<PAGE>
Securities Trust
Lord Abbett
o Growth & Income Series
o International Series
o World Bond-Debenture Series
o Alpha Series
1998 ANNUAL REPORT
[GRAPHIC OMITTED]
Investment portfolios designed to help you
capture capital growth over the long term
[LOGO](R)
<PAGE>
Report to Shareholders
For the Fiscal Year Ended October 31, 1998
[PHOTO OMITTED]
/s/ Robert S. Dow
- -----------------------
ROBERT S. DOW
CHAIRMAN
DECEMBER 1, 1998
Table of Contents
Growth & Income Series
- --------------------------------------------------------------------------------
Fund Facts 2
Statement of Net Assets 4
International Series
- --------------------------------------------------------------------------------
When Searching the Globe 3
Statement of Net Assets 7
World Bond-Debenture Series
- --------------------------------------------------------------------------------
Statement of Net Assets 9
Alpha Series
- --------------------------------------------------------------------------------
Statement of Net Assets 11
Data on All Series
- --------------------------------------------------------------------------------
Statements of Operations 12
Statements of Changes in Net Assets 13
Financial Highlights 14
Notes to Financial Statements 17
Lord Abbett Securities Trust completed its fiscal year on October 31, 1998. The
following is an overview of class-specific data for the period under review.
Growth & Income Series - Fiscal Year Ended 10/31/98
Class A Class B Class C
- --------------------------------------------------------------------------------
Net asset value $9.15 $9.13 $9.11
Dividends $0.035 -- --
Capital gains $0.590 $0.590 $0.590
Total return* +11.97% +11.17% +10.94%
International Series - Fiscal Year Ended 10/31/98
Class A Class B Class C Class Y+
(partial period)
- --------------------------------------------------------------------------------
Net asset value $12.39 $12.28 $12.28 $12.41
Dividends $ 0.030 -- -- --
Total return* +14.36% +13.39% +13.39% +10.02%
World Bond-Debenture Series - 12/18/97** - 10/31/98
Class A Class B Class C
- --------------------------------------------------------------------------------
Net asset value $9.66 $9.65 $9.65
Dividends $0.426 $0.384 $0.384
Total return* +0.75% +0.24% +0.24%
Alpha Series - 12/29/97** - 10/31/98
Class A Class B Class C
- --------------------------------------------------------------------------------
Net asset value $12.91 $12.85 $12.86
Total return* -4.51% -4.96% -4.88%
About Growth and Income Series
While we anticipated that an environment of slowing corporate earnings might
move stock prices lower during the second half of the Fund's fiscal year,
extreme investor concern over economic problems abroad resulted in significant
declines across nearly all equity sectors. The Fund's value approach to stock
selection did not spare it from declining during the stock market downturn.
The economy continues to slow, and the financial markets have shown increased
volatility over concerns regarding earnings shortfalls and evidence of a global
credit crunch. However, our expectation for the U.S. economy at this time is not
recession, but rather that we have reached an inflection point of slower growth.
Consumer activity, well over half the economy, continues to provide support for
growth with continuing gains in job creation, income and spending. Business
spending is an area of greater concern. Recession abroad is likely to reduce
exports and have a flattening effect on corporate profit growth. Overall, gross
domestic product is likely to grow at an annual rate of approximately 1.5 - 2.0%
during the next 6 to 12 months. U.S. interest rates have fallen, reflecting
slower economic growth and continuing low inflation. As the Fund's new fiscal
year begins, the market is still anticipating some additional easing by the
Federal Reserve, a view with which we concur. In sum, it is our view that the
underpinnings of sound equity markets remain in place, and the price declines of
the third quarter created more opportunities for long-term investors.
* Total return, which is not annualized, is the percent change in
value with all dividends and distributions reinvested for the
periods shown, using the SEC=required uniform method to compute such
returns.
** Commencement of operations.
+ International Series Class Y shares commenced operations on
12/30/97.
<PAGE>
Report to Shareholders
About International Series
The Fund's investment strategy of holding a relatively concentrated portfolio of
industry-leading companies bought at low valuation levels means that we have
utilized the recent period of market weakness to steadily add to existing
positions.
We anticipate that next year, as investors realize that economic growth outside
Japan will remain strong and non-inflationary, share prices will likely surpass
their previous record highs, particularly in Europe. There, corpo-rate earnings
should receive an additional substantial boost from ongoing cost reduction
programs aimed at enhancing productivity, particularly in France and Germany.
Investor sentiment should also improve, helped by further interest rate
reductions and the Euro's introduction.
Meanwhile, by contrast, the Far Eastern markets, while stabilized, will continue
to reflect the uncertain state of their local economies, corporate sectors, and
political situations, so the Fund will likely remain underweighted there.
About World Bond-Debenture Series
A further slowdown in the Asian economies spread deflationary pressures to the
rest of the world, setting the stage for lower global interest rates and
increased currency volatility. Even the U.S. economy, which has served as the
engine for global economic growth over the last eight years, began to show signs
of a slowdown. Against this backdrop, new governments, taking office in both
developed and developing countries, have been working to promote growth and
reduce unemployment. In this environment, we at Lord Abbett World Bond-Debenture
Series have endeavored to capture value across a variety of asset classes, while
limiting the downside risk from volatile markets.
High-quality assets tended to outperform during much of the year as markets
discounted the prospect of lower rates in a flight to quality. The World
Bond-Debenture Series, with its limited exposure to emerging markets, was able
to hold its own in a falling market by maintaining exposure to the U.S. and
European high-yield markets as well as to high-grade markets. However, as
difficulties in various emerging markets become resolved, a prudent reassessment
of investment opportunities in such markets will be required.
About Alpha Series
Concern over economic problems abroad made investors reluctant to take risk,
pushing stock prices down in most sectors. Small-cap stocks, which are generally
less liquid than mid-cap and large-cap stocks, underperformed most other asset
classes. The Fund declined moderately amid difficult market conditions. More
recently, the Federal Reserve Board moved to lower interest rates to restore
investor confidence, and small-company stocks have rallied. However, relative to
most large-company stocks, small-caps remain meaningfully undervalued. We view
this as a unique opportunity to invest in select small companies. Furthermore,
we anticipate that continued intervention by the Federal Reserve will create an
environment in which small-cap stocks can perform well.
We are pleased that you have chosen one or more of the Series in the Lord Abbett
Securities Trust to play a role in your diversified investment portfolio. We
appreciate the confidence you have placed in Lord Abbett and aim to reward your
confidence in us going forward with continued strong long-term performance by
the Trust.
1
<PAGE>
Fund Facts
The Sophisticated Shopper:
When it comes to stock selection, the portfolio manager of the Growth & Income
Series tries to be a savvy buyer. We have an experienced team of financial
professionals whose approach includes elements similar to those taken by smart
shoppers.
When you think about how you shop, you realize that you like to find bargains.
Savvy shoppers often check out the sales racks to find items with a low price
tag. Of course, just because "the price is right" does not mean that a product
is worth buying. A smart shopper will carefully inspect the item, checking it
for defects and overall quality. Another important test required by the smart
shopper: usability and function. If the item is not in style, or is something
that would not likely be used, there is probably no point in buying it.
Quantitative Research:
Performed on a universe of the 1,000 largest U.S. and multinational companies to
identify those stocks that represent the best bargains: a "low price tag."
Fundamental Research:
Conducted to assess a company's operating environment, resources and strategic
plans, and to determine its prospects for exceeding the earnings expectations
reflected in its stock price: "overall quality."
Business Cycle Analysis:
Used to assess the economic and interest-rate sensitivity of the Fund's
portfolio. This analysis helps the portfolio manager assess how adding or
eliminating stocks changes a portfolio's overall sensitivity to economic
activity and interest rates: "Is it in style?"
Lord Abbett Securities Trust - Growth & Income Series -- A Strong Performer
Average Annual Class C Share Total Return(1) as of 10/31/98
[The following table was depicted as a bar graph in the printed material.]
1 Year 3 Years Life of Series(2)
------ ------- -----------------
10.9% 18.9% 16.6%
(1) Reflects the percent change at net asset value (for Class C shares) which
includes the reinvestment of all distributions. The Series issues
additional classes of shares with distinct pricing options. For a full
discussion of the differences in pricing alternatives, please call Lord
Abbett Distributor LLC at 800-874-3733 and ask for the current prospectus.
(2) The Series commenced operations on 1/3/94. Formerly Lord Abbett Securities
Trust - Growth & Income Trust.
Growth & Income Series
SEC-required average annual total returns (for Class C shares) for the periods
ended 9/30/98, with all distributions reinvested:
[The following table was depicted as a bar graph in the printed material.]
1 Year Life of Series
------ --------------
-0.60% 15.11%
Past performance is not an indication of future results. The investment return
and principal value of an investment will fluctuate so that shares, on any given
day or when redeemed, may be worth more or less than their original cost.
2
<PAGE>
When Searching the Globe for the Best Investment Opportunities ...
Rely On An Experienced Global Manager ...
Lord, Abbett & Co. is a minority owner of the International Series' sub-adviser
Fuji-Lord Abbett International, Limited (Fuji-Lord Abbett).
Fuji-Lord Abbett is:
o An investment management affiliate of Fuji Bank, one of the world's
largest banks
o A money manager whose services, until now, had been available only to
large, institutional accounts
o An asset manager with offices in Tokyo and London serving the pension
investment needs of many premier international companies, including:
Bridgestone NISSAN
Hitachi SONY
MCI Canon Inc.
... And a Solid Investment Strategy
Fuji-Lord Abbett's strategy is based on the timely purchase of undervalued
foreign companies which have focused on benefiting from the future changes
within their industries. Their disciplined research process involves:
o examining global trends to identify developments on an
industry-by-industry basis;
o using this information, along with our research and experience, to try to
define the ideal company within each industry; and
o assessing the companies in each industry to determine which are
"best-of-breed." In other words, determining which ones best match the
"ideal" company, based on a blend of both quantitative and fundamental
analysis.
The International Series' portfolio consists of 40-50 such companies, which meet
our goal of creating a portfolio where the performance of individual holdings is
not diluted across too many securities.
Lord Abbett Securities Trust - International Series
Total Returns Through 10/31/98:(1)
[The following table was depicted as a bar graph in the printed material.]
1 Year(1) Life of Series(2)
--------- -----------------
14.4% 15.8%
(1) Performance is at net asset value (for Class A shares). The Series offers
additional classes of shares with distinct pricing options. For a full
discussion of the differences in pricing alternatives, please call Lord
Abbett Distributor LLC at 800-874-3733 and ask for the current prospectus.
(2) The Series commenced operations on 12/13/96.
International Series
SEC-required average annual total return for Class A shares at the maximum sales
charge of 5.75% for the period 12/13/96 (commencement of operations) through
9/30/98, with all distributions reinvested:
[The following table was depicted as a bar graph in the printed material.]
1 Year Life of Series
------ --------------
3.10% 10.24%
Past performance is not an indication of future results. The investment return
and principal value of an investment will fluctuate so that shares, on any given
day or when redeemed, may be worth more or less than their original cost.
3
<PAGE>
A Note About Year 2000 Matters
As you probably know, the Fund depends on the proper functioning of computer
systems for most, if not all, aspects of its operations. Many computer systems
now in use cannot distinguish between the year 2000 (Y2K) and the year 1900, an
inability that could disrupt the services provided to the Fund.
Lord Abbett, Lord Abbett Distributor LLC, the Fund's transfer agent, the Fund's
custodian and other providers of services critical to the Fund all have advised
the Fund that they have been actively working on changes to their computer
systems to prepare for the Year 2000 and expect that their systems, and those of
their external service providers, will be adapted in time. Although the Y2K
issue is unprecedented and the process of Y2K preparedness evaluation and
systems remediation is an ongoing one, we presently believe that there will be
no material effect on the Fund and its financial statements.
Important Information
Results quoted herein reflect appropriate Rule 12b-1 Plan expenses from
commencement of the Plan. Tax consequences are not reflected. If used as sales
material after 12/31/98, this report must be accompanied by Lord Abbett's
Performance Quarterly for the most recently completed calendar quarter.
Foreign investment risk factors include the potential for less regulation and
liquidity and more volatility than U.S. markets; currency fluctuation;
potentially less publicly-available information about companies, banks and
governments than for U.S. counterparts; lack of uniform accounting standards
among countries, impairing comparisons; potentially higher transaction costs and
different securities settlement practices.
Statements of Net Assets
GROWTH & INCOME SERIES October 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
===============================================================================================================================
<S> <C> <C> <C>
Common Stocks 95.45%
===============================================================================================================================
Aerospace .40% Raytheon Co. Class A-A leading factor in air-defense missiles and
military electronic products 1,313 $ 73,528
Raytheon Co. Class B-A leading factor in air-defense missiles and
military electronic products 10,000 580,625
Total 654,153
- -------------------------------------------------------------------------------------------------------------------============
Agricultural Equipment .72% Deere & Co.-World's largest manufacturer of farm equipment 33,800 1,195,675
- -------------------------------------------------------------------------------------------------------------------============
Agricultural Products .38% Pioneer Hi-Bred International Inc.-Leading U.S. supplier of
hybrid seed 22,500 630,000
- -------------------------------------------------------------------------------------------------------------------============
Apparel 1.11% VF Corp.-Leading producer of blue jeans and other apparel 44,200 1,848,113
- -------------------------------------------------------------------------------------------------------------------============
Auto Parts .43% Genuine Parts Co.-National distributor of automotive replacement
parts 22,800 718,200
- -------------------------------------------------------------------------------------------------------------------============
Automobiles .78% General Motors Corp.-Worldwide auto producer 20,600 1,299,088
- -------------------------------------------------------------------------------------------------------------------============
Banks: Money Center 1.84% Chase Manhattan Corp.-Major money-center bank-holding company 53,800 3,056,512
- -------------------------------------------------------------------------------------------------------------------============
Banks: Regional 9.73% Bank One Corp.-Leading bank-holding company 65,640 3,208,155
BankAmerica Corp.-Major money-center bank 41,642 2,391,812
BankBoston Corp.-Leading New England regional bank 44,800 1,649,200
Comerica Inc.-Midwestern regional bank-holding company 42,150 2,718,675
First Union Corp.-Major East Coast bank 24,000 1,392,000
KeyCorp.-Multi-regional bank holding company serving the
Northwest U.S. 34,000 1,030,625
Mellon Bank Corp.-Commercial bank located in Pittsburgh, PA 50,000 3,006,250
Washington Mutual Inc.-A leading savings and loan company 20,000 748,750
Total 16,145,467
- -------------------------------------------------------------------------------------------------------------------============
Brokers 1.25% Morgan Stanley, Dean Witter, Discover & Co.-Major brokerage and
credit card company 32,000 2,072,000
- -------------------------------------------------------------------------------------------------------------------============
Chemicals 1.28% Air Products & Chemicals Inc.-Industrial gas producer 40,000 1,510,000
Union Carbide Corp.-Major U.S.-based producer of plastics and
chemicals 15,700 604,450
Total 2,114,450
------------------------------------------------------------------------------------============
</TABLE>
4
<PAGE>
Statements of Net Assets
GROWTH & INCOME SERIES October 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
===============================================================================================================================
<S> <C> <C> <C>
Communications Equipment Harris Corp.-Manufacturer of advanced electronic systems and
1.04% communications equipment 49,200 $ 1,725,075
- -------------------------------------------------------------------------------------------------------------------============
Computer: Hardware 5.33% Hewlett-Packard Co.-Leading manufacturer of computer products
including printers, servers, workstations and PCs 20,400 1,227,825
International Business Machines Corp.-World's largest computer
manufacturer 27,800 4,126,563
*Sun Microsystems Inc.-Supplier of network computer products
including workstations, servers, software, microprocessors and a
full range of services and support 60,000 3,495,000
Total 8,849,388
- -------------------------------------------------------------------------------------------------------------------============
Computer: Peripherals 3.89% EMC Corp.-A supplier of high-performance storage devices and
related services 70,000 4,506,250
Seagate Technology Inc.-Manufacturer of computer disk drive
equipment 74,000 1,951,750
Total 6,458,000
- -------------------------------------------------------------------------------------------------------------------============
Drugs/Health-Care Products American Home Products Corp.-Producer of drugs, food, housewares
8.92% and packaged medicine and medical products 54,000 2,632,500
Bristol-Myers Squibb Co.-Major worldwide pharmaceutical concern
with interests in infant nutrition, non-prescription medications,
medical devices and toiletries 32,000 3,538,000
Pharmacia & Upjohn Inc.-Develops, makes and sells prescription
pharmaceutical & other related health-care products 50,000 2,646,875
SmithKline Beecham plc ADR-Major U.K. based health-care company 57,000 3,633,750
Warner-Lambert Co.-Drug and consumer products manufacturer 30,000 2,351,250
Total 14,802,375
- -------------------------------------------------------------------------------------------------------------------============
Electric Power 4.63% Baltimore Gas & Electric Co.-Regional electric utility company 32,500 1,019,687
Carolina Power & Light Co.-Electric utility company serving North
and South Carolina 25,000 1,146,875
Cinergy Corp.-Supplier of electricity and natural gas in
southwestern Ohio and adjacent Kentucky and Indiana territories 52,900 1,825,050
Firstenergy Corp.-Major Midwestern electric utility holding
company 50,000 1,500,000
FPL Group Inc.-One of the nation's premier electric utilities,
serving about 7 million people in Florida's east, southeast and
southwest coasts 35,000 2,189,687
Total 7,681,299
- -------------------------------------------------------------------------------------------------------------------============
Electrical Equipment 1.10% Emerson Electric Co.-Diversified manufacturer of consumer and
industrial electrical components 27,600 1,821,600
- -------------------------------------------------------------------------------------------------------------------============
Financial: Miscellaneous Fed National Mortgage-America's largest supplier of conventional
2.59% home mortgages 25,000 1,770,312
First Data Corp.-Information supplier for credit card processing
and related services 95,000 2,517,500
Total 4,287,812
- -------------------------------------------------------------------------------------------------------------------============
Food 6.65% Bestfoods-Producer of diversified packaged foods 40,000 2,180,000
ConAgra Inc.-Major producer of agricultural and consumer products 53,940 1,641,799
General Mills Inc.-A leading producer of consumer foods and
operator of restaurant chains 30,000 2,205,000
Heinz H.J. Co.-Domestic packaged foods producer 61,400 3,568,875
Sara Lee Corp.-A diversified maker of branded food products,
apparel and household consumer products 24,000 1,432,500
Total 11,028,174
- -------------------------------------------------------------------------------------------------------------------============
Health-Care Products 1.27% Baxter International Inc.-World's leading distributor and major
manufacturer of hospital supplies and related medical equipment 35,000 2,097,812
- -------------------------------------------------------------------------------------------------------------------============
Health-Care Services .74% *Humana Inc.-Major U.S. provider of managed-health plans 65,000 1,230,938
- -------------------------------------------------------------------------------------------------------------------============
Household Products 1.56% Fort James Corp.-Producer of paper-based consumer products,
packaging and communication papers 64,100 2,584,031
- -------------------------------------------------------------------------------------------------------------------============
Insurance: Life 1.39% American General Corp.-A leading provider of financial services,
including life/health insurance, annuities, consumer credit and
mortgage financing 33,600 2,301,600
- -------------------------------------------------------------------------------------------------------------------============
Insurance: Property and Chubb Corp.-Broad-based property and casualty insurance
Casualty 2.30% organization 22,000 1,353,000
Cigna Corp.-Multi-line insurance and medical services 33,800 2,465,287
Total 3,818,287
- -------------------------------------------------------------------------------------------------------------------============
Miscellaneous 1.59% Fortune Brands Inc.-Consumer products conglomerate 36,900 1,220,006
</TABLE>
5
<PAGE>
Statements of Net Assets
GROWTH & INCOME SERIES October 31, 1998
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
===============================================================================================================================
<S> <C> <C> <C>
National Service Industries Inc.-Diversified manufacturer of
lighting equipment, rental uniforms and specialty chemicals 39,400 $ 1,413,475
Total 2,633,481
- -------------------------------------------------------------------------------------------------------------------============
Natural Gas: Distribution Columbia Energy Group-Utility holding company and natural gas
3.36% distribution 45,000 2,604,375
Nicor Inc.-Natural gas distributor in Illinois 70,000 2,966,250
Total 5,570,625
- -------------------------------------------------------------------------------------------------------------------============
Natural Gas: Diversified .93% The Coastal Corp.-A diversified gas pipeline company 43,600 1,536,900
- -------------------------------------------------------------------------------------------------------------------============
Oil: International Integrated Amoco Corp.-Major integrated petroleum and natural gas company
6.28% with sizeable interests 6.28% in chemicals 39,800 2,233,775
Chevron Corp.-Worldwide petroleum company with important
interests in chemicals and minerals 23,600 1,923,400
Exxon Corp.-World's largest integrated oil company 40,000 2,850,000
Mobil Corp.-Large international oil company 45,000 3,405,938
Total 10,413,113
- -------------------------------------------------------------------------------------------------------------------============
Paper and Forest Products Georgia-Pacific Corp.-Producer of paper and forest products 40,000 2,070,000
1.58%
International Paper Co.-Producer of paper and forest products 11,750 545,641
Total 2,615,641
- -------------------------------------------------------------------------------------------------------------------============
Photographic 3.50% Eastman Kodak Co.-Leading manufacturer of photographic film and
equipment 50,000 3,875,000
Xerox Corp.-World's leading duplication technology supplier 20,000 1,937,500
Total 5,812,500
- -------------------------------------------------------------------------------------------------------------------============
Printing and Publishing 2.52% Gannett Co., Inc.-Major U.S. newspaper publisher 15,200 940,500
Time Warner Inc.-A major entertainment and communications firm 35,000 3,248,438
Total 4,188,938
- -------------------------------------------------------------------------------------------------------------------============
Railroads .19% Canadian National Railway Co.-Major Canadian-based railroad
operator 6,300 317,756
- -------------------------------------------------------------------------------------------------------------------============
Retail: Dept & Merchandise May Department Stores Co.-Leading department store retailer 25,000 1,525,000
3.62%
Wal-Mart Stores Inc.-Largest U.S. discount retailer 65,000 4,485,000
Total 6,010,000
- -------------------------------------------------------------------------------------------------------------------============
Telephone: Long Distance AT&T Corp.-Global telecommunications giant 67,000 4,170,750
5.67%
*MCI Worldcom Inc.-Diversified telecommunications company 67,075 3,705,894
Sprint Corp.-Third largest long distance telephone system 20,000 1,535,000
Total 9,411,644
- -------------------------------------------------------------------------------------------------------------------============
Telephone: Regional 2.91% Bell Atlantic Corp.-Regional telephone company 33,600 1,785,000
BellSouth Corp.-Regional telephone company 14,400 1,149,300
SBC Communications Inc.-Mexican telephone monopoly 41,000 1,898,813
Total 4,833,113
- -------------------------------------------------------------------------------------------------------------------============
Tobacco 2.07% Philip Morris Companies Inc.-Leading tobacco company 67,000 3,425,375
- -------------------------------------------------------------------------------------------------------------------============
Waste Management 1.90% Waste Management, Inc.-A leading waste-management concern 70,000 3,158,750
------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $108,773,129) 158,347,885
===============================================================================================================================
Other Assets, Less Liabilities 4.55%
===============================================================================================================================
Short-term
Investment UST Inc. 5.20% due 11/2/1998 (Cost $7,436,466) 7,440M 7,436,466
- -------------------------------------------------------------------------------------------------------------------============
Cash and Receivables, Net of
Liabilities 119,747
- -------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 7,556,213
===============================================================================================================================
Net Assets 100.00% $165,904,098
===============================================================================================================================
</TABLE>
6
<PAGE>
Statements of Net Assets
GROWTH & INCOME SERIES October 31, 1998
<TABLE>
===============================================================================================================================
<S> <C> <C>
Class A Shares-Net asset value ($72,862,597 / 7,965,970 shares
outstanding) $9.15
Maximum offering price (Class A Shares) $9.71
Class B Shares-Net asset value ($3,404,044 / 372,743 shares
outstanding) $9.13
Class C Shares-Net asset value ($89,637,457 / 9,837,873 shares
outstanding) $9.11
</TABLE>
* Non-income producing security.
See Notes to Financial Statements.
The descriptions of the companies shown in the portfolio, which were
obtained from published reports and other sources believed to be
reliable, are supplemental and unaudited.
Statements of Net Assets
INTERNATIONAL SERIES October 31, 1998
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
===============================================================================================================================
<S> <C> <C> <C>
Investments in Securities 85.83%
===============================================================================================================================
Foreign 83.62%
===============================================================================================================================
Australia 1.20% Novogen Ltd.-Biotechnology company specializing in plant-sterol-
based OTC and eventually ethical pharmaceutical products 1,250,000 $ 1,834,125
- -------------------------------------------------------------------------------------------------------------------============
Canada 6.25% *Ballard Power Systems-Designs, manufactures and develops methanol
or hydrogen-based fuel cells that are the only true zero emission
power source for vehicles 264,600 7,339,528
*Descartes System Group-Supply chain automation & integration
software supplier 363,100 1,423,679
Timber West Timber Trust-Forestry land block consolidator that
also operates the assets to produce timber & pulp 450,000 801,990
Total 9,565,197
- -------------------------------------------------------------------------------------------------------------------============
Denmark 3.67% Jyske Bank-Bank specializing in international private and
commercial banking 20,000 1,636,480
Syd-Sonderhill-Regional, mortgage and personal-banking firm 46,000 2,068,321
Unidanmark `A'-One of Denmark's largest full-service banking
groups 25,000 1,906,577
Total 5,611,378
- -------------------------------------------------------------------------------------------------------------------============
Finland 5.58% Pohjola-Finland's largest general insurance company covering both
the life and the non-life sectors 93,000 3,804,965
Raisio Yhtyma Oyj-Producer of paper-processing chemicals and
foodstuffs, including a cholesterol-lowering margarine 350,000 4,726,925
Total 8,531,890
- -------------------------------------------------------------------------------------------------------------------============
France 9.97% Alcatel-One of the world's largest full-line heavy electrical
engineering firms 25,000 2,788,942
AXA-UAP-One of Europe's largest financial organizations 40,000 4,527,187
Ecia-Leading worldwide supplier of car seat and exhaust pipe
systems 9,500 1,806,279
Thomson-CSF-A major aerospace company 80,000 2,782,632
*Ubi Soft Entertain-One of the largest producers, translators and
distributors of games software in Europe 20,100 3,024,763
Ubi Soft Entertain-3.8% Conv. Deb due 7/16/2005-One of the
largest producers, translators and distributors of games software
in Europe 156.2M 323,734
Total 15,253,537
- -------------------------------------------------------------------------------------------------------------------============
Germany 29.83% Daimler-Benz-World's largest manufacturer of luxury cars, buses
and class eight trucks 33,000 2,562,391
Drillisch AG-Reseller of mobile phone and long distance telephone
capacity in the CAD/CAM/CAE integration industry 10,000 1,525,772
Eigner & Partner-A major software developer 3,394 766,355
Gea AG Dem-One of the world's top suppliers of food and
pharmaceutical processing equipment 90,000 2,474,469
Gehe AG-Europe's largest pharmacy chain 75,000 5,642,332
HIS Sportswear-Designs and retails sportswear and leisurewear 10,500 107,861
Iwka AG-Multi-line engineering company making packaging, robot
welding and defense equipment 150,000 2,465,400
LHS Group Inc.-Leading global provider of client/server, modular,
customer care & billing services to telecom utilities 60,000 2,530,668
</TABLE>
7
<PAGE>
Statements of Net Assets
INTERNATIONAL SERIES October 31, 1998
<TABLE>
<CAPTION>
Investments Shares Market Value
===============================================================================================================================
<S> <C> <C> <C>
Marschollek Lauten & Partners-Largest independent personal life
insurance and investment consultancy services 10,000 $ 5,106,049
Preussag AG-Diversified firm with activities from oil extraction
to metals 6,000 2,215,240
SAI Automotive AG-Europe's largest supplier of specialist car
interior modules-cockpits & doors 245,000 2,812,870
Sap Ag-World's fourth-largest software firm dominating the global
market for relational database software tools 10,000 4,199,649
SAP AG Non-Vtg. Pref.-World's fourth largest software firm,
dominating the global market for relational databases 500 243,821
SKW Trostberg AG-Specialist niche chemical firm producing
additives, coverings, adhesives, anti-corrosive paints and oil
well drilling products 150,000 3,707,175
Viag AG-Diversified group with utility, aluminum, chemical, glass
and packaging operations 6,000 4,078,796
Vossloh AG-Manufacturer of electrical lighting equipment as well
as railway truck fasteners and the related installation equipment 120,000 3,437,063
W.E.T. Automotive-Leading global supplier of car seat heating
systems 35,000 1,776,544
Total 45,652,455
- -------------------------------------------------------------------------------------------------------------------============
Netherlands 3.23% Hunter Douglas NV-Major global supplier of decorative building
fittings, especially window blinds 30,000 1,078,614
Koninklijke Pakhoed NV-Largest chemical distributor worldwide 30,000 740,541
Stork NV-Engineering and service company focused on aircraft
parts, processing machinery and food-manufacturing equipment 125,000 3,125,838
Total 4,944,993
- -------------------------------------------------------------------------------------------------------------------============
Switzerland 3.68% Baloise Holdings-Insurance group 3,750 3,103,257
Christ Aesch-Major global provider of water-treatment chemicals
and purification equipment 700 238,342
Saurer AG Arbon-Textile machinery and auto component
manufacturing firm 1,100 651,369
Stratec Holding AG-Health-care company concentrating on
osteosynthesis and prosthetics 600 732,791
Swiss Life-Major life insurance company with operations
throughout Europe 1,500 904,885
Total 5,630,644
- -------------------------------------------------------------------------------------------------------------------============
United Kingdom 20.21% Ashtead Group-Major construction plant and machinery hire firm 1,100,000 3,590,950
Delphi Group-Producer of temporary, contract and permanent IT
staff to corporations in the U.S. and the U.K. 227,431 999,446
DBS Management-Supplies independent financial advisors with
financial product evaluation and administration software and
services 1,000,000 2,410,700
First Technology-Designs and manufactures equipment and systems
for auto safety 650,000 3,155,685
General Electric Company-Electronics group 125,000 999,225
Jarvis Ord-Specialist engineering and service company focused on
the installation of related track and signals 500,000 5,248,300
Johnson Matthey-Precision metal-based refinery, alloy
manufacturing and trading company 120,000 675,996
Mayflower Corp.-Specialist supplier of bus, coach and car bodies 500,000 1,088,150
Verity Group plc-Makes high-quality loudspeakers and has
developed the first commercial flatbed panel speaker 4,000,000 3,867,200
Precoat International-Processes and distributes precoated steel
in Europe and North America 760,000 1,571,300
Regal Hotel Group-Owns and operates more than 100 medium-quality,
medium-sized hotels and inns 5,000,000 2,553,000
Trifast-Distributes and manufactures industrial fasteners,
particularly for electronics and electrical concerns 465,000 4,009,044
UTD Assurance Grp Cnv-A major insurance provider 3,500,000 761,600
Total 30,930,596
------------------------------------------------------------------------------------============
Total Investments in Foreign Securities (Cost $136,935,731) 127,954,815
===============================================================================================================================
United States 2.21%
===============================================================================================================================
*Net B@nk Inc.-Provider of banking services over the internet 178,800 3,386,025
------------------------------------------------------------------------------------============
Total Investments in Common Stocks (Cost $140,121,070) 131,340,840
------------------------------------------------------------------------------------============
</TABLE>
8
<PAGE>
Statements of Net Assets
INTERNATIONAL SERIES October 31, 1998
<TABLE>
<CAPTION>
Investments Principal Amount Market Value
===============================================================================================================================
<S> <C> <C> <C>
Other Assets, Less Liabilities 14.17%
===============================================================================================================================
Short-term
Investment FMC Discount Note due 5.42% 11/2/1998 (Cost $20,490,741) $ 20,500M $ 20,490,741
============
Cash and Receivables, Net of
Liabilities $ 1,200,924
- -------------------------------------------------------------------------------------------------------------------------------
Total Other Assets, Less Liabilities 21,691,665
===============================================================================================================================
Net Assets 100.00% $153,032,505
===============================================================================================================================
Class A Shares-Net asset value ($80,606,325 / 6,508,142 shares
outstanding) $12.39
Maximum offering price (Class A Shares) $13.15
Class B Shares-Net asset value ($15,933,455 / 1,297,388 shares
outstanding) $12.28
Class C Shares-Net asset value ($13,722,682 / 1,117,500 shares
outstanding) $12.28
Class Y Shares-Net asset value ($42,770,043 / 3,446,616 shares
outstanding) $12.41
</TABLE>
* Non-income producing security.
See Notes to Financial Statements.
The descriptions of the companies shown in the portfolio, which were
obtained from published reports and other sources believed to be
reliable, are supplemental and unaudited.
Statements of Net Assets
WORLD BOND-DEBENTURE SERIES October 31, 1998
<TABLE>
<CAPTION>
Investments Principal Amount Value
===============================================================================================================================
<S> <C> <C> <C>
Investments in Securities 93.01%
===============================================================================================================================
Foreign 41.10%
===============================================================================================================================
Argentina 2.58% Telefonica de Argentina SA+ 9 1/8/2008(a) $ 300M $ 261,750
- -------------------------------------------------------------------------------------------------------------------============
Brazil .88% Globo Participaco par 10 5/8/2004(a) 100M 89,000
- -------------------------------------------------------------------------------------------------------------------============
Canada 4.31% Call-Net Enterprises Inc. Sr. Discount Note Zero Coupon due
2008**(a) 350M 199,500
Canadian Airlines Corp. Sr. Notes 10/2005(a) 200M 177,000
Rogers Comms Inc. 8 3/4/2007(b) 100M 59,850
Total 436,350
- -------------------------------------------------------------------------------------------------------------------============
Croatia .44% Croatia Rep 7/2002(a) 50M 45,000
- -------------------------------------------------------------------------------------------------------------------============
Germany 6.55% Geberit International SA 10 1/8/2007(b) 150M 97,891
Esprit Telecom Group plc 11/2008(b) 350M 171,310
Fresenius Medical Care 7 3/8/2008(b) 350M 200,919
RSL Communications plc Zero Coupon Sr. Discount Notes due 2008+**(b) 300M 84,295
Viatel Inc. Conv. Deb. 14 1/4/2011+(b) 10M 3,714
Viatel Inc. 11.15/2008(b) 200M 106,351
Total 664,480
- -------------------------------------------------------------------------------------------------------------------============
Mexico 9.67% Coca-Cola Femsa SA de CV 8.95/2006(a) 100M 98,250
Grupo Televisa SA Zero Coupon Sr. Discount Note due 2008**(a) 350M 244,125
Mexican United States 9 7/8/2007(a) 100M 95,000
Pepsi-Gemex SA de CV Sr. Note 9 3/4/2004(a) 250M 232,500
TV Azteca SA de CV Sr. Notes 10 1/2/2007(a) 200M 141,000
United Mexican States 11 3/8/2016(a) 175M 169,121
Total 979,996
- -------------------------------------------------------------------------------------------------------------------============
New Zealand .51% Bell Atlantic Finl Service (Nlztel) Conv. Sub. Deb. 5 3/4/2003+(a) 50M 51,563
- -------------------------------------------------------------------------------------------------------------------============
Switzerland 1.09% Roche Holdings Inc. Zero Coupon Conv. Notes due 2010+(a) 175M 110,250
- -------------------------------------------------------------------------------------------------------------------============
Turkey 3.95% Turkey 20/1999(a) 77,000,000M 400,400
- -------------------------------------------------------------------------------------------------------------------============
United Kingdom 11.12% British Airways 10 7/8/2008(b) 50M 109,654
Comcast UK Cable Partners Limited Zero Coupon Sr. Discount Deb.
due 2007**(a) 200M 158,000
</TABLE>
9
<PAGE>
Statements of Net Assets
WORLD BOND-DEBENTURE SERIES October 31, 1998
<TABLE>
<CAPTION>
Principal Amount
Investments of Shares Value
===============================================================================================================================
<S> <C> <C> <C>
General Elec. Cap. Corp. 8/1999(b) $ 180M $ 306,099
IPC Magazines Group 9 5/8/2008(b) 50M 63,197
Orange plc 8 5/8/2008(b) 200M 324,441
Swiss Life (GLXO) Conv. 2/2003+(a) 150M 165,375
Total 1,126,766
------------------------------------------------------------------------------------============
Total Investments in Foreign Securities (Cost $4,427,019) 4,165,555
===============================================================================================================================
Domestic 51.91%
===============================================================================================================================
United States 51.91% Allbritton Communications Co. Sr. Sub. Notes 9 3/4/2007(a) 119M 123,165
American Mobile Satellite Corp. Warrants expiring 4/1/2008+(a) 150 642
Amsc Acquisition Co. Inc. Sr. Sub. Notes 12 1/4/2008(a) 150M 69,375
Arbor Software Corp. Conv. Sub. Deb. 4 1/2/2005+(a) 125M 100,664
Big Flower Press Sr. Sub. Notes 8 7/8/2007(a) 150M 147,000
BE Aerospace Inc. Sr. Sub. Notes 9 7/8/2006(a) 50M 51,000
BF Saul Reit 9 3/4/2008(a) 150M 125,250
Chancellor Media Corp. Sr. Notes 10 1/2/2007(a) 100M 106,000
Chattam Inc. Sr. Sub. Notes 8 7/8/2008(a) 200M 194,000
Costar 6 1/4/2010(a) 100M 80,000
Cumulus Media Sr. Sub. Notes 10 3/8/2008(a) 150M 153,750
D.R. Horton, Inc. Sr. Sub. Notes 10/2006(a) 150M 153,750
Diamond Triumph Auto Glass, Inc. Sr. Notes 9 1/4/2008+(a) 150M 146,625
Fox/Liberty Networks LLC Sr. Notes 8 7/8/2007(a) 200M 194,500
Global Crossing Holdings, Ltd. Sr. Notes 9 5/8/2008+(a) 150M 145,500
GST Telecommunications Inc.*(a) 3,000 20,812
Hyperion Telecommunications, Inc. Sr. Notes 12 1/4/2004+(a) 150M 147,750
Integrated Health Services Inc. Sr. Sub. Notes 9 1/2/2007+(a) 100M 93,500
Iron Mountain Inc. Sr. Sub. Notes 10 1/8/2006(a) 150M 158,250
Iron Mountain Sr. Sub. Notes 8 3/4/2009(a) 50M 49,750
Jefferson-Pilot Corp. (NBX) $5.256 Conv. Pfd.(a) 1,000 98,000
Loews Cineplex Sr. Sub. Notes 8 7/8/2008+(a) 150M 146,250
Mastec Inc. Sr. Sub. Notes 7 3/4/2008+(a) 50M 45,250
Nortek Inc. Sr. Sub. Notes 8 7/8/2008+(a) 175M 170,625
Orbital Imaging Corp. Warrants expiring 3/1/2005+(a) 150 6,000
Orbital Imaging Corp. Sr. Notes 11 5/8/2005(a) 150M 129,750
Owens-Illinois Inc. Conv. Pfd. 4.75%(a) 2,000 80,250
Pierce Leahy Command Corp. Sr. Notes 8 1/8/2008+(a) 100M 96,750
Pillowtex Corp. Sr. Sub. Notes 9/2007(a) 150M 150,750
Prime Medical Svcs., Inc. Sr. Sub. Notes 8 3/4/2008(a) 100M 91,500
Purina Mills Inc. Sr. Sub. Notes 9/2010(a) 190M 193,800
Renaissance Media Zero Coupon due 2008+**(a) 100M 65,500
Sinclair Broadcasting Group, Inc. Sr. Sub. Notes 10/2005(a) 100M 102,500
Splitrock Services Sr. Notes 11 3/4/2008 w/Warrants expiring
7/15/08(a) 50M 45,250
Stater Brothers Holdings Inc. Sr. Sub. Notes 9/2004+(a) 150M 134,250
Steel Heddle Mfg. Co. Sr. Sub. Notes 10 5/8/2008+(a) 150M 128,250
Telewest plc Zero Coupon Sr. Discount Deb. due 2007**(a) 200M 156,250
Trump Atlantic City Associates Funding 1st Mtge. Notes 11 1/4/2006(a) 100M 87,500
U.S. Treasury Bonds 5 1/2/2028(a) 750M 789,257
U.S. Treasury Bonds 6 1/8/2027(a) 250M 281,328
Total Investments in United States Securities (Cost $5,574,927) 5,260,293
------------------------------------------------------------------------------------============
Total Investments in Securities (Cost $10,001,946) 9,425,848
------------------------------------------------------------------------------------============
</TABLE>
10
<PAGE>
Statements of Net Assets
WORLD BOND-DEBENTURE SERIES October 31, 1998
<TABLE>
<CAPTION>
Investments Principal Amount Value
===============================================================================================================================
<S> <C> <C> <C>
Other Assets, Less Liabilities 6.99%
===============================================================================================================================
Other Assets
Short-term
Investments
(U.S. dollar-
denominated) UST Inc. 5.20% due 11/2/1998 (Cost $289,862) $ 290M $ 289,862
- -------------------------------------------------------------------------------------------------------------------============
Cash 75,422
===============================================================================================================================
Receivable for: Securities sold 4,355,861
Other 305,261
Total Other Assets 5,026,406
- -------------------------------------------------------------------------------------------------------------------============
Payable for: Securities purchased 4,318,443
- -------------------------------------------------------------------------------------------------------------------============
Total Other Assets, Less Liabilities 707,963
===============================================================================================================================
Net Assets 100.00% $ 10,133,811
===============================================================================================================================
Class A Shares-Net asset value ($7,403,406 / 766,742 shares outstanding) $ 9.66
Maximum offering price (Class A Shares) $10.14
Class B Shares-Net asset value ($1,141,120 /118,284 shares outstanding) $ 9.65
Class C Shares-Net asset value ($1,589,285 / 164,754 shares outstanding) $ 9.65
</TABLE>
(a) Investments in U.S. dollar-denominated securities (83.79%).
(b) Investments in non-U.S. dollar-denominated securities (16.21%).
* Non-income producing security. ** Deferred-interest debentures pay
no interest for a stipulated number of years, after which they pay a
predetermined coupon rate.
+ Restricted security under Rule 144A.
See Notes to Financial Statements.
Statements of Net Assets
ALPHA SERIES October 31, 1998
<TABLE>
<CAPTION>
Shares or
Investments Principal Amount Market Value
===============================================================================================================================
<S> <C> <C> <C>
Investments in Securities 99.42%
===============================================================================================================================
Lord Abbett Developing Growth Fund, Inc.-Class Y 2,471,842 $ 32,183,387
Lord Abbett Securities Trust-International Series-Class Y 3,446,604 42,772,357
Lord Abbett Research Fund-Small-Cap Series-Class Y 2,271,450 30,710,009
Total Investments in Securities (Cost $123,152,222) 105,665,753
===============================================================================================================================
Other Assets, Less Liabilities.58%
===============================================================================================================================
Other Assets
Short-term
Investments UST Inc. 5.20% due 11/2/1998 (Cost $149,929) 150M 149,929
- -------------------------------------------------------------------------------------------------------------------============
Cash and Receivables, Net of
Liabilities 463,086
- -------------------------------------------------------------------------------------------------------------------------------
Total Other Assets, Less Liabilities 613,015
===============================================================================================================================
Net Assets 100.00% $106,278,768
===============================================================================================================================
Class A Shares-Net asset value ($49,587,133 / 3,839,908 shares outstanding) $12.91
Maximum offering price (Class A Shares) $13.70
Class B Shares-Net asset value ($36,201,807 / 2,816,425 shares outstanding) $12.85
Class C Shares-Net asset value ($20,489,828 / 1,593,800 shares outstanding) $12.86
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
12/18/97 12/29/97
(Commencement (Commencement
of Operations) of Operations)
Year Ended 10/31/98 to 10/31/98 to 10/31/98
--------------------------- ------------- --------------
Growth & World Bond-
Income International Debenture Alpha
Investment Income Series Series Series Series
================================================================================================ ============= ==============
<S> <C> <C> <C> <C> <C>
Income Dividends $ 3,096,370 $ 1,803,189 $ 2,313 $ 11
Interest 290,587 559,794 459,492 11,357
Foreign taxes withheld -- (332,143) -- --
Total income 3,386,957 2,030,840 461,805 11,368
---------------------------------------------------------------------------------- ------------- --------------
Expenses Management fee 1,202,319 700,368 39,168 204,935
Management fee waived -- -- (39,168) (204,935)
12b-1 distribution plan-Class A 161,340 143,035 7,538 46,152
12b-1 distribution plan-Class B 18,807 82,767 4,411 146,102
12b-1 distribution plan-Class C 908,552 83,164 6,034 74,834
Shareholder servicing 221,497 170,403 3,750 55,670
Report to shareholders 63,208 21,917 2,920 9,325
Professional 39,085 16,584 4,050 7,876
Registration 36,000 57,991 900 19,000
Organization 7,332 6,773 2,052 7,170
Directors 5,059 1,050 225 498
Other 6,783 12,210 10,021 5,760
Total expenses before reductions and reimbursements 2,669,982 1,296,262 41,901 372,387
Expenses assumed by other funds -- -- -- (105,299)
Net expenses 2,669,982 1,296,262 41,901 267,088
---------------------------------------------------------------------------------- ------------- --------------
Net investment income (loss) 716,975 734,578 419,904 (255,720)
---------------------------------------------------------------------------------- ------------- --------------
Realized and Unrealized Gain on Investments and Foreign Currency
Transactions
================================================================================================ ============= ==============
Net realized gain (loss) from investment and foreign currency
transactions
Proceeds from sales 70,889,762 17,074,584 37,057,557 500,000
Cost of investments sold 64,978,008 16,301,868 37,314,535 664,572
Net realized gain (loss) 5,911,754 772,716 (256,978) (164,572)
---------------------------------------------------------------------------------- ------------- --------------
Unrealized appreciation (depreciation) of investments and foreign
currency holdings 9,416,949 (11,465,508) (573,481) (17,486,469)
- ------------------------------------------------------------------------------------------------ ------------- --------------
Net realized and unrealized gain (loss) on investments and foreign
currency transactions 15,328,703 (10,692,792) (830,459) (17,651,041)
- ------------------------------------------------------------------------------------------------ ------------- --------------
Net Increase (decrease) in Net Assets Resulting from Operations $ 16,045,678 $ (9,958,214) $ (410,555) $(17,906,761)
=================================================================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
12/18/97 12/29/97 12/13/96
(Commencement (Commencement Year (Commencement
of Operations) of Operations) Ended of Operations)
Year Ended 10/31/98 to 10/31/98 to 10/31/98 10/31/97 to 10/31/97
--------------------------- ------------- ------------- ------------ -------------
Growth & World Bond- Growth &
Income International Debenture Alpha Income International
Increase (Decrease) in Net Assets Series Series Series Series Series Series
======================================================================== ============= ============= ============ ============
<S> <C> <C> <C> <C> <C> <C>
Operations Net investment income $ 716,975 $ 734,578 $ 419,904 $ (255,720) $ 939,517 $ 62,336
Net realized gain (loss)
from investment and foreign
currency transactions 5,911,754 772,716 (256,978) (164,572) 9,523,336 (498,854)
Net unrealized appreciation
(depreciation) of investments
and foreign currency holdings 9,416,949 (11,465,508) (573,481) (17,486,469) 19,515,134 2,685,278
Net increase (decrease) in
net assets resulting from
operations 16,045,678 (9,958,214) (410,555) (17,906,761) 29,977,987 2,248,760
- ------------------------------------------------------------------------ ------------- ------------- ------------ ------------
Undistributed net investment income
included in price of share transactions -- -- -- -- (7,673) 143,734
- ------------------------------------------------------------------------ ------------- ------------- ------------ ------------
Distributions to shareholders from
net investment income:
Class A (260,319) (75,253) (273,961) -- (660,996) --
Class B -- -- (31,624) -- -- --
Class C -- -- (44,552) -- (351,430) --
Total (260,319) (75,253) (350,137) -- (1,012,426) --
---------------------------------------------------------- ------------- ------------- ------------ ------------
Distributions to shareholders from net
realized from investment and foreign
currency transactions:
Class A (3,955,825) -- -- -- (501,039) --
Class B (22,589) -- -- -- -- --
Class C (5,643,683) -- -- -- (701,709) --
Total (9,622,097) -- -- -- (1,202,748) --
---------------------------------------------------------- ------------- ------------- ------------ ------------
Total distributions (9,882,416) (75,253) (350,137) -- (2,215,174) --
- ------------------------------------------------------------------------ ------------- ------------- ------------ ------------
Share transactions:
Net proceeds from sales of
shares 31,813,070 152,668,725 12,071,035 131,488,957 21,789,630 36,170,176
Net asset value of shares
issued to shareholders in
reinvestment of net investment
income and realized gain from
investment transactions 9,259,717 71,968 256,482 -- 2,029,420 --
Total 41,072,787 152,740,693 12,327,517 131,488,957 23,819,050 36,170,176
---------------------------------------------------------- ------------- ------------- ------------ ------------
Cost of shares reacquired (24,323,626) (27,009,220) (2,433,514) (7,313,428) (22,544,262) (3,228,171)
---------------------------------------------------------- ------------- ------------- ------------ ------------
Increase in net assets
derived from capital share
transactions 16,749,161 125,731,473 9,894,003 124,175,529 1,274,788 32,942,005
---------------------------------------------------------- ------------- ------------- ------------ ------------
Increase in net assets 22,912,423 115,698,006 9,133,311 106,268,768 29,029,928 35,334,499
- ------------------------------------------------------------------------ ------------- ------------- ------------ ------------
Net Assets
Beginning of period 142,991,675 37,334,499 1,000,500 10,000 113,961,747 2,000,000
---------------------------------------------------------- ------------- ------------- ------------ ------------
End of period+ $165,904,098 $153,032,505 $10,133,811 $106,278,768 $142,991,675 $37,334,499
====================================================================================================================
</TABLE>
+ Including undistributed net investment income of $297,775, $721,661,
$262,939 and $0, respectively, as of October 31, 1998 and
undistributed net
Investment income of $153,968 and $206,070 as of October 31, 1997.
See Notes to Financial Statements.
13
<PAGE>
Financial Highlights
GROWTH & INCOME SERIES
<TABLE>
<CAPTION>
Class A Shares Class B Shares
------------------------------------ --------------------------
Year Ended Year Ended
10/31, 7/15/96(a) 10/31, 6/5/97(a)
Per Share Operating Performance: 1998 1997 to 10/31/96 1998 to 10/31/97
================================================================================================== ==========================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.79 $ 7.09 $ 6.50 $ 8.80 $ 8.20
- -------------------------------------------------------------------------------------------------- --------------------------
Income from investment operations
Net investment income .057 .093 .028 --(d) --(d)
Net realized and unrealized gain on investments .928 1.781 .589 .92 .60
Total from investment operations .985 1.874 .617 .92 .60
-------------------------------------------------------------------------------------------- --------------------------
Distributions
Dividends from net investment income (.035) (.099) (.027) -- --
Distributions from net realized gain (.590) (.075) -- (.590) --
-------------------------------------------------------------------------------------------- --------------------------
Net asset value, end of period $ 9.15 $ 8.79 $ 7.09 $ 9.13 $ 8.80
- -------------------------------------------------------------------------------------------------- --------------------------
Total Return(b) 11.97% 26.78% 12.10%(c) 11.17% 7.19%(c)
===============================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver 1.22% 1.29% .39%(c) 1.98% .86%(c)
Expenses, excluding waiver 1.22% 1.29% .39%(c) 1.98% .86%(c)
Net investment income .88% 1.15% .40%(c) .09% .01%(c)
=========================================================================================================================
</TABLE>
(a) Commencement of offering class shares.
(b) Total return does not consider the effects of sales loads and
assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Amount less than $.01.
See Notes to Financial Statements.
Financial Highlights
GROWTH & INCOME SERIES
<TABLE>
<CAPTION>
Class C Shares
-----------------------------------------------------------------
Year Ended 10/31, 1/3/94(a)
Per Share Operating Performance: 1998 1997 1996 1995 to 10/31/94
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.80 $ 7.09 $ 6.04 $ 5.07 $ 5.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .011 .032 .0949 .12 .089
Net realized and unrealized gain on investments .889 1.790 1.0986 .97 .041
Total from investment operations .900 1.822 1.1935 1.09 .130
-------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income -- (.037) (.1035) (.12) (.06)
Distributions from net realized gain (.590) (.075) (.04) -- --
-------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 9.11 $ 8.80 $ 7.09 $ 6.04 $ 5.07
- -------------------------------------------------------------------------------------------------------------------------------
Total Return(b) 10.94% 26.24% 20.02% 21.83% 2.62%(c)
===============================================================================================================================
Ratios to Average Net Assets:
Expenses, including waiver 1.98% 2.05% 1.55% 1.16% .61%(c)
Expenses, excluding waiver 1.98% 2.05% 2.01% 1.91% 1.94%(c)
Net investment income .12% .39% 1.36% 2.06% 2.03%(c)
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended 10/31, 1/3/94(b)
Supplemental Data for All Classes: 1998 1997 1996 1995 to 10/31/94
===============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net assets, end of period (000) $165,904 $142,992 $113,962 $32,770 $9,160
Portfolio turnover rate 45.83% 36.37% 23.84% 23.17% 31.95%
=========================================================================================================================
</TABLE>
(a) Commencement of operations.
(b) Total return does not consider the effects of sales loads and
assumes the reinvestment of all distributions.
(c) Not annualized.
See Notes to Financial Statements.
14
<PAGE>
Financial Highlights
INTERNATIONAL SERIES
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares Class Y Shares
------------------------- ------------------------- ------------------------- --------------
Year Year Year
Ended 12/13/96(a) Ended 6/2/97(b) Ended 6/2/97(b) 12/30/97(b)
10/31, to 10/31, to 10/31, to to
Per Share Operating Performance: 1998 10/31/97 1998 10/31/97 1998 10/31/97 10/31/98
=========================================================== ========================= ========================= ==============
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $10.86 $9.42 $10.83 $10.26 $10.83 $10.26 $11.28
- ----------------------------------------------------------- ------------------------- ------------------------- --------------
Income (loss) from investment
operations
Net investment income (loss) .11(e) .07 .02(e) (.03) .02(e) (.03) .15(e)
Net realized and unrealized
gain on investments and
foreign currency holdings 1.45 1.37 1.43 .60 1.43 .60 .98
Total from investment
operations 1.56 1.44 1.45 .57 1.45 .57 1.13
------------------------------------------------------- ------------------------- ------------------------- --------------
Distributions
Dividends from net investment
income (.03) -- -- -- -- -- --
======================================================= ========================= ========================= ==============
Net asset value, end of period $12.39 $10.86 $12.28 $10.83 $12.28 $10.83 $12.41
- ----------------------------------------------------------- ------------------------- ------------------------- --------------
Total Return(c) 14.36% 15.21%(d) 13.39% 5.56%(d) 13.39% 5.56%(d) 10.02%(d)
=========================================================== ========================= ========================= ==============
Ratios to Average Net Assets:
Expenses 1.31% 1.23%(d) 2.03% .87%(d) 2.05% .87%(d) .84%(d)
Net investment income (loss) .80% .41%(d) .18% (0.46)%(d) .12% (0.46)%(d) 1.11%(d)
======================================================= ========================= ========================= ==============
<CAPTION>
Year Ended
10/31, 12/13/96(a)
Supplemental Data for All Classes: 1998 to 10/31/97
==============================================================================================================================
<S> <C> <C>
Net assets, end of period (000) $153,033 $37,334
Portfolio turnover rate 20.52% 29.72%
========================================================================================================================
</TABLE>
(a) Commencement of operations.
(b) Commencement of offering class shares.
(c) Total return does not consider the effects of sales loads and
assumes the reinvestment of all distributions.
(d) Not annualized.
(e) Calculated using average shares outstanding during the period.
See Notes to Financial Statements.
15
<PAGE>
Financial Highlights
WORLD BOND-DEBENTURE SERIES
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
------------------ ------------------ --------------
12/18/97(a) 12/19/97(b) 12/19/97(b)
Per Share Operating Performance: to 10/31/98 to 10/31/98 to 10/31/98
========================================================================================= ================== ==============
<S> <C> <C> <C>
Net asset value, beginning of period $10.00 $10.00 $10.00
- ----------------------------------------------------------------------------------------- ------------------ --------------
Income (loss) from investment operations
Net investment income .511 .406 .395
Net realized and unrealized gain on investments and foreign
currency holdings (.425) (.372) (.361)
Total from investment operations .086 .034 .034
----------------------------------------------------------------------------------- ------------------ --------------
Distributions
Distributions from net investment income (.426) (.384) (.384)
----------------------------------------------------------------------------------- ------------------ --------------
Net asset value, end of period $ 9.66 $ 9.65 $ 9.65
- ----------------------------------------------------------------------------------------- ------------------ --------------
Total Return(c)(d) .75% .24% .24%
========================================================================================= ================== ==============
Ratios to Average Net Assets:(d)
Expenses, including waiver .55% 1.28% 1.28%
Expenses, excluding waiver 1.20% 1.93% 1.93%
Net investment income 7.08% 6.67% 6.62%
=================================================================================== ================== ==============
<CAPTION>
12/18/97
Supplemental Data for All Classes: to 10/31/98
===========================================================================================================================
<S> <C>
Net assets, end of period (000) $10,134
Portfolio turnover rate 159.14%
=====================================================================================================================
</TABLE>
(a) Commencement of operations.
(b) Commencement of offering respective class shares.
(c) Total return does not consider the effects of sales loads and
assumes the reinvestment of all distributions.
(d) Not annualized.
See Notes to Financial Statements.
Financial Highlights
ALPHA SERIES
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
------------------- ------------------- ---------------
12/29/97(a) 12/29/97(a) 12/29/97(a)
Per Share Operating Performance: to 10/31/98 to 10/31/98 to 10/31/98
======================================================================================= =================== ===============
<S> <C> <C> <C>
Net asset value, beginning of period $13.52 $13.52 $13.52
- --------------------------------------------------------------------------------------- ------------------- ---------------
Income (loss) from investment operations
Net investment loss (.03)(d) (.11)(d) (.11)(d)
Net realized and unrealized loss on investments (.58) (.56) (.55)
Total from investment operations (.61) (.67) (.66)
--------------------------------------------------------------------------------- ------------------- ---------------
Net asset value, end of period $12.91 $12.85 $12.86
- --------------------------------------------------------------------------------------- ------------------- ---------------
Total Return(b)(c) (4.51)% (4.96) (4.88)
===========================================================================================================================
Ratios to Average Net Assets:(c)
Expenses, including waiver .21% .83% .82%
Expenses, excluding waiver .63% 1.26% 1.24%
Net investment loss (.18)% (.81)% (.82)%
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
12/29/97 to
Supplemental Data for All Classes: 10/31/98
===========================================================================================================================
<S> <C>
Net assets, end of period (000) $106,279
Portfolio turnover rate 0.01%
=====================================================================================================================
</TABLE>
(a) Commencement of operations.
(b) Total return does not consider the effects of sales loads and
assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Calculated using average shares outstanding during the period.
See Notes to Financial Statements.
16
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Securities Trust (the "Trust") is an open-end management investment
company, organized as a Delaware business trust. The Trust currently consists of
four separate portfolios ("Series")-Lord Abbett Growth & Income Series ("Growth
& Income") and Lord Abbett International Series ("International"), Lord Abbett
World Bond-Debenture Series ("World Bond-Debenture") and Lord Abbett Alpha
Series ("Alpha"). Effective December 18, 1997, the World Bond-Debenture Series
was added, and the Trust received a capital contribution of $1,000,500 and
issued 100,050 shares to the partners of Lord Abbett & Co. ("Lord Abbett"). The
Alpha Series was added on December 29, 1997 at which time the Trust received a
capital contribution of $10,000 and issued 740 shares of the Alpha Series to the
partners of Lord Abbett. The Alpha Series invests in other funds managed by Lord
Abbett ("Underlying Funds"). Each Series is diversified as defined under the
Investment Company Act of 1940. The financial statements have been prepared in
conformity with generally accepted accounting principles which permit management
to make certain estimates and assumptions at the date of the financial
statements:
The following summarizes the significant accounting policies of the Trust: (a)
Security valuation is determined as follows: Portfolio securities listed or
admitted to trading privileges on any national securities exchange are valued at
the last sales price on the principal securities exchange on which such
securities are traded, or, if there is no sale, at the mean between the last bid
and ask prices on such exchange. Securities traded in the over-the-counter
market are valued at the mean between the last bid and ask prices in such
market, except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price if it is determined that such price
more accurately reflects the value of such securities. Investments in the
Underlying Funds are valued at the closing net asset value per share of each
Underlying Fund on the day of valuation. Short-term securities are valued at
amortized cost which approximates market value. Securities for which market
quotations are not available are valued at fair value under procedures approved
by the Board of Trustees. (b) Transactions denominated in foreign currencies are
recorded in the Trust's records at the rate prevailing when earned or incurred.
Asset and liability accounts that are denominated in foreign currencies are
adjusted to reflect current exchange rates. (c) The Trust may write call options
on securities it owns. Premiums received by the Trust upon writing covered call
options are included in the Trust's statement of net assets as an asset and an
equivalent liability. The liability is adjusted daily to the market value of the
options written. If an option expires, or if the Trust enters into a closing
purchase transaction, the Trust realizes a gain or, if the cost of a closing
purchase transaction exceeds the premium originally received, a loss, and the
liability related to the option is extinguished. If an option is exercised, the
proceeds of the sale of the underlying security are increased by the premium
originally received when the option was written. (d) It is the policy of the
Trust to meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute all of its taxable income in
taxable distributions. Therefore, no federal income tax provision is required.
(e) Security transactions are recorded on the date that the securities are
purchased or sold (trade date). Realized gains and losses from investment
transactions are calculated on the identified cost basis. Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis. Net investment income (other than
class-specific expenses such as distribution and service fees) and realized and
unrealized gains or losses are allocated to each class of shares based upon the
relative proportion of net assets at the beginning of the day. (f) Organization
expenses are amortized evenly over a period of five years. (g) Effective
November 1, 1997, the Trust discontinued the accounting practice of
equalization. Undistributed (overdistributed) net investment income of $(7,673)
and $143,734, representing accumulated equalization at October 31, 1997 for the
Growth & Income and International Series, respectively, was transferred to
paid-in-capital. Such reclassification had no effect on net assets, results of
operations, or net asset value per share.
2. Management Fee and Other Transactions with Affiliates
The Trust has a management agreement with Lord Abbett pursuant to which Lord
Abbett supplies the Trust with investment management services and executive and
other personnel, pays the remuneration of officers, provides office space and
pays for ordinary and necessary office and clerical expenses relating to
research and statistical work and supervision of the Trust's investment
portfolios. The management fee is based on average daily net assets at the rate
of 0.75% per annum for the Growth and Income, International and World
Bond-Debenture Series and 0.50% per annum for the Alpha Series. Lord Abbett
waived its fee for the World Bond-Debenture and Alpha Series for the year ended
October 31, 1998. Lord Abbett has entered into a sub-advisory agreement with
Fuji-Lord Abbett International, Ltd. ("sub-adviser"). Lord, Abbett & Co. is a
minority owner of the sub-adviser. The sub-adviser furnishes investment advisory
services in connection with the management of the International Series. Lord
Abbett pays for the cost of the sub-adviser's services.
Each Series of the Trust has Rule 12b-1 plans and agreements with respect to one
or more classes of shares as described below (the "Class A, Class B and Class C
Plans") with Lord Abbett Distributor LLC ("Distributor"), an affiliate of Lord
Abbett. Each Series makes payments to Distributor which uses or passes on such
payments to authorized institutions. Pursuant to the Class A Plan, each Series
pays Distributor (1) an annual service fee of 0.25% of the average daily net
assets of Class A shares, (2) a one-time distribution fee of up to 1% on certain
qualifying purchases and (3) a supplemental annual distribution fee of 0.10% of
the average daily net assets of Class A shares serviced by certain qualifying
institutions. Pursuant to the Class B Plan, each Series pays Distributor an
annual service and distribution fee of 0.25% and 0.75%, respectively, of the
average daily net asset value of the Class B shares. Pursuant to the Class C
Plan, each Series pays Distributor (1) a service fee and a distribution fee, at
the time such shares are sold, not to exceed 0.25% and 0.75%, respectively, of
the net asset value of such shares sold and (2) at each quarter-end after the
first anniversary of the sale of such shares, a service fee and a distribution
fee at an annual rate not to exceed 0.25% and 0.75%, respectively, of the
average annual net asset value of such shares outstanding. Class Y does not have
a Rule 12b-1 plan. The Class A Plan for the World Bond-Debenture Series became
operative May 1, 1998.
The Alpha Series has entered into a Servicing Arrangement with the Underlying
Funds pursuant to which each Underlying Fund will pay a portion of the expenses
of the Alpha Series in proportion to the average daily value of shares owned by
the Alpha Series.
Lord Abbett received the following commissions for the period ended October 31,
1998 on sales of shares of the Trust after concessions were paid to authorized
distributors:
Lord Abbett Dealers'
Series Commissions Concessions
- --------------------------------------------------------------------------------
Growth & Income $ 60,633 $ 358,962
- --------------------------------------------------------------------------------
International $ 228,119 $1,423,041
- --------------------------------------------------------------------------------
World Bond-Debenture $ 27,140 $ 166,144
- --------------------------------------------------------------------------------
Alpha $ 301,587 $1,832,777
- --------------------------------------------------------------------------------
3. Distributions
Dividends from net investment income, if any, are declared and paid
semi-annually for the Growth & Income Series, annually for the International and
Alpha Series, and monthly for the World Bond-Debenture Series. Net realized
gains from investment transactions, if any, are distributed to shareholders at
least annually. At October 31, 1998, the accumulated undistributed net realized
gain (loss) for financial reporting purposes, aggregated $5,817,588 for the
Growth & Income Series, $273,862 for the
17
<PAGE>
Notes to Financial Statements
International Series, $(450,150) for the World Bond-Debenture Series and
($164,572) for the Alpha Series. Distributions declared on November 18, 1998 and
payable on November 25, 1998 to shareholders of record on November 18, 1998 were
as follows:
Rate Aggregate
Per Share Amount
- --------------------------------------------------------------------------------
Growth & Income Series-Net Investment Income-Class A $ 0.05 $ 401,032
- --------------------------------------------------------------------------------
Growth & Income Series-Net Investment Income-Class B $ 0.01 $ 3,850
- --------------------------------------------------------------------------------
Growth & Income Series-Net Investment Income-Class C $ 0.01 $ 97,485
- --------------------------------------------------------------------------------
Growth & Income Series-Capital Gains-Class A $ 0.325 $2,606,704
- --------------------------------------------------------------------------------
Growth & Income Series-Capital Gains-Class B $ 0.325 $ 125,112
- --------------------------------------------------------------------------------
Growth & Income Series-Capital Gains-Class C $ 0.325 $3,168,223
- --------------------------------------------------------------------------------
International Series-Net Investment Income-Class A $ 0.085 $ 567,114
- --------------------------------------------------------------------------------
International Series-Net Investment Income-Class B $ 0.015 $ 20,006
- --------------------------------------------------------------------------------
International Series-Net Investment Income-Class C $ 0.015 $ 17,512
- --------------------------------------------------------------------------------
International Series-Net Investment Income-Class Y $ 0.070 $ 257,274
- --------------------------------------------------------------------------------
International Series-Capital Gains-Class A $0.0225 $ 150,118
- --------------------------------------------------------------------------------
International Series-Capital Gains-Class B $0.0225 $ 30,109
- --------------------------------------------------------------------------------
International Series-Capital Gains-Class C $0.0225 $ 26,269
- --------------------------------------------------------------------------------
International Series-Capital Gains-Class Y $0.0225 $ 82,695
- --------------------------------------------------------------------------------
World Bond-Debenture Series-
Foreign Currency Transactions-Class A $ 0.18 $ 146,447
- --------------------------------------------------------------------------------
World Bond-Debenture Series-
Foreign Currency Transactions-Class B $ 0.18 $ 26,529
- --------------------------------------------------------------------------------
World Bond-Debenture Series-
Foreign Currency Transactions-Class C $ 0.18 $ 29,786
- --------------------------------------------------------------------------------
Income and capital gains distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles.
4. Capital
Transactions in shares of beneficial interest for the Growth & Income Series
were as follows:
Year Ended Year Ended
October 31, 1998 October 31, 1997
-------------------------- --------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------- --------------------------
Sales of shares 1,916,824 $17,374,528 962,023 $ 7,725,077
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
distributions 470,043 3,900,320 134,345 1,035,066
Total 2,386,867 21,274,848 1,096,368 8,760,143
- -------------------------------------------------- --------------------------
Shares reacquired (1,119,700) (9,997,500) (1,067,517) (8,524,014)
Increase 1,267,167 $11,277,348) 28,851 $ 236,129
- --------------------------------------------------------------------------------
Year Ended 6/5/97 to
October 31, 1998 October 31, 1997
-------------------------- --------------------------
Class B Shares Amount Shares Amount
- -------------------------------------------------- --------------------------
Sales of shares 351,815 $3,196,791 38,206 $339,259
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
distributions 2,736 22,576 -- --
Total 354,551 3,219,367 38,206 339,259
- -------------------------------------------------- --------------------------
Shares reacquired (19,528) (175,415) (486) (4,369)
Increase 335,023 $3,043,952) 37,720 $334,890
- --------------------------------------------------------------------------------
Year Ended Year Ended
October 31, 1998 October 31, 1997
-------------------------- --------------------------
Class C Shares Amount Shares Amount
- -------------------------------------------------- --------------------------
Sales of shares 1,238,147 $ 11,241,751 1,695,886 $ 13,725,294
Shares issued to
shareholders in
reinvestment of net
investment income
and realized gain
distributions 648,459 5,336,821 130,943 994,354
Total 1,886,606 16,578,572 1,826,829 14,719,648
- -------------------------------------------------- --------------------------
Shares reacquired (1,570,614) (14,150,711) (1,713,554) (14,015,879)
Increase 315,992 $ 2,427,861) 113,275 $ 703,769
- --------------------------------------------------------------------------------
Transactions in shares of beneficial interest for the International Series were
as follows:
Year Ended 12/13/96 to
October 31, 1998 October 31, 1997
-------------------------- --------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------- --------------------------
Sales of shares 4,503,630 $ 61,680,518 3,074,958 $31,360,535
Shares issued to
shareholders in
reinvestment of net
investment income
dividends 6,701 71,968 -- --
Total 4,510,331 61,752,486 3,074,958 31,360,535
- -------------------------------------------------- --------------------------
Shares reacquired (1,017,196) (13,021,404) (272,153) (2,887,954)
Increase 3,493,135 $ 48,731,082) 2,802,805 $28,472,581
- --------------------------------------------------------------------------------
Year Ended 6/2/97 to
October 31, 1998 October 31, 1997
-------------------------- --------------------------
Class B Shares Amount Shares Amount
- -------------------------------------------------- --------------------------
Sales of shares 1,222,629 $16,942,824 159,588 $1,691,357
- -------------------------------------------------- --------------------------
Shares reacquired (77,687) (962,598) (7,142) (77,972)
- -------------------------------------------------- --------------------------
Increase 1,144,942 $15,980,226) 152,446 $1,613,385
- --------------------------------------------------------------------------------
Year Ended 6/2/97 to
October 31, 1998 October 31, 1997
-------------------------- --------------------------
Class C Shares Amount Shares Amount
- -------------------------------------------------- --------------------------
Sales of shares 1,839,301 $ 24,518,535 295,740 $3,118,284
- -------------------------------------------------- --------------------------
Shares reacquired (992,256) (12,825,218) (25,285) (262,245)
- -------------------------------------------------- --------------------------
Increase 847,045 $ 11,693,317) 270,455 $2,856,039
- --------------------------------------------------------------------------------
12/30/97 to
October 31, 1998
--------------------------
Class Y Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 3,464,016 $49,526,848
- --------------------------------------------------------------------------------
Shares reacquired (17,400) (200,000)
- --------------------------------------------------------------------------------
Increase 3,446,616 $49,326,848
- --------------------------------------------------------------------------------
Transactions in shares of beneficial interest for the World Bond-Debenture
Series were as follows:
12/18/97 to
October 31, 1998
--------------------------
Class A Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 872,491 $ 9,065,643
Shares issued to
shareholders in
reinvestment of net
investment income dividends 20,089 201,411
Total 892,580 9,267,054
- --------------------------------------------------------------------------------
Shares reacquired (225,888) (2,331,174)
Increase 666,692 $ 6,935,880
- --------------------------------------------------------------------------------
18
<PAGE>
12/19/97 to
October 31, 1998
--------------------------
Class B Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 120,952 $1,264,229
Shares issued to shareholders in reinvestment
of net investment income dividends 2,061 20,483
Total 123,013 1,284,712
- --------------------------------------------------------------------------------
Shares reacquired (4,729) (48,478)
Increase 118,284 $1,236,234
- --------------------------------------------------------------------------------
12/19/97 to
October 31, 1998
--------------------------
Class C Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 166,740 $1,741,163
Shares issued to shareholders in reinvestment
of net investment income 3,490 34,588
Total 170,230 1,775,751
- --------------------------------------------------------------------------------
Shares reacquired (5,476) (53,862)
Increase 164,754 $1,721,889
- --------------------------------------------------------------------------------
Transactions in shares of beneficial interest for the Alpha Series were as
follows:
12/29/97 to
October 31, 1998
--------------------------
Class A Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 4,111,581 $60,901,622
- --------------------------------------------------------------------------------
Shares reacquired (272,413) (3,501,712)
- --------------------------------------------------------------------------------
Increase 3,839,168 $57,399,910
- --------------------------------------------------------------------------------
12/29/97 to
October 31, 1998
--------------------------
Class B Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 2,961,179 $44,641,341
- --------------------------------------------------------------------------------
Shares reacquired (144,754) (1,903,606)
- --------------------------------------------------------------------------------
Increase 2,816,425 $42,737,735
- --------------------------------------------------------------------------------
12/29/97 to
October 31, 1998
--------------------------
Class C Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 1,743,733 $25,945,994
- --------------------------------------------------------------------------------
Shares reacquired (149,933) (1,908,110)
- --------------------------------------------------------------------------------
Increase 1,593,800 $24,037,884
- --------------------------------------------------------------------------------
As of October 31, 1998, paid in capital for each Series was as follows:
Series
- --------------------------------------------------------------------------------
Growth & Income $110,213,979
- --------------------------------------------------------------------------------
International $160,817,212
- --------------------------------------------------------------------------------
World Bond-Debenture $ 10,897,120
- --------------------------------------------------------------------------------
Alpha $123,929,809
- --------------------------------------------------------------------------------
5. Purchases and Sales of Securities
Purchases and sales of investment securities (other than U.S. Government
obligations, short-term investments and foreign currency transactions) were as
follows:
Series Purchases Sales
- --------------------------------------------------------------------------------
Growth & Income $ 74,662,777 $70,889,762
- --------------------------------------------------------------------------------
International $124,367,383 $17,074,585
- --------------------------------------------------------------------------------
World Bond-Debenture $ 15,737,172 $ 6,747,615
- --------------------------------------------------------------------------------
Alpha $123,816,794 $ 500,000
- --------------------------------------------------------------------------------
Purchases and sales of U.S. Government obligations for the World Bond-Debenture
Series aggregated $2,791,523 and $1,723,632, respectively.
As of October 31, 1998, net unrealized appreciation, unrealized appreciation and
unrealized depreciation of investments based on cost for federal income tax
purposes were as follows:
Net Unrealized
Appreciation Unrealized Unrealized
Series (Depreciation) Appreciation (Depreciation)
- --------------------------------------------------------------------------------
Growth & Income $ 49,574,756 $ 50,472,618 $ (897,862)
- --------------------------------------------------------------------------------
International $ (8,780,230) $ 12,363,527 $(21,143,757)
- --------------------------------------------------------------------------------
World Bond-Debenture $ (576,098) $ 149,119 $ (725,217)
- --------------------------------------------------------------------------------
Alpha $(17,486,469) $ -- $(17,486,469)
- --------------------------------------------------------------------------------
The cost of investments for federal income tax purposes is the same as that used
for financial reporting purposes.
Transactions in call options written during the year ended October 31, 1998 for
the Growth & Income Series were as follows:
Number Premiums
of Contracts Received
- --------------------------------------------------------------------------------
Options written 415 $53,962
- --------------------------------------------------------------------------------
Options expired 415 $53,962
- --------------------------------------------------------------------------------
Options outstanding at
October 31, 1998 -- $ --
- --------------------------------------------------------------------------------
At October 31, 1998, the World Bond-Debenture Series had outstanding forward
currency contracts to sell foreign currencies as follows:
Value at Unrealized
Foreign Currency Settlement Date Current Appreciation
Sell Contracts Receivable Value (Depreciation)
- --------------------------------------------------------------------------------
Deutsche Marks,
expiring 12/15/98 $ 50,905 $ 54,863 $ (3,958)
- --------------------------------------------------------------------------------
British Pounds Sterling,
expiring 3/15/99 $838,475 $831,900 $ 6,575
- --------------------------------------------------------------------------------
Total $889,380 $886,763 $ 2,617
- --------------------------------------------------------------------------------
6. Trustees' Remuneration
The Trustees of the Trust associated with Lord Abbett and all officers of the
Trust receive no compensation from the Trust for acting as such. Outside
Trustees' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on net assets of each fund. Trustees' fees payable at October
31, 1998, under a deferred compensation plan were $110,515.
7. Line of Credit
The Growth & Income and International Series, respectively, with certain other
funds managed by Lord Abbett, have available a $200,000,000 unsecured revolving
credit facility ("Facility"), from a consortium of banks, to be used for
temporary or emergency purposes as an additional source of liquidity to fund
redemptions of investor shares. Any borrowings under this Facility will bear
interest at current market rates as defined in the agreement. The fee for this
Facility is 0.05% per annum. There were no loans outstanding pursuant to this
Facility at October 31, 1998, nor was the Facility utilized at any time during
the year.
19
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders,
Lord Abbett Securities Trust:
We have audited the accompanying statements of net assets of Lord Abbett
Securities Trust-Growth & Income Series, International Series, World
Bond-Debenture Series and Alpha Series as of October 31, 1998, the related
statements of operations and of changes in net assets and the financial
highlights for each of the periods presented. These financial statements and the
financial highlights are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1998 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett
Securities Trust-Growth & Income Series, International Series, World
Bond-Debenture Series and Alpha Series at October 31, 1998, the results of their
operations, the changes in their net assets and their financial highlights for
the respective periods presented, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
December 11, 1998
Our Management
Board of Trustees
Robert S. Dow
E. Thayer Bigelow*+
William H. T. Bush*
Robert B. Calhoun
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*
Thomas J. Neff*+
* Outside Director
+ Audit Committee
Officers
Robert S. Dow, Chairman and President
Zane E. Brown, Executive Vice President
Robert G. Morris, Executive Vice President
Paul A. Hilstad, Vice President
and Secretary
Daniel E. Carper, Vice President
Robert P. Fetch, Vice President
Timothy W. Horan, Vice President
Jerald Lanzotti, Vice President
Stephen I. McGruder, Vice President
Fernando Saldanha, Vice President
Christopher J. Towle, Vice President
John J. Walsh, Vice President
Lawrence H. Kaplan, Vice President
and Assistant Secretary
Thomas F. Konop, Vice President
and Assistant Secretary
A. Edward Oberhaus III, Vice President
Keith F. O'Connor, Vice President
Donna McManus, Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
Investment Manager and Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
Copyright (C) 1998 by Lord Abbett Securities Trust, 767 Fifth Avenue, New York,
NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Securities Trust, is to be distributed only if preceded or
accompanied by a current prospectus which includes information concerning each
Series' investment objective and policies, sales charges and other matters.
There is no guarantee that the forecasts contained within this publication will
come to pass.
All rights reserved. Printed in the U.S.A.
20
<PAGE>
Lord, Abbett & Co.
A Tradition of Performance Through
Disciplined
Investing
[PHOTO OMITTED]
(seated)
Zane E. Brown
Partner and Director of Fixed Income
(standing, from left to right)
Fernando Saldanha
Emerging Market Specialist
Timothy W. Horan
Director of International Fixed Income
Christopher J. Towle
Partner and Director of High-Yield Fixed Income
A successful long-term track record is evidence of a successful investment
strategy. For decades, we at Lord, Abbett & Co. have believed that investing
with a disciplined, value approach is the best way to achieve competitive
returns and reduce portfolio risk. This commitment and the dedication of our
team of 57 investment professionals have helped us earn the trust of financial
professionals and investors for over 65 years.
About Your Trust's Board of Trustees
The Securities and Exchange Commission (SEC) views the role of the independent
Board of Trustees as one of the most important components in overseeing a mutual
fund. The Board of Trustees watches over your Trust's general operations and
represents your interests. Trustees review and approve every contract between
your Trust and Lord, Abbett & Co. (the Trust's investment manager) and Lord
Abbett Distributor LLC (the Trust's underwriter). They meet regularly to review
a wide variety of information and issues regarding your Trust. Every Trustee
possesses extensive business experience. Lord Abbett Securities Trust
shareholders are indeed fortunate to have a group of independent Trustees with
diverse backgrounds to provide a variety of viewpoints in the oversight of their
Trust. Below, we feature one of our Trustees, Robert B. Calhoun, Jr.
Robert B. Calhoun, Jr.
Trustee -- Lord Abbett
Securities Trust
[PHOTO OMITTED]
Mr. Calhoun is a graduate of Princeton University with over 35 years of Wall
Street experience. He is a Managing Partner and co-founder of Monitor Clipper
Partners and The Clipper Group, both private equity investment firms.
Previously, Mr. Calhoun spent over 25 years in Credit Suisse First Boston's
Investment Banking Department.
Mr. Calhoun became a Trustee of Lord Abbett's funds in 1998. He also currently
serves on the boards of David's Bridal, Interstate Bakeries, Hvide Marine,
TravelCenters of America and Long John Silver's Inc.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
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GROWTH
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INCOME
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<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Growth Fund Income Funds Income Funds Market Fund
Developing Alpha Series Affiliated Fund Balanced Series Bond-Debenture o National U.S. Government
Growth Fund Fund o California Securities
Global Fund- Growth & o Connecticut Money Market
Equity Series Income Series Global Fund- o Florida Fund**+
Income Series o Georgia
Growth Research Fund- o Hawaii
Opportunities Large-Cap High Yield Fund o Michigan
Fund Series o Minnesota
Limited Duration o Missouri
International U.S. Government o New Jersey
Series Securities Series** o New York
o Pennsylvania
Mid-Cap U.S. Government o Texas
Value Fund Securities Series** o Washington
Research Fund- World Bond-
Small-Cap Debenture Series
Series*
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your investment professional provides value in helping you identify and
understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for Lord Abbett Securities
Trust.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your investment professional or Lord Abbett
Distributor LLC at 800-874-3733 for a prospectus. Read it carefully before
investing.
When you invest in a family of funds, you benefit from:
Diversification. You and your investment professional can diversify your
investments between equity and income funds.
Flexibility. As your investment goals change, your investment professional can
help you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 32
portfolios designed to meet a variety of investment needs. While you may
reallocate your assets among our funds at any time, we recommend speaking with
your investment professional to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or Statement Inquiries: 800-821-5129
For Literature Only: 800-874-3733
For More Information: 800-426-1130
Visit Our Web Site:
http://www.lordabbett.com
* The Lord Abbett Research Fund-Small-Cap Series is closed to new investors
** An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ An investment in the Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. This Fund is managed
to maintain, and has maintained, its stable $1.00 per share price.
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
Lord Abbett mutual fund shares are distributed by:
LORD ABBETT DISTRIBUTOR LLC
- ------------------------------------------------------------ LST-2-1098
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (12/98)
