1933 Act File No. 2-38910
1940 Act File No. 8112145
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 44 [X]
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT [X]
OF 1940
Post-Effective Amendment No. 25 [X]
LORD ABBETT BOND-DEBENTURE FUND, INC.
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Exact Name of Registrant as Specified in Charter
767 FIFTH AVENUE, NEW YORK, N. Y. 10153-0203
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Address of Principal Executive Office
Registrant's Telephone Number (212) 848-1800
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Thomas F. Konop, Vice President
767 FIFTH AVENUE, NEW YORK, N. Y. 10153
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(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
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X on May 1, 1998 pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a)(1) of Rule 485
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on (date) pursuant to paragraph (a) (1) of Rule 485
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75 days after filing pursuant to paragraph (a)(2) of Rule 485
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on (date) pursuant to paragraph (a) (2) of Rule 485
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If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
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previously filed post-effective amendment
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<PAGE>
LORD ABBETT BOND-DEBENTURE FUND, INC.
FORM N-1A
Cross Reference Sheet
Post-Effective Amendment No. 44
Pursuant to Rule 481(a)
Form N-1A Location In Prospectus or
Item No. Statement of Additional Information
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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
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<PAGE>
Form N-1A Location in Prospectus or
Item No. Statement of Additional Information
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16 (f) Purchases, Redemptions
and Shareholder Services; Investment Advisory and Other
Services
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
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<PAGE>
This Prospectus sets forth concisely the information about Lord Abbett
Bond-Debenture Fund, Inc. ("we" or the "Fund") that you should know before
investing. Please read this Prospectus before investing and retain it for future
reference.
The Fund has five classes of shares. This Prospectus offers four of those
classes designated Class A, B, C and P shares which provide investors with
different purchase options. See "Purchases" for a description of these choices.
Our investment objective is high current income and the opportunity for
capital appreciation to produce a high total return. There can be no assurance
that this objective will be achieved.
The Statement of Additional Information dated May 1, 1998 has been filed
with the Securities and Exchange Commission and is incorporated by reference
into this Prospectus. You may obtain it, 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."
Shaded terms are defined in the Glossary of Terms.
Mutual Fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank. Shares are not 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.
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.
LORD ABBETT
BOND-DEBENTURE FUND
PROSPECTUS
May 1, 1998
TABLE OF CONTENTS PAGE
How We Invest 2
Risk Factors 2
Portfolio Management 2
Investor Expenses 2
Financial Highlights 3
Purchases 4
Opening Your Account 5
Shareholder Services 6
Redemptions 7
Dividends and Capital Gains 7
Our Management 8
Fund Performance 8
Investment Policies, Risks and Limits 8
Sales Compensation 9
Glossary of Terms 10
LORD, ABBETT & CO.
Investment Management
A Tradition of Performance Through Disciplined Investing
The General Motors Building
767 Fifth Avenue o New York o New York o 10153
(800) 426-1130
<PAGE>
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HOW WE INVEST
Normally, we invest 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." At least 20% of our assets must be invested in
any combination of investment-grade debt securities, U.S. Government securities
and cash equivalents.
We believe that a high total return (current income and capital
appreciation) may be derived from an actively managed, diversified security
portfolio. Under normal circumstances, we invest at least 65% of our total
assets in bonds and/or debentures. 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.
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.
See "Investment Policies, Risks and Limits."
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RISK FACTORS
The lower-rated bonds in which the Fund invests involve risks that
interest and principal payments may not be made. 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. In addition, the value of your investment will change as
the general levels of interest rates fluctuate. When interest rates decline,
share value may rise. When interest rates rise, share value may decline. The
Fund employs other investment practices, such as investments in foreign
securities, illiquid securities and other securities, that could adversely
affect performance. Before you invest, please read "Investment Policies, Risks
and Limits."
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PORTFOLIO MANAGEMENT
Christopher J. Towle, Executive Vice President and portfolio manager of
the Fund, is primarily responsible for the day-to-day management of the Fund.
Mr. Towle has been with Lord, Abbett & Co. ("Lord Abbett") since 1988 and has
over 17 years of investment experience.Mr. Towle is assisted by, and may
delegate management duties to, other Lord Abbett employees who may be Fund
officers.
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INVESTOR EXPENSES
The expenses shown below are based on estimated expenses for the current fiscal
year. Future expenses may be different than those shown.
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Bond-Debenture Fund Class A Class B Class C Class P
Shareholder Transaction Expenses
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Maximum Sales Charge on Purchases
(as a % of offering price) 4.75% None None None
Deferred Sales Charge (See "Purchases") None 5.00% 1.00% None
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Annual Fund Operating Expenses (as a % of average net assets)
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Management Fees 0.46% 0.46% 0.46% 0.46%
(See "Our Management")
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12b-1 Fees(1) 0.28% 1.00% 1.00% 0.45%
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Other Expenses 0.15% 0.15% 0.15% 0.15%
(See "Our Management")
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Total Operating Expenses 0.89% 1.61% 1.61% 1.06%
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Example
Assume an average annual return of 5% and no change in the level of expenses.
For a $1,000 investment with all dividends and distributions reinvested, you
would have paid the following total expenses assuming you sold your shares at
the end of each time period indicated.
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Share Class 1 Year 3 Years 5 Years 10 Years
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Class A shares $56 $75 $94 $152
Class B shares(2) $66 $81 $108 $172
Class C shares $26 $51 $88 $191
Class P shares $11 $34 $58 $129
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You would pay the following expenses on the same investment, assuming you kept
your shares:
Class A shares $56 $75 $94 $152
Class B shares(2) $16 $51 $88 $172
Class C shares $16 $51 $88 $191
Class P shares $11 $34 $58 $129
This example is for comparison and is not a representation of the Fund's actual
expenses and returns, either past or present.
(1) Because of the 12b-1 fee, long-term shareholders may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of your original purchase of Class B shares.
2
<PAGE>
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FINANCIAL HIGHLIGHTS The following table has been audited by Deloitte & Touche
LLP, independent accountants, in connection with their annual audit of the
Fund's Financial Statements, whose report may be obtained on request. Call
800-821-5129 and ask for the Fund's 1997 Annual Report.
<TABLE>
<CAPTION>
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Per Class A Share+ Operating Year Ended December 31,
Performance: 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.41 $ 9.29 $ 8.71 $ 9.95 $ 9.43
Income from investment operations
Net investment income .75(a) .81 .85 .84 .89
Net realized and unrealized
gain (loss) on investments .40 .17 .606 (1.203) .55
Total from investment operations 1.15 .98 1.456 (.363) 1.44
Distributions
Dividends from net investment income (.80) (.86) (.876) (.877) (.92)
Net asset value, end of year $ 9.76 $ 9.41 $ 9.29 $ 8.71 $ 9.95
Total Return(b) 12.70% 11.16% 17.50% (3.87)% 15.97%
Ratios to Average Net Assets:
Expenses 0.89% 0.89% 0.82% 0.88% 0.88%
Net Investment Income 7.89% 8.77% 9.41% 8.97% 9.17%
<CAPTION>
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Per Class A Share+ Operating Year Ended December 31,
Performance: 1992 1991 1990 1989 1988
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<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.02 $ 7.36 $ 9.03 $ 9.59 $ 9.39
Income from investment operations
Net investment income .95 .98 1.02 1.04 1.09
Net realized and unrealized
gain (loss) on investments .42 1.66 (1.65) (.56) .15
Total from investment operations 1.37 2.64 (.63) .48 1.24
Distributions
Dividends from net investment income (.96) (.98) (1.04) (1.04) (1.04)
Net asset value, end of year $ 9.43 $ 9.02 $ 7.36 $ 9.03 $ 9.59
Total Return(b) 15.99% 38.34% (7.57)% 5.06% 13.80%
Ratios to Average Net Assets:
Expenses 0.84% 0.85% 0.80% 0.59% 0.64%
Net Investment Income 10.18% 11.96% 12.48% 10.97% 11.29%
</TABLE>
<TABLE>
<CAPTION>
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Class B Shares Class C Shares
Per Class Share Operating Year Ended August 1, 1996(c) to Year Ended July 15, 1996(c) to
Performance December 31, 1997 December 31, 1996 December 31, 1997 December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------
<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 .68(a) .34 .69(a) .35
Net realized and unrealized
gain on securities .38 .26 .39 .33
Total from investment operations 1.06 .60 1.08 .68
Distributions
Dividends from net investment income (.72) (.32) (.72) (.32)
Net asset value, end of period $ 9.75 $ 9.41 $ 9.77 $ 9.41
Total Return(b) 11.85% 6.57%(d) 11.97% 7.86%(d)
Ratios to Average Net Assets:
Expenses 1.63% 0.70%(d) 1.58% 0.75%(d)
Net investment income 7.06% 3.37%(d) 7.16% 3.72%(d)
</TABLE>
<TABLE>
<CAPTION>
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Year Ended December 31,
Supplemental Data For All Classes: 1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Net Assets, end of year (000) $2,866,184 $2,129,421 $1,339,508 $ 987,613 $ 969,736
Portfolio turnover rate 89.14% 106.79% 134.90% 147.98% 159.79%
<CAPTION>
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Year Ended December 31,
Supplemental Data For All Classes: 1992 1991 1990 1989 1988
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Assets, end of year (000) $ 734,017 $ 594,008 $ 480,847 $ 643,953 $ 717,775
Portfolio turnover rate 188.44% 208.49% 145.47% 123.77% 140.01%
</TABLE>
+ The fund had only one class of shares prior to July 12, 1996. That class of
shares is now designated Class A shares.
(a) Calculated using average shares outstanding during the period.
(b) Total return does not consider the effects of front-end sales or contingent
deferred sales charges.
(c) Commencement of operations for Class shares.
(d) Not annualized.
See Notes to Financial Statements.
3
<PAGE>
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PURCHASES
This Prospectus offers four classes of shares: Class A, B, C and P. These
classes of shares represent investments in the same portfolio of securities but
are subject to different expenses. Our shares are continuously offered based on
the per share net asset value ("NAV") next computed after we accept your
purchase order submitted in proper form, plus a front-end sales charge as
described below, in the case of the Class A shares and without a front-end sales
charge, in the case of the Class B, C and P shares as described below. Investors
should read this section carefully to determine which class of shares represents
the best investment option for their particular situation.
Class A
o Normally offered with a front-end sales charge.
o Lower annual expenses than Class B and Class C shares.
Class B
o No front-end sales charge.
o Higher annual expenses than Class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
sixth anniversary of purchase.
o Automatically convert to Class A shares after eight years.
Class C
o No front-end sales charge.
o Higher annual expenses than Class A shares.
o A contingent deferred sales charge is applied to shares sold prior to the
first anniversary of purchase.
Class P shares, available to a limited number of shareholders, are described on
the next page.
It may not be suitable for you to place a purchase order for Class B shares of
$500,000 or more or a purchase order for Class C shares of $1,000,000 or more.
You should discuss pricing options with your investment professional.
For more information, see "Alternative Sales Arrangements" in the Statement of
Additional Information.
Class A Shares. Front-end sales charges are as follows:
To Compute
As a % of As a % of Offering Price
Offering Your Divide
Your Investment Price Investment NAV by
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Less than $50,000 4.75% 4.99% .9525
$50,000 to $99,999 4.75% 4.99% .9525
$100,000 to $249,999 3.75% 3.90% .9625
$250,000 to $499,999 2.75% 2.83% .9725
$500,000 to $999,999 2.00% 2.04% .9800
$1,000,000 or more No Sales Charge 1.0000
Reducing Your Class A Front-End Sales Charges. There are several ways you can
qualify for a lower sales charge when purchasing Class A shares if you inform
the Fund that you are eligible at the time of purchase.
o Rights of Accumulation -- a Purchaser can add the share value of any
Eligible Fund already owned to the amount of the next purchase of Class A
shares for purposes of calculating the sales charge.
o Statement of Intention -- a Purchaser can purchase Class A shares of any
Eligible Fund over a 13-month period and receive the same sales charge as
if all shares had been purchased at once. Shares purchased through
reinvestment of distributions are not included.
For more information on eligibility for these privileges, read the applicable
sections in the attached application.
Class A Share Purchases Without a Front-End Sales Charge. Class A shares may be
purchased without a front-end sales charge under the following circumstances.
1 Purchases of $1 million or more. P
2 Purchases by Retirement Plans with at least 100 eligible employees. P
3 Purchases under a Special Retirement Wrap Program. P
4 Purchases made with dividends and distributions on Class A shares of
another Eligible Fund.
5 Purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) plan for Class A shares.
6 Employees of any consenting securities dealer having a sales agreement
with Lord Abbett Distributor.
7 Purchases under a Mutual Fund Wrap-Fee Program.
8 Lord Abbett Consultants/Advisers.
9 Employees of our shareholder servicing agent.
10 Employees of any national securities trade organization to which
4
<PAGE>
Lord Abbett belongs.
11 Employees of Lord Abbett and our Directors/Trustees (active or retired),
their spouses, including surviving spouses, and other family members.
Contingent Deferred
Anniversary(1) Sales Charge on
of the Day on Redemptions
Which the Purchase (As % of Amount
Order Was Accepted Subject to Charge)
On Before
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(2)
(1) Anniversary is the 365th day subsequent to a purchase or a prior
anniversary.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
12 Trustees or custodians of any pension or profit sharing plan, or payroll
deduction IRA for the persons mentioned in 6, 9, 10 and 11 above.
P May be subject to a contingent deferred sales charge.
Contingent Deferred Sales Charges ("CDSC"). The CDSC, regardless of class, is
not charged on shares acquired through reinvestment of dividends or capital
gains distributions and is charged on the original purchase cost or the current
market value of the shares being sold, whichever is lower. In addition,
repayment of loans under Retirement Plans and 403(b) plans will constitute new
sales for purposes of assessing the CDSC.
Class A Share CDSC. If you buy Class A shares under one of the starred (P)
categories listed above subject to a dealer's concession of up to 1% and you
redeem any of the Class A shares within 24 months after the month in which you
initially purchased such shares, the Fund normally will collect a CDSC of 1%.
The Class A share CDSC generally will be waived under the following
circumstances.
o Benefit payments such as Retirement Plan loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
distribution under Retirement Plans (documentation may be required).
o Redemptions continuing as investments in another fund participating in a
Special Retirement Wrap Program.
Class B Share CDSC. The CDSC for Class B shares normally applies if you redeem
your shares before the sixth anniversary of their initial purchase. The CDSC
varies depending on how long you own your shares according to the following
schedule.
5
<PAGE>
The Class B share CDSC generally will be waived under the following
circumstances.
o Benefit payments such as Retirement Plan loans, hardship withdrawals,
death, disability, retirement, separation from service or any excess
distribution under Retirement Plans.
o Eligible Mandatory Distributions under 403(b) plans and individual
retirement accounts.
o Death of the shareholder (natural person).
o On redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year).
See "Systematic Withdrawal Plan" for more information on CDSCs with respect to
Class B shares.
Class C Share CDSC. The 1% CDSC for Class C shares normally applies if you
redeem your shares before the first anniversary of your original purchase.
Application of CDSC to a Redemption. To determine if a CDSC applies to a
redemption, the Fund redeems shares in the following order.
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).
3 Shares held the longest before the sixth anniversary of their purchase
(Class B) or before the first anniversary of their purchase (Class C).
Class P Shares.
o No front-end sales charge.
o Lower annual expenses than Class B and Class C shares.
o No CDSC.
Class P shares are available to a limited number of investors. Class P
shares are currently sold at net asset value to the trustees of, or
employer-sponsors with respect to, pension or Retirement Plans with at least 100
eligible employees (such as a plan under Section 401(a), 401(k) or 457(b) of the
Internal Revenue Code) which engage an investment professional providing or
participating in an agreement to provide certain recordkeeping, administrative
and/or sub-transfer agency services to the Fund on behalf of the Class P
shareholders.
Purchases and redemptions of Class P shares will be effected at net asset
value by trustees, custodians or employers on behalf of plan participants.
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OPENING YOUR ACCOUNT
Minimum Initial Investment
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o Regular account $1,000
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o Individual Retirement Accounts
(Traditional, Education and Roth) and 403(b) $250
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o Invest-A-Matic and Div-Move $250 initial
$50 subsequent minimum
For Retirement Plans and Mutual Fund Wrap Programs, there is no minimum
investment required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the attached
application and send it to the Fund at the address stated below. You should read
this Prospectus carefully before placing your order to assure your order is in
proper form.
Lord Abbett Bond-Debenture Fund, Inc.
P.O. Box 419100
Kansas City, MO 64141
Proper Form. To be in proper form an order submitted directly to the Fund must
contain (1) a completed Application Form or information and any other
documentation required supplementally by the Fund, and (2) payment by check. For
more information regarding proper form of a purchase order, call the Fund at
800-821-5129.
Payment must be credited in U.S. dollars to our custodian bank's account.
IMPORTANT INFORMATION. If you fail to provide a correct taxpayer identification
number or to make certain required certifications, you may be subject to a $50
penalty under the Internal Revenue Code and we may be required to withhold a
portion (31%) of any redemption proceeds and of any dividend or distribution on
your account.
By Exchange. Telephone the Fund at 1-800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
We reserve the right to withdraw all or any part of the offering made by
this Prospectus or to reject any purchase order. We also reserve the right to
waive, increase or establish minimum investment requirements. All purchase
orders are subject to our acceptance and are not binding until confirmed or
accepted in writing.
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SHAREHOLDER SERVICES
Telephone Exchanges. You or your investment professional, with proper
identification, can instruct the Fund by telephone to exchange shares of any
class for the same class of any Eligible Fund. Instructions must be received by
the Fund in Kansas City by calling 1-800-821-5129 prior to the close of the New
York Stock Exchange ("NYSE") to obtain an Eligible Fund's NAV per class share on
that day. Exchanges will be treated as a sale for federal tax purposes.
For your protection, telephone requests for exchanges are recorded. We
will take measures to verify the identity of the caller, such as asking for your
name, account num-
6
<PAGE>
ber, social security or taxpayer identification number and other relevant
information. The Fund will not be liable for following instructions communicated
by telephone that it reasonably believes to be genuine.
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 limit or terminate this privilege for any shareholder making frequent
exchanges and may revoke the privilege for all shareholders upon 60 days' prior
written notice. You have this privilege unless you refuse it in writing.
You should read the prospectus of the other Lord Abbett-sponsored fund(s)
selected before making an exchange.
Invest-A-Matic. You can make fixed, periodic investments ($250 initial and $50
subsequent minimum) into the Fund by means of automatic money transfers from
your bank checking account. See the attached Application Form for instructions.
Div-Move. You can invest the dividends paid on your account ($50 minimum) into
another account, within the same class, in any Eligible Fund.
The account must be either your account, a joint spousal account, or a custodial
account for your minor child.
Investing By Phone. Upon completion and receipt of the attached application form
(in particular, section 7), you can instruct the Fund by phone to have money
transferred from your bank account to purchase shares of the Fund for an
existing account. The Fund will purchase the requested shares upon receipt of
the money from your bank.
Systematic Withdrawal Plan ("SWP"). You can make periodic cash withdrawals from
your account which are automatically paid to you in fixed or variable amounts.
To participate, the value of your shares must be at least $10,000, except for
retirement plans for which there is no minimum.
With respect to Class B shares, the CDSC will be waived on redemptions of
up to 12% of the current net asset value of your account at the time of your
SWPrequest. For Class B share redemptions over 12% per year, the CDSC will apply
to the entire redemption. Please contact the Fund for assistance in minimizing
the CDSC in this situation.
Redemption proceeds due to a SWP for Class B (up to 12% per year) and
Class C shares, will be redeemed in the order described under "Redemptions."
Lord Abbett's Retirement Plans. The Lord Abbett Family of Funds offers a range
of qualified retirement plans, including IRAs (Traditional, Education and Roth)
SIMPLE IRAs, Simplified Employee Pension Plans, 403(b) and pension and
profit-sharing plans, including 401(k) plans. To find out more about these
plans, call the Fund at 1-800-842-0828.
Account Changes. For any changes you need to make to your account, consult your
investment professional or call the Fund at 1-800-821-5129.
Householding. Generally, shareholders with the same last name and address will
receive a single copy of an annual or semi-annual report, unless additional
reports are specifically requested in writing to the Fund.
Reinvestment Privilege. If you sell shares of the Fund, you have the one time
right to reinvest some or all of the proceeds in the same class of any Eligible
Fund within 60 days without a sales charge. If you paid a CDSC when you sold
your shares, you will be credited with the amount of the CDSC. All accounts
involved must have the same registration.
Pricing Shares. The net asset value ("NAV") per share for each class of shares
is calculated each business day at the close of regular trading on the New York
Stock Exchange ("NYSE") by dividing a class's net assets by the number of shares
outstanding. The Fund is open on those business days when the NYSE is open.
Purchases and redemptions are executed at the next NAV to be calculated after
your request is accepted.
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REDEMPTIONS
By Broker. Call your broker or investment professional for directions on how to
redeem your shares.
By Telephone. To obtain the proceeds of an expedited redemption of $50,000 or
less, you or your representative can call the Fund at 1-800-821-5129. The Fund
will employ the procedures described in telephone exchanges to confirm that the
instructions received are genuine.
The Fund will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine.
By Mail. Submit a written redemption request indicating your Fund's name, your
share class, your account number, the name(s) in which the account is registered
and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity,
the signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regard-
7
<PAGE>
ing proper documentation call 1-800-821-5129.
We will verify that the shares being redeemed were purchased at least 15
days earlier. Your account balance must be sufficient to cover the amount being
redeemed or your redemption order will not be processed.
Normally a check will be mailed to the name(s) and addresses in which the
account is registered, or otherwise according to your instruction within one
business day after receipt of your redemption request. The Fund reserves the
right to make payment within three business days.
To determine if a CDSC applies to a redemption, see "Contingent Deferred
Sales Charges" above.
- --------------------------------------------------------------------------------
DIVIDENDS AND CAPITAL GAINS
Dividends. The Fund distributes most or all of its net earnings in the form of
dividends which are paid to shareholders monthly.
Capital Gains Distributions. Any capital gains are paid at least annually and
may be taken in cash or reinvested. Distributions by the Fund of any net
long-term capital gains will be taxable to a shareholder as long-term capital
gains regardless of how long the shareholder has held the shares. Under recently
enacted legislation, the maximum tax rate on long-term capital gains for a U.S.
individual, estate or trust is reduced to 20% for distributions derived from the
sale of assets held by the Fund for more than 18 months. (If the taxpayer is in
the 15% tax bracket, the rate is 10%.) For distributions derived from the sale
of assets held by the Fund between 12 and 18 months, the tax rate remains at 28%
(15% if the taxpayer is in the 15% tax bracket).
Dividends/Capital Gains Receipt or Reinvestment. If you elect to receive
dividends or capital gains in cash, a check will be mailed to you as soon as
possible after the reinvestment date. If you arrange for direct deposit, your
payment will be electronically transmitted to your bank account within one day
after the payable date. Most investors reinvest their dividends and capital
gains. If you choose this option, or if you do not indicate any choice, your
dividends and capital gains distributions will be automatically reinvested in
additional shares.
Taxes. The Fund pays no federal income tax on the earnings it distributes to
shareholders. Consequently, dividends you receive from the Fund, whether
reinvested or taken in cash, are generally considered taxable. Dividends
declared in October, November or December of any year 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.
Each January the Fund will mail to you, if applicable, a Form 1099 tax
information statement detailing your dividends and capital gain distributions.
You should consult your tax adviser concerning applicable state and local taxes.
For more information about the tax consequences from dividends and
distributions, see the Statement of Additional Information.
- --------------------------------------------------------------------------------
OUR MANAGEMENT
The Fund is supervised by a Board of Directors, an independent body which has
ultimate responsibility for the Fund's activities. The Board has retained Lord
Abbett as investment manager pursuant to a Management Agreement. Lord Abbett has
been an investment manager for over 69 years and currently manages over $27
billion in a family of mutual funds and other advisory accounts. Lord Abbett
provides similar services to twelve other funds having various investment
objectives and also advises other investment clients. For more information about
the services Lord Abbett provides to the Fund, see the Statement of Additional
Information.
The Fund pays Lord Abbett a monthly fee based on average daily net assets
for each month. For the fiscal year ended December 31, 1997, the fee paid to
Lord Abbett was at an annual rate of .46 of 1%. In addition, the Fund pays all
expenses not expressly assumed by Lord Abbett.
The Fund. The Fund is a diversified open-end management investment company
established in 1976. Its Class A, B, C and P shares have equal rights as to
voting, dividends, assets and liquidation except for differences resulting from
certain class-specific expenses.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
The Fund posted strong performance during the past fiscal year amid the
continuing economic growth, low inflation and favorable interest-rate
environment that characterized the period. Particularly beneficial to the Fund's
performance was the portfolio's concentration in the telephone communications,
media and energy sectors. Basic industry issues also generally outperformed the
bond market. In addition, the robust U.S. economic growth provided significant
increases in corporate profitability, which resulted in improved credit ratings
and strong gains for many of our holdings. We have been devoting increasing
amounts of time and resources to fundamental research, as financial markets have
little tolerance for earnings shortfalls. Our U.S. Treasury and mortgage-related
securities provided total returns in the 9.0% - 9.5% range during the year.
However, significantly higher total returns earned by high-
8
<PAGE>
yield and convertible securities throughout the course of 1997 proved most
beneficial to the Fund.
See the performance chart on the second to last page of this Prospectus.
- --------------------------------------------------------------------------------
INVESTMENT POLICIES, RISKS AND LIMITS
The Fund is permitted to utilize, within limits established by the Board of
Directors, the following investment policies in an effort to enhance the Fund's
performance. These policies have risks associated with them. However, the Fund
follows certain practices that may reduce these risks. To the extent the Fund
utilizes some of these policies, its overall performance may be positively or
negatively affected.
High Yield Debt Securities: High yield debt securities or "junk bonds" are rated
BB/Ba or lower and typically pay a higher yield than investment-grade debt
securities.
Risk: The market for lower-rated bonds generally is less liquid than that for
higher-rated bonds. 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.
Limit: 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 or (3)
cash or cash equivalents (short-term obligations of banks, corporations or the
U.S. Government).
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.
Securities Lending: The lending of securities to financial institutions which
provide continuous collateral equal to the market value of the securities
loaned.
Risk: Delay in recovery of collateral and loss should the borrower of the
security fail financially.
Limit: Loans, in the aggregate, may not exceed 30% of the Fund's total assets.
Selling Covered Call Options: A covered call option on stock gives the buyer of
the option, upon payment of a premium to the seller (writer) of the option, the
right to call upon the writer to deliver a specified number of shares of a stock
owned by the writer on or before a fixed date at a predetermined price.
Risk: Although the Fund receives income based on receipt of the premium, it
gives up participation in the appreciation of the stock above the predetermined
price if it is called away by the buyer.
Limit: The Fund may write covered call options on securities having an aggregate
market value not to exceed 20% of the Fund's gross assets.
Foreign Securities: Foreign securities are securities primarily traded in
countries outside the United States.
Risk: These securities are not subject to the same degree of regulation and may
be more volatile and less liquid than securities traded in major U.S. markets.
Other considerations include political and social instability, expropriations,
higher transaction costs, currency fluctuations, nondeductible withholding taxes
and different settlement practices.
Limit: The Fund may invest up to 20% of its assets at the time of investment in
foreign securities.
Illiquid Securities: Securities not traded on the open market. May include
illiquid Rule 144A securities.
Risk: Certain securities may be difficult or impossible to sell at the time and
price the seller would like.
Limit: The Fund may invest up to 15% of its assets in illiquid securities.
Securities determined by the Board of Directors to be liquid are not subject to
this limitation.
OTHER POLICIES. (1) 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.
9
<PAGE>
(2) Subject to the percentage limitations for purchases of other than debt
securities described above, we may purchase common and preferred stocks.
(3) 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 33 1/3% 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.
PORTFOLIO TURNOVER. The portfolio turnover rate for the fiscal year ended
December 31, 1997 was 89.14%, compared to 106.79% for the prior fiscal year.
For more information about investment policies, restrictions and risk factors,
see the Statement of Additional Information.
OBJECTIVE, RESTRICTION AND POLICY CHANGES. We will not change our investment
objective or our fundamental investment restrictions without shareholder
approval. If we determine that our objective can best be achieved by a
substantive change in investment policy, which may be changed without
shareholder approval, we may make such change by disclosing it in our
prospectus.
- --------------------------------------------------------------------------------
SALES COMPENSATION
As part of its plan for distributing shares, the Fund, along with Lord Abbett
Distributor, pays compensation to Authorized Institutions that sell the Fund's
shares. These firms typically pass along a portion of this compensation to your
investment professional.
Compensation payments originate from two sources: sales charges and 12b-1 fees
that are paid out of the Fund's assets ("12b-1"refers to the federal securities
regulation authorizing annual fees of this type). The 12b-1 fee rates vary by
share class, according to the Rule 12b-1 plan adopted by the Fund for each share
class. The sales charges and 12b-1 fees paid by investors are detailed in the
class-by-class information under "Investor Expenses" and "Purchases." The
portion of these expenses that are paid as compensation to Authorized
Institutions, such as your dealer, are shown in the chart on the last page of
this Prospectus. Sometimes compensation is not paid where tracking data is not
available for certain accounts and where the Authorized Institution waives part
or all of the compensation as with an account under a Mutual Fund Wrap-Fee
Program.
Rule 12b-1 distribution fees may be used to pay for sales compensation to
Authorized Institutions, for any activity which is primarily intended to result
in the sale of shares and, for Class B shares, the financing of sales
commissions.
First Year Compensation. Whenever you make an investment in the Fund, the
Authorized Institution receives compensation as described in the chart on the
last page of this Prospectus.
Annual Compensation After First Year. Beginning with the second year after an
investment is made, the Authorized Institution receives annual compensation as
described in the chart on the last page of this Prospectus.
Additional Concessions may be paid to Authorized Institutions from time to time.
- --------------------------------------------------------------------------------
GLOSSARY OF TERMS
Additional Concessions. A supplemental annual distribution fee equal to 0.10% of
the average daily net asset value of the Class A shares is available to
Authorized Institutions which have a program for the promotion and retention of
such shares satisfying Lord Abbett Distributor. Class A shares held pursuant to
a satisfactory program would, for example, (i) constitute a significant
percentage of the Fund's net assets, (ii) be held for a substantial length of
time and/or (iii) have a lower than average redemption rate.
Lord Abbett Distributor may, for specified periods, allow dealers to
retain the full sales charge for sales of shares or may pay an additional
concession to a dealer who 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 Lord Abbett's headquarters
or other locations, including meals and entertainment, or the receipt of
merchandise. The cash payments may 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
10
<PAGE>
capable of obtaining best execution, we may prefer the dealer who has sold our
shares and/or shares of other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to receive
service and/or distribution fees under a Rule 12b-1 plan are "authorized
institutions."
Eligible Fund. (a) Any Lord Abbett-sponsored fund except 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; Lord Abbett Equity Fund; Lord Abbett
Series Fund; Lord Abbett Research Fund -- Mid-Cap Series; Lord Abbett U.S.
Government Securities Money Market Fund ("GSMMF") (except for holdings in GSMMF
which are attributable to any shares exchanged from the Lord Abbett family of
funds). (b) Any Authorized Institution's bond debenture money market fund
satisfying Lord Abbett Distributor as to certain omnibus account and other
criteria.
Eligible Guarantor. Any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an eligible guarantor.
Eligible Mandatory Distributions. If Class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC waiver is available only
for that portion of a mandatory distribution which bears the same relation to
the entire mandatory distribution as the B share investment bears to the total
investment.
Employees of Lord Abbett/Fund Directors (Trustees). The terms "directors,"
"trustees" (of a Fund) and "employees" (of Lord Abbett) include a director's
(trustee's) or employee's spouse (including the surviving spouse of a deceased
director (trustee) or employee). The terms "directors," "trustees" and
"employees of Lord Abbett" also include other family members and retired
directors (trustees) and employees.
Legal Capacity. With respect to a redemption request, if (for example) the
request is on behalf of the estate of a deceased shareholder, John W. Doe, by a
person (Robert A. Doe) who has the legal capacity to act for the estate of the
deceased shareholder because he is the executor of the estate, then the request
must be executed as follows: Robert A.Doe, Executor of the Estate of John W.
Doe.
Similarly, if (for example) the redemption request is on behalf of the ABC
Corporation by a person (Mary B. Doe) that has the legal capacity to act on
behalf of this corporation, because she is the President of the corporation,
then the request must be executed as follows: ABC Corporation by Mary B.Doe,
President.
An acceptable form of guarantee would be as follows:
o In the case of the estate -
Robert A. Doe, Executor
of the Estate of John W. Doe
[Date]
o In the case of the corporation -
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
Lord Abbett Consultants/Advisers. 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.
Lord Abbett Distributor LLC. Lord Abbett Distributor is the Fund's exclusive
selling agent. 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.
Mutual Fund Wrap-Fee Program. Certain unaffiliated 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
11
<PAGE>
investment products made available for a fee to clients of such brokers,
dealers, registered investment advisers and other financial institutions.
Purchaser. 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.
Retirement Plans. Employer-sponsored retirement plans under the Internal Revenue
Code.
Special Retirement Wrap Program. A program sponsored by an authorized
institution showing 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 Class A
12b-1 Plan and the fact that the program relates to participant-directed
Retirement Plans.
Total Return. "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. There is no CDSC for Class P shares. 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.
Yield. 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 investment return based on dividends
actually paid to shareholders. To show that return, a dividend distribution rate
may be calculated. 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. Yields and dividend
distribution rates 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, Class C and P shares do not reflect the deduction
of the CDSC.
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 performance of the Class A shares which is shown in the comparison below
will be greater than or less than that for Class B, C and P 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 in the
Fund, assuming reinvestment of all dividends and distributions to three
unmanaged indices: Salomon Brothers Broad Investment High-Grade Index, First
Boston High-Yield Index, and the Value Line Convertible Index.
[The following is represented by a line Graph]
<TABLE>
<CAPTION>
The Fund (Class A The Fund (Class A Salomon Brothers First Boston Value Line
shares) at shares) at Broad Investment High-Yield Convertible
Date Net Asset Value maximum offering price(1)High-Grade Index(2) Index (2) Index (2)
<S> <C> <C> <C> <C> <C>
12/31/87 10,000 9,523 10,000 10,000 10,000
12/31/88 11,380 10,837 10,798 11,365 11,598
12/31/89 11,956 11,38 12,358 11,408 12,841
12/31/90 11,050 10,524 13,482 10,680 12,364
12/31/91 15,287 14,558 15,634 15,353 15,913
12/31/92 17,733 16,888 16,821 17,911 18,114
12/31/93 20,564 19,584 18,484 21,298 20,800
12/31/94 19,770 18,827 17,958 21,091 19,702
12/31/95 23,230 22,122 21,290 24,757 24,184
12/31/96 25,821 24,591 22,060 27,832 29,069
12/31/97 29,099 27,713 24,187 31,347 34,020
</TABLE>
- ---------------------------------------------------
Average Annual Total Return for Class A Shares(3)
- ---------------------------------------------------
1 Year 5 Years 10 Years
7.30% 9.34% 10.73%
- ---------------------------------------------------
- ---------------------------------------------------
Average Annual Total Return for Class B Shares(4)
1 Year LIFE (8/1/96 - 12/31/97)
- ---------------------------------------------------
7.39% 9.99%
- ---------------------------------------------------
- ---------------------------------------------------
Average Annual Total Return for Class C Shares(5)
- ---------------------------------------------------
1 Year LIFE (7/15/96 - 12/31/97)
11.96% 13.77%
- ---------------------------------------------------
(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 Solomon Brothers Broad Investment
High-Grade Index (source: Chase Global), First Boston High-Yield Index
(source: CSFB), and Value Line Convertible Index (source: Morningstar) 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
1997 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) high-yield corporate 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, 1997 using the SEC-required uniform method to compute such
return.
(4) The Class B shares commenced operations on August 1, 1996. Performance
numbers reflect the deduction of a 4% CDSC.
(5) The Class C shares commenced operations on July 15, 1996.
12
<PAGE>
<TABLE>
<CAPTION>
FIRST YEAR COMPENSATION
Class A investments
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total compensation(2)
(% of offering price) (% of offering price) (%of net investment) (% of offering price)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 4.75% 4.00% 0.25% 4.24%
$50,000 - $99,999 4.75% 4.25% 0.25% 4.49%
$100,000 - $249,999 3.75% 3.25% 0.25% 3.49%
$250,000 - $499,999 2.75% 2.50% 0.25% 2.74%
$500,000 - $999,999 2.00% 1.75% 0.25% 2.00%
$1 million or more(3) or
Retirement Plan - 100 or more eligible employees(3) or
Special Retirement Wrap Program(3)
- -------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25% 1.25%
Next $5 million above that no front-end sales charge 0.55% 0.25% 0.80%
Next $40 million above that no front-end sales charge 0.50% 0.25% 0.75%
Over $50 million no front-end sales charge 0.25% 0.25% 0.50%
Class B investments Paid at time of sale (% of net asset value)
All amounts no front-end sales charge 3.75% 0.25% 4.00%
Class C investments
All amounts no front-end sales charge 0.75% 0.25% 1.00%
Class P investments Percentage of average net assets
All amounts no front-end sales charge 0.25% 0.20% 0.45%
<CAPTION>
ANNUAL COMPENSATION AFTER FIRST YEAR
<S> <C> <C> <C> <C>
Class A investments
All amounts no front-end sales charge none 0.25% 0.25%
Class B invest Percentage of average net assets (4)
All amounts no front-end sales charge none 0.25% 0.25%
Class C investments
All amounts no front-end sales charge 0.65% 0.25% 0.90%
Class P investments
All amounts no front-end sales charge 0.25% 0.20% 0.45%
</TABLE>
(1) The service fee for Class A and P shares is paid quarterly and for Class A
shares may not exceed 0.15% if sold prior to June 1, 1990. The first
year's service fee on Class B and C shares is paid at the time of sale.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions from time to time.
(3) Concessions are paid 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. With respect to (a) Class A share purchases at $1million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded.
(4) With respect to Class B, C and P shares, 0.25%, 0.90% and 0.45%,
respectively, of the average annual net asset value of such shares
outstanding during the quarter (including distribution reinvestment shares
after the first anniversary of their issuance) is paid to Authorized
Institutions. These fees are paid quarterly in arrears. In the case of C
shares for fixed-income portfolios, such as the Fund, 0.10% of the average
annual net asset value of such shares is retained by Lord Abbett
Distributor, thus reducing from 0.75% to 0.65% after the first year. Lord
Abbett Distributor uses this 0.10% for expenses primarily intended to
result in the sale of such Fund's shares. With respect to shares, CDSC
revenues collected may be used to fund commission payments when there is
no initial sales charge.
13
<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
Printed in the U.S.A.
LABD-1-598
(5/98)
May 1, 1998
Application Inside
Lord Abbett
Bond-Debenture Fund
LORD ABBETT
BOND-DEBENTURE FUND, INC.
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
<PAGE>
LORD ABBETT May 1, 1998
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, 1998.
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 five classes of shares. This statement of additional information
offers four of those classes (A, B, C and P), $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 15
7. Taxes 16
8. Information About the Fund 17
9. Financial Statements 17
10. Appendix 17
1
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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 33 1/3% of its total assets (including the amount
borrowed), 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
mortgage-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,
2
<PAGE>
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 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, 1997, our portfolio
turnover was 89.14% versus 106.79% 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 53, Chairman and President
E. Wayne Nordberg, age 59, 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
Courtroom Television Network
600 Third Avenue
New York, New York
Chief Executive Officer of Courtroom Television Network. Formerly President
and Chief Executive Officer of Time Warner Cable Programming, Inc. Prior to
that, President and Chief Operating Officer of Home Box Office. Age 56.
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 67.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a
proxy tabulating firm. Age 72.
C. Alan MacDonald
Directorship, Inc.
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8 Sound Shore Drive
Greenwich, Connecticut
Managing Director of Directorship Inc., a consultancy in board management and
corporate governance. Formerly General Partner, The Marketing Partnership, Inc.,
a full service marketing consulting firm (1994 - 1997). Prior to that, Chairman
and Chief Executive Officer of Lincoln Snacks, Inc., manufacturer of branded
snack foods (1992 - 1994). His career spans 36 years at Stouffers and Nestle
with 18 of the years as Chief Executive Officer. Currently serves as Director of
DenAmerica Corp., J.B. Williams Company, Inc., Fountainhead Water Company and
Exigent Diagnostics. Age 64.
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 69.
Thomas J. Neff
Spencer Stuart U.S.
277 Park Avenue
New York, New York
Chairman of Spencer Stuart U.S., an executive search consulting firm. Age 60.
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 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.
For the Fiscal Year Ended December 31, 1997
4
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<TABLE>
<CAPTION>
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1997
Accrued by the Total Compensation
Aggregate Fund and Accrued by the Fund and
Compensation Twelve Other Lord Twelve Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Fund(1) Funds(2) Funds(3)
- ---------------- ----------- -------- --------
<S> <C> <C> <C>
E. Thayer Bigelow $7,869 $17,068 $56,000
Stewart S. Dixon $7,726 $32,190 $55,000
John C. Jansing $7,726 $45,085(4) $55,000
C. Alan MacDonald $8,064 $30,703 $57,400
Hansel B. Millican, Jr. $7,726 $37,747 $55,000
Thomas J. Neff $7,869 $19,853 $56,000
</TABLE>
(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 is being deferred under a plan that deems the deferred
amounts to be invested in shares of the Fund for later distribution to the
directors.
(2) The amounts in Column 3 were accrued by the Lord Abbett-Sponsored Funds
for the 12 months ended October 31, 1997 with respect to the equity based
plans established for independent directors in 1996. This plan supercedes
a previously approved retirement plan for all future directors. Current
directors had the option to convert their accrued benefits under the
retirement plan. All of the outside directors except one made such an
election. Each plan also provides for a pre-retirement death benefit and
actuarially reduced joint-and-survivor spousal benefits.
(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, 1997. The amounts of the aggregate compensation payable
by the Fund as of December 31, 1997 deemed invested in Fund shares,
including dividends reinvested and changes in net asset value applicable to
such deemed investments, were: Mr. Bigelow, $21,180; Mr. Dixon, $67,108;
Mr. Jansing, $86,838; Mr. MacDonald, $39,508; Mr. Millican, $87,581and Mr.
Neff, $87,615. If the amounts deemed invested in Fund shares were added to
each director's actual holdings of Fund shares as of December 31, 1997,
each would own, the following: Mr. Bigelow, 26,688 shares; Mr. Dixon, 1,284
shares; Mr. Jansing, 1,503 shares; Mr. MacDonald, 64,893 shares; Mr.
Millican, 103,529 shares; and Mr. Neff, 1,295 shares.
(4) Mr. Jansing chose to continue to receive benefits under the retirement
plan, which provides that outside directors (trustees) may receive annual
retirement benefits for life equal to their final annual retainer
following retirement at or after age 72 with at least ten years of
service. Thus, if Mr. Jansing were to retire and the annual retainer
payable by the funds were the same as it is today, he would receive annual
retirement benefits of $50,000.
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Brown, Carper, Hilstad, Morris, and Walsh are partners of Lord Abbett; the
others are employees: Christopher Towle, age 40, Executive Vice President, Paul
A. Hilstad, age 55, Vice President and Secretary (with Lord Abbett since 1995 -
formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.); Thomas J. Baade, Zane E. Brown, age 46; Daniel E.
Carper, age 46; Michael S. Goldstein, age 29, Lawrence H. Kaplan, age 41 (with
Lord Abbett since 1997 formerly vice president and Chief Counsel of Salomon
Brothers Asset Management Inc from 1995 to 1997, prior thereto Senior Vice
President, Director and General Counsel of Kidder Peabody Asset Management,
Inc.) ; Thomas F. Konop, age 56; Robert G. Morris, age 53; A. Edward Oberhaus,
age 38; Keith F. O'Connor, age 42; Richard S. Szaro, age 55; John J. Walsh, age
62, Vice Presidents; and Donna M. McManus, age 37, Treasurer (with Lord Abbett
since 1996, formerly a Senior Manager at Deloitte & Touche LLP).
5
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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 December 31, 1997, 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. Of the twelve general partners of Lord Abbett, six are
officers and/or directors of the Fund: Zane E. Brown, Daniel E. Carper, Robert
S. Dow, Paul A. Hilstad, Robert G. Morris, and John J. Walsh. The six other
general partners are: Stephen Allen, E. Wayne Nordberg, Daria L. Foster, W.
Thomas Hudson, Michael B. McLaughlin and Robert J. Noelke. 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, 1997, 1996, and 1995, the
management fees paid to Lord Abbett amounted to $11,621,344, $7,802,104, and
$5,342,563, 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.
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 auditors of the Fund and must be approved at least annually by
our Board of Directors to continue in such capacity. Independent auditors
perform audit services for the Fund, including the examination of financial
statements included in our annual report to shareholders.
4.
Portfolio Transactions
6
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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.
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.
7
<PAGE>
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, 1997, 1996 and 1995, we paid total
commissions to independent broker-dealers of $14,773,720, $8,760,174, and
$6,717,922, 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, Martin Luther King, Jr. 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, 1997 was computed
as follows:
Class A
-------
Net asset value per share (net assets divided
by shares outstanding)....................... $ 9.76
Maximum offering price per share (net asset
value divided by .9525)...................... $10.25
8
<PAGE>
The net asset value per share for the Class B, C and P shares is determined in
the same manner as for the Class A shares (net assets divided by shares
outstanding). Our Class B, C and P 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,
1997 1996 1995
---- ---- ----
Gross sales charge $12,867,756 $14,739,450 $12,694,946
Amount allowed to dealers $11,119,368 $12,711,165 $10,898,476
----------- ----------- -----------
Net commissions
received by Lord Abbett $ 1,748,388 $ 2,028,285 $ 1,796,470
=========== =========== ===========
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.
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Fund offers investors five different classes of shares.
This Prospectus offers four of those classes designated Class A, B, C and P. 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" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor from a mutual fund
wrap fee program). 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 0.28 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 in "Buying Class A Shares" 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
9
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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 in "Buying Class B Shares" 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 in "Buying Class C Shares" below.
Class P Shares. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described in "Class P Rule 12b-1 Plan."
Class P shares are available to a limited number of investors.
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, 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.
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 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. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
10
<PAGE>
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, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
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" in the Prospectus for
more information about the 12% annual waiver of the CDSC. 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 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.
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 $ 5,369,967 under the A Plan, $ 2,452,228
under the B Plan and $ 3,466,612 under the C Plan. 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
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<PAGE>
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 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 (a) the aggregate
dollar amount of your account, in the case of Class A shares, and (b) the
percentage of each share redeemed, in the case of class B and C shares,
representing an 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. In the case of Class A
shares, this increase is represented by shares having an aggregate dollar value
in your account. In the case of Class B and C shares, this increase is
represented by that percentage of each share redeemed where the net asset value
exceeded the initial purchase price.
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:
<TABLE>
<CAPTION>
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount Subject
to Charge)
<S> <C>
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
</TABLE>
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
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<PAGE>
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.
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) shares
representing an aggregate dollar amount of your account, in the case of Class A
shares, (ii) that percentage of each share redeemed, in the case of Class B and
C shares, derived from increases in the value of the shares above the total cost
of shares being redeemed due to increases in net asset value, (iii) 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 (iv) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the
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<PAGE>
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 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
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<PAGE>
benefit of employees of any national securities trade organization to which Lord
Abbett belongs or any company with an account(s) in excess of $10 million
managed by Lord Abbett on a private-advisory-account basis. For purposes of this
paragraph, the terms "directors" and "employees" include a director's or
employee's spouse (including the surviving spouse of a deceased director or
employee). The terms "our directors" and "employees of Lord Abbett" also include
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) in
connection with a merger, acquisition or other reorganization (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. 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.
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.
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
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<PAGE>
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 Traditional, Education, Roth and
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.
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, 1997 were as follows: 7.30%, 9.34% and 10.73% for the
Fund's Class A shares, respectively. The total return for Class B shares for the
fiscal year ending on December 31, 1997 and for the period August 1, 1996
through December 31, 1997 were 7.39%, and 9.99%, respectively. For Class C
shares for the fiscal year ending December 31, 1997 and for the period period
July 15, 1996 through December 31, 1997, the total returns were 11.96%, and
13.77%, respectively.
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
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<PAGE>
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, 1997, the yield for the Class A, B and C
shares of the Fund were 6.92%, 6.57% and 6.57%, 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 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.
17
<PAGE>
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, 1997 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1997 Annual Report to Shareholders of Lord Abbett
Bond-Debenture Fund, Inc. are incorporated herein by reference to such financial
statements and report, in reliance upon the authority of Deloitte & Touche LLP
as experts in auditing and accounting.
10.
Appendix
Corporate Bond Ratings
Moody's Investors Service, Inc.'s Corporate Bond Ratings
18
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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.
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.
19
<PAGE>
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.
20
<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, 1997.
Part B - Statement of Net Assets at December 31, 1997.
Statement of Operations for the year ended December
31, 1997.
Statements of Changes in Net Assets for the years
ended December 31, 1997 and 1996.
Supplementary Financial Information for the five
years ended December 31, 1997.
(b) Exhibits -
99.B1 Articles of Restatement*
99.B2 By-Laws*
99.B10 Consent of Independent Auditors*
99.B16 Computation of Performance and Yield*
Ex. 17 Financial Data Schedule*
Exhibits not mentioned above are not applicable.
* Filed herewith.
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Record Holders of Securities
As of April 17, 1998 (Class A) - 86,962
(Class B) - 14,071
(Class C) - 13,206
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 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-
<PAGE>
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.
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:
-5-
<PAGE>
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
Paul A. Hilstad Vice President & Secretary
Zane E. Brown Vice President
Daniel E. Carper Vice President
Robert G. Morris Vice President
John J. Walsh Vice President
The other general partners of Lord, Abbett & Co. who are neither
officers nor directors of the Registrant are Stephen I. Allen, Daria L. Foster,
W. Thomas Hudson, Michael B. McLaughlin, E. Wayne Nordberg and Robert J. Noelke.
(1) Each of the above has a principal business address:
767 Fifth Avenue, New York, NY 10153
(c) Not applicable
Item 30. Location of Accounts and Records
Registrant maintains the records required by Rules 31a -1(a) and (b), and
31a - 2(a) at its main office.
Lord, Abbett & Co. maintains the records required by Rules 31a - 1(f) and
31a - 2(e) at its main office.
Certain records such as cancelled stock certificates and correspondence
may be physically maintained at
-6-
<PAGE>
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).
<PAGE>
-7-
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
30th day of April, 1998.
LORD ABBETT BOND-DEBENTURE FUND, INC.
/s/ Robert S. Dow
By Robert S. Dow,
Chairman of the Board
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.
/s/ Robert S. Dow Chairman, President
and Director 4/30/98
Robert S. Dow (Title) (Date)
/s/ Keith F. O'Connor Vice President and
Chief Financial Officer 4/30/98
Keith F. O'Connor (Title) (Date)
/s/ E. Wayne Nordberg
Director 4/30/98
Wayne Nordberg (Title) (Date)
/s/ E. Thayer Bigelow
Director 4/30/98
Thayer Bigelow (Title) (Date)
/s/ Stewart S. Dixon
Director 4/30/98
Stewart S. Dixon (Title) (Date)
/s/ John C. Jansing
Director 4/30/98
John C. Jansing (Title) (Date)
/s/ C. Alan MacDonald
Director 4/30/98
C. Alan MacDonald (Title) (Date)
/s/ Hansel B. Millican, Jr.
Director 4/30/98
Hansel B. Millican, Jr. (Title) (Date)
/s/ Thomas J. Neff
Director 4/30/98
Thomas J. Neff (Title) (Date)
<PAGE>
LORD ABBETT BOND-DEBENTURE FUND, INC.
ARTICLES OF RESTATEMENT
FIRST: LORD ABBETT BOND-DEBENTURE FUND, INC., a Maryland
corporation, (the "Corporation") desires to restate its charter as currently in
effect.
SECOND: The following provisions are all the provisions of the
charter currently in effect.
RESTATED ARTICLES OF INCORPORATION
OF
LORD ABBETT BOND-DEBENTURE FUND, INC.
ARTICLE I
I, the subscriber, Kenneth B. Cutler, whose post office address is
63 Wall Street, New York, New York 10005, being at least twenty-one years of
age, am acting as incorporator with the intention of forming a corporation under
and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations.
ARTICLE II
The name of the corporation (hereinafter called the "Corporation")
is Lord Abbett Bond-Debenture Fund, Inc.
ARTICLE III
The current post office address of the place at which the principal
office of the Corporation in the State of Maryland is located is c/o The
Prentice-Hall Corporation System, Maryland, 11 East Chase Street, Baltimore,
Maryland 21202.
The Corporation's current resident agent is The Prentice-Hall
Corporation System, Maryland, 11 East Chase Street, Baltimore, Maryland 21202.
Said resident agent is a corporation in the State of Maryland.
ARTICLE IV
The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, promoted or carried on are:
A. To conduct, operate and carry on the business of an investment
company.
<PAGE>
B. To purchase, subscribe for, invest in or otherwise acquire, and
to own, hold, sell, possess, transfer or otherwise dispose of, or turn to
account or realize upon, and generally deal in, all forms of securities of every
nature, kind, character, type and form, including but not limited to, shares,
stocks, bonds, debentures, notes, scrip, participation certificates, rights to
subscribe, warrants, options, certificates of deposit, choses in action,
evidences of indebtedness, certificates of indebtedness and certificates of
interest of any and every kind and nature whatsoever, secured and unsecured,
issued or to be issued, by any corporation, partnership, association, trust,
entity or person, public or private, whether organized under the laws of the
United States, or any state, commonwealth, territory or possession thereof, or
organized under the laws of any foreign country.
C. To issue, sell, repurchase, redeem, retire, cancel, acquire,
resell, transfer, and otherwise deal in shares of the capital stock of the
Corporation, and to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of shares of capital stock of the Corporation, any
funds of the Corporation, whether capital surplus or otherwise to the full
extent permitted by the laws of Maryland, without the vote or consent of the
shareholders of the Corporation.
D. To conduct its business in the State of Maryland, all other
states and elsewhere in any part of the world, and to have one or more offices
outside the State of Maryland.
E. To do any and all things herein set forth, and in addition such
other acts and things as are necessary or convenient to the attainment of the
purposes of this Corporation, or any of them, to the same extent as natural
persons lawfully might or could do in any part of the world, and to engage in
any lawful act or activity for which corporations may be organized under the
laws of the State of Maryland.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from the terms of any other clause of this or any other Article of
these Articles of Incorporation, and shall each be regarded as independent, and
construed as powers as well as objects and purposes, and the enumeration of
specific purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the general powers of the
Corporation now or hereafter conferred by the laws of the State of Maryland, nor
shall the expression of one thing be deemed to exclude another, though it be of
like nature, not expressed; provided, however, that the Corporation shall not
have
2
<PAGE>
power to carry on within the State of Maryland any business whatsoever the
carrying on of which would preclude it from being classified as an ordinary
business corporation under the laws of said State; nor shall it carry on any
business, or exercise any powers, in any other state, territory, district or
county except to the extent that the same may lawfully be carried on or
exercised under the laws thereof.
ARTICLE V
A. The total number of shares which the Corporation has authority to
issue is 1,000,000,000 shares of capital stock of the par value of $.001 each,
having an aggregate par value of $1,000,000. The amount of authorized stock of
the Corporation may be increased or decreased by the affirmative vote of the
holders of a majority of the stock of the Corporation entitled to vote. The
Board of Directors of the Corporation shall have full power and authority, from
time to time, to classify or reclassify any unissued shares of stock of the
Corporation, including, without limitation, the power to classify or reclassify
unissued shares into series, and to classify or reclassify a series into one or
more classes of stock that may be invested together in the common investment
portfolio in which the series is invested, by setting or changing the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of such shares of stock. All shares of stock of a series shall
represent the same interest in the Corporation and have the same preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption as the other
shares of stock of that series, except to the extent that the Board of Directors
provides for differing preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms or
conditions of redemption of shares of stock of classes of such series as
determined pursuant to Articles Supplementary filed for record with the State
Department of Assessments and Taxation of Maryland, or as otherwise determined
pursuant to these Articles or by the Board of Directors in accordance with law.
Prior to the first classification of unissued shares of stock into additional
series, all outstanding shares of stock shall be of a single series, and prior
to the first classification of a series into additional classes, all outstanding
shares of stock of such series shall be of a single class. Nothwithstanding any
other provision of these Articles, upon the first classification of unissued
shares of stock into additional series, the Board of Directors shall specify a
legal
3
<PAGE>
name for the outstanding series, as well as for the new series, in appropriate
charter documents filed for record with the State Department of Assessments and
Taxation of Maryland providing for such name change and classification, and upon
the first classification of a series into additional classes, the Board of
Directors shall specify a legal name for the outstanding class, as well as for
the new class or classes, in appropriate charter documents filed for record with
the State Department of Assessments and Taxation of Maryland providing for such
name changes and classification.
[On July 3, 1996, the Articles of Incorporation of the Corporation were
amended by the filing of Articles of Amendment with the State Department of
Assessments and Taxation of Maryland which specified the legal name for the
existing class of capital stock of the Corporation, both outstanding shares and
unissued shares, as Class A shares.
On July 9, 1996, the Articles of Incorporation of the Corporation were
further supplemented by the filing of Articles Supplementary with the State
Department of Assessments and Taxation of Maryland which, as subsequently
corrected by Articles of Correction filed on September 5, 1996, increased the
number of Class A shares of capital stock which the Corporation shall have
authority to issue to 1,000,000,000 of the par value $.001 each, having an
aggregate par value of $1,000,000. Such Articles Supplementary further provided
that pursuant to the authority of the Board of Directors to classify and
reclassify unissued shares of stock of the Corporation and to classify a series
into one or more classes of such series, the Board of Directors (i) classified
and reclassified 80,000,000 authorized but unissued Class A shares as Class C
shares and (ii) classified and reclassified 160,000,000 authorized but unissued
Class A shares as Class B shares. Such Articles Supplementary further provided
that subject to the power of the Board of Directors to classify and reclassify
unissued shares, all shares of the Corporation's Class B and Class C stock shall
be invested in the same investment portfolio of the Corporation as the Class A
stock, and shall have the same preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption set forth in Article V of the Articles of Incorporation
of the Corporation and shall be subject to all other provisions of the Articles
of Incorporation relating to stock of the Corporation generally.
On October 9, 1997, the Articles of Incorporation of the Corporation were
further supplemented by the filing of Articles Supplementary with the State
Department of Assessments and Taxation of Maryland which pursuant to the
authority of the Board of Directors of the Corporation to classify and
reclassify unissued Shares of stock of the Corporation and to classify a series
into one or more classes of such series, the Board of Directors classified and
reclassified 300,000,000 authorized but unissued Class A shares as Class Y
shares. Such Articles Supplementary further provided that subject to the power
of the Board of Directors to classify and reclassify unissued shares, all shares
of the Corporation's Class Y stock shall be invested in the investment portfolio
of the Corporation as the Class A, Class B and Class C stock, and shall have the
same
4
<PAGE>
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption set forth in Article V of the Articles of Incorporation of the
Corporation and shall be subject to all other provisions of the Articles of
Incorporation relating to stock of the Corporation generally.]
B. A description of the relative preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of all series and classes of series of
shares is as follows, unless otherwise set forth in Articles Supplementary filed
for record with the State Department of Assessments and Taxation of Maryland or
otherwise determined pursuant to these Articles:
1. Assets Belonging to Series. All consideration received or
receivable by the Corporation for the issue or sale of shares of a
particular series, together with all assets in which such consideration is
invested or reinvested, all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrecovably belong to that series for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of
the Corporation. Such consideration, assets, income, earnings, profits and
proceeds, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, together
with any unallocated items (as hereinafter defined) relating to that
series as provided in the following sentence, are herein referred to as
"assets belonging to" that series. In the event that there are any assets,
income, earnings, profits or proceeds thereof, funds or payments that are
not readily identifiable as belonging to any particular series
(collectively "Unallocated Items"), the Board of Directors shall allocate
such Unallocated Items to and among any one or more of the series created
from time to time in such manner and on such basis as it, in its sole
discretion, deems fair and equitable; and any Unallocated Items so
allocated to a particular series shall belong to that series. Each such
allocation by the Board of Directors shall be conclusive and binding upon
the stockholders of all series for all purposes.
2. Liabilities Belonging to Series. The assets belonging to each
particular series shall be charged with the liabilities of the Corporation
in respect of that series, including any class thereof, and with all
expenses, costs, charges and reserves attributable to that series,
including any such class, and shall be so
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recorded upon the books of account of the Corporation. Such liabilities,
expenses, costs, charges and reserves, together with any unallocated items
(as hereinafter defined) relating to that series, including any class
thereof, as provided in the following sentence, so charged to that series,
are herein referred to as "liabilities belonging to" that series. In the
event there are any unallocated liabilities, expenses, costs, charges or
reserves of the Corporation which are not readily identifiable as
belonging to any particular series (collectively "Unallocated Items"), the
Board of Directors shall allocate and charge such Unallocated Items to and
among any one or more of the series created from time to time in such
manner and on such basis as the Board of Directors in its sole discretion
deems fair and equitable; and any Unallocated Items so allocated and
charged to a particular series shall belong to that series. Each such
allocation by the Board of Directors shall be conclusive and binding upon
the stockholders of all series for all purposes. To the extent determined
by the Board of Directors, liabilities and expenses relating solely to a
particular class (including, without limitation, distribution expenses
under a Rule 12b-1 plan and administrative expenses under an
administration or service agreement, plan or other arrangement, however
designated, which may be adopted for such class) shall be allocated to and
borne by such class and shall be appropriately reflected (in the manner
determined by the Board of Directors) in the net asset value, dividends
and distributions and liquidation rights of the shares of such class.
3. Dividends. Dividends and distributions on shares of a particular
series may be paid to the holders of shares of that series at such times,
in such manner and from such of the income and capital gains, accrued or
realized, from the assets belonging to that series, after providing for
actual and accrued liabilities belonging to that series, as the Board of
Directors may determine. Such dividends and distributions may vary between
or among classes of a series to reflect differing allocations of
liabilities and expenses of such series between or among such classes to
such extent as may be provided in or determined pursuant to Articles
Supplementary filed for record with the State Department of Assessments
and Taxation of Maryland or as may otherwise be determined by the Board of
Directors.
4. Liquidation. In the event of the liquidation or dissolution of
the Corporation, the stockholders of each series shall be entitled to
receive, as a series, when and as declared by the Board of Directors, the
excess of the assets belonging to that series over the liabilities
belonging to that series. The assets so distributable to the stockholders
of one or more classes of a series shall be distributed
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among such stockholders in proportion to the respective aggregate net
asset values of the shares of such series held by them and recorded on the
books of the Corporation.
5. Voting. On each matter submitted to vote of the stockholders,
each holder of a share shall be entitled to one vote for each such share
standing in his name on the books of the Corporation irrespective of the
series or class thereof and all shares of all series and classes shall
vote as a single class ("Single Class Voting"); provided, however, that
(i) as to any matter with respect to which a separate vote of any series
or class is required by the Investment Company Act of 1940, as amended
from time to time, applicable rules and regulations thereunder, or the
Maryland General Corporation Law, such requirement as to a separate vote
of that series or class shall apply in lieu of Single Class Voting as
described above; (ii) in the event that the separate vote requirements
referred to in (i) above apply with respect to one or more (but less than
all) series or classes, then, subject to (iii) below, the shares of all
other series and classes shall vote as a single class; and (iii) as to any
matter which does not affect the interest of a particular series or class,
only the holders of shares of the one or more affected series or classes
shall be entitled to vote.
6. Conversion. At such times (which times may vary among shares of a
class) as may be determined by the Board of Directors, shares of a
particular class of a series may be automatically converted into shares of
another class of such series based on the relative net asset values of
such classes at the time of conversion, subject, however, to any
conditions of conversion that may be imposed by the Board of Directors.
C. Notwithstanding any provision of law requiring that any action be
taken or authorized by the affirmative vote of the holders of a designated
proportion greater than a majority of the shares or votes entitled to be cast,
such action shall be effective and valid if taken or authorized by the
affirmative vote of the holders of a majority of the total number of shares
outstanding and entitled to vote thereon.
D. No holder of stock of the Corporation shall, as such holder, have
any right to purchase or subscribe for any shares of the capital stock of the
Corporation which it may issue or sell (whether out of the number of shares now
or hereafter authorized by these Articles of Incorporation, or any amendment
thereof, or out of any shares of the capital stock of the Corporation acquired
by it after the issue thereof, or
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otherwise) other than such right, if any, the Board of Directors, in its
discretion, may determine.
ARTICLE VI
The following provisions are inserted for the management of the
business and conduct of the affairs of the Corporation, and to create, define,
limit and regulate the powers of the Corporation, and to create, define, limit
and regulate the powers of the Corporation, the directors and the stockbrokers.
A. In furtherance and not in limitation of the powers conferred by
statute and pursuant to these Articles of Incorporation, the Board of Directors
is expressly authorized to do the following:
1. To make, adopt, alter, amend and repeal by-laws of the
Corporation;
2. To distribute, in its discretion, for any fiscal year (in the
year or in the next fiscal year) as ordinary dividends and as capital
gains distributions, respectively, amounts sufficient to enable the
Corporation as a regulated investment company to avoid any liability for
Federal income tax in respect of such year. Any distribution or dividend
paid to stockholders from any capital source shall be accompanied by a
written statement showing the source or sources of such payment;
3. To issue and sell or to cause the issuance and sale of shares of
the Corporation's capital stock in such amounts and on such terms and
conditions, for such purpose and for such amount or kind of consideration
as is now or hereafter permitted by the laws of the State of Maryland;
4. To purchase and to cause to be purchased shares of the capital
stock of the Corporation, pursuant to paragraphs B, C and D of this
Article, upon tender thereof by the holder or holders thereof or
otherwise, provided the Corporation has assets legally available for such
purpose whether arising out of paid-in surplus, other surplus, net profits
or otherwise, to such extent and in such manner and upon such terms as the
Board of Directors shall deem expedient, and to pay for such shares in
cash then held or owned by the Corporation;
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5. To authorize, subject to such vote, consent, or approval of
stockholders and other conditions, if any, as may be required by any
applicable statute, rule or regulation, the execution and performance by
the Corporation of an agreement or agreements with any person,
corporation, association, partnership, or other organization whereby,
subject to the supervision and control of the Board of Directors, any such
other person, corporation, association, partnership, or other organization
shall render managerial, investment advisory and related services to the
Corporation (including, if deemed advisable, the management or supervision
of the investment portfolio of the Corporation) upon such terms and
conditions as may be provided in such agreement or agreements;
6. To authorize, subject to such vote, consent or approval of
stockholders and other conditions, if any, as may be required by any
applicable statute, rule or regulation, the execution and performance by
the Corporation of an agreement or agreements, which may be exclusive,
with any person, corporation, association, partnership or other
organization, as distributor, providing for the sale and distribution of
shares of the capital stock of the Corporation. Such agreement or
agreements may provide for the charge by the Corporation of a premium over
the net asset value (determined as hereinafter provided) of such shares
and the allowance of a discount by the Corporation to such distributor,
and may further provide for the reallowance by such distributor of
concessions or commissions from such discount; provided, however, that
such discount shall not exceed the amount of the premium;
7. To authorize any agreement of the character described in
subparagraphs 5 or 6 of this paragraph A or other agreement or transaction
with any person, corporation, association, partnership or other
organization, although one or more of the members of the Board of
Directors or officers of the Corporation may be the other party to any
such agreement or an officer, director, shareholder, or member of such
other party, and no such agreement shall be invalidated or rendered
voidable by reason of the existence of any such relationship. Any director
of the Corporation who is also a director or officer of such other
corporation or who is so interested may be counted in determining the
existence of a quorum at any meeting of the Board of Directors which shall
authorize any such agreement, and may vote thereat to authorize any such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested. Any
agreement entered into pursuant to said subparagraphs 5 or 6 shall be
consistent with and subject to the requirements of the Investment Company
Act of 1940, as amended from time to
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time, applicable rules and regulations thereunder or any other applicable
Act of Congress hereafter enacted, and no amendment to any agreement
entered into pursuant to said subparagraph 5 (other than an amendment
reducing the compensation of the other party thereto) shall be effective
unless assented to by the affirmative vote of a majority of the
outstanding voting securities of the Corporation (as such phrase is
defined in the Investment Company Act of 1940, as amended from time to
time) entitled to vote on the matter.
B. Each holder of shares of capital stock shall be entitled at his
option, exercisable as hereinafter provided, to require the Corporation to
purchase all or any part of the shares of its capital stock owned by such holder
for an amount equal to the proportionate interest in the net assets of the
Corporation represented by such shares determined as hereinafter set forth,
subject to and in accordance with the provisions of the laws of Maryland, such
regulations (not inconsistent with these Articles of Incorporation) as the Board
of Directors may adopt and the terms and conditions set forth below.
Notwithstanding the foregoing, the Corporation may deduct from the proceeds
otherwise due to any stockholder requiring the Corporation to redeem shares less
a charge, not to exceed one percent (1%) of such proportionate interest in such
net assets, if and as fixed by resolution of the Board of Directors of the
Corporation from time to time, or a reimbursement charge, a deferred sales
charge or other charge that is integral to the Corporation's distribution
program (which charges may vary within and among series and classes) as may be
established from time to time by the Board of Directors.
1. Such option shall be exercised in each instance by and only by
the delivery during usual business hours on business day (which shall be
any day on which the New York Stock Exchange is open for trading) to the
Corporation, or an agent designated for the purpose by it (hereinafter
referred to as an Agent) of a written request that the Corporation
purchase such shares, duly executed by such holder, accompanied by
surrender to the Corporation or the Agent of the certificate or
certificates, if any, for the shares to be purchased in proper form for
transfer, together with such documents and proof of the authenticity of
signatures as may be required by the Corporation;
2. The time as of which the net asset value applicable to any such
purchase shall be computed (hereinafter referred to as a Determination
Time) shall be a time determined by the Board of Directors in its
discretion that is reasonably proximate to the time of the surrender to
the Corporation or an Agent of instructions to purchase, together with the
certificate or certificates, if any, for such shares, in proper form for
transfer, and the manner in which such net asset
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value shall be determined shall be as hereinafter in paragraph D of this
Article provided;
3. Payment of the purchase price by the Corporation or an Agent
under this paragraph B and paragraph C shall be made in cash within seven
days after the surrender to the Corporation or an Agent of instructions to
purchase, together with the certificate or certificates, if any, for such
shares, in proper form for transfer, except that:
(a) any such payment may be postponed or right of redemption
suspended (1) for any period during which the New York Stock
Exchange is closed other than the customary weekend and holiday
closings, or during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a
result of which disposal by the Corporation of securities owned by
it is not reasonably practicable, or it is not reasonably
practicable for the Corporation fairly to determine the value of its
net assets; or (3) for such other periods as the Securities and
Exchange Commission may by order permit for the protection of
security holders of the Corporation; provided that applicable rules
and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) shall govern as to the existence
of restricted trading under (1) above or the emergency under (2)
above;
(b) the right of a holder of shares to receive dividends
thereon, and all other rights with respect to such shares, shall
forthwith cease and terminate from and after the time of the
acceptance of such shares by the Corporation for repurchase (in
accordance with this paragraph B or paragraph C of this Article V),
except the right of such holder to receive in cash the repurchase
price of such shares from the Corporation;
C. The Board of Directors may authorize the purchase by the
Corporation, either directly or through an agent, of shares of its capital stock
by agreement with stockholders, in the open market or otherwise at prices not in
excess of the net asset value of such shares (determined as hereinafter
provided) as of a time determined by the Board of Directors (hereinafter
referred to as a Determination Time) reasonably proximate to the time of
purchase by the Corporation or any such agent.
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D. The Corporation, pursuant to a resolution of the Board of
Directors and without the vote or consent of stockholders of the Corporation,
shall have the right to redeem at net asset value all shares of capital stock in
any stockholder account in which there are fewer than 25 shares or such lesser
number of shares as shall be specified in such resolution. Such resolution shall
set forth that redemption of shares in such accounts has been determined to be
in the economic best interest of the Corporation or necessary to reduce
disproportionately burdensome expenses in servicing stockholder accounts. Such
resolution shall provide that prior notice of at least six months shall be given
to a stockholder before such redemption of shares, and that the stockholder will
have six months (or such longer period as is specified in the resolution) from
the date of the notice to avoid such redemption by increasing his account to at
least 25 shares, or such lesser number of shares as is specified in the
resolution.
E. For the purposes referred to in these Articles of Incorporation,
the net asset value of shares of the capital stock of the Corporation of each
series and class as of any Determination Time shall be determined by or pursuant
to the direction of the Board of Directors as follows:
1. At times when a series is not classified into multiple classes,
the net asset value of each share of stock of a series, as of a
determination time, shall be the quotient, carried out to not less than
two decimal points, obtained by dividing the net value of the assets of
the Corporation belonging to that series (determined as hereinafter
provided) as of such Determination Time by the total number of shares of
that series then outstanding, including all shares of that series which
the Corporation has agreed to sell for which the price has been
determined, and excluding shares of that series which the Corporation has
agreed to purchase or which are subject to redemption for which the price
has been determined.
The net value of the assets of the Corporation of a series as of any
Determination Time shall be determined in accordance with sound accounting
practice by deducting from the gross value of the assets of the
Corporation belonging to that series (determined as hereinafter provided),
the amount of all liabilities belonging to that series (as such terms are
defined in subparagraph 2 of paragraph B of Article V), in each case as of
such Determination Time.
The gross value of the assets of the Corporation belonging to a
series as of such Determination Time shall be an amount equal to all cash,
receivables, the market value of all securities for which market
quotations are readily available and the fair value of other assets of the
Corporation belonging to that series (as such
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terms are defined in subparagraph 1 of Paragraph B of Article V) at such
Determination Time, all determined in accordance with sound accounting
practice and giving effect to the following:
(a) the market value as of any Determination Time of any
security owned by the Corporation which is listed or admitted to
trading privileges on the New York Stock Exchange or the American
Stock Exchange shall be the last sale price or (in the case of a
security in which there has been no previously reported sale
transaction since the last Determination Time) the mean between the
last bid price and the last asked price, for such security on such
exchange. In case securities being valued are listed or admitted to
trading privileges on any securities exchange other than the New
York Stock Exchange or the American Stock Exchange, the securities
exchange, sale transactions or bid or asked prices which are to be
used as aforesaid, shall be selected by the Board of Directors or
any officer or other person designated by the Board of Directors for
the purpose.
(b) The market value of securities dealt in an
over-the-counter market shall be the mean between the last bid and
asked price in such market prior to the then current Determination
Time.
(c) The market value of other property, including any
securities which are neither listed nor admitted to trading
privileges on any exchange or dealt in an over-the-counter market,
shall be determined in good faith in such manner as the Board of
Directors shall prescribe from time to time.
(d) The determination of the market value of securities
hereunder may be made in reliance on any recognized source of
quotations or basis for ascertaining quotations.
(e) If a security is traded in more than one market, a
determination may be made as to which market most accurately
reflects the value of such security.
2. At times when a series is classified into multiple classes, the
net asset value of each share of stock of a class of such series shall be
determined in accordance with subparagraphs 1 and 3 of this paragraph E
with appropriate adjustments to reflect differing allocations of
liabilities and expenses of such series between or among such classes to
such extent as may be provided in or determined
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pursuant to Articles Supplementary filed for record with the State
Department of Assessments and Taxation of Maryland or as may otherwise be
determined by the Board of Directors.
3. The Board of Directors is empowered, in its discretion, to
establish other methods for determining such net asset value whenever such
other methods are deemed by it to be necessary or desirable, including,
but without limiting the generality of the foregoing, any method based on
actual market movements and any method deemed necessary or desirable in
order to enable the Corporation to comply with any provision of the
Investment Company Act of 1940 or any rule or regulation thereunder.
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F. Any determination as to any of the following matters made by or
pursuant to the direction of the Board of Directors consistent with these
Articles of Incorporation and in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of duties, shall be final and conclusive
and shall be binding upon the Corporation and every holder of shares of capital
stock of the Corporation, of any series or class, namely, the amount of the
assets, obligations, liabilities and expenses of the Corporation or belonging to
any series or with respect to any class; the amount of the net income of the
Corporation from dividends and interest for any period and the amount of assets
at any time legally available for the payment of dividends with respect to any
series or class; the amount of paid-in surplus, other surplus, annual or other
net profits, or net assets in excess of capital, undivided profits, or excess of
profits over losses on sales of securities belonging to the Corporation or any
series or class; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged) with respect to the
Corporation or any series or class; the market value, or any sale, bid or asked
price to be applied in determining the market value, of any security owned or
held by the Corporation; the fair value of any other asset owned by the
Corporation; the number of shares of stock of any series or class issued or
issuable; the existence of conditions permitting the postponement of payment of
the repurchase price of shares of stock of any series or class or the suspension
of the right of redemption as provided by law; any matter relating to the
acquisition, holding and disposition of securities and other assets by the
Corporation; any question as to whether any transaction constitutes a purchase
of securities on margin, a short sale of securities, or an underwriting of the
sale of, or participation in any underwriting or selling group in connection
with the public distribution of any securities; and any matter relating to the
issue, sale, repurchase and/or other acquisition or disposition of shares of
stock of any series or class.
G. The Corporation is adopting its corporate title through
permission of the firm of Lord, Abbett & Co.; and if it shall enter into a
management or advisory contract with such firm or a subsidiary or affiliate of
such firm as authorized herein, the Corporation shall make appropriate
agreements that upon the termination of such contract for any cause, or if such
firm or subsidiary or affiliate deems it advisable to withdraw the right to the
use of its name, the Corporation will, at the request of such firm or subsidiary
or affiliate, take such action as may be necessary to change its name to
eliminate all use of or reference to the words "Lord Abbett" in any form and
will neither use or refer to such words in any name or in any other manner, nor
use the registered service mark of Lord, Abbett & Co., without the written
consent of such firm or subsidiary or affiliate. The Corporation shall also
agree in such contract that investment companies other than the
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Corporation for which such firm or a subsidiary may act as investment adviser,
and other companies affiliated with Lord, Abbett & Co., may be formed with the
words "Lord Abbett" in their corporate titles. Such agreements on the part of
the Corporation are hereby made binding upon it, its directors, officers,
stockholders, creditors and all other persons claiming under or through it.
ARTICLE VII
The current number of directors of the Corporation is eight, and the
names of those who shall act as such until their successors are duly elected and
qualify are as follows:
Robert S. Dow
E. Wayne Nordberg
E. Thayer Bigelow
Stewart S. Dixon
John C. Jansing
C. Alan MacDonald
Hansel B. Millican
Thomas J. Neff
However, the By-Laws of the Corporation may fix the number of directors at a
number other than eight and may authorize the Board of Directors, by the vote of
a majority of the entire Board of Directors, to divide the Board into classes,
to increase or decrease the number of directors within a limit specified in the
By-Laws, provided that in no case shall the number of directors be less than
five, and to fill the vacancies created by any such increase in the number of
directors. Unless otherwise provided in the By-Laws of the Corporation, the
directors of the Corporation need not be stockholders.
ARTICLE VIII
From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed (including any amendment that
changes the terms of
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any of the outstanding stock by classification, reclassification or otherwise),
and other provisions that might, under the statutes of the State of Maryland at
the time in force, be lawfully contained in articles of incorporation may be
added or inserted, upon the vote of the holders of a majority of the shares of
capital stock of the Corporation at the time outstanding and entitled to vote,
and all rights at any time conferred upon the stockholders of the Corporation by
these Articles of Incorporation are subject to the provisions of this Article
VIII.
THIRD: The foregoing restatement of the charter has been approved by
a majority of the entire board of directors.
FOURTH: The charter is not amended by these Articles of Restatement.
FIFTH: The current address of the principal office of the
Corporation is set forth in Article III of the foregoing restatement of the
charter.
SIXTH: The name and address of the Corporation's current resident
agent are set forth in Article III of the foregoing restatement of the charter.
SEVENTH: The number of directors of the Corporation and the names of
those currently in office are set forth in Article VII of the foregoing
restatement of the charter.
The undersigned Vice President acknowledges these Articles of
Restatement to be the corporate act of the Corporation and as to all matters or
facts set forth herein required to be verified under oath, the undersigned Vice
President acknowledges that to the best of his knowledge, information and
belief, these matters and
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facts are true in all material respects and that this statement is made under
the penalties of perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be
signed in its name and on its behalf by its Vice President and witnessed to by
its Secretary on this 24th day of April, 1998.
LORD ABBETT BOND-DEBENTURE
FUND, INC.
By /s/ Thomas F. Konop
---------------
Thomas F. Konop, Vice President
WITNESS:
/s/ Paul A. Hilstad
---------------
Paul A. Hilstad, Secretary
BY-LAWS
OF
LORD ABBETT BOND-DEBENTURE FUND, INC.
(a Maryland Corporation)
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the
Corporation in Maryland shall be in the City of Baltimore, and the name of the
resident agent in charge thereof is The Prentice-Hall Corporation Systems,
Maryland.
Section 2. Other Offices. The Corporation may also have an
office in the City and State of New York and offices at such other places as the
Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDERS MEETINGS
Section 1. Annual Meetings. The Corporation shall not hold an
annual meeting of its stockholders in any fiscal year of the Corporation unless
required in accordance with the following sentence. The Chairman of the Board or
the President shall call an annual meeting of the stockholders when one or more
matters are required to be acted on by stockholders under the Investment Company
Act of 1940, as amended, and the Chairman of the Board, the President, a Vice
<PAGE>
President, the Secretary or any director shall call an annual meeting of
stockholders at the request in writing of a majority of the Board of Directors
or of stockholders holding at least one quarter of the stock of the Corporation
outstanding and entitled to vote at the meeting. Any annual meeting of the
stockholders held pursuant to the foregoing sentence shall be held at such time
and at such place, within the City of New York or elsewhere, as may be fixed by
the Chairman of the Board or the President or the Board of Directors or by the
stockholders holding at least one-quarter of the stock of the Corporation
outstanding and entitled to vote, as the case may be, and as may be stated in
the notice setting forth such call, provided that any stockholders requesting
such meeting shall have paid to the Corporation the reasonably estimated cost of
preparing and mailing the notice thereof, which the Secretary shall determine
and specify to such stockholders. Any meeting of stockholders held in accordance
with this Section 1 shall for all purposes constitute the annual meeting of
stockholders for the fiscal year of the Corporation in which the meeting is held
and, without limiting the generality of the foregoing, shall be held for the
purposes of (a) acting on any such matter of matters so required to be acted on
by stockholders under the Investment Company Act of 1940, as amended, and (b)
electing directors to hold the offices of any directors who have held office for
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more than one year (or, in the case of directors elected prior to July 1, 1987,
who have held office for more than three years) or who have been elected by the
Board of Directors to fill vacancies which result from any cause, and for
transacting such other business as may properly be bought before the meeting.
Only such business, in addition to that prescribed by law, by the Articles of
Incorporation and by these By-Laws, may be brought before such meeting as may be
specified by resolution of the Board of Directors or by writing filed with the
Secretary of the Corporation and signed by the Chairman of the Board or by the
President or by a majority of the directors or by stockholders holding at least
one-quarter of the stock of the Corporation outstanding and entitled to vote at
the meeting.
Section 2. Special Meetings. Special meetings of the
stockholders for any purpose or purposes may be held upon call by the President
or by a majority of the Board of Directors, and shall be called by the
President, a Vice President, the Secretary or any director at the request in
writing of a majority of the Board of Directors or of stockholders holding at
least one-quarter of the stock of the Corporation outstanding and entitled to
vote at the meeting, at such time and at such place where an annual meeting of
stockholders could be held, as may be fixed by the President or the Board of
Directors or by the stockholders holding at least one-quarter of the stock of
the Corporation outstanding and so entitled to vote, as the case may be, and as
may be stated in the notice setting forth such call. Such request shall state
the purpose or purposes of the proposed meeting, and only such purpose or
purposes so specified may properly be brought before such meeting.
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Section 3. Notice of Meetings. Written or printed notice of
every annual or special meeting of stockholders, stating the time and place
thereof and the general nature of the business proposed to be transacted at any
such meeting, shall be delivered personally or mailed not less than 10 nor more
than 90 days previous thereto to each stockholder of record entitled to vote at
the meeting at his address as the same appears on the books of the Corporation.
Meetings may be held without notice if all of the stockholders entitled to vote
are present or represented at the meeting, or if notice is waived in writing,
either before or after the meeting, by those not present or represented at the
meeting. No notice of an adjourned meeting of the stockholders other than an
announcement of the time and place thereof at the preceding meeting shall be
required.
Section 4. Quorum. At every meeting of the stockholders the
holders of record of a majority of the outstanding shares of the stock of the
Corporation entitled to vote at the meeting, whether present in person or
represented by proxy, shall, except as otherwise provided by law, constitute a
quorum. If at any meeting there shall be no quorum, the holders of record of a
majority of such shares entitled to vote at the meeting so present or
represented may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have been obtained, at which
time any business may be transacted which might have been transacted at the
meeting as originally called.
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Section 5. Voting. Each stockholder entitled to vote at any
meeting shall have one vote in person or by proxy for each share of stock held
by him, but no proxy shall be voted after eleven months from its date, unless
such proxy provides for a longer period. All elections of directors shall be
had, and all questions, except as otherwise provided by law or by the Articles
of Incorporation or by these By-Laws, shall be decided, by a majority of the
votes cast by stockholders present or represented and entitled to vote thereat
in person or by proxy.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The property, affairs and business
of the corporation shall be managed by the Board of Directors, provided,
however, that the Board of Directors may authorize the Corporation to enter into
an agreement or agreements with any person, corporation, association,
partnership or other organization, subject to the Board's supervision and
control, for the purpose of providing managerial, investment advisory and
related services to the Corporation which may include management or supervision
of the investment portfolio of the Corporation.
5
<PAGE>
Section 2. Number, Class, Quorum, Election, Term of Office and
Qualifications. The Board of Directors of the Corporation shall consist of not
less than three or more than fifteen persons, none of whom need be stockholders
of the Corporation. The number of directors (within the above limits) shall be
determined by the Board of Directors from time to time, as it sees fit, by vote
of a majority of the whole Board. Directors elected prior to July 1, 1987, shall
be divided into three classes, each to hold office for a term of three years;
directors elected thereafter shall consist of one class only. The directors
shall be elected at each annual meeting of stockholders and, whether or not
elected for a specific term, shall hold office, unless sooner removed, until
their respective successors are elected and qualify.
One-third of the whole Board, but in no event less than two,
shall constitute a quorum for the transaction of business, but if at any meeting
of the Board there shall be less than a quorum present, a majority of the
directors present may adjourn the meeting from time to time until a quorum shall
have been obtained, when any business may be transacted which might have been
transacted at the meeting as originally convened. No notice of an adjourned
meeting of the directors other than an announcement of the time and place
thereof at the preceding meeting shall be required. The acts of the majority of
the directors present at any meeting at which there is a quorum shall be the
acts of the Board, except as otherwise provided by law, by the Articles of
Incorporation or by these By-Laws.
6
<PAGE>
Section 3. Vacancies. The Board of Directors, by vote of a
majority of the whole Board, may elect directors to fill vacancies in the Board
resulting from an increase in the number of directors or from any other cause.
Directors so chosen shall hold office until their respective successors are
elected and qualify, unless sooner displaced pursuant to law or these By-Laws.
The stockholders, at any meeting called for the purpose, may,
with or without cause, remove any director by the affirmative vote of the
holders of a majority of the votes entitled to be cast, and at any meeting
called for the purpose may fill the vacancy in the Board thus caused.
Section 4. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and place, within or without the State of
Maryland, as may from time to time be fixed by Resolution of the Board or as may
be specified in the notice of any meeting. No notice of regular meetings of the
Board shall be required.
Section 5. Special Meetings. Special meetings of the Board of
Directors may be called from time to time by the Chairman of the Board, the
President, any Vice President or any two directors. Each special meeting of the
Board shall be held at such place, either within or outside of the State of
Maryland, as shall be designated in the notice of such meeting. Notice of each
such meeting shall be mailed to each director, at his residence or usual place
of business, at least two days before the day of the meeting, or shall be
directed to him at such place by telegraph or cable, or be delivered to him
personally not later than the day before the day of the meeting. Every such
notice shall state the time and place of the meeting but need not state the
purposes thereof, except as otherwise expressly provided in these By-Laws or by
statute.
7
<PAGE>
Section 6. Telephonic Conference Meetings. Any meeting of the
Board or any committee thereof may be held by conference telephone, regardless
where each director may be located at the time, by means of which all persons
participating in the meeting can hear each other, and participation in such
meeting in such manner shall constitute presence in person at such meeting.
Section 7. Fees and Expenses. The directors shall receive such
fees and expenses for services to the Corporation as may be fixed by the Board
of Directors, subject however, to such limitations as may be provided in the
Articles of Incorporation. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity as an
officer, agent or otherwise and receiving compensation therefor.
8
<PAGE>
Section 8. Transactions with Directors. Except as otherwise
provided by law or in the Articles of Incorporation, a director of the
Corporation shall not in the absence of fraud be disqualified from office by
dealing or contracting with the Corporation either as a vendor, purchaser or
otherwise, nor in the absence of fraud shall any transaction or contract of the
Corporation be void or voidable or affected by reason of the fact that any
director, or any firm of which any director is a member, or any corporation of
which any director is an officer, director or stockholder, is in any way
interested in such transaction or contract; provided that at the meeting of the
Board of Directors, at which said contract or transaction is authorized or
confirmed, the existence of an interest of such director, firm or corporation is
disclosed or made known and there shall be present a quorum of the Board of
Directors a majority of which, consisting of directors not so interested, shall
approve such contract or transaction. Nor shall any director be liable to
account to the Corporation for any profit realized by him from or through any
such transaction or contract of the Corporation ratified or approved as
aforesaid, by reason of the fact that he or any firm of which he is a member, or
any corporation of which he is an officer, director, or stockholder, was
interested in such transaction or contract. Directors so interested may be
counted when present at meetings of the Board of Directors for the purpose of
determining the existence of a quorum. Any contract, transaction or act of the
Corporation or of the Board of Directors (whether or not approved or ratified as
hereinabove provided) which shall be ratified by a majority of the votes cast at
any annual or special meeting at which a quorum is present called for such
purpose, or approved in writing by a majority in interest of the stockholders
having voting power without a meeting, shall, except as otherwise provided by
law, be valid and as binding as though ratified by every stockholder of the
Corporation.
9
<PAGE>
Section 9. Committees. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
committees each such committee to consist of two or more directors of the
Corporation, which, to the extent permitted by law and provided in said
resolution, shall have and may exercise the powers of the Board over the
business and affairs of the Corporation, and may have power to authorize the
seal of the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. A majority of the
members of any such committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
The Board of Directors shall have power at any time to change the membership of,
to fill vacancies in, or to dissolve any such committee.
Section 10. Written Consents. Any action required or permitted
to be taken at any meeting of the Board of Directors or by any committee thereof
may be taken without a meeting, if a written consent thereto is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes or proceedings of the Board or committee.
Section 11. Waiver of Notice. Whenever under the provisions of
these By-Laws, or of the Articles of Incorporation, or of any of the laws of the
State of Maryland, or other applicable statute, the Board of Directors is
authorized to hold any meeting or take any action after notice or after the
lapse of any prescribed period of time, a waiver thereof, in writing, signed by
the person or persons entitled to such notice or lapse of time, whether before
or after the time of meeting or action stated herein, shall be deemed equivalent
thereto. The presence at any meeting of a person or persons entitled to notice
thereof shall be deemed a waiver of such notice as to such person or persons.
10
<PAGE>
ARTICLE IV
OFFICERS
Section 1. Number and Designation. The Board of Directors
shall each year appoint from among their members a Chairman and a President of
the Corporation, and shall appoint one or more Vice Presidents, a Secretary and
a Treasurer and, from time to time, any other officers and agents as it may deem
proper. Any two of the above-mentioned offices, except those of the President
and a Vice President, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity if such
instrument be required by law or by these By-Laws to be executed, acknowledged
or verified by any two or more officers.
Section 2. Term of Office. The term of office of all officers
shall be one year or until their respective successors are chosen; but any
officer or agent chosen or appointed by the Board of Directors may be removed,
with or without cause, at any time, by the affirmative vote of a majority of the
members of the Board then in office.
Section 3. Duties. Subject to such limitations as the Board of
Directors may from time to time prescribe, the officers of the Corporation shall
each have such powers and duties as generally appertain to their respective
offices, as well as such powers and duties as from time to time may be conferred
by the Board of Directors.
11
<PAGE>
ARTICLE V
CERTIFICATE OF STOCK
Section 1. Form and Issuance. Each stockholder of the
Corporation shall be entitled upon request, to a certificate or certificates, in
such form as the Board of Directors may from time to time prescribe, which shall
represent and certify the number of shares of stock of the Corporation owned by
such stockholder. The certificates for shares of stock of the Corporation shall
bear the signature, either manual or facsimile, of the Chairman of the Board,
the President or a Vice President and the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary, and shall be sealed with the seal of
the Corporation or bear a facsimile of such seal. The validity of any stock
certificate shall not be affected if any officer whose signature appears thereon
ceases to be an officer of the Corporation before such certificate is issued.
12
<PAGE>
Section 2. Transfer of Stock. The shares of stock of the
Corporation of any Class shall be transferable on the books of the Corporation
by the holder thereof in person or by a duly authorized attorney, upon surrender
for cancellation of a certificate or certificates for a like number of shares,
with a duly executed assignment and power of transfer endorsed thereon or
attached thereto, or, if no certificate has been issued to the holder in respect
of shares of stock of the Corporation, upon receipt of written instructions,
signed by such holder, to transfer such shares from the account maintained in
the name of such holder by the Corporation or its agent. Such proof of the
authenticity of the signatures as the Corporation or its agent may reasonably
require shall be provided.
Section 3. Lost, Stolen, Destroyed and Mutilated Certificates.
The holder of any stock of the Corporation shall immediately notify the
Corporation of any loss, theft, destruction or mutilation of any certificate
therefore, and the Board of Directors may, in its discretion, cause to be issued
to him a new certificate or certificates of stock, upon the surrender of the
mutilated certificate or in case of loss, theft or destruction of the
certificate upon satisfactory proof of such loss, theft, or destruction; and the
Board of Directors may, in its discretion, require the owner of the lost, stolen
or destroyed certificate, or his legal representatives, to give to the
Corporation and to such registrar or transfer agent as may be authorized or
required to countersign such new certificate or certificates a bond, in such sum
as they may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be made against them or any of them on
account of or in connection with the alleged loss, theft, or destruction of any
such certificates.
13
<PAGE>
Section 4. Record Date. The Board of Directors may fix, in
advance, a date as the record date for the purpose of determining stockholders
entitled to notice of, or to vote at, any meeting of stockholders, or
stockholders entitled to receive payment of any dividend or the allotment of any
rights, or in order to make a determination of stockholders for any other proper
purpose. Such date, in any case, shall be not more than 90 days, and in case of
a meeting of stockholders, not less than 10 days, prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
In lieu of fixing a record date, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period but not to exceed, in
any case, 20 days prior to the date of any meeting of stockholders or the date
for payment of any divided or the allotment of rights. If the stock transfer
books are closed for the purpose of determining stockholders entitled to notice
of or to vote at a meeting of stockholders, such books shall be closed for at
least 10 days immediately preceding such meeting. If no record date is fixed and
the stock transfer books are not closed for determination of stockholders, the
record date for the determination of stockholders entitled to notice of, or to
vote at, a meeting of stockholders shall be at the close of business on the day
on which notice of the meeting is mailed or the day 30 days before the meeting,
whichever is the closer date to the meeting, and the record date for the
determination of stockholders entitled to receive payment of a dividend or an
allotment of any rights shall be at the close of business on the day on which
the resolution of the Board of Directors declaring the dividend or allotment of
rights is adopted, provided that the payment or allotment date shall not be more
than 90 days after the date of the adoption of such resolution.
14
<PAGE>
ARTICLE VI
CORPORATE BOOKS
The books of the Corporation, except the original or a
duplicate stock ledger, may be kept outside the State of Maryland at such place
or places as the Board of Directors may from time to time determine. The
original or duplicate stock ledger shall be maintained at the office of the
Corporation's transfer agent.
ARTICLE VII
SIGNATURES
Except as otherwise provided in these By-Laws or as the Board
of Directors may generally or in particular cases authorize the execution
thereof in some other manner, all deeds, leases, transfers, contracts, bonds,
notes, checks, drafts and other obligations made, accepted or endorsed by the
Corporation and all endorsements, assignments, transfers, stock powers or other
instruments of transfer of securities owned by or standing in the name of the
Corporation shall be signed or executed by two officers of the Corporation, who
shall be the Chairman of the Board, the President or a Vice President and a Vice
President, the Secretary or the Treasurer.
15
<PAGE>
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall be established by
resolution of the Board of Directors of the Corporation.
ARTICLE IX
CORPORATE SEAL
The corporate seal of the Corporation shall consist of a flat
faced circular die with the word "Maryland" together with the name of the
Corporation, the year of its organization, and such other appropriate legend as
the Board of Directors may from time to time determine, cut or engraved thereon.
In lieu of the corporate seal, when so authorized by the Board of Directors or a
duly empowered committee thereof, a facsimile thereof may be impressed or
affixed or reproduced.
ARTICLE X
INDEMNIFICATION
As part of the consideration for agreeing to serve and serving
as a director of the Corporation, each director of the Corporation shall be
indemnified by the Corporation against every judgment, penalty, fine,
settlement, and reasonable expense (including attorneys' fees) actually incurred
by the director in connection with any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, in
which the director was, is, or is threatened to be made a named defendant or
respondent (or otherwise becomes a party) by reason of such director's service
in that capacity or status as such, and the amount of every such judgment,
penalty, fine, settlement and reasonable expense so incurred by the director
shall be paid by the Corporation or, if paid by the director, reimbursed to the
director by the Corporation, subject only to the conditions and limitations
imposed by the applicable provisions of Section 2-418 of the Corporations and
Associations Article of the Annotated Code of the State of Maryland and by the
provisions of Section 17(h) of the United States Investment Company Act of 1940
as interpreted and as required to be implemented by Securities and Exchange
Commission Release No. IC-11330 of September 4, 1980. The foregoing shall not
limit the authority of the Corporation to indemnify any of its officers,
employees, or agents to the extent consistent with applicable law.
ARTICLE XI
AMENDMENTS
All By-Laws of the Corporation shall be subject to alteration,
amendment, or repeal, and new By-Laws not inconsistent with any provision of the
Articles of Incorporation of the Corporation may be made, either by the
affirmative vote of the holders of record of a majority of the outstanding stock
of the Corporation entitled to vote in respect thereof, given at an annual
meeting or at any special meeting, provided notice of the proposed alteration,
amendment or repeal of the proposed new By-Laws is included in or accompanies
the notice of such meeting, or by the affirmative vote of a majority of the
whole Board of Directors given at a regular or special meeting of the Board of
Directors, provided that the notice of any such special meeting indicates that
the By-Laws are to be altered, amended, repealed, or that new By-Laws are to be
adopted.
16
CONSENT OF INDEPENDENT AUDITORS
Lord Abbett Bond-Debenture Fund, Inc.:
We consent to the incorporation by reference in Post-Effective Amendment 44 to
Registration Statement No. 2-38910 of our report dated February 9, 1998
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 the captions "Investment Advisory and Other Services" and "Financial
Statements" in the Statement of Additional Information, both of which are part
of such Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
April 27, 1998
Exhibit 16
Lord Abbett Bond-Debenture Fund, Inc.
- -------------------------------------
Post Effective Amendment No. 44 on Form N-1A
Class A shares
Fiscal Year Ending December 31, 1997
<TABLE>
<CAPTION>
1 Year 5 Year 10 Years
---------- ---------- ----------
<S> <C> <C> <C>
Initial Investment $ 1,000 $ 1,000 $ 1,000
Dividend by Initial Offering Price $ 9.88 $ 9.90 $ 9.86
---------- ---------- ----------
Equals Shares Purchased 101.215 101.010 101.420
Plus Shares Acquired through Dividend
and Capital Gains Reinvestment 8.757 59.142 182.511
---------- ---------- ----------
Equals Shares held at Ending Peiord Date 109.972 160.152 283.931
Multiplied by Net Asset Value at Ending
Period Date 9.76 9.76 9.76
---------- ---------- ----------
Equals Ending Value before Deduction of
CDSC at Period End Date $ 1,073 $ 1,563 $ 2,771
Less Deferred Sales Charge 0 0 0
---------- ---------- ----------
Equals Ending Redeemable Value(ERV)at
Period End Date $ 1,073 $ 1,563 $ 2,771
Divide ERV by $1000 $ 1,073 $ 1,563 $ 2,771
---------- ---------- ----------
Subtract 1 $ 0.073 $ 0.563 $ 1.771
---------- ---------- ----------
Expressed as a Percentage-Equals the Aggregate
Total Return for the Period 7.30% 56.30% 177.10%
Divide ERV by $1000 1.073 1.563 2.771
---------- ---------- ----------
Raise to the power of 1 0.2 0.1
---------- ---------- ----------
Equals 1.073 1.093 1.107
Subtract 1 0.073 0.093 0.107
---------- ---------- ----------
Expressed as a Percentage-Equals the Average
Annualized Total Return for the Period 7.30% 9.34% 10.73%
</TABLE>
<PAGE>
Class B shares
Fiscal Year Ending December 31, 1997
------------------------------------
<TABLE>
<CAPTION>
1 Year Life of Series
---------- ----------------
<S> <C> <C>
Initial Investment $ 1,000 $ 1,000
Dividend by Initial Offering Price $ 9.40 $ 9.13
---------- ----------------
Equals Shares Purchased 106.383 109.529
Plus Shares Acquired through Dividend
and Capital Gains Reinvestment 8.345 12.731
---------- ----------------
Equals Shares held at Ending Peiord Date 114.728 122.260
Multiplied by Net Asset Value at Ending
Period Date 9.75 9.75
---------- ----------------
Equals Ending Value before Deduction of
CDSC at Period End Date $ 1,119 1,192
Less Deferred Sales Charge 4% 4%
---------- ----------------
Equals Ending Redeemable Value(ERV)at
Period End Date $ 1,073.85 $ 1,144.35
Divide ERV by $1000 $ 1.074 $ 1.144
---------- ----------------
Subtract 1 $ 0.074 $ 0.144
---------- ----------------
Expressed as a Percentage-Equals the Aggregate
Total Return for the Period 7.39% 14.44%
Divide ERV by $1000 1.074 1.144
---------- ----------------
Raise to the power of 1 0.704633205
---------- ----------------
Equals 1.074 1.100
Subtract 1 0.074 0.100
---------- ----------------
Expressed as a Percentage-Equals the Average
Annualized Total Return for the Period 7.39% 9.99%
</TABLE>
<PAGE>
Class C shares
Fiscal Year Ending December 31, 1997
------------------------------------
<TABLE>
<CAPTION>
1 Year Life of Series
---------- ----------
<S> <C> <C>
Initial Investment $ 1,000 $ 1,000
Dividend by Initial Offering Price $ 9.41 $ 9.03
---------- ----------
Equals Shares Purchased 106.270 110.742
Plus Shares Acquired through Dividend
and Capital Gains Reinvestment 8.326 12.865
---------- ----------
Equals Shares held at Ending Peiord Date 114.596 123.607
Multiplied by Net Asset Value at Ending
Period Date 9.77 9.77
---------- ----------
Equals Ending Value before Deduction of
CDSC at Period End Date $ 1,120 1,208
Less Deferred Sales Charge 0 0
---------- ----------
Equals Ending Redeemable Value(ERV)at
Period End Date $ 1,120 $ 1,208
Divide ERV by $1000 $ 1.120 $ 1.208
---------- ----------
Subtract 1 $ 0.120 $ 0.208
---------- ----------
Expressed as a Percentage-Equals the Aggregate
Total Return for the Period 11.96% 20.76%
Divide ERV by $1000 1.120 1.208
---------- ----------
Raise to the power of 1 0.682242991
---------- ----------
Equals 1.120 1.137
Subtract 1 0.120 0.137
---------- ----------
Expressed as a Percentage-Equals the Average
Annualized Total Return for the Period 11.96% 13.77%
</TABLE>
<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. 44 on Form N-1A.
YIELD FORMULA
For the 30 Days
Ended December 30, 1997
YIELD = 2[(a-b+1))6-1] = 6.92
cd
Where: a = Fund dividends and interest earned during the period in the
amount of $13,971,584
b = Fund expenses accrued for the period (net of reimbursements)
in the amount of $1,670,819
c = the average daily number of Fund shares outstanding during the
period that were entitled to receive dividends were 211,044,504
d = the maximum offering price per Fund share on the last day of
the period was $10.25
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. 44 on Form N-1A.
YIELD FORMULA
For the 30 Days
Ended December 30, 1997
YIELD = 2[(a-b+1))6-1] = 6.57
cd
Where: a = Fund dividends and interest earned during the period in the
amount of $2,475,706
b = Fund expenses accrued for the period (net of reimbursements)
in the amount of $503,051
c = the average daily number of Fund shares outstanding during the
period that were entitled to receive dividends were 37,434,555
d = the maximum offering price per Fund share on the last day of
the period was $9.75
<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, 1997
YIELD = 2[(a-b+1))6-1] = 6.57
cd
Where: a = Fund dividends and interest earned during the period in the
amount of $2,823,201
b = Fund expenses accrued for the period (net of reimbursements)
in the amount of $576,000
c = the average daily number of Fund shares outstanding during the
period that were entitled to receive dividends were 42,601,557
d = the maximum offering price per Fund share on the last day of
the period was $9.77
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000060365
<NAME> LORD ABBETT BOND-DEBENTURE FUND, INC.
<SERIES>
<NUMBER> 001
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2918440339
<INVESTMENTS-AT-VALUE> 3000015316
<RECEIVABLES> 78094673
<ASSETS-OTHER> 5016861
<OTHER-ITEMS-ASSETS> 9000000
<TOTAL-ASSETS> 3092126850
<PAYABLE-FOR-SECURITIES> 220527748
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5415172
<TOTAL-LIABILITIES> 225942920
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2839891222
<SHARES-COMMON-STOCK> 212228650
<SHARES-COMMON-PRIOR> 185334145
<ACCUMULATED-NII-CURRENT> 15247267
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16347182)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 81574977
<NET-ASSETS> 2866183930
<DIVIDEND-INCOME> 8049722
<INTEREST-INCOME> 160180168
<OTHER-INCOME> 0
<EXPENSES-NET> 16981334
<NET-INVESTMENT-INCOME> 151086591
<REALIZED-GAINS-CURRENT> 38805326
<APPREC-INCREASE-CURRENT> 60937427
<NET-CHANGE-FROM-OPS> 293497038
<EQUALIZATION> 1095496
<DISTRIBUTIONS-OF-INCOME> 157993072
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 46518192
<NUMBER-OF-SHARES-REDEEMED> 27836818
<SHARES-REINVESTED> 8213131
<NET-CHANGE-IN-ASSETS> 736762533
<ACCUMULATED-NII-PRIOR> 21057418
<ACCUMULATED-GAINS-PRIOR> (99239387)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8624604
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16981334
<AVERAGE-NET-ASSETS> 1915816270
<PER-SHARE-NAV-BEGIN> 9.41
<PER-SHARE-NII> 0.75
<PER-SHARE-GAIN-APPREC> 0.40
<PER-SHARE-DIVIDEND> 0.80
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> .89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000060365
<NAME> LORD ABBETT BOND-DEBENTURE FUND, INC.
<SERIES>
<NUMBER> 002
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 2918440339
<INVESTMENTS-AT-VALUE> 3000015316
<RECEIVABLES> 78094673
<ASSETS-OTHER> 5016861
<OTHER-ITEMS-ASSETS> 9000000
<TOTAL-ASSETS> 3092126850
<PAYABLE-FOR-SECURITIES> 220527748
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5415172
<TOTAL-LIABILITIES> 225942920
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2839891222
<SHARES-COMMON-STOCK> 38431556
<SHARES-COMMON-PRIOR> 11570383
<ACCUMULATED-NII-CURRENT> 70678
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (16347182)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 81574977
<NET-ASSETS> 2866183930
<DIVIDEND-INCOME> 895857
<INTEREST-INCOME> 20434702
<OTHER-INCOME> 0
<EXPENSES-NET> 4013929
<NET-INVESTMENT-INCOME> 17392800
<REALIZED-GAINS-CURRENT> 38805326
<APPREC-INCREASE-CURRENT> 60937427
<NET-CHANGE-FROM-OPS> 293497038
<EQUALIZATION> 253622
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