<PAGE>
[TYPE]
[DESCRIPTION] Semi-Annual REPORT
Lord Abbett Bond-Debenture
Fund
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED JUNE 30, 1997
[PHOTO: Tool belt with tools]
A mutual fund with
a multi-faceted
approach to seeking
high income
[LOGO](R)
<PAGE>
Lord Abbett Bond-Debenture Fund
[PHOTO: Wood, hammer and nails]
Since its establishment in 1971, Lord Abbett Bond-Debenture Fund has sought the
best of both worlds--high current income and capital growth. The Fund's flexible
investment approach, combined with Lord Abbett's value management style, has
produced a history of strong performance in a variety of economic climates.
Morningstar says:
"Over the long term, the fund's flexible approach has more than proved itself.
Its 10-year return is in the top half of the high-yield group while volatility
has been below average."(1)
Morningstar Mutual Funds, May 9, 1997
- --------------------------------------------------------------------------------
Historically Consistent
Total Returns
Average Annual Rates of Total Return as of 6/30/97(2)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
For the past 20 years +10.6% per year
For the past 15 years +12.3% per year
For the past 10 years +10.1% per year
For the past 5 years +10.6% per year
For the past year +14.4% for the year
- --------------------------------------------------------------------------------
Flexibility
The Fund's flexible investment policy enables it to adapt to changing economic
conditions. (See page 4 for the Fund's portfolio composition.)
- --------------------------------------------------------------------------------
High Current Income
Dividend Distribution Rates on 6/30/97(3)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
At Net Asset Value 8.12%
At Maximum Offering Price 7.73%
- --------------------------------------------------------------------------------
Average annual total returns for periods ended 6/30/97 at the Class A share
maximum sales charge of 4.75%, with all distributions reinvested:
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
10 years +9.58%
5 years +9.48%
1 year +8.90%
The Fund's SEC yield for the 30 days ended 6/30/97 was 6.73%. Total return is
the percent change in value, assuming the reinvestment of all distributions.
The results quoted herein represent Class A share past performance which is no
indication of future results. The investment return and principal value of an
investment in the Fund will fluctuate so that shares, on any given day or when
redeemed, may be worth more or less than their original cost.
(1) Ranking data was compiled by Morningstar, Inc. The annualized 10-year total
returns of 48 high-yield funds were ranked over a 10-year period ending
4/30/97. The one-, three- and five-year rankings of Lord Abbett
Bond-Debenture Fund, based on total return as of 6/30/97, were as follows:
87 of 157, 52 of 104 and 44 of 65 high-yield funds, respectively.
(2) Class A share performance at net asset value. The Series issues additional
classes of shares (Class B and C) with distinct pricing options. See
Important Information on page 5.
(3) Based on the Class A share monthly dividend of $.065, annualized.
<PAGE>
Report to Shareholders
For the Six Months Ended June 30, 1997
[PHOTO: Robert S. Dow]
/s/ Robert S. Dow
- -----------------
ROBERT S. DOW
CHAIRMAN
JULY 15, 1997
"As always, the Fund
benefited from its flexible
investment strategy..."
Lord Abbett Bond-Debenture Fund completed the first half of its fiscal year on
June 30, 1997 with net assets of $2.5 billion. Below is an overview of each
Class share's performance for the period.
Six Months Ended June 30, 1997
- --------------------------------------------------------------------------------
Class A Class B Class C
- --------------------------------------------------------------------------------
Net asset value $9.61 $9.61 $9.62
Dividends $0.405 $0.369 $0.369
Total return*++ +6.6% +6.3% +6.3%
Despite the volatility that characterized the U.S. interest-rate environment,
Lord Abbett Bond-Debenture Fund's performance over the past six months proved
rewarding for shareholders. Performance over the period can be attributed to
several factors. First, the Fund's exposure to convertible securities,
especially the interest-sensitive, financial service holdings, proved to be very
beneficial. Second, high-yield bonds performed remarkably well, with many issues
exhibiting price gains. Robust economic growth in the U.S. economy has produced
significant increases in profitability, resulting in improved credit ratings for
many companies we hold. In fact, several of our holdings were upgraded to
investment grade, translating into strong gains for the Fund. As always, the
Fund benefited from its flexible investment strategy, which allows the
management team to take advantage of value-based investments as they are
uncovered.
As we look toward the second half of the year, we expect the economy to remain
strong within an environment of low inflation. We believe current economic
fundamentals present an almost ideal investing environment for the Fund, given
its flexible investment strategy. Recognizing that markets have performed well,
we will continue to rely on our talented investment management team to research
new opportunities, focusing on companies that we believe are positioned to
perform well within their industries.
Thank you for making Lord Abbett Bond-Debenture Fund a part of your investment
portfolio. We look forward to helping you achieve your financial goals in 1997
and beyond.
* Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
++ Not annualized.
1
<PAGE>
Aiming for High Total Returns
Seeking High Returns
Dividend distribution rates were 8.12% and 7.73% (based on the Class A share net
asset value and maximum offering price, respectively, on 6/30/97, and the
monthly dividend of $.065, annualized).
Striving for Consistency of Performance
The Fund's goal is high total return through high current income and capital
appreciation. The Fund strives for competitive returns in both up and down
markets.
Growth of $10,000 Investments: 4/1/71-6/30/97(1)
1973-1974 1977-1981 1990-1991
- --------------------------- ---------------- ---------------------------------
The last major bear market; Interest rates Recession and the Middle East
the unmanaged S&P 500 soared; bond crises jolted all markets; lower
declined 37.3%. The Fund prices sank. The rated bon market especially
mitigated the decline, Fund was up hard hit. The Fund mitigated the
then recovered strongly. every year. decline, then recovered strongly.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Average of High Inflation
Date The Fund Current Yield Funds (Consumer Price Index)
4/1/71 10000 10000 10000
12/71 10765 10275 10666
12/72 11438 10625 11638
12/73 10313 11550 10426
12/74 9789 12975 9251
12/75 12689 13875 11351
12/76 16613 14550 14675
12/77 17777 15525 15633
12/78 18269 16925 15933
12/79 19547 19175 16729
12/80 21283 21575 17376
12/81 22412 23500 18518
12/82 28585 24400 24188
12/83 33416 25325 28054
12/84 35073 26325 30418
12/85 42442 27325 37190
12/86 46946 27625 42119
12/87 47828 28850 43073
12/88 54427 30125 48655
12/89 57181 31525 48208
12/90 52852 33450 43396
12/91 73116 34475 59373
12/92 84810 35475 69847
12/93 98356 36450 83018
12/94 94553 37425 79971
12/95 111099 38375 93363
12/96 123498 39650 106320
6/30/97 131663 40075 112579
This graph illustrates total return performance of Class A shares. The
Fund's results do not include the maximum sales charge of 4.75% applicable
to Class A share investments under $100,000; there is no sales charge on
investments of $1 million or more. For performance at the Class A share
maximum sales charge, see inside front cover. See Important Information on
page 5.
(1) The Fund commenced operations on 4/1/71.
(2) Average of high current yield funds in existence at each month or quarter
end for the periods shown. No sales charge has been deducted from these
figures. Source: Chase Global Data and Research, Concord, MA.
2
<PAGE>
Performance Update
The Fund has an impressive history of protecting long-term income investors from
public enemy #1--inflation. Below, the Fund's growth is compared to the Consumer
Price Index, a standard inflation measure.(1)
The Fund Versus Inflation
$100,000 Investments: 4/1/71-6/30/97(2)
$100,000 invested at the Fund's inception grew to over $1 million
From the early 1970s through the early 1980s, the U.S. economy experienced
rapidly rising inflation and interest rates. The Fund kept pace with inflation
over this turbulent period.
As the rate of inflation and interest rates declined in the 1980s, the Fund
outperformed the CPI by an average of 6.7%/year.
Value of
$100,000
Year Annual Investment with Inflation
Ended Dividends all Distributions (Consumer
Dec. 31 Reinvested Reinvested Price Index)
- --------------------------------------------------------------------------------
1971(3) $ 3,450 $103,588 $102,750
1972 7,460 110,073 106,250
1973 8,204 99,239 115,500
1974 9,163 94,202 129,750
1975 9,719 122,105 138,750
1976 10,970 159,867 145,500
1977 11,883 171,064 155,250
1978 14,100 175,803 169,250
1979 16,410 188,105 191,750
1980 18,614 204,818 215,750
1981 22,844 215,671 235,000
1982 27,279 275,072 244,000
1983 31,092 321,561 253,250
1984 37,521 337,510 263,250
1985 43,150 408,427 273,250
1986 48,531 451,763 276,250
1987 51,214 460,251 288,500
1988 53,120 523,756 301,250
1989 59,178 550,254 315,250
1990 66,312 508,602 334,500
1991 71,085 703,596 344,750
1992 77,910 816,148 354,750
1993 82,556 946,487 364,500
1994 86,858 909,890 374,250
1995 95,753 1,069,120 383,750
1996 103,439 1,188,430 396,500
6/30/97 (6 months) 52,079 1,267,008 400,750
Total Dividends
Reinvested: $1,119,894
- -------------------==========---------------------------------------------------
Average Annual Rate of Return: 10.16% 5.43%
- -------------------------------------------------======-------------=====-------
The dollar amounts of capital gains distributions reinvested in Fund shares
were: 1973-$1,559; 1977-$971; 1978-$7,503; 1979-$5,622; 1980-$769; 1981-$2,765;
1984-$4,516; 1986-$5,415; total-$29,120.
Source: Lord, Abbett & Co.
(1) See Important Information on page 5.
(2) Fund investment reflects the deduction of the reduced 3.75% sales charge
applicable to Class A share investments of $100,000.
(3) Nine months only. The Fund began operations on 4/1/71.
3
<PAGE>
Management in Action
Current Dividend Distribution Rates: 8.12% and 7.73% (based on the Class A share
net asset value and maximum offering price, respectively, on 6/30/97, and the
monthly dividend of $.065, annualized)
The Fund's 3-Way Focus
1. High-yield Corporate Debt and Straight-preferred Stocks: 60.5%(1)
The Fund's lower rated debt holdings pay high income and help minimize the
effects of interest-rate fluctuations. Price appreciation may result if the
credit rating of debt issuers is upgraded.
2. Equity-related Securities: 18.5%(1)
Capital appreciation is sought by investing in convertible bonds which may be
exchanged for common stock. When the stock market rises, these equity-related
issues generally increase in value.
3. High-grade Debt and Other Assets, Less Liabilities: 21.0%(1)
High-quality issues, corporate issues and U.S. Government-backed securities
provide a dependable stream of high current income.
A History of the Fund's Portfolio Blend
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
High Yield Corporate Equity-related High-Grade
Debt and Straight- Securities Debt
Year preferred Stocks
1974 15.7% 49.6% 34.7%
1979 34.8% 36.1% 29.1%
1982 18.3% 54.6% 27.1%
1985 45.1% 40.5% 14.4%
1988 52.9% 33.4% 13.7%
1990 55.7% 28.0% 16.3%
1995 62.9% 16.5% 20.6%
1996 60.8% 18.1% 21.1%
6/30/97 60.5% 18.5% 21.0%
Consistency of Performance...Over the Long Term
The Fund produced positive total returns 18 out of the last 20 calendar years(2)
Over the last 20 years (between 1977 and 1996), Lord Abbett Bond-Debenture Fund
shareholders holding the Fund for any ten-year period earned average annual
returns of at least 9% per year(3):
<TABLE>
<CAPTION>
Average Annual Total Returns for 10-Year Periods Ending December 31:
1977- 1978- 1979- 1980- 1981- 1982- 1983- 1984- 1985- 1986- 1987-
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10.9% 10.4% 11.5% 11.3% 9.5% 12.6% 11.5% 11.4% 10.4% 10.1% 10.2%
<FN>
(1) Percent of net assets on 6/30/97.
(2) At net asset value. All years end 12/31.
(3) All periods end December 31. Assumes investment in Class A shares at net
asset value. Total return is the percent change in value, assuming the
reinvestment of all distributions. Total return for the six months ended
6/30/97 was 6.6%.
</FN>
</TABLE>
4
<PAGE>
Important Information
SEC yield is calculated on the Class A share maximum offering price of $10.09 on
6/30/97, using a standard method which does not take into account certain
portfolio strategies. The Fund's distribution rate differs from its SEC yield
primarily because the Fund purchases short- and intermediate-term high-coupon
securities at a premium and distributes to shareholders all of the interest
income on those securities without amortizing the premiums. This practice is
consistent with applicable tax regulations and generally accepted accounting
principles, but may result in a decrease in the net asset value of shares of the
Fund as the market value of the premium securities decreases over time.
Bonds purchased are subject to market fluctuations upward and downward inversely
to the rise and fall of interest rates. Common stocks are subject to market
fluctuations providing potential for gain and risk of loss. Lower rated bonds
generally provide a higher yield than higher rated bonds of similar average
maturity, but have greater credit risk. Non-investment-grade, fixed-income
securities generally involve greater volatility of price to principal and income
than securities in higher rating categories. Performance results quoted herein
reflect past performance, current sales charges (where applicable) and
appropriate Rule 12b-1 Plan expenses from commencement of the Plan. Tax
consequences are not reflected. The Fund's sales charge structure has changed in
the past. The Fund issues additional classes of shares, with distinct pricing
options. For a full discussion of the differences in pricing alternatives,
please call 800-874-3733 and ask for the Fund's current prospectus. If used as
sales material after 9/30/97, this report must be accompanied by Lord Abbett's
Performance Quarterly for the most recently completed calendar quarter.
<TABLE>
<CAPTION>
Statement of Net Assets
June 30, 1997
Principal
Investments Amount Market Value
====================================================================================================================================
Investments in Securities 88.99%
====================================================================================================================================
High-Yield Corporate Debt 59.34%
====================================================================================================================================
<S> <C> <C> <C>
Advertising .49% Lamar Advertising Co. Sr. Sub. Notes 9 5/8 /2006 $12,000M $ 12,390,000
- ----------------------------------------------------------------------------------------------------------------------==============
Aerospace 1.47% BE Aerospace Inc. Sr. Sub. Notes 9 7/8 /2006+ 11,000M 11,618,750
Fairchild Corp. Sub. Deb. 13 1/8 /2006 5,000M 5,200,000
L-3 Communications Corp. Sr. Sub. Notes 10 3/8 /2007+ 4,000M 4,260,000
Tracor Inc. Sr. Sub. Notes 8 1/2 /2007 2,400M 2,442,000
UNC Inc. Sr. Sub. Notes 11/2006+ 8,440M 9,938,100
Wyman Gordon Co. Sr. Notes 10 3/4 /2003 3,000M 3,217,500
Total 36,676,350
- ----------------------------------------------------------------------------------------------------------------------==============
Agricultural .86% Agricultural Minerals & Chemical Inc. Sr. Notes 10 3/4 /2003 10,250M 11,121,250
PMI Acquisition Corp. Sr. Sub. Notes 10 1/4 /2003 10,000M 10,500,000
Total 21,621,250
- ----------------------------------------------------------------------------------------------------------------------==============
Airlines .26% Northwest Airlines Inc. Sr. Notes 12.0916/2000 1,488M 1,535,905
US Air Inc. Equipment Trust Certificate 10 1/2 /2004 2,634M 2,755,823
US Air Inc. (Piedmont) Equipment Trust Notes 10.35/2011 2,000M 2,114,688
Total 6,406,416
- ----------------------------------------------------------------------------------------------------------------------==============
Aluminum .38% Kaiser Aluminum & Chemical Corp. Sr. Notes 10 7/8 /2006 5,000M 5,400,000
Maxxam Group Zero Coupon Sr. Secured Discount Notes due 2003** 4,500M 4,140,000
Total 9,540,000
- ----------------------------------------------------------------------------------------------------------------------==============
Apparel and Textile 1.01% Dan River Inc. Sr. Sub. Notes 10 1/8 /2003 6,000M 6,390,000
GFSI, Inc. Sr. Sub. Notes 9 5/8 /2007+ 7,000M 7,087,500
Riddell Sports Inc. Sr. Notes 10 1/2 /2007+ 5,000M 5,150,000
Tultex Corp. Sr. Notes 9 5/8 /2007+ 1,900M 2,028,250
William Carter Sr. Sub. Notes 10 3/8 /2006+ 4,475M 4,743,500
Total 25,399,250
---------------------------------------------------------------------------------------==============
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
June 30, 1997
Principal
Investments Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Automotive .21% Safelite Glass Corp. 9 7/8 /2006+ 5,000M$ 5,312,500
- ----------------------------------------------------------------------------------------------------------------------==============
Banking .82% Ocwen Federal Bank FSB Sub. Deb. 12/2005 7,000M 7,560,000
Ocwen Financial Corp. Sr. Notes 11 7/8 /2003 5,100M 5,584,500
Saul, B.F. Real Estate Investment Trust Sr. Notes 11 5/8 /2002 7,000M 7,490,000
Total 20,634,500
- ----------------------------------------------------------------------------------------------------------------------==============
Building Materials .71% American Builders & Contractors Supply Co., Inc. Sr. Sub. Notes 10 5/8 /2007 3,650M 3,777,750
Falcon Building Products Zero Coupon Sr. Sub. Discount Notes due 2007+** 12,500M 7,562,500
Southdown Inc. Sr. Sub. Notes 10/2006 6,000M 6,570,000
Total 17,910,250
- ----------------------------------------------------------------------------------------------------------------------==============
Chemicals 3.22% Acetex Corp. Sr. Secured Notes 9 3/4 /2003 5,000M 5,112,500
Atlantis Group Inc. Sr. Notes 11/2003 5,000M 5,221,875
Borden Chemical Sr. Notes 9 1/2 /2005 3,000M 3,161,250
Harris Chemical N.A. Inc. Sr. Secured Notes 10 1/4 /2001 12,000M 12,540,000
Huntsman Specialty Chemicals Corp. 9 1/4 /2007 5,000M 5,125,000
NL Industries Inc. Zero Coupon Sr. Secured Discount Notes due 2005** 5,000M 4,700,000
NL Industries Inc. Sr. Secured Notes 11 3/4 /2003 5,000M 5,450,000
Pioneer American Acquisition Corp. Sr. Secured Notes 9 1/4 /2007+ 8,500M 8,415,000
Polymer Group Inc. Sr. Notes 12 1/4 /2002 3,667M 4,070,370
Sterling Chemical Sr. Sub. Notes 11 3/4 /2006 10,000M 10,850,000
Texas Petrochemicals Corp. Sr. Sub. Notes 11 1/8 /2006+ 8,500M 9,137,500
UCC Investors Holdings Inc. Sr. Sub. Notes 11/2003 6,500M 7,020,000
Total 80,803,495
- ----------------------------------------------------------------------------------------------------------------------==============
Communications 9.11% Adelphia Communications Corp. Sr. Notes 12 1/2 /2002 5,500M 5,843,750
Bell Cable Media plc Zero Coupon Sr. Discount Notes due 2004** 10,000M 9,050,000
Brooks Fiber Properties Inc. Zero Coupon Sr. Discount Notes due 2006** 18,000M 12,330,000
Cablevision System Sr. Sub. Notes 9 1/4 /2005 11,000M 11,357,500
Cellular Inc. Zero Coupon Sr. Sub. Discount Notes due 2003** 20,000M 19,500,000
Cencall Communications Corp. Zero Coupon Sr. Discount Notes due 2004** 7,500M 5,943,750
Comcast Cellular Sr. Sub. Notes 9 1/2 /2007+ 17,000M 17,212,500
C.S. Wireless Systems, Inc. Zero Coupon Sr. Discount Notes due 2006+** 6,000M 1,470,000
Dobson Communication Corp. Sr. Sub. Notes 11 3/4 /2007+ 3,000M 2,925,000
Frontier Vision Sr. Sub. Notes 11/2006 5,000M 5,237,500
Fundy Cable Ltd. Sr. Secured 2nd Priority Notes 11/2005 7,000M 7,577,500
ICG Holdings (USA) Inc. Zero Coupon Sr. Discount Notes due 2005 w/Warrants** 22,000M 16,967,500
International Cabletel Incorporated Sr. Notes 10/2007+ 12,000M 12,270,000
Marcus Cable Co. Zero Coupon Sr. Sub. Discount Notes due 2004** 11,000M 9,597,500
Metrocall Inc. Sr. Sub. Notes 10 3/8 /2007 6,000M 5,550,000
MFS Communication Zero Coupon Sr. Discount Notes due 2006** 30,000M 23,775,000
Mobile Media Communications Inc. Sr. Sub. Notes 9 3/8 /2007 12,000M 2,010,000
Nextel Communications Sr. Discount Notes 9 3/4 /2004 5,500M 4,262,500
Pan Am Sat L.P. Zero Coupon Sr. Discount Notes due 2003** 7,500M 7,307,813
Teleport Communications, Inc. Sr. Notes 9 7/8 /2006 5,000M 5,325,000
Teleport Communications, Inc. Sr. Discount Notes 11 1/8 /2007 3,000M 2,152,500
Telewest plc Zero Coupon Sr. Discount Deb. due 2007** 20,000M 14,450,000
Vanguard Cellular Systems Sr. Deb. 9 3/8 006 8,000M 8,120,000
Videotron Holdings plc Zero Coupon Sr. Discount Notes due 2004** 15,000M 13,537,500
Western Wireless Sr. Sub. Notes 10 1/2 /2007+ 5,000M 5,175,000
Total 228,947,813
- ----------------------------------------------------------------------------------------------------------------------==============
Computer Systems and Digital Equipment Corp. Sr. Notes 7 3/4 /2023 8,000M 7,253,750
Peripherals .78% Exide Electronics Group, Inc. Sr. Sub. Notes 11 1/2 /2006 w/Warrants 3,530M 3,812,400
Viasystems Inc. Sr. Sub. Notes 9 3/4 /2007+ 8,350M 8,517,000
Total 19,583,150
---------------------------------------------------------------------------------------==============
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
June 30, 1997
Principal
Investments Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Consumer Products 1.80% American Standard Inc. Zero Coupon Sr. Sub. Deb. due 2005** $ 5,000M $ 4,934,375
Interface Inc. Sr. Sub. Notes 9 1/2 /2005 12,000M 12,390,000
Leiner Health Products Inc. Sr. Sub. Notes 9 5/8 /2007+ 2,500M 2,556,250
North Atlantic Trading Co. Inc. Sr. Notes 11/2004+ 1,500M 1,541,250
Rayovac Corp. Sr. Sub. Notes 10 1/4 /2006+ 12,665M 13,393,238
Twin Laboratories Inc. Sr. Sub. Notes 10 1/4 /2006 10,000M 10,525,000
Total 45,340,113
- ----------------------------------------------------------------------------------------------------------------------==============
Container and Packaging 2.02% BWAY Corp. Sr. Sub. Notes 10 1/4 /2007+ 2,000M 2,160,000
GCB Calmar Inc. Sr. Sub. Notes 11 1/2 /2005 12,000M 12,960,000
Portola Packaging Inc. Sr. Notes 10 3/4 /2005 7,000M 7,533,750
Printpack Inc. Sr. Sub. Notes 10 5/8 /2006+ 12,000M 12,630,000
US Can Corporation Sr. Sub. Notes 10 1/8 /2006+ 6,000M 6,420,000
Vicap Guaranteed by Vitro, S.A. Sr. Notes 11 3/8 /2007+ 8,550M 8,945,438
Total 50,649,188
- ----------------------------------------------------------------------------------------------------------------------==============
Drugs/Pharmaceuticals .22% Imed Corp. Sr. Sub. Notes 9 3/4 /2006+ 5,500M 5,623,750
- ----------------------------------------------------------------------------------------------------------------------==============
Electronics .21% LDM Technologies 10 3/4 /2007+ 5,000M 5,312,500
- ----------------------------------------------------------------------------------------------------------------------==============
Financial .42% CEI Citicorp Holding 9 3/4 /2007+ 4,000M 4,145,000
Navistar Financial Corp. Sr. Notes 9/2002+ 6,200M 6,386,000
Total 10,531,000
- ----------------------------------------------------------------------------------------------------------------------==============
Food 2.19% Ameri King, Inc. Sr. Notes 10 3/4 /2006 7,300M 7,701,500
Delta Beverage Group Sr. Notes 9 3/4 /2003+ 6,400M 6,704,000
Doane Products Co. Sr. Notes 10 5/8 /2006 8,000M 8,440,000
MBW Foods Inc. Sr. Sub. Notes 9 7/8 /2007+ 5,000M 5,087,500
Pepsi-Gemex 9 3/4 /2004+ 10,000M 10,262,500
Quality Food Centers, Inc. Sr. Sub. Notes 8.70/2007+ 5,000M 4,975,000
Stroh Brewery 11.10/2006 w/Warrants 3,374M 3,535,847
Van de Kamp's Inc. Sr. Sub. Notes 12/2005 7,500M 8,325,000
Total 55,031,347
- ----------------------------------------------------------------------------------------------------------------------==============
Forest Products .37% Pacific Lumber Co. Sr. Notes 10 1/2 /2003 9,000M 9,315,000
- ----------------------------------------------------------------------------------------------------------------------==============
Hotel/Leisure 3.02% Act III Theatres Inc. Sr. Sub. Notes 11 7/8 /2003 5,000M 5,425,000
AMF Group Inc. Sr. Sub. Notes 10 7/8 /2006 3,500M 3,797,500
Aztar Corp. Sr. Sub. Notes 11/2002 6,500M 6,743,750
Aztar Corp. Sr. Sub. Notes 13 3/4 /2004 2,000M 2,300,000
Claridge Hotel & Casino Corp. 1st Mtge. Notes 11 3/4 /2002 1,700M 1,513,000
HMC Acquisition Properties Sr. Notes 9/2007 5,000M 5,087,500
HMH Properties Inc. Sr. Secured Notes 9 1/2 /2005 10,000M 10,425,000
Host Marriott Travel Plazas Inc. Sr. Secured Notes 9 1/2 /2005 5,000M 5,243,750
Majestic Star Casino LLC Sr. Secured Notes 12 3/4 /2003+ 3,650M 4,033,250
Plitt Theatres Inc. Sr. Sub. Notes 10 7/8 /2004 5,000M 5,325,000
Santa Fe Hotel Inc. 1st Mtge. Notes 11/2000 w/Warrants 2,500M 1,837,567
Showboat Inc. 1st Mtge. Notes 9 1/4 /2008 7,000M 7,245,000
Showboat Marina 1st Mtge. Notes 13 1/2 /2003 6,000M 6,900,000
Trump Atlantic City Funding 1st Mtge. Notes 11 1/4 /2006 10,000M 9,775,000
Total 75,651,317
- ----------------------------------------------------------------------------------------------------------------------==============
Household Products 1.15% Fonda Group Inc. Sr. Sub. Notes 9 1/2 /2007+ 10,000M 9,650,000
Knoll Inc. Sr. Sub. Notes 10 7/8 /2006 3,285M 3,650,456
Specialty Equipment Cos. Inc. Sr. Sub. Notes 11 3/8 /2003 5,000M 5,475,000
Sweetheart Cup Sr. Sub. Notes 10 1/2 /2003 10,000M 10,193,750
Total 28,969,206
--------------------------------------------------------------------------------------==============
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
June 30, 1997
Principal
Investments Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Industrial and Capital
Goods 1.29% Echo Bay Mines Jr. Sub. Notes 11/2027 $ 5,800M $ 5,850,750
Euramax International Sr. Sub. Notes 11 1/4 /2006+ 6,250M 6,750,000
Fairfield Manufacturing Inc. Sr. Sub. Notes 11 3/8 /2001 4,800M 5,112,000
International Wire Group Inc. Sr. Sub. Notes 11 3/4 /2005 10,000M 10,700,000
Mettler Toledo Inc. Sr. Sub. Notes 9 3/4 /2006 3,650M 3,887,250
Total 32,300,000
- ----------------------------------------------------------------------------------------------------------------------==============
Machinery 2.10% Alvey Systems Inc. Sr. Sub. Notes 11 3/8 /2003+ 10,000M 10,350,000
Carbide Graphite Group Inc. Sr. Notes 11 1/2 /2003 5,909M 6,440,810
Clark Materials Handling Sr. Notes 10 3/4 /2006+ 6,850M 7,209,625
Essex Group Inc. Sr. Notes 10/2003 14,030M 14,766,575
Terex Corporation Sr. Secured Notes 13 3/4 /2002+ 5,000M 5,650,000
Tokheim Corporation Sr. Sub. Notes 11 1/2 /2006+ 7,500M 8,287,500
Total 52,704,510
- ----------------------------------------------------------------------------------------------------------------------==============
Media 5.38% American Radio System Sr. Sub. Notes 9/2006 8,000M 8,200,000
Australia Media Ltd. Zero Coupon Sr. Discount Notes due 2003 w/Warrants** 8,000M 5,880,000
Benedek Broadcasting Corp. Sr. Secured Notes 11 7/8 /2005 6,000M 6,645,000
Chancellor Radio Broadcasting Co. Sr. Sub. Notes 9 3/8 /2004 15,000M 15,637,500
Granite Broadcasting Corp. Sr. Sub. Notes 10 3/8 /2005 10,500M 10,657,500
Gray Communication System Inc. Sr. Sub. Notes 10 5/8 /2006 4,000M 4,250,000
Grupo Televisa, S.A. Sr. Notes Series B 11 7/8 /2006 5,000M 5,662,500
Heritage Media Corp. Sr. Sub. Notes 8 3/4 /2006 7,500M 7,781,250
SCI Television Sr. Secured Notes 11/2005 5,000M 5,331,250
Sinclair Broadcasting Group, Inc. Sr. Sub. Notes 10/2005 20,000M 20,650,000
Sinclair Broadcasting Group, Inc. Sr. Sub. Notes 9/2007+ 7,000M 6,825,000
Sullivan Broadcasting Sr. Sub. Notes 10 1/4 /2005 8,000M 8,200,000
Sun Media Corp. Sr. Sub. Notes 9 1/2 /2007+ 7,500M 7,650,000
TV Azteca S.A. Sr. Notes 10 1/2 /2007+ 10,000M 10,300,000
Viacom Inc. Sub. Deb. 8/2006 12,000M 11,610,000
Total 135,280,000
- ----------------------------------------------------------------------------------------------------------------------==============
Medical/Health Care .91% Integrated Health Services, Inc. Sr. Sub. Notes 10 1/4 /2006+ 4,900M 5,267,500
Integrated Health Services, Inc. Sr. Sub. Notes 9 1/2 /2007+ 2,475M 2,549,250
Packard Bioscience Co. Sr. Sub. Notes 9 3/8 /2007+ 10,000M 10,050,000
Tenet Healthcare Corporation Sr. Sub. Notes 85/8/2007 5,000M 5,100,000
Total 22,966,750
- ----------------------------------------------------------------------------------------------------------------------==============
Miscellaneous 2.66% Dyncorp Inc. Sr. Sub. Notes 9 1/2 /2007+ 10,625M 10,837,500
Iron Mountain Sr. Sub. Notes 10 1/8 /2006 17,400M 18,487,500
Kinder Care Learning Center, Inc. Sr. Sub. Notes 9 1/2 /2009 5,000M 4,837,500
Outsourcing Solutions Sr. Sub. Notes 11/2006 2,600M 2,847,000
Prime Succession Acquisition Co. Sr. Sub. Notes 10 3/4 /2004+ 3,400M 3,740,000
Republic of Argentina 11 3/8 /2017 5,000M 5,579,688
Republic of Argentina Series L 5 1/4 /2023 10,000M 7,050,000
Republic of Venezuela Series B 6 3/4 /2020 w/Warrants 6,000M 4,620,000
Voto-Votorantim 8 1/2 /2005+ 8,950M 8,916,438
Total 66,915,626
- ----------------------------------------------------------------------------------------------------------------------==============
Oil and Gas 5.14% Clark USA Inc. Zero Coupon Sr. Secured Notes due 2000 14,500M 11,056,250
Coda Energy Inc. Sr. Sub. Notes 10 1/2 /2006 12,000M 12,765,000
Cross Timbers Oil Co. Sr. Sub. Notes 9 1/4 /2007+ 11,300M 11,667,250
Crown Central Petroleum Corp. Sr. Notes 10 7/8 /2005 11,500M 12,075,000
Flores & Rucks Sr. Sub. Notes 9 3/4 /2006 10,000M 10,487,500
HS Resources Inc. Sr. Sub. Notes 9 1/4 /2006+ 7,000M 7,070,000
KCS Energy, Inc. Sr. Notes 11/2003 8,500M 9,222,500
Lomak Petroleum Inc. Sr. Sub. Notes 8 3/4 /2007 8,050M 7,969,500
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
June 30, 1997
Principal
Investments Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Mesa Operating Co. Sr. Sub. Notes 10 5/8 /2006 $ 7,500M $ 8,559,375
Metro Gas, S.A. Sr. Sub. Notes 12/2000 6,000M 6,705,000
Perez Company S.A. 9/2004+ 11,900M 12,390,875
Pogo Producing Sr. Sub. Notes 8 3/4 /2017+ 7,200M 7,272,000
United Meridian Corp. Sr. Sub. Notes 10 3/8 /2005 6,750M 7,357,500
Vintage Petro Sr. Sub. Notes 8 5/8 /2009 4,625M 4,601,875
Total 129,199,625
- ----------------------------------------------------------------------------------------------------------------------==============
Oil Service .63% DI Industries Inc. Sr. Notes 8 7/8 /2007 7,000M 6,930,000
J.Ray McDermott, S.A. Sr. Sub. Notes 9 3/8 /2006 6,000M 6,120,000
Rowan Cos. Inc. Sr. Notes 11 7/8 /2001 2,611M 2,792,138
Total 15,842,138
- ----------------------------------------------------------------------------------------------------------------------==============
Paper and Pulp 2.61% Crown Paper Co. Sr. Sub. Notes 11/2005 10,000M 10,000,000
Four M Corp. Sr. Secured Notes Series A 12/2006+ 7,000M 7,262,500
Repap Wisconsin Inc. Sr. Secured 2nd Priority 9 7/8 /2006 8,000M 8,040,000
S.D. Warren Co. Sr. Sub. Notes 12/2004 12,000M 13,372,500
Stone Container Corp. 1st Mtge. Notes 10 3/4 /2002 14,000M 14,595,000
Tembec Finance Corp. Sr. Notes 9 7/8 /2005 12,000M 12,420,000
Total 65,690,000
- ----------------------------------------------------------------------------------------------------------------------==============
Printing and Publishing .84% Big Flower Press Inc. Sr. Sub. Notes 10 3/4 /2003 5,333M 5,732,975
Big Flower Press Inc. Sr. Sub. Notes 8 7/8 /2007+ 10,000M 9,850,000
Garden State Newspapers Inc. Sr. Sub. Notes 12/2004 5,000M 5,475,000
Total 21,057,975
- ----------------------------------------------------------------------------------------------------------------------==============
Real Estate .17% Trizec Finance Ltd. Sr. Notes 10 7/8 /2005 3,860M 4,284,600
- ----------------------------------------------------------------------------------------------------------------------==============
Retail 1.29% Guess Inc. Sr. Sub. Notes 9 1/2 /2003 6,700M 6,859,125
Pamida Inc. Sr. Sub. Notes 11 3/4 /2003 8,000M 7,660,000
Specialty Retailers, Inc. Sr. Sub. Notes 9/2007+ 4,750M 4,773,750
United Stationers Supply Co. Sr. Sub. Notes 12 3/4 /2005 11,500M 13,124,375
Total 32,417,250
- ----------------------------------------------------------------------------------------------------------------------==============
Steel 2.85% AK Steel Corp. Sr. Notes 10 3/4 /2004 6,000M 6,465,000
Earle M. Jorgenson Co. Sr. Notes 10 3/4 /2000 5,000M 5,025,000
G.S. Technologies Operating Co. Sr. Notes 12 1/4 /2005 6,000M 6,570,000
Interlake Corp. Sr. Notes 12/2001 5,000M 5,525,000
Ivaco Inc. Sr. Notes 11 1/2 /2005 5,500M 5,885,000
Oregon Steel Mills 1st Mtge. Notes 11/2003 4,615M 4,972,663
Republic Engineered Steel Inc. 1st Mtge. Notes 9 7/8 /2001 11,000M 10,230,000
WCI Steel Inc. Sr. Secured Notes 10/2004+ 7,000M 7,315,000
Weirton Steel Sr. Notes 11 3/8 /2004 7,900M 8,413,500
Westmin Resources Ltd. Sr. Notes 11/2007 10,800M 11,326,500
Total 71,727,663
- ----------------------------------------------------------------------------------------------------------------------==============
Supermarket .47% Dairy Mart Convenience Stores Inc. Sr. Sub. Notes 10 1/4 /2004 4,000M 3,970,000
Farm Fresh Holdings Sr. Notes P.I.K. 14 1/4 /2002*** 7,537M 791,363
Pathmark Stores Inc. Zero Coupon Jr. Sub. Discount Notes due 2003** 5,500M 3,877,500
Pathmark Stores Inc. Sub. Notes 11 5/8 /2002 3,000M 3,045,000
Victory Markets Inc. Sub. Notes 12 1/2 /2000* 5,000M 150,000
Total 11,833,863
- ----------------------------------------------------------------------------------------------------------------------==============
Transportation .99% Atlantic Express 10 3/4 /2004+ 6,200M 6,510,000
Blue Bird Body Company 10 3/4 /2006+ 3,000M 3,195,000
Ryder Trs. Inc. Sr. Sub. Notes 10/2006+ 10,000M 10,350,000
Trism Inc. Sr. Sub. Notes 10 3/4 /2000 5,000M 4,812,500
Total 24,867,500
---------------------------------------------------------------------------------------==============
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
June 30, 1997
Principal
Investments Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Utility 1.03% Beaver Valley II Funding Corp. Secured Lease Obligation 9/2017 $ 7,170M $ 7,516,177
Cal Energy Co. Inc. Sr. Notes 9 1/2 /2006+ 8,000M 8,600,000
Comp Energeticia Sao Paulo Notes 9 1/8 /2007+ 10,000M 9,881,250
Total 25,997,427
- ----------------------------------------------------------------------------------------------------------------------==============
Waste Management .26% Allied Waste North America 10 1/4 /2006+ 6,000M 6,442,500
---------------------------------------------------------------------------------------==============
Total Investments in High-Yield Corporate Debt (Cost $1,455,343,258) 1,491,175,822
====================================================================================================================================
Convertible Debt 11.39%
====================================================================================================================================
Advertising .48% Omnicom Group Inc. Conv. Sub. Deb. 4 1/4 /2007+ 10,000M 12,078,125
- ----------------------------------------------------------------------------------------------------------------------==============
Automotive .39% Pep Boys Conv. Sub. Deb. 4/1999 7,500M 7,810,547
Pep Boys Zero Coupon Conv. Notes due 2011 3,300M 1,877,906
Total 9,688,453
- ----------------------------------------------------------------------------------------------------------------------==============
Banking .61% Fuji International Finance Trust Conv. Unit .25/2002+ 563M 15,328,555
- ----------------------------------------------------------------------------------------------------------------------==============
Communications .27% Broadband Technologies, Inc. Conv. Sub. Deb. 5/2001+ 3,000M 2,197,969
Telekom Malaysia Conv. Notes 4/2004+ 5,000M 4,587,500
Total 6,785,469
- ----------------------------------------------------------------------------------------------------------------------==============
Computer Software and
Services .25% National Data Corp. Conv. Sub. Notes 5/2003 6,000M 6,371,250
- ----------------------------------------------------------------------------------------------------------------------==============
Computer Support Systems .14% Businessland Inc. Conv. Sub. Deb. 5 1/2 /2007 5,000M 3,462,500
- ----------------------------------------------------------------------------------------------------------------------==============
Consumer Products .21% CS First Boston (Exch. PG) Conv. Deb. 3 1/2 /2001 4,700M 5,377,828
- ----------------------------------------------------------------------------------------------------------------------==============
Data Processing Equipment Atmel S.A. Conv. Sub. Deb. 3 1/4 /2002+ 3,825M 4,095,141
and Components 2.28% Automatic Data Processing Zero Coupon Conv. Sub. Deb. due 2012 30,000M 18,478,125
Data General Corp. Conv. Sub. Notes 6/2004+ 4,375M 5,337,500
EMC Corp. Conv. Sub. Notes 3 1/4 /2002+ 11,000M 12,130,938
HMT Technology Conv. Deb. 5 3/4 /2004+ 6,400M 5,546,000
Synoptics Comm. Conv. Deb. 5 1/4 /2003+ 12,000M 11,570,625
Total 57,158,329
- ----------------------------------------------------------------------------------------------------------------------==============
Drugs/Pharmaceuticals 1.65% Alza Corp. Conv. Sub. Deb. 5/2006 11,000M 11,161,563
Roche Holdings Inc. Zero Coupon Conv. Notes due 2010+ 42,000M 21,315,000
Swiss Bank Corp. (Exch. Novartis) Sr. Notes 2 1/2 /2002 6,000M 6,015,000
Synetic Inc. Conv. Sub. Deb 5/2007 3,350M 2,942,766
Total 41,434,329
- ----------------------------------------------------------------------------------------------------------------------==============
Electrical Equipment .16% Thermo Instrument System Conv. Deb. 4 1/2 /2003+ 4,000M 4,045,000
- ----------------------------------------------------------------------------------------------------------------------==============
Industrial and Capital
Goods .29% RPM Inc. Zero Coupon Conv. Sub. Deb. due 2012 15,000M 7,237,500
- ----------------------------------------------------------------------------------------------------------------------==============
Insurance .22% CII Financial Inc. Conv. Sub. Deb. 7 1/2 /2001 6,000M 5,610,000
- ----------------------------------------------------------------------------------------------------------------------==============
Medical/Health Care .29% Healthsource, Inc. Conv. Sub. Notes 5/2003+ 7,200M 7,196,625
- ----------------------------------------------------------------------------------------------------------------------==============
Oil and Gas 1.07% Pennzoil (Exch. Chevron) Conv. Sub. Deb. 4 3/4 /2003 10,000M 12,846,875
Pogo Producing Co. Conv. Sub. Notes 5 1/2 /2006+ 5,000M 5,568,750
Swift Energy Co. Conv. Sub. Notes 6 1/4 /2006 6,500M 6,581,250
Wainoco Oil Corp. Inc. Conv. Sub. Deb. 7 3/4 /2014 2,400M 1,980,000
Total 26,976,875
- ----------------------------------------------------------------------------------------------------------------------==============
Oil Service .90% Baker Hughes Inc. Zero Coupon Conv. Notes due 2008 15,000M 12,035,156
Diamond Offshore Conv. Sub. Deb. 3 3/4 /2007 6,000M 6,918,750
Nabors Industries Inc. Conv. Sub. Notes 5/2006 2,500M 3,776,563
Total 22,730,469
- ----------------------------------------------------------------------------------------------------------------------==============
Photography .16% Xerox Corp. Sr. Index Notes Conv. 2 7/8 /2002 4,000M 4,025,000
- ----------------------------------------------------------------------------------------------------------------------==============
Printing and Publishing .92% Scholastic Corp. Conv. Sub. Deb. 5/2005+ 13,020M 11,148,375
The Times Mirror Company Zero Coupon Conv. Sub. Deb. due 2017+ 30,000M 12,093,750
Total 23,242,125
---------------------------------------------------------------------------------------==============
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
June 30, 1997
Principal
Amount
Investments or Shares Market Value
====================================================================================================================================
<S> <C> <C> <C>
Restaurant .15% UBS Fin. (Exch. MCD) Conv. Notes 2/2000 4,000M $ 3,861,250
- ----------------------------------------------------------------------------------------------------------------------==============
Retail .76% Home Depot Inc. Conv. Sub. Deb. 3 1/4 /2001 15,000M 17,170,313
U.S. Office Products, Co. Conv. Sub. Deb. 5 1/2 /2003+ 2,000M 1,865,000
Total 19,035,313
- ----------------------------------------------------------------------------------------------------------------------==============
Waste Management .19% WMX Technologies Inc. Conv. Sub. Notes 2/2005 5,000M 4,673,438
---------------------------------------------------------------------------------------==============
Total Investments in Convertible Debt (Cost $266,477,260) 286,318,433
====================================================================================================================================
Preferred and Convertible-Preferred Stocks, Common Stocks and Warrants 8.30%
====================================================================================================================================
Banking 1.03% Ahmanson, H.F. & Co. $3.00 Conv. Pfd. Series D 90,000 8,325,000
California Federal Preferred Capital Corp. $9.125 Pfd. 350,000 9,034,375
Crossland Savings FSB Brooklyn, NY $1.8125 Conv. Pfd. Series A 375,000 5,859
National Australia Bank Pfd. $7.875 297,000 8,297,438
Total 25,662,672
- ----------------------------------------------------------------------------------------------------------------------==============
Building Materials .45% Owens Corning $3.25 Conv. Pfd.+ 200,000 11,340,625
- ----------------------------------------------------------------------------------------------------------------------==============
Chemicals .24% Atlantic Richfield Co. (Exch. Lyondell Petrochemical) $2.23 Conv. Pfd. 285,000 6,127,500
- ----------------------------------------------------------------------------------------------------------------------==============
Communications .29% Evergreen Media Corporation $6.00 Conv. Pfd.+ 132,000 7,173,375
- ----------------------------------------------------------------------------------------------------------------------==============
Container and Packaging .25% Crown Cork & Seal $1.885 Conv. Pfd. 125,000 6,312,500
- ----------------------------------------------------------------------------------------------------------------------==============
Financial .84% Jefferson-Pilot Corp. (NBX) $5.256 Conv. Pfd. 185,000 21,228,750
- ----------------------------------------------------------------------------------------------------------------------==============
Insurance 1.31% American Bankers Insurance Group $3.125 Conv. Pfd. 73,000 5,256,000
American General $3.00 Conv. Pfd. Series A 150,000 9,506,250
Frontier Insurance Group, Inc. $6.25 Conv. Pfd.+ 150,000 11,325,000
St. Paul's Capital, LLC $3.00 Conv. Pfd. 100,000 6,925,000
Total 33,012,250
- ----------------------------------------------------------------------------------------------------------------------==============
Machinery .27% Bucyrus-Erie Company 56,624 601,630
Navistar International Corp. $6.00 Conv. Pfd. Series G 100,000 6,112,500
Total 6,714,130
- ----------------------------------------------------------------------------------------------------------------------==============
Miscellaneous .69% Corning Delaware LP $3.00 Conv. Pfd. 200,000 17,400,000
- ----------------------------------------------------------------------------------------------------------------------==============
Oil and Gas .57% Occidental Petroleum $3.875 Conv. Pfd.+ 100,000 5,832,813
Unocal Corp. $6.25 Conv. Pfd. 150,000 8,552,344
Total 14,385,157
- ----------------------------------------------------------------------------------------------------------------------==============
Paper and Pulp .53% International Paper Capital Trust $2.625 Conv. Pfd.+ 250,000 13,289,063
- ----------------------------------------------------------------------------------------------------------------------==============
Real Estate .44% Walden Residential Properties $2.30 Pfd. w/Warrants 400,000 10,950,000
- ----------------------------------------------------------------------------------------------------------------------==============
Restaurant .47% Wendy's Financing $2.50 Conv. Pfd. 200,000 11,725,000
- ----------------------------------------------------------------------------------------------------------------------==============
Retail .25% Ikon Office Solutions $2.05 Conv. Pfd. 76,400 4,918,250
Supermarkets General Holdings Corp. $3.52 Pfd. P.I.K.*** 60,000 1,260,000
Total 6,178,250
- ----------------------------------------------------------------------------------------------------------------------==============
Utility .44% Calenergy, C.T. $3.125 Conv. Pfd.+ 150,000 11,085,938
- ----------------------------------------------------------------------------------------------------------------------==============
Waste Management .23% Browning Ferris Industries Inc. $2.58 Conv. Pfd. 176,300 5,861,975
- ----------------------------------------------------------------------------------------------------------------------==============
Total Investments in Preferred and Convertible-Preferred Stocks,
Common Stocks and Warrants (Cost $182,064,795) 208,447,185
====================================================================================================================================
U.S. Government Obligations 9.96%
====================================================================================================================================
Federal National Mortgage Association 7% due 3/1/2026 19,379M 19,028,005
Federal National Mortgage Association 7 1/2% due on an announced basis 50,000M 50,031,250
Federal National Mortgage Association 7 1/2% due 6/1/2027 24,750M 24,815,761
Federal National Mortgage Association 7.95% due 3/7/2005 10,000M 10,259,375
Federal National Mortgage Association 8% due on an announced basis 25,000M 25,558,577
Federal National Mortgage Association 8% due 7/1/2026 9,008M 9,224,597
Federal National Mortgage Association 8% due 8/1/2026 8,000M 8,192,143
Federal National Mortgage Association 8% due 9/1/2026 23,982M 24,536,948
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Statement of Net Assets
June 30, 1997
Principal
Investments Amount Market Value
====================================================================================================================================
<S> <C> <C> <C>
Federal National Mortgage Association 8% due 4/1/2027 $ 8,000M $ 8,192,108
Government National Mortgage Association 7 1/2% due 1/15/2027 24,521M 24,617,279
U.S. Treasury Bonds Zero Coupon due 11/15/2004 17,000M 10,545,313
U.S. Treasury Notes 6 5/8% due 4/30/2002 35,000M 35,328,125
---------------------------------------------------------------------------------------==============
Total Investments in Government Obligations (Cost $250,253,897) 250,329,481
---------------------------------------------------------------------------------------==============
Total Investments in Securities (Cost $2,154,139,210) 2,236,270,921
====================================================================================================================================
Other Assets, Less Liabilities 11.01%
====================================================================================================================================
Other Assets Short-Term Federal Home Loan Banks 9 1/2% due 1/20/1998 50,000M 51,093,750
Investments Federal Home Loan Banks 12 1/2% due 7/22/1997 65,000M 65,264,063
Federal Home Loan Banks 12 1/2% due 9/10/1997 40,000M 40,537,500
Federal Home Loan Banks 12 1/2% due 10/23/1997 50,000M 51,046,875
Student Loan Marketing Association 12 1/2% due 9/26/1997 76,000M 77,211,250
Ford Motor Credit Co. 6.11% due 7/1/1997 5,000M 5,000,000
General Electric Capital Corp. 5.50% due 7/2/1997 10,300M 10,300,000
General Electric Capital Corp. 5.56% due 7/2/1997 500M 500,000
Total Short-Term Investments (Cost $312,827,625) 300,953,438
- ----------------------------------------------------------------------------------------------------------------------==============
Cash and Receivables, Net of Liabilities (24,281,014)
---------------------------------------------------------------------------------------==============
Total Other Assets, Less Liabilities 276,672,424
====================================================================================================================================
Net Assets 100.00% $2,512,943,345
====================================================================================================================================
Class A Shares-Net asset value ($1,915,703,130 / 199,331,274 shares outstanding) $9.61
Class B Shares-Net asset value ($244,333,985 / 25,428,775 shares outstanding) $9.61
Class C Shares-Net asset value ($352,906,230 / 36,693,150 shares outstanding) $9.62
</TABLE>
* Non-income producing.
** Deferred-interest debentures pay no interest for a stipulated number of
years, after which time they pay a stipulated coupon rate.
*** Represents a payment-in-kind security, which may pay interest/dividends in
additional face/shares.
+ Restricted security under Rule 144A.
See Notes to Financial Statements.
12
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
Investment Income Six Months Ended June 30, 1997
====================================================================================================================================
<S> <C> <C> <C>
Income Dividends $ 5,203,027
Interest 99,364,945
Total income $104,567,972
----------------------------------------------------------------------------------------------------------------------
Expenses Management fee 5,372,317
12b-1 distribution plan-Class A 2,488,162
12b-1 distribution plan-Class B 900,373
12b-1 distribution plan-Class C 1,464,705
Shareholder servicing 1,221,382
Reports to shareholders 139,456
Registration 126,000
Directors 45,636
Professional services 69,500
Other 199,894
Total expenses 12,027,425
----------------------------------------------------------------------------------------------------------------------
Net investment income 92,540,547
----------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain on Investments
====================================================================================================================================
Realized gain from investment transactions
Proceeds from sales 912,368,848
Cost of investments sold (905,215,128)
----------------------------------------------------------------------------------------------------------------------
Net realized gain 7,153,720
----------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investments 49,495,421
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 56,649,141
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $149,189,688
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Six Months Year Ended
Ended June 30, December 31,
Increase (Decrease) in Net Assets 1997 1996
====================================================================================================================================
<S> <C> <C> <C>
Operations Net investment income $ 92,540,547 $ 145,990,034
Net realized gain from investment transactions 7,153,720 21,344,390
Net unrealized appreciation of investments 49,495,421 19,291,096
Net increase in net assets resulting from operations 149,189,688 186,625,520
----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions 523,812 3,837,343
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income
Class A (78,329,699) (142,154,269)
Class B (6,791,860) (1,525,182)
Class C (12,204,323) (8,199,939)
Total distributions (97,325,882) (151,879,390)
----------------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 446,455,797 659,731,030
Net asset value of shares issued to shareholders in reinvestment
of net investment income 49,105,525 75,207,820
Net asset value of shares issued in exchange for assets acquired in
tax-free acquisition -- 208,387,462
Total 495,561,322 943,326,312
----------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (164,426,992) (191,996,711)
----------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions 331,134,330 751,329,601
----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 383,521,948 789,913,074
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets
Beginning of period 2,129,421,397 1,339,508,323
----------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income
of $23,752,966 and $28,014,489, respectively) $2,512,943,345 $2,129,421,397
----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
Class A Shares
---------------------------------------------------------------------------------------
Six Months
Ended June 30, Year Ended December 31,
Per Share Operating Performance: 1997 1996 1995 1994 1993 1992
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.41 $9.29 $8.71 $9.95 $9.43 $9.02
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .38(b) .81 .85 .84 .89 .95
Net realized and unrealized gain (loss)on
investments .23 .17 .606 (1.203) .55 .42
Total from investment operations .61 .98 1.456 (.363) 1.44 1.37
------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.41) (.86) (.876) (.877) (.92) (.96)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.61 $9.41 $9.29 $8.71 $9.95 $9.43
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 6.62%(c) 11.16% 17.50% (3.87)% 15.97% 15.99%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses .44%(c) .89% .82% .88% .88% .84%
Net investment income 4.04%(c) 8.77% 9.41% 8.97% 9.17% 10.18%
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
------------------------------ -------------------------------
Six Months Six Months
Ended June 30, 8/1/96(d) Ended June 30, 7/15/96(d)
Per Share Operating Performance: 1997 to 12/31/96 1997 to 12/31/96
============================================================================================== ===============================
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.41 $9.13 $9.41 $9.05
- ---------------------------------------------------------------------------------------------- -------------------------------
Income from investment operations
Net investment income .34(b) .34 .35(b) .35
Net realized and unrealized gain on investments .23 .26 .23 .33
Total from investment operations .57 .60 .58 .68
---------------------------------------------------------------------------------------- -------------------------------
Distributions
Dividends from net investment income (.37) (.32) (.37) (.32)
---------------------------------------------------------------------------------------- -------------------------------
Net asset value, end of period $9.61 $9.41 $9.62 $9.41
- ---------------------------------------------------------------------------------------------- -------------------------------
Total Return(c) 6.32% 6.57% 6.31% 7.86%
====================================================================================================================================
Ratios to Average Net Assets(c):
Expenses .81% .70% .77% .75%
Net investment income 3.66% 3.37% 3.70% 3.72%
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
Supplemental Data for All Classes: 1997 1996 1995 1994 1993 1992
============================================================ =====================================================================
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $2,512,943 $2,129,421 $1,339,508 $987,613 $969,736 $734,017
Portfolio turnover rate 33.86% 106.79% 134.90% 147.98% 159.79% 188.44%
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads.
(b) Calculated using average shares outstanding during the period.
(c) Not annualized.
(d) Commencement of offering respective class shares.
See Notes to Financial Statements.
14
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies Lord Abbett Bond-Debenture Fund, Inc. (the
"Company") is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The financial statements
have been prepared in conformity with generally accepted accounting principles
which require management to make certain estimates and assumptions at the date
of the financial statements. The following summarizes the significant accounting
policies of the Company: (a) Market value is determined as follows: Securities
listed or admitted to trading privileges on any national securities exchange are
valued at the last sales price on the principal securities exchange on which
such securities are traded, or, if there is no sale, at the mean between the
last bid and asked prices on such exchange, or, in the case of bonds and notes,
in the over-the-counter market if, in the judgment of the Company's officers,
that market more accurately reflects the market value of bonds and notes.
Securities traded only in the over-the-counter market are valued at the mean
between the bid and asked prices, except that securities admitted to trading on
the NASDAQ National Market System are valued at the last sales price if it is
determined that such price more accurately reflects the value of such
securities. Securities for which market quotations are not available are valued
at fair value under procedures approved by the Board of Directors. (b) It is the
policy of the Company to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income. Therefore, no federal income tax provision is required. (c)
Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Realized gains and losses from investment
transactions are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. The Company has elected not to amortize
the premiums on U.S. Government bonds, which is consistent with the treatment
for federal income tax purposes. Net investment income (other than distribution
and service fees) and realized and unrealized gains or losses are allocated to
each class of shares based upon the relative proportion of net assets at the
beginning of the day. (d) A portion of the proceeds from sales and costs of
repurchases of capital shares, equivalent to the amount of distributable net
investment income on the date of the transaction, is credited or charged to
undistributed income. Undistributed net investment income per share thus is
unaffected by sales or repurchases of shares.
2. Management Fee and Other Transactions with Affiliates The Company has a
management agreement with Lord, Abbett & Co. ("Lord Abbett") pursuant to which
Lord Abbett supplies the Company with investment management, research,
statistical and advisory services and pays officers' remuneration and certain
other expenses of the Company. The management fee is based on average daily net
assets at the following annual rates: 0.50% on the first $500 million and 0.45%
on assets over $500 million. The Company has Rule 12b-1 plans and agreements
(the "Class A, Class B and Class C Plans") with Lord Abbett Distributor LLC
("Distributor"), an affiliate of Lord Abbett. The Company makes payments to
Distributor which uses or passes on such payments to authorized institutions.
Pursuant to the Class A Plan, the Company pays Distributor (1) an annual service
fee of 0.15% of the average daily net asset value of shares sold prior to June
1, 1990 and 0.25% of the average daily net asset value of shares sold on or
after that date, (2) a one-time distribution fee of up to 1% on certain
qualifying purchases and (3) a supplemental annual distribution fee of 0.10% of
the average daily net assets of Class A shares serviced by certain qualifying
institutions. Pursuant to the Class B Plan, the Company pays Distributor an
annual service and a distribution fee of 0.25% and 0.75%, respectively, of the
average daily net asset value of the Class B shares. Pursuant to the Class C
Plan, the Company pays Distributor (1) a service fee and a distribution fee, at
the time such shares are sold, not to exceed 0.25% and 0.75%, respectively, of
the net asset value of such shares sold and (2) at each quarter-end after the
first anniversary of the sale of such shares, a service fee and a distribution
fee at an annual rate not to exceed 0.25% and 0.75%, respectively, of the
average annual net asset value of such shares outstanding. Distributor received
$832,645 representing payment of commissions on sales of Class A shares after
deducting $5,237,998 allowed to authorized distributors as concessions. Certain
of the Company's officers and directors have an interest in Lord Abbett.
3. Distributions Dividends from net investment income are paid monthly. Capital
gain distributions, if any, will be made annually. At June 30, 1997, accumulated
net realized loss for financial reporting purposes aggregated $92,085,667. The
Company had a capital loss carryforward as of December 31, 1996 of approximately
$99,200,000 of which $3,300,000 expires in 1997, $28,600,000 expires in 1998,
$16,945,000 expires in 1999, $35,000 expires in 2002 and $50,320,000 in 2003. No
capital gain distribution is expected to be paid to shareholders until net gains
have been realized in excess of such amounts. Income and capital gains
distributions are determined in accordance with income tax regulations which may
differ from methods used to determine the corresponding income and capital gains
amounts in accordance with generally accepted accounting principles.
4. Capital The Company has authorized 760 million shares of $.001 par value
capital stock designated Class A, 160 million shares of $.001 par value capital
stock designated Class B, and 80 million shares of $.001 par value capital stock
designated Class C. Paid in capital amounted to $2,511,018,522 at June 30, 1997.
Transactions in shares of capital stock were as follows:
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
------------------------- ----------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------- ----------------------------
Sales of shares 24,347,877 $228,117,657 52,597,828 $ 482,030,592
Shares issued to
shareholders in
reinvestment of net
investment income 4,109,375 38,575,637 7,626,981 70,002,967
Total 28,457,252 266,693,294 60,224,809 552,033,559
- ------------------------------------------------- ----------------------------
Shares reacquired (14,460,123 (135,284,310) (19,113,648) (177,419,703)
Increase in shares 13,997,129 $131,408,984 41,111,161 $ 374,613,856
- ------------------------------------------------- ----------------------------
August 1, 1996
(Commencement of
Six Months Ended offering Class B shares)
June 30, 1997 to December 31, 1996
------------------------- ----------------------------
Class B Shares Amount Shares Amount
- ------------------------------------------------- ----------------------------
Sales of shares 14,062,964 $132,366,609 11,594,111 $107,794,119
Shares issued to
shareholders in
reinvestment of net
investment income 394,786 3,702,241 80,127 746,995
Total 14,457,750 136,068,850 11,674,238 108,541,114
- ------------------------------------------------- ----------------------------
Shares reacquired (599,358) (5,626,736) (103,855) (972,069)
Increase in shares 13,858,392 $130,442,114 11,570,383 $107,569,045
- ------------------------------------------------- ----------------------------
July 15, 1996
(Commencement of
Six Months Ended offering Class C shares)
June 30, 1997 to December 31, 1996
------------------------- ----------------------------
Class C Shares Amount Shares Amount
- ------------------------------------------------- ----------------------------
Sales of shares 9,120,389 $85,971,531 7,294,466 $ 69,906,319
Shares issued to
shareholders in
reinvestment of net
investment income 726,509 6,827,647 488,922 4,457,858
Shares issued to
shareholders in
exchange for net
assets acquired in
tax-free acquisition -- -- 23,033,874 208,387,462
Total 9,846,898 92,799,178 30,817,262 282,751,639
- ------------------------------------------------- ----------------------------
Shares reacquired (2,500,200) (23,515,946) (1,470,810) (13,604,939)
Increase in shares 7,346,698 $69,283,232 29,346,452 $269,146,700
- --------------------------------------------------------------------------------
15
<PAGE>
Notes to Financial Statements
5. Purchases and Sales of Securities Purchases and sales of investment
securities (other than U.S. Government obligations and short-term investments)
aggregated $548,422,020 and $319,998,597, respectively. Purchases and sales of
U.S. Government obligations aggregated $603,139,824 and $592,370,252,
respectively. As of June 30, 1997, unrealized appreciation for federal income
tax purposes aggregated $70,257,524, of which $128,705,061 related to
appreciated securities and $58,447,537 related to depreciated securities. For
federal income tax purposes, the identified cost of investments owned at June
30, 1997 was substantially the same as the cost for financial reporting
purposes.
6. Directors' Remuneration The Directors of the Company associated with Lord
Abbett and all officers of the Company receive no compensation from the Company
for acting as such. Outside Directors' fees and retirement costs are allocated
among all funds in the Lord Abbett group based on the net assets of each fund.
Directors' fees payable at June 30, 1997 under a deferred compensation plan were
$404,042.
7. Acquisition On July 12, 1996, the Company acquired the net assets of Lord
Abbett Securities Trust-Bond-Debenture Trust (the "Trust") pursuant to a plan of
reorganization approved by the Trust's shareholders on June 19, 1996. The
acquisition was accomplished by a tax-free exchange of 23,033,874 shares of
newly issued Class C shares for 44,089,410 shares of the Trust valued at
$208,387,462 in the aggregate on July 12, 1996. The aggregate net assets of the
Company and the Trust immediately before the acquisition were $1,535,612,851 and
$208,387,462 (including $1,759,291 of net unrealized depreciation and $79,619 of
accumulated net realized losses), respectively.
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Bond-Debenture Fund, Inc.:
We have audited the accompanying statement of net assets of Lord Abbett
Bond-Debenture Fund, Inc. as of June 30, 1997, the related statements of
operations and of changes in net assets and the financial highlights for each of
the periods presented. These financial statements and the financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at June 30,
1997 by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett
Bond-Debenture Fund, Inc. at June 30, 1997, the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
New York, New York
August 1, 1997
Our Management
Board of Directors
Robert S. Dow
E. Wayne Nordberg
E. Thayer Bigelow*+
Stewart S. Dixon*
John C. Jansing*
C. Alan MacDonald*+
Hansel B. Millican, Jr.*
Thomas J. Neff*+
* Outside Director
+ Audit Committee
Officers
Robert S. Dow, Chairman and President
Christopher J. Towle, Executive Vice
President and Portfolio Manager
Kenneth B. Cutler, Vice President and 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
Paul A. Hilstad, Vice President and Assistant Secretary
Thomas F. Konop, Vice President and Assistant Secretary
Keith F. O'Connor, Vice President and Treasurer
A. Edward Oberhaus III, Vice President
Donna McManus, Assistant Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
Investment Manager and
Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N.A.
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
Copyright (C) 1997 by Lord Abbett Bond-Debenture Fund, Inc., 767 Fifth Avenue,
New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Bond-Debenture Fund, Inc., is to be distributed only if preceded or
accompanied by a current prospectus which includes information concerning the
Fund's investment objective and policies, sales charges and other matters. There
is no guarantee that the forecasts contained within this publication will come
to pass.
All rights reserved. Printed in the U.S.A.
16
<PAGE>
Lord, Abbett & Co.
A Tradition of Performance Through
Disciplined
Investing
[PHOTO: Richard S. Szaro, Amy K. Kennedy, Ho C. Wang, Christoperh J. Towle and
Zane E. Brown]
(from left to right)
Richard S. Szaro, senior securities analyst
Amy K. Kennedy, securities analyst
Ho C. Wang, senior securities analyst
Christopher J. Towle, portfolio manager-
Lord Abbett Bond-Debenture Fund
(seated)
Zane E. Brown, partner and
director of fixed income
A successful long-term track record is evidence of a successful investment
strategy. For decades we, at Lord, Abbett & Co., have believed that investing
with a disciplined, value approach is the best way to achieve competitive
returns and reduce portfolio risk. This commitment and the dedication of our
team of 51 investment professionals have helped us earn the trust of financial
professionals and investors for over 65 years.
About Your
Fund's
Board of
Directors
The Securities and Exchange Commission (SEC) views the role of the independent
Board of Directors as one of the most important components in overseeing a
mutual fund. The Board of Directors watches over your Fund's general operations
and represents your interests. Board members review and approve every contract
between your Fund and Lord, Abbett & Co. (the Fund's investment manager) and
Lord Abbett Distributor LLC (the Fund's underwriter). They meet regularly to
review a wide variety of information and issues regarding your Fund. Every
member of the Board possesses extensive business experience. Lord Abbett
Bond-Debenture Fund's shareholders are indeed fortunate to have a group of
independent directors with diverse backgrounds to provide a variety of
viewpoints in the oversight of their Fund. Below, we feature one of our
independent directors, Hansel B. Millican, Jr.
Hansel B. Millican, Jr.
Director--Lord Abbett
Bond-Debenture Fund
[PHOTO: Hansel B. Millican, Jr.]
An alumnus of North Carolina State University (Raleigh), Mr. Millican has over
45 years of corporate management experience. He is currently the President and
CEO of Rochester Button Company. Mr. Millican has been an independent director
for all of Lord Abbett's funds since 1982.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
GROWTH
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Income Funds Income Funds Market Fund
<S> <C> <C> <C> <C> <C> <C>
Developing Global Fund- Affiliated Fund Balanced Series Bond-Debenture o National
Growth Fund Equity Series Fund o California U.S. Government
Growth & o Connecticut Securities
International Mid-Cap Income Series Global Fund- o Florida Money Market
Series Value Fund Income Series o Georgia Fund*+
Research Fund- o Hawaii
Research Fund- Large-Cap Series Limited Duration o Michigan
Small-Cap Series U.S. Government o Minnesota
Securities Series* o Missouri
o New Jersey
U.S. Government o New York
Securities Series* o Pennsylvania
o Texas
o Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your financial adviser provides value in helping you identify and
understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for Lord Abbett Bond-Debenture
Fund.
For more complete information about any other Lord Abbett fund, including
charges and expenses, call your financial adviser or Lord Abbett Distributor LLC
at 800-874-3733 for a prospectus. Read it carefully before investing.
When you invest in a family of funds, you benefit from:
Diversification. You and your financial adviser can diversify your investments
between equity and income funds.
Flexibility. As your investment goals change, your financial adviser can help
you reallocate your portfolio.
As an investor in the Lord Abbett Family of Funds, you have access to 28
portfolios designed to meet a variety of investment needs. While you may
reallocate your assets among our funds at any time, we recommend speaking with
your financial adviser to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or
Statement Inquiries:
800-821-5129
For Literature:
800-874-3733
For More Information:
800-426-1130
Visit Our Web Site:
http://www.lordabbett.com
* An investment in this Fund is neither insured nor guaranteed by the U.S.
Government.
+ There can be no assurance that this Fund will be able to maintain a stable
net asset value of $1.00 per share. This Fund is managed to maintain, and
has maintained, its stable $1.00 per share price.
[LOGO](R) LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC LABD-3-697
- ------------------------------------------------------------
The GM Building o 767 Fifth Avenue o New York, NY 10153-0203 (8/97)
