inc. 25,480 692 Schering-Plough Corp. 17,896 374 Wyeth 15,745 708 -------------- TOTAL 3,436 -------------- ROAD & RAIL 2.36% Canadian National Railway Co.(a) 5,849 335 CSX Corp. 1,863 75 Union Pacific Corp. 5,750 367 -------------- TOTAL 777 -------------- SOFTWARE 1.29% Microsoft Corp. 16,840 426 -------------- TEXTILES & APPAREL 0.84% NIKE, Inc. Class B 3,577 275 -------------- TOTAL COMMON STOCKS (Cost $31,174,931) 31,072 ============== PRINCIPAL AMOUNT VALUE INVESTMENTS (000) (000) ------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT 5.75% REPURCHASE AGREEMENT 5.75% Repurchase Agreement dated 4/29/2005, 2.22% due 5/2/2005 with State Street Bank & Trust Co. collateralized by $1,945,000 of Federal Home Loan Bank at 2.375% due 2/15/2006; value: $1,937,173; proceeds: $1,894,795 (Cost $1,894,444) $ 1,894 $ 1,894 ============== TOTAL INVESTMENTS IN SECURITIES 100.15% (Cost $33,069,375) 32,966 ============== LIABILITIES IN EXCESS OF OTHER ASSETS (0.15%) (51) -------------- NET ASSETS 100.00% $ 32,915 ==============
* Non-income producing security. (a) Foreign security traded in U.S dollars. ADR American Depository Receipt. SEE NOTES TO FINANCIAL STATEMENTS. 33 STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2005
INTERNATIONAL ALL VALUE ALPHA CORE EQUITY FUND FUND FUND ASSETS: Investment in securities, at cost $ 2,058,912,936 $ 129,500,586 $ 148,784,558 -------------------------------------------------------------------------------------------------------------------------------- Investment in securities, at value $ 2,250,965,038 $ 137,099,555 $ 152,642,612 Foreign cash, at value (cost $5,023,353) - - 5,012,363 Receivables: Interest and dividends 1,910,892 416 637,282 Investment securities sold 16,063,891 4,000,000 2,825,699 Capital shares sold 10,296,396 340,066 2,626,678 From affiliates - 5,902 - Prepaid expenses and other assets 320,190 17,053 62,804 -------------------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS 2,279,556,407 141,462,992 163,807,438 -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES: Payables: Investment securities purchased 18,728,903 - 5,302,237 Capital shares reacquired 2,032,222 189,942 295,257 Management fees 994,608 - 90,481 12b-1 distribution fees 1,189,206 89,918 65,404 Fund administration 73,626 - 4,826 Trustees' fees 161,544 6,797 541 Accrued expenses and other liabilities 787,178 104,347 88,095 -------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 23,967,287 391,004 5,846,841 ================================================================================================================================ NET ASSETS $ 2,255,589,120 $ 141,071,988 $ 157,960,597 ================================================================================================================================ COMPOSITION OF NET ASSETS: Paid-in capital $ 2,002,758,229 $ 140,770,646 $ 149,812,382 Undistributed (distributions in excess of) net investment income 1,476,937 (133,069) 486,173 Accumulated net realized gain (loss) on investments and foreign currency related transactions 59,301,852 (7,164,558) 3,806,726 Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 192,052,102 7,598,969 3,855,316 -------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 2,255,589,120 $ 141,071,988 $ 157,960,597 ================================================================================================================================ NET ASSETS BY CLASS: Class A Shares $ 1,552,987,367 $ 73,609,765 $ 120,987,816 Class B Shares $ 220,598,023 $ 41,243,953 $ 9,236,016 Class C Shares $ 469,535,696 $ 25,788,596 $ 23,069,018 Class P Shares $ 10,002,958 - $ 11,396 Class Y Shares $ 2,465,076 $ 429,674 $ 4,656,351 OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF AUTHORIZED SHARES OF BENEFICIAL INTEREST): Class A Shares 136,603,744 4,449,512 10,609,393 Class B Shares 19,981,288 2,565,729 816,339 Class C Shares 42,656,597 1,603,962 2,038,310 Class P Shares 885,242 - 1,000 Class Y Shares 216,161 26,008 407,114 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (NET ASSETS DIVIDED BY OUTSTANDING SHARES): Class A Shares-Net asset value $ 11.37 $ 16.54 $ 11.40 Class A Shares-Maximum offering price (Net asset value plus sales charge of 5.75%) $ 12.06 $ 17.55 $ 12.10 Class B Shares-Net asset value $ 11.04 $ 16.07 $ 11.31 Class C Shares-Net asset value $ 11.01 $ 16.08 $ 11.32 Class P Shares-Net asset value $ 11.30 - $ 11.40 Class Y Shares-Net asset value $ 11.40 $ 16.52 $ 11.44
SEE NOTES TO FINANCIAL STATEMENTS. 34 STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)(CONCLUDED) APRIL 30, 2005
INTERNATIONAL OPPORTUNITIES LARGE-CAP FUND VALUE FUND ASSETS: Investment in securities, at cost $ 133,917,070 $ 33,069,375 ------------------------------------------------------------------------------------------------------------ Investment in securities, at value $ 168,358,706 $ 32,966,128 Foreign cash, at value (cost $1,134,037) 1,134,302 - Receivables: Interest and dividends 579,999 40,745 Investment securities sold 6,409,742 163,256 Capital shares sold 244,931 139,868 From advisor - 5,051 Prepaid expenses and other assets 17,979 13,936 ------------------------------------------------------------------------------------------------------------ TOTAL ASSETS 176,745,659 33,328,984 ------------------------------------------------------------------------------------------------------------ LIABILITIES: Payables: Investment securities purchased - 225,957 Capital shares reacquired 4,376,894 148,906 Management fees 109,875 8,749 12b-1 distribution fees 66,830 6,501 Fund administration 5,815 875 Trustees' fees 11,954 783 To affiliate 2,361 - Accrued expenses and other liabilities 142,303 22,193 ------------------------------------------------------------------------------------------------------------ TOTAL LIABILITIES 4,716,032 413,964 ============================================================================================================ NET ASSETS $ 172,029,627 $ 32,915,020 ============================================================================================================ COMPOSITION OF NET ASSETS: Paid-in capital $ 239,368,636 $ 32,451,485 Undistributed (distributions in excess of) net investment income (387,210) 96,481 Accumulated net realized gain (loss) on investments and foreign currency related transactions (101,455,628) 470,301 Net unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies 34,503,829 (103,247) ------------------------------------------------------------------------------------------------------------ NET ASSETS $ 172,029,627 $ 32,915,020 ============================================================================================================ NET ASSETS BY CLASS: Class A Shares $ 76,187,858 $ 11,623,142 Class B Shares $ 24,388,682 $ 1,708,508 Class C Shares $ 14,937,268 $ 2,504,409 Class P Shares $ 1,143 $ 12,323 Class Y Shares $ 56,514,676 $ 17,066,638 OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF AUTHORIZED SHARES OF BENEFICIAL INTEREST): Class A Shares 7,260,009 969,211 Class B Shares 2,392,097 144,185 Class C Shares 1,472,617 211,268 Class P Shares 107.64 1,027 Class Y Shares 5,290,190 1,418,211 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (NET ASSETS DIVIDED BY OUTSTANDING SHARES): Class A Shares-Net asset value $ 10.49 $ 11.99 Class A Shares-Maximum offering price (Net asset value plus sales charge of 5.75%) $ 11.13 $ 12.72 Class B Shares-Net asset value $ 10.20 $ 11.85 Class C Shares-Net asset value $ 10.14 $ 11.85 Class P Shares-Net asset value $ 10.62 $ 12.00 Class Y Shares-Net asset value $ 10.68 $ 12.03
SEE NOTES TO FINANCIAL STATEMENTS. 35 STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2005
INTERNATIONAL ALL VALUE ALPHA CORE EQUITY FUND FUND FUND INVESTMENT INCOME: Dividends $ 19,868,852 $ 320,359 $ 1,545,422 Interest and other 1,075,921 41,640 53,014 Foreign withholding tax (93,382) - (176,264) -------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 20,851,391 361,999 1,422,172 -------------------------------------------------------------------------------------------------------------------------------- EXPENSES: Management fees 5,820,402 73,322 415,949 12b-1 distribution plan-Class A 2,619,356 132,953 155,554 12b-1 distribution plan-Class B 1,059,743 217,552 27,978 12b-1 distribution plan-Class C 2,233,197 138,135 76,552 12b-1 distribution plan-Class P 16,655 - 25 Shareholder servicing 2,018,580 246,403 126,512 Professional 97,615 15,570 9,960 Reports to shareholders 136,865 8,927 4,463 Fund administration 427,938 - 22,184 Custody 54,869 2,854 66,463 Trustees' fees 16,138 1,633 1,016 Registration 82,993 6,030 15,414 Offering - - 12,152 Other 17,271 2,390 2,795 -------------------------------------------------------------------------------------------------------------------------------- Gross expenses 14,601,622 845,769 937,017 Expense reductions (See Note 7) (15,970) (1,037) (1,522) Expenses assumed by advisor (See Note 3) - - (231) Expenses assumed by Underlying Funds (See Note 3) - (282,770) - Management fee waived (See Note 3) - (73,322) - -------------------------------------------------------------------------------------------------------------------------------- NET EXPENSES 14,585,652 488,640 935,264 -------------------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME (LOSS) 6,265,739 (126,641) 486,908 -------------------------------------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Capital gains received from Underlying Funds - 3,446,887 - Net realized gain (loss) on investments and foreign currency related transactions 60,551,003 (41,326) 5,635,386 Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies (18,454,439) 2,654,961 13,796 ================================================================================================================================ NET REALIZED AND UNREALIZED GAIN 42,096,564 6,060,522 5,649,182 ================================================================================================================================ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 48,362,303 $ 5,933,881 $ 6,136,090 ================================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 36 STATEMENTS OF OPERATIONS (UNAUDITED)(CONCLUDED) FOR THE SIX MONTHS ENDED APRIL 30, 2005
INTERNATIONAL OPPORTUNITIES LARGE-CAP FUND VALUE FUND INVESTMENT INCOME: Dividends $ 1,198,136 $ 240,044 Interest and other 9,415 14,751 Securities lending-net 22,578 - Foreign withholding tax (97,306) (1,763) ------------------------------------------------------------------------------------------------------------ TOTAL INVESTMENT INCOME 1,132,823 253,032 ------------------------------------------------------------------------------------------------------------ EXPENSES: Management fees 647,656 46,476 12b-1 distribution plan-Class A 129,431 18,538 12b-1 distribution plan-Class B 120,554 8,212 12b-1 distribution plan-Class C 71,468 9,936 12b-1 distribution plan-Class P 2 28 Shareholder servicing 290,706 9,374 Professional 17,336 7,721 Reports to shareholders 15,620 744 Fund administration 34,542 4,647 Custody 49,062 24,738 Trustees' fees 1,794 128 Registration 11,317 2,684 Subsidy (See Note 3) 115,167 - Other 5,206 785 ------------------------------------------------------------------------------------------------------------ Gross expenses 1,509,861 134,011 Expense reductions (See Note 7) (1,674) (228) Expenses assumed by advisor (See Note 3) - (27,109) ------------------------------------------------------------------------------------------------------------ NET EXPENSES 1,508,187 106,674 ------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME (LOSS) (375,364) 146,358 ------------------------------------------------------------------------------------------------------------ NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on investments and foreign currency related transactions 12,365,196 477,937 Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies 2,512,021 (506,738) ============================================================================================================ NET REALIZED AND UNREALIZED GAIN (LOSS) 14,877,217 (28,801) ============================================================================================================ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 14,501,853 $ 117,557 ============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 37 STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) SIX MONTHS ENDED APRIL 30, 2005
INTERNATIONAL ALL VALUE ALPHA CORE EQUITY INCREASE IN NET ASSETS FUND FUND FUND OPERATIONS: Net investment income (loss) $ 6,265,739 $ (126,641) $ 486,908 Capital gains received from Underlying Funds - 3,446,887 - Net realized gain (loss) on investment and foreign currency related transactions 60,551,003 (41,326) 5,635,386 Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies (18,454,439) 2,654,961 13,796 -------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 48,362,303 5,933,881 6,136,090 ================================================================================================================================ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (7,885,374) (454,589) (54,643) Class B (232,649) - - Class C (543,813) - - Class P (33,338) - - Class Y (15,526) (3,899) (8,050) Net realized gain Class A (13,311,718) - - Class B (2,003,914) - - Class C (4,200,063) - - Class P (54,527) - - Class Y (18,323) - - -------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (28,299,245) (458,488) (62,693) ================================================================================================================================ CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 504,699,261 11,752,374 83,679,444 Reinvestment of distributions 24,894,588 429,563 55,712 Cost of shares reacquired (143,933,521) (16,412,016) (5,661,711) -------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 385,660,328 (4,230,079) 78,073,445 ================================================================================================================================ NET INCREASE IN NET ASSETS 405,723,386 1,245,314 84,146,842 ================================================================================================================================ NET ASSETS: Beginning of period 1,849,865,734 139,826,674 73,813,755 -------------------------------------------------------------------------------------------------------------------------------- END OF PERIOD $ 2,255,589,120 $ 141,071,988 $ 157,960,597 ================================================================================================================================ UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME $ 1,476,937 $ (133,069) $ 486,173 ================================================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 38 STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)(CONCLUDED) SIX MONTHS ENDED APRIL 30, 2005
INTERNATIONAL OPPORTUNITIES LARGE-CAP INCREASE IN NET ASSETS FUND VALUE FUND OPERATIONS: Net investment income (loss) $ (375,364) $ 146,358 Net realized gain (loss) on investment and foreign currency related transactions 12,365,196 477,937 Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies 2,512,021 (506,738) ------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 14,501,853 117,557 ============================================================================================================ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A - (90,006) Class B - (9,403) Class C - (11,671) Class P - (89) Class Y (40,279) (24,772) Net realized gain Class A - (134,647) Class B - (20,541) Class C - (21,775) Class P - (161) Class Y - (28,334) ------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (40,279) (341,399) ============================================================================================================ CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 16,369,834 20,857,321 Reinvestment of distributions 40,087 295,515 Cost of shares reacquired (18,028,363) (3,106,325) ------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS (1,618,442) 18,046,511 ============================================================================================================ NET INCREASE IN NET ASSETS 12,843,132 17,822,669 ============================================================================================================ NET ASSETS: Beginning of period 159,186,495 15,092,351 ------------------------------------------------------------------------------------------------------------ END OF PERIOD $ 172,029,627 $ 32,915,020 ============================================================================================================ UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF) NET INVESTMENT INCOME $ (387,210) $ 96,481 ============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 39 STATEMENTS OF CHANGES IN NET ASSETS YEAR ENDED OCTOBER 31, 2004
INTERNATIONAL ALL VALUE ALPHA CORE EQUITY INCREASE IN NET ASSETS FUND FUND FUND* OPERATIONS: Net investment income $ 4,432,625 $ 452,060 $ 141,544 Capital gains received from Underlying Funds - 2,192,549 - Net realized gain (loss) on investment and foreign currency related transactions 19,574,189 (2,072,933) (1,992,691) Net change in unrealized appreciation (depreciation) on investments and translation of assets and liabilities denominated in foreign currencies 126,594,624 13,375,938 3,841,520 -------------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 150,601,438 13,947,614 1,990,373 ================================================================================================================================ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (564,577) - - Class P (791) - - Class Y (36) - - Net realized gain Class A (5,324,535) - - Class B (1,049,372) - - Class C (2,125,180) - - Class P (13,578) - - Class Y (123) -------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (9,078,192) - - ================================================================================================================================ CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 1,104,267,626 20,645,973 79,753,827 Reinvestment of distributions 7,831,700 - - Cost of shares reacquired (157,444,389) (28,461,786) (7,930,445) -------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 954,654,937 (7,815,813) 71,823,382 ================================================================================================================================ NET INCREASE IN NET ASSETS 1,096,178,183 6,131,801 73,813,755 ================================================================================================================================ NET ASSETS: Beginning of year 753,687,551 133,694,873 - -------------------------------------------------------------------------------------------------------------------------------- END OF YEAR $ 1,849,865,734 $ 139,826,674 $ 73,813,755 ================================================================================================================================ UNDISTRIBUTED NET INVESTMENT INCOME $ 3,921,898 $ 452,060 $ 61,958 ================================================================================================================================
* For the period December 15, 2003 (commencement of investment operations) to October 31, 2004. SEE NOTES TO FINANCIAL STATEMENTS. 40 STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED) YEAR ENDED OCTOBER 31, 2004
INTERNATIONAL OPPORTUNITIES LARGE-CAP INCREASE IN NET ASSETS FUND VALUE FUND OPERATIONS: Net investment income $ 388,842 $ 66,295 Net realized gain on investment and foreign currency related transactions 18,816,479 198,549 Net change in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 3,110,081 275,213 ------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 22,315,402 540,057 ============================================================================================================ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A (964,614) (19,175) Class B (207,009) (1,026) Class C (160,464) (1,139) Class P (12) (67) Class Y (992,387) (83) ------------------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (2,324,486) (21,490) ============================================================================================================ CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 29,640,763 15,420,584 Reinvestment of distributions 2,290,948 20,347 Cost of shares reacquired (29,504,937) (3,419,287) ------------------------------------------------------------------------------------------------------------ NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 2,426,774 12,021,644 ============================================================================================================ NET INCREASE IN NET ASSETS 22,417,690 12,540,211 ============================================================================================================ NET ASSETS: Beginning of year 136,768,805 2,552,140 ------------------------------------------------------------------------------------------------------------ END OF YEAR $ 159,186,495 $ 15,092,351 ============================================================================================================ UNDISTRIBUTED NET INVESTMENT INCOME $ 28,433 $ 86,064 ============================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 41 FINANCIAL HIGHLIGHTS ALL VALUE FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.18 $ 9.93 $ 8.22 $ 9.83 $ 11.53 $ 10.87 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income(a) .05 .06 .02 .01 .04 .05 Net realized and unrealized gain (loss) .32 1.30 1.87 (.67) (.83) 1.17 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .37 1.36 1.89 (.66) (.79) 1.22 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income (.07) (.01) - (.02) (.03) - Net realized gain (.11) (.10) (.18) (.93) (.88) (.56) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions (.18) (.11) (.18) (.95) (.91) (.56) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 11.37 $ 11.18 $ 9.93 $ 8.22 $ 9.83 $ 11.53 ============= ============= ========== ========== ========== ========== Total Return(b) 3.29%(d) 13.80% 23.46% (7.95)% (7.26)% 11.44% RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions .58%(d) 1.24% 1.38% 1.42% 1.42% 1.35% Expenses, excluding expense reductions .58%(d) 1.24% 1.38% 1.42% 1.43% 1.36% Net investment income .39%(d) .53% .25% .13% .40% .48% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 1,552,987 $ 1,268,285 $ 452,098 $ 189,698 $ 166,406 $ 136,038 Portfolio turnover rate 20.52% 21.92% 36.39% 79.39% 103.11% 65.06%
SEE NOTES TO FINANCIAL STATEMENTS. 42 FINANCIAL HIGHLIGHTS (CONTINUED) ALL VALUE FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.84 $ 9.69 $ 8.07 $ 9.70 $ 11.42 $ 10.85 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) .01 (.01) (.03) (.04) (.03) (.02) Net realized and unrealized gain (loss) .31 1.26 1.83 (.66) (.81) 1.15 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .32 1.25 1.80 (.70) (.84) 1.13 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income (.01) - - - -(e) - Net realized gain (.11) (.10) (.18) (.93) (.88) (.56) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions (.12) (.10) (.18) (.93) (.88) (.56) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 11.04 $ 10.84 $ 9.69 $ 8.07 $ 9.70 $ 11.42 ============= ============= ========== ========== ========== ========== Total Return(b) 2.99%(d) 12.98% 22.77% (8.51)% (7.86)% 10.80% RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions .90%(d) 1.87% 2.00% 2.03% 2.03% 2.00% Expenses, excluding expense reductions .90%(d) 1.87% 2.00% 2.03% 2.04% 2.01% Net investment income (loss) .07%(d) (.10)% (.37)% (.48)% (.27)% (.17)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 220,598 $ 185,775 $ 100,272 $ 47,423 $ 39,188 $ 17,453 Portfolio turnover rate 20.52% 21.92% 36.39% 79.39% 103.11% 65.06%
SEE NOTES TO FINANCIAL STATEMENTS. 43 FINANCIAL HIGHLIGHTS (CONTINUED) ALL VALUE FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.81 $ 9.66 $ 8.05 $ 9.67 $ 11.38 $ 10.81 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) .01 (.01) (.03) (.03) (.01) (.02) Net realized and unrealized gain (loss) .31 1.26 1.82 (.66) (.82) 1.15 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .32 1.25 1.79 (.69) (.83) 1.13 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income (.01) - - - -(e) - Net realized gain (.11) (.10) (.18) (.93) (.88) (.56) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions (.12) (.10) (.18) (.93) (.88) (.56) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 11.01 $ 10.81 $ 9.66 $ 8.05 $ 9.67 $ 11.38 ============= ============= ========== ========== ========== ========== Total Return(b) 3.02%(d) 13.02% 22.70% (8.42)% (7.70)% 10.74% RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions .90%(d) 1.87% 2.00% 1.89% 1.98% 2.00% Expenses, excluding expense reductions .90%(d) 1.87% 2.00% 1.89% 1.99% 2.01% Net investment income (loss) .07%(d) (.10)% (.37)% (.34)% (.14)% (.17)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 469,536 $ 389,161 $ 200,025 $ 112,052 $ 112,299 $ 112,776 Portfolio turnover rate 20.52% 21.92% 36.39% 79.39% 103.11% 65.06%
SEE NOTES TO FINANCIAL STATEMENTS. 44 FINANCIAL HIGHLIGHTS (CONTINUED) ALL VALUE FUND
SIX MONTHS ENDED YEAR ENDED 10/31 8/15/2001(c) 4/30/2005 --------------------------------------------------- TO (UNAUDITED) 2004 2003 2002 10/31/2001 PER SHARE OPERATING PERFORMANCE (CLASS P SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.12 $ 9.88 $ 8.19 $ 9.83 $ 10.85 =========== =============== =============== =============== ============== Investment operations: Net investment income (loss)(a) .03 .05 .01 -(e) -(e) Net realized and unrealized gain (loss) .33 1.30 1.86 (.66) (1.02) ----------- --------------- --------------- --------------- -------------- Total from investment operations .36 1.35 1.87 (.66) (1.02) ----------- --------------- --------------- --------------- -------------- Distributions to shareholders from: Net investment income (.07) (.01) - (.05) - Net realized gain (.11) (.10) (.18) (.93) - ----------- --------------- --------------- --------------- -------------- Total distributions (.18) (.11) (.18) (.98) - ----------- --------------- --------------- --------------- -------------- NET ASSET VALUE, END OF PERIOD $ 11.30 $ 11.12 $ 9.88 $ 8.19 $ 9.83 =========== =============== =============== =============== ============== Total Return(b) 3.24%(d) 13.71% 23.30% (8.04)% (9.40)%(d) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions .63%(d) 1.32%+ 1.45% 1.48% .31%(d) Expenses, excluding expense reductions .63%(d) 1.32%+ 1.45% 1.48% .31%(d) Net investment income (loss) .30%(d) .45%+ .18% .07% (.01)%(d) SIX MONTHS ENDED YEAR ENDED 10/31 8/15/2001(c) 4/30/2005 --------------------------------------------------- TO SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 10/31/2001 -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 10,003 $ 4,895 $ 1,280 $ 368 $ 1 Portfolio turnover rate 20.52% 21.92% 36.39% 79.39% 103.11%
SEE NOTES TO FINANCIAL STATEMENTS. 45 FINANCIAL HIGHLIGHTS (CONCLUDED) ALL VALUE FUND
SIX MONTHS ENDED 3/31/2003(c) 4/30/2005 YEAR ENDED TO (UNAUDITED) 10/31/2004 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.22 $ 9.95 $ 7.83 =============== =============== =============== Investment operations: Net investment income(a) .06 .10 .03 Net realized and unrealized gain .33 1.30 2.09 --------------- --------------- --------------- Total from investment operations .39 1.40 2.12 --------------- --------------- --------------- Distributions to shareholders from: Net investment income (.10) (.03) - Net realized gain (.11) (.10) - --------------- --------------- --------------- Total distributions (.21) (.13) - --------------- --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.40 $ 11.22 $ 9.95 =============== =============== =============== Total Return(b) 3.45%(d) 14.18% 27.08%(d) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions .40%(d) .87%+ 1.00%(d)+ Expenses, excluding expense reductions .40%(d) .87%+ 1.00%(d)+ Net investment income .55%(d) .90%+ .63%(d)+ SIX MONTHS ENDED 3/31/2003(c) 4/30/2005 YEAR ENDED TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 10/31/2003 ---------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 2,465 $ 1,750 $ 13 Portfolio turnover rate 20.52% 21.92% 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. 46 FINANCIAL HIGHLIGHTS ALPHA FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.96 $ 14.38 $ 10.62 $ 12.96 $ 17.46 $ 15.21 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) .01 .10 .02 (.05) (.05) (.03) Net realized and unrealized gain (loss) .67 1.48 3.83 (1.70) (3.82) 2.60 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .68 1.58 3.85 (1.75) (3.87) 2.57 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income (.10) - - - (.30) (.21) Net realized gain - - (.09) (.59) (.33) (.11) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions (.10) - (.09) (.59) (.63) (.32) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 16.54 $ 15.96 $ 14.38 $ 10.62 $ 12.96 $ 17.46 ============= ============= ========== ========== ========== ========== Total Return(b) 4.26%(d) 10.99% 36.59% (14.41)% (22.67)% 17.10% RATIOS TO AVERAGE NET ASSETS:* Expenses, including expense reductions .18%(d) .36 .39% .37% .36% .40% Expenses, excluding expense reductions .42%(d) 1.03% 1.45% 1.37% 1.34% 1.33% Net investment income (loss) .07%(d) .63% .13% (.34)% (.32)% (.16)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 73,610 $ 69,957 $ 62,383 $ 53,121 $ 70,785 $ 96,652 Portfolio turnover rate 2.63% 2.59% 2.47% 1.75% 15.34% 1.54%
SEE NOTES TO FINANCIAL STATEMENTS. 47 FINANCIAL HIGHLIGHTS (CONTINUED) ALPHA FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.46 $ 14.02 $ 10.43 $ 12.81 $ 17.27 $ 15.05 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) (.04) .01 (.06) (.12) (.14) (.13) Net realized and unrealized gain (loss) .65 1.43 3.74 (1.67) (3.79) 2.58 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .61 1.44 3.68 (1.79) (3.93) 2.45 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income - - - - (.20) (.12) Net realized gain - - (.09) (.59) (.33) (.11) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions - - (.09) (.59) (.53) (.23) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 16.07 $ 15.46 $ 14.02 $ 10.43 $ 12.81 $ 17.27 ============= ============= ========== ========== ========== ========== Total Return(b) 3.95%(d) 10.27% 35.62% (14.91)% (23.21)% 16.40% RATIOS TO AVERAGE NET ASSETS:* Expenses, including expense reductions .50%(d) 1.01% 1.04% 1.00% 1.00% 1.00% Expenses, excluding expense reductions .74%(d) 1.68% 2.10% 2.00% 1.98% 1.93% Net investment income (loss) (.25)%(d) .03% (.52)% (.97)% (.96)% (.75)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 41,244 $ 41,771 $ 42,342 $ 35,661 $ 50,377 $ 70,300 Portfolio turnover rate 2.63% 2.59% 2.47% 1.75% 15.34% 1.54%
SEE NOTES TO FINANCIAL STATEMENTS. 48 FINANCIAL HIGHLIGHTS (CONTINUED) ALPHA FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.46 $ 14.02 $ 10.43 $ 12.80 $ 17.25 $ 15.04 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) (.04) .01 (.06) (.10) (.14) (.12) Net realized and unrealized gain (loss) .66 1.43 3.74 (1.68) (3.78) 2.56 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .62 1.44 3.68 (1.78) (3.92) 2.44 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income - - - - (.20) (.12) Net realized gain - - (.09) (.59) (.33) (.11) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions - - (.09) (.59) (.53) (.23) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 16.08 $ 15.46 $ 14.02 $ 10.43 $ 12.80 $ 17.25 ============= ============= ========== ========== ========== ========== Total Return(b) 4.01%(d) 10.27% 35.62% (14.77)% (23.25)% 16.34% RATIOS TO AVERAGE NET ASSETS:* Expenses, including expense reductions .50%(d) 1.01% 1.04% .89% 1.00% 1.00% Expenses, excluding expense reductions .74%(d) 1.68% 2.10% 1.89% 1.98% 1.93% Net investment income (loss) (.25)%(d) .03% (.52)% (.86)% (.97)% (.70)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 25,788 $ 27,701 $ 28,970 $ 24,690 $ 35,395 $ 44,977 Portfolio turnover rate 2.63% 2.59% 2.47% 1.75% 15.34% 1.54%
SEE NOTES TO FINANCIAL STATEMENTS. 49 FINANCIAL HIGHLIGHTS (CONCLUDED) ALPHA FUND
SIX MONTHS ENDED 10/20/2004(a) 4/30/2005 TO (UNAUDITED) 10/31/2004 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 15.96 $ 15.65 =============== =============== Investment operations: Net investment income(b) .04 -(e) Net realized and unrealized gain .68 .31 --------------- --------------- Total from investment operations .72 .31 --------------- --------------- Distributions to shareholders from: Net investment income (.16) - --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 16.52 $ 15.96 =============== =============== Total Return(c) 4.47%(d) 2.18%(d) RATIOS TO AVERAGE NET ASSETS:* Expenses, including expense reductions .00%(d) .00%(d) Expenses, excluding expense reductions .24%(d) .00%(d) Net investment income .24%(d) .00%(d)(f) SIX MONTHS ENDED 10/20/2004(a) 4/30/2005 TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 ----------------------------------------------------------------------------------- Net assets, end of period (000) $ 430 $ 398 Portfolio turnover rate 2.63% 2.59%
* Does not include expenses of the Underlying Funds in which the Fund invests. (a) Commencement of offering of class shares. (b) Calculated using average shares outstanding during the period. (c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions. (d) Not annualized. (e) Amount is less than $.01. (f) Amount is less than .01%. SEE NOTES TO FINANCIAL STATEMENTS. 50 FINANCIAL HIGHLIGHTS INTERNATIONAL CORE EQUITY FUND
SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO (UNAUDITED) 10/31/2004 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) Net asset value, beginning of period $ 10.42 $ 10.00 =============== =============== Unrealized appreciation on investments .15 --------------- NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15 =============== Investment operations: Net investment income(b) .05 .04 Net realized and unrealized gain .94 .23 --------------- --------------- Total from investment operations .99 .27 --------------- --------------- Distributions to shareholders from: Net investment income (.01) - --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.40 $ 10.42 =============== =============== Total Return(c) 1.50%(d)(e) Total Return(c) 9.49%(d) 2.66%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed .78%(d) 1.50%(d) Expenses, excluding expense reductions and expenses assumed .78%(d) 2.13%(d) Net investment income .48%(d) .40%(d) SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 ----------------------------------------------------------------------------------- Net assets, end of period (000) $ 120,988 $ 58,484 Portfolio turnover rate 51.29% 142.16%
SEE NOTES TO FINANCIAL STATEMENTS. 51 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL CORE EQUITY FUND
SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO (UNAUDITED) 10/31/2004 ----------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.36 $ 10.00 =============== =============== Unrealized appreciation on investments .15 --------------- NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15 =============== Investment operations: Net investment income (loss)(b) .03 (.01) Net realized and unrealized gain .92 .22 --------------- --------------- Total from investment operations .95 .21 --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.31 $ 10.36 =============== =============== Total Return(c) 1.50%(d)(e) Total Return(c) 9.17%(d) 2.07%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed 1.09%(d) 2.04%(d) Expenses, excluding expense reductions and expenses assumed 1.09%(d) 2.67%(d) Net investment income (loss) .28%(d) (.14)%(d) SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 ----------------------------------------------------------------------------------- Net assets, end of period (000) $ 9,236 $ 2,937 Portfolio turnover rate 51.29% 142.16%
SEE NOTES TO FINANCIAL STATEMENTS. 52 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL CORE EQUITY FUND
SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO (UNAUDITED) 10/31/2004 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.37 $ 10.00 =============== =============== Unrealized appreciation on investments .15 --------------- NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15 =============== Investment operations: Net investment income (loss)(b) .02 (.01) Net realized and unrealized gain .93 .23 --------------- --------------- Total from investment operations .95 .22 --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.32 $ 10.37 =============== =============== Total Return(c) 1.50%(d)(e) Total Return(c) 9.16%(d) 2.17%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed 1.09%(d) 2.04%(d) Expenses, excluding expense reductions ane expenses assumed 1.09%(d) 2.67%(d) Net investment income (loss) .22%(d) (.14)%(d) SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 ------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 23,069 $ 9,291 Portfolio turnover rate 51.29% 142.16%
SEE NOTES TO FINANCIAL STATEMENTS. 53 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL CORE EQUITY FUND
SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO (UNAUDITED) 10/31/2004 PER SHARE OPERATING PERFORMANCE (CLASS P SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.41 $ 10.00 =============== =============== Unrealized appreciation on investments .15 --------------- NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15 =============== Investment operations: Net investment income(b) .03 .04 Net realized and unrealized gain .96 .22 --------------- --------------- Total from investment operations .99 .26 --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.40 $ 10.41 =============== =============== Total Return(c) 1.50%(d)(e) Total Return(c) 9.51%(d) 2.56%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed .81%(d) 1.55%(d)+ Expenses, excluding expense reductions and expenses assumed .81%(d) 2.18%(d)+ Net investment income .28%(d) .35%(d)+ SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 ------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 12 $ 11 Portfolio turnover rate 51.29% 142.16%
SEE NOTES TO FINANCIAL STATEMENTS. 54 FINANCIAL HIGHLIGHTS (CONCLUDED) INTERNATIONAL CORE EQUITY FUND
SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO (UNAUDITED) 10/31/2004 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 10.45 $ 10.00 =============== =============== Unrealized appreciation on investments .15 --------------- NET ASSET VALUE ON SEC EFFECTIVE DATE $ 10.15 =============== Investment operations: Net investment income(b) .06 .08 Net realized and unrealized gain .96 .22 --------------- --------------- Total from investment operations 1.02 .30 --------------- --------------- Distributions to shareholders from: Net investment income (.03) - --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.44 $ 10.45 =============== =============== Total Return(c) 1.50%(d)(e) Total Return(c) 9.73%(d) 2.96%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed .60%(d) 1.16%(d) Expenses, excluding expense reductions and expenses assumed .60%(d) 1.79%(d) Net investment income .54%(d) .74%(d) SIX MONTHS ENDED 12/15/2003(a) 4/30/2005 TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 ------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 4,656 $ 3,091 Portfolio turnover rate 51.29% 142.16%
+ The ratios have been determined on a Fund basis. (a) Commencement of investment operations is December 15, 2003; SEC effective date is December 31, 2003; date shares first became available to the public is January 2, 2004. (b) Calculated using average shares outstanding during the period. (c) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions. (d) Not annualized. (e) Total return for the period 12/15/2003 through 12/31/2003. (f) Total return for the period 12/31/2003 through 10/31/2004. SEE NOTES TO FINANCIAL STATEMENTS. 55 FINANCIAL HIGHLIGHTS INTERNATIONAL OPPORTUNITIES FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 9.61 $ 8.41 $ 6.29 $ 7.78 $ 14.48 $ 13.90 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) (.02) .02 .08 .03 (.06) (.08) Net realized and unrealized gain (loss) .90 1.33 2.09 (1.52) (6.56) 1.54 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .88 1.35 2.17 (1.49) (6.62) 1.46 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income - (.15) (.05) - - (.06) Net realized gain - - - - (.08) (.82) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions - (.15) (.05) - (.08) (.88) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.49 $ 9.61 $ 8.41 $ 6.29 $ 7.78 $ 14.48 ============= ============= ========== ========== ========== ========== Total Return(b) 9.16%(d) 16.31% 35.07% (19.16)% (45.92)% 10.97% RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions .85%(d) 1.83% 2.11% 1.89% 2.07% 1.80% Expenses, excluding expense reductions .85%(d) 1.83% 2.11% 1.89% 2.08% 1.80% Net investment income (loss) (.20)%(d) .26% 1.11% .50% (.55)% (.53)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 76,188 $ 67,314 $ 55,230 $ 44,975 $ 71,591 $ 135,701 Portfolio turnover rate 37.98% 75.56% 72.36% 82.38% 65.26% 35.14%
SEE NOTES TO FINANCIAL STATEMENTS. 56 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 9.37 $ 8.20 $ 6.13 $ 7.65 $ 14.31 $ 13.75 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) (.05) (.04) .03 (.02) (.11) (.17) Net realized and unrealized gain (loss) .88 1.30 2.05 (1.50) (6.47) 1.55 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .83 1.26 2.08 (1.52) (6.58) 1.38 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income - (.09) (.01) - - -(c) Net realized gain - - - - (.08) (.82) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions - (.09) (.01) - (.08) (.82) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.20 $ 9.37 $ 8.20 $ 6.13 $ 7.65 $ 14.31 ============= ============= ========== ========== ========== ========== Total Return(b) 8.86%(d) 15.61% 33.89% (19.87)% (46.19)% 10.42% RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions 1.18%(d) 2.48% 2.73% 2.69% 2.59% 2.35% Expenses, excluding expense reductions 1.18%(d) 2.48% 2.73% 2.69% 2.60% 2.36% Net investment income (loss) (.53)%(d) (.39)% .49% (.30)% (1.07)% (1.09)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 24,389 $ 21,962 $ 17,978 $ 13,174 $ 17,743 $ 33,124 Portfolio turnover rate 37.98% 75.56% 72.36% 82.38% 65.26% 35.14%
SEE NOTES TO FINANCIAL STATEMENTS. 57 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 9.32 $ 8.19 $ 6.12 $ 7.61 $ 14.30 $ 13.75 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) (.05) (.04) .07 -(e) (.13) (.17) Net realized and unrealized gain (loss) .87 1.30 2.04 (1.49) (6.48) 1.54 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .82 1.26 2.11 (1.49) (6.61) 1.37 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income - (.13) (.04) - - -(e) Net realized gain - - - - (.08) (.82) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions - (.13) (.04) - (.08) (.82) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.14 $ 9.32 $ 8.19 $ 6.12 $ 7.61 $ 14.30 ============= ============= ========== ========== ========== ========== Total Return(b) 8.80%(d) 15.61% 34.67% (19.58)% (46.43)% 10.35% RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions 1.18%(d) 2.48% 2.73% 2.36% 2.83% 2.35% Expenses, excluding expense reductions 1.18%(d) 2.48% 2.73% 2.36% 2.84% 2.36% Net investment income (loss) (.52)%(d) (.39)% .99% .03% (1.32)% (1.10)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 --------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 14,937 $ 12,766 $ 10,323 $ 7,823 $ 11,399 $ 25,546 Portfolio turnover rate 37.98% 75.56% 72.36% 82.38% 65.26% 35.14%
SEE NOTES TO FINANCIAL STATEMENTS. 58 FINANCIAL HIGHLIGHTS (CONTINUED) INTERNATIONAL OPPORTUNITIES FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS P SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 9.71 $ 8.47 $ 6.31 $ 7.82 $ 14.51 $ 13.91 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) (.01) .01 .10 .03 (.06) (.08) Net realized and unrealized gain (loss) .92 1.35 2.10 (1.54) (6.55) 1.55 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .91 1.36 2.20 (1.51) (6.61) 1.47 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income - (.12) (.04) - - (.05) Net realized gain - - - - (.08) (.82) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions - (.12) (.04) - (.08) (.87) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.62 $ 9.71 $ 8.47 $ 6.31 $ 7.82 $ 14.51 ============= ============= ========== ========== ========== ========== Total Return(b) 9.37%(d) 16.37% 35.17% (19.31)% (45.75)% 11.03% RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions .74%(d) 1.93%+ 2.18%+ 2.14% 2.04% 1.80% Expenses, excluding expense reductions .74%(d) 1.93%+ 2.18%+ 2.14% 2.05% 1.80% Net investment income (loss) (.08)%(d) .16%+ 1.00%+ .25% (.55)% (.51)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 1 $ 1 $ 1 $ 1 $ 1 $ 1 Portfolio turnover rate 37.98% 75.56% 72.36% 82.38% 65.26% 35.14%
SEE NOTES TO FINANCIAL STATEMENTS. 59 FINANCIAL HIGHLIGHTS (CONCLUDED) INTERNATIONAL OPPORTUNITIES FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 9.77 $ 8.53 $ 6.39 $ 7.90 $ 14.61 $ 14.00 ============= ============= ========== ========== ========== ========== Investment operations: Net investment income (loss)(a) -(c) .06 .10 .06 (.01) (.01) Net realized and unrealized gain (loss) .92 1.34 2.12 (1.57) (6.62) 1.54 ------------- ------------- ---------- ---------- ---------- ---------- Total from investment operations .92 1.40 2.22 (1.51) (6.63) 1.53 ------------- ------------- ---------- ---------- ---------- ---------- Distributions to shareholders from: Net investment income (.01) (.16) (.08) - - (.10) Net realized gain - - - - (.08) (.82) ------------- ------------- ---------- ---------- ---------- ---------- Total distributions (.01) (.16) (.08) - (.08) (.92) ------------- ------------- ---------- ---------- ---------- ---------- NET ASSET VALUE, END OF PERIOD $ 10.68 $ 9.77 $ 8.53 $ 6.39 $ 7.90 $ 14.61 ============= ============= ========== ========== ========== ========== Total Return(b) 9.39%(d) 16.73% 35.22% (19.11)% (45.58)% 11.45% RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions .68%(d) 1.48% 1.74% 1.69% 1.59% 1.35% Expenses, excluding expense reductions .68%(d) 1.48% 1.74% 1.69% 1.60% 1.37% Net investment income (loss) (.03)%(d) .61% 1.47% .70% (.06)% (.09)% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 56,515 $ 57,143 $ 53,237 $ 45,748 $ 60,227 $ 79,833 Portfolio turnover rate 37.98% 75.56% 72.36% 82.38% 65.26% 35.14%
+ The ratios have been determined on a Fund basis. (a) Calculated using average shares outstanding during the period. (b) Total return does not consider the effects of sales loads and assumes the reinvestment of all distributions. (c) Amount is less than $.01. (d) Not annualized. SEE NOTES TO FINANCIAL STATEMENTS. 60 FINANCIAL HIGHLIGHTS LARGE-CAP VALUE FUND
SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO (UNAUDITED) 10/31/2004 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 10.73 $ 10.00 --------------- --------------- --------------- Unrealized depreciation on investments (.10) --------------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90 =============== Investment operations: Net investment income(b) .08 .09 .03 Net realized and unrealized gain .38 1.05 .80 --------------- --------------- --------------- Total from investment operations .46 1.14 .83 --------------- --------------- --------------- Distributions to shareholders from: Net investment income (.11) (.07) - Net realized gain (.16) - - --------------- --------------- --------------- Total distributions (.27) (.07) - --------------- --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.99 $ 11.80 $ 10.73 =============== =============== =============== Total Return(c) (1.00)%(d)(e) Total Return(c) 3.86%(d) 10.74% 8.38%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed .47%(d) .95% .33%(d)+ Expenses, excluding expense reductions and expenses assumed .60%(d) 2.59% 7.12%(d)+ Net investment income .66%(d) .75% .27%(d)+ SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 10/31/2003 ----------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 11,623 $ 10,102 $ 2,271 Portfolio turnover rate 20.32% 30.53% 8.87%
SEE NOTES TO FINANCIAL STATEMENTS. 61 FINANCIAL HIGHLIGHTS (CONTINUED) LARGE-CAP VALUE FUND
SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO (UNAUDITED) 10/31/2004 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS B SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.67 $ 10.68 $ 10.00 --------------- --------------- --------------- Unrealized depreciation on investments (.11) --------------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.89 =============== Investment operations: Net investment income(b) .04 .01 -(g) Net realized and unrealized gain .37 1.05 .79 --------------- --------------- --------------- Total from investment operations .41 1.06 .79 --------------- --------------- --------------- Distributions to shareholders from: Net investment income (.07) (.07) - Net realized gain (.16) - - --------------- --------------- --------------- Total distributions (.23) (.07) - --------------- --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 11.85 $ 11.67 $ 10.68 =============== =============== =============== Total Return(c) (1.10)%(d)(e) Total Return(c) 3.52%(d) 10.02% 7.99%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed .79%(d) 1.60% .56%(d)+ Expenses, excluding expense reductions and expenses assumed .91%(d) 3.24% 7.35%(d)+ Net investment income .32%(d) .10% .04%(d)+ SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 10/31/2003 ---------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 1,709 $ 1,445 $ 111 Portfolio turnover rate 20.32% 30.53% 8.87%
SEE NOTES TO FINANCIAL STATEMENTS. 62 FINANCIAL HIGHLIGHTS (CONTINUED) LARGE-CAP VALUE FUND
SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO (UNAUDITED) 10/31/2004 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS C SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.69 $ 10.69 $ 10.00 =============== =============== ============== Unrealized depreciation on investments (.11) -------------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.89 ============== Investment operations: Net investment income(b) .04 .01 -(g) Net realized and unrealized gain .37 1.06 .80 --------------- --------------- -------------- Total from investment operations .41 1.07 .80 --------------- --------------- -------------- Distributions to shareholders from: Net investment income (.09) (.07) - Net realized gain (.16) - - --------------- --------------- -------------- Total distributions (.25) (.07) - --------------- --------------- -------------- NET ASSET VALUE, END OF PERIOD $ 11.85 $ 11.69 $ 10.69 =============== =============== ============== Total Return(c) (1.10)%(d)(e) Total Return(c) 3.45%(d) 10.07% 8.09%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed .79%(d) 1.60% .56%(d)+ Expenses, excluding expense reductions and expenses assumed .91%(d) 3.24% 7.35%(d)+ Net investment income .31%(d) .10% .04%(d)+ SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 10/31/2003 ---------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 2,504 $ 1,490 $ 148 Portfolio turnover rate 20.32% 30.53% 8.87%
SEE NOTES TO FINANCIAL STATEMENTS. 63 FINANCIAL HIGHLIGHTS (CONTINUED) LARGE-CAP VALUE FUND
SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO (UNAUDITED) 10/31/2004 10/31/2003 ---------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE (CLASS P SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 10.73 $ 10.00 =============== =============== ============== Unrealized depreciation on investments (.10) -------------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90 ============== Investment operations: Net investment income(b) .07 .07 .02 Net realized and unrealized gain .38 1.07 .81 --------------- --------------- -------------- Total from investment operations .45 1.14 .83 --------------- --------------- -------------- Distributions to shareholders from: Net investment income (.09) (.07) - Net realized gain (.16) - - --------------- --------------- -------------- Total distributions (.25) (.07) - --------------- --------------- -------------- NET ASSET VALUE, END OF PERIOD $ 12.00 $ 11.80 $ 10.73 =============== =============== ============== Total Return(c) (1.00)%(d)(e) Total Return(c) 3.79%(d) 10.65% 8.38%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed .52%(d) 1.05% .37%(d)+ Expenses, excluding expense reductions and expenses assumed .61%(d) 2.69% 7.16%(d)+ Net investment income .61%(d) .65% .23%(d)+ SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 10/31/2003 ---------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 12 $ 12 $ 11 Portfolio turnover rate 20.32% 30.53% 8.87%
SEE NOTES TO FINANCIAL STATEMENTS. 64 FINANCIAL HIGHLIGHTS (CONCLUDED) LARGE-CAP VALUE FUND
SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO (UNAUDITED) 10/31/2004 10/31/2003 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.85 $ 10.75 $ 10.00 =============== =============== =============== Unrealized depreciation on investments (.10) --------------- NET ASSET VALUE ON SEC EFFECTIVE DATE, JUNE 30, 2003 $ 9.90 =============== Investment operations: Net investment income(b) .09 .13 .04 Net realized and unrealized gain .39 1.05 .81 --------------- --------------- --------------- Total from investment operations .48 1.18 .85 --------------- --------------- --------------- Distributions to shareholders from: Net investment income (.14) (.08) - Net realized gain (.16) - - --------------- --------------- --------------- Total distributions (.30) (.08) - --------------- --------------- --------------- NET ASSET VALUE, END OF PERIOD $ 12.03 $ 11.85 $ 10.75 =============== =============== =============== Total Return(c) (1.00)%(d)(e) Total Return(c) 4.03%(d) 11.09% 8.59%(d)(f) RATIOS TO AVERAGE NET ASSETS: Expenses, including expense reductions and expenses assumed .29%(d) .60% .21%(d)+ Expenses, excluding expense reductions and expenses assumed .40%(d) 2.24% 7.00%(d)+ Net investment income .69%(d) 1.10% .39%(d)+ SIX MONTHS ENDED YEAR 6/23/2003(a) 4/30/2005 ENDED TO SUPPLEMENTAL DATA: (UNAUDITED) 10/31/2004 10/31/2003 ---------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 17,067 $ 2,043 $ 11 Portfolio turnover rate 20.32% 30.53% 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. 65 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Lord Abbett Securities Trust (the "Trust") is registered under the Investment Company Act of 1940 (the "Act") as a diversified open-end management investment company organized as a Delaware business trust on February 26, 1993. The Trust currently consists of seven funds. This report covers the following five funds and their respective classes (separately, a "Fund" and collectively, the "Funds"): Lord Abbett All Value Series ("All Value Fund"), Classes A, B, C, P and Y shares; Alpha Series ("Alpha Fund"), Classes A, B, C and Y shares; Lord Abbett International Core Equity Fund ("International Core Equity Fund"), Classes A, B, C, P and Y shares; Lord Abbett International Opportunities Fund ("International Opportunities Fund"), Classes A, B, C, P and Y shares; and Lord Abbett Large-Cap Value Fund ("Large-Cap Value Fund"), Classes A, B, C, P, and Y shares. All Value Fund's investment objective is long-term growth of capital and income without excessive fluctuations in market value. Alpha Fund's, International Core Equity 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 & Co. LLC ("Lord Abbett"). Large-Cap Value Fund's investment objective is to seek a high level of total return. Each class of shares has different expenses and dividends. A front-end sales charge is normally added to the Net Asset Value ("NAV") for Class A shares. There is no front-end sales charge in the case of the Class B and C shares, although there may be a contingent deferred sales charge ("CDSC") as follows: certain redemptions of Class A shares made within 24 months (12 months if shares were purchased on or after November 1, 2004) following certain purchases made without a sales charge; Class B shares redeemed before the sixth anniversary of purchase; and Class C shares redeemed before the first anniversary of purchase. Class B shares will convert to Class A shares on the eighth anniversary of the original purchase of Class B shares. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 2. SIGNIFICANT ACCOUNTING POLICIES (a) INVESTMENT VALUATION-Securities traded on any recognized U.S. or non-U.S. exchange or on NASDAQ, Inc. are valued at the last sale price or official closing price on the exchange or system on which they are principally traded. Events occuring after the close of trading on non-U.S. exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the New York Stock Exchange. The Fund may rely on an independent fair valuation service in adjusting the valuations of foreign securities. Unlisted equity securities are valued at last quoted sale price or, if no sale price is available, at the mean between the most recently quoted bid and asked prices. Fixed income securities are valued at the mean between the bid and asked price on the basis of prices supplied by independent pricing services, which reflect broker/dealer supplied valuations and electronic data processing techniques. Exchange-traded options and futures contracts are valued at the last sale price in the market where they are principally 66 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) traded. If no sale has occurred, the mean between the most recently quoted bid and asked price is used. Securities for which market quotations are not readily available are valued at fair value as determined by management and approved in good faith by the Board of Trustees. Short-term securities with 60 days or less remaining to maturity are valued using the amortized cost method, which approximates current market value. (b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date that the securities are purchased or sold (trade date). Realized gains and losses on sales of portfolio securities are calculated using the identified-cost method. Realized and unrealized gains (losses) are allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. (c) INVESTMENT INCOME-Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Discounts are accreted and premiums are amortized using the effective interest method. Investment income is allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. (d) FEDERAL TAXES-It is the policy of each Fund to meet the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all taxable income and capital gains to its shareholders. Therefore, no Federal income tax provision is required. (e) EXPENSES-Expenses incurred by the Trust that do not specifically relate to an individual fund are generally allocated to the Funds within the Trust on a pro rata basis. Expenses, excluding class specific expenses, are generally allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. Classes A, B, C and P shares bear all expenses and fees relating to their respective 12b-1 Distribution Plans. (f) FOREIGN TRANSACTIONS-The books and records of International Core Equity Fund and International Opportunities Fund are maintained in U.S. dollars and transactions denominated in foreign currencies are recorded in each Fund's records at the rate prevailing when earned or recorded. Asset and liability accounts that are denominated in foreign currencies are adjusted to reflect current exchange rates. The resultant exchange gains and losses are included in Net Realized Gain (Loss) on Investments and Foreign Currency Related Transactions on each Fund's Statement of Operations. Each Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in market prices of the securities. (g) OFFERING COSTS-Lord Abbett incurred initial offering costs on behalf of Interntional Core Equity Fund which have been reimbursed by the Fund in the full amount thereof. Such expenses were deferred and are 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 Core Equity Fund and International Opportunities Fund may enter into forward foreign currency exchange contracts in order to reduce their exposure to changes in foreign currency exchange rates on their foreign portfolio holdings and to lock in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in foreign currencies. A forward foreign currency exchange contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated rate. The contracts are valued daily at forward exchange rates and any unrealized gain (loss) is included in Net Change in Unrealized Appreciation (Depreciation) on 67 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) Investments and Translation of Assets and Liabilities Denominated in Foreign Currencies on each Fund's Statement of Operations. The gain (loss) arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing of such contracts is included in Net Realized Gain (Loss) on Investments and Foreign Currency Related Transactions on each Fund's Statement of Operations. As of April 30, 2005, there were no open 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. Government securities in an amount at least equal to 102% of the market value of securities loaned (105% in the case of foreign securities loaned) as determined at the close of business on the preceding business day. 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. At their October 21, 2004 meeting, the Board of Trustees voted to discontinue, as soon as practicable, the Funds' securities lending program. (j) REPURCHASE AGREEMENTS-Each Fund may enter into repurchase agreements with respect to securities. A repurchase agreement is a transaction in which the Fund acquires a security and simultaneously commits to resell that security to the seller (a bank or securities dealer) at an agreed-upon price on an agreed-upon date. Each Fund requires at all times that the repurchase agreement be collateralized by cash, or by securities of the U.S. Government, its agencies, its instrumentalities, or U.S. Government sponsored enterprises having a value equal to, or in excess of, the value of the repurchase agreement (including accrued interest). If the seller of the agreement defaults on its obligation to repurchase the underlying securities at a time when the value of these securities has declined, the Fund may incur a loss upon disposition of the securities. (k) WHEN-ISSUED OR FORWARD TRANSACTIONS-Each Fund may purchase portfolio securities on a when-issued or forward basis. When-issued or forward transactions involve a commitment by the Fund to purchase securities, with payment and delivery ("settlement") to take place in the future, in order to secure what is considered to be an advantageous price or yield at the time of entering into the transaction. During the period between purchase and settlement, the value of the securities will fluctuate and assets consisting of cash and/or marketable securities (normally short-term U.S. Government or U.S. Government sponsored enterprises securities) marked to market daily in an amount sufficient to make payment at settlement will be segregated at a Fund's custodian in order to pay for the commitment. At the time the Fund makes the commitment to purchase a security on a when-issued basis, it will record the transaction and reflect the liability for the purchase and the value of the security in determining its net asset value. Each Fund, generally, has the ability to close out a purchase obligation on or before the settlement date rather than take delivery of the security. Under no circumstances will settlement for such securities take place more than 120 days after the purchase date. (l) REDEMPTION FEES-International Core Equity Fund and International Opportunities Fund impose a redemption fee of 2.00% of the NAV of the shares being redeemed or exchanged if the redemption or exchange occurs within ten business days after such shares were 68 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) acquired. This does not include shares acquired through the reinvestment of dividends or other distributions or certain automatic or systematic investment, exchange or withdrawal plans. The fees are retained by each Fund and are included as Paid-in Capital on the Statement of Assets and Liabilities and are included in the Net Proceeds from Sale of Shares on each Fund's Statement of Changes in Net Assets. During the six months ended April 30, 2005, redemption fees were received as follows:
FUND REDEMPTION FEES ------------------------------------------------------------ International Core Equity Fund $ 1,384 International Opportunities Fund 199
3. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES The Trust has a management agreement with Lord Abbett pursuant to which Lord Abbett supplies the Trust with investment management services and executive and other personnel, pays the remuneration of officers, provides office space and pays for ordinary and necessary office and clerical expenses relating to research and statistical work and supervision of the Trust's investment portfolios. The management fees are based on average daily net assets at the following annual rates:
MANAGEMENT CONTRACTUAL FEES WAIVER ------------------------------------------------------------------------------------ All Value Fund .57%(1) - Alpha Fund .10% .10%(2) International Core Equity Fund .75%(3) - International Opportunities Fund .75% - Large-Cap Value Fund .40%(4) -
(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) For the fiscal year ending October 31, 2005, Lord Abbett has contractually agreed to waive its management fee. (3) The management fee for International Core Equity Fund is based on average daily net assets at the following annual rates: First $1 billion .75% Next $1 billion .70% Over $2 billion .65%
(4) 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%
For the fiscal year ending October 31, 2005, Lord Abbett has contractually agreed to reimburse expenses for International Core Equity Fund to the extent necessary to maintain net operating expenses for Class A at 1.75%, for Classes B and C at 2.40%, Class P at 1.85%, and Class Y at 1.40% of average daily net assets. For the fiscal year ending October 31, 2005, Lord Abbett has contractually agreed to reimburse expenses for Large-Cap Value Fund to the extent necessary to maintain net operating expenses for Class A at .95%, for Classes B and C at 1.60%, Class P at 1.05%, and Class Y at .60% of average daily net assets. 69 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) Lord Abbett provides certain administrative services to the Funds pursuant to an Administrative Services Agreement at an annual rate of .04% of each Fund's average daily net assets. This fee is not assessed to the Alpha Fund. 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, and distribution and service fees) of Alpha Fund in proportion to the average daily value of total Underlying Fund shares owned by Alpha Fund. Each Underlying Fund's expense is reflected in Subsidy on the respective Statement of Operations. 12b-1 DISTRIBUTION PLANS Each Fund has adopted a distribution plan with respect to one or more classes of shares pursuant to Rule 12b-1 of the Act, which provides for the payment of ongoing distribution and service fees to Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The fees are accrued daily at annual rates based upon average daily net assets as follows:
FEES CLASS A CLASS B CLASS C CLASS P(2) ----------------------------------------------------------------------------------- Service .25% .25% .25% .20% Distribution .10%(1) .75% .75% .25%
(1) Until October 1, 2004, each Fund paid a one-time distribution fee of up to 1.00% on certain qualifying purchases of Class A shares. Effective October 1, 2004, the Distributor commenced payment of such one-time distribution fee. The unamortized balance of prepaid distribution fees for each Fund, as of April 30, 2005, was as follows:
UNAMORTIZED BALANCE --------------------------------------------------------------- All Value $ 121,174 Alpha 4,622 International Core Equity 19,607 International Opportunities 205 Large-Cap Value 821
These amounts will continue to be amortized by each Fund, generally over a two-year period. The amount of CDSC collected by each Fund during the six months ended April 30, 2005, was as follows:
CDSC COLLECTED --------------------------------------------------------------- All Value $ 15,026 Alpha 53 International Opportunities 1,263
(2) All Value Fund, International Core Equity Fund, International Opportunities Fund, and Large-Cap Value Fund only. Class Y does not have a distribution plan. COMMISSIONS The Distributor received the following commissions on sales of Class A shares of the Funds, after concessions were paid to authorized dealers, for the six months ended April 30, 2005:
DISTRIBUTOR DEALERS' COMMISSIONS CONCESSIONS -------------------------------------------------------------------------------- All Value Fund $ 1,627,169 $ 8,900,242 Alpha Fund 32,562 174,617 International Core Equity Fund 250,977 1,347,011 International Opportunities Fund 34,006 182,614 Large-Cap Value Fund 18,502 101,001
One Trustee and certain of the Trust's officers have an interest in Lord Abbett. 70 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) 4. DISTRIBUTIONS AND CAPITAL LOSS CARRYFORWARD Dividends from net investment income, if any, are declared and paid semi-annually for All Value Fund, and annually for Alpha Fund, International Core Equity Fund, International Opportunities Fund, and Large-Cap Value Fund. Taxable net realized gains from investment transactions, reduced by capital loss carryforwards, if any, are declared and distributed to shareholders at least annually. The capital loss carryforward amount, if any, is available to offset future net capital gains. Dividends and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with Federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the components of net assets based on their federal tax basis treatment; temporary differences do not require reclassification. Dividends and distributions which exceed earnings and profit for tax purposes are reported as a tax return of capital. The tax character of distributions paid during the six months ended April 30, 2005 and the fiscal year ended October 31, 2004 are as follows:
ALL VALUE FUND ALPHA FUND ---------------------------------------------------------------------------------------- SIX MONTHS ENDED SIX MONTHS ENDED 04/30/2005 YEAR ENDED 04/30/2005 YEAR ENDED (UNAUDITED) 10/31/2004 (UNAUDITED) 10/31/2004 ---------------------------------------------------------------------------------------- Disitributions paid from: Ordinary income $ 8,710,700 $ 565,404 $ 458,488 $ - Net long-term capital gains 19,588,545 8,512,788 - - ---------------------------------------------------------------------------------------- Total distributions paid $ 28,299,245 $ 9,078,192 $ 458,488 $ - ======================================================================================== INTERNATIONAL INTERNATIONAL CORE EQUITY FUND OPPORTUNITIES FUND ---------------------------------------------------------------------------------------- SIX MONTHS ENDED SIX MONTHS ENDED 04/30/2005 YEAR ENDED 04/30/2005 YEAR ENDED (UNAUDITED) 10/31/2004 (UNAUDITED) 10/31/2004 ---------------------------------------------------------------------------------------- Disitributions paid from: Ordinary income $ 62,693 $ - $ 40,279 $ 2,324,486 ---------------------------------------------------------------------------------------- Total distributions paid $ 62,693 $ - $ 40,279 $ 2,324,486 ======================================================================================== LARGE-CAP VALUE FUND ------------------------------------------------------ SIX MONTHS ENDED 04/30/2005 YEAR ENDED (UNAUDITED) 10/31/2004 ------------------------------------------------------ Disitributions paid from: Ordinary income $ 243,219 $ 21,490 Net long-term capital gains 98,180 - ------------------------------------------------------ Total distributions paid $ 341,399 $ 21,490 ======================================================
71 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) As of October 31, 2004, the capital loss carryforwards, along with the related expiration dates, are as follows:
2009 2010 2011 2012 TOTAL ------------------------------------------------------------------------------------------------------------------- Alpha Fund $ - $ - $ 9,866,764 $ - $ 9,866,764 International Core Equity Fund - - - 955,918 955,918 International Opportunities Fund 67,925,466 37,966,698 7,911,942 - 113,804,106
As of April 30, 2005, the aggregate unrealized security gains and losses based on cost for U.S. Federal income tax purposes are as follows:
INTERNATIONAL ALL VALUE FUND ALPHA FUND CORE EQUITY FUND ------------------------------------------------------------------------------------ Tax cost $ 2,060,150,493 $ 130,203,941 $ 149,657,300 ------------------------------------------------------------------------------------ Gross unrealized gain 246,528,334 13,997,634 5,749,588 Gross unrealized loss (55,713,789) (7,102,020) (2,764,276) ------------------------------------------------------------------------------------ Net unrealized security gain $ 190,814,545 $ 6,895,614 $ 2,985,312 ==================================================================================== INTERNATIONAL OPPORTUNITIES FUND LARGE-CAP VALUE FUND ---------------------------------------------------------------------------------- Tax cost $ 133,933,788 $ 33,076,996 ---------------------------------------------------------------------------------- Gross unrealized gain 37,844,294 1,099,022 Gross unrealized loss (3,419,376) (1,209,890) ---------------------------------------------------------------------------------- Net unrealized security gain (loss) $ 34,424,918 $ (110,868) ==================================================================================
The difference between book-basis and tax-basis unrealized gains (losses) is attributable primarily to wash sales and other temporary tax adjustments. 5. PORTFOLIO SECURITIES TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the six months ended April 30, 2005 were as follows:
PURCHASES SALES ------------------------------------------------------------------ All Value Fund $ 787,725,909 $ 417,172,743 Alpha Fund 3,767,246 11,500,000 International Core Equity Fund 127,025,272 55,365,574 International Opportunities Fund 66,725,012 62,968,851 Large-Cap Value Fund 16,173,071 4,702,740
There were no purchases or sales of U.S. Government securities for the six months ended April 30, 2005. In connection with the securities lending program, State Street Bank & Trust Company ("SSB") received fees of $9,676 for the six months ended April 30, 2005, which are netted against Securities Lending Income on the Statement of Operations. As of April 30, 2005, there were no securities on loan. 72 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) 6. TRUSTEES' REMUNERATION The Trust's officers and the one trustee who are associated with Lord Abbett do not receive any compensation from the Trust for serving in such capacities. Outside Trustees' fees are allocated among all Lord Abbett-sponsored funds based on the net assets of each fund. There is an equity based plan available to all outside Trustees under which outside Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of Trustees' fees. The deferred amounts are treated as though equivalent dollar amounts have been invested proportionately in the Trust. Such amounts and earnings accrued thereon are included in Trustees' Fees on the Statement of Operations and in Trustees' Fees Payable on the Statement of Assets and Liabilities and are not deductible for U.S. Federal income tax purposes until such amounts are paid. 7. EXPENSE REDUCTIONS The Trust has entered into arrangements with its transfer agent and custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of each Fund's expenses. 8. LINE OF CREDIT All Value Fund, International Core Equity Fund, International Opportunities Fund, 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. For the period November 1, 2004 through December 9, 2004, the fee for this Facility was at an annual rate of .09%. Effective December 10, 2004, the Facility was renewed at an annual rate of .08%. At April 30, 2005, there were no loans outstanding pursuant to this Facility nor was the Facility utilized at any time during the six months ended April 30, 2005. 9. CUSTODIAN AND ACCOUNTING AGENT SSB is the Trust's custodian and accounting agent. SSB performs custodial, accounting and recordkeeping functions relating to portfolio transactions and calculating each Fund's NAV. 10. INVESTMENT RISKS Each Fund is subject to the general risks and considerations associated with equity investing. The value of an investment will fluctuate in response to movements in the stock market in general, and to the changing prospects of individual companies in which the Funds invest. Large company value stocks, in which All Value Fund and Large-Cap Value Fund invest, may perform differently than the market as a whole and other types of stocks, such as small company stocks and growth stocks. This is because different types of stocks tend to shift in and out of favor depending on market and economic conditions. The market may fail to recognize the intrinsic value of a particular value stock for a long time. In addition, if a Fund's assessment of a company's 73 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) value or prospects for exceeding earnings expectations or market conditions is wrong, the Fund could suffer losses or produce poor performance relative to other funds, even in a rising market. In addition, although All Value Fund invests a significant portion of its assets in large-cap company stocks, it also invests in mid-cap and small-cap company stocks which may be more volatile and less liquid than large-cap stocks. International Core Equity Fund is subject to the risks of investing in foreign securities and in the securities of large foreign companies. Foreign securities may pose greater risks than domestic securities, including greater price fluctuations and higher transaction costs. Foreign investments also may be affected by changes in currency rates or currency controls. International Opportunities Fund is also subject to the risks of investing in foreign securities and in the securities of small-cap companies. Foreign securities may pose greater risks than domestic securities, including greater price fluctuations and higher transaction costs. Foreign investments also may be affected by changes in currency rates or currency controls. Investing in small-cap companies generally involves greater risks than investing in the stocks of large-cap companies, including more volatility and less liquidity. 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 each Fund's performance. 74 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) 11. SUMMARY OF CAPITAL TRANSACTIONS Transactions in shares of beneficial interest are as follows: ALL VALUE FUND
SIX MONTHS ENDED APRIL 30, 2005 YEAR ENDED (UNAUDITED) OCTOBER 31, 2004 ------------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Shares sold 30,383,842 $ 356,766,439 77,238,255 $ 820,475,828 Reinvestment of distributions 1,706,888 19,799,553 551,426 5,492,414 Shares reacquired (8,976,367) (105,002,009) (9,831,040) (105,162,568) ------------------------------------------------------------------------------------------------------------------- Increase 23,114,363 $ 271,563,983 67,958,641 $ 720,805,674 ------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Shares sold 3,684,168 $ 42,027,557 8,518,633 $ 88,599,964 Reinvestment of distributions 161,446 1,824,336 89,021 865,287 Shares reacquired (1,001,385) (11,422,097) (1,823,012) (18,892,791) ------------------------------------------------------------------------------------------------------------------- Increase 2,844,229 $ 32,429,796 6,784,642 $ 70,572,460 ------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Shares sold 8,749,934 $ 99,602,478 18,336,210 $ 189,969,707 Reinvestment of distributions 279,800 3,150,551 150,641 1,459,709 Shares reacquired (2,373,392) (26,995,316) (3,196,194) (33,142,806) ------------------------------------------------------------------------------------------------------------------- Increase 6,656,342 $ 75,757,713 15,290,657 $ 158,286,610 ------------------------------------------------------------------------------------------------------------------- CLASS P SHARES Shares sold 471,649 $ 5,509,322 332,094 $ 3,537,085 Reinvestment of distributions 7,509 86,656 1,424 14,131 Shares reacquired (34,293) (401,067) (22,700) (246,224) ------------------------------------------------------------------------------------------------------------------- Increase 444,865 $ 5,194,911 310,818 $ 3,304,992 ------------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Shares sold 66,817 $ 793,465 154,694 $ 1,685,042 Reinvestment of distributions 2,882 33,492 16 159 Shares reacquired (9,525) (113,032) - - ------------------------------------------------------------------------------------------------------------------- Increase 60,174 $ 713,925 154,710 $ 1,685,201 -------------------------------------------------------------------------------------------------------------------
75 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) ALPHA FUND
SIX MONTHS ENDED APRIL 30, 2005 YEAR ENDED (UNAUDITED) OCTOBER 31, 2004 ------------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Shares sold 405,833 $ 6,958,561 842,543 $ 12,914,133 Reinvestment of distributions 24,791 425,664 - - Shares reacquired (365,427) (6,235,441) (796,821) (12,237,203) ------------------------------------------------------------------------------------------------------------------- Increase 65,197 $ 1,148,784 45,722 $ 676,930 ------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Shares sold 158,303 $ 2,629,221 250,831 $ 3,761,163 Reinvestment of distributions - - - - Shares reacquired (294,235) (4,903,572) (568,522) (8,525,182) ------------------------------------------------------------------------------------------------------------------- Decrease (135,932) $ (2,274,351) (317,691) $ (4,764,019) ------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Shares sold 127,756 $ 2,122,212 237,978 $ 3,579,134 Reinvestment of distributions - - - - Shares reacquired (315,120) (5,245,329) (512,272) (7,699,401) ------------------------------------------------------------------------------------------------------------------- Decrease (187,364) $ (3,123,117) (274,294) $ (4,120,267) ------------------------------------------------------------------------------------------------------------------- PERIOD ENDED OCTOBER 31, 2004* ------------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Shares sold 2,473 $ 42,380 24,945 $ 391,543 Reinvestment of distributions 228 3,899 - - Shares reacquired (1,638) (27,674) - - ------------------------------------------------------------------------------------------------------------------- Increase 1,063 $ 18,605 24,945 $ 391,543 -------------------------------------------------------------------------------------------------------------------
* For the period October 20, 2004 (commencement of offering of share class) to October 31, 2004. 76 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) INTERNATIONAL CORE EQUITY FUND
SIX MONTHS ENDED APRIL 30, 2005 PERIOD ENDED (UNAUDITED) OCTOBER 31, 2004** ------------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Shares sold 5,369,767 $ 61,832,286 6,334,498 $ 64,068,547 Reinvestment of distributions 4,407 49,623 Shares reacquired (375,588) (4,305,932) (723,691) (7,319,356) ------------------------------------------------------------------------------------------------------------------- Increase 4,998,586 $ 57,575,977 5,610,807 $ 56,749,191 ------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Shares sold 555,940 $ 6,367,489 310,399 $ 3,147,471 Shares reacquired (22,965) (261,357) (27,035) (269,461) ------------------------------------------------------------------------------------------------------------------- Increase 532,975 $ 6,106,132 283,364 $ 2,878,010 ------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Shares sold 1,224,919 $ 14,074,460 930,102 $ 9,477,115 Shares reacquired (82,636) (951,478) (34,075) (341,628) ------------------------------------------------------------------------------------------------------------------- Increase 1,142,283 $ 13,122,982 896,027 $ 9,135,487 ------------------------------------------------------------------------------------------------------------------- CLASS P SHARES Shares sold - $ - 1,000 $ 10,000 ------------------------------------------------------------------------------------------------------------------- Increase - $ - 1,000 $ 10,000 ------------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Shares sold 123,002 $ 1,405,209 295,774 $ 3,050,694 Reinvestment of distributions 540 6,089 - - Shares reacquired (12,202) (142,944) - - ------------------------------------------------------------------------------------------------------------------- Increase 111,340 $ 1,268,354 295,774 $ 3,050,694 -------------------------------------------------------------------------------------------------------------------
** For the period December 15, 2003 (commencement of investment operations) to October 31, 2004. 77 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) INTERNATIONAL OPPORTUNITIES FUND
SIX MONTHS ENDED APRIL 30, 2005 YEAR ENDED (UNAUDITED) OCTOBER 31, 2004 ------------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Shares sold 937,032 $ 9,922,715 2,068,789 $ 18,950,733 Reinvestment of distributions 31 244 116,074 951,166 Shares reacquired (682,203) (7,168,582) (1,744,796) (15,957,567) ------------------------------------------------------------------------------------------------------------------- Increase 254,860 $ 2,754,377 440,067 $ 3,944,332 ------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Shares sold 328,378 $ 3,386,885 629,605 $ 5,630,954 Reinvestment of distributions 9 74 24,183 194,187 Shares reacquired (281,420) (2,897,151) (500,148) (4,480,281) ------------------------------------------------------------------------------------------------------------------- Increase 46,967 $ 489,808 153,640 $ 1,344,860 ------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Shares sold 270,962 $ 2,786,358 430,000 $ 3,865,434 Reinvestment of distributions - - 19,174 153,200 Shares reacquired (168,682) (1,726,407) (338,548) (3,057,232) ------------------------------------------------------------------------------------------------------------------- Increase 102,280 $ 1,059,951 110,626 $ 961,402 ------------------------------------------------------------------------------------------------------------------- CLASS P SHARES Shares sold 12.08 $ 130 1.36 $ 13 Reinvestment of distributions - - 1.35 11 ------------------------------------------------------------------------------------------------------------------- Increase 12.08 $ 130 2.71 $ 24 ------------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Shares sold 25,719 $ 273,746 123,690 $ 1,193,629 Reinvestment of distributions 3,895 39,769 119,564 992,384 Shares reacquired (588,096) (6,236,223) (632,072) (6,009,857) ------------------------------------------------------------------------------------------------------------------- Decrease (558,482) $ (5,922,708) (388,818) $ (3,823,844) -------------------------------------------------------------------------------------------------------------------
78 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONCLUDED) LARGE-CAP VALUE FUND
SIX MONTHS ENDED APRIL 30, 2005 YEAR ENDED (UNAUDITED) OCTOBER 31, 2004 ------------------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ------------------------------------------------------------------------------------------------------------------- CLASS A SHARES Shares sold 306,451 $ 3,745,964 908,712 $ 10,502,711 Reinvestment of distributions 17,677 213,362 1,753 18,773 Shares reacquired (210,742) (2,560,910) (266,208) (3,056,762) ------------------------------------------------------------------------------------------------------------------- Increase 113,386 $ 1,398,416 644,257 $ 7,464,722 ------------------------------------------------------------------------------------------------------------------- CLASS B SHARES Shares sold 33,084 $ 400,660 123,718 $ 1,405,471 Reinvestment of distributions 1,588 18,994 63 673 Shares reacquired (14,299) (172,655) (10,398) (118,370) ------------------------------------------------------------------------------------------------------------------- Increase 20,373 $ 246,999 113,383 $ 1,287,774 ------------------------------------------------------------------------------------------------------------------- CLASS C SHARES Shares sold 105,367 $ 1,274,466 134,831 $ 1,533,110 Reinvestment of distributions 1,894 22,678 70 751 Shares reacquired (23,454) (283,021) (21,321) (244,155) ------------------------------------------------------------------------------------------------------------------- Increase 83,807 $ 1,014,123 113,580 $ 1,289,706 ------------------------------------------------------------------------------------------------------------------- CLASS P SHARES Reinvestment of distributions 21 $ 250 6 $ 67 ------------------------------------------------------------------------------------------------------------------- Increase 21 $ 250 6 $ 67 ------------------------------------------------------------------------------------------------------------------- CLASS Y SHARES Shares sold 1,249,813 $ 15,436,231 171,369 $ 1,979,292 Reinvestment of distributions 3,325 40,231 8 83 Shares reacquired (7,304) (89,739) - - ------------------------------------------------------------------------------------------------------------------- Increase 1,245,834 $ 15,386,723 171,377 $ 1,979,375 -------------------------------------------------------------------------------------------------------------------
79 UNDERLYING FUND INFORMATION (UNAUDITED) Alpha Fund invests in other funds ("Underlying Funds") managed by Lord Abbett, As of April 30, 2005, Alpha Fund's investments were allocated among the Underlying Funds as follows:
UNDERLYING FUND NAME % OF INVESTMENTS ----------------------------------------------------------------- Lord Abbett Developing Growth Fund, Inc. - Class Y 27.67% Lord Abbett Research Fund, Inc. - Small Cap Value Fund - Class Y 29.65% Lord Abbett Securities Trust - International Opportunities Fund - Class Y 40.21%
The Ten Largest Holdings and the Holdings by Sector, as of April 30, 2005, for Lord Abbett Developing Growth Fund, Inc. and Lord Abbett Research Fund, Inc. - Small Cap Value Fund, in which Alpha Fund held a significant concentration of its investments, are as follows: LORD ABBETT DEVELOPING GROWTH FUND, INC.
TEN LARGEST HOLDINGS % OF INVESTMENTS --------------------------------------------------------- Sierra Health Services, Inc. 2.00% Corporate Executive Board Co. 1.82% P.F. Chang's China Bistro, Inc. 1.72% Scientific Games Corp. Class A 1.60% Shuffle Master, Inc. 1.58% Sybron Dental Specialties, Inc. 1.57% Pacific Sunwear of California, Inc. 1.55% Kos Pharmaceuticals, Inc. 1.52% SRA Int'l., Inc. 1.47% CACI Int'l., Inc. Class A 1.40% HOLDINGS BY SECTOR % OF INVESTMENTS --------------------------------------------------------- Auto & Transportation 3.31% Consumer Discretionary 30.55% Consumer Staples 0.37% Financial Services 7.42% Healthcare 24.11% Integrated Oils 0.77% Materials & Processing 3.75% Other Energy 8.62% Producer Durables 5.17% Short-Term Investment 1.81% Technology 14.12% --------------------------------------------------------- Total 100.00% ---------------------------------------------------------
80 UNDERLYING FUND INFORMATION (UNAUDITED)(CONCLUDED) LORD ABBETT RESEARCH FUND, INC. - SMALL-CAP VALUE FUND
TEN LARGEST HOLDINGS % OF INVESTMENTS --------------------------------------------------------- Quanex Corp. 4.45% Carlisle Cos., Inc. 2.95% Itron, Inc. 2.67% Helmerich & Payne, Inc. 2.17% Curtiss-Wright Corp. 1.92% Hexcel Corp. 1.79% Wabtec Corp. 1.71% Unova, Inc. 1.62% Briggs & Stratton Corp. 1.55% Nationwide Health Properties, Inc. 1.54% HOLDINGS BY SECTOR % OF INVESTMENTS --------------------------------------------------------- Auto & Transportation 12.54% Consumer Discretionary 9.95% Consumer Staples 1.79% Financial Services 11.23% Healthcare 2.12% Integrated Oils 1.26% Materials & Processing 24.57% Other 4.35% Other Energy 9.92% Producer Durables 17.09% Short-Term Investment 2.79% Technology 2.39% --------------------------------------------------------- Total 100.00% ---------------------------------------------------------
The Schedule of Investments and the Holdings by Sector of Lord Abbett Securities Trust - International Opportunities Fund, also an Underlying Fund of Alpha Fund, have been presented earlier in this Semi-Annual Report to Shareholders. 81 HOUSEHOLDING The Trust has adopted a policy that allows it to send only one copy of the Funds' Prospectus, proxy material, annual report and semi-annual report to certain shareholders residing at the same "household." This reduces Trust expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be "householded," please call Lord Abbett at 800-821-5129 or send a written request with your name, the name of your fund or funds and your account number or numbers to Lord Abbett Family of Funds, P.O. Box 219336, Kansas City, MO 64121. PROXY VOTING POLICIES, PROCEDURES, AND RECORD A description of the policies and procedures that Lord Abbett uses to vote proxies related to the Fund's portfolio securities, and information on as to how Lord Abbett voted each Funds' proxies during the 12-month period ended June 30, 2004 are available without charge, upon request, (i) by calling 888-522-2388; (ii) or on Lord Abbett's website at www.LordAbbett.com; and (iii) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE The Funds are required to file their complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Form N-Q for fiscal quarters ending on or after July 9, 2004. Copies of the filings will be available without charge, upon request on the SEC's website at www.sec.gov and may be available by calling Lord Abbett at 800-821-5129. You can also obtain copies of Form N-Q by (i) visiting the SEC's Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330); (ii) sending your request and a duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfo@sec.gov. 82 APPROVAL OF ADVISORY CONTRACTS At meetings on December 9, 2004, the Board of Trustees of the Funds, including all Trustees who are not interested persons of the Funds (the "Board"), considered whether to approve the continuation of the existing management agreement between each of the Funds and Lord Abbett. In addition to the materials the Board had reviewed throughout the course of the year, the Board received materials relating to the management agreement before the meeting and had the opportunity to ask questions and request further information in connection with its consideration. The materials received by the Board as to each Fund included, but were not limited to, (1) information provided by Lipper Analytical Services, Inc. regarding the investment performance of each Fund compared to the investment performance of a group of funds with substantially similar investment objectives (the "performance universe") and to the investment performance of an appropriate securities index (if such an index existed), for various time periods each ending September 30, 2004, (2) information on the effective management fee rates and expense ratios for funds with similar objectives and similar size (the "peer group"), (3) sales and redemption information for each Fund, (4) information regarding Lord Abbett's financial condition, (5) an analysis of the relative profitability of the management agreement to Lord Abbett, (6) information regarding the distribution arrangements of each Fund, (7) information regarding the personnel and other resources devoted by Lord Abbett to managing each Fund. The specific considerations as to each Fund are discussed below. LARGE-CAP VALUE FUND INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading. The Board noted that Lord Abbett did not use brokerage commissions to purchase third-party research. INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment performance as well as the performance of the performance universe of funds, both in terms of total return and in terms of other statistical measures noted that the performance of the Class A shares of the Fund was in the fourth quintile of its performance universe for the nine-month and one-year periods and since the inception of the Fund (June 30, 2003). The Board also noted that the performance was below that of the Lipper Large-Cap Value Index for each of those periods. LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel providing investment management services to each Fund, in light of each Fund's investment objective and discipline. Among other things, it considered the size and experience of Lord Abbett's investment management staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel. NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett supervision of third party service providers, including the Fund's transfer agent and custodian. EXPENSES. The Board considered the expense ratios of each class and the expense ratios of peer groups. It also considered the amount and nature of the fees paid by shareholders. The Board noted that the contractual management and administrative services fees for the Fund were 83 approximately forty basis points below the median of the peer group and that actual management and administrative services fees were approximately eight basis points below the median. The Board also noted that, since the Fund's inception, Lord Abbett had agreed to cap the Fund's Class A total expense ratio at 0.95%, the Classes B and C total expense ratios at 1.60%, the Class P total expense ratio at 1.05%, and the Class Y total expense ratio at 0.60%, with the result that the total expense ratio of Class A was approximately fifty basis points below the median of the peer group, the total expense ratios of Classes B and C were approximately fifty-four basis points below the median, the total expense ratio of Class P was approximately two basis points above the median, and the total expense ratio of Class Y was approximately forty-two basis points below the median. PROFITABILITY. The Board considered the level of Lord Abbett's profits in managing the Fund, including a review of Lord Abbett's methodology for allocating its costs to its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was appropriate. It considered the profits realized by Lord Abbett in connection with the operation of the Fund and whether the amount of profit was fair for the management of the Fund. The Board also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel. The Board noted that Lord Abbett's profitability had increased, in part due to an increase in assets under management. ECONOMIES OF SCALE. The Board considered whether there had been any economies of scale in managing the Fund, whether the Fund had appropriately benefited from any such economies of scale, and whether there was potential for realization of any further economies of scale. OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services other than investment. The Board also considered the revenues and profitability of Lord Abbett's investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund. ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms. In considering whether to approve the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. After considering all of the relevant factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the management agreement. ALL VALUE FUND INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading. The Board noted that Lord Abbett did not use brokerage commissions to purchase third-party research. INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment performance as well as the performance of the performance universe of funds, both in terms of 84 total return and in terms of other statistical measures. The Board noted that the performance of the Class C shares of the Fund was in the third quintile of its performance universe for the nine-month and one-year periods and in the second quintile for the three-, five-, and ten-year periods. The Board also noted that the Fund's performance was below that of the Lipper Multi-Cap Value Index for the nine-month and three-year periods, but above that of the Index for the one-, five-, and ten-year periods. LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel providing investment management services to each Fund, in light of each Fund's investment objective and discipline. Among other things, it considered the size and experience of Lord Abbett's investment management staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel. NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett supervision of third party service providers, including the Fund's transfer agent and custodian. EXPENSES. The Board considered the expense ratios of each class and the expense ratios of peer groups. It also considered the amount and nature of the fees paid by shareholders. The Board noted that the contractual management and administrative services fees of the Fund were less than one basis point below the median of the peer group and that the actual management fees were approximately four basis points above the median. The Board also noted that the actual total expense ratio of Class A was approximately eight basis points above the median of the peer group and that the actual total expense ratio of Class C was less than one basis point above the median. The Board noted that the contractual management fees of the Fund had been reduced, effective October 1, 2004, and were now approximately four basis points below the median of the peer group and the actual management fees would be approximately one basis point above the median of the peer group. The Board also noted that Lord Abbett had agreed to cap the total expense ratio of Class A at 0.95% and total expense ratio of Class C at 1.60% and that the total expense ratio of Class A would be approximately three basis points below the median of the peer group and the total expense ratio of Class C would be approximately two basis points below the median. PROFITABILITY. The Board considered the level of Lord Abbett's profits in managing the Fund, including a review of Lord Abbett's methodology for allocating its costs to its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was appropriate. It considered the profits realized by Lord Abbett in connection with the operation of the Fund and whether the amount of profit was fair for the management of the Fund. The Board also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel. The Board noted that Lord Abbett's profitability had increased, in part due to an increase in assets under management. ECONOMIES OF SCALE. The Board considered whether there had been any economies of scale in managing the Fund, whether the Fund had appropriately benefited from any such economies of scale, and whether there was potential for realization of any further economies of scale. OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services 85 other than investment. The Board also considered the revenues and profitability of Lord Abbett's investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund. ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms. In considering whether to approve the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. After considering all of the relevant factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the management agreement. ALPHA SERIES INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading. The Board noted that Lord Abbett did not use brokerage commissions to purchase third-party research. INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment performance as well as the performance of the performance universe of funds, both in terms of total return and in terms of other statistical measures. The Board noted that the performance of the Class A shares of the Fund was in the third quintile of its performance universe for the nine-month, one-year, three-year, and five-year periods. The Board also noted that there was no Lipper index that would serve as an appropriate comparison for the Fund. LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel providing investment management services to each Fund, in light of each Fund's investment objective and discipline. Among other things, it considered the size and experience of Lord Abbett's investment management staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel. NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett supervision of third party service providers, including the Fund's transfer agent and custodian. EXPENSES. The Board considered the expense ratio of the Fund and the expense ratios of a peer group. It also considered the amount and nature of the fees paid by shareholders. The Board noted that the contractual management fees were approximately eight basis points below the median of the peer group and that the actual management fees were approximately four basis points that of the median of the peer group. The Board also noted that the total expense ratio of Class A was approximately fifteen basis points below the median of the peer group and that the total expense ratios of Classes B and C were approximately the same as the median of the peer group. The Board noted that, like other funds in the peer group, the Fund indirectly pays the management fees and other expenses of the underlying funds in which it invests. PROFITABILITY. The Board considered the level of Lord Abbett's profits in managing the Fund, including a review of Lord Abbett's methodology for allocating its costs to its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was 86 appropriate. It considered the profits realized by Lord Abbett in connection with the operation of the Fund and whether the amount of profit was fair for the management of the Fund. The Board also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel. The Board noted that Lord Abbett's profitability had increased, in part due to an increase in assets under management. ECONOMIES OF SCALE. The Board considered whether there had been any economies of scale in managing the Fund, whether the Fund had appropriately benefited from any such economies of scale, and whether there was potential for realization of any further economies of scale. OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services other than investment. The Board also considered the revenues and profitability of Lord Abbett's investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund. ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms. In considering whether to approve the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. After considering all of the relevant factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the management agreement. INTERNATIONAL OPPORTUNITIES FUND INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading. The Board noted that Lord Abbett did not use brokerage commissions to purchase third-party research. INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment performance as well as the performance of the performance universe of funds, both in terms of total return and in terms of other statistical measures. The Board noted that the performance of the Class A shares of the Fund was in the fourth quintile of its performance universe for the nine-month and one-year period and in the fifth quintile for the three- and five-year periods. The Board also noted that the performance was above that of the Lipper International Small/Mid-Cap Growth Index for the nine-month period and below that of the Index for all other periods. LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel providing investment management services to each Fund, in light of each Fund's investment objective and discipline. Among other things, it considered the size and experience of Lord Abbett's investment management staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel. NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor 87 and the nature and extent of Lord Abbett supervision of third party service providers, including the Fund's transfer agent and custodian. EXPENSES. The Board considered the expense ratio of the Fund and the expense ratios of a peer group. It also considered the amount and nature of the fees paid by shareholders. The Board noted that the contractual management and administrative services fees were approximately twenty-one basis points below the median of the peer group and that the the actual management and administrative services fees were approximately the same as the median of the peer group. The Board noted that the total expense ratio of Class A was approximately nine basis points below the median of the peer group, the total expense ratios of Classes B and C were the same as the median of the peer group, the total expense ratio of Class P was approximately fourteen basis points above the median and the total expense ratio of Class Y was approximately eighteen basis points above the median. PROFITABILITY. The Board considered the level of Lord Abbett's profits in managing the Fund, including a review of Lord Abbett's methodology for allocating its costs to its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was appropriate. It considered the profits realized by Lord Abbett in connection with the operation of the Fund and whether the amount of profit was fair for the management of the Fund. The Board also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel. The Board noted that Lord Abbett's profitability had increased, in part due to an increase in assets under management. ECONOMIES OF SCALE. The Board considered whether there had been any economies of scale in managing the Fund, whether the Fund had appropriately benefited from any such economies of scale, and whether there was potential for realization of any further economies of scale. OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services other than investment. The Board also considered the revenues and profitability of Lord Abbett's investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund. ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms. In considering whether to approve the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. After considering all of the relevant factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the management agreement. INTERNATIONAL CORE EQUITY FUND INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading. The Board noted that Lord Abbett did not use brokerage commissions to purchase third-party research. 88 INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment performance as well as the performance of the performance universe of funds, both in terms of total return and in terms of other statistical measures. The Board noted that the Fund had only been in existence since December 31, 2003. The Board further noted that the performance of the Class A shares of the Fund was in the fifth quintile of its peer group and below that of the Lipper International Multi-Cap Core Index for the period since inception. LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel providing investment management services to each Fund, in light of each Fund's investment objective and discipline. Among other things, it considered the size and experience of Lord Abbett's investment management staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel. NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett supervision of third party service providers, including the Fund's transfer agent and custodian. EXPENSES. The Board considered the expense ratio of the Fund and the expense ratios of a peer group. It also considered the amount and nature of the fees paid by shareholders. The Board also noted that the contractual management and administrative services fees of the Fund were approximately twenty-one basis points below the median of the peer group and that the actual management and administrative services fees were approximately nine basis points below the median. The Board noted that the total expense ratio of Class A was approximately seven basis points below the median of the peer group, the total expense ratios of Classes B and C were approximately three basis points below the median, the total expense ratio of Class P was approximately twenty-nine basis points above the median, and the total expense ratio of Class Y was approximately thirteen basis points above the median. The Board also noted that Lord Abbett had agreed to implement a total expense cap for the Fund that would limit the total expense ratio of Class A to 1.75%, the total expense ratios of Classes B and C to 2.40%, the total expense ratio of Class P to 1.85%, and the total expense ratio of Class Y to 1.40%, but that the total expense ratio of each class was below that cap at September 30, 2004. PROFITABILITY. The Board considered the level of Lord Abbett's profits in managing the Fund, including a review of Lord Abbett's methodology for allocating its costs to its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was appropriate. It considered the profits realized by Lord Abbett in connection with the operation of the Fund and whether the amount of profit was fair for the management of the Fund. The Board also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel. The Board noted that Lord Abbett's profitability had increased, in part due to an increase in assets under management. ECONOMIES OF SCALE. The Board considered whether there had been any economies of scale in managing the Fund, whether the Fund had appropriately benefited from any such economies of scale, and whether there was potential for realization of any further economies of scale. OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services other than investment. The Board also considered the revenues and profitability of Lord Abbett's 89 investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund. ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms. In considering whether to approve the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. After considering all of the relevant factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the management agreement. 90 [LORD ABBETT(R) LOGO] This report when not used for the general information of shareholders of the Fund, is to Lord Abbett Securities Trust be distributed only if preceded or accompanied Lord Abbett All Value Fund by a current Fund Prospectus. Lord Abbett Alpha Fund Lord Abbett International Core Equity Fund Lord Abbett Mutual Fund shares are distributed by Lord Abbett International Opportunities Fund LORD ABBETT DISTRIBUTOR LLC Lord Abbett Large-Cap Value Fund LST-3-0405 (06/05)
[LORD ABBETT LOGO] 2005 SEMI- ANNUAL REPORT LORD ABBETT MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2005 -------------------------------------------------------------------------------- LORD ABBETT MICRO-CAP GROWTH FUND AND MICRO-CAP VALUE FUND SEMI-ANNUAL REPORT FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 2005 DEAR SHAREHOLDERS: We are pleased to provide you with this overview of Lord Abbett Micro-Cap Growth and Lord Abbett Micro-Cap Value Funds' strategies and performance for the six-month period ended April 30, 2005. 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: The U.S. economy began the six-month period ended April 30, 2005 with signs of healthy growth. However, by period end, investor optimism had waned as energy prices soared and the stock market relinquished some of its previous gains. Of greatest note, the Federal Reserve Board (the Fed) continued its measured pace of interest rate hikes, raising the fed funds rate in 0.25% increments in November, December, February and March, bringing the rate to 2.75% at the end of the six-month period. (The fed funds rate is the rate charged by banks with excess reserves at the Federal Reserve district bank to other banks needing overnight loans to meet reserve requirements.) The March interest rate hike marked the seventh quarter-point increase since June 2004. Broad stock indices finished calendar year 2004 strong, but stumbled out of the gate in early 2005. The S&P 500 Index(1) gained 4.1% in November 2004 and 3.4% in December 2004, finishing calendar year 2004 with a 10.9% gain. By the end of the first quarter of 2005, however, the Index had declined 2.2%, largely reflecting investors' concerns that rising oil and gas prices would hurt economic growth by cutting into corporate profits and dampening consumer spending. Even with an agreement among members of the Organization of Petroleum Exporting Countries (OPEC) to increase oil production, crude oil prices climbed to over $57 per barrel. Nonetheless, the U.S. economy continued to grow at a healthy pace during the first quarter of 2005 and, despite rising interest rates, corporate fundamentals remained positive. Improved profitability continued to generate excess 1 -------------------------------------------------------------------------------- cash, strengthening corporate balance sheets, and business spending picked up. Elsewhere, U.S. housing starts reached their highest reported level in 21 years, and the unemployment rate remained stable at 5.2%, except for a small uptick to 5.4% in February of 2005. By the end of the six-month period, however, investors had more to fret about than the price of oil when a warning on profits from General Motors triggered a flight out of equity and the Consumer Price Index (CPI) showed a slight upward bias. (The CPI is a commonly used measure of inflation, which reflects changes in the prices paid by urban consumers for a representative basket of goods and services.) In April, for the third consecutive month, the Consumer Confidence Index declined. (Based on a representative sample of 5,000 households, the Consumer Confidence Index measures consumer confidence about current business, employment and economic conditions as well as their expectations for the same six months hence.) As the six-month period ended April 30, 2005 came to a close, investors were cautious. LORD ABBETT MICRO-CAP GROWTH FUND Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned 3.3% reflecting performance at the Net Asset Value (NAV) of Class A shares with all distributions reinvested, compared with its benchmark, the Russell 2000(R) Growth Index,(2) which returned -2.0% over the same period. Standardized Average Annual Total Returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, are 1 Year: -7.02% and Since Inception (May 1, 2000): -3.18%. Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1.0% if the shares are redeemed within 12 months of the purchase. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: Stock selection in the technology sector was the largest contributor to the Fund's outperformance of its benchmark for the six-month period ended April 30, 2005. The portfolio benefited from its focus on gaming 2 -------------------------------------------------------------------------------- companies within the technology industry. A provider of diversified technology and content products and services used in the worldwide gaming industry outperformed due to industry interest in its new security technology for use inside of gaming chips. Another gaming technology holding, a company that provides online betting for horse racing, also reported gains because of increasing acceptance of online gambling. In addition, the Fund was helped by some of its "softer" technology holdings during the period including a holding that helps companies create online advertisements, an online education company and a leading provider of advanced intelligent traffic management solutions. Strong stock selection in the consumer discretionary sector also aided performance. This sector includes stocks in the consumer durables, apparel, media, hotel and leisure industries. Two retail apparel holdings outperformed. A denim company did well due to increased consumer interest in purchasing higher-end denim jeans, and a department store chain reported improving growth. In addition, a leading designer, manufacturer and distributor of liquid crystal displays, modules and assemblies was a strong performer following an acquisition and its introduction of color liquid crystal displays. The greatest detractor to the Fund's performance relative to its benchmark for the six-month period ended April 30, 2005 was stock selection in the producer durables sector, which includes capital goods and industrials. A company that offers systems support for industrial weighing and measuring requirements underperformed based on unfavorable consumer sales. Also, a company that specializes in rapid cook technology used in the fast food industry disappointed when, during the company's February 2005 equity offering, the current management team sold a portion of their personal holdings resulting in a lowering of the stock's price. Stock selection in healthcare also hurt performance based on the underperformance of three biotech holdings. Rising interest rates have caused biotech valuations to come down. THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES. LORD ABBETT MICRO-CAP VALUE FUND Q: HOW DID THE FUND PERFORM OVER THE SIX-MONTH PERIOD ENDED APRIL 30, 2005? A: For the six-month period ended April 30, 2005, the Fund returned 7.0%, reflecting performance at the Net Asset Value (NAV) of Class A shares with all distributions reinvested, compared with its benchmark, the Russell 2000(R) Value Index,(3) which returned 1.5% over the same period. Standardized Average Annual Total Returns, which reflect performance 3 -------------------------------------------------------------------------------- at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, are 1 Year: 7.48% and Since Inception (May 1, 2000): 20.82%. Class A shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1.0% if the shares are redeemed within 12 months of the purchase. PERFORMANCE DATA QUOTED REFLECT PAST PERFORMANCE AND ARE NO GUARANTEE OF FUTURE RESULTS. CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE QUOTED. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE SO THAT SHARES, ON ANY GIVEN DAY OR WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. YOU CAN OBTAIN PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH END BY CALLING LORD ABBETT AT 800-821-5129 OR REFERRING TO OUR WEBSITE AT www.LordAbbett.com. Q: WHAT WERE THE MOST SIGNIFICANT FACTORS AFFECTING PERFORMANCE? A: An underweight position combined with strong stock selection in the overall poorly performing financial services sector proved to be the greatest positive factor impacting the Fund's performance relative to the benchmark for the six-month period ended April 30, 2005. In this sector, the portfolio was helped by strong performance by a company that is both a malpractice insurance manager and a fixed-income trading brokerage. Most of this company's outperformance was due to its ties to the strong-performing health care sector. Another solid performer for the period was a Korean bank based in Southern California. The bank's fine performance is part of a trend of ethnic-centric economic growth. Such banks have tended to have more loyal customer bases than mainstream banks, even when interest rates are rising. Also, a regional property and casualty insurance company reported gains due to the strength of its long-term underwriting discipline and recent acquisitions. Stock selection in the healthcare sector also boosted portfolio performance. A maker of puncture-safe needles contributed favorably. This holding was purchased when corporate changes within its largest distributor temporarily reduced the stock price to a very attractive value. In addition, a company that provides medical testing products so that doctors can perform rapid in-office testing for common maladies helped performance. The holding was undervalued by the market but gained strength after acquisitions that linked them to homeland security issues. Although somewhat offset by a large overweight position in the relatively strong performing producer durables sector, stock selection within the sector was the greatest detractor to Fund performance for the six-month period ended April 30, 2005. Producer durables include industrials and capital goods used 4 -------------------------------------------------------------------------------- in the production of other goods such as industrial buildings, machinery and equipment. A company that manufactures electronic components for the computer, networking and telecommunications industry underperformed due to market pressure and its reliance on the underperforming technology industry. A holding that produces capital equipment for the newspaper industry was hurt by the difficult business environment of its newspaper customer base. In addition, a company that makes industrial floor cleaners and polishing equipment enjoyed increased revenues, but its gains were offset by rising steel prices. An underweight position in the utilities sector also took away from performance as the utility sector performed well during the six-month period. THE FUND'S PORTFOLIO IS ACTIVELY MANAGED AND, THEREFORE, ITS HOLDINGS AND WEIGHTINGS OF A PARTICULAR ISSUER OR PARTICULAR SECTOR AS A PERCENTAGE OF PORTFOLIO ASSETS ARE SUBJECT TO CHANGE. SECTORS MAY INCLUDE MANY INDUSTRIES. A PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT A FUND, INCLUDING A FUND'S INVESTMENT OBJECTIVES, RISKS, CHARGES AND ONGOING EXPENSES, THAT AN INVESTOR SHOULD CAREFULLY CONSIDER BEFORE INVESTING. TO OBTAIN A PROSPECTUS ON ANY LORD ABBETT MUTUAL FUND, CONTACT YOUR INVESTMENT PROFESSIONAL, OR LORD ABBETT DISTRIBUTOR LLC AT (800) 874-3733 OR www.LordAbbett.com. READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. (1) The S&P 500 Index is widely regarded as the standard for measuring large-cap U.S. stock market performance. This popular index includes a representative sample of leading companies in leading industries. The Index is unmanaged, does not reflect the deduction of fees or expenses and is not available for direct investment. (2) The Russell 2000(R) Growth Index measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. The Index is unmanaged, does not reflect the deduction of fees or expenses and is 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. The Index is unmanaged, does not reflect the deduction of fees or expenses and is not available for direct investment. IMPORTANT PERFORMANCE AND OTHER INFORMATION THE VIEWS OF EACH FUND'S MANAGEMENT AND THE PORTFOLIO HOLDINGS DESCRIBED IN THIS REPORT ARE AS OF APRIL 30, 2005; THESE VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THIS DATE AND THEY DO NOT GUARANTEE THE FUTURE PERFORMANCE OF THE MARKETS OR THE FUNDS. INFORMATION PROVIDED IN THIS REPORT SHOULD NOT BE CONSIDERED A RECOMMENDATION TO PURCHASE OR SELL SECURITIES. A NOTE ABOUT RISK: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with a Fund, please see the Fund's Prospectus. PERFORMANCE: BECAUSE OF ONGOING MARKET VOLATILITY, A FUND'S PERFORMANCE MAY BE SUBJECT TO SUBSTANTIAL FLUCTUATION. Except where noted, comparative 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. MUTUAL FUNDS ARE NOT INSURED BY THE FDIC, ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY BANKS, AND ARE SUBJECT TO INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. 5 -------------------------------------------------------------------------------- EXPENSE EXAMPLES As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges on purchase payments (these charges vary among the share classes); and (2) ongoing costs, including management fees; distribution and service (12b-1) fees (these charges vary among the share classes); and other Fund expenses. The Examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (November 1, 2004 through April 30, 2005). ACTUAL EXPENSES For each class of the Fund, the first line of the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period 11/1/04 - 4/30/05" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES For each class of the Fund, the second line of the table on the following page provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5.0% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5.0% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. 6 MICRO-CAP GROWTH FUND -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE PERIOD+ ----- ----- ------- 11/1/04 - 11/1/04 4/30/05 4/30/05 ------- ------- ------- CLASS A Actual $ 1,000.00 $ 1,033.10 $ 10.57 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,014.39 $ 10.47 CLASS Y Actual $ 1,000.00 $ 1,034.50 $ 9.31 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.64 $ 9.22
+ For each class of the Fund, expenses are equal to the annualized expense ratio for such class (2.10% for Class A, and 1.85% for Class Y) multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period). -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS PRESENTED BY SECTOR APRIL 30, 2005
SECTOR %* Consumer Discretionary 28.30% Financial Services 11.41% Healthcare 26.15% Integrated Oils 1.36% Materials & Processing 4.86% Producer Durables 4.98% Short-Term Investment 2.22% Technology 19.48% Utilities 1.24% Total 100.00%
* Represents percent of total investments. 7 MICRO-CAP VALUE FUND -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT PAID DURING VALUE VALUE PERIOD+ ----- ----- ------- 11/1/04 - 11/1/04 4/30/05 4/30/05 ------- ------- ------- CLASS A Actual $ 1,000.00 $ 1,070.30 $ 10.77 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,014.39 $ 10.47 CLASS Y Actual $ 1,000.00 $ 1,071.80 $ 9.48 Hypothetical (5% Return Before Expenses) $ 1,000.00 $ 1,015.64 $ 9.22
+ For each class of the Fund, expenses are equal to the annualized expense ratio for such class (2.10% for Class A, and 1.85% for Class Y) multiplied by the average account value over the period, multiplied by 181/365 (to reflect one-half year period). -------------------------------------------------------------------------------- PORTFOLIO HOLDINGS PRESENTED BY SECTOR APRIL 30, 2005
SECTOR %* Auto & Transportation 9.65% Consumer Discretionary 24.30% Consumer Staples 1.56% Financial Services 15.60% Healthcare 6.95% Integrated Oils 1.79% Materials & Processing 11.48% Other Energy 1.82% Producer Durables 15.83% Short-Term Investment 3.72% Technology 5.35% Utilities 1.95% Total 100.00%
* Represents percent of total investments. 8 SCHEDULE OF INVESTMENTS (UNAUDITED) MICRO-CAP GROWTH FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ---------------------------------------------------------------------------------- COMMON STOCKS 96.91% BANKS 6.14% Community Bancorp* 8,200 $ 197 Online Resources Corp.* 19,900 173 ------------ TOTAL 370 ------------ BANKS: OUTSIDE NEW YORK CITY 2.26% Heritage Commerce Corp.* 7,100 136 ------------ BIOTECHNOLOGY RESEARCH & PRODUCTION 8.15% Kendle Int'l., Inc.* 18,000 213 Matrixx Initiatives, Inc.* 12,600 142 Regeneration Technologies, Inc.* 8,700 80 Vion Pharmaceuticals, Inc.* 20,900 56 ------------ TOTAL 491 ------------ CASINOS & GAMBLING 6.28% Mikohn Gaming Corp.* 13,700 193 Youbet.com, Inc.* 34,300 185 ------------ TOTAL 378 ------------ CHEMICALS 4.81% Medis Technologies Ltd.* 9,500 127 Ultralife Batteries, Inc.* 10,400 163 ------------ TOTAL 290 ------------ COMMUNICATIONS TECHNOLOGY 2.21% Telkonet, Inc.* 42,500 133 ------------ COMPUTER SERVICES SOFTWARE & SYSTEMS 12.22% Aladdin Knowledge Systems Ltd.*(a) 5,900 121 Digitas, Inc.* 19,200 191 eCollege.com, Inc.* 9,300 104 Electronic Clearing House, Inc.* 21,400 183 Nestor, Inc.* 22,500 137 ------------ TOTAL 736 ------------ COMPUTER TECHNOLOGY 1.01% Digital Recorders, Inc.* 30,400 $ 61 ------------ DRUGS & PHARMACEUTICALS 5.36% BioCryst Pharmaceuticals, Inc.* 16,600 66 Bone Care Int'l., Inc.* 3,900 101 SFBC Int'l., Inc.* 5,000 156 ------------ TOTAL 323 ------------ ELECTRONICS: INSTRUMENTS, GAUGES & METERS 3.06% Measurement Specialties, Inc.* 8,300 184 ------------ ELECTRONICS: MEDICAL SYSTEMS 4.48% PhotoMedex, Inc.* 60,800 180 Rita Medical Systems, Inc.* 29,700 90 ------------ TOTAL 270 ------------ ELECTRONICS: OTHER 1.73% International DisplayWorks, Inc.* 11,850 104 ------------ ELECTRONICS: SEMI-CONDUCTORS/ COMPONENTS 2.14% Windsortech, Inc.* 64,600 129 ------------ ENTERTAINMENT 1.98% WPT Enterprises, Inc.* 9,000 119 ------------ FINANCE COMPANIES 2.92% Asta Funding, Inc. 8,400 176 ------------ HEALTH & PERSONAL CARE 2.14% NovaMed, Inc.* 25,000 129 ------------ JEWELRY WATCHES & GEMSTONES 1.73% LJ Int'l., Inc.*(a) 44,200 104 ------------ MACHINERY: SPECIALTY 1.88% TurboChef Technologies, Inc.* 10,900 113 ------------
SEE NOTES TO FINANCIAL STATEMENTS. 9 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED) MICRO-CAP GROWTH FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ---------------------------------------------------------------------------------- MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 5.79% Medtox Scientific, Inc.* 10,900 $ 74 Molecular Devices Corp.* 9,500 180 Neogen Corp.* 6,650 95 ------------ TOTAL 349 ------------ OIL: INTEGRATED DOMESTIC 1.34% Gasco Energy, Inc.* 22,900 81 ------------ PRINTING AND COPYING SERVICES 1.69% TRM Corp.* 6,100 102 ------------ RETAIL 6.84% Bon-Ton Stores, Inc. (The) 9,700 174 Cache, Inc.* 10,900 122 Design Within Reach, Inc.* 7,600 116 ------------ TOTAL 412 ------------ SERVICES: COMMERCIAL 2.21% Exponent, Inc.* 5,600 133 ------------ TEXTILES APPAREL MANUFACTURERS 7.31% Oxford Industries, Inc. 5,400 198 True Religion Apparel, Inc.* 16,300 242 ------------ TOTAL 440 ------------ UTILITIES: ELECTRICAL 1.23% Gexa Corp.* 11,200 74 ------------ TOTAL COMMON STOCKS (Cost $5,495,227) 5,837 ============ PRINCIPAL AMOUNT VALUE INVESTMENTS (000) (000) ---------------------------------------------------------------------------------- SHORT-TERM INVESTMENT 2.21% REPURCHASE AGREEMENT 2.21% Repurchase Agreement dated 4/29/2005, 2.22% due 5/2/2005 with State Street Bank & Trust Co. collateralized by $140,000 of Federal Home Loan Bank at 2.375% due 2/15/06; value: $139,437; proceeds: $132,594 (Cost $132,569) $ 133 $ 133 ------------ TOTAL INVESTMENTS IN SECURITIES 99.12% (Cost $5,627,796) 5,970 ============ OTHER ASSETS IN EXCESS OF LIABILITIES 0.88% 53 ============ NET ASSETS 100.00% $ 6,023 ============
* Non-income producing security. (a) Foreign security traded in U.S. dollars. SEE NOTES TO FINANCIAL STATEMENTS. 10 SCHEDULE OF INVESTMENTS (UNAUDITED) MICRO-CAP VALUE FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ---------------------------------------------------------------------------------- COMMON STOCKS 95.70% AEROSPACE 4.29% Allied Defense Group, Inc.* 10,500 $ 263 Ladish Co., Inc.* 31,400 378 ------------ TOTAL 641 ------------ AGRICULTURE FISHING & RANCHING 1.23% Andersons Inc. (The) 6,800 184 ------------ AIR TRANSPORTATION 1.34% Frontier Airlines, Inc.* 20,700 201 ------------ AUTO COMPONENTS 0.56% Wabash National Corp. 3,300 84 ------------ AUTO PARTS: AFTER MARKET 1.74% Keystone Automotive Industries, Inc.* 13,000 260 ------------ BANKS: OUTSIDE NEW YORK CITY 6.25% CoBiz, Inc. 10,150 171 Columbia Bancorp 10,200 185 Dearborn Bancorp, Inc.* 8,305 217 Franklin Bank Corp.* 13,500 227 Pennsylvania Commerce Bancorp, Inc.* 4,600 135 ------------ TOTAL 935 ------------ CHEMICALS 2.21% NuCo2, Inc.* 8,200 201 Quaker Chemical Corp. 6,600 129 ------------ TOTAL 330 ------------ COMMUNICATIONS TECHNOLOGY 1.34% Bel Fuse, Inc. Class A 8,600 200 ------------ COMPUTER SERVICES SOFTWARE & SYSTEMS 1.54% Moldflow Corp.* 18,100 231 ------------ COMPUTER TECHNOLOGY 2.43% Fargo Electronics, Inc.* 13,400 $ 194 Mobility Electronics, Inc.* 21,900 170 ------------ TOTAL 364 ------------ CONSTRUCTION 1.70% Modtech Holdings, Inc.* 31,800 255 ------------ CONTAINERS & PACKAGING: METAL & GLASS 1.50% Mobile Mini, Inc.* 6,400 224 ------------ DIVERSIFIED FINANCIAL SERVICES 1.02% American Physicians Services Group, Inc. 12,100 153 ------------ ELECTRICAL EQUIPMENT & COMPONENTS 2.51% AZZ, Inc.* 11,300 175 Powell Industries, Inc.* 11,100 201 ------------ TOTAL 376 ------------ ELECTRICAL: HOUSEHOLD APPLIANCE 1.12% Emerson Radio Corp.* 57,300 168 ------------ FINANCIAL MISCELLANEOUS 0.78% Financial Federal Corp. 3,300 116 ------------ FOODS 0.70% Tasty Baking Co. 13,100 105 ------------ FUNERAL PARLORS & CEMETERY 3.01% Carriage Services, Inc.* 44,000 264 Rock of Ages Corp. 28,900 186 ------------ TOTAL 450 ------------ HEALTHCARE FACILITIES 1.40% Capital Senior Living Corp.* 35,500 210 ------------ HEALTHCARE MANAGEMENT SERVICES 2.82% American Dental Partners, Inc.* 17,600 422 ------------
SEE NOTES TO FINANCIAL STATEMENTS. 11 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONTINUED) MICRO-CAP GROWTH FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ---------------------------------------------------------------------------------- HOTEL/MOTEL 1.59% Interstate Hotels & Resorts, Inc.* 31,700 $ 142 Marcus Corp. (The) 5,000 96 ------------ TOTAL 238 ------------ HOUSEHOLD FURNISHINGS 0.31% Haverty Furniture Cos., Inc. 3,300 47 ------------ IDENTIFICATION CONTROL & FILTER DEVICES 1.00% Robbins & Myers, Inc. 6,900 150 ------------ INSURANCE: PROPERTY-CASUALTY 3.20% Donegal Group, Inc. 14,000 261 Navigators Group, Inc. (The)* 6,800 218 ------------ TOTAL 479 ------------ MACHINERY: INDUSTRIAL/SPECIALTY 2.63% Tennant Co. 5,300 188 Twin Disc, Inc. 9,700 206 ------------ TOTAL 394 ------------ MACHINERY: OIL WELL EQUIPMENT & SERVICES 1.81% Lufkin Industries, Inc. 9,200 271 ------------ MACHINERY: SPECIALTY 1.81% Key Technology, Inc.* 16,800 161 Quipp, Inc.* 9,800 110 ------------ TOTAL 271 ------------ MEDICAL & DENTAL INSTRUMENTS & SUPPLIES 2.69% ICU Medical, Inc.* 4,700 167 Meridian Bioscience, Inc. 13,900 235 ------------ TOTAL 402 ------------ METAL FABRICATING 1.50% Material Sciences Corp.* 10,200 125 NN, Inc. 7,900 99 ------------ TOTAL 224 ------------ METALS & MINERALS MISCELLANEOUS 1.52% Castle (A.M.) & Co.* 19,100 $ 228 ------------ MISC. MATERIALS & COMMODITIES 1.02% Lydall, Inc.* 17,100 153 ------------ OIL: INTEGRATED DOMESTIC 1.78% Pioneer Drilling Co.* 20,200 266 ------------ POLLUTION CONTROL AND ENVIRONMENTAL SERVICES 2.15% Team, Inc.* 16,400 321 ------------ RAILROADS 0.82% Genesee & Wyoming, Inc. Class A* 5,087 122 ------------ REAL ESTATE INVESTMENT TRUSTS 1.00% Agree Realty Corp. 5,500 149 ------------ RENTAL & LEASING SERVICES: COMMERCIAL 1.73% McGrath RentCorp 11,600 258 ------------ RETAIL 1.91% Rush Enterprises, Inc. Class B* 19,300 286 ------------ SAVINGS & LOAN 1.54% Beverly Hills Bancorp Inc. 22,100 231 ------------ SERVICES: COMMERCIAL 12.19% Ambassadors Int'l., Inc. 5,300 177 Exponent, Inc.* 16,600 396 Hudson Highland Group, Inc.* 11,700 161 Integrated Alarm Services Group, Inc.* 40,700 153 Monro Muffler Brake, Inc.* 13,500 346 SM&A* 44,200 373 World Fuel Services Corp. 8,700 217 ------------ TOTAL 1,823 ------------
SEE NOTES TO FINANCIAL STATEMENTS. 12 SCHEDULE OF INVESTMENTS (UNAUDITED)(CONCLUDED) MICRO-CAP GROWTH FUND APRIL 30, 2005
VALUE INVESTMENTS SHARES (000) ---------------------------------------------------------------------------------- SHOES 1.16% Skechers U.S.A., Inc. Class A* 14,100 $ 173 ------------ STEEL 0.73% Steel Technologies Inc. 5,700 109 ------------ TELECOMMUNICATIONS EQUIPMENT 1.34% C-Cor Inc.* 30,300 200 ------------ TEXTILES APPAREL MANUFACTURERS 2.86% Cutter & Buck Inc. 14,800 200 Hartmarx Corp.* 26,400 228 ------------ TOTAL 428 ------------ TOBACCO 0.85% DIMON, Inc. 14,300 85 Standard Commercial Corp. 2,400 42 ------------ TOTAL 127 ------------ TRANSPORTATION MISCELLANEOUS 2.96% Hub Group, Inc. Class A* 3,800 209 Quixote Corp. 11,600 234 ------------ TOTAL 443 ------------ TRUCKERS 2.17% Covenant Transport, Inc. Class A* 11,400 153 P.A.M. Transportation Services, Inc.* 10,200 172 ------------ TOTAL 325 ------------ UTILITIES: GAS DISTRIBUTORS 0.53% Chesapeake Utilities Corp. 2,900 79 ------------ UTILITIES: MISCELLANEOUS 1.41% Waste Industries USA, Inc. 16,000 211 ------------ TOTAL COMMON STOCKS (Cost $11,652,279) 14,317 ============ PRINCIPAL AMOUNT VALUE INVESTMENTS (000) (000) ---------------------------------------------------------------------------------- SHORT-TERM INVESTMENT 3.70% REPURCHASE AGREEMENT 3.70% Repurchase Agreement dated 4/29/2005, 2.22% due 5/2/2005 with State Street Bank & Trust Co. collateralized by $570,000 of Federal National Mortgage Assoc at zero coupon due 8/10/2005; value: $565,013; proceeds: $553,565 (Cost $553,463) $ 553 $ 553 ------------ TOTAL INVESTMENTS IN SECURITIES 99.40% (COST $12,205,742) 14,870 ============ OTHER ASSETS IN EXCESS OF LIABILITES 0.60% 90 ============ NET ASSETS 100.00% $ 14,960 ============
* Non-income producing security. SEE NOTES TO FINANCIAL STATEMENTS. 13 STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2005
MICRO-CAP MICRO-CAP GROWTH FUND VALUE FUND ASSETS: Investment in securities, at cost $ 5,627,796 $ 12,205,742 ------------------------------------------------------------------------------------------------- Investment in securities, at value $ 5,969,610 $ 14,870,278 Receivables: Interest and dividends 310 4,176 Investment securities sold 187,869 183,555 Capital shares sold 6,423 10,655 From advisor 838 2,306 Prepaid expenses and other assets 11 2,668 ------------------------------------------------------------------------------------------------- TOTAL ASSETS 6,165,061 15,073,638 ------------------------------------------------------------------------------------------------- LIABILITIES: Payables: Investment securities purchased 107,290 71,537 Management fees 7,514 18,582 12b-1 distribution fees 1,309 3,390 Fund administration 201 495 Trustees' fees 335 259 Accrued expenses and other liabilities 25,654 19,505 ------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 142,303 113,768 ================================================================================================= NET ASSETS $ 6,022,758 $ 14,959,870 ================================================================================================= COMPOSITION OF NET ASSETS: Paid-in capital $ 5,320,441 $ 11,256,672 Accumulated net investment loss (63,519) (92,126) Accumulated net realized gain on investments 424,022 1,130,788 Net unrealized appreciation on investments 341,814 2,664,536 ------------------------------------------------------------------------------------------------- NET ASSETS $ 6,022,758 $ 14,959,870 ================================================================================================= NET ASSETS BY CLASS: Class A Shares $ 4,961,525 $ 12,509,165 Class Y Shares $ 1,061,233 $ 2,450,705 OUTSTANDING SHARES BY CLASS (UNLIMITED NUMBER OF AUTHORIZED SHARES OF BENEFICIAL INTEREST): Class A Shares 415,658 548,057 Class Y Shares 87,886 106,681 NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE (NET ASSETS DIVIDED BY OUTSTANDING SHARES): Class A Shares-Net asset value $ 11.94 $ 22.82 Class A Shares-Maximum offering price (Net asset value plus sales charge of 5.75%) $ 12.67 $ 24.21 Class Y Shares-Net asset value $ 12.08 $ 22.97 =================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 14 STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2005
MICRO-CAP MICRO-CAP GROWTH FUND VALUE FUND INVESTMENT INCOME: Dividends $ 2,825 $ 50,615 Interest 2,145 6,807 ------------------------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 4,970 57,422 ------------------------------------------------------------------------------------------------- EXPENSES: Management fees 49,739 108,754 12b-1 distribution plan-Class A 6,793 15,298 Shareholder servicing 2,612 5,218 Professional 7,636 7,818 Reports to shareholders 2,287 6,122 Fund administration 1,326 2,900 Custody 1,487 4,711 Trustees' fees 64 267 Registration - 1,155 Other 58 118 ------------------------------------------------------------------------------------------------- Gross expenses 72,002 152,361 Expense reductions (See Note 7) (79) (106) Expenses assumed by advisor (See Note 3) (3,760) (2,783) ------------------------------------------------------------------------------------------------- NET EXPENSES 68,163 149,472 ------------------------------------------------------------------------------------------------- NET INVESTMENT LOSS (63,193) (92,050) ------------------------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on investments 424,054 1,136,398 Net change in unrealized appreciation (depreciation) on investments (178,692) (160,139) ================================================================================================= NET REALIZED AND UNREALIZED GAIN 245,362 976,259 ================================================================================================= NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 182,169 $ 884,209 =================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 15 STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) SIX MONTHS ENDED APRIL 30, 2005
MICRO-CAP MICRO-CAP INCREASE IN NET ASSETS GROWTH FUND VALUE FUND OPERATIONS: Net investment loss $ (63,193) $ (92,050) Net realized gain (loss) on investments 424,054 1,136,398 Net change in unrealized appreciation (depreciation) on investments (178,692) (160,139) ------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 182,169 884,209 ================================================================================================= DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized gain Class A (145,059) (1,261,565) Class Y (29,179) (202,569) ------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS (174,238) (1,464,134) ================================================================================================= CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 611,624 1,652,554 Reinvestment of distributions 173,991 1,463,982 Cost of shares reacquired (514,298) (177,636) ------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 271,317 2,938,900 ================================================================================================= NET INCREASE IN NET ASSETS 279,248 2,358,975 ================================================================================================= NET ASSETS: Beginning of period 5,743,510 12,600,895 ------------------------------------------------------------------------------------------------- END OF PERIOD $ 6,022,758 $ 14,959,870 ================================================================================================= ACCUMULATED NET INVESTMENT LOSS $ (63,519) $ (92,126) =================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 16 STATEMENTS OF CHANGES IN NET ASSETS YEAR ENDED OCTOBER 31, 2004
MICRO-CAP MICRO-CAP INCREASE IN NET ASSETS GROWTH FUND VALUE FUND OPERATIONS: Net investment loss $ (104,644) $ (131,931) Net realized gain on investments 595,487 1,589,792 Net change in unrealized appreciation (depreciation) on investments (66,499) 457,431 ------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 424,344 1,915,292 ================================================================================================= DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Class A - (122,771) Class Y - (351) Net realized gain Class A - (532,495) Class Y - (1,280) ------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS - (656,897) ================================================================================================= CAPITAL SHARE TRANSACTIONS: Net proceeds from sales of shares 1,784,611 3,926,178 Reinvestment of distributions - 656,897 Cost of shares reacquired (1,128,485) (2,153,835) ------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM CAPITAL SHARE TRANSACTIONS 656,126 2,429,240 ================================================================================================= NET INCREASE IN NET ASSETS 1,080,470 3,687,635 ================================================================================================= NET ASSETS: Beginning of year 4,663,040 8,913,260 ------------------------------------------------------------------------------------------------- END OF YEAR $ 5,743,510 $ 12,600,895 ================================================================================================= ACCUMULATED NET INVESTMENT LOSS $ (326) $ (76) =================================================================================================
SEE NOTES TO FINANCIAL STATEMENTS. 17 FINANCIAL HIGHLIGHTS MICRO-CAP GROWTH FUND
SIX MONTHS ENDED YEAR ENDED 10/31 5/1/2000(c) 4/30/2005 ----------------------------------------------- TO (UNAUDITED) 2004 2003 2002 2001 10/31/2000 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 11.88 $ 10.87 $ 7.51 $ 9.49 $ 13.18 $ 16.76 ========= ========= ========= ========= ======== ======== Investment operations: Net investment income (loss)(a) (.13) (.23) (.14) (.02) -(e) (.01) Net realized and unrealized gain (loss) .54 1.24 3.50 (1.95) (1.34) (3.57) --------- --------- --------- --------- -------- -------- Total from investment operations .41 1.01 3.36 (1.97) (1.34) (3.58) --------- --------- --------- --------- -------- -------- Distributions to shareholders from: Net investment income - - - (.01) (.01) - Net realized gain (.35) - - - (2.34) - --------- --------- --------- --------- -------- -------- Total distributions (.35) - - (.01) (2.35) - --------- --------- --------- --------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 11.94 $ 11.88 $ 10.87 $ 7.51 $ 9.49 $ 13.18 ========= ========= ========= ========= ======== ======== Total Return(b) 3.31%(d) 9.29% 44.74% (20.81)% (11.30)% (21.36)%(d) RATIOS TO AVERAGE NET ASSETS: Expenses, including waiver and expense reductions 1.04%(d) 2.10% 1.75% .38% .38% .18%(d) Expenses, excluding waiver and expense reductions 1.10%(d) 2.52% 2.84% 2.99% 4.02% 1.36%(d) Net investment income (loss) (.97)%(d) (1.91)% (1.60)% (.24)% .04% (.04)%(d) SIX MONTHS ENDED YEAR ENDED 10/31 5/1/2000(c) 4/30/2005 ----------------------------------------------- TO SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 10/31/2000 -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 4,962 $ 4,726 $ 4,655 $ 2,698 $ 2,266 $ 2,160 Portfolio turnover rate 39.27% 79.07% 126.71% 34.08% 80.17% 103.33%
SEE NOTES TO FINANCIAL STATEMENTS. 18 FINANCIAL HIGHLIGHTS (CONCLUDED) MICRO-CAP GROWTH FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 12.00 $ 10.96 $ 7.55 $ 9.52 $ 13.21 $ 12.57 ========= ========= ========= ========= ======== ======== Investment operations: Net investment income (loss)(a) (.11) (.20) (.11) .01 .04 .04 Net realized and unrealized gain (loss) .54 1.24 3.52 (1.95) (1.35) 1.73 --------- --------- --------- --------- -------- -------- Total from investment operations .43 1.04 3.41 (1.94) (1.31) 1.77 --------- --------- --------- --------- -------- -------- Distributions to shareholders from: Net investment income - - - (.03) (.04) (.02) Net realized gain (.35) - - - (2.34) (1.11) --------- --------- --------- --------- -------- -------- Total distributions (.35) - - (.03) (2.38) (1.13) --------- --------- --------- --------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 12.08 $ 12.00 $ 10.96 $ 7.55 $ 9.52 $ 13.21 ========= ========= ========= ========= ======== ======== Total Return(b) 3.45%(d) 9.49% 45.17% (20.42)% (11.00)% 14.48% RATIOS TO AVERAGE NET ASSETS: Expenses, including waiver and expense reductions .92%(d) 1.85%+ 1.42% .00% .00% .00% Expenses, including waiver and expense reductions .97%(d) 2.27%+ 2.51% 2.61% 3.64% 2.33% Net investment income (loss) (.84)%(d) (1.66)%+ (1.27)% .14% .42% .22% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ------------------------------------------------------------ SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 1,061 $ 1,018 $ 8 $ 6 $ 7 $ 8 Portfolio turnover rate 39.27% 79.07% 126.71% 34.08% 80.17% 103.33%
+ 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. 19 FINANCIAL HIGHLIGHTS MICRO-CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED 10/31 5/1/2000(c) 4/30/2005 ----------------------------------------------- TO (UNAUDITED) 2004 2003 2002 2001 10/31/2000 PER SHARE OPERATING PERFORMANCE (CLASS A SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 23.89 $ 21.43 $ 15.56 $ 15.68 $ 15.90 $ 13.13 ========= ========= ========= ========= ======== ======== Investment operations: Net investment income (loss)(a) (.15) (.27) (.14) .05 .10 .07 Net realized and unrealized gain 1.81 4.31 6.69 .60 2.20 2.70 --------- --------- --------- --------- -------- -------- Total from investment operations 1.66 4.04 6.55 .65 2.30 2.77 --------- --------- --------- --------- -------- -------- Distributions to shareholders from: Net investment income - (.30) (.05) (.05) (.14) - Net realized gain (2.73) (1.28) (.63) (.72) (2.38) - --------- --------- --------- --------- -------- -------- Total distributions (2.73) (1.58) (.68) (.77) (2.52) - --------- --------- --------- --------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 22.82 $ 23.89 $ 21.43 $ 15.56 $ 15.68 $ 15.90 ========= ========= ========= ========= ======== ======== Total Return(b) 7.03%(d) 20.08% 43.80% 4.12% 17.16% 21.10%(d) RATIOS TO AVERAGE NET ASSETS: Expenses, including waiver and expense reductions 1.04%(d) 2.10% 1.73% .38% .38% .17%(d) Expenses, excluding waiver and expense reductions 1.06%(d) 2.27% 2.18% 2.76% 3.08% 1.50%(d) Net investment income (loss) (.65)%(d) (1.22)% (.84)% .31% .64% .49%(d) SIX MONTHS ENDED YEAR ENDED 10/31 5/1/2000(c) 4/30/2005 ----------------------------------------------- TO SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 10/31/2000 -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 12,509 $ 10,838 $ 8,892 $ 5,442 $ 4,889 $ 2,032 Portfolio turnover rate 16.72% 36.97% 48.55% 36.02% 52.63% 82.02%
SEE NOTES TO FINANCIAL STATEMENTS. 20 FINANCIAL HIGHLIGHTS (CONCLUDED) MICRO-CAP VALUE FUND
SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------- (UNAUDITED) 2004 2003 2002 2001 2000 PER SHARE OPERATING PERFORMANCE (CLASS Y SHARES) NET ASSET VALUE, BEGINNING OF PERIOD $ 24.00 $ 21.53 $ 15.63 $ 15.72 $ 15.92 $ 10.75 ========= ========= ========= ========= ======== ======== Investment operations: Net investment income (loss)(a) (.12) (.22) (.09) .12 .16 .14 Net realized and unrealized gain 1.82 4.32 6.73 .59 2.19 5.19 --------- --------- --------- --------- -------- -------- Total from investment operations 1.70 4.10 6.64 .71 2.35 5.33 --------- --------- --------- --------- -------- -------- Distributions to shareholders from: Net investment income - (.35) (.11) (.08) (.17) (.09) Net realized gain (2.73) (1.28) (.63) (.72) (2.38) (.07) --------- --------- --------- --------- -------- -------- Total distributions (2.73) (1.63) (.74) (.80) (2.55) (.16) --------- --------- --------- --------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 22.97 $ 24.00 $ 21.53 $ 15.63 $ 15.72 $ 15.92 ========= ========= ========= ========= ======== ======== Total Return(b) 7.18%(d) 20.36% 44.35% 4.51% 17.48% 50.12% RATIOS TO AVERAGE NET ASSETS: Expenses, including waiver and expense reductions .92%(d) 1.85%+ 1.41% .00% .00% .00% Expenses, including waiver and expense reductions .94%(d) 2.02%+ 1.86% 2.38% 2.70% 2.50% Net investment income (loss) (.53)%(d) (.97)%+ (.52)% .69% 1.02% 1.15% SIX MONTHS ENDED YEAR ENDED 10/31 4/30/2005 ----------------------------------------------------------- SUPPLEMENTAL DATA: (UNAUDITED) 2004 2003 2002 2001 2000 -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000) $ 2,451 $ 1,763 $ 21 $ 15 $ 14 $ 12 Portfolio turnover rate 16.72% 36.97% 48.55% 36.02% 52.63% 82.02%
+ 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. SEE NOTES TO FINANCIAL STATEMENTS. 21 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION Lord Abbett Securities Trust (the "Trust") is registered under the Investment Company Act of 1940 (the "Act") as an open-end management investment company organized as a Delaware business trust on February 26, 1993. The Trust currently consists of seven funds. This report covers the following two funds and their respective classes (separately, a "Fund" and collectively, the "Funds"): Lord Abbett Micro-Cap Growth Fund ("Micro-Cap Growth Fund"), Class A and Y shares and Lord Abbett Micro-Cap Value Fund ("Micro-Cap Value Fund"), Class A and Y shares. The investment objective of both Micro-Cap Growth Fund and Micro-Cap Value Fund is long-term capital appreciation. Each class of shares has different expenses and dividends. A front-end sales charge is normally added to the Net Asset Value ("NAV") for Class A shares. There is no front-end sales charge in the case of Class Y shares, although there may be a contingent deferred sales charge ("CDSC") for certain redemptions of Class A shares made within 24 months (12 months if shares were purchased on or after November 1, 2004) following certain purchases made without a sales charge. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. 2. SIGNIFICANT ACCOUNTING POLICIES (a) INVESTMENT VALUATION-Securities traded on any recognized U.S. or non-U.S. exchange or on NASDAQ, Inc. are valued at the last sale price or official closing price on the exchange or system on which they are principally traded. Unlisted equity securities are valued at the last quoted sale price or, if no sale price is available, at the mean between the most recently quoted bid and asked prices. Securities for which market quotations are not readily available are valued at fair value as determined by management and approved in good faith by the Board of Trustees. Short-term securities with 60 days or less remaining to maturity are valued using the amortized cost method, which approximates current market value. (b) SECURITY TRANSACTIONS-Security transactions are recorded as of the date that the securities are purchased or sold (trade date). Realized gains and losses on sales of portfolio securities are calculated using the identified-cost method. Realized and unrealized gains (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. 22 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) (e) EXPENSES-Expenses incurred by the Trust that do not specifically relate to an individual fund are generally allocated to the Funds within the Trust on a pro rata basis. Expenses, excluding class specific expenses, are allocated to each class of shares based upon the relative proportion of net assets at the beginning of the day. Class A shares bear all expenses and fees relating to the Class A 12b-1 Distribution Plan. (f) REPURCHASE AGREEMENTS-Each Fund may enter into repurchase agreements with respect to securities. A repurchase agreement is a transaction in which the Fund acquires a security and simultaneously commits to resell that security to the seller (a bank or securities dealer) at an agreed-upon price on an agreed-upon date. Each Fund requires at all times that the repurchase agreement be collateralized by cash or by securities of the U.S. Government, its agencies, its instrumentalities, or U.S. Government sponsored enterprises having a value equal to, or in excess of, the value of the repurchase agreement (including accrued interest). If the seller of the agreement defaults on its obligation to repurchase the underlying securities at a time when the value of these securities has declined, the Fund may incur a loss upon disposition of the securities. 3. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES The Trust has a management agreement with Lord, Abbett & Co. LLC ("Lord Abbett") pursuant to which Lord Abbett supplies the Trust with investment management services and executive and other personnel, pays the remuneration of officers, provides office space and pays for ordinary and necessary office and clerical expenses relating to research and statistical work and supervision of the Trust's investment portfolios. The management fee is based on average daily net assets at an annual rate of 1.50%. For the fiscal year ending October 31, 2005, Lord Abbett has contractually agreed to reimburse expenses for each Fund to the extent necessary to maintain total operating expenses for Class A at 2.10% and Class Y at 1.85% of average daily net assets. Lord Abbett provides certain administrative services to the Funds pursuant to an Administrative Services Agreement at an annual rate of .04% of each Fund's average daily net assets. 12b-1 DISTRIBUTION PLANS Each Fund has adopted a distribution plan with respect to the Class A shares of the Micro-Cap Growth Fund and Micro-Cap Value Fund pursuant to Rule 12b-1 of the Act, which provides for the payment of ongoing distribution and service fees to Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord Abbett. The service fees are accrued daily based upon the average daily net assets attributable to Class A at an annual rate of .25%. 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 declared and distributed to shareholders at least annually. The capital loss carryforward amount, if any, is available to offset future net capital gains. Dividends and distributions to shareholders 23 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with Federal income tax regulations which may differ from accounting principles generally accepted in the United States of America. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the components of net assets based on their federal tax basis treatment; temporary differences do not require reclassification. Dividends and distributions, which exceed earnings and profits for tax purposes, are reported as a tax return of capital. The tax character of distributions paid during the six months ended April 30, 2005 and the fiscal year ended October 31, 2004 were as follows:
MICRO-CAP GROWTH FUND MICRO-CAP VALUE FUND --------------------------------------------------------------------------------------- 04/30/2005 10/31/2004 04/30/2005 10/31/2004 (UNAUDITED) (UNAUDITED) --------------------------------------------------------------------------------------- Distributions paid from: Ordinary income $ - $ - $ 276,855 $ 123,122 Net long-term capital gains 174,238 - 1,187,279 533,775 --------------------------------------------------------------------------------------- Total distributions paid $ 174,238 $ - $ 1,464,134 $ 656,897 =======================================================================================
As of April 30, 2005, 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 $ 5,627,796 $ 12,209,103 --------------------------------------------------------------------------------------- Gross unrealized gain 985,867 3,066,450 Gross unrealized loss (644,053) (405,275) --------------------------------------------------------------------------------------- Net unrealized security gain $ 341,814 $ 2,661,175 =======================================================================================
The difference between book-basis and tax-basis unrealized gains (losses) is primarily attributable to wash sales and other temporary tax adjustments. 5. PORTFOLIO SECURITIES TRANSACTIONS Purchases and sales of investment securities (excluding short-term investments) for the six months ended April 30, 2005 were as follows:
PURCHASES SALES ---------------------------------------------------------------- Micro-Cap Growth $ 2,720,622 $ 2,508,407 Micro-Cap Value 3,630,420 2,332,910
There were no purchases or sales of U.S. Government securities for the six months ended April 30, 2005. 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 24 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) amounts are treated as though equivalent dollar amounts have been invested proportionately in the Funds. Such amounts and earnings accrued thereon are included in Trustees' Fees on the Statement of Operations and in Trustees' Fees Payable on the Statement of Assets and Liabilities and are not deductible for U.S. Federal income tax purposes until such amounts are paid. 7. EXPENSE REDUCTIONS The Trust has entered into arrangements with its transfer agent and custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of each Fund's expenses. 8. CUSTODIAN AND ACCOUNTING AGENT State Street Bank & Trust Company ("SSB") is the Trust's custodian and accounting agent. SSB performs custodial, accounting and recordkeeping functions relating to portfolio transactions and calculating each Fund's NAV. 9. INVESTMENT RISKS Each Fund is subject to the general risks and considerations associated with equity investing, as well as the particular risks associated with micro-cap and growth or value stocks. The value of an investment will fluctuate in response to movements in the stock market in general and to the changing prospects of individual companies in which the Funds invest. Micro-cap companies may be subject to greater risks and may be more sensitive to changes in economic conditions than larger, more established companies. There may be less liquidity in micro-cap company stocks, subjecting them to greater price fluctuations than larger company stocks. In the case of Micro-Cap Growth Fund, the growth stocks in which it generally invests may add to the Fund's volatility. In the case of the Micro-Cap Value Fund, the intrinsic value of particular value stocks may not be recognized for a long time. These factors can affect each Fund's performance. 10. SUMMARY OF CAPITAL TRANSACTIONS Transactions in shares of beneficial interest are as follows: MICRO-CAP GROWTH FUND
SIX MONTHS ENDED APRIL 30, 2005 YEAR ENDED (UNAUDITED) OCTOBER 31, 2004 ---------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------------------- CLASS A SHARES Shares sold 26,447 $ 338,742 66,459 $ 794,315 Reinvestment of distributions 11,457 144,812 - - Shares reacquired (20,102) (258,606) (96,743) (1,128,485) ---------------------------------------------------------------------------------------------------------- Increase (decrease) 17,802 $ 224,948 (30,284) $ (334,170) ---------------------------------------------------------------------------------------------------------- CLASS Y SHARES Shares sold 20,355 $ 272,882 84,132 $ 990,296 Reinvestment of distributions 2,285 29,179 - - Shares reacquired (19,626) (255,692) - - ---------------------------------------------------------------------------------------------------------- Increase 3,014 $ 46,369 84,132 $ 990,296 ----------------------------------------------------------------------------------------------------------
25 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONCLUDED) MICRO-CAP VALUE FUND
SIX MONTHS ENDED APRIL 30, 2005 YEAR ENDED (UNAUDITED) OCTOBER 31, 2004 ---------------------------------------------------------------------------------------------------------- SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------------------------- CLASS A SHARES Shares sold 42,254 $ 986,310 99,668 $ 2,225,860 Reinvestment of distributions 55,593 1,261,412 32,042 655,266 Shares reacquired (3,516) (80,508) (92,812) (2,153,835) ---------------------------------------------------------------------------------------------------------- Increase 94,331 $ 2,167,214 38,898 $ 727,291 ---------------------------------------------------------------------------------------------------------- CLASS Y SHARES Shares sold 28,434 $ 666,244 72,362 $ 1,700,318 Reinvestment of distributions 8,880 202,570 80 1,631 Shares reacquired (4,074) (97,128) - - ---------------------------------------------------------------------------------------------------------- Increase 33,240 $ 771,686 72,442 $ 1,701,949 ----------------------------------------------------------------------------------------------------------
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. 26 HOUSEHOLDING The Trust has adopted a policy that allows it to send only one copy of the Funds' Prospectus, proxy material, annual report and semi-annual report to certain shareholders residing at the same "household." This reduces Trust expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be "householded," please call Lord Abbett at 800-821-5129 or send a written request with your name, the name of your fund or funds and your account number or numbers to Lord Abbett Family of Funds, P.O. Box 219100, Kansas City, MO 64121. PROXY VOTING POLICIES, PROCEDURES, AND RECORD A description of the policies and procedures that Lord Abbett uses to vote proxies related to the Fund's portfolio securities, and information on as to how Lord Abbett voted each Fund's proxies during the 12-month period ended June 30, 2004 are available without charge, upon request, (i) by calling 888-522-2388; (ii) or on Lord Abbett's website at www.LordAbbett.com; and (iii) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE The Funds are required to file their complete schedule of portfolio holdings with the SEC for their first and third fiscal quarters on Form N-Q for fiscal quarters ending on or after July 9, 2004. Copies of the filings will be available without charge, upon request on the SEC's website at www.sec.gov and may be available by calling Lord Abbett at 800-821-5129. You can also obtain copies of Form N-Q by (i) visiting the SEC's Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330); (ii) sending your request and duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfo@sec.gov. 27 APPROVAL OF ADVISORY CONTRACTS At meetings on December 9, 2004, the Board of Trustees of the Funds, including all Trustees who are not interested persons of the Funds (the "Board"), considered whether to approve the continuation of the existing management agreement between each of the Funds and Lord Abbett. In addition to the materials the Board had reviewed throughout the course of the year, the Board received materials relating to the management agreement before the meeting and had the opportunity to ask questions and request further information in connection with its consideration. The materials received by the Board as to each Fund included, but were not limited to, (1) information provided by Lipper Analytical Services, Inc. regarding the investment performance of each Fund compared to the investment performance of a group of funds with substantially similar investment objectives (the "performance universe") and to the investment performance of an appropriate securities index (if such an index existed), for various time periods each ending September 30, 2004, (2) information on the effective management fee rates and expense ratios for funds with similar objectives and similar size (the "peer group"), (3) sales and redemption information for each Fund, (4) information regarding Lord Abbett's financial condition, (5) an analysis of the relative profitability of the management agreement to Lord Abbett, (6) information regarding the distribution arrangements of each Fund, (7) information regarding the personnel and other resources devoted by Lord Abbett to managing each Fund. The specific considerations as to each Fund are discussed below. MICRO-CAP VALUE FUND INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading. The Board noted that Lord Abbett did not use brokerage commissions to purchase third-party research. INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment performance as well as the performance of the performance universe of funds, both in terms of total return and in terms of other statistical measures. The Board noted the difficulty of comparing the Fund to an appropriate performance universe, given the limited number of registered investment companies having a similar investment objective, and considered the performance of the Fund compared to two different performance universes. The Board noted that the performance of the Class Y shares of the Fund were in the first quintile of one performance universe for all periods, and in the first quintile of the other performance universe for all periods, except the one-year period, in which it was in the second quintile. The Board also noted that the performance was above that of the Lipper Small-Cap Core Index and the Lipper Small-Cap Value Index in each period. LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel providing investment management services to each Fund, in light of each Fund's investment objective and discipline. Among other things, it considered the size and experience of Lord Abbett's investment management staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel. NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett supervision of third party service providers, including the Fund's transfer agent and custodian. 28 EXPENSES. The Board considered the expense ratios of each class and the expense ratios of peer groups. It also considered the amount and nature of the fees paid by shareholders. The Board noted that the contractual management and administrative services fees were approximately thirty-nine basis points above the median of the peer group and the actual advisory and administrative services fees were approximately sixty-four basis points above the median. The Board also noted that Lord Abbett had implemented an expense cap that reduced the total expense ratio of Class A to 2.10% and the total expense ratio of Class Y to 1.85%. The Board noted that, taking into account the cap, the total expense ratio of Class A was approximately thirty-six basis points above the median of the peer group and the total expense ratio of Class Y was approximately forty-five basis points above the median. The Board also noted the Fund was only offered to institutional investors and to employees of Lord Abbett. PROFITABILITY. The Board considered the level of Lord Abbett's profits in managing the Fund, including a review of Lord Abbett's methodology for allocating its costs to its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was appropriate. It considered the profits realized by Lord Abbett in connection with the operation of the Fund and whether the amount of profit was fair for the management of the Fund. The Board also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel. The Board noted that Lord Abbett's profitability had increased, in part due to an increase in assets under management. ECONOMIES OF SCALE. The Board considered whether there had been any economies of scale in managing the Fund, whether the Fund had appropriately benefited from any such economies of scale, and whether there was potential for realization of any further economies of scale. OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services other than investment. The Board also considered the revenues and profitability of Lord Abbett's investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund. ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms. In considering whether to approve the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. After considering all of the relevant factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the management agreement. MICRO-CAP GROWTH FUND INVESTMENT MANAGEMENT SERVICES GENERALLY. The Board considered the investment management services provided by Lord Abbett to the Fund, including investment research, portfolio management, and trading. The Board noted that Lord Abbett did not use brokerage commissions to purchase third-party research. 29 INVESTMENT PERFORMANCE AND COMPLIANCE. The Board reviewed the Fund's investment performance as well as the performance of the performance universe of funds, both in terms of total return and in terms of other statistical measures. The Board noted the difficulty of comparing the Fund to an appropriate performance universe, given the limited number of registered investment companies having a similar investment objective, and considered the performance of the Fund compared to two different performance universes. The Board noted noted that the performance of the Class Y shares of the Fund was in the fourth quintile of one performance universe for the nine-month and three-year periods and in the fifth quintile for the one-and five-year periods, and in the first quintile in the nine-month and three-year periods, in the third quintile in the one-year period, and in the second quintile in the five-year period for the second performance universe. The Board also noted that the performance was below that of the Lipper Small-Cap Core Index and above that of the Lipper Small-Cap Growth Index for each period. LORD ABBETT'S PERSONNEL AND METHODS. The Board considered the qualifications of the personnel providing investment management services to each Fund, in light of each Fund's investment objective and discipline. Among other things, it considered the size and experience of Lord Abbett's investment management staff, Lord Abbett's investment methodology and philosophy, and Lord Abbett's approach to recruiting, training, and retaining investment management personnel. NATURE AND QUALITY OF OTHER SERVICES. The Board considered the nature, quality, costs, and extent of administrative and other services performed by Lord Abbett and Lord Abbett Distributor and the nature and extent of Lord Abbett supervision of third party service providers, including the Fund's transfer agent and custodian. EXPENSES. The Board considered the expense ratios of each class and the expense ratios of peer groups. It also considered the amount and nature of the fees paid by shareholders. The Board noted that the contractual management and administrative services fees were approximately thirty-nine basis points above the median of the peer group and the actual management and administrative services fees were approximately sixty-four basis points above the median of the peer group. The Board noted that Lord Abbett had implemented a total expense cap for the Fund that reduced the total expense ratio of Class A to 2.10% and the total expense ratio of Class Y to 1.85%. The Board noted that, in light of the expense, the total expense ratio of Class A was approximately thirty-six basis points above the median of the peer group and the total expense ratio of Class Y was approximately forty-five basis points above the median of the peer group. The Board also noted the Fund was offered only to institutional investors and to employees of Lord Abbett. PROFITABILITY. The Board considered the level of Lord Abbett's profits in managing the Fund, including a review of Lord Abbett's methodology for allocating its costs to its management of the Fund. The Board concluded that the allocation methodology had a reasonable basis and was appropriate. It considered the profits realized by Lord Abbett in connection with the operation of the Fund and whether the amount of profit was fair for the management of the Fund. The Board also considered the profits realized from other businesses of Lord Abbett, which may benefit from or be related to the Fund's business. The Board considered Lord Abbett's profit margins in comparison with available industry data, both accounting for and ignoring marketing and distribution expenses, and how those profit margins could affect Lord Abbett's ability to recruit and retain investment personnel. The Board noted that Lord Abbett's profitability had increased, in part due to an increase in assets under management. 30 ECONOMIES OF SCALE. The Board considered whether there had been any economies of scale in managing the Fund, whether the Fund had appropriately benefited from any such economies of scale, and whether there was potential for realization of any further economies of scale. OTHER BENEFITS TO LORD ABBETT. The Board considered the character and amount of fees paid by the Fund and the Fund's shareholders to Lord Abbett and Lord Abbett Distributor for services other than investment. The Board also considered the revenues and profitability of Lord Abbett's investment advisory business apart from its mutual fund business, and the intangible benefits enjoyed by Lord Abbett by virtue of its relationship with the Fund. ALTERNATIVE ARRANGEMENTS. The Board considered whether, instead of approving continuation of the management agreement, employing one or more alternative arrangements might be in the best interests of the Fund, such as continuing to employ Lord Abbett, but on different terms. In considering whether to approve the continuation of the management agreement, the Board did not identify any single factor as paramount or controlling. This summary does not discuss in detail all matters considered. After considering all of the relevant factors, the Board unanimously found that continuation of the existing management agreement was in the best interests of the Fund and its shareholders and voted unanimously to approve the continuation of the management agreement. 31 This page is intentionally left blank. [LORD ABBETT(R) LOGO] This report when not used for the general information of shareholders of the Fund, is to be distributed only if Lord Abbett Securities Trust preceded or accompanied by a current Fund Prospectus. Lord Abbett Micro-Cap Growth Fund Lord Abbett Micro-Cap Value Fund Lord Abbett Mutual Fund shares are distributed by LORD ABBETT DISTRIBUTOR LLC LAMC-3-0405 (06/05)
ITEM 2: CODE OF ETHICS. Not applicable ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4-8: PRINCIPAL ACCOUNTANT FEES AND SERVICES. [RESERVED] Not applicable. ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6: SCHEDULE OF INVESTMENTS. Not applicable. ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not Applicable. ITEM10: CONTROLS AND PROCEDURES. (a) Based on their evaluation of the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days prior to the filing date of this report, the Chief Executive Officer and Chief Financial Officer of the Registrant have concluded that such disclosure controls and procedures are reasonably designed and effective to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to them by others within those entities. (b) There were no significant changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant's second fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 11: EXHIBITS. (a)(1) Amendments to Code of Ethics - Not applicable. (a)(2) Certification of each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached hereto as a part of EX-99.CERT. (a)(3) Certification of each principal executive officer and principal financial officer of the Registrant as required by Section 906 of the Sarbanes-Oxley Act of 2002 is attached hereto as a part of EX-99.906CERT. 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: June 22, 2005 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: June 22, 2005