<PAGE>
LORD ABBETT BOND-DEBENTURE FUND 1995 ANNUAL REPORT
PHOTO - SWISS ARMY KNIFE
A mutual fund with a multi-faceted approach for producing high income
<PAGE>
LORD ABBETT BOND-DEBENTURE FUND
Since its establishment in 1971, Lord Abbett Bond-Debenture Fund has sought the
best of both worlds--high current income and capital growth. The Fund's flexible
investment approach, combined with Lord Abbett's value management style, has
produced a history of strong performance in a variety of economic climates.
Flexibility The Fund's flexible investment policy enables it to adapt to
changing economic conditions. (See page 4 for the Fund's portfolio
composition.)
High Current Income Dividend Distribution Rates on 12/31/95(1)
9.43%
At Net Asset Value
8.98%
At Maximum Offering Price
<TABLE>
<CAPTION>
<S> <C> <C>
Historically Consistent Total Returns Average Annual Rates of Total Return as of 12/31/95(2)
For the past 20 years 11.5% per year
For the past 15 years 11.7% per year
For the past 10 years 10.1% per year
For the past 5 years 16.0% per year
For the past year 17.5% for the year
Average Annual Average annual total returns for periods ended 1 year: +11.90%
Total Returns 12/31/95 at the 4.75% maximum sales charge, 5 years: +14.89%
with all distribution reinvested: 10 years: +9.57%
The Fund's SEC yield for the 30 days
ended 12/31/95 was 8.06%.
Total return is the percent change in
value, assuming the reinvestment of
all distributions.
</TABLE>
The results quoted herein represent past performance which is no indication of
future results. The investment return and principal value of an investment in
the Fund will fluctuate so that shares, on any given day or when redeemed, may
be worth more or less than their original cost.
(1) Based on the $.073 monthly dividend, annualized.
(2) At net asset value.
See Important Information on page 4.
<PAGE>
Report to Shareholders
For the Fiscal Year Ended December 31, 1995
PHOTO
/s/ Ronald P. Lynch
Ronald P. Lynch
Chairman
PHOTO
/s/ Robert S. Dow
Robert S. Dow
President
January 31, 1996
Lord Abbett Bond-Debenture Fund ended fiscal 1995 on December 31. 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 the year. 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 and
maximum offering price of $9.29 and $9.75, respectively, at the close of fiscal
1995.
After a surge last fall that heightened inflation concerns, the economy slowed
during the winter in response to credit restraints by the Federal Reserve. Since
December, the economy grew at a modest, annual rate of 21/2%, while inflation
averaged just under 3%. The combination of these factors enabled the Federal
Reserve Bank to reverse course and begin gradually lowering the Federal Funds
Rate in three, one-quarter point increments. The yield on the 30-year Treasury
bond (which began the year near 8%) was close to 6% by year-end.
Despite the U.S. economy's continued expansion over the last five years,
inflation remained well behaved. Labor cost increases have been moderate, as it
has become increasingly important for U.S. corporations to remain competitive in
the global marketplace. We are seeing a continuous effort by U.S. producers to
hold down wage costs through the use of technology, outsourcing and capital
equipment upgrades. Additionally, consumers resisted price increases, thereby
forcing companies to hold prices down.
We expect Gross Domestic Product in 1996 will grow at an annual rate of about
2%, with inflation remaining just below 3%. We believe this environment will
enable the Federal Reserve to lower the Federal Funds Rate from the current
51/4% level toward 41/2% by mid-year. We think 1996's corporate earnings will be
modestly below 1995's record levels. Still, moderate growth and contained
inflation, combined with a lower interest-rate environment, should bode well for
the financial markets; however, moderate volatility along the way is likely.
Your 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). The high-yield market
performed well, although we reduced holdings in those consumer-related
industries (such as retail and restaurants) where competition is fierce. In
1996, we believe the high-yield market has the potential to produce strong
returns, and your Fund is positioned accordingly. On December 31, 1995, higher
yielding, lower rated debt (including straight-preferred stocks) accounted for
63% of the Fund's portfolio; the balance was invested in convertible securities,
U.S. Government securities and equity holdings.
"In 1996, we believe the high-yield market has the potential to produce strong
returns..."
While there can be no guarantee that the Fund's net asset value will be
preserved in extreme market environments, the Fund's long-term investors have
been rewarded with strong returns in various economic climates.
We are pleased to announce that the Fund's Board of Directors elected Robert S.
Dow as President of the Fund. Mr. Dow, who has been a partner of Lord, Abbett &
Co. for nine years, is the Firm's Chief Investment Officer. In addition,
Christopher J. Towle has been named portfolio manager. Mr. Towle has assisted in
the management of your Fund since 1987.
We look forward to helping you attain your financial objectives in 1996 and
beyond.
1
<PAGE>
Aiming for High Total Returns
Seeking High Returns
Dividend distribution rates were 9.43% and 8.98% (based on the net asset value
and maximum offering price, respectively, on 12/31/95, and the monthly dividend
of $.073, annualized).
Striving for Consistency of Performance
The Fund's goal is high total return through high current income and capital
appreciation. The Fund strives for competitive returns in both up and down
markets.
<TABLE>
<CAPTION>
Growth of $10,000 Investments: 4/1/71(1)-12/31/95
1973-1974 1977-1981 1990-1991
The last major bear market Interest rates Recession and the Middle East
the unmanaged S&P 500 soared; bond crisis jolted all markets;
declined 37.3%. The Fund price sank. The lower rated bond market
mitigated the decline, then Fund was up especially hard hit. The
recovered every year Fund mitigated the decline,
then recovered strongly.
Performance of $10,000 investment from 4/1/71 (Fund's inception) through
12/31/95 on a total return basis for Lord Abbett Bond-Debenture Fund (at net
asset value), the Consumer Price Index and the Lipper Average of High Current
Yield Funds.
Consumer Price Index
<S> <C>
4/1/71 $10,000
1971 10,275
1972 10,625
1973 11,550
1974 12,975
1975 13,875
1976 14,550
1977 15,525
1978 16,925
1979 19,175
1980 21,575
1981 23,500
1982 24,400
1983 25,325
1984 26,325
1985 27,325
1986 27,625
1987 28,850
1988 30,125
1989 31,525
1990 33,450
1991 34,475
1992 35,475
1993 36,450
1994 37,425
1995 38,450
Lipper Average of High Current Yield Funds
4/1/71 10,000
1971 10,687
1972 11,584
1973 10,453
1974 9,274
1975 11,339
1976 14,570
1977 15,638
1978 15,999
1979 16,959
1980 17,914
1981 18,969
1982 24,584
1983 28,613
1984 30,859
1985 37,506
1986 42,119
1987 42,717
1988 48,019
1989 47,433
1990 42,182
1991 57,519
1992 67,695
1993 80,726
1994 77,634
1995 90,397
Lord Abbett Bond-Debenture Fund
4/1/71 10,000
1971 10,765
1972 11,438
1973 10,313
1974 9,789
1975 12,689
1976 16,613
1977 17,777
1978 18,269
1979 19,547
1980 21,283
1981 22,412
1982 28,585
1983 33,416
1984 35,073
1985 42,442
1986 46,946
1987 47,828
1988 54,427
1989 57,181
1990 52,852
1991 73,116
1992 84,810
1993 98,356
1994 94,553
1995 111,099
<FN>
This graph illustrates total return. The Fund's results do not include the
maximum sales charge of 4.75% applicable to investments under $100,000; there is
no sales charge on investments of $1 million or more. For performance at the
maximum sales charge, see inside front cover. See Important Information on page
4.
(1) The Fund commenced operations on 4/1/71.
(2) Average of high current yield funds in existence at each month or quarter
end for the periods shown. At 12/31/95, there were 139 high current yield
funds reported by Lipper. No sales charge has been deducted from these
figures. Source: Lipper Analytical Services.
(3) December 1995 figure is estimated.
</FN>
</TABLE>
2
<PAGE>
Performance Update
The Fund has an impressive history of protecting long-term income investors from
public enemy #1--inflation. Below, the Fund's growth is compared to the Consumer
Price Index, a standard inflation measure(1).
The Fund Versus Inflation
$100,000 Investments(2): 4/1/71-12/31/95
$100,000 invested at the Fund's inception grew to over $1 million
<TABLE>
<CAPTION>
Value of
<S> <C> <C> <C>
Value of
$100,000
Year Annual Investment with Inflation
Ended Dividends all Distributions (Consumer
Dec. 31 Reinvested Reinvested Price Index)
- -------------------------------------------------------------------------------
1971(3) $ 3,450 $ 103,588 $102,750 From the early
1972 7,460 110,073 106,250 1970s through
1973 8,204 99,239 115,500 the early 1980s,
1974 9,163 94,202 129,750 the U.S. econo-
1975 9,719 122,105 138,750 my experienced
1976 10,970 159,867 145,500 rapidly rising
1977 11,883 171,064 155,250 inflation and
1978 14,100 175,803 169,250 interest rates.
1979 16,410 188,105 191,750 The Fund kept
1980 18,614 204,818 215,750 pace with infla-
1981 22,844 215,671 235,000 tion over this
1982 27,279 275,072 244,000 turbulent period.
1983 31,092 321,561 253,250 As the rate of
1984 37,521 337,510 263,250 inflation and
1985 43,150 408,427 273,250 interest rates
1986 48,531 451,763 276,250 declined in the
1987 51,214 460,251 288,500 1980s, the Fund
1988 53,120 523,756 301,250 outperformed
1989 59,178 550,254 315,250 the CPI by an
1990 66,312 508,602 334,500 average of
1991 71,085 703,596 344,750 6.7%/year.
1992 77,910 816,148 354,750
1993 82,556 946,487 364,500
1994 86,858 909,890 374,250
1995 95,753 1,069,120 384,500(4)
Total Dividends
Reinvested: $964,376
--------
Average Annual Rate of Return: 10.05% 5.59%(4)
------ --------
</TABLE>
The dollar amounts of capital gains distributions reinvested in Fund shares
were: 1973-$1,559; 1977-$971; 1978-$7,503; 1979-$5,622; 1980-$769; 1981-$2,765;
1984-$4,516; 1986-$5,415; total-$29,120.
Source: Lord, Abbett & Co.
(1) See Important Information on page 4.
(2) Fund investment reflects the deduction of the reduced 3.75% sales charge
applicable to investments of $100,000.
(3) Nine months only. The Fund began operations on 4/1/71.
(4) December 1995 figure is estimated.
3
<PAGE>
Current Dividend Distribution Rates: 9.43% and 8.98%
(based on the net asset value and the maximum offering price, respectively, on
12/31/95, and the monthly dividend of $.073, annualized)
The Fund's 3-Way Focus
1. Lower Rated Debt and Straight-preferred Stocks: 62.9%*
The Fund's lower rated debt holdings pay high income and help minimize the
effects of interest-rate fluctuations. Price appreciation may result if the
credit rating of debt issuers is upgraded.
2. Equity-related Securities: 16.5%*
Capital appreciation is sought by investing in convertible bonds which may be
exchanged for common stock. When the stock market rises, these equity-related
issues generally increase in value.
3. High-grade Debt and Other Assets, Less Liabilities: 20.6%*
High-quality issues, corporate issues and U.S. Government-backed securities
provide a dependable stream of high current income.
* Percent of portfolio on 12/31/95.
A History of the Fund's Portfolio Blend
Lower Rated Equity Related High-Grade
Straight Debt Securities Debt (U.S. Gov't)
and Straight (Convertible and other Assets
Preferred Stock Common, Warrants) Less Liabilities
1974 15.7% 49.6% 34.7%
1975 14.3% 50.4% 35.3%
1979 34.8% 36.1% 29.1%
1982 18.3% 54.6% 27.1%
1985 45.1% 40.5% 14.4%
1988 52.9% 33.4% 13.7%
1990 55.7% 28.0% 16.3%
1995 62.9% 16.5% 20.6%
IMPORTANT INFORMATION
SEC yield is calculated on the maximum offering price of $9.75 on 12/31/95,
using a standard method which does not take into account certain portfolio
strategies. The Fund's distribution rate differs from its SEC yield primarily
because the Fund purchases short- and intermediate-term high-coupon securities
at a premium and distributes to shareholders all of the interest income on those
securities without amortizing the premiums. This practice is consistent with
applicable tax regulations and generally accepted accounting principles, but may
result in a decrease in the net asset value of shares of the Fund as the market
value of the premium securities decreases over time. Dividends paid from this
interest income are taxable to shareholders as ordinary income.
Bonds purchased by the Fund are subject to market fluctuations upward and
downward inversely to the rise and fall of interest rates. Common stocks are
also subject to market fluctuations providing potential for gain and risk of
loss. Lower rated bonds generally provide a higher yield than higher rated bonds
of similar average maturity, but have greater credit risk. The performance
results quoted herein reflect past performance, current sales charges (where
applicable) and appropriate Rule 12b-1 Plan expenses from commencement of the
Plan. Tax consequences are not reflected. The Fund's sales charge structure has
changed in the past. If used as sales material after 3/31/96, this report must
be accompanied by Lord Abbett's Performance Quarterly for the most recently
completed calendar quarter.
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS December 31, 1995
<S> <C> <C> <C>
Principal Market Value
Security Amount (Note 1a)
- ------------------------------------------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES 91.74%
LOWER RATED STRAIGHT DEBT (Note 2) 61.53%
Aerospace Fairchild Corp. Sub. Deb. 13 1/8/2006 $ 5,000M $ 4,600,000)
.93% GPA Delaware, Inc. Deb. 8 3/4/1998 5,000M 4,712,500
Wyman Gordon Co. Sr. Notes 10 3/4/2003 3,000M 3,097,500
Total 12,410,000
--------------
Agricultural Arcadian Partner Sr. Notes 10 3/4/2005 5,000M 5,537,500
.80% PMI Acquisition Corp. Sr. Sub. Notes 10 1/4/2003 5,000M 5,156,250
Total 10,693,750
--------------
Airlines Northwest Airlines Inc. Sr. Notes 12.0916/2000 3,245M 3,358,789
.61% US Air Inc. Equipment Trust CTF 10 1/2/2004 2,634M 2,698,204
US Air Inc. (Piedmont) Equipment Trust Notes
10.35/2011 2,000M 2,129,688
Total 8,186,681
--------------
Aluminum Kaiser Aluminum & Chemical Corp. Sr. Sub. Notes
.64% 12 3/4/2003 5,000M 5,487,500
Maxxam Group Zero Coupon Sr. Discount Secured
Notes due 2003** 4,500M 3,105,000
Total 8,592,500
--------------
Automotive Motor Wheel Corp. Sr. Notes 11 1/2/2000 6,800M 6,222,000
.84% Walbro Corp. Sr. Notes 9 7/8/2005+ 5,000M 5,000,000
Total 11,222,000
----------
Banking Berkeley Federal Bank Sub. Deb. 12/2005 7,000M 7,210,000
1.29% Central Bank of Nigeria 6 1/4/2020 w/Warrants 6,000M 2,940,000
Saul, B.F. Real Estate Investment Trust Sr. Notes
11 5/8/2002 7,000M 7,175,000
Total 17,325,000
--------------
Building
.52% Scotsman Group Inc. Sr. Notes 9 1/2/2000 6,800M 6,936,000
--------------
Building Materials Associated Materials, Inc. Sr. Sub. Notes
.97% 11 1/2/2003 2,000M 1,587,188
Dal-tile International Inc. Zero Coupon Sr.
Notes due 1998 15,000M 11,400,000
Total 12,987,188
--------------
Chemicals Atlantis Group Inc. Sr. Notes 11/2003 5,000M 4,395,313
3.22% Harris Chemical NA Inc. Zero Coupon Sr. Secured
Discount Notes due 2001** 8,500M 8,117,500
Huntsman Corp. 1st Mtge. Notes 11/2004 10,000M 11,470,313
NL Industries Inc. Zero Coupon Sr. Secured Notes
due 2005** 5,000M 3,850,000
NL Industries Inc. Sr. Secured Discount Notes
11 3/4/2003 5,000M 5,356,250
Polymer Group Inc. Sr. Notes 12 1/4/2002 4,750M 4,845,000
UCC Investors Holdings Inc. Sr. Sub. Notes 11/2003 5,000M 5,075,000
Total 43,109,376
--------------
Communications Adelphia Communications Corp. Sr. Notes 12 1/2/2002 7,000M 6,877,500
12.22% Australis Media Ltd. Zero Coupon Sr. Discount Notes
due 2003 w/Warrants** 8,000M 5,810,000
Bell Cable Media plc Zero Coupon Sr. Discount
Notes due 2004** 14,000M 9,940,000
Cablevision System Sr. Sub. Notes 9 1/4/2005 7,500M 7,856,250
CAI Wireless System Inc. Sr. Notes 12 1/4/2002 2,850M 3,049,500
Cellular Inc. Sr. Sub. Discount Notes 11 3/4/2003** 12,000M 9,600,000
Cencall Communications Corp. Zero Coupon Sr.
Discount Notes due 2004** 7,500M 4,256,250
Comcast Cellular Corp. Zero Coupon Sr. Notes Series
B due 2000 10,000M 7,725,000
Comcast UK Cable Partners Limited Zero Coupon Sr.
Discount Deb. 10,000M 5,875,000
due 2007
Dial Call Communications Inc. Zero Coupon Sr.
Discount Notes due 5,000M 2,875,000
2004 w/Warrants**
Fundy Cable Ltd. Sr. Secured 2nd Priority Notes
11/2005 3,200M 3,344,000
Horizon Cellular Inc. Zero Coupon Sr. Sub.
Discount Notes due 2000** 7,000M 6,107,500
Intelcom Group (USA) Inc. Zero Coupon Sr.
Discount Notes due 2005 w/Warrants+ 20,000M 11,750,000
Intermedia Communications of Florida Sr. Notes
13 1/2/2005 w/Warrants 5,000M 5,562,500
International Cabletel Inc. Zero Coupon Sr.
Discount Notes due 2003** 5,000M 3,625,000
Lenfest Communications Sr. Notes 8 3/8/2005 5,000M 5,021,875
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS December 31, 1995
<S> <C> <C>
Principal Market Value
Security Amount (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------------------
Marcus Cable Co. Zero Coupon Sr. Discount Notes due 2004** $ 10,000M $ 7,550,000
Metrocall Inc. Sr. Sub. Notes 10 3/8/2007 10,000M 10,625,000
Mobile Media Communications Inc. Zero Coupon Sr. Sub. Notes due 8,000M 6,260,000
2003**
Mobile Media Communications Inc. Sr. Sub. Notes 9 3/8/2007 7,500M 7,762,500
Nextel Communications Inc. Zero Coupon Sr. Discount Notes due 5,500M 3,478,750
2003**
Pan Am Sat L.P. Zero Coupon Sr. Discount Sub. Notes due 2003** 7,500M 6,168,750
Telewest plc Zero Coupon Sr. Discount Deb. due 2007 20,000M 12,100,000
Videotron Holdings plc Zero Coupon Sr. Discount Notes due 2004** 15,000M 10,518,750
Total 163,739,125
--------------
Computer Systems and
Peripherals
.52% Digital Equipment Corp. Sr. Notes 7 3/4/2023 7,000M 7,001,094
--------------
Consumer Products
.90% American Standard Inc. Zero Coupon Sr. Sub. Deb. due 2005** 14,000M 12,022,500
Container and Calmar Inc. Sr. Sub. Notes 11 1/2/2005 6,000M 6,082,500
Packaging Portola Packaging Inc. Sr. Notes 10 3/4/2005 5,000M 5,200,000
1.35% Silgan Corp. Sr. Sub. Notes 11 3/4/2002 1,000M 1,075,000
Silgan Holdings Inc. Zero Coupon Sr. Discount Notes due 2002** 6,000M 5,685,000
Total 18,042,500
--------------
Electrical Equipment
.05% Howmet Inc. Sr. Sub. Notes 10/2003 700M 729,750
--------------
Food Dr. Pepper Bottling Holding Inc. Zero Coupon Sr. Discount Notes 6,750M 5,568,750
1.20% due 2003**
Heilman Acquisition Corp. Sr. Sub. Notes 9 5/8/2004 8,000M 2,360,000
Specialty Foods Corp. Sr. Notes 11 1/8/2002 2,000M 1,910,000
Van de Kamp's Inc. Sr. Sub. Notes 12/2005 6,000M 6,240,000
Total 16,078,750
--------------
Forest Products
.36% Pacific Lumber Co. Sr. Notes 10 1/2/2003 5,000M 4,787,500
--------------
Hotel/Leisure Act III Theatres Inc. Sr. Sub. Notes 11 7/8/2003 4,000M 4,360,000
5.21% Aztar Corp. Sr. Sub. Notes 11/2002 4,000M 4,020,000
Aztar Corp. Sr. Sub. Notes 13 3/4/2004 2,000M 2,230,000
Bally GNF Corp. 1st Mtge. Notes 10 5/8/2003 5,000M 4,681,250
Claridge Hotel & Casino Corp. 1st Mtge. Notes 11 3/4/2002 5,000M 3,975,000
Empress River Casino Finance Corp. Sr. Notes 10 3/4/2002 5,000M 5,187,500
HMC Acquisition Properties Sr. Notes 9/2007 3,000M 3,037,500
HMH Properties Inc. Sr. Secured Notes 9 1/2/2005 10,000M 10,250,000
Host Marriott Travel Plazas Inc. Sr. Notes 91/2/2005 5,000M 4,956,250
Mohegan Tribal Gaming Authority Sr. Secured Notes 131/2/2002 5,000M 5,412,500
Plitt Theatres Inc. Sr. Sub. Notes 107/8/2004 5,000M 4,550,000
Road Master Industries Inc. Sr. Sub. Notes 113/4/2002 5,000M 3,475,000
Santa Fe Hotel Inc. 1st Mtge. Notes 11/2000 w/Warrants 4,535M 2,925,134
Showboat Inc. 1st Mtge. Notes 91/4/2008 5,000M 5,050,000
Stratosphere Corp. 1st Mtge. Notes 141/4/2002 5,000M 5,665,625
Total 69,775,759
--------------
Household Products
.38% Specialty Equipment Cos. Inc. Sr. Sub. Notes 113/8/2003 5,000M 5,093,750
--------------
Machinery Carbide Graphite Group Inc. Sr. Notes 111/2/2003 5,455M 5,905,038
2.32% Eagle Industries Inc. Zero Coupon Sr. Discount Notes due 2003** 6,000M 5,055,000
Essex Group Inc. Sr. Notes 10/2003 10,000M 9,800,000
IMO Industries Inc. Sr. Sub. Deb. 12/2001 5,000M 5,137,500
Terex Corporation Sr. Secured Notes 133/4/2002 6,000M 5,220,000
Total 31,117,538
----------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS December 31, 1995
<S> <C> <C>
Principal Market Value
Security Amount (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------------------
Media Act 3 Broadcasting Sr. Sub. Notes 10 1/4/2005 $ 2,500M 2,562,500
3.17% Benedek Broadcasting Corp. Sr. Secured Notes 11 7/8/2005 5,000M 5,325,000
Granite Broadcasting Corp. Sr. Sub. Notes 10 3/8/2005 10,000M 10,300,000
Lamar Advertising Inc. Sr. Secured Notes 11/2003 3,000M 3,150,000
NWCG Holdings Corp. Zero Coupon Sr. Secured Discount Notes due 1999 8,000M 5,540,000
SCI Television Sr. Secured Notes 11/2005 5,000M 5,306,250
Sinclair Broadcasting Group, Inc. Sr. Sub. Notes 10/2005 10,000M 10,225,000
Total 42,408,750
----------
Medical/Health Care Paracelsus Health Care Corp. Sr. Sub. Notes 9 7/8/2003 5,000M 5,100,000
.72% Quorum Healthcare Group Inc. Sr. Sub. Notes 11 7/8/2002 4,000M 4,500,000
Total 9,600,000
----------
Miscellaneous Fairfield Manufacturing Inc. Sr. Sub. Notes 11 3/8/2001 4,800M 4,698,000
2.50% Interface Inc. Sr. Sub. Notes 9 1/2/2005 10,000M 10,300,000
International Wire Group Inc. Sr. Sub. Notes 11 3/4/2005 10,000M 9,650,000
Monarch Marking Acquisition Corp. Sr. Notes 12 1/2/2003 5,000M 5,300,000
Republic of Venezuela 6 3/4/2020 Series B w/Warrants 6,000M 3,480,000
Total 33,428,000
----------
Non Ferrous Metals Interlake Corp. Sr. Notes 12/2001 5,000M 5,075,000
.78% Sherritt Gordon Inc. Notes 11/2004 7,000M 5,399,380
Total 10,474,380
----------
Oil and Gas Clark USA Inc. Zero Coupon Sr. Secured Notes due 2000 12,000M 8,025,000
2.66% Crown Central Petroleum Corp. Sr. Notes 10 7/8/2005 10,000M 10,600,000
Metro Gas, S.A. Sr. Sub. Notes 12/2000 5,000M 5,081,250
Nuevo Energy Co. Sr. Sub. Notes 12 1/2/2002 4,000M 4,380,000
United Meridian Corp. Sr. Sub. Notes 10 3/8/2005 5,750M 6,095,000
Wainoco Oil Corp. Sr. Notes 12/2002 1,500M 1,455,000
Total 35,636,250
----------
Oil Service
.24% Rowan Cos. Inc. Sr. Notes 11 7/8/2001 3,000M 3,262,500
----------
Paper and Pulp Crown Paper Co. Sr. Sub. Notes 11/2005 10,000M 8,800,000
3.40% Domtar Inc. Sub. Deb. 11 1/4/2017 5,000M 5,343,750
Repap Wisconsin Inc. Sr. Secured 2nd Priority 9 7/8/2006 10,000M 9,500,000
S.D. Warren Co. Sr. Sub. Notes 12/2004 4,200M 4,651,500
Stone Container Corp. 1st Mtge. Notes 10 3/4/2002 10,000M 10,350,000
Tembec Finance Corp. Sr. Notes 9 7/8/2005 7,000M 6,973,750
Total 45,619,000
----------
Printing and Publishing Big Flower Press Inc. Sr. Sub. Notes 10 3/4/2003 5,333M 5,679,645
1.27% Garden State Newspapers Inc. Sr. Sub. Notes 12/2004 5,000M 5,050,000
Webcraft Technologies Inc. Sr. Sub. Notes 9 3/8/2002 6,500M 6,272,500
Total 17,002,145
----------
Real Estate Trizec Finance Sr. Notes 10 7/8/2005 4,200M 4,326,000
.32% ----------
Retail Cole National Corp. Sr. Notes 11 1/4/2001 8,000M 8,040,000
3.54% Cort Furniture Rental Corp. 12/2000 w/Warrants 3,220M 3,445,400
County Seat Stores Inc. Sr. Sub. Notes 12/2002 w/Warrants 5,000M 4,550,000
Finlay Fine Jewelry Corp. Sr. Notes 10 5/8/2003 5,000M 4,875,000
Guess Inc. Sr. Sub. Notes 9 1/2/2003 5,000M 4,900,000
Pamida Inc. Sr. Sub. Notes 11 3/4/2003 8,000M 6,240,000
United Stationers Supply Co. Sr. Sub. Notes 12 3/4/2005 10,000M 10,975,000
Wickes Lumber Co. Sr. Sub. Notes 11 5/8/2003 6,000M 4,440,000
Total 47,465,400
----------
</TABLE>
7
<PAGE>
STATEMENT OF NET ASSETS December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Market Value
Security Amount (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------------------
Steel AK Steel Corp. Sr. Notes 10 3/4 /2004 $5,000M $5,562,500
3.15% Earle M. Jorgenson Co. Sr. Notes 10 3/4 /2000 5,000M 4,612,500
G.S. Technologies Operating Co. Sr. Notes 12 1/4 /2005 5,000M 4,993,750
Inland Steel Industries Inc. 12 3/4 /2002 4,500M 5,085,000
Ivaco Inc. Sr. Notes 11 1/2 /2005 5,000M 4,918,750
Republic Engineered Steel Inc. 1st Mtge. 9 7/8 /2001 7,000M 6,335,000
Stelco Inc. Sub. Deb. 10.40/2009 5,000M 3,911,719
WCI Steel Inc. Sr. Notes 10 1/2 /2002 7,000M 6,825,000
Total 42,244,219
------------
Supermarket *Victory Markets Inc. Sub. Notes 12 1/2 /2000 5,000M 1,000,000
2.37% Bruno's Inc. Sr. Sub. Notes 10 1/2 /2005 5,000M 4,962,500
Dairy Mart Convenience Stores Inc. Sr. Sub. Notes 10 1/4 /2004 5,000M 4,275,000
Farm Fresh Holdings Sr. Notes P.I.K. 14 1/4 /2002*** 5,472M 2,653,955
Pathmark Stores Inc. Zero Coupon Sub. Notes due 2003** 10,000M 6,150,000
Pathmark Stores Inc. Sub. Notes 11 5/8 /2002 3,000M 3,022,500
Ralphs Grocery Co. Sr. Sub. Notes 13 3/4 /2005 3,000M 3,210,000
Ralphs Supermarkets Inc. Sr. Notes 10.45/2004 6,300M 6,410,250
Total 31,684,205
------------
Textile Dan River Inc. Sr. Sub. Notes 10 1/8 /2003 5,000M 4,600,000
1.92% J.P. Stevens & Co. Inc. Sr. Deb. 9/2017 3,000M 2,910,000
Synthetic Industries Inc. Sr. Sub. Notes 12 3/4 /2002 5,000M 4,912,500
Tultex Corp. Sr. Notes 10 5/8 /2005 4,000M 4,100,000
US Leather Inc. Sr. Notes 10 1/4 /2003 5,000M 4,225,000
Westpoint Stevens Inc. Sr. Sub. Deb. 9 3/8 /2005 5,000M 4,950,000
Total 25,697,500
------------
Transportation Omi Corp. Sr. Notes 10 1/4 /2003 5,000M 4,500,000
.78% Trism Inc. Sr. Sub. Notes 10 3/4 /2000 6,000M 5,940,000
Total 10,440,000
------------
Utility
.38% Beaver Valley II Funding Corp. Secured Lease Obligation 9/2017 5,924M 5,055,764
------------
Total Investments in Lower Rated Straight Debt (Cost $821,118,692) 824,194,874
CONVERTIBLE DEBT 8.34%
Business Services
.34% Olsten Corp. Conv. Sub. Deb. 4 7/8 /2003 4,000M 4,600,000
Communications LDDS Communication Inc. Conv. Sub. Deb. 5/2003 10,000M 10,525,000
1.15% Telekom Malaysia Conv. Notes 4/2004 5,000M 4,875,000
Total 15,400,000
------------
Computer Support Systems
.18% Businessland Inc. Conv. Sub. Deb. 5 1/2 /2007 5,000M 2,375,000
------------
Computer Systems and Conner Peripherals Inc. Conv. Sub. Deb. 6 1/2 /2002 5,000M 5,075,000
Peripherals Unisys Corp. Conv. Sub. Notes 8 1/4 /2000 5,000M 4,450,000
1.09% Xilinx Inc. Conv. Sub. Notes 5 1/4 /2002 5,500M 5,065,156
Total 14,590,156
------------
Data Processing Equipment Automatic Data Processing Zero Coupon Conv. Sub. Deb. due 2012 12,000M 5,926,875
and Components EMC Corp. Conv. Sub. Notes 4 1/4 /2001 7,000M 7,020,781
.97% Total 12,947,656
Drugs/Pharmaceuticals Roche Holdings Inc. Zero Coupon Conv. Notes due 2010 30,000M 13,237,500
1.24% Sandoz Capital, BVI, Ltd. Conv. Sub. Deb. 2/2002 3,500M 3,316,250
Total 16,553,750
------------
</TABLE>
8
<PAGE>
STATEMENT OF NET ASSETS December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Market Value
Security Amount (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------------------
Electronics Analog Devices Conv. Sub. Deb. 3 1/2/2000 $ 2,275M $ 2,380,219
1.03% Checkpoint Systems Inc. Conv. Sub. Notes 5 1/4/2005 5,000M 5,884,375
VLSI Technology, Inc. Conv. Sub. Deb. 8 1/4/2005 6,000M 5,538,750
Total 13,803,344
------------
Industrial and Raymond Corp. Conv. Sub. Deb. 6 1/2/2003 3,000M 4,155,000
Capital Goods RPM, Inc. Zero Coupon Conv. Sub. Notes due 2012 7,500M 3,243,750
.55% Total 7,398,750
---------
Insurance
.32% CII Financial Inc. Conv. Sub. Deb. 7 1/2/2001 5,000M 4,350,000
Medical/Health Care ------------
.50% Integrated Health Service Conv. Sub. Deb. 6/2003 7,000M 6,691,563
Oil and Gas Pennzoil (Exch. Chevron) Conv. Sub. Deb. 4 3/4/2003 4,000M 4,031,250
.43% Wainoco Oil Corp. Conv. Sub. Deb. 7 3/4/2014 2,400M 1,788,000
Total 5,819,250
------------
Oil Service
.21% Noble Affiliates Inc. Conv. Sub. Notes 4 1/4/2003 2,800M 2,807,000
------------
Waste Management
.32% WMX Technologies Inc. Conv. Sub. Notes 2/2005 5,000M 4,325,000
------------
Total Investments in Convertible Debt (Cost $107,729,567) 111,661,469
PREFERRED AND
CONVERTIBLE-PREFERRED
STOCKS AND COMMON STOCKS
9.47%
Banking Ahmanson, H.F. & Co. $6.00 Conv. Pfd. Series D 100,000 5,912,500
1.24% California Federal Bank $10.625 Non Cum. Pfd. Series B 45,000 4,924,688
Greater NY Savings $3.00 Non Cum. Pfd. Series B 200,000 5,750,000
Total 16,587,188
------------
Building Materials
.91% Owens Corning $3.25 Conv. Pfd. + 200,000 12,246,875
------------
Chemicals
.39% Atlantic Richfield Co. (Exch. $2.23 Conv. Pfd. 225,000 5,287,500
Lyondell Petrochemical) ------------
Communications
.05% Evergreen Media Corp. $3.00 Conv. Pfd. 10,000 700,000
------------
Data Processing Equipment
and Components
.55% General Motors Corp. $3.25 Conv. Pfd. (Electronic Data Systems) 100,000 7,325,000
Series C ------------
Drugs/Pharmaceuticals
.44% Foxmeyer Health Corp. $4.20 Pfd. Series A 157,977 5,904,390
------------
Electrical Equipment
.72% Westinghouse Electric Corp. $1.30 Conv. Pfd. Series C+ 600,000 9,609,375
------------
Financial American Express Co. $6.25 Conv. Pfd. Notes 50,000 2,775,000
.83% Jefferson-Pilot Corp. (Nations Bank) 7 1/4 Conv. Pfd. Notes 115,000 8,409,375
Total 11,184,375
------------
Hotel/Leisure
.61% AMC Entertainment Inc. $1.75 Conv. Pfd. 200,000 8,150,000
------------
Insurance American General $3.00 Conv. Pfd. Series A 200,000 10,437,500
1.54% Penncorp Financial $3.375 Conv. Pfd. 64,800 4,625,100
St. Paul's Capital, LLC $3.00 Conv. Pfd. 100,000 5,625,000
Total 20,687,600
------------
Machinery Bucyrus-Erie Company 56,624 460,070
.44% Navistar International Corp. $6.00 Conv. Pfd. Series G 100,000 5,425,000
Total 5,885,070
------------
</TABLE>
9
<PAGE>
STATEMENT OF NET ASSETS December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Market Value
Security Amount (Note 1a)
- -----------------------------------------------------------------------------------------------------------------------------------
Non Ferrous Metals
.24% Freeport McMoRan Copper & Gold $1.75 Conv. Pfd. 110,000 $ 3,162,500
------------
Office Equipment
.29% Alco Standard Corp. $5.04 Conv. Pfd. 45,100 3,856,050
------------
Paper and Pulp
.70% International Paper Co. 5.25% Conv. Pfd. 204,000 9,321,350
------------
Retail
.17% Supermarkets General Holdings Corp. $3.52 Pfd. P.I.K.*** 80,000 2,280,000
------------
Waste Management
.35% Browning Ferris Industries Inc. $2.58 Conv. Pfd. 150,000 4,706,250
Total Investments in Preferred and Convertible-Preferred
Stocks and Common Stocks (Cost $126,403,650) 126,893,523
GOVERNMENT AGENCY ISSUES
12.40%
Federal National Mortgage Association 6 1/2% due on an announced 90,000M 88,931,250
basis
Federal National Mortgage Association 7 1/2% due on an announced 40,000M 40,993,750
basis
Government National Mortgage Association 6 1/2% due on an announced 15,000M 14,878,125
basis
U.S. Treasury Notes 6 1/2% due 8/15/2005 20,000M 21,312,500
Total Investments in Government Agency Issues (Cost $164,718,751) 166,115,625
Total Investments in Securities (Cost $1,219,970,660) 1,228,865,491
OTHER ASSETS, LESS
LIABILITIES 8.26%
Other Short-Term Federal Home Loan Banks 13% due 7/19/1996 62,000M 64,596,250
Assets Investments, Federal Home Loan Mortgage Corporation 12% due 3/13/1996 39,000M 39,499,688
at Market Federal Home Loan Mortgage Corporation 12% due 5/1/1996 25,000M 25,523,438
Federal Home Loan Mortgage Corporation 14% due 11/1/1996 16,300M 17,435,906
Federal National Mortgage Association 14% due 9/25/1996 59,000M 62,540,000
Total (Cost $215,259,813) 209,595,282
Short-Term Ford Motor Credit Co. 5.81% due 1/2/1996 5,000M 5,000,000
Investments, Prudential Funding Corp. 5.65% 5,200M 5,200,000
due 1/3/1996
at Cost Total 10,200,000
Total Short-Term Investments 219,795,282
Cash 3,601,649
Receivable for: Interest 25,326,338
Capital shares sold 6,406,931
Securities sold 3,154,029
Dividends 548,843
Total Other Assets 258,833,072
Liabilities Payable for: Securities purchased 145,928,175
Capital stock reacquired 982,057
Accrued expenses 1,280,008
Total Liabilities 148,190,240
Total Other Assets, Less Liabilities 110,642,832
Net Assets (equivalent to $9.29 a share on 144,222,984 shares of $1.00 par value
100.00% capital stock outstanding; authorized, 300,000,000 shares) $1,339,508,323
</TABLE>
*Non-income producing.
**Deferred-interest debentures pay no interest for a stipulated number of
years, after which they pay the indicated coupon rate.
***Represents a payment-in-kind security, which may pay interest/dividends
in additional face/shares.
+Restricted security under Rule 144A.
See Notes to Financial Statements.
10
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Income Interest $111,011,129
Dividends 6,103,242
Total Income $117,114,371
Expenses Management fee (Note 6) 5,342,563
12b-1 distribution plan (Note 6) 2,437,438
Shareholder servicing 1,170,979
Reports to shareholders 179,927
Legal and audit 82,997
Directors' fees 26,955
Other 165,768
Total expenses 9,406,627
Net investment income 107,707,744
Net Realized and Unrealized Gain (Loss) on Investment (Note 5)
Net realized loss from security transactions
Proceeds from sales 1,731,772,417
Cost of securities sold 1,780,432,781
Net realized loss (48,660,364)
Net unrealized appreciation (depreciation) of investments
Beginning of year (118,993,760)
End of year 3,230,300
Net unrealized appreciation 122,224,060
Net realized and unrealized gain on investments 73,563,696
Net Increase in Net Assets Resulting from Operations $181,271,440
</TABLE>
See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
Increase (Decrease) in Net Assets 1995 1994
<S> <C> <C>
Operations Net investment income 107,707,744 $ 89,879,578
Net realized gain (loss) from securities transactions (48,660,364) 13,853,235
Net unrealized appreciation (depreciation) of investments 122,224,060 (144,176,493)
Net increase (decrease) in net assets resulting from operations 181,271,440 (40,443,680)
Undistributed net investment income included in price of shares sold (reacquired) (Note 1d) 4,588,268 2,516,546
Distributions to shareholders from net investment income (109,789,425) (93,546,234)
Capital share transactions
Net proceeds from sales of 38,145,671 and 25,133,098 shares, respectively 341,253,620 232,049,429
Net asset value of 5,890,156 and 4,986,894 shares, respectively, issued
to shareholders in reinvestment of net investment income and realized gain
from security transactions 52,422,843 45,801,632
Total 393,676,463 277,851,061
Cost of 13,236,691 and 14,137,840 shares reacquired, respectively (117,851,327) (128,500,987)
Increase in net assets derived from capital share transactions (net
increase of 30,799,136 and 15,982,152 shares, respectively) 275,825,136 149,350,074
Total increase in net assets 351,895,419 17,876,706
Net Assets
Beginning of year 987,612,904 969,736,198
End of year (including undistributed net investment income of
$29,330,459 and $27,096,524, respectively) $1,339,508,323 $ 987,612,904
See Notes to Financial Statements.
</TABLE>
11
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
Year Ended December 31,
Per Share Operating Performance 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.71 $ 9.95 $ 9.43 $ 9.02 $ 7.36
Income from investment operations
Net investment income .85 .84 .89 .95 .98
Net realized and unrealized gain
(loss) on investments .606 (1.203) .55 .42 1.66
Total from investment operations 1.456 (.363) 1.44 1.37 2.64
Distributions
Dividends from net investment
income (.876) (.877) (.92) (.96) (.98)
Net asset value, end of year $ 9.29 $ 8.71 $ 9.95 $ 9.43 $ 9.02
Total Return* 17.50% (3.87)% 15.97% 15.99% 38.34%
Ratios/Supplemental Data:
Net assets, end of year (000) $ 1,339,508 $987,613 $969,736 $734,017 $594,008
Ratios to Average Net Assets:
Expenses .82% .88% .88% .84% .85%
Net investment income 9.41% 8.97% 9.17% 10.18% 11.96%
Portfolio turnover rate 134.90% 147.98% 159.79% 188.44% 208.49%
</TABLE>
**Total return does not consider
the effects of sales loads.
*See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies The Company is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The following is a summary of significant accounting policies
consistently followed by the Company. The policies are in conformity with
generally accepted accounting principles.
(a) Market value is determined as follows: Securities listed or admitted to
trading privileges on any national securities exchange are valued at the last
sales price on the principal securities exchange on which such securities are
traded, or, if there is no sale, at the mean between the last bid and asked
prices on such exchange, or, in the case of bonds and notes, in the over-the-
counter market if, in the judgment of the Company's officers, that market more
accurately reflects the market value of bonds and notes. Securities traded only
in the over-the-counter market are valued at the mean between the bid and asked
prices, except that securities admitted to trading on the NASDAQ National Market
System are valued at the last sales price if it is determined that such price
more accurately reflects the value of such securities. Securities for which
market quotations are not available are valued at fair value under procedures
approved by the Board of Directors; such procedures require the use of
estimates.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income in taxable distributions. Therefore, no federal income tax
provision is required.
(c) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Interest income is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on the ex-
dividend date. The Company has elected not to amortize the premiums on U.S.
Government bonds, which is consistent with the treatment for federal income tax
purposes.
(d) A portion of the proceeds from sales and costs of repurchases of capital
shares, equivalent to the amount of distributable net investment income on
the date of the transaction, is credited or charged to undistributed income.
Undistributed net investment income per share thus is unaffected by sales or
repurchases of shares.
2. Investment Grades
Investment-grade corporate bonds consist of securities rated within one of the
four highest ratings determined either by Moody's Investors Service, Inc. or
Standard & Poor's Corporation. Lower rated straight debt consists of securities
rated lower than the four highest ratings or that have no rating.
3. Distributions
Dividends from net investment income are declared quarterly and paid monthly.
Taxable net realized gains from security transactions, if any, are usually
declared in December of the current year or January of the succeeding year. At
December 31, 1995, accumulated net realized loss for financial reporting
purposes, which is substantially the same as for federal income tax purposes,
aggregated $118,884,881.
The Company had a capital loss carryforward as of December 31, 1995
of approximately $119,000,000 of which $20,000,000 expires in 1996, $5,000,000
expires in 1997, $28,000,000 expires in 1998, $17,000,000 expires in 1999 and
$49,000,000 in 2003. Accordingly, no capital gain distribution is expected to be
paid to shareholders until net gains have been realized in excess of such
amounts.
Income and capital gains distributions are determined in accordance with income
tax regulations which may differ from methods used to determine the
corresponding income and capital gains amounts in accordance with generally
accepted accounting principles. These differences are primarily caused by
differences in the timing of recognition of certain components of income,
expense or capital gain. Where such differences are permanent in nature, they
are reclassified in the Sources of Net Assets based upon their
12
<PAGE>
ultimate characterization for federal income tax purposes. Any such
reclassifications will have no effect on net assets, results of operations or
net asset value of the Fund.
4. Capital Paid In
At December 31, 1995, capital paid in aggregated $1,425,832,445.
5. Purchases and Sales of Securities
Purchases and sales of investment securities (other than U.S. Government
obligations and short-term investments) aggregated $1,657,500,466 and
$1,394,388,187, respectively. Purchases and sales of short-term investments and
long-term U.S. Government obligations aggregated $413,876,061 and $332,846,730,
respectively. Security gains and losses are computed on the identified cost
basis. As of December 31, 1995, unrealized appreciation for federal income tax
purposes aggregated $3,230,300, of which $57,264,788 related to appreciated
securities and $54,034,488 related to depreciated securities. For federal income
tax purposes, the identified cost of investments owned at December 31, 1995 was
substantially the same as the cost for financial reporting purposes.
6. Management Fee and Other Transactions with Affiliates
Lord, Abbett & Co. received a management fee of $5,342,563 for which it supplied
investment management, research, statistical and advisory services and paid
officers' remuneration and certain other expenses of the Company. For the
services performed and expenses assumed by Lord, Abbett & Co., the Company paid
a fee based on average daily net assets at the following annual rates: 0.50% on
the first $500 million and 0.45% on the assets over $500 million. Lord, Abbett &
Co. also received $1,796,470 representing payment of commissions on sales of
capital stock of the Company after deducting $10,898,476 allowed to authorized
distributors as concessions. Certain of the Company's officers and directors
have an interest in Lord, Abbett & Co. The Company has a Rule 12b-1 Plan
providing for (a) the payment of a service fee to dealers at the annual rate of
.15% of the average daily net asset value of the Company's shares sold by
dealers prior to June 1, 1990 and .25% of the average daily net asset value of
such shares sold on or after that date and (b) a one-time 1% distribution fee,
at the time of sale, on such shares sold at net asset value of $1 million or
more.
7. Directors' Remuneration
The Directors of the Company associated with Lord, Abbett & Co. and all officers
of the Company receive no compensation from the Company for acting as such.
Outside Directors' fees, including attendance fees for board and committee
meetings, and outside Directors' retirement costs, are allocated among all funds
in the Lord Abbett group based on net assets of each fund. The direct
remuneration accrued during the period for outside Directors of the Company as a
group was $21,102 (exclusive of expenses), a portion of which has been deemed
invested in shares of the Company under a deferred compensation plan
contemplating future payment of the value of those shares. As of December 31,
1995, the aggregate amount in Directors' accounts maintained under the plan was
$272,652. Retirement costs accrued during the period ended December 31, 1995
amounted to $8,988.
This report to shareholders inaugurates a new procedure whereby a single copy of
the 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.
Copyright (C) 1996 by Lord Abbett Bond-Debenture Fund, Inc., 767 Fifth Avenue,
New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Bond-Debenture Fund, Inc., is to be distributed only if preceded or
accompanied by a current prospectus which includes information concerning the
Fund's investment objective and policies, sales charges and other matters. There
is no guarantee that the forecasts contained within this publication will come
to pass.
All rights reserved. Printed in the U.S.A.
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Bond-Debenture Fund, Inc.:
We have audited the accompanying statement of net assets of Lord Abbett Bond-
Debenture Fund, Inc. as of December 31, 1995, the related statements of
operations for the year then ended and of changes in net assets for each of the
years in the two-year period then ended, and the financial highlights
for each of the years in the five-year period then ended. These financial
statements and the financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1995 by correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett Bond-
Debenture Fund, Inc. at December 31, 1995, the results of its operations, the
changes in its net assets and the financial highlights for the above-stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
February 9, 1996
Our Management
Board of Directors
Ronald P. Lynch
Robert S. Dow
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*+
Thomas J. Neff*
* Outside Director
+ Audit Committee
Investment Manager and
Underwriter
Lord, Abbett & Co.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
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LABD-2-1295
The GM Building . 767 Fifth Avenue . New York, NY 10153-0203 (2/96)
