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. 42 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Post-Effective Amendment No. 23 [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, 1997 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
<PAGE>
LORD ABBETT BOND-DEBENTURE FUND, INC.
FORM N-1A
Cross Reference Sheet
Post-Effective Amendment No. 42
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
<PAGE>
LORD ABBETT
BOND-DEBENTURE FUND, INC.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
800-426-1130
Lord Abbett Bond-Debenture Fund, Inc. ("we" or the "Fund"), is a mutual fund
with three classes of shares. These classes, designated Class A, B and C shares,
provide investors with different investment options in purchasing shares of the
Fund. See "Purchases" for a description of these choices. We seek high current
income and the opportunity for capital appreciation to produce a high total
return. See "Investment Objective." In seeking this investment objective, the
Fund invests in lower-rated debt securities which entail greater risks than
investments in higher-rated debt securities. The former are referred to
colloquially as "junk bonds." Before investing, investors should carefully
consider these risks set forth under "How We Invest" and also that at least 20%
of our assets must be invested in any combination of investment grade debt
securities, U.S.
Government securities and cash equivalents. 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, 1997.
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 3
4 How We Invest 4
5 Purchases 6
6 Shareholder Services 13
7 Our Management 14
8 Dividends, Capital Gains
Distributions and Taxes 14
9 Redemptions 15
10 Performance 16
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 INVESTMENT OBJECTIVE
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
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
Shareholder Transaction Expenses(1)
(as a percentage of offering price)
Maximum Sales Load(2) on Purchases
(See "Purchases") 4.75% None None
Deferred Sales Load(2) (See "Purchases") None 5% if shares are redeemed 1% if shares
before 1st anniversary are redeemed
of purchase, declining before 1st anniversary
to 1% before 6th of purchase
anniversary and
eliminated on and
after 6th anniversary(3)
Annual Fund Operating Expenses(4)
(as a percentage of average net assets)
Management Fees (See "Our Management") 0.46% 0.46% 0.46%
12b-1 Fees (See "Purchases")(1)(2) 0.26% 1.00% 1.00%
Other Expenses (See "Our Management") 0.18% 0.18% 0.18%
Total Operating Expenses 0.90% 1.64% 1.64%
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.
Example: Assume an annual return of 5% and there is no change in the level of
expenses described above. For a $1,000 investment, with reinvestment of all
dividends and distributions, you would pay the following total expenses,
assuming redemption on the last day of each period indicated.
1 year 3 years 5 years 10 years
Class A shares $56 $75 $95 $153
Class B shares(3) $66 $82 $109 $174
Class C shares $27 $52 $89 $194
Example: You would pay the following expenses on the same investment, assuming
no redemption:
1 year 3 years 5 years 10 years
Class A shares $56 $75 $95 $153
Class B shares(3) $17 $52 $89 $174
Class C shares $17 $52 $89 $194
<FN>
(1)Although the Fund does not, with respect to the Class B and Class C shares,
charge a front-end sales charge, investors should be aware that long-term
shareholders may pay, under the Rule 12b-1 plans applicable to the Class B and
Class C shares of the Fund (both of which pay annual 0.25% service and 0.75%
distribution fees), more than the economic equivalent of the maximum front-end
sales charge as permitted by certain rules of the National Association of
Securities Dealers, Inc. Likewise, with respect to Class A shares, investors
should be aware that, over the long term, such maximum may be exceeded due to
the Rule 12b-1 plan applicable to Class A shares which permits the Fund to pay
up to 0.50% in total annual fees, half for service and the other half for
distribution. The 12b-1 fee for the Class A shares has been restated to reflect
current fees under the recently amended Class A 12b-1 plan.
(2)Sales "load" is referred to as sales "charge," "deferred sales load" is
referred to as "contingent deferred sales charge" (or "CDSC") and "12b-1 fees"
which consist of a "service fee" and a "distribution fee" are referred to by
either or both of these terms where appropriate with respect to Class A, Class B
and Class C shares throughout this Prospectus.
(3)Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
(4)The annual operating expenses shown in the summary have been restated from
December 31, 1996 fiscal year amounts to reflect current fees.
The foregoing is provided to give investors a better understanding of the
expenses that are incurred by an investment in the Fund.
</FN>
</TABLE>
<PAGE>
3 FINANCIAL HIGHLIGHTS
The following financial highlights have been audited by Deloitte & Touche llp,
independent accountants, whose report thereon is incorporated by reference into
the Statement of Additional Information and may be obtained upon request.
<TABLE>
<CAPTION>
<C>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER CLASS A SHARE+ OPERATING -------------------------------------------------------------------------------------
PERFORMANCE: 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $9.29 $8.71 $9.95 $9.43 $9.02 $7.36 $9.03 $9.59 $9.39 $10.29
INCOME FROM INVESTMENT OPERATIONS
Net investment income .81 .85 .84 .89 .95 .98 1.02 1.04 1.09 1.07
Net realized and unrealized
gain (loss) on securities .17 .606 (1.203) .55 .42 1.66 (1.65) (.56) .15 (.85)
TOTAL FROM INVESTMENT OPERATIONS .98 1.456 (.363) 1.44 1.37 2.64 (.63) .48 1.24 .22
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from net investment income (.86) (.876) (.877) (.92) (.96) (.98) (1.04) (1.04) (1.04) (1.12)
NET ASSET VALUE, END OF YEAR $9.41 $9.29 $8.71 $9.95 $9.43 $9.02 $7.36 $9.03 $9.59 $9.39
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN* 11.16% 17.50% (3.87)% 15.97% 15.99% 38.34% (7.57)% 5.06% 13.80% 1.88%
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.89% 0.82% 0.88% 0.88% 0.84% 0.85% 0.80% 0.59% 0.64% 0.65%
Net investment income 8.77% 9.41% 8.97% 9.17% 10.18% 11.96% 12.48% 10.97% 11.29% 10.49%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
CLASS B SHARES CLASS C SHARES
PER CLASS SHARE OPERATING AUGUST 1, 1996** TO JULY 15, 1996** TO
PERFORMANCE: DECEMBER 31, 1996 DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.13 $9.05
INCOME FROM INVESTMENT OPERATIONS
Net investment income .34 .35
Net realized and unrealized
gain on securities .26 .33
TOTAL FROM INVESTMENT OPERATIONS .60 .68
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from net investment income (.32) (.32)
NET ASSET VALUE, END OF PERIOD $9.41 $9.41
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN* 6.57%++ 7.86%++
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.70%++ 0.75%++
Net investment income 3.37%++ 3.72%++
</TABLE>
<TABLE>
YEAR ENDED DECEMBER 31,
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA FOR ALL CLASSES: 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year(000) $2,129,421 $1,339,508 $987,613 $969,736 $734,017 $594,008 $480,847 $643,953 $717,775 $733,198
Portfolio turnover rate 106.79% 134.90% 147.98% 159.79% 188.44% 208.49% 145.47% 123.77% 140.01% 176.37%
<FN>
* Total return does not consider the effects of front-end or contingent
deferred sales charges.
** Commencement of offering Class shares.
+ The Fund had only one class of shares prior to July 12, 1996. That class of
shares is now designated Class A shares.
++ Not annualized.
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.
Under normal circumstances, we invest at least 65% of our total assets in bonds
and/or debentures. 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 shorter-term debt securities whose prices
might not be affected as much by an increase in interest rates.
The following policies are subject to change by the Board of Directors 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 "investment
grade," i.e., 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 20% 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 35% 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
neither purchase securities for short-term trading, nor 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.
We may, but have no present intention to, invest in financial futures and
options on financial futures and commit more than 5% of our gross assets to the
lending of our portfolio securities.
We may not 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.
<PAGE>
We will not change our investment objective without shareholder approval.
RISK FACTORS. We may invest substantially in lower-rated bonds because they tend
to have 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 relatively insensitive 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 callable 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. If bonds are rated BB/Ba or
lower, they are described as "high-yield bonds" because of their generally
higher yields and are referred to colloquially as "junk bonds" because of their
greater risks. In selecting lower-rated bonds for 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. Some issuers may default as to principal and/or
interest payments subsequent to our 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: 23.98% AAA/Aaa, 2.66% AA/Aa, 3.24% A/A, 3.67% BBB/Baa, 13.32% BB/Ba,
45.66% B/B, 3.78% CCC/Caa, 0.18% D and 3.51% 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, 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
values may be significantly affected on days when shareholders do not have
access to the Fund.
PORTFOLIO TURNOVER. The portfolio turnover rate for the fiscal year ended
December 31, 1996 was 106.79%, compared to 134.90% for the prior fiscal year.
<PAGE>
5 PURCHASES
ALTERNATIVE SALES ARRANGEMENTS
CLASSES OF SHARES. The Fund offers investors three different classes of shares.
The different classes of shares represent investments in the same portfolio of
securities but are subject to different expenses and will likely have different
share prices. Investors should read this section carefully to determine which
class represents the best investment option for their particular situation.
CLASS A SHARES. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" defined under
"Class A Share Net Asset Value Purchases" below). If you purchase Class A shares
as part of an investment of at least $1 million (or for Retirement Plans with at
least 100 eligible employees or under a "special retirement wrap program") in
shares of one or more Lord Abbett-sponsored funds, you will not pay an initial
sales charge, but if you redeem any of those shares within 24 months after the
month in which you buy them, you may pay to the Fund a contingent deferred sales
charge ("CDSC") of 1% except for redemptions under a "special retirement wrap
program." Class A shares are subject to service and distribution fees that are
currently estimated to total annually approximately 0.26 of 1% of the annual net
asset value of the Class A shares. The initial sales charge rates, the CDSC and
the Rule 12b-1 plan applicable to the Class A shares are described under
"General" below.
CLASS B SHARES. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC ("Lord
Abbett Distributor"). That CDSC varies depending on how long you own shares.
Class B shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class B shares. The CDSC and the Rule
12b-1 plan applicable to the Class B shares are described under "General" below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described under "General" below.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Fund. We used the sales charge rates that apply
to Class A, Class B and Class C shares, and considered the effect of the higher
distribution fees on Class B and Class C expenses (which will affect your
investment return). Of course, the actual performance of your investment cannot
be predicted and will vary, based on the Fund's actual investment returns, the
operating expenses borne by each class of shares, and the class of shares you
purchase. The factors briefly discussed below are not intended to be investment
advice, guidelines or recommendations, because each investor's financial
considerations are different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will purchase only one
class of shares and not a combination of shares of different classes.
<PAGE>
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. For
example, over time, the reduced sales charges available for larger purchases of
Class A shares may offset the effect of paying an initial sales charge on your
investment, compared to the effect over time of higher class-specific expenses
on Class B or Class C shares for which no initial sales charge is paid. Because
of the effect of class-based expenses, your choice should also depend on how
much you plan to invest.
Investing for the Short Term. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. This is because of the effect of the Class B CDSC if you redeem before
the sixth anniversary of your purchase, as well as the effect of the Class B
distribution fee on the investment return for that class in the short term.
Class C shares might be the appropriate choice (especially for investments of
less than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them for one
year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C shares. If you are investing $500,000 or more, Class A shares may become
more desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more, or for Retirement Plans with
at least 100 eligible employees or for investments pursuant to a special
retirement wrap program, in most cases Class A shares will be the most
advantageous choice, no matter how long you intend to hold your shares. For that
reason, Lord Abbett Distributor normally will not accept purchase orders (i) for
Class B shares of $500,000 or more and for Class C shares of $1,000,000 or more
from a single investor or (ii) for Class B or C shares (a) from Retirement Plans
with at least 100 eligible employees or (b) from special retirement wrap
programs.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option if you plan to invest less than $100,000. If
you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's rights of accumulation.
Of course, these examples are based on approximations of the effect of current
sales charges and expenses on a hypothetical investment over time, and should
not be relied on as rigid guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" for more information
about the 12% annual waiver of the CDSC with respect to Class B shares. You
should carefully review how you plan to use your investment account before
deciding which class of shares you buy. For example, the dividends payable to
Class B and Class C shareholders will be reduced by the expenses borne solely by
each of these classes, such as the higher distribution fee to which Class B and
Class C shares are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled to receive compensation for selling Fund shares
may receive different compensation for selling one class than for selling
another class. As discussed in more detail below, such compensation is primarily
paid at the time of sale in the case of Class A and B shares and is paid over
time, so long as shares remain outstanding, in the case of Class C shares. It is
important that investors understand that the primary purpose of the CDSC for the
Class B shares and the
<PAGE>
distribution fee for Class B and Class C shares is the same as the purpose of
the front-end sales charge on sales of Class A shares: to compensate brokers and
other persons selling such shares. The CDSC, if payable, supplements the Class B
distribution fee and reduces the Class C distribution fee expenses for the Fund
and Class C shareholders.
GENERAL
How Much Must You Invest? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor, 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 minimum) and Individual Retirement
Accounts ($250 minimum). For Retirement Plans there is no minimum initial
investment required. See "Shareholder Services." 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 Distributor
reserves the right to reject any order.
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.
Buying Shares Through Your Dealer. 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 Distributor 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 Distributor 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 Distributor. A business day is a day on
which the NYSE is open for trading.
Lord Abbett Distributor 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 Distributor may,
from time to time, implement promotions under which Lord Abbett Distributor 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
Distributor'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. 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.
BUYING CLASS A SHARES. The offering price of Class A shares is based on the
per-share net asset value next computed after your order is accepted plus a
sales charge as follows.
Sales Charge as a Dealer's
Percentage of: Concession
as a To Compute
Net Percentage Offering
Offering Amount of Offering Price, Divide
Size of Investment Price Invested Price NAV by
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
+Authorized institutions receive concessions on purchases made by a retirement
plan, pursuant to a special retirement wrap program or by another qualified
purchaser within a 12-month period (beginning with the first net asset value
purchase) as follows: 1.00% on purchases of $5 million, 0.55% of the next $5
million, 0.50% of the next $40 million and 0.25% on purchases over $50
million. See "Class A Rule 12b-1 Plan" below.
<PAGE>
CLASS A SHARE VOLUME DISCOUNTS. This section describes several ways to qualify
for a lower sales charge when purchasing Class A shares if you inform Lord
Abbett Distributor or the Fund that you are eligible at the time of purchase.
(1) Any purchaser (as described below) may aggregate a Class
A share purchase in the Fund with any share 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 Lord Abbett Research Fund not offered to the
general public ("LARF") and Lord Abbett U.S. Government Securities Money Market
Fund ("GSMMF"), except for holdings in GSMMF which are attributable to any
shares exchanged from a Lord Abbett-sponsored fund.) (2) A purchaser may sign a
non-binding 13-month statement of intention to invest $100,000 or more in any
shares of the Fund or in any of the above eligible funds. If the intended
purchases are completed during the period, the total amount of your intended
purchases of any shares will determine the reduced sales charge rate for the
Class A shares purchased during the period. If not completed, each Class A share
purchase will be at the sales charge for the aggregate of the actual share
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.
CLASS A SHARE NET ASSET VALUE PURCHASES. Our Class A 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 Distributor 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 or Lord Abbett
Distributor 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 Class A shares
also may be purchased at net asset value (a) at $1 million or more; (b) with
dividends and distributions on Class A shares of other Lord Abbett-sponsored
funds, except for dividends and distributions on shares of LARF, LAEF and LASF;
(c) under the loan feature of the Lord Abbett-sponsored prototype 403(b) plan
for Class A 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 Distributor in accordance with certain standards approved by Lord
Abbett Distributor, providing specifically for the use of our Class A 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, Lord Abbett
Distributor or Lord Abbett-sponsored funds who consent to such purchase if such
persons provide services to Lord Abbett, Lord Abbett Distributor or such funds
on a continuing basis and are familiar with such fund; (f) through Retirement
Plans with at least 100 eligible employees; (g) 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
Distributor or Lord Abbett (other than a money market fund), if such redemptions
have occurred no more than 60 days prior to the purchase of our Class A 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 and (h) through a "special retirement wrap program" sponsored by an
authorized institution having one or more characteristics distinguishing it, in
the opinion of Lord Abbett Distributor from a mutual fund wrap fee program. Such
characteristics include, among other things, the fact that an authorized
institution does not charge its clients any fee of a consulting or advisory
nature that is economically equivalent to the distribution fee under a Class A
12b-1 Plan and the fact that the program relates to participant-directed
Retirement Plans. Purchasers should consider the impact, if any,
<PAGE>
of contingent deferred sales charges in determining whether to redeem shares for
subsequent investment in our Class A shares pursuant to the purchase option in
(g) above. Lord Abbett Distributor may suspend or terminate the purchase option
in (g) above at any time. We plan to terminate the net asset value transfer
privilege in (g) on June 1, 1997.
CLASS ARULE 12B-1 PLAN. We have adopted a Class A share Rule 12b-1 Plan (the "A
Plan") which authorizes the payment of fees to authorized institutions (except
as to certain accounts for which tracking data is not available) in order to
provide additional incentives for them (a) to provide continuing information and
investment services to their Class A shareholder accounts and otherwise to
encourage those accounts to remain invested in the Fund and (b) to sell Class A
shares of the Fund. Under the A Plan, in order to save on the expense of
shareholders' meetings and to provide flexibility to the Board of Directors, the
Board, including a majority of the outside directors who are not "interested
persons" of the Fund as defined in the Investment Company Act of 1940, is
authorized to approve annual fee payments from our Class A assets of up to 0.50
of 1% of the average net of such assets consisting of distribution and service
fees, each at a maximum annual rate not exceeding 0.25 of 1%, except that the
service fee may not exceed 0.15 of 1% in the case of shares sold or attributable
to shares sold prior to June 1, 1990 (the "Fee Ceiling").
Under the A Plan, the Board has approved payments by the Fund to Lord Abbett
Distributor which uses or passes on to authorized institutions (1) an annual
service fee (payable quarterly) of .25% of the average daily net asset value of
the Class A shares serviced by authorized institutions and (2) a one-time
distribution fee of up to 1% (reduced according to the following schedule: 1% of
the first $5 million, .55% of the next $5 million, .50% of the next $40 million
and .25% over $50 million), payable at the time of sale on all Class A shares
sold during any 12-month period starting from the day of the first net asset
value sale (i) at the $1 million level by authorized institutions, including
sales qualifying at such level under the rights of accumulation and statement of
intention privileges; (ii) through Retirement Plans with at least 100 eligible
employees or (iii) constituting new sales pursuant to a special retirement wrap
program and excluding exchanges into the Fund under such a program. In addition,
the Board has approved for those authorized institutions which qualify, a
supplemental annual distribution fee equal to 0.10% of the average daily net
asset value of the Class A shares serviced by authorized institutions which have
a satisfactory program for the promotion of such shares comprising a significant
percentage of the Class A assets, with a lower than average redemption rate.
Institutions and persons permitted by law to receive such fees are "authorized
institutions."
Under the A Plan, Lord Abbett Distributor is permitted to use payments received
to provide continuing services to Class A shareholder accounts not serviced by
authorized institutions and, with Board approval, to finance any activity which
is primarily intended to result in the sale of Class A shares. Any such payments
are subject to the Fee Ceiling. Any payments under that Plan not used by Lord
Abbett Distributor in this manner are passed on to authorized institutions.
Holders of Class A shares on which the 1% sales distribution fee has been paid
may be required to pay to the Fund on behalf of its Class A shares a CDSC of 1%
of the original cost or the then net asset value, whichever is less, of all
Class A 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. (Exceptions are made for: (i) redemptions by
Retirement Plans due to any benefit payment such as Plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants or the distribution of any excess contributions and (ii)
participant directed redemptions which continue as program investments in
another fund participating in a special retirement wrap program.) If the Class A
shares have been exchanged into another Lord Abbett-sponsored fund and are
thereafter redeemed out of the Lord Abbett family of funds on or before the end
of such twenty-fourth month, the charge will be collected for the Fund's Class A
shares by the other fund. The Fund will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
<PAGE>
BUYING CLASS B SHARES. Class B shares are sold at net asset value per share
without an initial sales charge. However, if Class B shares are redeemed for
cash before the sixth anniversary of their purchase, a CDSC may be deducted from
the redemption proceeds. That sales charge will not apply to shares purchased by
the reinvestment of dividends or capital gains distributions. The charge will be
assessed on the lesser of the net asset value of the shares at the time of
redemption or the original purchase price. The Class B CDSC is paid to Lord
Abbett Distributor to compensate it for its services rendered in connection with
the distribution of Class B shares, including the payment and financing of sales
commissions. See "Class B Rule 12b-1 Plan" below.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held until the sixth anniversary of
their purchase or later, and (3) shares held the longest before the sixth
anniversary of their purchase.
The amount of the CDSC will depend on the number of years since you invested and
the dollar amount being redeemed, according to the following schedule.
Anniversary
of the Day on Contingent Deferred
Which the Purchase Sales Charge on
Order Was Accepted Redemptions
(As % of Amount
On Before Subject to Charge)
1st 5.0%
1st 2nd 4.0%
2nd 3rd 3.0%
3rd 4th 3.0%
4th 5th 2.0%
5th 6th 1.0%
on or after the None
6th anniversary
In the table, an "anniversary" is the 365th day subsequent to a purchase or a
prior anniversary. All purchases are considered to have been made on the
business day the purchase was made. See "Buying Shares Through Your Dealer"
above.
If Class B shares are exchanged into the same class of another Lord
Abbett-sponsored fund and the new shares are subsequently redeemed for cash
before the sixth anniversary of the original purchase, the CDSC will be payable
on the new shares on the basis of the time elapsed from the original purchase.
The Fund will collect such a charge for other Lord Abbett-sponsored funds in a
similar situation.
WAIVER FO CLASS B SALES CHARGES . The Class B CDSC will not be applied to shares
purchased in certain types of transactions nor will it apply to shares redeemed
in certain circumstances as described below.
The Class B CDSC will be waived for redemptions of shares (i) in connection with
the Systematic Withdrawal Plan and Div-Move services, as described in more
detail under "Shareholder Services" below; (ii) by Retirement Plans due to any
benefit payment such as Plan loans, hardship withdrawals, death, retirement or
separation from service with respect to plan participants or the distribution of
any excess contributions; (iii) in connection with mandatory distributions under
403(b) plans and individual retirement accounts; and (iv) in connection with the
death of the shareholder.
CLASS B RULE 12B-1 PLAN . The Fund has adopted a Class B share Rule 12b-1 Plan
(the "B Plan") under which the Fund periodically pays Lord Abbett Distributor
(i) an annual service fee of 0.25 of 1% of the average daily net asset value of
the Class B shares and (ii) an annual distribution fee of 0.75 of 1% of the
average daily net asset value of the Class B shares that are outstanding for
less than 8 years. Lord Abbett Distributor uses the service fee to compensate
authorized institutions (except as to certain accounts for which tracking data
is not available) for providing personal services for accounts that hold Class B
shares. Those services are similar to those provided under the A Plan, described
above.
Lord Abbett Distributor pays an up-front payment to authorized institutions
totalling 4%, consisting of 0.25% for service and 3.75% for a sales commission
as described below.
<PAGE>
Lord Abbett Distributor pays the 0.25% service fee to authorized institutions in
advance for the first year after Class B shares have been sold by the authorized
institutions. After the shares have been held for a year, Lord Abbett
Distributor pays the service fee on a quarterly basis. Lord Abbett Distributor
is entitled to retain such service fee payable under the B Plan with respect to
accounts for which there is no authorized institution of record or for which
such authorized institution did not qualify. Although not obligated to do so,
Lord Abbett Distributor may waive receipt from the Fund of part or all of the
service fee payments.
The 0.75% annual distribution fee is paid to Lord Abbett Distributor to
compensate it for its services rendered in connection with the distribution of
Class B shares, including the payment and financing of sales commissions.
Although Class B shares are sold without a front-end sales charge, Lord Abbett
Distributor pays authorized institutions responsible for sales of Class B shares
a sales commission of 3.75% of the purchase price. This payment is made at the
time of sale from Lord Abbett Distributor's own resources. Lord Abbett has made
arrangements to finance these commission payments, which arrangements include
non-recourse assignments by Lord Abbett Distributor to the financing party of
such distribution and CDSC payments concerning Class B shares.
The distribution fee and CDSC payments described above allow investors to buy
Class B shares without a front-end sales charge while allowing Lord Abbett
Distributor to compensate authorized institutions that sell Class B shares. The
CDSC is intended to supplement Lord Abbett Distributor's reimbursement for the
commission payments it has made with respect to Class B shares and its related
distribution and financing costs. The distribution fee payments are at a fixed
rate and the CDSC payments are of a nature that, during any year, both forms of
payment may not be sufficient to reimburse Lord Abbett Distributor for its
actual expenses. The Fund is not liable for any expenses incurred by Lord Abbett
Distributor in excess of (i) the amount of such distribution fee payments to be
received by Lord Abbett Distributor and (ii) unreimbursed distribution expenses
of Lord Abbett Distributor incurred in a prior plan year, subject to the right
of the Board of Directors or shareholders to terminate the B Plan. Over the long
term, the expenses incurred by Lord Abbett Distributor are likely to be greater
than such distribution fee and CDSC payments. Nevertheless, there exists a
possibility that for a short-term period Lord Abbett Distributor may not have
sufficient expenses to warrant reimbursement by receipt of such distribution fee
payments. Although Lord Abbett Distributor does not intend to make a profit
under the B Plan, the B Plan is considered a compensation plan (i.e.,
distribution fees are paid regardless of expenses incurred) in order to avoid
the possibility of Lord Abbett Distributor not being able to receive
distribution fees because of a temporary timing difference between its incurring
expenses and receipt of such distribution fees.
ATOMATIC CONVERSION OF CLASS B SHARES. On the eighth anniversary of your
purchase of Class B shares, those shares will automatically convert to Class A
shares. This conversion relieves Class B shareholders of the higher annual
distribution fee that applies to Class B shares under the Class B Rule 12b-1
Plan. The conversion is based on the relative net asset values of the two
classes, and no sales charge or other charge is imposed. When Class B shares
convert, any other Class B shares that were acquired by the reinvestment of
dividends and distributions will also convert to Class A shares on a pro rata
basis. The conversion feature is subject to the continued availability of an
opinion of counsel or a tax ruling described in "Purchases, Redemptions and
Shareholder Services" in the Statement of Additional Information.
BUYING CLASS C SHARES. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed for
cash before the first anniversary of their purchase, a CDSC of 1% will be
deducted from the redemption proceeds. That reimbursement charge will not apply
to shares purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net asset value
of the shares at the time of redemption or the original purchase price. The
Class C CDSC is paid to the Fund to reimburse it, in whole or in part, for the
service and distribution fee payments made by the Fund at the time such shares
were sold, as described below.
<PAGE>
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held for one year or more and (3) shares
held the longest before the first anniversary of their purchase. If Class C
shares are exchanged into the same class of another Lord Abbett-sponsored fund
and subsequently redeemed before the first anniversary of their original
purchase, the charge will be collected by the other fund on behalf of this
Fund's Class C shares. The Fund will collect such a charge for other Lord
Abbett-sponsored funds in a similar situation.
CLASS C 12B-1 PLAN . The Fund has adopted a Class C share Rule 12b-1 Plan (the
"C Plan") under which (except as to certain accounts for which tracking data is
not available) the Fund pays authorized institutions through Lord Abbett
Distributor (1) a service fee and a distribution fee, at the time shares are
sold, not to exceed 0.25 and 0.75 of 1%, respectively, of the net asset value of
such shares and (2) at each quarter-end after the first anniversary of the sale
of shares, fees for services and distribution at annual rates not to exceed 0.25
and 0.75 of 1% respectively, of the average annual net asset value of such
shares outstanding (payments with respect to shares not outstanding during the
full quarter to be prorated). These service and distribution fees are for
purposes similar to those mentioned above with respect to the A Plan. Sales in
clause (1) exclude shares issued for reinvested dividends and distributions and
shares outstanding in clause (2) include shares issued for reinvested dividends
and distributions after the first anniversary of their issuance.
6 SHAREHOLDER SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege: Shares of any class may be exchanged without a
service charge: (a) for shares of the same class of any other Lord
Abbett-sponsored fund except for (i) LAEF, LASF and LARF 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 and (b) for shares of any
authorized institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus account and other criteria (together,
"Eligible Funds").
You or your representative with proper identification can instruct the Fund to
exchange uncertificated shares of a class (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 class 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.
Systematic Withdrawal Plan ("SWP"): 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. With respect to Class B shares,
the CDSC will be waived on redemptions of up to 12% per year of the current net
asset value of your account at the time your SWP is established. For Class B
shares (over 12% per year) and C shares, redemption proceeds due to a SWP will
be derived from the following sources in the order listed: (1) shares acquired
by reinvestment of dividends and capital gains, (2) shares held for six years or
more (Class B) or one year or more (Class C); and (3) shares held the longest
before the sixth anniversary of their purchase (Class B) or before the first
anniversary of their purchase (Class C). For Class B share redemptions over 12%
per year, the CDSC will apply to the entire redemption. Therefore, please
contact the Fund for assistance in minimizing the CDSC in this situation.
Shareholders should be careful in establishing a SWP, especially to the extent
that such a withdrawal exceeds the annual total return for a class, in which
case, the shareholder's original principal will be invaded and, over time, may
be depleted.
<PAGE>
Div-Move: You can invest the dividends paid on your account ($50 minimum
investment) into an existing account within the same class 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. Such dividends are not subject to a CDSC. You should
read the prospectus of any 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 retirement plan documents
including 401(k) plans and custodial agreements for IRAs (Individual Retirement
Accounts including SIMPLE IRAs and Simplified Employee Pensions), 403(b) plans
and pension and profit-sharing plans.
Householding: A single copy of an annual or semi-annual report will be 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 with the advice of Lord Abbett. We employ
Lord Abbett as investment manager pursuant to a Management Agreement. Lord
Abbett has been an investment manager for over 67 years and currently manages
approximately $22 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 twelve 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, and has been involved with the Fund's management since
1987. Mr. Towle has been with Lord Abbett nine 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, 1996, the fee paid to Lord Abbett
as a percentage of average daily net assets was at the annual rate of .46%. In
addition, we pay all expenses not expressly assumed by Lord Abbett. The ratios
of expenses, including management fee expenses, to average net assets for the
year ended December 31, 1996 was .89% (Class A), for the period August 1, 1996
through December 31, 1996 was .70% (Class B) and for the period July 15, 1996
through December 31, 1996 was .75% (Class C).
THE FUND. The Fund is a diversified open-end management investment company
incorporated under Maryland law on January 23, 1976. Its Class A, B and C shares
have equal rights as to voting, dividends, assets and liquidation except for
differences resulting from certain class-specific expenses.
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.
<PAGE>
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 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 has been proposed that 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 REDEMTIONS
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 class and registration, in any of the
Eligible Funds at the then applicable net asset value (i) without the payment of
a front-end sales charge or (ii) with reimbursement for the payment of any CDSC.
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
The Fund completed its fiscal year on December 31, 1996 with net asset values of
$9.41 per share for each of the Class A, B and C shares.
The last fiscal year proved to be a rewarding year for shareholders, despite the
volatility that characterized the U.S. interest-rate environment. In the first
half of the fiscal year, interest rates rose in response to economic growth
which was greater than the prevailing trend. Investors' concern decreased about
a possible move by the Federal Reserve Board to increase short-term rates to
slow economic growth as the year progressed.
The Fund benefited from its exposure to high-yield bonds, especially those bonds
issued by companies whose performance tends to parallel the economy. These
high-yield securities, many of which were purchased at the close of fiscal 1995
at less than face value, produced good price appreciation while paying a high
rate of interest. In addition, the Fund profited from its investments in
convertible bonds (which may be exchanged for the underlying shares of the
issuer's common stock) issued by companies in the energy, financial and
technology sectors. These bonds were selected based upon the Fund's
value-oriented criteria and provided strong returns, especially toward the end
of the fiscal year.
YIELD AND TOTAL RETURN. Yield and total return data may, from time to time, be
included in advertisements about the Fund. Each class of shares calculates its
"yield" by dividing the annualized net investment income per share on the
portfolio during a 30-day period by the maximum offering price on the last day
of the period. The yield of each class will differ because of the different
expenses (including actual 12b-1 fees) of each class of shares. The yield data
represents a hypothetical investment return on the portfolio, and does not
measure an investment return based on dividends actually paid to shareholders.
To show that return, a dividend distribution rate may be calculated. A dividend
distribution rate is calculated by dividing the dividends of a class derived
from net investment income during a stated period by the maximum offering price
on the last day of the period. The yield and dividend distribution rate for
Class A shares reflect the deduction of the maximum initial sales charge, but
may also be shown based on the Fund's net asset value per share. Yields for
Class B and Class C shares do not reflect the deduction of the CDSC.
"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. When total return is quoted for Class A shares,
it includes the payment of the maximum initial sales charge. When total return
is shown for Class B and Class C shares, it reflects the effect of the
applicable CDSC. Total return also may be presented for other periods or based
on investments at reduced sales charge levels or net asset value. Any quotation
of total return not reflecting the maximum sales charge (front-end, level, or
back-end) 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
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 value 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.
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 change 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.
<PAGE>
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 value 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.
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.
The performance of the Class A shares which is shown in the comparison below
will be greater than or less than that shown below for Class B and Class C
shares based on the differences in sales charges and fees paid by shareholders
investing in the different classes.
Comparison of change in value of a $10,000 investment in Class A shares of the
Fund, assuming reinvestment of all dividends and distributions, with the
unmanaged Salomon Brothers Broad Investment High-Grade, First Boston High-Yield
and Value Line Convertible Indices.
The The
Fund at Fund at
Net Asset Maximum Offering SAL.BRD FOB VAL.LN
Date Value Price Index HY CVT.
12/31/86 $10000 $ 9528 $10000 $10000 $10000
12/31/87 10188 9706 10259 10654 9285
12/31/88 11594 11047 11079 12110 10616
12/31/89 12181 11605 12678 12158 11410
12/31/90 11259 10727 13831 11382 9909
12/31/91 15575 14839 16040 16359 12809
12/31/92 18066 17212 17259 19086 15136
12/31/93 20951 19962 18971 22694 18266
12/31/94 20141 19190 18428 22476 17550
12/31/95 23665 22548 21843 26382 22303
12/31/96 26307 25064 22634 29656 25924
AVERAGE ANNUAL TOTAL RETURN
FOR CLASS A SHARES (3)
1 YEAR 5 YEARS 10 YEARS
5.90% 9.98% 9.62%
AVERAGE ANNUAL TOTAL RETURN
FOR CLASS B SHARES (4)
LIFE OF CLASS
(8/1/96-12/31/96)
1.27%
AVERAGE ANNUAL TOTAL RETURN
FOR CLASS C SHARES (5)
LIFE OF CLASS
(7/15/96-12/31/96)
6.82%
(1) Data reflects the deduction of the maximum initial sales charge of 4.75%
applicable to Class A shares.
(2) Performance numbers for the unmanaged Salomon Brothers Broad Investment
High-Grade Index, First Boston High-Yield Index and Value Line Convertible
Indices 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 1996
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
initial sales charge of 4.75% applicable to Class A shares, with all dividends
and distributions reinvested for the periods shown ending December 31, 1996
using the SEC-required uniform method to compute such return.
(4) The Class B shares were first offered on August 1, 1996. Performance numbers
are not annualized and reflect the deduction of a 5% CDSC.
(5) The Class C shares were first offered on July 15, 1996. Performance numbers
are not annualized and reflect the deduction of a 1% CDSC.
<PAGE>
Investment Manager and Underwriter
Lord, Abbett & Co. and Lord Abbett Distributor LLC
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
<PAGE>
LORD ABBETT
PROSPECTUS 97
MAY 1, 1997
LORD ABBETT
BOND-DEBENTURE FUND
<PAGE>
LORD ABBETT May 1,1997
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 Distributor LLC
("Lord Abbett Distributor") 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, 1997.
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. The Fund has 1,000,000,000 shares of authorized capital stock
consisting of three classes (A, B and C), $0.001 par value. The Board of
Directors will allocate these authorized shares of capital stock among the
classes from time to time. All shares have equal noncumulative voting rights and
equal rights with respect to dividends, assets and liquidation, except for
certain class-specific expenses. They are fully paid and nonassessable when
issued and have no preemptive or conversion rights. Although no present plans
exist to do so, further series may be added in the future. The Investment
Company Act of 1940, as amended (the "Act"), requires that where more than one
series exists, each series must be preferred over all other series in respect of
assets specifically allocated to such series.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class affected by such
matter. Rule 18f-2 further provides that a class shall be deemed to be affected
by a matter unless the interests of each class in the matter are substantially
identical or the matter does not affect any interest of such class. However, the
Rule exempts the selection of independent public accountants, the approval of a
contract with a principal underwriter and the election of directors from its
separate voting requirements.
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 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 13
7. Taxes 14
8. Information About the Fund 15
9. Financial Statements 15
10. Appendix 16
1
<PAGE>
1.
Investment Policies
FUNDAMENTAL INVESTMENT RESTRICTIONS
We are subject to the following investment restrictions which cannot be changed
without approval of a majority of our outstanding shares. The Fund may not: (1)
borrow money, except that (i) the Fund may borrow from banks (as defined in the
Investment Company Act of 1940, as amended (the "Act")) in amounts up to 33 1/3%
of its total assets (including the amount borrowed), (ii) the Fund may borrow up
to an additional 5% of its total assets for temporary purposes, (iii) the Fund
may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (iv) the Fund may purchase
securities on margin to the extent permitted by applicable law; (2) pledge its
assets (other than to secure borrowings, or to the extent permitted by the
Fund's investment policies as permitted by applicable law); (3) engage in the
underwriting of securities, except pursuant to a merger or acquisition or to the
extent that, in connection with the disposition of its portfolio securities, it
may be deemed to be an underwriter under federal securities laws; (4) make loans
to other persons, except that the acquisition of bonds, debentures or other
corporate debt securities and investment in government obligations, commercial
paper, pass-through instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be subject to this
limitation, and except further that the Fund may lend its portfolio securities,
provided that the lending of portfolio securities may be made only in accordance
with applicable law; (5) buy or sell real estate (except that the Fund may
invest in securities directly or indirectly secured by real estate or interests
therein or issued by companies which invest in real estate or interests therein)
or commodities or commodity contracts (except to the extent the Fund may do so
in accordance with applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with futures
contracts); (6) with respect to 75% of the gross assets of the Fund, buy
securities of one issuer representing more than (i) 5% of the Fund's gross
assets, except securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities or (ii) 10% of the voting securities of such
issuer; (7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of the
U.S. Government, its agencies and instrumentalities); or (8) issue senior
securities to the extent such issuance would violate applicable law.
With respect to the restrictions mentioned herein, compliance therewith will not
be affected by changes in the market value of portfolio securities but will be
determined at the time of purchase or sale of such securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. In addition to the investment
restrictions above which cannot be changed without shareholder approval, we also
are subject to the following non-fundamental investment policies which may be
changed by the Board of Directors without shareholder approval. The Fund may
not: (1) borrow in excess of 5% of its 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; (2) make short sales of
securities or maintain a short position except to the extent permitted by
applicable law; (3) invest knowingly more than 15% of its net assets (at the
time of investment) in illiquid securities, except for securities qualifying for
resale under Rule 144A of the Securities Act of 1933, deemed to be liquid by the
Board of Directors; (4) invest in the securities of other investment companies
except as permitted by applicable law; (5) invest in securities of issuers
which, with their predecessors, have a record of less than three years'
continuous operations, if more than 5% of the Fund's total assets would be
invested in such securities (this restriction shall not apply to
mortgaged-backed securities, asset-backed securities or obligations issued or
guaranteed by the U. S. Government, its agencies or instrumentalities); (6) hold
securities of any issuer if more than 1/2 of 1% of the securities of such issuer
are owned beneficially by one or more officers or directors of the Fund or by
one or more partners or members of the Fund's underwriter or investment adviser
if these owners in the aggregate own beneficially more than 5% of the securities
of such issuer; (7) invest in warrants if, at the time of the acquisition, its
investment in warrants, valued at the lower of cost or market, would exceed 5%
of the Fund's total assets (included within such limitation, but not to exceed
2% of the Fund's total assets, are warrants which are not listed on the New York
or American Stock Exchange or a major foreign exchange); (8) invest in real
estate limited partnership interests or interests in oil, gas or other mineral
leases, or exploration or other development programs, except that the Fund may
invest in securities issued by companies that engage in oil, gas or other
mineral exploration or other development activities; (9) write, purchase or sell
puts, calls, straddles, spreads or combinations thereof, except to the extent
permitted in the Fund's prospectus and statement of additional information, as
they may be amended from time to time; (10) buy
2
<PAGE>
from or sell to any of its officers, directors, employees, or its investment
adviser or any of its officers, directors, partners or employees, any securities
other than shares of the Fund's common stock; or (11) invest more than 10% of
the market value of its gross assets at the time of investment in debt
securities which are in default as to interest or principal.
Although it has no current intention to do so, the Fund may invest in financial
futures and options on financial futures.
PORTFOLIO TURNOVER RATE. For the year ended December 31, 1996, our portfolio
turnover was 106.79% versus 134.90% for the prior year.
2.
Directors and Officers
The following directors are partners of Lord, Abbett & Co. ("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 twelve other Lord Abbett-sponsored funds.
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.
Robert S. Dow, age 51, Chairman and President
E. Wayne Nordberg, age 58, Vice President
The following outside directors are also directors or trustees of the twelve
other Lord Abbett-sponsored funds referred to above.
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 55.
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 66.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a
proxy tabulating firm. Age 71.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm. Formerly Chairman and Chief Executive Officer of Lincol
Snacks, Inc., manufacturer of branded snack foods (1992-1994).
Formerly President
3
<PAGE>
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 63.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 68.
Thomas J. Neff
Spencer Stuart & Associates
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 59.
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third column sets forth information with
respect to the equity-based benefits accrued for outside directors by the Lord
Abbett- sponsored funds. The fourth column sets forth information with respect
to the retirement plan for outside directors maintained by each of the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. 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>
<CAPTION>
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
(1) (2) (3) (4) (5)
<S> <C> <C> <C> <C>
Estimated Annual For Year Ended
Equity-Based Benefits Under December 31, 1996
Benefits Accrued Retirement Plans Total Compensation
Aggregate by the Fund and to be Paid by the Accrued by the Fund and
Compensation Twelve Other Lord Fund and Twelve Twelve Other Lord
Accrued by Abbett-sponsored Other Lord Abbett- Abbett-sponsored
NAME OF DIRECTOR the Funds1 Funds2 sponsored Funds2 Funds3
E. Thayer Bigelow $5,352 $11,563 None $48,200
Stewart S. Dixon $5,174 $22,283 None $46,700
John C. Jansing $5,174 $28,242 $50,000 $46,700
C. Alan MacDonald $5,352 $29,942 None $48,200
Hansel B. Millican, Jr. $5,500 $24,499 None $49,600
Thomas J. Neff $5,211 $15,990 None $46,900
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on the 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
amounts of the aggregate compensation payable by the Fund as of December 31,
1996, deemed invested in Fund shares, including dividends reinvested and changes
in net asset value applicable to such deemed investments, were: Mr. Bigelow,
$11,430; Mr. Dixon, $59,548; Mr. Jansing, $69,825; Mr. MacDonald, $35,057; Mr.
Millican, $70,484 and Mr. Neff, $70,381.
4
<PAGE>
2. Each Lord Abbett-sponsored fund has a retirement plan providing that outside
directors may receive annual retirement benefits for life equal to 100% of their
final annual retainers following retirement at or after age 72 with at least 10
years of service. Each 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. Such retirement plans,
and the deferred compensation plans referred to in footnote one, have been
amended recently to, among other things, enable outside directors to elect to
convert their prospective benefits under the retirement plans to equity-based
benefits under the deferred compensation plans (renamed the equity-based plans
and hereinafter referred to as such). Five of the six outside directors made
such an election. The amounts accrued in column 3 were accrued by the Lord
Abbett-sponsored funds during the fiscal year ended October 31, 1996 with
respect to the equity-based plans. These accruals were based on the plans as in
effect before the recent amendments and on the fees payable to outside directors
of the Fund during the year ended October 31, 1996. Under the recent amendments,
the annual retainer was increased to $50,000 and the annual retirement benefits
were increased from 80% to 100% of a director's final annual retainer. The
amount stated in column 4 would be payable annually under the retirement plans
as recently amended if that director was to retire at age 72 and the annual
retainer payable by the funds was the same as it is today.
3. This column shows aggregate compensation, including directors fees and
attendance fees for board and committee meetings, of a nature referred to in
footnote one, accrued by the Lord Abbett-sponsored funds during the year ended
December 31, 1996.
</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, Brown, Carper, Cutler, Ms. Foster, Messrs. Morris, Noelke, Nordberg and
Walsh are partners of Lord Abbett; the others are employees: Christopher Towle,
age 39, Executive Vice President, Kenneth B. Cutler, age 64, Vice President and
Secretary; Stephen I. Allen, age 43; Zane E. Brown, age 46; Daniel E. Carper,
age 45; Daria L. Foster, age 42; Robert G. Morris, age 52, Robert J. Noelke, age
40; E. Wayne Nordberg, age 58; Paul A. Hilstad, age 54 (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.); Thomas F. Konop, age 55; A. Edward Oberhaus, age
36; Victor W. Pizzolato, age 64; John J. Walsh, age 61, Vice Presidents; and
Keith F. O'Connor, age 41, Vice President and 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, 1996, 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 ten general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Zane E. Brown,
Daniel E. Carper, Kenneth B. Cutler, Robert S. Dow, Daria L. Foster, Robert G.
Morris, Robert J. Noelke, 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. This fee is allocated among Classes
A, B and C based on the classes' proportionate shares of such average daily net
assets. For the fiscal years ended December 31, 1996, 1995, and 1994, the
management fees paid to Lord Abbett amounted to $7,802,104, $5,342,563 and
$4,786,098, 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.
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The Bank of New York ("BNY"), 48 Wall Street, New York, New York, is the Fund's
custodian. In accordance with the requirements of Rule 17f-5, the Fund's
directors have approved arrangements permitting the Fund's foreign assets not
held by BNY or its foreign branches to be held by certain qualified foreign
banks and depositories.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent accountants of the Fund and must be approved at least annually
by our Board of Directors to continue in such capacity. Independent 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
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, the Fund may pay, as described below, a higher commission than
some brokers might charge on the same transaction. 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 obtaining best
execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market, proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of our brokers 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 the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information bases. 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.
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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
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, 1996, 1995 and 1994, we paid total
commissions to independent broker-dealers of $8,760,174, $6,717,922 and
$4,482,094, respectively.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions", respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. 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 Fund values its portfolio securities at market value as of the close of the
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.
The maximum offering price of Class A shares on December 31, 1996 was computed
as follows:
Class A
Net asset value per share (net assets divided
by shares outstanding)...............................................$9.41
Maximum offering price per share (net asset
value divided by .9525)..............................................$9.88
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The net asset value per share for the Class B and C shares is determined in the
same manner as for the Class A shares (net assets divided by shares
outstanding). Our Class B and C shares are offered at net asset value.
The Fund has entered into a distribution agreement with Lord Abbett Distributor
LLC, a New York limited liability company ("Lord Abbett Distributor") and
subsidiary of Lord Abbett under which Lord Abbett Distributor 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 Distributor's
judgment, a substantial distribution can be obtained by reasonable efforts.
For the last three fiscal years Lord Abbett, as the Fund's principal
underwriter, received net commissions after allowance of a portion of the sales
charge to independent dealers with respect to Class A shares as follows:
YEAR ENDED DECEMBER 31,
1996 1995 1994
Gross sales charge $14,739,450 $12,694,946 $7,717,386
Amount allowed to dealers $12,711,165 $10,898,476 $6,648,480
---------- ---------- ---------
Net commissions
received by Lord Abbett $2,028,285 $1,796,470 $1,068,906
========= ========= =========
CONVERSION OF CLASS B SHARES. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
CLASS A, B AND C RULE 12B-1 PLANS. As described in the Prospectus, the Fund has
adopted a Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for
each of the three Fund Classes: the "A Plan", the "B Plan" and the "C Plan",
respectively. In adopting each Plan and in approving its continuance, the Board
of Directors has concluded that there is a reasonable likelihood that each Plan
will benefit its respective Class and such Class' shareholders. The expected
benefits include greater sales and lower redemptions of Class shares, which
should allow each Class to maintain a consistent cash flow, and a higher quality
of service to shareholders by authorized institutions than would otherwise be
the case. During the last fiscal year, the Fund accrued or paid through Lord
Abbett to authorized institutions $4,077,353 under the A Plan, $213,870 under
the B Plan (For the period from August 1, 1996 through December 31, 1996) and
$1,073,700 under the C Plan (For the period from July 15, 1996 through December
31, 1996). Lord Abbett used all amounts received under each Plan for payments to
dealers for (i) providing continuous services to 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.
Each 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. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors,
including a majority 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. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable class and the
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approval of a majority of the directors, including a majority of the outside
directors. Each Plan may be terminated at any time by vote of a majority of the
outside directors or by vote of a majority of its Class's outstanding voting
securities.
CONTINGENT DEFERRED SALES CHARGES. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) will be assessed
on the lesser of the net asset value of the shares at the time of redemption or
the original purchase price and (iv) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares.
CLASS A SHARES. As stated in the Prospectus, subject to certain expceptions ,a
CDSC of 1% is imposed with respect to those Class A shares (or Class A shares of
another Lord Abbett-sponsored fund or series acquired through exchange of such
shares) on which the Fund has paid the one-time distribution fee of 1% 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.
CLASS B SHARES. As stated in the Prospectus, subject to certain exceptions, if
Class B shares (or Class B shares of another Lord Abbett-sponsored fund or
series acquired through exchange of such shares) are redeemed out of the Lord
Abbett-sponsored family of funds for cash before the sixth anniversary of their
purchase, a CDSC will be deducted from the redemption proceeds. The Class B CDSC
is paid to Lord Abbett Distributor to reimburse its expenses, in whole or in
part, for providing distribution-related service to the Fund in connection with
the sale of Class B shares.
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions
(As % of Amount Subject to Charge)
Before the 1st........................................................5.0%
On the 1st, before the 2nd............................................4.0%
On the 2nd, before the 3rd............................................3.0%
On the 3rd, before the 4th............................................3.0%
On the 4th, before the 5th............................................2.0%
On the 5th, before the 6th ...........................................1.0%
On or after the 6th anniversary........................................None
In the table, an "anniversary" is the 365th day subsequent to the acceptance of
a purchase order or a prior anniversary. All purchases are considered to have
been made on the business day on which the purchase order was accepted.
CLASS C SHARES. As stated in the Prospectus, subject to certain exceptions if
Class C shares are redeemed for cash before the first anniversary of their
purchase, the redeeming shareholder will be required to pay to the Fund on
behalf of Class C shares a CDSC of 1% of the lower of cost or the then net asset
value of Class C shares redeemed. If such shares are exchanged into the same
class of another Lord Abbett-sponsored fund and subsequently redeemed before the
first anniversary of their original purchase, the charge will be collected by
the other fund on behalf of this Fund's Class C shares.
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GENERAL. The percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage".
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue as investments in another fund participating in the
program. With respect to Class B shares, no CDSC is payable for redemptions (i)
in connection with Systematic Withdrawal Plan and Div-Move services as described
below under those headings, (ii) in connection with mandatory distribution under
403(b) plans and IRAs and (iii) in connection with death of the shareholder. In
the case of Class A and Class C shares, the CDSC 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 long-term shareholder account in the Fund. In
the case of Class B shares, the CDSC is received by Lord Abbett Distributor and
is intended to reimburse its expenses of providing distribution-related service
to the Fund (including recoupment of the commission payments made) in connection
with the sale of Class B shares before Lord Abbett Distributor has had an
opportunity to realize its anticipated reimbursement by having such a long-term
shareholder account subject to the B Plan distribution fee.
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds")) have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC 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 the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage 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 CDSC will 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 12b-1 fee and, in the case of Class B shares, Lord
Abbett Distributor paid no sales charge or service fee (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 the case of Class A shares); for six years or more (in the
case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares
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<PAGE>
not subject to the CDSC will be redeemed before shares subject to the CDSC and
(b) of the shares subject to a CDSC, those held the longest will be the first to
be redeemed.
EXCHANGES. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, 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 other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of 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 or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). 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 AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares, and series of Lord Abbett
Research Fund not offered to the general public ("LARF").
STATEMENT OF INTENTION. Under the terms of the Statement of Intention as
described in the Prospectus you may invest $100,000 or more over a 13-month
period in shares of a Lord Abbett-sponsored fund (other than shares of LAEF,
LASF, LARF, GSMMF and AMMF, unless holdings in GSMMF and AMMF are attributable
to shares exchanged from a Lord Abbett-sponsored fund offered with a front-end,
back-end or level sales charge). Shares 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 and reduced initial sales charge for
Class A shares. Class A 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 of Intention 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.
RIGHTS OF ACCUMULATION. 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, GSMMF, and AMMF unless holdings in GSMMF or AMMF
are attributable to shares exchanged from a Lord Abbett-sponsored fund offered
with a front-end, back-end or level sales charge) 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 for Class A shares.
NET ASSET VALUE PURCHASES OF CLASS A SHARES. As stated in the Prospectus, our
Class A 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.
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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 retired directors and employees and other family members thereof.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LARF, LAEF and LASF, (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 Distributor in accordance
with certain standards approved by Lord Abbett Distributor, 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 program"), (e)
by employees, partners and owners of unaffiliated consultants and advisors to
Lord Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent
to such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees, (g)
our Class A 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 and (h) through a
special retirement wrap program sponsored by an authorized institution having
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor, from a mutual fund wrap program. Such characteristics include,
among other things, the fact that an authorized institution does not charge its
clients any fee of a consulting or advisory nature that is economically
equivalent to the distribution fee under Class A 12b-1 Plan and the fact that
the program relates to participant-directed Retirement Plan. Purchasers should
consider the impact, if any, of contingent deferred sales charges in determining
whether to redeem shares for subsequent investment in our Class A shares
pursuant to the purchase option in (g) above. Lord Abbett may suspend, change or
terminate the purchase option in (g) above at any time. Shares are offered at
net asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett Distributor and/or the Fund has
business relationships. We plan to terminate this net asset value transfer
privilege in (g) on June 1, 1997.
REDEMPTIONS. 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 Distributor 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 months' 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.
DIV-MOVE. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class 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.
12
<PAGE>
INVEST-A-MATIC. 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 checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
SYSTEMATIC WITHDRAWAL PLANS. The Systematic Withdrawal Plan ("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. With respect to
Class B shares the CDSC will be waived on redemptions of up to 12% per year of
the current net asset value of your account at the time the SWP is established.
For Class B share redemptions over 12% per year, the CDSC will apply to the
entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation. With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. 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.
RETIREMENT PLANS. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms including 401(k) plans and custodial agreements for
IRAs (Individual Retirement Accounts, including SIMPLE IRAs and Simplified
Employee Pensions), 403(b) plans and qualified pension and profit-sharing plans.
The forms name Investors Fiduciary Trust Company as custodian and contain
specific information about the plans excluding 401(k) 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 for each
class 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 (as described in the next
paragraph) from the 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.
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
13
<PAGE>
Using the computation method described above, the Fund's average annual
compounded rates of total return for the last one, five and ten fiscal year(s)
ending on December 31, 1996 were as follows: 5.90%, 9.98% and 9.62% for the
Fund's Class A shares, respectively. The total return for Class B shares for the
period August 1, 1996 through December 31, 1996 was 1.30% (not annualized) and
for the Class C shares for the period July 15, 1996 through December 31, 1996
was 6.80% (not annualized).
Yield quotation for each Class 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 the maximum offering price per share of such Class on the last day of
the period. This is determined by finding the following quotient: take the
Class' 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 shares of such Class outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such Class 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. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Fund's net asset value per share. Yields for Class B and C
shares do not reflect the deduction of the CDSC. For the 30-day period ended
December 31, 1996, the yield for the Class A, B and C shares of the Fund were
7.18%, 6.75% and 6.78%, respectively.
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.
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
14
<PAGE>
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.
9.
Financial Statements
The financial statements for the fiscal year ended December 31, 1996 and the
report of Deloitte & Touche LLP, independent accountants, on such financial
statements contained in the 1996 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.
15
<PAGE>
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.
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.
16
<PAGE>
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.
17
<PAGE>
PART C OTHER INFORMATION
Item 24 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Part A - Financial Highlights for the ten years ended
December 31,1996.
Part B - Statement of Net Assets at December 31,1996.
Statement of Operations for the year ended
December 31, 1996. Statements of Changes in
Net Assets for the years ended December 31,
1996 and 1995. Supplementary Financial
Information for the five years ended
December 31, 1996.
(b) Exhibits -
99.B1 Articles of Amendment**
99.B6 Form of Distribution Agreement**
99.B7 Amended Equity-Based Plans for Non-
Interested Person Directors/Trustees of
Lord Abbett Funds*
99.B11 Consent of Deloitte & Touche*
99.B15a Forms of Rule 12b-1 Plans for Class A
and Class C shares**
99.B15b Form of Rule 12b-1 Plan for Class B
shares**
99.B18 Form of Plan entered into by Registrant
pursuant to Rule 18f-3**
Ex. 16 Computation of Performance and Yield*
Ex. 27 Financial Data Schedule*
Exhibits not mentioned above are not applicable.
* Filed herewith.
** Previously filed.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 26. NUMBER OF RECORD HOLDERS OF SECURITIES
As of April 4, 1997 (Class A) - 76,375
(Class B) - 5,267
(Class C) - 9,256
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.
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
-1-
<PAGE>
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 twelve other open-end
investment companies (of which it is principal underwriter for
thirteen) and as investment adviser to approximately 5,700 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 Mid-Cap Value Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Tax-Free Income 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
Robert S. Dow Chairman and President
Kenneth B. Cutler Vice President & Secretary
Stephen I. Allen Vice President
Zane E. Brown Vice President
Daniel E. Carper Vice President
Daria L. Foster Vice President
Robert G. Morris Vice President
Robert J. Noelke Vice President
E. Wayne Nordberg Vice President
John J. Walsh Vice President
(1) Each of the above has a principal business address:
767 Fifth Avenue, New York, NY 10153
-3-
<PAGE>
(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-
<PAGE>
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 1997.
LORD ABBETT BOND-DEBENTURE FUND, INC.
By /S/ ROBERT S. DOW
Robert S. Dow, 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, President
/s/ Robert S. Dow & Director April 29, 1997
/s/ Keith F. O'Connor Vice President & April 29, 1997
Treasurer
/s/ E. Wayne Nordberg Director April 29, 1997
/s/ E. Thayer Bigelow Director April 29, 1997
/s/ Stewart S. Dixon Director April 29, 1997
/s/ John C. Jansing Director April 29, 1997
/s/ C. Alan MacDonald Director April 29, 1997
/s/ Hansel B. Millican, Jr. Director April 29, 1997
/s/ Thomas J. Neff Director April 29, 1997
EQUITY-BASED PLANS FOR NON-INTERESTED
PERSON DIRECTORS AND TRUSTEES OF LORD ABBETT FUNDS
(As Amended and Restated as of September 1, 1996)
1. PURPOSE.
The purpose of these Equity-Based Plans for Non- Interested
Person Directors and Trustees (collectively, the "Equity-Based Plans" and
separately, an "Equity-Based Plan"), which were initially called the Deferred
Compensation Plan for Non-Interested Person Directors and Trustees of Lord
Abbett Funds, is to provide eligible directors and trustees of each investment
company referred to on Schedule I that has adopted an Equity-Based Plan and any
other investment company sponsored and managed by Lord, Abbett & Co. that adopts
an Equity-Based Plan (collectively, the "Companies" and separately, a "Company")
with the opportunity to defer the receipt of compensation earned by them as
directors and trustees in lieu of receiving payment of such compensation
currently and to give them to the extent of such deferred compensation and other
compensation a pecuniary interest in the investment performance of the
Companies. The Plans constitute a separate Plan of each Company.
<PAGE>
2. ELIGIBILITY.
Any member of the Board of Trustees (if a Company is a trust)
and any member of the Board of Directors (if a Company is a corporation) of a
Company (the "Board") who is not an "interested person" of such Company as such
term is defined in the Investment Company Act of 1940 (an "Independent Board
Member") shall be eligible to participate in the Plan of such Company. 3.
AMOUNTS OF DEFERRALS.
(a) ACCRUED PENSION PLAN DEFERRALS. The "Retirement Plan for
Non-Interested Person Directors and Trustees of Lord Abbett Funds" (the "Pension
Plan") has been amended, effective October 16, 1996, to provide that Independent
Board Members may elect to receive equity-based benefits under the Equity-Based
Plans in lieu of retirement benefits under the Pension Plan. Any Independent
Board Member who makes such an election by the close of business on November 29,
1996 shall not be entitled to retirement benefits under the Pension Plan, but
shall have his Account (as defined in section 4) for each Company increased, as
of November 29, 1996, through credit of an amount equal to the value of such
Independent Board Member's retirement benefits under such Company's Pension Plan
(prior to giving effect to
<PAGE>
such amendment) as accrued to such date to reflect the terms
of the Pension Plan.
(b) MANDATORY DEFERRALS. Each Independent Board Member who
makes the election referred to in the foregoing section 3(a) by the close of
business on November 29, 1996, and each Independent Board Member who becomes an
Independent Board Member after such date, shall defer receipt of such amount, if
any, of the compensation earned by such Independent Board Member for serving as
a member of the Board or as a member of any committee (or subcommittee of such
committee) of the Board of which such Independent Board Member from time to time
may be a member as may be specified with respect to such Independent Board
Member from time to time by resolution of the Independent Board Members.
(c) OPTIONAL DEFERRALS. In addition to the above deferrals an
Independent Board Member may elect to defer receipt of all or a specified
portion of any other compensation (including fees for attending meetings) earned
by such Independent Board Member by notice to the Companies. Expenses of
attending meetings of the Board, committees of the Board or subcommittees of
such committees may not be deferred.
<PAGE>
4. EQUITY-BASED ACCOUNTS.
A deferred compensation equity-based account (the "Account")
shall be established by each Company in the name of each Independent Board
Member. Any amounts credited to an Account pursuant to section 3(a) will be
credited as of the close of business on November 29, 1996. Any compensation
earned by an Independent Board Member during any year and deferred pursuant to
section 3(b) will be credited to such Independent Board Member's Account on a
quarterly basis on the last days of March, June, September and December of such
year. Any compensation deferred by an Independent Board Member pursuant to
section 3(c) will be credited to such Independent Board Member's Account on the
date such compensation otherwise would have been payable to such Independent
Board Member. 5. ACCOUNT INVESTMENT.
(a) TREATMENT OF CREDIT AMOUNTS. Any amounts credited at any
time to an Independent Board Member's Account established by a Company shall be
deemed invested in a number of shares, which shall be class A shares if such
Company has multiple classes of shares, of such Company's Common Stock equal to
the quotient of (i) the amount credited to the Independent Board Member's
Account divided
<PAGE>
by (ii) the Net Asset Value per share as of the date such amount is so credited.
The Net Asset Value per share shall be determined as set forth in the Company's
Articles of Incorporation. If such Company has more than one series, the amount
credited to the Independent Board Member's Account shall be allocated between or
among the series on the same basis as the compensation being deferred is charged
to the series (or, in the case of an amount credited pursuant to section 3(a),
on the same basis as the amount thereof was charged to the series).
(b) MERGERS, ETC. In the event that the Company shall pay a
stock dividend on, or split up, combine, reclassify or substitute other
securities by merger, consolidation or otherwise for its outstanding shares, the
number of shares credited to the Independent Board Member's Account shall be
adjusted to preserve rights substantially proportionate to the rights held
immediately prior to such event.
(c) DISTRIBUTIONS. On each payable date of a dividend or
capital gains distribution declared by the Board of a Company, the Account will
be credited with the number of full and fractional shares of the Company or
series that the shares of such Company or series deemed to be held in
<PAGE>
the Account would have purchased if such dividend or
distribution had been reinvested at the Net Asset Value on
the investment date established by the Board with respect to
such dividend or distribution.
6. MANNER OF ELECTING OPTIONAL DEFERRALS; PAYMENT
ELECTIONS.
(a) NOTICE. Each Independent Board Member who participates in
a Plan shall complete, sign and file with the Companies for which he is an
Independent Board Member a Notice of Election (the "Notice") in one or more of
the forms attached hereto as Exhibits A, B and C. The Notice shall include, as
appropriate:
(i) the amount, if any, of compensation to be deferred
under section 3(c);
(ii) the time or times of payment of any amounts credited and deferred under
sections 3(a) and (b) and of any amounts deferred under section 3(c);
(iii) the manner of payment of any amounts credited and deferred under
sections 3(a) and (b) and of any amounts deferred under section 3(c)
(I.E., in a lump sum or in a number of annual installments); and
<PAGE>
(iv) any beneficiary designated pursuant to section 9(b) and the manner of
payment to such designated beneficiary.
(b) DATE OF FIRST PAYOUT OF OPTIONAL DEFERRALS UNDER SECTION
3(C). With respect to amounts deferred pursuant to section 3(c), each
Independent Board Member shall have the right in the Notice to elect to defer
the receipt of such deferred compensation until any one of the following events,
which such Independent Board Member shall specify in the Notice:
(i) the first business day of January following the
year in which such Independent Board Member ceases
to be an Independent Board Member of the
Companies;
(ii) the date such Independent Board Member specifically chooses
(but not earlier than the January 1 of the second calendar
year following the calendar year in which such election is
made); or
(iii) the date on which some specific future event occurs which is
not within the Independent Board Member's control.
<PAGE>
(c) DATE OF FIRST PAYOUT OF AMOUNTS CREDITED AND DEFERRED
UNDER SECTION 3(A) AND (B). With respect to amounts credited to an Account and
deferred under sec tions 3(a) and (b), each Independent Board Member shall defer
the receipt of such amounts until any one of the following dates or events,
which such Independent Board Member shall specify in the Notice:
(i) the first business day of January following the
year in which such Independent Board Member ceases
to be an Independent Board Member of the
Companies;
(ii) the later of the first business day of January following the
year in which such Independent Board Member turns 65 and
January 1 of the second calendar year following the calendar
year in which such election is made;
(iii) the later of the first business day of January following the
year in which such Independent Board Member retires from his
or her principal occupation and January 1 of the second
calendar year following the calendar year in which such
election is made; and
<PAGE>
(iv) the first business day of a month not earlier than
the earliest of the dates referred to in (i), (ii)
and (iii) above.
(d) FAILURE TO DESIGNATE. If an Independent Board Member who
participates in a Plan fails to designate in his Notice a time or date as of
which payment of his Account (or any part of his Account) shall commence,
payment of such amount shall commence as of the date set forth in (b)(i) above
(unless the Independent Board Member files an amended Notice in compliance with
section 8(b) selecting a different distribution date). If an Independent Board
Member fails to designate in his Notice the manner of distribution to apply to
his Account (or any part of his Account), such Account shall be distributed in a
lump sum (unless the Independent Board Member files an amended Notice in
compliance with section 8(b) selecting a different method of distribution).
(e) DISSOLUTION, ETC. Deferrals under this Plan which are
deemed invested in shares of a Company (or series of a Company) shall be
distributed upon the dissolution, liquidation or winding up of the Company (or
other termination of the series), whether voluntary or involuntary; or the
voluntary sale, conveyance or transfer
<PAGE>
of all or substantially all of a Company's (or a series') assets (unless the
obligations of the Company or the series shall have been assumed by another
investment company or another series of an investment company); or the merger of
a Company into another trust or corporation or its consolidation with one or
more other trusts or corporations (unless the obligations of the Company are
assumed by such surviving entity and such surviving entity is another investment
company).
(f) HARDSHIP. Upon application by an Independent
Board Member and a determination by the Compensation and
Nominating Committees of the Boards that the Independent
Board Member has suffered a severe and unanticipated
financial hardship, the Administrator shall distribute to
the Independent Board Member, in a single lump sum, an
amount equal to the lesser of the amount needed by the
Independent Board Member to meet the hardship (pro-rata
among the Accounts), or the balance of the Independent Board
Member's Accounts.
7. EFFECTIVE DATE AND DURATION OF DEFERRAL ELECTIONS.
(a) ELECTION IRREVOCABLE. Except as provided in
sections 7(b) and 8(a), any election by an Independent Board
Member or nominee for election as an Independent Board
<PAGE>
Member to defer compensation pursuant to section 3(c) shall be irrevocable from
and after the date on which such person's Notice is filed with the Companies.
Elections to defer compensation pursuant to section 3(c) shall be effective to
defer an Independent Board Member's compensation as follows:
(i) As to any Independent Board Member in office on
the effective date of the Plans who files a Notice
no later than 60 days after such effective date,
the Notice shall be effective to defer any
compensation which may be deferred pursuant to
section 3(c) and is earned by such Independent
Board Member after the date of the filing of the
Notice;
(ii) As to any nominee for the office of trustee or
director who has not previously served as an
Independent Board Member and who files a Notice
prior to his election as an Independent Board
Member, such election to defer compensation
pursuant to section 3(c) shall be effective to
defer any compensation which may be deferred
pursuant to section 3(c) and is earned by such
<PAGE>
nominee after his election as an Independent Board
Member; and
(iii) As to any other Independent Board Member, the
election to defer compensation pursuant to sec
tion 3(c) shall be effective to defer any
compensation which may be deferred pursuant to
section 3(c) and is earned from and after January
1 of the calendar year next succeeding the year in
which the Notice is filed.
(b) CONTINUANCE OF NOTICES. Any election to
----------------------
defer compensation pursuant to section 3(c) made by an Independent Board Member
shall continue in effect unless and until the Company is notified in writing by
such Independent Board Member prior to the end of any calendar year that he
wishes to terminate such election or modify the amount of compensation deferred
pursuant to such election. Any such revocation or modification shall be
effective only with re spect to compensation earned after the calendar year in
which such amended Notice is filed with the Company. Upon receipt by the Company
from an Independent Board Member of such an amended Notice, the applicable
portion of compensation earned by such Independent Board Member from and after
January 1 of the calendar year succeeding the day
<PAGE>
on which such Notice was received shall be paid currently and no longer deferred
as provided in the Plan. However, any amounts in such Independent Board Member's
Account on such January 1 and any amount which the Independent Board Member
thereafter defers shall continue to be payable in accordance with the Notice (or
Notices) pursuant to which it was deferred except as provided in section 8(a).
(c) SUBSEQUENT NOTICE. An Independent Board
Member who has filed a Notice to terminate deferment of
compensation may thereafter again file a Notice to
participate pursuant to section 6 hereof effective for the
calendar year subsequent to the calendar year in which he
files the new Notice.
8. CHANGES IN FORM AND TIMING OF PAYMENT OF DEFERRED
AMOUNTS.
An Independent Board Member may elect to change the timing and
manner of any distribution election with respect to any or all amounts deferred
and credited with respect to the Independent Board Member under the Plans by
filing an amended Notice with the Companies
(a) prior to the calendar year in which the
Independent Board Member ceases to be an Independent
Board Member of the Companies, and
<PAGE>
(b) by a date such that at least one full
calendar year elapses between
(i) the date as of which such amended Notice is
filed and
(ii) each of
(A) the date as of which a distribution
would otherwise have commenced and
(B) the date as of which such distribution
will commence under such amended Notice.
No such amended Notice shall, however, provide for payment of an amount credited
under section 3(a) or 3(b) earlier than permitted in accordance with section
6(c), except as provided in section 9(b). 9. PAYMENT OF AMOUNTS CREDITED TO
ACCOUNTS.
(a) MANNER OF PAYMENT. An Account established by a Company for
an Independent Board Member will be paid in a lump sum or in installments, or
both, as specified in his Notice or amended Notice, and at the time or times
specified in the Notice or amended Notice. If installments are elected by an
Independent Board Member, such installments shall be paid in cash and the amount
of the first cash payment shall be a fraction of the then value of the portion
of such Account to be paid in installments, the numerator of
<PAGE>
which is one, and the denominator of which is the total number of installments.
The amount of each subsequent cash payment shall be a fraction of the then value
of such portion of such Account remaining after the prior payment, the numerator
of which is one and the denominator of which is the total number of installments
elected minus the number of installments previously paid. If a lump sum is
elected, payment shall be made in the full and fractional shares of the Company
(and of any series of such Company) in which the portion of such Independent
Board Member's Account to be paid in a lump sum is deemed invested.
(b) PAYMENT TO BENEFICIARY. In the event of an Independent
Board Member's death before he has received payment of all amounts in an Account
established by a Company for such Independent Board Member, the value of such
Account shall be paid to the beneficiary designated in such Independent Board
Member's Notice or, if no such beneficiary is designated, to such Independent
Board Member's estate, in accordance with the provisions of the Equity-Based
Plans. Any beneficiary so designated by an Independent Board Member may be
changed at any time by notice in writing from such Independent Board Member to
the Companies. Payments to a beneficiary shall be made in a lump sum or in
installments,
<PAGE>
or both, as specified in the Independent Board Member's Notice or amended
Notice. If a lump sum is elected, payment shall be made as soon as reasonably
possible in the full and fractional shares of the Company (and of any series of
such Company) in which such Account is deemed invested. If installments are
elected, such installments shall be paid in cash in amounts determined as
provided in section 9(a). If an Independent Board Member fails to designate in a
Notice or amended Notice on file with the Companies at the time of his death the
manner of distribution to his designated beneficiary, any distribution to such
beneficiary (or if no such beneficiary is designated, to his estate) shall be
made in a lump sum. 10. PRIOR DEFERRALS.
Notwithstanding anything else contained herein to the
contrary, if an Independent Board Member who is eligible to participate in a
Plan under section 2 hereof has deferred any compensation under any arrangement
in effect prior to the establishment of such Plan (i) such Independent Board
Member shall be deemed to be a participant in such Plan, (ii) the amount
credited for the benefit of such Independent Board Member under such arrangement
as of December 31, 1992 shall be credited to such Independent Board Member's
Account
<PAGE>
under such Plan as of January 1, 1993 and (iii) the provisions of such Plan
shall apply to such Independent Board Member and to the amount described in
subclause (ii) above as though such amount had been deferred under the terms of
such Plan. Elections under sections 6 or 8 by an Independent Board Member
subject to the provisions of this section 10 shall govern any amounts described
in this section. 11. STATEMENTS OF ACCOUNT.
Each Company will furnish each Independent Board Member with a
statement setting forth the value of such Independent Board Member's Account
under that Company's Plan and the value of each portion of the Account that
relates to amounts deferred under each subsection of section 3 as of the end of
each calendar year and all credits to and payments from such Account during such
year. Such statements will be furnished no later than 60 days after the end of
each calendar year. 12. RIGHTS IN ACCOUNTS.
Credits to Accounts and any shares purchased by the Companies
to help satisfy the contractual obligations with respect to such Accounts shall
remain part of the general assets of the Companies, shall at all times be the
<PAGE>
sole and absolute property of the Companies and shall in no event be deemed to
constitute a fund, trust or collateral security for the payment of the deferred
compensation to which Independent Board Members are entitled from such Accounts.
The right of any Independent Board Member or his designated beneficiary or
estate to receive future payment of deferred compensation under the provisions
of the Plans shall be an unsecured claim against general assets of the
Companies, if any, available at the time of payment.
13. NON-ASSIGNABILITY.
Neither any Independent Board Member, his designated
beneficiary nor his estate, nor any other person shall have the right to
encumber, pledge, sell, assign or transfer the right to receive payments under
the Plans, except by will or by the laws of descent and distribution. All such
payments and the right thereto are expressly declared to be non-assignable. 14.
ADMINISTRATION.
The Equity-Based Plans shall be administered by one or more
officers of the Companies appointed by the Compensation and Nominating
Committees of the Boards (the "Administrator"). All Notices and amendments shall
be filed with the Administrator and the Administrator shall be
<PAGE>
responsible for maintaining records of all Accounts and for
furnishing the annual statements of account provided for in
section 11. The Administrator shall also have the general
authority to interpret, construe and implement provisions of
the Plans. Any determination by such officer(s) shall be
binding on the Independent Board Member and shall be final
and conclusive.
15. AMENDMENT OR TERMINATION.
The Equity-Based Plans may at any time be amended,
modified or terminated by the Board. However, no amendment,
modification or termination shall adversely affect any
Independent Board Member's rights in respect of amounts
theretofore credited to his Accounts.
16. EFFECTIVE DATE.
The Equity-Based Plans shall be effective as of January 1,
1993, and any amendments hereto shall be effective on the date of adoption
thereof by the Boards or as otherwise provided in such amendments. The Deferred
Compensation Plans in the form previously adopted by the Companies or the
arrangements of the Companies for deferred compensation in effect prior to the
establishment of the Equity-Based Plans, as the case may be, shall remain in
effect until January 1, 1993.
<PAGE>
SCHEDULE I
Funds Adopting the Equity-Based Plans
for Non-Interested Person Directors
AND TRUSTEES OF LORD ABBETT FUNDS
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Mid-Cap Value Fund, Inc.
Lord Abbett Affiliated Fund, Inc.
Lord Abbett Equity Fund
Lord Abbett Series Fund, Inc.
Lord Abbett Global Fund, Inc.
Lord Abbett Securities Trust
Lord Abbett Investment Trust
Lord Abbett Research Fund, Inc.
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Tax-Free Income Fund, Inc.
Lord Abbett Tax-Free Income Trust
Lord Abbett U.S. Government Securities Money
Market Fund, Inc.
<PAGE>
[For use by new Board members or EXHIBIT A
by Board members who are not
currently deferring compensation]
INDEPENDENT BOARD MEMBERS OF
LORD, ABBETT & CO.-SPONSORED FUNDS
Notice of Election
UNDER THE EQUITY-BASED PLANS
Effective for compensation that I earn as an Independent Board Member
of each Lord Abbett-sponsored Fund in the future after I become an Independent
Board Member or after the calendar year in which this Notice of Election is
filed with the Companies if I am already an Independent Board Member, I hereby
elect under section 6(a) and, if I am not already an Independent Board Member,
section 6(c) of the Equity-Based Plans, as follows:
A. Optional deferrals pursuant to section
3(C) OF THE EQUITY-BASED PLANS.
1. AMOUNT DEFERRED:
(a) All compensation that I may defer
pursuant to section 3(c) of the Equity-
Based Plans
(b) $ per month (pro rated
among all Funds and series on the basis
of such compensation)
(c) Other:
2. PERIOD OF ELECTION:
<PAGE>
Subject to my further election to change or terminate this
election, my deferred election under item 1 shall continue:
(a) Until I cease to be an Independent Board
Member
(b) Until
[specify date or event]
3. TIME OF PAYMENT:
(a) The first business day of January
following the year in which I cease to
be an Independent Board Member
(b) The first business day of (not earlier than
January 1 of the second calendar year
following the calendar year in which this
Notice of Election is filed with the
Companies):
[specify month/year]
(c) The date of the following specific event
which is not within my control:
4. NUMBER OF PAYMENTS:
(a) Entire amount in a lump sum
(b) In annual installments
calculated as provided in section 9(a)
of the Equity-Based Plans
(c) With the consent of the Companies, as
follows:
B. Mandatory deferrals pursuant to section 3(b) of the
EQUITY-BASED PLANS (NEW INDEPENDENT BOARD MEMBERS ONLY).
<PAGE>
1. TIME OF PAYMENT:
(a) The first business day of January
following the year in which I cease
to be an Independent Board Member
(b) The later of the first business day of
January following the year in which I turn
65 and January of the second calendar year
following the calendar year in which this
Notice of Election is filed with the
Companies
(c) The later of the first business day of
January following the year in which I retire
from my principal occupation and January of
the second calendar year following the
calendar year in which this Notice of
Election is filed with the Companies
(d) The first business day of (which day
cannot be earlier than the earliest of
(a), (b) and (c) above):
[specify month/year]
2. NUMBER OF PAYMENTS:
(a) Entire amount in a lump sum
(b) In annual installments
calculated as provided in section 9(a)
of the Equity-Based Plans
(c) With the consent of the Companies, as
follows:
C. DESIGNATION OF BENEFICIARY:
<PAGE>
I hereby designate * as my beneficiary to receive all payments in the
event of my death before payments in full hereunder have been made. In
the event that the said beneficiary predeceases me, I hereby designate
* as beneficiary instead.
Benefits payable to my designated beneficiary shall be paid in
accordance with section 9(b) of the Equity- Based Plans, as follows:
(a) Entire amount in a lump sum
(b) In annual installments
calculated as provided in section 9(a) of the
Equity-Based Plans
(c) In the event I have elected pursuant to A4(b) or
B2(b) above to receive annual installments but such
installments have not been paid in full, such
installments shall be continued and paid to my
designated beneficiary
<PAGE>
(d) With the consent of the Companies, as
follows:
Name:
Date:
* If more than one beneficiary is to be designated, add a page listing the
beneficiaries and specify the percentage of each payment to be received by each
beneficiary.
<PAGE>
[For use on or prior to EXHIBIT B
November 29, 1996 by Board
members who wish to convert
their retirement benefit
to an equity-based benefit]
INDEPENDENT BOARD MEMBERS OF
LORD, ABBETT & CO.-SPONSORED FUNDS
Notice of Election to Receive Benefits
under the Equity-Based Plans in
LIEU OF BENEFITS UNDER THE RETIREMENT PLAN
1. Election to Receive Benefits
UNDER THE EQUITY-BASED PLANS:
____ I hereby elect (A) pursuant to section 3(a) of the
-
Equity-Based Plans and Article III of the
Retirement Plan to receive benefits under sections
3(a) and 3(b) of the Equity-Based Plans in lieu of
retirement benefits under the Retirement Plan and
(B) pursuant to sections 6(a) and 6(c) of the
-
Equity-Based Plans as follows with respect to such
benefits:
2. TIME OF PAYMENT:
(a) The first business day of January
following the year in which I cease to
be an Independent Board Member
(b) The later of the first business day of
January following the year in which I turn 65
and January 1, 1998
(c) The later of the first business day of
January following the year in which I retire
from my principal occupation and January 1,
1998
<PAGE>
____ (d) The first business day of (which day cannot
be earlier than the earliest of (a), (b) and
(c) above):
[specify month/year]
3. NUMBER OF PAYMENTS:
(a) Entire amount in a lump sum
(b) In annual installments
calculated as provided in section 9(a) of the
Equity-Based Plans
(c) With the consent of the Companies, as
follows:
4. DESIGNATION OF AND PAYMENTS TO BENEFICIARY:
I hereby designate * as my beneficiary to receive payments of the
benefits under Sections 3(a) and 3(b) of the Equity-Based Plans in the
event of my death before payments of such benefits have been made in
full. In the event that the said beneficiary predeceases me, I hereby
designate ___________________* as beneficiary instead.
Benefits payable to my designated beneficiary shall be paid in
accordance with section 9(b) of the Equity- Based Plans, as follows:
(a) Entire amount in a lump sum
(b) In annual installments
calculated as provided in section 9(a) of the
Equity-Based Plans
(c) In the event I have elected pursuant to 3(b) above to
receive annual installments but such installments
have not been paid in full, such
<PAGE>
installments shall be continued and paid to
my designated beneficiary
(d) With the consent of the Companies, as
follows:
Name:
Date: November , 1996
* If more than one beneficiary is to be designated, add a page listing the
beneficiaries and specify the percentage of each payment to be received by each
beneficiary.
<PAGE>
[For use by Board members EXHIBIT C
who wish to change a
prior election]
INDEPENDENT BOARD MEMBERS OF
LORD ABBETT & CO.-SPONSORED FUNDS
Amended Notice of Election
UNDER THE EQUITY-BASED PLANS
I hereby elect pursuant to section 7(b) or 7(c) and section 8 of the
Equity-Based Plans to change all prior Notices of Election I have filed with the
Companies as follows:
A. Optional deferrals pursuant to section
3(C) OF THE EQUITY-BASED PLANS.
1. AMOUNT DEFERRED:
Effective for compensation earned as an Independent Board
Member of each Lord Abbett- sponsored Fund after the calendar
year in which this Amended Notice of Election is filed with
the Companies, I hereby elect to defer under section 3(c) of
the Equity-Based Plans:
___ (a) All compensation that I may defer
pursuant to section 3(c) of the Equity-
Based Plans
___ (b) $_____________ per month (pro rated
among all Funds and series on the basis
of such compensation)
___ (c) Other: ____________________________
___ (d) None
<PAGE>
2. PERIOD OF ELECTION:
Subject to my further election to change or terminate this
election, my deferred election under item 1 shall continue:
___ (a) Until I cease to be an Independent
Board Member
___ (b) Until _____________________________
[specify date or event]
Effective for ALL amounts deferred under section 3(c) of the
Equity-Based Plans, including any amounts previously deferred,
I hereby elect as follows:
3. TIME OF PAYMENT:
___ (a) The first business day of January
following the year in which I cease
to be an Independent Board Member
___ (b) The first business day of (which
day cannot be earlier than the
January 1 of the second calendar
year following the calendar year in
which this Amended Notice of
Election is filed with the
Companies):________________________
[specify month/year]
___ (c) The date of the following specific event
which is not within my control:
4. NUMBER OF PAYMENTS:
___ (a) Entire amount in a lump sum
<PAGE>
___ (b) In _____ annual installments calculated
as provided in section 9(a) of the
Equity-Based Plans
___ (c) With the consent of the Companies,
as follows:_______________________
---------------
B. Mandatory deferrals pursuant to section
3(B) OF THE EQUITY-BASED PLANS.
1. TIME OF PAYMENT:
(a) The first business day of January
following the year in which I cease to
be an Independent Board Member
(b) The later of the first business day of
January following the year in which I turn
65 and January of the second calendar year
following the calendar year in which this
Amended Notice of Election is filed with the
Companies
(c) The later of the first business day of
January following the year in which I retire
from my principal occupation and January of
the second calendar year following the
calendar year in which this Amended Notice
of Election is filed with the Companies
(d) The first business day of (which day
cannot be earlier than the earliest of
(a), (b) and (c) above):
[specify month/year]
2. NUMBER OF PAYMENTS:
(a) Entire amount in a lump sum
<PAGE>
(b) In annual installments
calculated as provided in section 9(a)
of the Equity-Based Plans
(c) With the consent of the Companies, as
follows:
C. DESIGNATION OF BENEFICIARY:
I hereby revoke any prior beneficiary designation I may have made under
the Equity-Based Plans, and I hereby designate ___________________* as
my beneficiary to receive payments in the event of my death before
payments in full hereunder have been made. In the event that the said
beneficiary predeceases me, I hereby designate ____________________* as
beneficiary instead.
Benefits payable to my designated beneficiary shall be paid in
accordance with section 9(b) of the Equity- Based Plans, as follows:
(a) Entire amount in a lump sum
(b) In annual installments
calculated as provided in section 9(a) of the
Equity-Based Plans
(c) In the event I have elected pursuant to A4(b) or
B2(b) above to receive annual installments but such
installments have not been paid in full, such
installments shall be continued and paid to my
designated beneficiary
(d) With the consent of the Companies, as
follows:
I understand that this Amended Notice of Election shall be valid with
respect to changes in the timing or number of payments only if it is filed with
the Company (i) prior to
<PAGE>
the calendar year in which I cease to be an Independent Board Member, (ii) by a
date such that one full calendar year elapses between the filing of this Amended
Notice with the Companies and the date my distribution would otherwise have
commenced under my prior Notice of Election and (iii) by a date such that one
full calendar year elapses between the filing of this Amended Notice with the
Companies and the date my distribution will commence under this Amended Notice
of Election. My prior Notice of Election shall be effective to the extent this
Amended Notice of Election is invalid and to the extent no entry is made under
any of the above items.
--------------------------
Name:
Date: _____________________
* If more than one beneficiary is to be designated, add a page listing the
beneficiaries and specify the percentage of each payment to be received by each
beneficiary.
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Bond-Debenture Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment No. 42
to Registration Statement No. 2-38910 of our report dated February 7, 1997
appearing in the annual report to shareholders and to the reference to us under
the caption "Financial Highlights" in the Prospectus and to the references to us
under "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 30, 1997
EXHIBIT 16
LORD ABBETT BOND-DEBENTURE FUND, INC.
Post Effective Amendment No. 42 on Form N-1A
Class A
Results of a $1,000 investment reflecting the maximum sales charge and the
reinvestment of all distributions for:
Periods Ending December 31, 1996
One Five Ten
YEAR YEARS YEARS
$1,059 $1,609 $2,506
P = 1,000 P = 1,000 P = 1,000
N = 1 N = 5 N = 10
ERV = 1,059 ERV = 1,609 ERV = 2,506
T = Average annual total return
P(1+T)N = 1,059
1000(1+T)1 = 1,059 1000(1+T)5 = 1,609 1000(1+T)10 = 2,506
(1+T) = 1,059 (1+T)5 = 1,609 (1+T)10 = 2,506
----- ----- -----
1000 1000 1000
1+T = 1,059 (1+T) = (1,609).20 (1+T) = (2,506).10
----- ----- -----
1,000 (1000) (1000)
T = (1,059) - 1 T= (1,609).20-1 T (2,506).10-1
------- ------- -----
(1000) (1000) (1000)
T = 5.90% T = 9.98% T = 9.62%
<PAGE>
LORD ABBETT BOND-DEBENTURE FUND, INC.
Post Effective Amendment No. 42 on Form N-1A
Class B
Results of a $1,000 investment reflecting a 5% contingent deferred sales
charge and the reinvestment of all distributions for:
Periods Ending December 31, 1996
Life of Class
$1,013
P = 1,000
ERV = 1,013
T = Average annual total return
P(1+T)N = 1,013
1000(1+T)1 = 1,013
(1+T) = 1,013
-----
1000
1+T = 1,013
-----
1,000
T = (1,013) - 1
-------
(1000)
T = 1.30%
*The Fund's Class B shares commenced operations on 8/1/96
<PAGE>
LORD ABBETT BOND-DEBENTURE FUND, INC.
Post Effective Amendment No. 42 on Form N-1A
Class C
Results of a $1,000 investment reflecting a 1% contingent deferred sales
charge and the reinvestment of all distributions for:
Periods Ending December 31, 1996
Life of Class
$1,068
P = 1,000
ERV = 1,068
T = Average annual total return
P(1+T)N = 1,068
1000(1+T)1 = 1,068
(1+T) = 1,068
-----
1000
1+T = 1,068
-----
1,000
T = (1,068) - 1
-------
(1000)
T = 6.80%
*The Fund's Class C shares commenced operations on 7/15/96
<PAGE>
Calculation of yield appearing in the Statement of Additional Information for
the Class A shares of Lord Abbett Bond-Debenture Fund, Inc. Post-Effective
amendment No. 42 on Form N-1A.
YIELD FORMULA
For the 30 Days
Ended December 30, 1996
YIELD = 2[(a-b+1))6-1] = 7.18
cd
Where: a = Fund dividends and interest earned during the period in
the amount of $12,126,109
b = Fund expenses accrued for the period (net of reimbursements)
in the amount of $1,402,215
c = the average daily number of Fund shares outstanding
during the period that were entitled to receive dividends
were
184,104,145
d = the maximum offering price per Fund share on the last day of
the period was $9.88
<PAGE>
Calculation of yield appearing in the Statement of Additional Information for
the Class B shares of Lord Abbett Bond-Debenture Fund, Inc. Post-Effective
amendment No. 42 on Form N-1A.
YIELD FORMULA
For the 30 Days
Ended December 30, 1996
YIELD = 2[(a-b+1))6-1] = 6.75
cd
Where: a = Fund dividends and interest earned during the period in the
amount of $690,852
b = Fund expenses accrued for the period (net of reimbursements)
in the amount of $143,383
c = the average daily number of Fund shares outstanding
during the period that were entitled to receive dividends
were
10,494,505
d = the maximum offering price per Fund share on the last day
of the period was $9.46
<PAGE>
Calculation of yield appearing in the Statement of Additional Information for
the Class C shares of Lord Abbett Bond-Debenture Fund, Inc. Post-Effective
amendment No. 42 on Form N-1A.
YIELD FORMULA
For the 30 Days
Ended December 30, 1996
YIELD = 2[(a-b+1))6-1] = 6.78
cd
Where: a = Fund dividends and interest earned during the period in the
amount of $1,889,824
b = Fund expenses accrued for the period (net of reimbursements)
in the amount of $385,706
c = the average daily number of Fund shares outstanding
during the period that were entitled to receive dividends
were
28,692,174
d = the maximum offering price per Fund share on the last day of
theperiod was $9.41
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000060305
<NAME> LORD ABBETT BOND-DEBENTURE FUND, INC.
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</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000060305
<NAME> LORD ABBETT BOND-DEBENTURE FUND, INC.
<SERIES>
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<NAME> CLASS B
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<PERIOD-TYPE> 12-MOS
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<ACCUMULATED-NII-CURRENT> 215387
<OVERDISTRIBUTION-NII> 0
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<NET-ASSETS> 2129421396
<DIVIDEND-INCOME> 227810
<INTEREST-INCOME> 1881728
<OTHER-INCOME> 0
<EXPENSES-NET> 360737
<NET-INVESTMENT-INCOME> 1748801
<REALIZED-GAINS-CURRENT> 21344390
<APPREC-INCREASE-CURRENT> 19291096
<NET-CHANGE-FROM-OPS> 186625520
<EQUALIZATION> 3837343
<DISTRIBUTIONS-OF-INCOME> 1525182
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 11594111
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<SHARES-REINVESTED> 80127
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<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 360737
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<PER-SHARE-NAV-BEGIN> 9.13
<PER-SHARE-NII> 0.34
<PER-SHARE-GAIN-APPREC> 0.26
<PER-SHARE-DIVIDEND> 0.32
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<PER-SHARE-NAV-END> 9.41
<EXPENSE-RATIO> .70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000060305
<NAME> LORD ABBETT BOND-DEBENTURE FUND, INC.
<SERIES>
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<NAME> CLASS C
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<SHARES-COMMON-PRIOR> 23033874
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<OVERDISTRIBUTION-NII> 471837
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<DIVIDEND-INCOME> 795348
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<EXPENSES-NET> 1803842
<NET-INVESTMENT-INCOME> 8889453
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