1933 Act File No.2-38910
1940 Act File No.811-2145
SECURITIES & EXCHANGE COMMISSION
Washington, D.C.20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No.39 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Post-Effective Amendment No.20 [X]
LORD ABBETT BOND-DEBENTURE FUND, INC.
Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
Address of Principal Executive Office
Registrant's Telephone Number (212) 848-1800
Kenneth B.Cutler, Vice President & Secretary
767 FIFTH AVENUE, NEW YORK, N. Y. 10153
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately on filing pursuant to paragraph (b) of Rule 485
X on May 1, 1996 pursuant to paragraph (b) of Rule 485
60 days after filing pursuant to paragraph (a)(1) of Rule 485
on (date) pursuant to paragraph (a) (1) of Rule 485
75 days after filing pursuant to paragraph (a)(2) of Rule 485
on (date) pursuant to paragraph (a) (2) of Rule 485
If appropriate, check the following box:
this post-effective amendment designates a new effective date for
a previously filed post-effective amendment
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a) (1) and a Rule 24f-2 Notice for
Registrant's most recent fiscal year was filed with the Commission on or about
February 28, 1996.
<PAGE>
LORD ABBETT BOND-DEBENTURE FUND, INC.
FORM N-1A
Cross Reference Sheet
Post-Effective Amendment No. 39
Pursuant to Rule 481(a)
Form N-1A Location In Prospectus or
Item No. Statement of Additional Information
1 Cover Page
2 Fee Table
3 (a) Financial Highlights; Performance
3 (b) N/A
3 (c) Performance
3 (d) N/A
4 (a) (i) Cover Page
4 (a) (ii) Investment Objective; How We Invest
4 (b) (c) How We Invest
5 (a) Our Management
5 (b) Back Cover Page
5 (c) Our Management
5 (d) N/A
5 (e) Back Cover Page
5 (f) Our Management
5 (g) N/A
5 A Performance
6 (a) Cover Page
6 (b) (c) (d) N/A
6 (e) Cover Page
6 (f) (g) Dividends, Capital Gains
Distributions and Taxes
6 (h) N/A
7 (a) Back Cover Page
7 (b) (c)
(d) (e) (f) Purchases
8 Redemptions
9 N/A
10 Cover Page
11 Cover Page - Table of Contents
12 N/A
13 Investment Objective and Policies
14 Directors and Officers
15 (a) (b) N/A
15 (c) Directors and Officers
16 (a) (i) Investment Advisory and Other Services
16 (a) (ii) Directors and Officers
16 (a) (iii) Investment Advisory and Other Services
16 (b) Investment Advisory and Other Services
16 (c) (d)
(e) (g) N/A
16 (f) Purchases, Redemptions
and Shareholder Services; Investment Advisory and
Other Services
<PAGE>
Form N-1A Location in Prospectus or
Item No. Statement of Additional Information
16 (h) Investment Advisory and Other Services
16 (i) N/A
17 (a) Portfolio Transactions
17 (b) N/A
17 (c) Portfolio Transactions
17 (d) Portfolio Transactions
17 (e) N/A
18 (a) Cover Page
18 (b) N/A
19 (a) (b) Purchases, Redemptions
and Shareholder Services; Notes
to Financial Statements
19 (c) N/A
20 Taxes
21 (a) Purchases, Redemptions
and Shareholder Services
21 (b) (c) N/A
22 (a) N/A
22 (b) Past Performance
23 Financial Statements
LORD ABBETT
BOND-DEBENTURE FUND, INC.
THE GENERAL MOTORS BUILDING
767 FIFTH AVENUE
NEW YORK, NY 10153-0203
800-426-1130
Our Fund, Lord Abbett Bond-Debenture Fund, Inc. ("we" or the "Fund"), is a
diversified, open-end management investment company incorporated under Maryland
law on January 23, 1976. We have a single class of shares with equal rights as
to voting, dividends, assets and liquidation.
Our investment objective is high current income and the opportunity for capital
appreciation to produce a high total return through a professionally-managed
portfolio consisting primarily of convertible and discount debt securities, many
of which are lower-rated. These lower-rated debt securities entail greater risks
than investments in higher-rated debt securities and, therefore, the former are
referred to colloquially as "junk bonds". Investors should carefully consider
these risks set forth under "How We Invest" before investing. There can be no
assurance that we will achieve our objective.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. Additional information about
the Fund has been filed with the Securities and Exchange Commission. The
Statement of Additional Information is incorporated by reference into this
Prospectus and may be obtained, without charge, by writing to the Fund or by
calling 800-874-3733. Ask for "Part B of the Prospectus -- The Statement of
Additional Information".
The date of this Prospectus and of the Statement of Additional Information is
May 1, 1996.
PROSPECTUS
Investors should read and retain this Prospectus. Shareholder inquiries should
be made in writing to the Fund or by calling 800-821-5129. You can also make
inquiries through your broker-dealer.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by, any bank, and the shares are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency. An
investment in the Fund involves risks, including the possible loss of principal.
CONTENTS PAGE
1 Investment Objective 2
2 Fee Table 2
3 Financial Highlights 2
4 How We Invest 3
5 Purchases 5
6 Shareholder Services 7
7 Our Management 8
8 Dividends, Capital Gains
Distributions and Taxes 8
9 Redemptions 9
10 Performance 10
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
1 IVESTMENT OBJECTIVES
Our investment objective is high current income and the opportunity for capital
appreciation to produce a high total return through a professionally-managed
portfolio consisting primarily of convertible and discount debt securities, many
of which are lower-rated.
2 FEE TABLE
A summary of the Fund's expenses is set forth in the table below. The example
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown.
SHAREHOLDER TRANSACTION EXPENSES
(AS A PERCENTAGE OF OFFERING PRICE)
Maximum Sales Load(1) on Purchases
(See "Purchases") 4.75%
Deferred Sales Load(1) (See "Purchases") None(2)
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fee (See "Our Management") .47%
12b-1 Fee (See "Purchases") .21%(3)
Other Expenses (See "Our Management") .14%
Total Operating Expenses .82%(3)
Example: Assume an annual return of 5% and there is no change in the level of
expenses described above. For every $1,000 invested, with reinvestment of all
distributions, you would pay the following total expenses if you closed your
account after the number of years indicated.
1 year 3 years 5 years 10 years
$55(4) $72(4) $91(4) $144(4)
(1)Sales "load" is referred to as sales "charge" and "deferred sales load" is
referred to as "contingent deferred reimbursement charge" throughout this
Prospectus.
(2)Redemptions of shares on which the Fund's 1% Rule 12b-1 sales distribution
fee for purchases of $1 million or more has been paid are subject to a 1%
contingent deferred reimbursement charge, if the redemption occurs within 24
months after the month of purchase, subject to certain exceptions described
herein.
(3)The Board of Directors has approved under a new 12b-1 plan, subject to
shareholder approval, payments that, had they been in effect for the Fund's most
recent fiscal year, would have increased 12b-1 fees and total expenses to 0.25%
and 0.86%, respectively. See "Rule 12b-1 Plan" for more details.
(4)Based on total operating expenses shown in the table above.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in the Fund.
3 FINANCIAL HIGHLIGHTS
The following table has been audited by Deloitte & Touche llp, independent
accountants, in connection with their annual audit of the Fund's Financial
Statements, whose report thereon is incorporated by reference in the Statement
of Additional Information and may be obtained upon request, and has been
included herein in reliance upon their authority as experts in accounting and
auditing.
<TABLE>
<CAPTION>
Per Share Operating Year Ended December 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Performance: 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
Net asset value, beginning of year $8.71 $9.95 $9.43 $9.02 $7.36 $9.03 $9.59 $9.39 $10.29 $10.56
Income from investment operations
Net investment income .85 .84 .89 .95 .98 1.02 1.04 1.09 1.07 1.16
Net realized and unrealized
gain (loss) on securities .606 (1.203) .55 .42 1.66 (1.65) (.56) .15 (.85) (.10)
Total from investment operations 1.456 (.363) 1.44 1.37 2.64 (.63) .48 1.24 .22 1.06
Distributions
Dividends from net investment income (.876) (.877) (.92) (.96) (.98) (1.04) (1.04) (1.04) (1.12) (1.19)
Distribution from net realized gain . . . . . . . (.14)
Net asset value, end of year $9.29 $8.71 $9.95 $9.43 $9.02 $7.36 $9.03 $9.59 $9.39 $10.29
Total Return* 17.50% (3.87)% 15.97% 15.99% 38.34% (7.57)% 5.06% 13.80% 1.88% 10.61%
Ratios/Supplemental Data:
Net assets, end of year (000) $1,339,508 $987,613 $969,736 $734,017 $594,008 $480,847 $643,953 $717,775 $733,198 $700,553
Ratios to Average Net Assets:
Expenses .82% .88% .88% .84% .85% .80% .59% .64% .65% .61%
Net investment income 9.41% 8.97% 9.17% 10.18% 11.96% 12.48% 10.97% 11.29% 10.49% 11.09%
Portfolio turnover rate 134.90% 147.98% 159.79% 188.44% 208.49% 145.47% 123.77% 140.01% 176.37% 137.33%
<FN>
*Total return does not consider the effects of sales loads.
See Notes to Financial Statements.
</FN>
</TABLE>
<PAGE>
4 HOW WE INVEST
We believe that a high total return (current income and capital appreciation)
may be derived from an actively-managed, diversified debt-security portfolio. In
no event will we voluntarily purchase any securities other than debt securities,
if, at the time of such purchase or acquisition, the value of the debt
securities in our portfolio is less than 80% of the value of our total assets.
We seek unusual values, particularly in lower-rated debt securities, some of
which are convertible into common stocks or have warrants to purchase common
stocks.
Higher yield on debt securities can occur during periods of inflation when the
demand for borrowed funds is high. Also, buying lower-rated bonds when the
credit risk is above average but, we think, likely to decrease, can generate
higher yields. Such debt securities normally will consist of secured debt
obligations of the issuer (i.e., bonds), general unsecured debt obligations of
the issuer (i.e., debentures) and debt securities which are subordinate in right
of payment to other debt of the issuer.
Capital appreciation potential is an important consideration in the selection of
portfolio securities. Capital appreciation may be obtained by (1) investing in
debt securities when the trend of interest rates is expected to be down; (2)
investing in convertible debt securities or debt securities with warrants
attached entitling the holder to purchase common stock; and (3) investing in
debt securities of issuers in financial difficulties when, in our opinion, the
problems giving rise to such difficulties can be successfully resolved, with a
consequent improvement in the credit standing of the issuers (such investments
involve corresponding risks that interest and principal payments may not be made
if such difficulties are not resolved). In no event will we invest more than 10%
of our gross assets at the time of investment in debt securities which are in
default as to interest or principal.
Normally we invest in long-term debt securities when we believe that interest
rates in the long run will decline and prices of such securities generally will
be higher. When we believe that long-term interest rates will rise, we will
endeavor to shift our portfolio into short-term debt securities whose prices
might not be affected as much by an increase in interest rates.
The following policies are subject to change without shareholder approval: (a)
we must keep at least 20% of the value of our total assets in (1) debt
securities which, at the time of purchase, are rated within one of the four
highest grades determined either by Moody's Investors Service, Inc. or Standard
& Poor's Ratings Services, (2) debt securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, (3) cash or cash equivalents
(short-term obligations of banks, corporations or the U.S. Government), or (4) a
combination of any of the foregoing; (b) we may invest up to 10% of our gross
assets, at market value, in debt securities primarily traded in foreign
countries -- such foreign debt securities normally will be limited to issues
where there does not appear to be substantial risk of nationalization, exchange
controls, confiscation or other government restrictions; (c) subject to the
percentage limitations for purchases of other than debt securities described
below, we may purchase common and preferred stocks; (d) we may hold or sell any
property or securities which we may obtain through the exercise of conversion
rights or warrants or as a result of any reorganization, recapitalization or
liquidation proceedings for any issuer of securities owned by us. In no event
will we voluntarily purchase any securities other than debt securities, if, at
the time of such purchase or acquisition, the value of the property and
securities, other than debt securities, in our portfolio is greater than 20% of
the value of our gross assets. A purchase or acquisition will not be considered
"voluntary" if made in order to avoid loss in value of a conversion or other
premium; and (e) we do not purchase securities for short-term trading, nor do we
purchase securities for the purpose of exercising control of management.
We may invest up to 15% of our net assets in illiquid securities. Bonds which
are subject to legal or contractual restrictions on resale, but which have been
determined by the Board of Directors to be liquid, will not be subject to this
limit. Investment by the Fund in such securities, initially determined to be
liquid, could have the effect of diminishing the level of the Fund's liquidity
during periods of decreased market interest in such securities.
<PAGE>
We may, but have no present intention to, commit more than 5% of our gross
assets to the lending of our portfolio securities.
We will not change our investment objective without shareholder approval.
RISK FACTORS. We may invest substantially in lower-rated bonds for their higher
yields. In general, the market for lower-rated bonds is more limited than that
for higher-rated bonds and, therefore, may be less liquid. Market prices of
lower-rated bonds may fluctuate more than those of higher-rated bonds,
particularly in times of economic change and stress. In addition, because the
market for lower-rated corporate debt securities has in past years experienced
wide fluctuations in the values of certain of these securities, past experience
may not provide an accurate indication of the future performance of that market
or of the frequency of default, especially during periods of recession.
Objective pricing data for lower-rated bonds may be more limited than for
higher-rated bonds and valuation of such securities may be more difficult and
require greater reliance upon judgment.
While the market for lower-rated bonds may be less sensitive to interest rate
changes, the market prices of these bonds structured as zero coupon or
pay-in-kind securities may be affected to a greater extent by such changes and
thus may be more volatile than prices of lower-rated securities paying interest
periodically in cash. Lower-rated bonds that are receivable prior to maturity
may be more susceptible to refunding during periods of falling interest rates,
requiring replacement with lower-yielding securities. Since the risk of default
generally is higher among lower-rated bonds, the research and analysis performed
by Lord, Abbett & Co. ("Lord Abbett") are especially important in the selection
of such bonds, which, if rated BB/Ba or lower, often are described as
"high-yield bonds" because of their generally higher yields and referred to
colloquially as "junk bonds" because of their greater risks. In selecting
lower-rated bonds for our investment, Lord Abbett does not rely upon ratings,
which evaluate only the safety of principal and interest, not market value risk,
and which, furthermore, may not accurately reflect an issuer's current financial
condition. We do not have any minimum rating criteria for our investments in
bonds and some issuers may default as to principal and/or interest payments
subsequent to the purchase of their securities. Through portfolio
diversification, good credit analysis and attention to current developments and
trends in interest rates and economic conditions, investment risk can be
reduced, although there is no assurance that losses will not occur.
Laws enacted from time to time could limit the tax or other advantages of, and
the issuance of, lower-rated securities and could adversely affect their
secondary market and the financial condition of their issuers. On the other
hand, such legislation (curtailing the supply of new issues) could improve the
liquidity, market values and demand for outstanding issues.
During our past fiscal year, the percentages of our average net assets invested
in (a) rated bonds and (b) unrated bonds judged by us to be of a quality
comparable to rated bonds, on a dollar-weighted basis, calculated monthly were
as follows: 21.52% AAA/Aaa, 1.27% AA/Aa, 3.50% A/A, 4.13% BBB/Baa, 10.08% BB/Ba,
50.48% B/B, 6.41% CCC/Caa, 0.0% C/C, 0.03% D and 2.60% unrated.
FOREIGN SECURITIES. Securities markets of foreign countries in which the Fund
may invest generally are not subject to the same degree of regulation as the
U.S. markets and may be more volatile and less liquid than the major U.S.
markets. Lack of liquidity may affect the Fund's ability to purchase or sell
large blocks of securities and thus obtain the best price. There may be less
publicly-available information on publicly-traded companies, banks and
governments in foreign countries than generally is the case for such entities in
the United States. The lack of uniform accounting standards and practices among
countries impairs the validity of direct comparisons of valuation measures (such
as price/earnings ratios) for securities in different countries. Other
considerations include political and social instability, expropriation, higher
transaction costs,
<PAGE>
withholding taxes that cannot be passed through as a tax credit or deduction to
shareholders, currency fluctuations and different securities settlement
practices. Settlement periods for foreign securities, which are sometimes longer
than those for securities of U.S. issuers, may affect portfolio liquidity. In
addition, foreign securities held by the Fund may be traded on days that the
Fund does not value its portfolio securities, such as Saturdays and customary
business holidays and, accordingly, the Fund's net asset value may be
significantly affected on days when shareholders do not have access to the Fund.
5 PURCHASES
You may buy our shares through any independent securities dealer having a sales
agreement with Lord Abbett, our exclusive selling agent. Place your order with
your investment dealer or send it to Lord Abbett Bond-Debenture Fund, Inc. (P.O.
Box 419100, Kansas City, Missouri 64141). The minimum initial investment is
$1,000 except for Invest-A-Matic and Div-Move ($250 initial and $50 subsequent)
and Retirement Plans ($250 minimum). See "Shareholder Services".
The net asset value of our shares is calculated every business day as of the
close of the New York Stock Exchange ("NYSE") by dividing net assets by the
number of shares outstanding. Securities are valued at their market value as
more fully described in the Statement of Additional Information.
Orders for shares received by the Fund prior to the close of the NYSE, or
received by dealers prior to such close and received by Lord Abbett prior to the
close of its business day, will be confirmed at the applicable public offering
price effective at such NYSE close. Orders received by dealers after the NYSE
closes and received by Lord Abbett in proper form prior to the close of its next
business day are executed at the applicable public offering price effective as
of the close of the NYSE on that next business day. The dealer is responsible
for the timely transmission of orders to Lord Abbett. A business day is a day on
which the NYSE is open for trading.
For information regarding the proper form of a purchase or redemption order,
call the Fund at 800-821-5129. This offering may be suspended, changed or
withdrawn. Lord Abbett reserves the right to reject any order.
The offering price is based on the per-share net asset value next computed after
your order is accepted plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge as a Dealers
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price* NAV by
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.99% 4.00% .9525
$50,000 to $99,999 4.75% 4.99% 4.25% .9525
$100,000 to $249,999 3.75% 3.90% 3.25% .9625
$250,000 to $499,999 2.75% 2.83% 2.50% .9725
$500,000 to $999,999 2.00% 2.04% 1.75% .9800
$1,000,000 or more No Sales Charge 1.00% 1.0000
<FN>
*Lord Abbett may, for specified periods, allow dealers to retain the full sales
charge for sales of shares during such periods, or pay an additional concession
to a dealer who, during a specified period, sells a minimum dollar amount of our
shares and/or shares of other Lord Abbett-sponsored funds. In some instances,
such additional concessions will be offered only to certain dealers expected to
sell significant amounts of shares. Lord Abbett may, from time to time,
implement promotions under which Lord Abbett will pay a fee to dealers with
respect to certain purchases not involving imposition of a sales charge.
Additional payments may be paid from Lord Abbett's own resources and will be
made in the form of cash or, if permitted, non-cash payments. The non-cash
payments will include business seminars at resorts or other locations, including
meals and entertainment, or the receipt of merchandise. The cash payments will
include payment of various business expenses of the dealer.
</FN>
</TABLE>
In selecting dealers to execute portfolio transactions for the Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares of
other Lord Abbett-sponsored funds.
<PAGE>
VOLUME DISCOUNTS. This section describes several ways to qualify for a lower
sales charge if you inform Lord Abbett or the Fund that you are eligible at the
time of purchase. (1) Any purchaser (as described below) may aggregate a
purchase in the Fund with purchases of any other eligible Lord Abbett-sponsored
fund, together with the current value at maximum offering price of any shares in
the Fund and in any eligible Lord Abbett-sponsored funds held by the purchaser.
(Holdings in the following funds are not eligible for the above rights of
accumulation: Lord Abbett Equity Fund ("LAEF"), Lord Abbett Series Fund
("LASF"), any series of the Lord Abbett Research Fund if not offered to the
general public ("LARF") and Lord Abbett U.S. Government Securities Money Market
Fund ("GSMMF"), except for existing holdings in GSMMF which are attributable to
shares exchanged from a Lord Abbett-sponsored fund offered with a front-end
sales charge or from a fund in the Lord Abbett Counsel Group.) (2) A purchaser
may sign a non-binding 13-month statement of intention to invest $100,000 or
more in the Fund or in any of the above eligible funds. If the intended
purchases are completed during the period, each purchase will be at the sales
charge, if any, applicable to the aggregate of such purchaser's intended
purchases. If not completed, each purchase will be at the sales charge for the
aggregate of the actual purchases. Shares issued upon reinvestment of dividends
or distributions are not included in the statement of intention. The term
"purchaser" includes (i) an individual, (ii) an individual and his or her spouse
and children under the age of 21 and (iii) a trustee or other fiduciary
purchasing shares for a single trust estate or single fiduciary account
(including a pension, profit-sharing, or other employee benefit trust qualified
under Section 401 of the Internal Revenue Code -- more than one qualified
employee benefit trust of a single employer, including its consolidated
subsidiaries, may be considered a single trust, as may qualified plans of
multiple employers registered in the name of a single bank trustee as one
account), although more than one beneficiary is involved.
Our shares may be purchased at net asset value by our directors, employees of
Lord Abbett, employees of our shareholder servicing agent and employees of any
securities dealer having a sales agreement with Lord Abbett who consents to such
purchases or by the trustee or custodian under any pension or profit-sharing
plan or Payroll Deduction IRA established for the benefit of such persons or for
the benefit of any national securities trade organization to which Lord Abbett
belongs or any company with an account(s) in excess of $10 million managed by
Lord Abbett on a private-advisory-account basis. For purposes of this paragraph,
the terms "directors" and "employees" include a director's or employee's spouse
(including the surviving spouse of a deceased director or employee). The terms
"directors" and "employees of Lord Abbett" also include other family members and
retired directors and employees. Our shares also may be purchased at net asset
value (a) at $1 million or more, (b) with dividends and distributions from other
Lord Abbett-sponsored funds, except for dividends and distributions on shares of
LARF, LAEF, LASF and Lord Abbett Counsel Group, (c) under the loan feature of
the Lord Abbett-sponsored prototype 403(b) plan for share purchases representing
the repayment of principal and interest, (d) by certain authorized brokers,
dealers, registered investment advisers or other financial institutions who have
entered into an agreement with Lord Abbett in accordance with certain standards
approved by Lord Abbett, providing specifically for the use of our shares in
particular investment products made available for a fee to clients of such
brokers, dealers, registered investment advisers and other financial
institutions ("mutual fund wrap fee programs"), (e) by employees, partners and
owners of unaffiliated consultants and advisers to Lord Abbett or Lord
Abbett-sponsored funds who consent to such purchase if such persons provide
services to Lord Abbett or such funds on a continuing basis and are familiar
with suc funds and (f) subject to appropriate documentation, through a
securities dealer where the amount invested represents redemption proceeds from
shares ("Redeemed Shares") of a registered open-end management investment
company not distributed or managed by Lord Abbett (other than a money market
fund), if
<PAGE>
such redemptions have occurred no more than 60 days prior to the purchase of our
shares, the Redeemed Shares were held for at least six months prior to
redemption and the proceeds of redemption were maintained in cash or a money
market fund prior to purchase. Purchasers should consider the impact, if any, of
contingent deferred sales charges in determining whether to redeem shares for
subsequent investment in our shares. Lord Abbett may suspend or terminate the
purchase option referred to in (f) above at any time.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company.
RULE 12B-1 PLAN. We have adopted a Rule 12b-1 Plan (the "Plan") which authorizes
the payment of distribution fees to dealers in order to provide additional
incentives for them (a) to provide continuing information and investment
services to their shareholder accounts and otherwise to encourage their accounts
to remain invested in the Fund and (b) to sell shares of the Fund. Under the
Plan (except as to certain accounts for which tracking data is not available),
the Fund pays Lord Abbett, who passes on to dealers, (1) an annual service fee
(payable quarterly) of .25% of the average daily net asset value of the Fund's
shares sold by dealers on or after June 1, 1990 and .15% of the average daily
net asset value of shares sold by dealers prior to that date and (2) a one-time
1% sales distribution fee, at the time of sale, on all shares at the $1 million
level sold by dealers including sales qualifying at such level under the rights
of accumulation and statement of intention privileges. Lord Abbett is required
to pay the sales distribution fee to dealers as compensation for selling our
shares.
Holders of shares on which the 1% sales distribution fee has been paid will be
required to pay to the Fund a contingent deferred reimbursement charge of 1% of
the original cost or the then net asset value, whichever is less, of all shares
so purchased which are redeemed out of the Lord Abbett-sponsored family of funds
on or before the end of the twenty-fourth month after the month in which the
purchase occurred. (An exception is made for redemptions by tax-qualified plans
under Section 401 of the Internal Revenue Code due to plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants.) If the shares have been exchanged into another Lord Abbett fund
and are thereafter redeemed out of the Lord Abbett family on or before the end
of such twenty-fourth month, the charge will be collected for the Fund by the
other fund. The Fund will collect such a charge for other Lord Abbett-sponsored
funds in a similar situation. Shares of a fund or series on which the 1% sales
distribution fee has been paid may not be exchanged into a fund or series with a
Rule 12b-1 Plan for which the payment provisions have not been in effect for at
least one year.
The Board of Directors of the Fund has approved, subject to shareholder approval
at a meeting to be held on June 19, 1996, a new Rule 12b-1 plan. Under the most
significant difference between the two plans, the board could approve under the
proposed new plan maximum annual fees of up to 0.50% of average daily net
assets, consisting of a distribution fee of 0.25% and a service fee of 0.25%
(except that the service fee may not exceed 0.15% in the case of shares sold or
attributable to shares sold prior to June 1, 1990). The board has approved under
the proposed new plan, subject to such shareholder approval, payments that, had
they been in effect for the Fund's most recent fiscal year, would have increased
12b-1 fees from 0.21% to 0.25% of average net assets.
6 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares may be exchanged, without a service charge,
for those of any other Lord Abbett-sponsored fund except for (i) LAEF, LASF,
LARF and Lord Abbett Counsel Group and (ii) certain tax-free, single-state
series where the exchanging shareholder is a resident of a state in which such
series is not offered for sale (together, "Eligible Funds").
You or your representative with proper identification can instruct the Fund to
exchange uncertificated shares (held by the transfer agent) by telephone.
Shareholders have this privilege unless they refuse it in writing. The Fund will
not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine and will employ reasonable procedures to
confirm that instructions received are genuine, including requesting proper
identification and recording all telephone exchanges. Instructions must be
received by the Fund in Kansas City (800-821-5129) prior to the close of the
NYSE to obtain each fund's net asset value per share on that day. Expedited
exchanges by telephone may be difficult to implement in times of drastic
economic or market change. The exchange privilege should not be used to take
advantage of short-term swings in the market. The Fund reserves the right to
terminate or limit the privilege of any shareholder who makes frequent
exchanges. The Fund can revoke the privilege for all shareholders upon 60 days'
prior written notice. A prospectus for the other Lord Abbett-sponsored fund
selected by you should be obtained and read before an exchange. Exercise of the
Exchange Privilege will be treated as a sale for federal income tax purposes
and, depending on the circumstances, a capital gain or loss may be recognized.
<PAGE>
Systematic Withdrawal Plan: Except for retirement plans for which there is no
such minimum, if the maximum offering price value of your uncertificated shares
is at least $10,000, you may have periodic cash withdrawals automatically paid
to you in either fixed or variable amounts.
Div-Move: You can invest the dividends paid on your account ($250 initial and
$50 subsequent minimum investment) into an existing account in any Eligible
Fund. The account must be either your account, a joint account for you and your
spouse, a single account for your spouse or a custodial account for your minor
child under the age of 21. You should read the prospectus of the other fund
before investing.
Invest-A-Matic: You can make fixed, periodic investments ($50 minimum
investment) into the Fund and/or any Eligible Fund by means of automatic money
transfers from your bank checking account. You should read the prospectus of the
other fund before investing.
Retirement Plans: Lord Abbett makes available the retirement plan forms and
custodial agreements for IRAs (Individual Retirement Accounts including
Simplified Employee Pensions), 403(b) plans and pension and profit-sharing
plans, including 401(k) plans.
Householding: A new procedure has been inaugurated whereby a single copy of an
annual or semi-annual report is sent to an address to which more than one
registered shareholder of the Fund with the same last name has indicated mail is
to be delivered, unless additional reports are specifically requested in writing
or by telephone.
All correspondence should be directed to Lord Abbett Bond-Debenture Fund, Inc.
(P.O. Box 419100, Kansas City, Missouri 64141; 800-821-5129).
7 OUR MANAGEMENT
Our business is managed by our officers on a day-to-day basis under the overall
direction of our Board of Directors. We employ Lord Abbett as investment manager
pursuant to a Management Agreement. Lord Abbett has been an investment manager
for over 65 years and currently manages over $19 billion in a family of mutual
funds and other advisory accounts. Under the Management Agreement, Lord Abbett
provides us with investment management services and executive and other
personnel, pays the remuneration of our officers and directors affiliated with
Lord Abbett, provides us with office space and pays for ordinary and necessary
office and clerical expenses relating to research, statistical work and
supervision of our portfolio and certain other costs. Lord Abbett provides
similar services to fifteen other Lord Abbett-sponsored funds having various
investment objectives and also advises other investment clients. Christopher J.
Towle, Executive Vice President of the Fund, has been primarily responsible for
the day-to-day management of the Fund since June 1, 1995, although he has been
involved with the Fund's management since 1987. Mr. Towle has been with Lord
Abbett eight years and has sixteen years of investment experience.
We pay Lord Abbett a monthly fee, based on average daily net assets for each
month. For the fiscal year ended December 31, 1995, the fee paid to Lord Abbett
as a percentage of average daily net assets was at the annual rate of .47%. In
addition, we pay all expenses not expressly assumed by Lord Abbett. Our ratio of
expenses, including management fee expenses, to average net assets for the year
ended December 31, 1995 was .82%.
8 DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Our net investment income is paid to shareholders monthly as a dividend.
Dividends may be taken in cash or reinvested in additional shares at net asset
value without a sales charge.
If you elect a cash payment (i) a check will be mailed to you as soon as
possible after the monthly reinvestment date or (ii) if you arrange for direct
deposit, your payment will be wired directly to your bank account within one day
after the date on which the dividend is paid.
A long-term capital gains distribution is made when we have net profits during
the year from sales of securities which we have held more than one year. If we
realize net short-term capital gains, they also will be distributed. Any capital
gains distribution will be paid in January. You may take the distribution in
cash or reinvest it in additional shares at net asset value without a sales
charge.
Supplemental dividends and distributions also may be paid in December or
January. Dividends and distributions declared in October, November or December
of any year to shareholders of record as of a date in such a month will be
treated for federal income tax purposes as having been received by shareholders
in that year if they are paid before February 1 of the following year. We intend
to continue to meet the requirements of Subchapter M of the Internal Revenue
Code. We will try to distribute to shareholders all our net investment income
and net realized capital gains, so as to avoid the necessity of the Fund paying
federal income tax. Shareholders, however, must report dividends and capital
gains distributions as taxable income. Distributions derived from net long-term
capital gains which are designated by the Fund as "capital gains dividends" will
be taxable to
<PAGE>
shareholders as long-term capital gains, whether received in cash or shares,
regardless of how long a taxpayer has held the shares. Under current law, net
long-term capital gains are taxed at the rates applicable to ordinary income,
except that the maximum rate for long-term capital gains for individuals is 28%.
Legislation pending as of the date of this Prospectus would have the effect of
reducing the federal income tax rate on capital gains. See "Performance" for a
discussion of the purchase of high-coupon securities at a premium and the
distribution to shareholders as ordinary income of all interest income on those
securities. This practice increases current income of the Fund, but may result
in higher taxable income to Fund shareholders than other portfolio management
practices.
Shareholders may be subject to a $50 penalty under the Internal Revenue Code and
we may be required to withhold and remit to the U.S. Treasury a portion (31%) of
any redemption proceeds (including the value of shares exchanged into another
Lord Abbett-sponsored fund), and of any dividend or distribution on any account,
where the payee (shareholder) failed to provide a correct taxpayer
identification number or to make certain required certifications.
We will inform shareholders of the federal tax status of each dividend and
distribution after the end of each calendar year. Shareholders should consult
their tax advisers concerning applicable state and local taxes as well as on the
tax consequences of gains or losses from the redemption or exchange of our
shares.
9 REDEMPTIONS
To obtain the proceeds of an expedited redemption of $50,000 or less, you or
your representative with proper identification can telephone the Fund. The Fund
will not be liable for following instructions communicated by telephone that it
reasonably believes to be genuine and will employ reasonable procedures to
confirm that instructions received are genuine, including requesting proper
identification, recording all telephone redemptions and mailing the proceeds
only to the named shareholder at the address appearing on the account
registration.
If you do not qualify for the expedited procedures described above, to redeem
shares directly, send your request to Lord Abbett Bond-Debenture Fund, Inc.
(P.O. Box 419100, Kansas City, Missouri 64141) with signature(s) and any legal
capacity of the signer(s) guaranteed by an eligible guarantor, accompanied by
any certificates for shares to be redeemed and other required documentation. We
will make payment of the net asset value of the shares on the date the
redemption order was received in proper form. Payment will be made within three
days. The Fund may suspend the right to redeem shares for not more than seven
days (or longer under unusual circumstances as permitted by Federal law). If you
have purchased Fund shares by check and subsequently submit a redemption
request, redemption proceeds will be paid upon clearance of your purchase check,
which may take up to 15 days. To avoid delays you may arrange for the bank upon
which a check was drawn to communicate to the Fund that the check has cleared.
Shares also may be redeemed by the Fund at net asset value through your
securities dealer who, as an unaffiliated dealer, may charge you a fee.
If your dealer receives your order prior to the close of the NYSE and
communicates it to Lord Abbett, as our agent, prior to the close of Lord
Abbett's business day, you will receive the net asset value as of the close of
the NYSE on that day. If the dealer does not communicate such an order to Lord
Abbett until the next business day, you will receive the net asset value as of
the close of the NYSE on that next business day.
Shareholders who have redeemed their shares have a one-time right to reinvest,
in another account having the identical registration, in any of the Eligible
Funds at the then applicable net asset value without the payment of a sales
charge. Such reinvestment must be made within 60 days of the redemption and is
limited to no more than the amount of the redemption proceeds.
<PAGE>
Under certain circumstances and subject to prior written notice, our Board of
Directors may authorize redemption of all of the shares in any account in which
there are fewer than 25 shares.
Tax-qualified Plans: For redemptions of $50,000 or less, follow normal
redemption procedures. Redemptions over $50,000 must be in writing from the
employer, broker or plan administrator stating the reason for the redemption.
The reason for the redemption must be received by the Fund prior to, or
concurrent with, the redemption request.
10 PERFORMANCE
Lord Abbett Bond-Debenture Fund completed its fiscal year on December 31, 1995.
The Fund's total return (the percent change in net asset value, assuming the
reinvestment of all distributions) was 17.5% for the year. Dividends totaling
$.876 per share were paid over this period. The Fund's dividend distribution
rates (based on the monthly dividend of $.073) were 9.4% and 9.0% based on the
net asset value of $9.29 and the maximum offering price of $9.75, respectively,
at the close of the fiscal year.
After a surge last fall that heightened inflation concerns, the economy slowed
during the winter in response to credit restraints by the Federal Reserve. The
Fund benefited from this year's favorable inflation and interest-rate
environment. We adjusted some of the Fund's strategies in the second half of
1995, in response to the strong performance of financial markets. In particular,
we reduced our holdings of convertibles (securities which can be exchanged for
the underlying shares of the issuer's common stock).
YIELD AND TOTAL RETURN. Yield and total return data may, from time to time, be
included in advertisements about the Fund. "Yield" is calculated by dividing the
Fund's annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share on the last day of that period.
The Fund's yield reflects the deduction of the maximum initial sales charge and
reinvestment of all income dividends and capital gains distributions. "Total
return" for the one-, five- and ten-year periods represents the average annual
compounded rate of return on an investment of $1,000 in the Fund at the maximum
public offering price. Total return also may be presented for other periods or
based on investment at reduced sales charge levels or net asset value. Any
quotation of total return not reflecting the maximum initial sales charge would
be reduced if such sales charge were used. Quotations of yield or total return
for any period when an expense limitation is in effect will be greater than if
the limitation had not been in effect. See "Past Performance" in the Statement
of Additional Information for a more detailed description. The Fund's dividend
distribution rate may differ from its SEC yield primarily because the Fund may
purchase short- and intermediate-term high-coupon securities at a premium and,
consistent with applicable tax regulations, distribute to shareholders all of
the interest income on these securities without amortizing the premiums. This
practice also is used by the Fund for financial statement purposes and is in
accordance with generally accepted accounting principles. In other words, the
Fund may pay more than face value for a security that pays a greater-than-market
rate of interest and then distribute all such interest as dividends. The
principal payable on the security at maturity will equal face value, and so the
market value of the security will gradually decrease to face value, assuming no
changes in the market rate of interest or in the credit quality of the issuer.
Shareholders should recognize that such dividends, therefore, will tend to
decrease the net asset value of the Fund. Dividends paid from this interest
income are taxable to shareholders at ordinary income rates. The Fund may make
distributions in excess of net investment income from time to time to provide
more stable dividends. Such distributions could cause slight decreases in net
asset values over time, but historically have not resulted in a return of
capital for tax purposes.
See "Performance" in the Statement of Additional Information for a more detailed
discussion concerning the computation of the Fund's total return and yield.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFER IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS OR IN SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY
THE FUND AND NO PERSON IS ENTITLED TO RELY UPON ANY INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN OR THEREIN.
<PAGE>
Comparison of change in value of a $10,000 investment in the Fund, assuming
reinvestment of all dividends and distributions, with Salomon Brothers Broad
Investment High-Grade Index, First Boston High-Yield Index and Value Line
Convertible Index.
<TABLE>
<CAPTION>
FUND FUND SALOMON
AT AT BROTHERS FIRST
NET MAXIMUM BROAD INVESTMENT BOSTON VALUE LINE
ASSET OFFERING HIGH-GRADE HIGH-YIELD CONVERTIBLE
DATE VALUE PRICE INDEX INDEX INDEX
---- ------ -------- --------------- --------- ------------
<S> <C> <C> <C> <C> <C>
12-31-84 $10,000 $ 9,525 $10,000 $10,000 $10,000
12-31-85 12,102 11,526 12,225 12,494 12,539
12-31-86 13,386 12,749 14,114 14,447 14,378
12-31-87 13,637 12,989 14,479 15,392 13,350
12-31-88 15,519 14,781 15,636 17,496 15,265
12-31-89 16,304 15,528 17,894 17,564 16,405
12-31-90 15,070 14,353 19,521 16,443 14,248
12-31-91 20,847 19,856 22,638 23,634 18,417
12-31-92 24,181 23,031 24,359 27,574 21,763
12-31-93 28,043 26,711 26,775 32,785 26,264
12-31-94 26,959 26,677 26,009 32,470 25,234
12-31-95 27,177 24,926 25,218 30,506 25,574
<FN>
(1) Data reflects the deduction of the maximum sales charge of 4.75%.
(2) Performance numbers for Salomon Brothers Broad Investment High-Grade Index,
First Boston High-Yield Index and Value Line Convertible Index do not
reflect transaction costs or management fees. An investor cannot invest
directly in any of these unmanaged indices. A review of the Fund's 1995
annual shareholders report shows a history of the Fund's portfolio blend
changing through the years but composed primarily of three categories of
securities: (i) lower rated debt (including straight-preferred stocks),
(ii) equity-related securities and (iii) high-grade debt. The three indices
chosen to compare to the Fund's performance have elements of these three
categories, but since there is no one index combining all three in the same
annual blend as the Fund's portfolio, these three separate indices may not
be a valid comparison for the Fund.
(3) Total return is the percent change in value, after deduction of the maximum
sales charge of 4.75%, with all dividends and distributions reinvested for
the periods shown ending December 31, 1995 using the SEC-required uniform
method to compute such return.
<PAGE>
Underwriter and Investment Manager
Lord, Abbett & Co.
The General Motors Building
767 Fifth Avenue
New York, New York 10153-0203
212-848-1800
Custodian
The Bank of New York
48 Wall Street
New York, New York 10286
Transfer Agent and Dividend
Disbursing Agent
United Missouri Bank of Kansas City, N.A.
Tenth and Grand
Kansas City, Missouri 64141
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, Missouri 64141
800-821-5129
Auditors
Deloitte & Touche llp
Counsel
Debevoise & Plimpton
Printed in the U.S.A.
<PAGE>
LORD ABBETT MAY 1, 1996
STATEMENT OF ADDITIONAL INFORMATION
LORD ABBETT
BOND-DEBENTURE
FUND, INC.
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord, Abbett & Co. at The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. This
Statement relates to, and should be read in conjunction with, the Prospectus
dated May 1, 1996.
Lord Abbett Bond-Debenture Fund, Inc. (sometimes referred to as "we" or the
"Fund") was organized in 1970 and was incorporated under Maryland law on January
23, 1976. Our authorized capital stock consists of a single class of 300,000,000
shares, $1.00 par value. All shares have equal noncumulative voting rights and
equal rights with respect to dividends, assets and liquidation. They are fully
paid and nonassessable when issued and have no preemptive or conversion rights.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Objective and Policies 2
2. Directors and Officers 3
3. Investment Advisory and Other Services 5
4. Portfolio Transactions 6
5. Purchases, Redemptions and Shareholder Services 7
6. Past Performance 11
7. Taxes 12
8. Information About the Fund 12
9. Financial Statements 13
10. Appendix 13
<PAGE>
1.
Investment Objective and Policies
The Fund's investment objective and policies are described in the Prospectus on
the cover page and under "How We Invest." In addition to those policies
described in the Prospectus, we are subject to the following investment
restrictions which cannot be changed without shareholder approval. We may not:
(1) sell short or buy on margin, although we may obtain short-term credit as
needed to clear purchases of securities; (2) buy or sell put or call options,
although we may buy, hold or sell warrants acquired with debt securities; (3)
borrow in excess of 5% of our gross assets taken at cost or market value,
whichever is lower at the time of borrowing, and then only as a temporary
measure for extraordinary or emergency purposes; (4) act as an underwriter of
securities issued by others, except where we may be deemed to be an underwriter
by selling a portfolio security requiring registration under the Securities Act
of 1933; (5) invest knowingly more than 15% of our gross assets in illiquid
securities; (6) make loans, except for (a) time or demand deposits with banks,
(b) purchasing commercial paper or publicly-offered debt securities at original
issue or otherwise, (c) short-term repurchase agreements with sellers of
securities we have bought and (d) loans of our portfolio securities to
registered broker-dealers if 100% secured by cash or cash equivalents, made in
full compliance with applicable regulations and which, in management's opinion,
do not expose us to significant risks or impair our qualification for
pass-through tax treatment under the Internal Revenue Code; (7) pledge,
mortgage, or hypothecate our assets; (8) buy or sell real estate (including
limited partnership interests but excluding securities of companies, such as
real estate investment trusts, which deal in real estate or interests therein)
or oil, gas or other mineral leases, or commodities, or commodity contracts
although we may buy securities of companies that deal in such interests
(however, we may hold and sell any of the aforementioned or any other property
acquired through ownership of other securities, although we may not purchase
securities for the purpose of acquiring those interests); (9) buy securities
issued by any other open-end investment company (except pursuant to a plan of
merger, consolidation or acquisition of assets), although we may invest up to 5%
of our gross assets, taken at market value at the time of investment, in
closed-end investment companies, provided such purchase is made in the open
market and does not involve the payment of a fee or commission greater than the
customary broker's commission; (10) invest more than 5% of our gross assets,
taken at market value at the time of investment, in securities of companies with
less than three years' continuous operation, including predecessor companies;
(11) with respect to 75% of our gross assets, buy the securities of any issuer
if the purchase causes us (a) to have more than 5% of our gross assets invested
in the securities of such issuer (except obligations of the United States, its
agencies or instrumentalities) or (b) to own more than 10% of the outstanding
voting securities of such issuer; (12) hold securities of any issuer, any of
whose officers, directors or security holders is an officer, director or partner
of our investment adviser or an officer or director of the Fund, if after the
purchase of the securities of such issuer by us, one or more of such persons
owns beneficially more than 1/2 of 1% of the securities of such issuer and such
persons together own beneficially more than 5% of such securities; (13)
concentrate our investments in a particular industry, though, if it is deemed
appropriate to our investment objective, up to 25% of the market value of our
gross assets at the time of investment may be invested in any one industry
classification we use for investment purposes; (14) buy from or sell to any of
our officers, directors, employees, or our investment adviser or any of its
officers, directors, partners or employees, any securities other than shares of
our common stock; or (15) invest more than 10% of the market value of our gross
assets at the time of investment in debt securities which are in default as to
interest or principal.
With respect to investment restriction (5) above, securities subject to legal or
contractual restrictions on resale, which are determined by the Board of
Directors, or by Lord Abbett pursuant to delegated authority, to be liquid are
considered liquid securities.
The Board of Directors has approved, subject to shareholder approval at a
meeting to be held June 19, 1996, various amendments to the investment
restrictions described above in order to provide greater uniformity among the
Lord Abbett-sponsored Funds and greater flexibility in the future management of
the Fund's portfolio. The principal effect of the proposed amendments will be to
permit the Fund to take certain actions not now permitted to it without
obtaining additional shareholder approval. The Board of Directors has no present
intention of approving any such action.
2
<PAGE>
Other Investment Restrictions (which can be changed without shareholder
approval)
Pursuant to Texas regulations, we will not invest more than 5% of our assets in
warrants and not more than 2% of such value in warrants not listed on the New
York or American Stock Exchanges, except when they form a unit with other
securities. As a matter of operating policy, we will not invest more than 5% of
our net assets in rights.
Portfolio Turnover Rate
For the year ended December 31, 1995, our portfolio turnover was 134.90% versus
147.98% for the prior year.
2.
Directors and Officers
The following directors are partners of Lord Abbett, The General Motors
Building, 767 Fifth Avenue, New York, New York 10153-0203. They have been
associated with Lord Abbett for over five years and are also officers and/or
directors or trustees of the fifteen other Lord Abbett-sponsored funds, except
for Lord Abbett Research Fund, Inc., of which only Messrs. Lynch and Dow are
directors. They are "interested persons" as defined in the Act, and as such, may
be considered to have an indirect financial interest in the Rule 12b-1 Plan
described in the Prospectus.
Ronald P.Lynch, age 60, Chairman
Robert S. Dow, age 51, President
The following outside directors are also directors or trustees of the fifteen
other Lord Abbett-sponsored funds referred to above except for Lord Abbett
Research Fund, Inc., of which only Messrs. Millican and Neff are directors.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 54.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 65.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 70.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
3
<PAGE>
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm. Formerly Chairman and Chief Executive Officer of Lincoln
Snacks, Inc., manufacturer of branded snack foods (1992-1994). Formerly
President and Chief Executive Officer of Nestle Foods Corp, and prior to that,
President and Chief Executive Officer of Stouffer Foods Corp., both subsidiaries
of Nestle SA, Switzerland. Currently serves as Director of Den West Restaurant
Co., J. B. Williams, and Fountainhead Water Company. Age 62.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 67.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 58.
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third and fourth columns set forth information
with respect to the retirement plan for outside directors maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. The first four columns give
information for the Fund's fiscal year ended December 31, 1995; the fifth column
gives information for the year ended December 31, 1995. No director of the Fund
associated with Lord Abbett and no officer of the Fund received any compensation
from the Fund for acting as a director or officer.
</TABLE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended December 31, 1995
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Pension or Estimated Annual For Year Ended
Retirement Benefits Benefits Upon December 31, 1995
Accrued as Expenses Retirement Accrued Total Compensation
by the Fund and by the Fund and Accrued by the Fund and
Aggregate Fifteen Other Lord Fifteen Other Lord Fifteen Other Lord
Compensation Abbett-sponsored Abbett-sponsored Abbett-sponsored
Name of Director from the Fund1 Funds2 Funds2 Funds3
E. Thayer Bigelow $3,534 $9,772 $33,600 $41,700
Stewart S. Dixon $3,517 $22,472 $33,600 $42,000
John C. Jansing $3,642 $28,480 $33,600 $42,960
C. Alan MacDonald $3,589 $27,435 $33,600 $42,750
Hansel B. Millican, Jr. $3,646 $24,707 $33,600 $43,000
Thomas J. Neff $3,559 $16,126 $33,600 $42,000
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on net
assets of each fund. A portion of the fees payable by the Fund to its outside
directors are being deferred under a plan that deems the deferred amounts to be
invested in shares of the Fund for later distribution to the directors. The
total amount accrued under the plan for each
4
<PAGE>
outside director since the beginning of his tenure with the Fund, including
dividends reinvested and changes in net asset value applicable to such deemed
investments were as follows as of December 31,1995: Mr. Bigelow, $4,593; Mr.
Dixon, $53,543; Mr. Jansing, $57,202; Mr. MacDonald, $31,512; Mr. Millican,
$57,554 and Mr. Neff, $57,706.
2. The retirement plan of the Lord Abbett-sponsored funds provides that outside
directors will receive an annual retirement benefit equal to 80% of their final
annual retainer following retirement at or after age 72 with at least 10 years
of service. The plan also provides for a reduced benefit upon early retirement
under certain circumstances, a pre-retirement death benefit and actuarially
reduced joint-and-survivor spousal benefits. The amounts stated would be payable
annually under such retirement plan if the director were to retire at age 72 and
the annual retainer payable by such funds were the same as it is today. The
amounts accrued in column 3 by the Lord Abbett-sponsored funds during the fiscal
year ended December 31, 1995 are used to fund the retirement benefits in column
4.
3. This column shows aggregate compensation, including director's fees and
attendance fees for board and committee meetings, of a nature referred to in the
first sentence of footnote one accrued by the Lord Abbett-sponsored funds during
the year ended December 31, 1995.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Carper, Cutler, Henderson, Morris, Nordberg and Walsh are partners of
Lord Abbett; the others are employees: Christopher Towle, age 38, Executive Vice
President, Kenneth B. Cutler, age 63, Vice President and Secretary; Stephen I.
Allen, age 42; Daniel E. Carper, age 44; Robert G. Morris, age 51, E. Wayne
Nordberg, age 59; John J. Gargana, Jr., age 64; Paul A. Hilstad, age 53 (with
Lord Abbett since 1995; formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.); Thomas F. Konop, age 54; Victor
W. Pizzolato, age 63; John J. Walsh, age 59, Vice Presidents; and Keith F.
O'Connor, age 41, Treasurer.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Act, or unless called by a majority of the Board of
Directors or by stockholders holding at least one quarter of the stock of the
Fund outstanding and entitled to vote at the meeting. When any such annual
meeting is held, the stockholders will elect directors and vote on the approval
of the independent auditors of the Fund.
As of April 1, 1995, our officers and directors as a group owned less than 1% of
our outstanding shares.
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The nine general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Daniel E. Carper,
Kenneth B. Cutler, Robert S. Dow, Thomas S. Henderson, Ronald P. Lynch, Robert
G. Morris, E. Wayne Nordberg and John J. Walsh. The address of each partner is
The General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203.
The services performed by Lord Abbett are described in the Prospectus under "Our
Management". Under the Management Agreement, we are obligated to pay Lord Abbett
a monthly fee, based on average daily net assets for each month, at the annual
rate of .50 of 1% of the Fund's first $500 million of average daily net assets
and .45% of such assets over $500 million. For the fiscal years ended December
31, 1995, 1994, and 1993, respectively, the management fees paid to Lord Abbett
amounted to $5,342,563, $4,786,098 and $4,091,742, respectively.
We pay all expenses not expressly assumed by Lord Abbett, including, without
limitation, 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio transactions.
We have agreed with the State of California to limit operating expenses
(including management fees but excluding taxes, interest, extraordinary expenses
and brokerage commissions) to 2 1/2% of average annual net assets up to
$30,000,000,
5
<PAGE>
2% of the next $70,000,000 of such assets and 1 1/2% of such assets in excess of
$100,000,000. The expense limitation is a condition on the registration of
investment company shares for sale in the state, and applies so long as our
shares are registered for sale in that state.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent public accountants of the Fund and must be approved at least
annually by our Board of Directors to continue in such capacity. Public
Accountants perform audit services for the Fund including the examination of
financial statements included in our annual report to shareholders.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
dealer markups and markdowns and any brokerage commissions. This policy governs
the selection of brokers or dealers and the market in which the transaction is
executed. To the extent permitted by law, we may, if considered advantageous,
make a purchase from or sale to another Lord Abbett-sponsored fund without the
intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services.Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett.These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett.They are responsible for best execution.
We may pay a brokerage commission on the purchase or sale of a security that
could be purchased from or sold to a market maker if our net cost of the
purchase or the net proceeds to us of the sale are at least as favorable as we
could obtain on a direct purchase or sale. Brokers who receive such commissions
may also provide research services at least some of which are useful to Lord
Abbett in their overall responsibilities with respect to us and the other
accounts they manage. Research includes trading equipment and computer software
packages, acquired from third-party suppliers, that enable Lord Abbett to access
various information bases and may include the furnishing of analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. Such services may be used by
Lord Abbett in servicing all their accounts, and not all of such services will
necessarily be used by Lord Abbett in connection with their management of the
Fund; conversely, such services furnished in connection with brokerage on other
accounts managed by Lord Abbett may be used in connection with their management
of the Fund, and not all of such services will necessarily be used by Lord
Abbett in connection with their advisory services to such other accounts. We
have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Fund to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
6
<PAGE>
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
We will not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from dealers as
consideration for the direction to them of portfolio business.
During the fiscal years ending December 31, 1995, 1994 and 1993, respectively,
we paid total commissions to independent broker-dealers of $6,717,922,
$4,482,094 and $5,739,293, respectively.
5.
Purchases, Redemptions
and Shareholder Services
The Fund values its portfolio securities at market value as of the close of the
New York Stock Exchange ("NYSE"). Market value will be determined as follows:
securities listed or admitted to trading privileges on the New York or American
Stock Exchange or on the NASDAQ National Market System are valued at the last
sales price, or, if there is no sale on that day, at the mean between the last
bid and asked prices, or, in the case of bonds, in the over-the-counter market
if, in the judgment of the Fund's officers, that market more accurately reflects
the market value of the bonds. Over-the-counter securities not traded on the
NASDAQ National Market System are valued at the mean between the last bid and
asked prices. Securities for which market quotations are not available are
valued at fair market value under procedures approved by the Board of Directors.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The maximum offering price of our shares on December 31, 1995 was computed as
follows:
Net asset value per share (net assets divided by shares outstanding) .... .$9.29
Maximum offering price per share (net asset value divided by .9525) ......$9.75
The Fund has entered into a distribution agreement with Lord Abbett under which
Lord Abbett is obligated to use its best efforts to find purchasers for the
shares of the Fund, and to make reasonable efforts to sell Fund shares so long
as, in Lord Abbett's judgment, a substantial distribution can be obtained by
reasonable efforts. For the last three fiscal years, Lord Abbett, as our
principal underwriter, received net commissions after allowance of a portion of
the sales charge to independent dealers as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C> <C>
1995 1994 1993
Gross sales charge $12,694,946 $7,717,386 $8,973,226
Amount allowed to
dealers $10,898,476 $6,648,480 $7,739,343
Net commissions
received by Lord Abbett $1,796,470 $1,068,906 $1,233,883
</TABLE>
7
<PAGE>
As described in the Prospectus, the Fund has adopted a Distribution Plan and
Agreement (the "Plan") pursuant to Rule 12b-1 of the Act. In adopting the Plan
and in approving its continuance, the Board of Directors has concluded that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The expected benefits include greater sales and lower redemptions
of Fund shares, which should allow the Fund to maintain a consistent cash flow,
and a higher quality of service to shareholders by dealers than would otherwise
be the case. During the last fiscal year, the Fund accrued or paid through Lord
Abbett to dealers $2,437,438 under the Plan. Lord Abbett uses all amounts
received under the Plan for payments to dealers for (i) providing continuous
services to the Fund's shareholders, such as answering shareholder inquiries,
maintaining records, and assisting shareholders in making redemptions,
transfers, additional purchases and exchanges and (ii) their assistance in
distributing shares of the Fund.
The Plan requires the directors to review, on a quarterly basis, written reports
of all amounts expended pursuant to the Plan and the purposes for which such
expenditures were made. The Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors
and of the directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan ("outside directors"), cast in person at a
meeting called for the purpose of voting on the Plan. The Plan may not be
amended to increase materially the amount spent for distribution expenses
without approval by a majority of the Fund's outstanding voting securities and
the approval of a majority of the directors, including a majority of the outside
directors. The Plan may be terminated at any time by vote of a majority of the
outside directors or by vote of a majority of the Fund's outstanding voting
securities.
As stated in the Prospectus, the Board of Directors of the Fund has approved,
subject to shareholder approval at a meeting to be held June 19, 1996, a new
Rule 12b-1 plan.
As stated in the Prospectus, a 1% contingent deferred reimbursement charge
("CDRC") is imposed with respect to those shares (or shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which the Fund has paid the one-time 1% 12b-1 sales distribution fee if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred.
No CDRC is payable on redemptions by tax qualified plans under section 401 of
the Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants. The CDRC is received by the Fund and is intended to reimburse all
or a portion of the amount paid by the Fund if the shares are redeemed before
the Fund has had an opportunity to realize the anticipated benefits of having a
large, long-term shareholder account in the Fund. Shares of a fund or series on
which such 1% sales distribution fee has been paid may not be exchanged into a
fund or series with a Rule 12b-1 plan for which the payment provisions have not
been in effect for at least one year.
The other Lord Abbett-sponsored funds and series which participate in the
Telephone Exchange Privilege (except Lord Abbett U.S. Government Securities
Money Market Fund, Inc. ("GSMMF") and certain series of Tax-Free Income Fund and
Lord Abbett Tax-Free Income Trust for which a Rule12b-1 Plan is not yet in
effect (collectively, the "Series")) have instituted a CDRC on the same terms
and conditions. No CDRC will be charged on an exchange of shares between Lord
Abbett funds. Upon redemption of shares out of the Lord Abbett family of funds,
the CDRC will be charged on behalf of and paid to the fund in which the original
purchase (subject to a CDRC) occurred. Thus, if shares of a Lord Abbett fund are
exchanged for shares of another such fund and the shares tendered ("Exchanged
Shares") are subject to a CDRC, the CDRC will carry over to the shares being
acquired, including GSMMF ("Acquired Shares"). Any CDRC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although GSMMF and the Series will not pay a 1% sales distribution fee
on $1 million purchases of their own shares, and will therefore not impose their
own CDRC, GSMMF will collect the CDRC on behalf of other Lord Abbett funds.
Acquired shares held in GSMMF which are subject to a CDRC will be credited with
the time such shares are held in that fund.
In no event will the amount of the CDRC exceed 1% of the lesser of (i) the net
asset value of the shares redeemed or (ii) the original cost of such shares (or
of the Exchanged Shares for which such shares were acquired). No CDRC will
8
<PAGE>
be imposed when the investor redeems (i) amounts derived from increases in the
value of the account above the total cost of shares being redeemed due to
increases in net asset value, (ii) shares with respect to which no Lord Abbett
fund paid a 1% sales distribution fee on issuance (including shares acquired
through reinvestment of dividend income and capital gains distributions) or
(iii) shares which, together with Exchanged Shares, have been held continuously
for 24 months from the end of the month in which the original sale occurred. In
determining whether a CDRC is payable, (a) shares not subject to the CDRC will
be redeemed before shares subject to the CDRC and (b) of shares subject to a
CDRC, those held the longest will be the first to be redeemed.
Under the terms of the Statement of Intention to invest $100,000 or more over a
13-month period as described in the Prospectus, shares of Lord Abbett-sponsored
funds (other than shares of Lord Abbett Equity Fund ("LAEF"), Lord Abbett Series
Fund ("LASF"), certain series of Lord Abbett Research Fund if not offered to the
general public ("LARF"), and GSMMF, unless holdings in GSMMF are attributable to
shares exchanged from a Lord Abbett-sponsored fund offered with a sales charge
or from a fund in the Lord Abbett Counsel Group) currently owned by you are
credited as purchases (at their current offering prices on the date the
Statement is signed) toward achieving the stated investment.Shares valued at 5%
of the amount of intended purchases are escrowed and may be redeemed to cover
the additional sales charge payable if the Statement is not completed.The
Statement of Intention is neither a binding obligation on you to buy, nor on the
Fund to sell, the full amount indicated.
As stated in the Prospectus, purchasers (as defined in the Prospectus) may
accumulate their investment in Lord Abbett-sponsored funds (other than LAEF,
LARF, LASF, and GSMMF, unless holdings in GSMMF are attributable to shares
exchanged from a Lord Abbett-sponsored fund offered with a front-end sales
charge or from Lord Abbett Counsel Group) so that a current investment, plus the
purchaser's holdings valued at the current maximum offering price, reach a level
eligible for a discounted sales charge.
As stated in the Prospectus, our shares may be purchased at net asset value by
our directors, employees of Lord Abbett, employees of our shareholder servicing
agent and employees of any securities dealer having a sales agreement with Lord
Abbett who consents to such purchases or by the director or custodian under any
pension or profit-sharing plan or Payroll Deduction IRA established for the
benefit of such persons or for the benefit of employees of any national
securities trade organization to which Lord Abbett belongs or any company with
an account(s) in excess of $10 million managed by Lord Abbett on a
private-advisory-account basis. For purposes of this paragraph, the terms
"directors" and "employees" include a director's or employee's spouse (including
the surviving spouse of a deceased director or employee). The terms "our
directors" and "employees of Lord Abbett" also include other family members and
retired directors and employees.
Our shares also may be purchased at net asset value (a) at $1 million or more,
(b) with dividends and distributions from other Lord Abbett-sponsored funds,
except for LARF, LAEF, LASF and Lord Abbett Counsel Group, (c) under the loan
feature of the Lord Abbett-sponsored prototype 403(b) plan for share purchases
representing the repayment of principal and interest, (d) by certain authorized
brokers, dealers, registered investment advisers or other financial institutions
who have entered into an agreement with Lord Abbett in accordance with certain
standards approved by Lord Abbett, providing specifically for the use of our
shares in particular investment products made available for a fee to clients of
such brokers, dealers, registered investment advisers and other financial
institutions, and (e) by employees, partners and owners of unaffiliated
consultants and advisors to Lord Abbett or Lord Abbett-sponsored funds who
consent to such purchase if such persons provide service to Lord Abbett or such
funds on a continuing basis and are familiar with such funds. Shares are offered
at net asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett and/or the Fund has business
relationships.
Our shares also may be purchased at net asset value, subject to appropriate
documentation, through a securities dealer where the amount invested represents
redemption proceeds from shares ("Redeemed Shares") of a registered open-end
management investment company not distributed or managed by Lord Abbett (other
than a money market fund), if such redemption has occurred no more than 60 days
prior to the purchase of our shares, the Redeemed Shares were held for at least
six months prior to redemption and the proceeds of redemption were maintained in
cash or a money market fund prior to purchase. Purchasers should consider the
impact, if any, of contingent deferred sales charges in determining
9
<PAGE>
<PAGE>
whether to redeem shares for subsequent investment in our shares. Lord Abbett
may suspend, change or terminate this purchase option at any time.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company. There are economies of selling efforts and sales-related expenses with
respect to offers to these investors and those referred to above.
The Prospectus briefly describes the Telephone Exchange Privilege.You may
exchange some or all of your shares for those of Lord Abbett-sponsored funds
currently offered to the public with a sales charge and GSMMF, to the extent
offers and sales may be made in your state. You should read the prospectus of
the other fund before exchanging.In establishing a new account by exchange,
shares of the Fund being exchanged must have a value equal to at least the
minimum initial investment required for the fund into which the exchange is
made.
Shareholders in other Lord Abbett-sponsored funds have the same right to
exchange their shares for the Fund's shares. Exchanges are based on relative net
asset values on the day instructions are received by the Fund in Kansas City if
the instructions are received prior to the close of the NYSE in proper form. No
sales charges are imposed except in the case of exchanges out of GSMMF (unless a
sales charge was paid on the initial investment). Exercise of the exchange
privilege will be treated as a sale for federal income tax purposes, and,
depending on the circumstances, a gain or loss may be recognized. In the case of
an exchange of shares that have been held for 90 days or less where no sales
charge is payable on the exchange, the original sales charge incurred with
respect to the exchanged shares will be taken into account in determining gain
or loss on the exchange only to the extent such charge exceeds the sales charge
that would have been payable on the acquired shares had they been acquired for
cash rather than by exchange. The portion of the original sales charge not so
taken into account will increase the basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are other Lord Abbett-sponsored funds which are eligible for the exchange
privilege, except LASF which offers its shares only in connection with certain
variable annuity contracts, LAEF which is not issuing shares, LARF and Lord
Abbett Counsel Group.
A redemption order is in proper form when it contains all of the information and
documentation required by the order form or supplementally by Lord Abbett or the
Fund to carry out the order. The signature(s) and any legal capacity of the
signer(s) must be guaranteed by an eligible guarantor. See the Prospectus for
expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares.Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts.At least 6 month's prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Under the Div-Move service described in the Prospectus, you can invest the
dividends paid on your account into an existing account in any other Eligible
Fund. The account must be either your account, a joint account for you and your
spouse, a single account for your spouse, or a custodial account for your minor
child under the age of 21. You should read the prospectus of the other fund
before investing.
The Invest-A-Matic method of investing in the Fund and/or any other Eligible
Fund is described in the Prospectus. To avail yourself of this method you must
complete the application form, selecting the time and amount of your bank
10
<PAGE>
checking account withdrawals and the funds for investment, include a voided,
unsigned check and complete the bank authorization.
The Systematic Withdrawal Plan (the "SWP") also is described in the Prospectus.
You may establish a SWP if you own or purchase uncertificated shares having a
current offering price value of at least $10,000.Lord Abbett prototype
retirement plans have no such minimum. The SWP involves the planned redemption
of shares on a periodic basis by receiving either fixed or variable amounts at
periodic intervals.Since the value of shares redeemed may be more or less than
their cost, gain or loss may be recognized for income tax purposes on each
periodic payment.Normally, you may not make regular investments at the same
time you are receiving systematic withdrawal payments because it is not in your
interest to pay a sales charge on new investments when in effect a portion of
that new investment is soon withdrawn. The minimum investment accepted while a
withdrawal plan is in effect is $1,000.The SWP may be terminated by you or by
us at any time by written notice.
The Prospectus indicates the types of retirement plans for which Lord Abbett
provides forms and explanations.Lord Abbett makes available the retirement plan
forms and custodial agreements for IRAs (Individual Retirement Accounts
including Simplified Employee Pensions), 403(b) plans and qualified pension and
profit-sharing plans, including 401(k) plans.The forms name Investors Fiduciary
Trust Company as custodian and contain specific information about the plans.
Explanations of the eligibility requirements, annual custodial fees and
allowable tax advantages and penalties are set forth in the relevant plan
documents. Adoption of any of these plans should be on the advice of your legal
counsel or qualified tax adviser.
6.
Past Performance
The Fund computes the average annual compounded rate of total return during
specified periods that would equate the initial amount invested to the ending
redeemable value of such investment by adding one to the computed average annual
total return, raising the sum to a power equal to the number of years covered by
the computation and multiplying the result by one thousand dollars which
represents a hypothetical initial investment. The calculation assumes deduction
of the maximum sales charge from the initial amount invested and reinvestment of
all income dividends and capital gains distributions on the reinvestment dates
at prices calculated as stated in the Prospectus. The ending redeemable value is
determined by assuming a complete redemption at the end of the period covered by
the average annual total return computation.
Using the method described above to compute average annual compounded rates of
total return for the Fund's last one, five and ten fiscal-years ending on
December 31, 1995 are as follows: 11.90%, 14.89% and 9.57%, respectively.
Our yield quotation is based on a 30-day period ended on a specified date,
computed by dividing our net investment income per share earned during the
period by our maximum offering price per share on the last day of the period.
This is determined by finding the following quotient: take the Fund's dividends
and interest earned during the period minus its expenses accrued for the period
and divide by the product of (i) the average daily number of Fund shares
outstanding during the period that were entitled to receive dividends and (ii)
the Fund's maximum offering price per share on the last day of the period. To
this quotient add one. This sum is multiplied by itself five times. Then one is
subtracted from the product of this multiplication and the remainder is
multiplied by two. For the 30-day period ended December 31, 1995, the yield for
the Fund was 8.77%.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
11
<PAGE>
7.
Taxes
The value of any shares redeemed by the Fund or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time the
redemption, repurchase or sale is made. Any gain or loss will generally be
taxable for federal income tax purposes. Any loss realized on the sale,
redemption or repurchase of Fund shares which you have held for six months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any capital gains distributions which you received with respect to such
shares. Losses on the sale of stock or securities are not deductible if, within
a period beginning 30 days before the date of the sale and ending 30 days after
the date of the sale, the taxpayer acquires stock or securities that are
substantially identical.
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar-year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax. Dividends paid by the Fund will qualify for the
dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
As described in the Prospectus under "Risk Factors", the Fund may be subject to
foreign withholding taxes which would reduce the yield on its investments. Tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is expected that Fund shareholders who are subject to United
States federal income tax will not be entitled to claim a federal income tax
credit or deduction for foreign income taxes paid by the Fund.
Gains and losses realized by the Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
The foregoing discussion relates solely to U. S. federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his tax adviser
regarding the U. S. and foreign tax consequences of the ownership of shares of
the Fund, including a 30% (or lower treaty rate) United States withholding tax
on dividends representing ordinary income and net short-term capital gains, and
the applicability of United States gift and estate taxes to non-United States
persons who own Fund shares.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of the Advisory Group.
12
<PAGE>
9.
Financial Statements
[FN]
The financial statements for the fiscal year ended December 31, 1995 and the
report of Deloitte & Touche LLP, independent public accountants, on such
financial statements contained in the 1995, Annual Report to Shareholders of
Lord Abbett Bond-Debenture Fund, Inc. are incorporated herein by reference to
such financial statements and report in reliance upon the authority of Deloitte
& Touche LLP as experts in auditing and accounting.
10.
Appendix
Corporate Bond Ratings
Moody's Investors Service, Inc.'s Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality and carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high-quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds that are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
13
<PAGE>
Standard & Poor's Corporation's Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB-B-CCC-CC-C - Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and
CCC the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
<PAGE>
PART C OTHER INFORMATION
Item 24 Financial Statements and Exhibits
(a) Financial Statements
Part A - Financial Highlights for the ten years ended
December 31,1995.
Part B - Statement of Net Assets at December 31, 1995.
Statement of Operations for the year
ended December 31, 1995. Statements of Changes
in Net Assets for the years ended
December 31, 1995 and 1994. Supplementary
Financial Information for the five years
ended December 31, 1995.
(b) Exhibits -
99B.6 Distribution Agreement**
99B.7a Retirement Plan for Non-interested
Person Directors and Trustees of Lord
Abbett Funds.***
99.B.7b Lord Abbett Prototype Retirements
Plans****
(1) 401(k)
(2) IRA
(3) 403(b)
(4) Profit-Sharing, and
(5) Money Purchases
99.B8 Custody Agreement**
99.B11 Consent of Deloitte & Touche*
99.B16 Total Return and Yield Computations*
* Filed herewith.
** Previously filed.
*** Incorporated by reference to Post-
Effective Amendment No. 7 to the
Registration Statement (on Form N1-A)
of Lord Abbett Equity Fund (File No.
811-6033).
**** Incorporated by reference to Post-
Effective Amendment No. 6 to the
Registration Statement (on Form N-1A)
of Lord Abbett Securities Trust
(File No. 811-7538).
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Record Holders of Securities
At April 1, 1996 - 66,306
Item 27. Indemnification
Registrant is incorporated under the laws of the State of Maryland and
is subject to Section 2-418 of the Corporations and Associations
Article of the Annotated Code of the State of Maryland controlling the
indemnification of the directors and officers. Since Registrant has
its executive offices in the State of New York, and is qualified as a
foreign corporation doing business in such State, the persons covered
by the foregoing statute may also be entitled to and subject to the
limitations of the indemnification provisions of Section 721-726 of
the New York Business Corporation Law.
1
<PAGE>
The general effect of these statutes is to protect officers, directors
and employees of Registrant against legal liability and expenses
incurred by reason of their positions with the Registrant. The
statutes provide for indemnification for liability for proceedings not
brought on behalf of the corporation and for those brought on behalf
of the corporation, and in each case place conditions under which
indemnification will be permitted, including requirements that the
officer, director or employee acted in good faith. Under certain
conditions, payment of expenses in advance of final disposition may be
permitted. The By-Laws of Registrant, without limiting the authority
of Registrant to indemnify any of its officers, employees or agents to
the extent consistent with applicable law, makes the indemnification
of its directors mandatory subject only to the conditions and
limitations imposed by the above-mentioned Section 2-418 of Maryland
Law and by the provisions of Section 17(h) of the Investment Company
Act of 1940 as interpreted and required to be implemented by SEC
Release No. IC-11330 of September 4, 1980.
In referring in its By-Laws to, and making indemnification of
directors subject to the conditions and limitations of, both Section
2-418 of the Maryland Law and Section 17(h) of the Investment Company
Act of 1940, Registrant intends that conditions and limitations on the
extent of the indemnification of directors imposed by the provisions
of either Section 2-418 or Section 17(h) shall apply and that any
inconsistency between the two will be resolved by applying the
provisions of said Section 17(h) if the condition or limitation
imposed by Section 17(h) is the more stringent. In referring in its
By-Laws to SEC Release No. IC-11330 as the source for interpretation
and implementation of said Section 17(h), Registrant understands that
it would be required under its By-Laws to use reasonable and fair
means in determining whether indemnification of a director should be
made and undertakes to use either (1) a final decision on the merits
by a court or other body before whom the proceeding was brought that
the person to be indemnified ("indemnitee") was not liable to
Registrant or to its security holders by reason of willful
malfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his office ("disabling conduct") or
(2) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable
by reason of such disabling conduct, by (a) the vote of a majority of
a quorum of directors who are neither "interested persons" (as defined
in the 1940 Act) of Registrant nor parties to the proceeding, or (b)
an independent legal counsel in a written opinion. Also, Registrant
will make advances of attorneys' fees or other expenses incurred by a
director in his defense only if (in addition to his undertaking to
repay the advance if he is not ultimately entitled to indemnification)
(1) the indemnitee provides a security for his undertaking, (2)
Registrant shall be insured against losses arising by reason of any
lawful advances, or (3) a majority of a quorum of the non-interested,
non-party directors of Registrant, or an independent legal counsel in
a written opinion, shall determine, based on a review of readily
available facts, that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expense
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
In addition, Registrant maintains a directors' and officers errors and
omissions liability insurance policy protecting directors and officers
against liability for breach of duty, negligent act, error or omission
committed in their capacity as directors or officers. The policy
contains certain exclusions, among which is exclusion from coverage
for active or deliberate dishonest or fraudulent acts and exclusion
for fines or penalties imposed by law or other matters deemed
uninsurable.
2
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Lord, Abbett & Co. acts as investment adviser for fifteen other
open-end investment companies (of which it is principal underwriter
for fifteen) and as investment adviser to approximately 5,100 private
accounts. Other than acting as directors and/or officers of open-end
investment companies managed by Lord, Abbett & Co., none of Lord,
Abbett & Co.'s partners has, in the past two fiscal years, engaged in
any other business, profession, vocation or employment of a
substantial nature for his own account or the capacity of director,
officer, employee, or partner of any entity except as follows:
John J. Walsh
Trustee
Brooklyn Hospital Center
100 Parkside Avenue
Brooklyn, N.Y.
Item 29. (a) Principal Underwriter
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Value Appreciation Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett California Tax-Free Income Fund, Inc.
Lord Abbett Fundamental Value Fund, Inc.
Lord Abbett U.S. Government Securities Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett U.S. Government Securities Money Market Fund, Inc.
Lord Abbett Series Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Tax-Free Income Trust
Lord Abbett Securities Trust
Lord Abbett Investment Trust
Lord Abbett Research Fund, Inc.
Investment Adviser
American Skandia Trust (Lord Abbett Growth and Income Portfolio)
(b) The partners of Lord, Abbett & Co. are:
Name and Principal Positions and Offices
Business Address (1) with Registrant
Ronald P. Lynch Chairman
Robert S. Dow President
Kenneth B. Cutler Vice President & Secretary
Stephen I. Allen Vice President
Daniel E. Carper Vice President
Thomas S. Henderson Vice President
Robert G. Morris Vice President
E. Wayne Nordberg Vice President
John J. Walsh Vice President
3
<PAGE>
(1) Each of the above has a principal business address:
767 Fifth Avenue, New York, NY 10153
(c) Not applicable
Item 30. Location of Accounts and Records
Registrant maintains the records required by Rules 31a -1(a) and (b),
and 31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a - 1(f)
and 31a - 2(e) at its main office.
Certain records such as cancelled stock certificates and
correspondence may be physically maintained at the main office of the
Registrant's Transfer Agent, Custodian, or Shareholder Servicing Agent
within the requirements of Rule 31a-3.
Item 31. Management Services
None
Item 32. Undertakings
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
The registrant undertakes, if requested to do so by the holders
of at least 10% of the registrant's outstanding shares, to call a
meeting of shareholders for the purpose of voting upon the
question of removal of a director or directors and to assist in
communications with other shareholders as required by Section
16(c).
4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Registration Statement
and/or any amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
29th day of April 1996.
LORD ABBETT BOND-DEBENTURE FUND, INC.
By /S/ RONALD P. LYNCH
Ronald P. Lynch, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
NAME TITLE DATE
- ----- ----- ----
Chairman
/s/ Ronald P. Lynch & Director April 29, 1996
/s/ John J. Gargana, Jr. Vice President & April 29, 1996
Chief Financial Officer
Robert S. Dow President & Director
/s/ E. Thayer Bigelow Director April 29, 1996
/s/ Stewart S. Dixon Director April 29, 1996
/s/ John C. Jansing Director April 29, 1996
/s/ C. Alan MacDonald Director April 29, 1996
/s/ Hansel B. Millican, Jr. Director April 29, 1996
/s/ Thomas J. Neff Director April 29, 1996
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------ -----------
99.B11 Consent of Deloitte & Touche
99.B16 Total Return and Yield Computations
27 Financial Data Schedule
EXHIBIT 99.B11
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Bond-Debenture Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 39 to Registration
Statement No. 2-38910 of our report dated February 9, 1996 appearing in the
annual report to shareholders and to the reference to us under the captions
"Financial Highlights" in the Prospectus and "Investment Advisory and Other
Services" and "Financial Statements" in the Statement of Additional Information,
both of which are part of such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
New York, New York
April 26, 1996
EXHIBIT 99B.16
Lord Abbett Bond-Debenture Fund, Inc.
Post Effective Amendment No. 39 on Form N-1A
Results of a $1,000 investment reflecting the maximum sales charge and the
reinvestment of all distributions for:
Periods Ending December 31, 1995
One Five Ten
Year Years Years
P = 1,000 P = 1,000 P = 1000
N = 1 N = 5 N = 0
ERV = 1,119 ERV = 2,002 ERV = 2,493
T = Average annual total return
P(1+T)N = ERV,
1000(1+T)1 = 1,119 1000(1+T)5 = 2,002 1000(1+T)= 2,493
(1+T) = 1,119 (1+T) = 2,002 (1+T)10 = 2,493
------ ---- -----
1000 1000 1000
1+T = 1,119 (1+T) = (2,002 ).20 (1+T) = (2,493).10
------ ----- -----
1,000 (1000) (1000)
T = [1,119]-1 T = (2,002).20-1 T = (2,493).10-1
----- ------ -----
[1000] (1000) (1000)
T = 11.90% T = 14.89% T = 9.57%
<PAGE>
Calculation of yield appearing in the Statement of Additional Information for
Lord Abbett Bond-Debenture Fund, Inc. Post- Effective amendment No. 39 on Form
N-1A.
YIELD FORMULA
For the 30 Days
Ended December 31, 1995
YIELD = 2[(a-b+1))6-1] = 8.06%
cd
When a = Fund dividends and interest earned during the period in the
amount of $10,123,238
b = Fund expenses accrued for the period (net of reimbursements)
in the amount of $915,007
c = The average daily number of Fund shares outstanding during
the period that were entitled to receive dividends
were 143,021,212
d = The maximum offering price per Fund share on the last day of
the period was $9.75
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<NAME> LORD ABBETT BOND-DEBENTURE FUND, INC.
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
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