Lord Abbett Bond-Debenture Fund
SEMI-ANNUAL REPORT FOR THE SIX MONTHS ENDED JUNE 30, 1999
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A mutual fund with a multi-faceted
approach to seeking high income
[LOGO]
<PAGE>
Lord Abbett Bond-Debenture Fund
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Since its establishment in 1971, Lord Abbett Bond-Debenture Fund has
sought the best of both worlds --high current income and capital
growth. The Fund's flexible investment approach, combined with Lord
Abbett's value management style, has produced a history of strong
performance in a variety of economic climates.
Morningstar says: "...Towle's credit selection has been strong enough
to give this fund one of the category's more attractive risk/reward
profiles."
Morningstar Mutual Funds, January 22, 1999
- --------------------------------------------------------------------------------
Average Annual Rates of Total Return as of 6/30/99 (1)
Historically Consistent
Total Returns
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For the past 20 years +10.5% per year
For the past 15 years +10.7% per year
For the past 10 years +9.8% per year
For the past 5 years +9.1% per year
For the past year +1.3% per year
- --------------------------------------------------------------------------------
Flexibility The Fund's flexible investment policy enables it to adapt to
changing economic conditions. (See page 4 for the Fund's
portfolio composition.)
- --------------------------------------------------------------------------------
Dividend Distribution Rates on 6/30/99 (2)
High Current Income
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At Net Asset Value +8.13%
At Maximum Offering Price +7.75%
- --------------------------------------------------------------------------------
Average Annual Total
Returns
Average annual total returns for periods ended 6/30/99 at the Class A share
maximum sales charge of 4.75%, with all distributions reinvested:
10 years +9.28%
5 years +8.04%
1 year -3.50%
The Fund's SEC yield for the 30 days ended 6/30/99 was 7.39%. Total return
is the percent change in value, assuming the reinvestment of all
distributions.
The results quoted herein represent Class A share past
performance, which is no indication of future results. The
investment return and principal value of an investment in the
Fund will fluctuate so that shares, on any given day or when
redeemed, may be worth more or less than their original cost.
(1) Class A share performance at net asset value. The Series issues
additional classes of shares with distinct pricing options. See
Important Information on page 5.
(2) Based on the Class A share monthly dividend of $. 0625,
annualized.
<PAGE>
[PHOTO]
ROBERT S. DOW
CHAIRMAN
JULY 15, 1999
"Bond-Debenture Fund's flexible invest ment strategy helps investors access
opportunities in highyield, convertible and government bonds."
Report to Shareholders
For the Six Months Ended June 30, 1999
Lord Abbett Bond-Debenture Fund completed the first half of its fiscal year on
June 30, 1999, with net assets of approximately $3.8 billion. Below is an
overview of Class share performance for the period.
Six Months Ended June 30, 1999
--------------------------------------------------------
Class A Class B Class C Class P Class Y
--------------------------------------------------------
Net asset value $9.22 $9.22 $9.23 $9.22 $9.21
Dividends $0.38 $0.34 $0.34 $0.37 $0.39
Total return (1)(2) 1.6% 1.3% $1.2% 1.5% 1.8%
Interest rates in general continued to rise during the first half of the Fund's
fiscal year, and the U.S. economy continued to grow. Many global economies,
including those in the Pacific Rim and South America, showed definite signs of
improvement. Despite little hard evidence of increasing wages or rising basic
materials costs, the strength of the U.S. economy sparked concerns about a surge
in inflation. Against this backdrop, the U.S. Federal Reserve Board (the "Fed")
increased its key interest rate by 0.25%. Bond prices generally declined during
the period.
Bond-Debenture Fund's flexible investment strategy helps investors access
opportunities in high-yield, convertible and government bonds. During the period
under review, the Fund emphasized holdings in high-yield/lower-rated bonds,
which enabled it to perform well when compared to traditional government or
investment-grade bonds. (3) Positions in convertible bonds also helped boost
performance, especially during the month of April when the stock market advanced
strongly and convertible securities posted solid returns.
Given the market's concerns about interest rates and inflation, the Fund's
management team reduced the portfolio's duration and holdings in government
bonds because of their interest-rate sensitivity. Positions in convertible bonds
were also reduced because we believed that many of these investments had reached
their full value prices during April's equity market rally.
Despite fears in the marketplace, we are optimistic that inflation will not
become a threat to the U.S. economy. With the increase in rates that has
occurred since the beginning of 1999 and the U.S. Federal Reserve Board's recent
interest rate hike, we expect the U.S. economy to grow at a more sustainable
rate of 2.5 to 3% during the second half of 1999. At this level of growth, much
of the inflationary fear that has consumed the market recently will likely be
eliminated. We believe that this will create an improved environment for bond
investments in general and particularly for high-yield/lower-rated investments,
which tend to perform well as global economies and corporate earnings grow.
Therefore, we expect to remain overweighted in this area during the coming
months to benefit from high current yields and to position the Fund to capture
potential capital appreciation when conditions in the bond market improve.
Thank you for choosing Lord Abbett Bond-Debenture Fund. We look forward to
helping you reach your financial goals in the years ahead.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) Not annualized.
(3) Unlike Treasury securities, an investment in the Fund is neither insured
nor guaranteed by the U. S. government and is regarded as involving a
greater degree of risk. The Fund's share price and income are not
guaranteed and the value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
1
<PAGE>
Aiming for High Total Returns
Seeking High Returns
Dividend distribution rates were 8.13% and 7.75% (based on the Class A share net
asset value and maximum offering price, respectively, on 6/30/99, and the
monthly dividend of $.0625, annualized). See Important Information on page 5.
Striving for Consistency of Performance
The Fund's goal is high total return through high current income and capital
appreciation. The Fund strives for competitive returns in both up and down
markets.
Growth of $10,000 Investments: 4/1/71-6/30/99 (1)
1973-1974
The last major bear market;
the unmanaged S&P 500 declined 37.3%. The Fund mitigated the decline, then
recovered strongly.
1977-1981
Interest rates soared; bond prices sank. The Fund was up every year.
1990-1991
Recession and the Middle East crisis jolted all markets; lower rated bond
market especially hard hit. The Fund mitigated the decline, then recoverd
strongly.
1997-1998
Global economic fears hurt high-yield bonds. The Fund posted a positive total
return.
[GRAPHIC OMITTED]
The Fund
Average of High
Current Yield Funds (2)
Inflation
(Consumer Price Index)
This graph illustrates total return performance of Class A shares. The Fund's
results do not include the maximum sales charge of 4.75% applicable to Class A
share investments under $100,000; there is no sales charge on investments of $1
million or more. For performance at the Class A share maximum sales charge, see
inside front cover. See Important Information on page 5. Past performance does
not guarantee future results.
(1) The Fund commenced operations on 4/1/71.
(2) Source: Lipper, Inc.
2
<PAGE>
Performance Update
The Fund has an impressive history of protecting long-term income investors from
inflation. Below, the Fund's growth is compared to the Consumer Price Index, a
standard inflation measure, through various economic, interest-rate and
inflation environments. (1)
The Fund Versus Inflation
$100,000 Invested: 4/1/71- 6/30/99 (2)
$100,000 invested at
the Fund's inception
grew to over $1 million
<TABLE>
<CAPTION>
Value of
$100,000
Year Annual Investment with Inflation
Ended Dividends all Distributions (Consumer
Dec. 31 Reinvested Reinvested Price Index)
-
<S> <C> <C> <C> <C>
1971 (3) $ 3,450 $ 103,588 $102,750 |
1972 7,460 110,073 106,250 | From the early 1970s
1973 8,204 99,239 115,500 | through the early
1974 9,163 94,202 129,750 | 1980s, the U. S.
1975 9,719 122,105 138,750 | economy experienced
1976 10,970 159,867 145,500 |-- rapidly rising
1977 11,883 171,064 155,250 | inflation and
1978 14,100 175,803 169,250 | interest rates. The
1979 16,410 188,105 191,750 | Fund kept pace with
1980 18,614 204,818 215,750 | inflation over this
1981 22,844 215,671 235,000 | turbulent period.
1982 27,279 275,072 244,000 |
=
1983 31,092 321,561 253,250 | As the rate of
1984 37,521 337,510 263,250 | inflation and
1985 43,150 408,427 273,250 | interest rates
1986 48,531 451,763 276,250 |-- declined in the
1987 51,214 460,251 288,500 | 1980s, the Fund
1988 53,120 523,756 301,250 | outperformed the CPI
1989 59,178 550,254 315,250 | by an average of
= 6.7% per year.
1990 66,312 508,602 334,500 |
1991 71,085 703,596 344,750 |
1992 77,910 816,148 354,750 | During the economic
1993 82,556 946,487 364,500 | expansion of the
1994 86,858 909,890 374,250 |-- 1990s, the Fund
1995 95,753 1,069,120 383,750 | outperformed the CPI
1996 103,439 1,188,430 396,500 | by an average of
1997 104,367 1,339,297 403,250 | 8.0% per year.
1998 108,089 1,403,094 409,750 |
6/30/99 56,612 1,424,740 415,500 |
=
Total Dividends
Reinvested: $1,336,883
- --------------===========-------------------------------------
Average Annual Rate of Return: 9.86% 5.17%
-----------------------------------======--------------=====
</TABLE>
The dollar amounts of capital gains distributions reinvested in Fund
shares were: 1973-$1,559; 1977-$971; 1978-$7,503; 1979-$5,622;
1980-$769; 1981-$2,765; 1984-$4,516; 1986-$5,415; total : $29,120.
Source: Lord, Abbett & Co.
(1) See Important Information on page 5.
(2) Fund investment reflects the deduction of the reduced 3.75% sales charge
applicable to Class A share investments of $100,000. The maximum sales
charge applicable to Class A shares is 4.75%.
(3) Nine months only. The Fund began operations on 4/1/71.
3
<PAGE>
Management in Action
The Fund's 3-Way Focus
1. High-yield Corporate Debt and Straight-preferred Stocks: 68.0% (1)
The Fund's lower rated debt holdings pay high income and help minimize the
effects of interest-rate fluctuations. Price appreciation may result if the
credit rating of debt issuers is upgraded.
2. Equity-related Securities: 15.3% (1)
Capital appreciation is sought by investing in convertible bonds and convertible
preferred stocks, which may be exchanged for common stock. When the underlying
stock rises, these equity-related issues generally increase in value.
3. High-grade Debt and Other Assets, Less Liabilities: 16.7% (1)
High-quality issues, corporate issues and U.S. Government-backed securities
provide a dependable stream of high current income.
Current Dividend Distribution Rates: 8.13% and 7.75% (based on the Class A share
net asset value and maximum offering price, respectively, on 6/30/99, and the
monthly dividend of $. 0625, annualized). See Important Information on page 5.
A History of the Fund's Portfolio Blend
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High-yield/lower-rated Corporate Debt and Straight-preferred Stocks
Equity-related Securities (Convertible Debt, Convertible-preferred Stocks,
Common Stocks, Warrants)
High-grade Debt (U. S. Gov't and Agency Obligations, Higher Rated Straight Debt)
and Other Assets, Less Liabilities
The Fund produced positive total returns 18 out of the last 20 calendar years
(2)
Consistency of Performance... Over the Long Term
Over the last 20 years (between 1979 and 1998), Lord Abbett Bond-Debenture Fund
shareholders holding the Fund for any ten-year period earned average annual
returns of at least 9.5% per year (3) :
Average Annual Total Returns for 10-Year Periods Ending December 31:
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.5% 11.3% 9.5% 12.6% 11.5% 11.4% 10.4% 10.1% 10.2% 11.3% 10.4%
</TABLE>
(1) Percent of net assets on 12/31/98. The Fund's portfolio is actively managed
and subject to change.
(2) At net asset value. All years end 12/31.
(3) All periods end 12/31. Assumes investment in Class A shares at net asset
value. Total return is the percent change in value, assuming the
reinvestment of all distributions.
4
<PAGE>
A Note About Year 2000 Matters
As you may know, there has been extensive media coverage about possible
problems that may arise as a result of uncertainties about the ability of
computers to "understand" dates using the year 2000. Potentially, these
problems could disrupt the services and systems that the Fund relies on in
its daily operations.
As a general matter, we believe the financial industry has taken a
leadership role addressing year 2000 (Y2K) issues and this should help to
inspire confidence among concerned investors. More specifically, Lord
Abbett, Lord Abbett Distributor LLC and the Fund's transfer agent,
custodian and other providers of services critical to the Fund have been
actively working on reviewing and replacing or updating computer systems
and computer-to-computer interfaces, as needed. Each has completed or is in
the process of testing new or revised systems and interfaces and generally
expects that their systems, as well as those of their key external service
providers, will be ready to handle Y2K without significant problems.
Furthermore, the Fund has been routinely taking each company's Y2K
preparations into account when considering or reviewing investments.
In summary, while the Y2K problem is unprecedented and we cannot completely
eliminate the possibility that the Fund could be affected in some way, we
are confident that all parties involved are taking appropriate steps to
resolve Y2K concerns.
Important Information
SEC yield is calculated on the Class A share maximum offering price of
$9.68 on 6/30/99, using a standard method which does not take into account
certain portfolio strategies. The Fund's distribution rate differs from its
SEC yield primarily because the Fund purchases short-and intermediate-term
high-coupon securities at a premium and distributes to shareholders all of
the interest income on those securities without amortizing the premiums.
This practice is consistent with applicable tax regulations and generally
accepted accounting principles, but may result in a decrease in the net
asset value of shares of the Fund as the market values of the premium
securities decrease over time.
Bonds purchased are subject to market fluctuations upward and downward
inversely to the rise and fall of interest rates. Common stocks are subject
to market fluctuations providing potential for gain and risk of loss. Lower
rated bonds generally provide a higher yield than higher rated bonds of
similar average maturity, but have greater credit risk.
Non-investment-grade, fixed-income securities generally involve greater
volatility of price to principal and income than securities in higher
ratings categories. Performance results quoted herein reflect past
performance, current sales charges (where applicable) and appropriate Rule
12b-1 Plan expenses from commencement of the Plan. Tax consequences are not
reflected. The Fund's sales charge structure has changed in the past. The
Fund issues additional classes of shares, with distinct pricing options.
For a full discussion of the differences in pricing alternatives, please
call 800-874-3733 and ask for the Fund's current prospectus. If used as
sales material after 9/30/99, this report must be accompanied by Lord
Abbett's Performance Quarterly for the most recently completed calendar
quarter.
Statement of Net Assets
June 30, 1999
<TABLE>
<CAPTION>
Principal
Amount
Investments (000) Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments in Securities 100.27%
- -----------------------------------------------------------------------------------------------------------------------------
High-Yield Corporate Debt 67. 17%
- -----------------------------------------------------------------------------------------------------------------------------
Air Transportation 1. 27% America West Airlines Inc. 10 3/4/2005 $ 15,000 $ 15,675,000
Aviation Sales Company 8 1/8/2008 7,810 7,341,400
Canadian Airlines Corp. Sr. Secured Notes 10/2005 (F) 10,000 7,450,000
Continental Airlines 8/2005 6,250 6,071,287
Piedmont Aviation Inc. Equipment Trust Certificate 10.35/2011 2,000 2,095,000
Trans World Airlines Inc. Sr. Secured Notes 11 1/2/2004 7,500 6,637,500
US Air Inc. Equipment Trust Certificate 10 1/2/2004 2,634 2,776,399
Total 48,046,586
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5
<PAGE>
Statement of Net Assets
June 30, 1999
Principal
Amount
Investments (000) Value
- -----------------------------------------------------------------------------------------------------------------------------
Automotive 3.76% Accuride Corp. 9 1/4/2008 $ 12,750 $ 12,558,750
Atlantic Express Transportation Corp. Sr. Secured Notes 10 3/4/2004 6,200 6,169,000
Atlantis Group Inc. 11/2003 5,000 5,125,000
Blue Bird Body Company 10 3/4/2006 5,000 5,350,000
Collins & Aikman Products Co 11 1/2/2006 15,000 15,225,000
Diamond Triumph Auto 9 1/4/2008 + 10,000 9,750,000
Dura Operating Corp. 9/2009 + 15,000 14,475,000
LDM Technologies Inc. 10 3/4/2007 6,000 5,970,000
Lear Corp. 8. 11/2009 + 12,000 11,662,500
Navistar Financial Corp. 9/2002 10,000 10,300,000
Navistar International Corp. 8/2008 12,500 12,312,500
Oshkosh Truck Corp. 8 3/4/2008 15,000 15,000,000
Safelite Glass Corp. 9 7/8/2006 10,000 9,300,000
Venture Holding Trust 9 1/2/2005 10,000 9,500,000
Total 142,697,750
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Banking .30% Ocwen Federal Bank FSB 12/2005 7,000 6,370,000
Ocwen Financial Corp. 11 7/8/2003 5,100 4,870,500
Total 11,240,500
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Broadcasting 6.01% Allbritton Communications Co. 9 3/4/2007 25,000 25,687,500
American Radio System Corp. 9/2006 13,500 14,354,293
Chancellor Media Corp. 9 3/8/2004 25,000 25,562,500
Chancellor Media Corp. 10 1/2/2007 5,000 5,475,000
Cumulus Media Inc. 10 3/8/2008 9,000 9,585,000
CBS Inc. 8 7/8/2022 3,000 3,210,060
Granite Broadcasting Corp. 10 3/8/2005 12,500 12,781,250
Grupo Televisa, S. A. Zero coupon due 2008** (F) 23,000 18,860,000
Grupo Televisa, S. A. 11 7/8/2006 Series B (F) 15,000 15,600,000
Interep National Radio Sales, Inc. 10/2008 10,000 10,250,000
Jacor Communications Inc. 9 3/4/2006 10,000 10,775,000
Sinclair Broadcasting Group 8 3/4/2007 7,500 7,331,250
Sinclair Broadcasting Group 10/2005 50,000 51,625,000
TV Azteca De CV S. A. 10 1/2/2007 (F) 22,000 16,830,000
Total 227,926,853
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Building Materials 1. 45% American Builders & Contractors Supply Inc. 10 5/8/2007 10,000 9,450,000
American Standard 8 1/4/2009 10,000 9,900,000
Euramax International plc 11 1/4/2006 (F) 10,000 10,150,000
Falcon Building Products Inc. Zero coupon due 2007** 10,000 6,800,000
Kevco Inc. 10 3/8/2007 10,000 6,950,000
Nortek Inc. 8 7/8/2008 + 12,000 11,790,000
Total 55,040,000
- -------------------------------------------------------------------------------------------------------------================
Cable 6.73% Bresnan Communications Group Zero coupon due 2009 *** 15,000 9,825,000
Century Communications Corp. 9 1/2/2005 20,000 20,700,000
Charter Communication Holdings Zero coupon due 2011 +** 15,000 9,375,000
Charter Communication Holdings LLC 8 5/8/2009 + 15,000 14,418,750
Comcast Cellular Holdings Inc. 9 1/2/2007 30,000 33,637,500
Comcast UK Cable Partners Ltd. Zero coupon due 2007** (F) 8,500 7,650,000
CSC Holdings Inc. 9 1/4/2005 15,000 15,525,000
Frontiervision Holdings LP/Capital Zero coupon due 2007** 11,250 9,815,625
Frontiervision Holdings LP/Capital Zero coupon due 2007** 8,750 7,612,500
6
<PAGE>
Statement of Net Assets
June 30, 1999
Principal
Amount
Investments (000) Value
- -----------------------------------------------------------------------------------------------------------------------
Frontiervision LP/Capital 11/2006 $ 3,000 $ 3,292,500
Fundy Cable Ltd. Sr. Secured 2nd Priority Notes 11/2005 (F) 15,000 16,425,000
Globo Communicacoes e Participacos Ltd. 10 5/8/2008 + (F) 10,000 7,150,000
Lenfest Communications Inc. 8 1/4/2008 5,000 5,162,500
Mediacom LLC 8 1/2/2008 22,000 20,680,000
NTL Communications Corp. Zero coupon due 2008** 15,000 10,350,000
NTL Inc. Zero coupon due 2009** 5,000 4,722,940
NTL Inc. 10/2007 15,000 15,562,500
Renaissance Media LLC Zero coupon due 2008** 15,000 10,425,000
Telewest Communications plc Zero coupon due 2009 + ** (F) 20,000 13,300,000
Telewest plc Zero coupon due 2007** (F) 22,000 19,745,000
Total 255,374,815
- ---------------------------------------------------------------------------------------------------------=============
Capital Goods .60% Alvey Systems Inc. 11 3/8/2003 6,955 7,059,325
Clark Materials Handling Co. 10 3/4/2006 6,850 5,993,750
Scotsman Group Inc. 8 5/8/2007 10,000 9,650,000
Total 22,703,075
- ---------------------------------------------------------------------------------------------------------=============
Chemicals 1. 92% Huntsman Corp. 9 1/2/2007 + 15,450 14,754,750
Huntsman Specialty Chemicals Corp. 9 1/4/2007 5,000 4,950,000
Lyondell Chemical Co. Sr. Secured Notes 9 5/8/2007 + 5,500 5,747,500
Lyondell Chemical Co. Sr. Secured Notes 9 7/8/2007 + 6,000 6,180,000
NL Industries Inc. Sr. Secured Notes 11 3/4/2003 5,000 5,250,000
Pioneer American 8.815/2006 4,518 4,134,036
Pioneer American 9.375/2006 361 330,723
Pioneer American 8.755/2006 2,440 2,232,379
Pioneer American 9.375/2006 45 62,011
Pioneer American Acquisition Corp. Sr. Secured Notes 9 1/4/2007 7,500 6,375,000
Sovereign Specialty Chemical Inc. 9 1/2/2007 4,500 4,545,000
Sterling Chemical Inc. 11 3/4/2006 15,000 11,625,000
Texas Petrochemicals Corp. 11 1/8/2006 7,500 6,712,500
Total 72,898,899
- ---------------------------------------------------------------------------------------------------------=============
Conglomerates .06% Cathay International Ltd. 13/2008 + (F) 6,000 2,220,000
- ---------------------------------------------------------------------------------------------------------=============
Consumer Products 1. 16% Chattem Inc. 8 7/8/2008 17,450 16,839,250
Rayovac Corp. 10 1/4/2006 8,236 8,853,700
Riddell Sports Inc. 10 1/2/2007 12,000 10,620,000
Scotts Co. 8 5/8/2009 + 8,000 7,880,000
Total 44,192,950
- ---------------------------------------------------------------------------------------------------------=============
Container .61% Portola Packaging Inc. 10 3/4/2005 7,550 7,738,750
Packaging Corp. 9 5/8/2009 + 5,000 5,100,000
US Can Corporation 10 1/8/2006 10,000 10,450,000
Total 23,288,750
- ---------------------------------------------------------------------------------------------------------=============
Department Stores .13% Specialty Retailers, Inc. 8 1/2/2005 7,000 5,075,000
- ---------------------------------------------------------------------------------------------------------=============
Emerging Markets 1. 59% Republic Of Panama 8 7/8/2027 (F) 22,500 18,717,188
- ---------------------------------------------------------------------------------------------------------=============
Republic Of Argentina 11 3/8/2017 (F) 15,000 13,134,375
Republic Of Venezuela 9 1/4/2027 (F) 20,000 13,375,000
United Mexican States 9 3/4/2005 (F) 5,000 4,997,655
United Mexican States 9 7/8/2007 (F) 10,000 10,193,750
Total 60,417,968
--------------------------------------------------------------------------------=============
7
<PAGE>
Statement of Net Assets
June 30, 1999
Principal
Amount
Investments (000) Value
- -----------------------------------------------------------------------------------------------------------------
Energy 3.28% Chesapeake Energy Corp. 9 5/8/2005 $ 7,500 $ 7,050,000
Coda Energy Inc. 10 1/2/2006 10,000 10,400,000
Cross Timbers Oil Co. 9 1/4/2007 5,000 4,900,000
Crown Central Petroleum Corp. 10 7/8/2005 10,000 8,650,000
Flores & Rucks Inc. 9 3/4/2006 25,000 25,937,500
Gulf Canada Resources Ltd. 9 1/4/2004 (F) 10,000 10,223,430
HS Resources Inc. 9 7/8/2003 10,000 10,100,000
KCS Energy, Inc. 8 7/8/2008 22,500 4,162,500
KCS Energy, Inc. 11/2003 9,300 5,626,500
Lomak Petroleum Inc. 8 3/4/2007 10,000 8,950,000
Petroleos Mexicanos 9/2007 + (F) 12,500 11,625,000
Pogo Producing Co. 8 3/4/2007 10,000 9,650,000
Vintage Petroleum Inc. 8 5/8/2009 7,500 7,181,250
Total 124,456,180
- ---------------------------------------------------------------------------------------------------=============
Entertainment .58% Loews Cineplex Entertainment Corp. 8 7/8/2008 8,000 7,680,000
Regal Cinemas Inc. 9 1/2/2008 15,000 14,175,000
Total 21,855,000
- ---------------------------------------------------------------------------------------------------=============
Financial .57% AXA SA 2 1/2/2014 (F) 1,930 3,259,425
Outsourcing Solutions Inc. 11/2006 5,000 4,925,000
Willis Corroon Corp. 9/2009 + 14,000 13,562,500
Total 21,746,925
- ---------------------------------------------------------------------------------------------------=============
Food/Beverage 2.04% AmeriKing, Inc. 10 3/4/2006 7,300 7,336,500
Aurora Foods Inc. 9 7/8/2007 10,000 10,400,000
Aurora Foods Inc. 9 7/8/2007 2,500 2,606,250
Coca-Cola Femsa SA 8.95/2006 (F) 13,000 12,967,500
Delta Beverage Group Inc. 9 3/4/2003 6,400 6,624,000
Doane Pet Care Co. 9 3/4/2007 5,859 6,034,770
Pepsi-Gemex SA 9 3/4/2004 (F) 15,000 15,037,500
Purina Mills Inc. 9/2010 12,500 9,687,500
Twin Laboratories Inc. 10 1/4/2006 6,519 6,551,595
Total 77,245,615
- ---------------------------------------------------------------------------------------------------=============
Healthcare 2.15% Fresenius Med Cap Tr II 7 7/8/2008 7,500 7,012,500
Integrated Health Services Inc. 9 1/2/2007 24,000 17,640,000
Integrated Health Services Inc. 10 1/4/2006 10,000 7,650,000
Leiner Health Products Inc. 9 5/8/2007 17,500 17,589,285
Prime Medical Services Inc. 8 3/4/2008 12,500 12,125,000
Tenet Healthcare Corporation 8 5/8/2007 20,000 19,700,000
Total 81,716,785
- ---------------------------------------------------------------------------------------------------=============
Hotel/Gaming 3.18% Aztar Corp. 8 7/8/2007 15,000 14,475,000
Aztar Corp. 13 3/4/2004 2,000 2,180,000
Claridge Hotel & Casino Corp. 1st Mtge. Notes 11 3/4/2002 1,700 1,266,500
Empress Entertainment Inc. 8 1/8/2006 5,000 5,062,500
Harrah's Operating Inc. 7 1/2/2009 10,000 9,739,060
Harrah's Operating Inc. 7 7/8/2005 15,000 14,587,500
Host Marriott Travel Plazas Inc. Sr. Secured Notes 9 1/2/2005 5,000 5,175,000
HMH Properties Inc. 7 7/8/2008 15,000 13,912,500
Isle of Capri Casinos 8 3/4/2009 + 5,000 4,725,000
Mohegan Tribal Gaming Authority 8 3/4/2009 20,000 19,975,000
Park Place Entertainment 7. 875/2005 12,000 11,460,000
8
<PAGE>
Statement of Net Assets
June 30, 1999
Principal
Amount
Investments (000) Value
- ----------------------------------------------------------------------------------------------------------------------------------
Trump Atlantic City Assoc. Funding Inc. 1st Mtge. Notes 11 1/4/2006 $ 20,000 $ 18,050,000
Total 120,608,060
- ------------------------------------------------------------------------------------------------------------------===============
Media/Diversified 1. 47% Ackerly Group 9/2009 15,000 14,775,000
CEI Citicorp Holdings SA 9 3/4/2007 (F) 5,000 3,850,000
Gray Communication System Inc. 10 5/8/2006 4,000 4,230,000
Heritage Media Corp. 8 3/4/2006 10,000 10,350,000
Lamar Advertising Co. 9 5/8/2006 10,000 10,250,000
Time-Warner Telecom Inc. 9 3/4/2008 12,000 12,420,000
Total 55,875,000
- ------------------------------------------------------------------------------------------------------------------===============
Metals/Mining .41% International Wire Group Inc. 11 3/4/2005 10,000 10,476,920
Kaiser Aluminum & Chemical Corp. 10 7/8/2006 5,000 5,225,000
Total 15,701,920
- -------------------------------------------------------------------------------------------------------------------==============
Miscellaneous .40% National Equipment Services Inc. 10/2004 10,000 10,200,000
P& L Coal Holdings Corp. 8 7/8/2008 5,000 5,037,500
Total 15,237,500
- -------------------------------------------------------------------------------------------------------------------==============
Paper 1. 66% Crown Paper Co. 11/2005 12,000 8,340,000
Fonda Group Inc. 9 1/2/2007 9,000 7,875,000
Four M Corp. Sr. Secured Notes 12/2006 10,000 7,650,000
Indah Kiat International Finance Co. 12 1/2/2006 (F) 5,000 3,950,000
S. D. Warren Co. 12/2004 10,000 10,775,000
Stone Container Corp. 1st Mtge. Notes 10 3/4/2002 10,000 10,425,000
Tembec Industries Inc. 8 5/8/2009 (F) 7,000 7,000,000
Vicap SA De CV 11 3/8/2007 (F) 7,500 6,975,000
Total 62,990,000
- -------------------------------------------------------------------------------------------------------------------==============
Printing and Publishing 1. 15% Big Flower Press Holdings Inc. 8 5/8/2008 15,000 13,875,000
Big Flower Press Holdings Inc. 8 7/8/2007 15,000 14,175,000
Mail-Well Corp. 8 3/4/2008 8,000 7,800,000
R. H. Donnelly Inc. 9 1/8/2008 7,800 7,839,000
Total 43,689,000
- -------------------------------------------------------------------------------------------------------------------==============
Real Estate/Homebuilders 1. 35% B. F. Saul REIT 9 3/4/2008 17,500 16,537,500
D. R. Horton Inc. 10/2006 15,000 16,012,500
Lennar Corp. 7 5/8/2009 7,000 6,772,500
MDC Holdings Inc. 8 3/8/2008 12,500 12,062,500
Total 51,385,000
- -------------------------------------------------------------------------------------------------------------------==============
Retail .22% United Stationers Supply Co. 12 3/4/2005 7,653 8,418,300
- -------------------------------------------------------------------------------------------------------------------==============
Services 2.58% Avis Rent A Car Inc. 11/2009 + 5,000 5,118,500
Budget Group Inc. 9 1/8/2006 12,000 11,100,000
Entex Information Services Inc. 12 1/2/2006 10,000 6,850,000
Iron Mountain Inc. 8 3/4/2009 20,000 19,700,000
Iron Mountain Inc. 10 1/8/2006 20,000 21,200,000
Iron Mountain Inc. 8 1/4/2011 + 3,600 3,438,000
Kinder Care Learning Center Inc. 9 1/2/2009 7,500 7,162,500
Pierce Leahy Corp. 9 1/8/2007 10,000 10,100,000
Prime Succession Inc. 10 3/4/2004 10,000 8,550,000
Unicco Service Co. 9 7/8/2007 5,000 4,800,000
Total 98,019,000
-----------------------------------------------------------------------------------==============
9
<PAGE>
Statement of Net Assets
June 30, 1999
Principal
Amount
Investments (000) Value
- ---------------------------------------------------------------------------------------------------------------------
Specialty Retailing .46% Advanced Stores Inc. 10 1/4/2008 $ 5,000 $ 4,800,000
Amazon. com Inc. Zero coupon due 2008** 12,000 8,220,000
Norton McNaughton Inc. 12 1/2/2005 5,000 4,525,000
Total 17,545,000
- --------------------------------------------------------------------------------------------------------=============
Steel .87% Armco Inc. 9/2007 8,000 8,220,000
AK Steel Corp. 9 1/8/2006 5,000 5,175,000
Hylsa De CV SA 9 1/4/2007 + (F) 5,500 4,317,500
WCI Steel Inc. Sr. Secured Notes 10/2004 15,000 15,337,500
Total 33,050,000
- --------------------------------------------------------------------------------------------------------=============
Supermarket .66% Stater Brothers Holdings Inc. 9/2004 15,000 14,400,000
Stater Brothers Holdings Inc. 11/2001 10,000 10,450,000
Victory Markets Inc. 12 1/2/2000 5,000 75,000
Total 24,925,000
- --------------------------------------------------------------------------------------------------------=============
Technology 3.26% BE Aerospace Inc. 8/2008 9,000 8,460,000
BE Aerospace Inc. 9 7/8/2006 20,000 20,350,000
Decision One Corp. 8.69/2005 959 413,556
Decision One Corp. 8.64/2005 5,276 2,215,892
Decision One Corp. 8.82/2005 3,664 1,538,814
Dyncorp Inc. 9 1/2/2007 13,500 13,466,250
Fisher Scientific International Inc. 9/2008 17,000 16,235,000
L-3 Communications Corp. 10 3/8/2007 15,000 15,937,500
Packard Bioscience Co. 9 3/8/2007 10,000 9,450,000
United Defense Industries Inc. 8 3/4/2007 15,000 14,662,500
Verio Inc. 11 1/4/2008 5,000 5,262,500
Viasystems Inc. 9 3/4/2007 18,000 15,840,000
Total 123,832,012
- --------------------------------------------------------------------------------------------------------=============
Telecommunications 12.88% AMSC Acquisition Inc. 12 1/4/2008 10,000 8,100,000
Call-Net Enterprises Inc. Zero coupon due 2008** (F) 20,000 11,300,000
Cencall Communications Corp. 10 1/8/2004 (F) 15,000 15,375,000
Clearnet Communications Zero coupon due 2009** 20,000 11,450,000
Dobson Communications Corp. 11 3/4/2007 7,000 7,367,500
Esprit Telecom Group plc 10 7/8/2008 (F) 15,000 15,675,000
Global Crossing Holdings Ltd. 9 5/8/2008 (F) 20,000 20,900,000
GST USA Inc. Zero coupon due 2005** 32,500 26,812,500
Hyperion Telecommunication Inc. Sr. Secured Notes 12 1/4/2004 10,000 10,600,000
ICG Holdings Inc. Zero coupon due 2005 w/Warrants** 40,000 35,564,000
Intermedia Communications Inc. Zero coupon due 2007** 50,000 36,250,000
Intermedia Communications Inc. Zero coupon due 2009** 23,800 13,625,500
Iridium LLC/Capital Corp. 14/2005 5,000 1,075,000
IXC Communications Inc. Note 9/2008 15,000 14,418,750
KPNQWEST BV 8 1/8/2009 + (F) 15,000 14,775,000
Level 3 Communications Inc. 9 1/8/2008 5,000 4,956,250
Logix Communications Enterprises Inc. 12 1/4/2008 7,250 6,615,625
Mastec Inc. 7 3/4/2008 5,500 5,197,500
McLeodUSA Inc. Zero coupon due 2007** 30,000 23,175,000
Metronet Communications Corp. Zero coupon due 2008** (F) 8,000 5,960,000
Mobile Media Corp. 9 3/8/2007 6,000 570,000
Nextel Communications Inc. Zero coupon due 2008** 35,000 24,237,500
Nextlink Communications Inc. Zero coupon due 2009** 13,250 7,883,750
10
<PAGE>
Statement of Net Assets
June 30, 1999
Principal
Amount
Investments (000) Value
- ------------------------------------------------------------------------------------------------------------------------------
Nextlink Communications Inc. 10 3/4/2008 $ 25,000 $ 25,875,000
Orange plc 8/2008 (F) 15,000 14,325,000
Orbital Imaging Corp. 11 5/8/2005 10,000 9,250,000
Price Communications Wireless Inc. Sr. Secured Notes 9 1/8/2006 6,000 6,270,000
Qwest Communications International Inc. Zero coupon due 2008** 13,000 9,685,000
Rogers Cantel Inc. Sr. Secured Notes 8.3/2007 (F) 30,000 29,850,000
RSL Communications plc Zero coupon due 2008** (F) 20,000 6,532,303
RSL Communications plc 12/2008 (F) 20,000 21,000,000
Splitrock Services Inc. 11 3/4/2008 1,500 1,410,000
SBA Communications Corp. Zero coupon due 2008** 20,000 11,700,000
Viatel Inc. Sr. Secured Notes 11 1/4/2008 17,000 17,425,000
Western Wireless Corp. 10 1/2/2007 13,000 13,715,000
Total 488,921,178
- ----------------------------------------------------------------------------------------------------------------=============
Textile 1. 72% Delta Mills Inc. 9 5/8/2007 8,500 8,117,500
Guess Inc. 9 1/2/2003 13,500 13,567,500
GFSI, Inc. 9 5/8/2007 15,000 12,975,000
Interface Inc. 9 1/2/2005 15,000 15,450,000
Pillowtex Corp. 9/2007 15,000 15,000,000
Total 65,110,000
- ----------------------------------------------------------------------------------------------------------------=============
Utility .32% AEI Holding Co. 10 1/2/2005 + 12,000 11,970,000
- ----------------------------------------------------------------------------------------------------------------=============
Waste Management .37% Allied Waste North America Inc. 7 7/8/2009 15,000 13,950,000
---------------------------------------------------------------------------------------=============
Total Investments in High-Yield Corporate Debt (Cost $2,698, 178,868) 2,549,370,621
=============================================================================================================================
Convertible Debt 10.32%
=============================================================================================================================
Advertising .45% Interpublic Group of Companies Conv. 1.80/2004 + 7,500 9,050,385
Interpublic Group of Companies Conv. 1.80/2004 3,500 4,223,513
Interpublic Group of Companies Conv. 1.87/2006 + 4,275 3,899,655
Total 17,173,553
- ----------------------------------------------------------------------------------------------------------------=============
Aerospace/Defense .28% Orbital Sciences Corp. Conv. 5/2002 + 10,000 10,687,500
- ----------------------------------------------------------------------------------------------------------------=============
Automotive .11% MascoTech Inc. Conv. 4 1/2/2003 5,000 4,150,000
- ----------------------------------------------------------------------------------------------------------------=============
Broadcasting .45% Clear Channel Conv. 2 5/8/2003 10,000 12,757,810
Jacor Communications Inc. Conv. Zero coupon due 2018 7,500 4,280,857
Total 17,038,667
- ----------------------------------------------------------------------------------------------------------------=============
Business Services .67% Businessland Inc. Conv. 5 1/2/2007 5,255 4,204,000
Interim Services Inc. Conv. 4 1/2/2005 5,000 4,342,965
Metamor Worldwide Inc. Conv. 2.94/2004 20,850 16,878,721
Total 25,425,686
- ----------------------------------------------------------------------------------------------------------------=============
Computer Software 1. 10% Affiliated Computers Service Inc. Conv. 4/2005 + 8,000 10,775,000
Arbor Software Corp. Conv. 4 1/2/2005 + 8,500 6,048,277
Arbor Software Corp. Conv. 4 1/2/2005 5,500 3,913,591
National Data Corp. Conv. 5/2003 20,000 20,940,620
Total 41,677,488
- ----------------------------------------------------------------------------------------------------------------=============
Computer Software DoubleClick Inc. Conv. 4 3/42006 + 3,000 3,763,593
and Services .53% Mindspring Enterprises Inc. Conv. 5/2006 2,200 2,080,375
Platinum Technology International Inc. Conv. 6 1/4/2002 10,000 10,000,000
Safeguard Scientifics Inc. Conv. 5/2006 + 4,000 4,103,124
Total 19,947,092
--------------------------------------------------------------------------------------=============
11
<PAGE>
Statement of Net Assets
June 30, 1999
Principal
Amount
Investments (000) Value
- ----------------------------------------------------------------------------------------------------------------------
Computer Systems and
Peripherals .21% ASE Test Limited Conv. 1/2004 + (F) $ 8,000 $ 8,000,000
- ---------------------------------------------------------------------------------------------------------=============
Data Processing Equipment & LSI Logic Corp. Conv. 4 1/4/2004 + 3,800 6,160,750
Components .85% Photronics Inc. Conv. 6/2004 3,900 4,252,825
Sanmina Corp. Conv. 4 1/4/2004 + 6,650 7,323,313
Solectron Corp. Conv. Zero coupon 2019 + 25,000 14,500,000
Total 32,236,888
- ---------------------------------------------------------------------------------------------------------=============
Drugs/Pharmaceuticals Elan Finance Corp. Conv. Zero coupon due 2018 + 40,000 20,487,481
Biotechnology 1. 29% Roche Holdings Inc. Conv. Zero coupon due 2010 + 50,000 28,375,000
Total 48,862,481
- ---------------------------------------------------------------------------------------------------------=============
Financial 1. 10% Credit Suisse First Boston Conv. 2 5/8/2003 7,500 6,993,750
Credit Suisse First Boston Conv. 2 1/4/2004 7,500 7,425,000
GS Financial Products Conv. 3/2002 6,000 6,464,400
Merrill Lynch & Co., Inc. Conv. 1 1/2/2005 15,000 15,225,000
Swiss Bank Corp. Conv. 2 1/2/2002 + (F) 6,000 5,737,500
Total 41,845,650
- ---------------------------------------------------------------------------------------------------------=============
Healthcare .41% Healthsouth Corp. Conv. 3 1/4/2003 12,000 10,166,244
Total Renal Care Holdings Conv. 7/2009 + 6,500 5,313,750
Total 15,479,994
- ---------------------------------------------------------------------------------------------------------=============
Hotel/Gaming .09% AMF Bowling Inc. Conv. Zero coupon due 2018 25,000 3,558,575
- ---------------------------------------------------------------------------------------------------------=============
Instrumentation .12% Thermo Instrument System Inc. Conv. 4 1/2/2003 + 5,000 4,450,780
- ---------------------------------------------------------------------------------------------------------=============
Insurance 1. 00% American International Group Inc. Conv. 2 1/4/2004 16,000 22,294,992
CII Financial Inc. Conv. 7 1/2/2001 6,000 5,640,000
Swiss Life Finance Ltd. Conv. 2/2003 + 10,000 9,862,500
Total 37,797,492
- ---------------------------------------------------------------------------------------------------------=============
Oil .70% Loews Corp. Conv. 3 1/8/2007 5,000 4,021,875
Parker Drilling Co. Conv. 5 1/2/2004 13,000 8,905,000
Swift Energy Co. Conv. 6 1/4/2006 8,500 6,661,875
Texaco Capital Inc. Conv. 3 1/2/2004 7,000 7,131,250
Total 26,720,000
- ---------------------------------------------------------------------------------------------------------=============
Printing and Publishing .62% Scholastic Corp. Conv. 5/2005 + 10,000 9,537,500
Times Mirror Company Conv. Zero coupon due 2017 30,000 14,029,680
Total 23,567,180
- ---------------------------------------------------------------------------------------------------------=============
Retail .19% Rite Aid Corp. Conv. 5 1/4/2002 7,000 7,042,651
- ---------------------------------------------------------------------------------------------------------=============
Telecommunications .15% Bell Atlantic Financial Service Conv. 5.75/2003 + 4,500 4,516,875
Broadband Technologies, Inc. Conv. 5/2001 + 3,000 1,365,000
Total 5,881,875
--------------------------------------------------------------------------=============
Total Investments in Convertible Debt (Cost $381, 285,973) 391,543,552
- ---------------------------------------------------------------------------------------------------------=============
12
<PAGE>
Statement of Net Assets
June 30, 1999
Investments Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred and Convertible-Preferred Stocks, Common Stocks and Warrants 6.39%
- ------------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense .18% Coltec Capital Trust 5.25% Conv. Pfd. 150,000 $ 6,897,645
- ---------------------------------------------------------------------------------------------------------------------===============
Banking .35% California Federal Capital Series A 9.125% Pfd. 500,000 13,095,000
Crossland Savings $1.8125 Conv. Pfd. Series A 375,000 58,500
Total 13,153,500
- ---------------------------------------------------------------------------------------------------------------------===============
Broadcasting .14% Sinclair Broadcasting Group Inc. Conv. Pfd. 6.00% 127,000 5,492,750
- ---------------------------------------------------------------------------------------------------------------------===============
Building Materials .10% Fleetwood Capital Trust 6% Conv. Pfd. Series D 95,800 3,906,839
- ---------------------------------------------------------------------------------------------------------------------===============
Capital Goods .01% Orbital Imaging Corp. Wts. expiring 3/1/2005 ** 10,000 300,000
- ---------------------------------------------------------------------------------------------------------------------===============
Chemicals .14% Monsanto Co. Pfd. 6.50% 128,000 5,136,000
- ---------------------------------------------------------------------------------------------------------------------===============
Communications .17% Comcast Corp. Conv. 3.35/2029 74,000 6,401,000
- ---------------------------------------------------------------------------------------------------------------------===============
Container .19% Owens-Illinois Inc. Conv. Pfd. 4.75% 166,000 7,304,000
- ---------------------------------------------------------------------------------------------------------------------===============
Energy .15% KN Energy Inc. Conv. Pfd. 8.25% 170,000 4,398,750
Lomak Financing Trust 5.75% Conv. Pfd. + 54,300 1,384,650
Total 5,783,400
- ---------------------------------------------------------------------------------------------------------------------===============
Entertainment .22% Seagram Co. Ltd. Conv. Pfd. 7.5/2002 169,000 8,376,063
- ---------------------------------------------------------------------------------------------------------------------===============
Financial 1. 10% Jefferson-Pilot Corp. 7.25% Conv. Pfd. 210,000 25,935,000
National Australia Bank Ltd. Pfd. 7.875% 200,000 6,075,000
WBK Strypes Trust 10.00% Conv. Pfd. 300,000 9,768,750
Total 41,778,750
- ---------------------------------------------------------------------------------------------------------------------===============
Insurance 1. 10% American General Corp. 6.00% Conv. Pfd. Series A 150,000 14,025,000
Amerus Life Holdings Inc. 7.00% Conv. Pfd. 355,000 9,673,750
Frontier Financing Trust 6.25% Conv. Pfd. 160,000 7,362,496
Lincoln National Corp. Conv. Pfd 7.75% 396,000 10,766,250
Total 41,827,496
- ---------------------------------------------------------------------------------------------------------------------===============
Machinery .18% Ingersoll-Rand Co. 6.75% Conv. Pfd. 225,000 6,750,000
- ---------------------------------------------------------------------------------------------------------------------===============
Paper .21% International Paper Capital Trust 5.25% Conv. Pfd. 150,000 7,957,020
- ---------------------------------------------------------------------------------------------------------------------===============
Real Estate/Homebuilders .23% Walden Residential Properties Pfd. 9.20% with/Wts. expiring 12/31/2001 400,000 8,650,000
Walden Residential Properties Wts. expiring 1/1/2002* 400,000 40,000
Total 8,690,000
- ---------------------------------------------------------------------------------------------------------------------===============
Retail .18% CVS Auto Exchange Trust 6% Conv. Pfd. 75,000 6,834,375
- ---------------------------------------------------------------------------------------------------------------------===============
Technology .23% AMDOCS Automatic Co. 6.75% Conv. Pfd. 400,000 8,900,000
- ---------------------------------------------------------------------------------------------------------------------===============
Telecommunications 1. 22% American Mobile Satellite Corp. Wts. expiring 4/1/2008 ** 10,000 402,500
GST Telecommunications Inc. 135,000 1,780,312
Intermedia Communications Inc. Wts. expiring 6/1/2000 ** 5,000 326,250
IXC Communications Inc. Conv. Pfd. 6.75% 37,000 1,415,250
IXC Communications Inc. Conv. Pfd. 6.75% + 213,000 8,147,250
Mediaone Group Inc. Conv. Pfd. 6.25% 200,000 18,100,000
Nextel Communications Inc. Class A 20,140 1,010,776
Splitrock Services Inc. Wts. expiring 7/15/2008* 1,500 105,000
UnitedGlobalCom Inc. 7.00% Conv. Pfd. + 259,000 12,950,000
Viatel Inc. 33,657 1,888,999
Total 46,126,337
- ---------------------------------------------------------------------------------------------------------------------===============
Utility .29% Texas Utilities Co. Conv. Pfd. 9.25% 200,000 11,000,000
----------------------------------------------------------------------------------===============
Total Investments in Preferred and Convertible-Preferred Stocks,
Common Stocks and Warrants (Cost $235,702,464) 242,615,175
----------------------------------------------------------------------------------===============
13
<PAGE>
Statement of Net Assets
June 30, 1999
Principal
Amount
Investments (000) Value
- ------------------------------------------------------------------------------------------------------------------------------------
Investment-Grade Corporate Bonds and Mortgage-Backed Securities 5.56%
- ------------------------------------------------------------------------------------------------------------------------------------
Bank One Corp. 8/2027 $ 3,976 $ 4,174,176
Computer Associates International Inc. 6 3/8/2005 30,000 28,762,500
COMM 1999-1 Class A2 6.455/2008 5,000 4,863,980
Cox Communications Inc. 6 7/8/2005 15,000 14,831,250
Credit Suisse First Boston 6.52/2007 23,120 22,820,041
Dayton Hudson Corp. 6 3/4/2028 4,955 4,610,469
DLJCM 1998-CF1 A1B 6.41/2008 5,000 4,860,070
Fox/Liberty Networks LLC Zero coupon due 2007** 12,800 10,048,000
Fox/Liberty Networks LLC 8 7/8/2007 20,000 20,800,000
FULBA 1998-C2 Class A2 6.56/2008 5,000 4,900,680
FULBA 1997-C2 Class A3 6.65/2007 10,000 9,872,611
GECMS 1995-10 Class B1 Mortgage Pass-Through Certificates 7/2010 617 608,914
GMAC 1997-C2 Class A3 Mortgage Pass-Through Certificates 6.566/2007 5,305 5,210,847
GMAC 1998-C2 Class A2 Mortgage Pass-Through Certificates 6.42/2008 4,150 4,027,621
LBCMT 1998-C4 Class A1B 6.21/2008 5,000 4,781,285
MetroGas, S. A. Series A 12/2000 (F) 7,500 7,706,250
Perez Companc S. A. 9/2004 + (F) 12,500 11,925,775
PSSF 1998-C1 Class A1B 6.506/2008 5,000 4,886,255
Saks Inc. 8 1/4/2008 10,000 10,482,810
SCAMT 11 1996-1 Class A 6.2/2006 10,000 10,003,120
Telefonica De Argentina S. A. 9 1/8/2008 + (F) 23,500 20,797,500
Total Investments in Investment-Grade Corporate Bonds and
Mortgage-Backed Securities (Cost $217, 453,502) 210,974,154
====================================================================================================================================
U. S. Government and Agency Issues 10.83%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation 6 1/2/2029 24,571 23,726,415
Federal Home Loan Mortgage Corporation 10/1999 75,000 75,949,200
Federal Home Loan Mortgage Corporation 10 1/2/1999 80,000 80,519,040
Federal National Mortgage Association 6 1/2/2028 23,079 22,271,018
Federal National Mortgage Association 6 1/2/2029 85,000 81,998,650
U. S. Treasury Notes 7 1/2/2002 75,000 78,679,650
U. S. Treasury Notes 7 1/2/2005 35,000 37,679,670
U. S. Treasury Notes 8 1/2/2000 10,000 10,204,680
Total Investments in U.S. Government and Agency Issues (Cost $419,428,794) 411,028,323
-----------------------------------------------------------------------------------------=============
Total Investments in Securities (Cost $3,952,049,601) 3,805,531,825
====================================================================================================================================
Other Assets, Less Liabilities (. 27)%
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term Investments Prudential Funding Corp. Discount Note 5 5/8% due 7/1/1999 (Cost $12,700,000) 12,700 12,700,000
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and Receivables, Net of Liabilities (22,942,023)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Other Assets, Less Liabilities (10,242,023)
====================================================================================================================================
Net Assets 100.00% $3,795,289,802
====================================================================================================================================
Class A Shares- Net asset value ($ 2,387,424,379 / 258,895,763 shares outstanding) $9.22
Maximum offering price (net asset value plus sales charge of 4.75% of the offering price) $9.68
Class B Shares- Net asset value ($ 802,372,864 / 87, 046,431 shares outstanding) $9.22
Class C Shares- Net asset value ($ 568,246,509 / 61,583,636 shares outstanding) $9.23
Class P Shares- Net asset value ($ 71,435 / 7, 746 shares outstanding) $9.22
Class Y Shares- Net asset value ($ 37, 174,615 / 4,034,184 shares outstanding) $9.21
====================================================================================================================================
*Non-income producing security.
**Deferred-interest debentures pay no interest
for a stipulated number of years, after which
time they pay a predetermined coupon rate.
+ Restricted security under Rule 144A. (F) Foreign Security. See Notes to Financial Statements.
</TABLE>
14
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Investment Income Six Months Ended June 30, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income Interest (net of foreign tax withholding of $6,079) $163,960,211
Dividends 5,689,812
Total income 169,650,023
----------------------------------------------------------------------------------------------------------------------
Expenses Management fee 8,416,463
12b-1 distribution plan- Class A 3,493,697
12b-1 distribution plan- Class B 3,658,350
12b-1 distribution plan- Class C 2,710,471
12b-1 distribution plan- Class P 99
Shareholder servicing 1,768,184
Reports to shareholders 191,329
Registration 123,885
Professional 87,891
Directors' fees 44,808
Other 101,253
Total expenses before reductions 20,596,430
Expense reductions (133,730)
Net expenses 20,462,700
Net investment income 149,187,323
Realized and Unrealized Loss on Investments and Foreign Currency Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized loss from investment and foreign currency transactions (30,313,274)
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and foreign currency holdings (66,554,147)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and foreign currency transactionsand foreign currency transactions (96,867,421)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 52,319,902
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Year Ended
Ended June 30, December 31,
Increase in Net Assets 1999 1998
<S> <C> <C>
Operations Net investment income $ 149,187,323 $ 247,358,781
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investment and foreign currency transactions (30,313,274) 52,159,873
Net change in unrealized depreciation of investments and foreign currency holdings (66,554,147) (161,964,155)
Net increase in net assets resulting from operations 52,319,902 137,554,499
---------------------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions - 2,086,963
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income
Class A (94,328,132) (174,256,684)
Class B (26,989,078) (36,713,105)
Class C (20,053,372) (33,996,539)
Class P (1,725) (3)
Class Y (1,317,726) (1,070,186)
Total (142,690,033) (246,036,517)
---------------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares 593,484,019 1,130,478,848
Net asset value of shares issued in reinvestment of dividends 94,019,174 144,066,481
Total 687,503,193 1,274,545,329
---------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired (341,967,016) (494,210,448)
---------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions 345,536,177 780,334,881
---------------------------------------------------------------------------------------------------------------------
Increase in net assets 255,166,046 673,939,826
- ------------------------------------------------------------------------------------------------------------------------------------
Net Assets Beginning of period 3,540,123,756 2,866,183,930
End of period (including undistributed net investment income of
$12,098,386 and $5,601, 096, respectively) $ 3,795,289,802 $3,540,123,756
=====================================================================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
--------------------------------------------------------------------------
Six Months Ended
June 30, Year Ended December 31,
Per Share Operating Performance: 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.45 $9.76 $9.41 $9.29 $8.71 $9.95
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .39 (b) .76 (b) .75 (b) .81 .85 .84
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (.24) (.31) .40 .17 .606 (1.203)
Total from investment operations .15 .45 1.15 .98 1.456 (.363)
-----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.38) (.76) (.80) (.86) (.876) (.877)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.22 $9.45 $9.76 $9.41 $9.29 $8.71
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 1.55% (c) 4.76% 12.70% 11.16% 17.50% (3.87)%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses (e) .44% (c) .88% .89% .89% .82% .88%
Net investment income 4.18% (c) 7.85% 7.89% 8.77% 9.41% 8.97%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
---------------------------------------------------------------------------------------
Six Months Six Months
Ended Year Ended 12/31, 8/1/96 (d) Ended Year Ended 12/31, 7/15/96 (d)
Per Share Operating Performance: 6/30/99 1998 1997 to 12/31/96 6/30/99 1998 1997 to 12/31/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.44 $9.75 $9.41 $9.13 $9.46 $9.77 $9.41 $9.05
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations
Net investment income .35 (b) .69 (b) .68 (b) .34 .36 (b) .69 (b) .69 (b) .35
Net realized and unrealized gain (loss)
on investments and foreign
currency transactions (.23)(. 31) .38 .26 (.25) (.31) .39 .33
Total from investment operations .12 .38 1.06 .60 .11 .38 1.08 .68
-----------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.34) (.69) (.72) (.32) (.34) (.69) (.72) (.32)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.22 $9.44 $9.75 $9.41 $9.23 $9.46 $9.77 $9.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) 1.27%(c) 3.98% 11.85% 6.57%(c) 1.17%(c) 3.98% 11.97% 7.86% (c)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses (e) .78% (c) 1.60% 1.63% .70% (c) .78% (c) 1.60% 1.58% .75% (c)
Net investment income 3.73% (c) 7.13% 7.06% 3.37% (c)3.79% (c) 7.13% 7.16% 3.72% (c)
==============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of sales loads and assumes
the reinvestment of all distributions. (b) Calculated using average shares
outstanding during the period.
(c) Not annualized.
(d) Commencement of offering respective class shares.
(e) The ratios for 1998 and 1999 include expenses paid through an expense
offset management. See Notes to Financial Statements.
17
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class P Shares Class Y Shares
------------------------------------------------------
Six Months
Six Months Ended 8/21/98 (d) Ended 3/27/98 (d)
Per Share Operating Performance: 6/30/99 to 12/31/98 6/30/99 to 12/31/98
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.45 $9.54 $9.44 $9.98
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income (b) .38 .25 .39 .59
Net realized and unrealized gain (loss) on investments
and foreign currency transactions (.24) (.09) (.23) (.54)
Total from investment operations .14 .16 .16 .05
-------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.37) (.25) (.39) (.59)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.22 $9.45 $9.21 $9.44
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (a) (c) 1.45% 1.73 1.82% .55%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses (c) (e) .49% .38% .29% .46%
Net investment income (c) 4.02% 2.90% 4.15% 6.24%
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
Supplemental Data for All Classes: 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period (000) $3,795,290 $3,540,124 $2,866,184 $2,129,421 $1,339,508 $987,613
Portfolio turnover rate 39.72% 86.48% 89.14% 106.79% 134.90% 147.98%
===============================================================================================================================
</TABLE>
(a) Total return does not consider the effects of
sales loads and assumes the reinvestment of all
distributions. (b) Calculated using average shares
outstanding during the period.
(c) Not annualized.
(d) Commencement of offering respective class shares.
(e) The ratios for 1998 and 1999 include expenses
paid through an expense offset management.
18
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
Lord Abbett Bond-Debenture Fund, Inc. (the "Company") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The financial statements have been prepared in conformity with
generally accepted accounting principles which require management to make
certain estimates and assumptions at the date of the financial statements. The
following summarizes the significant accounting policies of the Company:
(a) Securities are valued as follows: Portfolio securities listed or admitted to
trading privileges on any national securities exchange are valued at the last
sales price on the principal securities exchange on which such securities are
traded, or, if there is no sale, at the mean between the last bid and asked
prices on such exchange, or, in the case of bonds and notes, in the
over-thecounter market if, in the judgment of the Company's officers, that
market more accurately reflects the market value of bonds and notes. Securities
traded only in the over-the-counter market are valued at the mean between the
bid and asked prices, except that securities admitted to trading on the NASDAQ
National Market System are valued at the last sales price if it is determined
that such price more accurately reflects the value of such securities.
Short-term securities are valued at amortized cost which approximates market
value. Securities for which market quotations are not available are valued at
fair value under procedures approved by the Board of Directors.
(b) It is the policy of the Company to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute all
of its taxable income. Therefore, no federal income tax provision is required.
(c) Security transactions are accounted for on the date that the securities are
purchased or sold (trade date). Realized gains and losses from investment
transactions are calculated on the identified cost basis. Interest income is
recorded on the accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. The Company has elected not to amortize
premiums on U. S. Government bonds, which is consistent with the treatment for
federal income tax purposes. Net investment income (other than distribution and
service fees) and realized and unrealized gains or losses are allocated to each
class of shares based upon the relative proportion of net assets at the
beginning of the day.
(d) Prior to January 1, 1999, the Company followed the accounting practice known
as equalization whereby a portion of the proceeds from the sales and costs of
repurchases of capital shares was allocated to undistributed net investment
income. Effective January 1, 1999, the Company discontinued the use of
equalization. Such reclassification had no effect on net assets, results of
operations or net asset value per share. Discontinuing the use of equalization
will result in a simpler and more meaningful financial statement presentation.
(e) The Company enters into forward currency contracts to hedge its exposure to
changes in foreign currency exchange rates on its foreign portfolio holdings. A
forward contract is a commitment to purchase or sell a foreign currency at a
future date (usually the security transaction settlement date) at a negotiated
forward rate. The contracts are valued daily at current exchange rates and any
unrealized gain or loss is included in net unrealized appreciation or
depreciation of investments and foreign currency holdings. The gain or loss, if
any, arising from the difference between the settlement value of the forward
contract and the closing of such contract, is included in net realized gain or
loss from investment and foreign currency transactions. Risks may arise due to
changes in the value of the foreign cur- rency and as a result of the potential
inability of the counterparties to meet the terms of their contracts.
(f) The Company along with certain other funds managed by Lord Abbett (the
"Underlying Funds") has entered into a Servicing Agreement with the Balanced
Series of Lord Abbett Investment Trust pursuant to which the Underlying Funds
will pay a portion of the expenses of the Balanced Series in proportion to the
average daily value of shares owned by the Balanced Series. Other expenses
include approximately $39,000 accrued pursuant to this Servicing Agreement.
2. Management Fee and Other Transactions with Affiliates
The Company has a management agreement with Lord, Abbett & Co. (" Lord Abbett")
pursuant to which Lord Abbett supplies the Company with investment management,
research, statistical and advisory services and pays officers' remuneration and
certain other expenses of the Company. The management fee is based on average
daily net assets at the following annual rates: 0.50% on the first $500 million
and 0.45% on assets over $500 million.
The Company has Rule 12b-1 plans and agreements (the "Class A, Class B, Class C
and Class P Plans") with Lord Abbett Distributor LLC (" Distributor"), an
affiliate of Lord Abbett. The Company makes payments to Distributor which uses
or passes on such payments to authorized institutions. Pursuant to the Class A
Plan, the Company pays Distributor (1) an annual service fee of 0.15% of the
average daily net asset value of shares sold prior to June 1, 1990 and 0.25% of
the average daily net asset value of shares sold on or after that date, (2) a
one-time distribution fee of up to 1% on certain qualifying purchases and (3) an
annual distribution fee of 0. 10% of the average daily net asset value of Class
A shares. Pursuant to the Class B Plan, the Company pays Distributor an annual
service fee and a distribution fee of 0.25% and 0.75%, respectively, of the
average daily net asset value of the Class B shares. Pursuant to the Class C
Plan, the Company pays Distributor (1) a service fee and a distribution fee, at
the time such shares are sold, not to exceed 0.25% and 0.75%, respectively, of
the net asset value of such shares sold and (2) at each quarter end after the
first anniversary of the sale of such shares, a service fee and a distribution
fee at an annual rate not to exceed 0.25% and 0.75%, respectively, of the
average annual net asset value of such shares outstanding. Pursuant to the Class
P Plan, the Company pays Distributor an annual service fee and a distribution
fee of 0.20% and 0.25%, respectively, of the average daily net asset value of
the Class P shares. Class Y does not have a plan.
Distributor received $1, 113,008 representing payment of commissions on sales of
Class A shares after deducting $7, 097, 728 allowed to authorized distributors
as concessions. Certain of the Company's officers and directors have an interest
in Lord Abbett.
3. Distributions
Dividends from net investment income are paid monthly. Capital gain
distributions, if any, will be made annually. At June 30, 1999, accumulated net
realized loss for financial reporting purposes aggregated $39,500,583.
The Company had a capital loss carryforward as of December 31, 1998 of
approximately $11, 190,000 expiring in 2003. No capital gain distribution is
expected to be paid to shareholders until net gains have been realized in excess
of such amounts.
Income and capital gains distributions are determined in accordance with income
tax regulations which may differ from methods used to determine
19
<PAGE>
Notes to Financial Statements
the corresponding income and capital gain amounts in accordance with generally
accepted accounting principles.
4. Capital
The Company has authorized 1 billion shares of $. 001 par value capital stock
designated as follows: Class A -300 million shares, Class B -160 million shares,
Class C- 80 million shares, Class Y- 300 million shares and Class P- 160 million
shares. Paid in capital amounted to $3,969,510,771 at June 30, 1999.
Transactions in shares of capital stock were as follows:
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
--------------------------------------------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 28,333,123 $266,003,650 57,590,947 $552,957,628
Shares issued to
shareholders in
reinvestment of
dividends 6,853,411 64,111,259 10,683,812 101,432,633
Total 35,186,534 330,114,909 68,274,759 654,390,261
- --------------------------------------------------------------------------------
Shares reacquired (21,936,781) (205,498,863) (34,857,399) (333,882,819)
Increase 13,249,753 $124,616,046 33,417,360 $320,507,442
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
--------------------------------------------------------------
Class B Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 19,739,042 $185,055,013 36,377,830 $349,838,761
Shares issued to
shareholders in
reinvestment of
dividends 1,685,683 15,771,967 2,140,183 20,422,737
Total 21,424,725 200,826,980 38,518,013 370,261,498
- --------------------------------------------------------------------------------
Shares reacquired (5,435,016) (50,916,989) (5,892,847) (56,423,776)
Increase 15,989,709 $149,909,991 32,625,166 $313,837,722
- --------------------------------------------------------------------------------
Six Months Ended Year Ended
June 30, 1999 December 31, 1998
--------------------------------------------------------------
Class C Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 14,235,270 $133,513,060 20,409,568 $197,171,682
Shares issued to
shareholders in
reinvestment of
dividends 1,367,036 12,800,289 2,202,269 21,140,927
Total 15,602,306 146,313,349 22,611,837 218,312,609
- --------------------------------------------------------------------------------
Shares reacquired (9,128,906) (85,550,978) (10,531,098) (101,040,511)
Increase 6,473,400 $ 60,762,371 12,080,739 $117,272,098
- --------------------------------------------------------------------------------
August 21, 1998
(Commencement of
Six Months Ended offering Class P shares) to
June 30, 1999 December 31, 1998
--------------------------------------------------------------
Class P Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 7,566 $71,166 13 $125
Shares issued to
shareholders in
reinvestment of
dividends 186 1,733 - -
Total 7,752 72,899 13 125
- --------------------------------------------------------------------------------
Shares reacquired (20) (186) - -
Increase 7,732 $72,713) 13 $125
- --------------------------------------------------------------------------------
March 27, 1998
(Commencement of
Six Months Ended offering Class Y shares) to
June 30, 1999 December 31, 1998
--------------------------------------------------------------
Class Y Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 945,193 $ 8,841,130 3,146,376 $30,510,652
Shares issued to
shareholders in
reinvestment of
dividends 142,792 1,333,926 112,756 1,070,184
Total 1,087,985 10,175,056 3,259,132 31,580,836
- --------------------------------------------------------------------------------
Shares reacquired - - (312,933) (2,863,342)
Increase 1,087,985 $10,175,056 2,946,199 $28,717,494
- --------------------------------------------------------------------------------
5. Purchases and Sales of Securities
Purchases and sales of investment securities (other than U. S. Government
obligations, short-term investments and foreign currency transactions)
aggregated $1, 149,873,288 and $1, 272,937, 626, respectively. Purchases and
sales of U. S. Government obligations aggregated $328,648,438 and $198,375,177,
respectively. As of June 30,1999, net unrealized depreciation for federal income
tax purposes aggregated $146,517, 776, of which $85,001, 681 related to
appreciated securities and $231, 519,457 related to depreciated securities. For
federal income tax purposes, the identified cost of investments owned at June
30, 1999 was substantially the same as the cost for financial reporting
purposes.
At June 30, 1999 the Company had outstanding forward currency contracts to sell
foreign currency as follows:
Value at Unrealized
Foreign Currency Settlement Date Current Appreciation
Sell Contracts Receivable Value (Depreciation)
- --------------------------------------------------------------------------------
British Pounds,
expiring 9/13/99 $12,039,200 $11,759,949 $ 279,251
- --------------------------------------------------------------------------------
Deutsche Marks,
expiring 10/7/99 $ 6,693,407 $ 7,273,654 $(580,247)
- --------------------------------------------------------------------------------
Total $18,732,607 $19,033,603 $(300,996)
- --------------------------------------------------------------------------------
6. Directors' Remuneration
The Directors of the Company associated with Lord Abbett and all officers of the
Company receive no compensation from the Company for acting as such. Outside
Directors' fees and retirement costs are allocated among all funds in the Lord
Abbett group based on the net assets of each fund. Directors' fees payable at
June 30, 1999, under a deferred compensation plan, were $491, 882.
7. Line of Credit
The Company, along with certain other funds managed by Lord Abbett, has
available a $200,000,000 unsecured revolving credit facility (" Facility"), from
a consortium of banks, to be used for temporary or emergency purposes as an
additional source of liquidity to Fund redemptions of investor shares. Any
borrowings under this Facility will bear interest at current market rates as
defined in the agreement. The fee for this Facility is .06% per annum. There
were no loans outstanding pursuant to this Facility at June 30, 1999, nor was
the Facility utilized at any time during the period.
8. Expense Reduction
The Company has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expenses.
20
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders,
Lord Abbett Bond-Debenture Fund, Inc.:
We have audited the accompanying statement of net assets of Lord Abbett
Bond-Debenture Fund, Inc. as of June 30, 1999, the related statements of
operations and of changes in net assets and the financial highlights for each of
the periods presented. These financial statements and the financial highlights
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at June 30,
1999 by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Lord Abbett
Bond-Debenture Fund, Inc. at June 30, 1999, the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
presented in conformity with generally accepted accounting principles.
[GRAPHIC OMITTED]
Deloitte & Touche LLP
New York, New York
August 13, 1999
Lord Abbett & Company Bond-Debenture Semi
Our Management
Board of Directors
Robert S. Dow
E. Thayer Bigelow* +
William H. T. Bush* +
Robert B. Calhoun*
Stewart S. Dixon* +
John C. Jansing* *
C. Alan MacDonald*
Hansel B. Millican, Jr.*
Thomas J. Neff * +
* Outside Director
+ Audit Committee
Officers
Robert S. Dow, Chairman and President
Christopher J. Towle, Executive Vice
President and Portfolio Manager
Paul A. Hilstad, Vice President
and Secretary
Zane E. Brown, Vice President
Daniel E. Carper, Vice President
Robert G. Morris, Vice President
Lawrence H. Kaplan, Vice President
and Assistant Secretary
A. Edward Oberhaus III, Vice President
Keith F. O'Connor, Vice President
Richard S. Szaro, Vice President
Michael S. Goldstein, Vice President
Thomas J. Baade, Vice President
Donna M. McManus, Treasurer
Joseph Van Dyke, Assistant Treasurer
Lydia Guzman, Assistant Secretary
Robert M. Hickey, Assistant Secretary
Investment Manager and
Underwriter
Lord, Abbett & Co. and
Lord Abbett Distributor LLC
The General Motors Building
767 Fifth Avenue
New York, NY 10153-0203
212-848-1800
Custodian
The Bank of New York
New York, NY
Transfer Agent
United Missouri Bank of
Kansas City, N. A.
Shareholder Servicing Agent
DST Systems, Inc.
P. O. Box 419100
Kansas City, MO 64141
800-821-5129
Auditors
Deloitte & Touche LLP
New York, NY
Counsel
Debevoise & Plimpton
New York, NY
Copyright (C) 1999 by Lord Abbett Bond-Debenture Fund, Inc., 767 Fifth Avenue,
New York, NY 10153-0203
This publication, when not used for the general information of shareholders of
Lord Abbett Bond-Debenture Fund, Inc., is to be distributed only if preceded or
accompanied by a current prospectus, which includes information concerning the
Fund's investment objective and policies, sales charges and other matters. There
is no guarantee that the forecasts contained within this publication will come
to pass. All rights reserved. Printed in the U. S. A.
<PAGE>
Investing in the
Lord Abbett
Family of Funds
<TABLE>
<CAPTION>
GROWTH
- ---------------------------------------------------------------------------------------------------------------------------
INCOME
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Funds Growth & Balanced Fund Income Funds Tax-Free Money
Growth Fund Income Funds Income Funds Market Fund
Developing Research Fund - Research Fund - Balanced World Bond- National U. S. Government
Growth Fund* Small-Cap Value Large-Cap Series*** Debenture Series California Securities Money
Series Series Global Fund - Connecticut Market Fund ++
Alpha Series** Growth & Income Series Florida
International Income Series High Yield Fund Georgia
Series Affiliated Fund Bond-Debenture Hawaii
Mid-Cap Fund Michigan
Value Fund Limited Duration Minnesota
Growth U. S. Government Missouri
Opportunities Securities Series+ New Jersey
Fund U. S. Government) New York
Global Fund - Securities Series+ Pennsylvania
Equity Series Texas
Washington
</TABLE>
Finding the right mutual fund can be confusing. At Lord, Abbett & Co., we
believe your investment professional provides value in helping you identify and
understand your investment objectives and, ultimately, offering fund
recommendations suitable for your individual needs.
This publication, when used as sales literature, is to be distributed only if
preceded or accompanied by a current prospectus for the fund(s) covered by this
report.
For more complete information about any Lord Abbett fund, including risks,
charges and ongoing expenses, call your investment professional or Lord Abbett
Distributor LLC at 800-874-3733 for a prospectus. Read it carefully before
investing.
The Lord Abbett Family of Funds lets you access more than 30 portfolios designed
to meet a variety of investment needs.
Diversification. You and your investment professional can diversify your
investments between equity and income funds.
Flexibility. As your investment goals change, your investment professional can
help you reallocate your portfolio.
You may reallocate assets among our funds at any time. Speak with your
investment professional to help you customize your investment plan.
Numbers to Keep Handy
For Shareholder Account or Statement
Inquiries: 800-821-5129
For Literature Only: 800-874-3733
24-Hour Automated Shareholder
Service Line: 800-865-7582
Visit Our Web Site:
http://www.lordabbett.com
*** Lord Abbett Developing Growth Fund Class A, B and C will close to new
investors on 9/30/99.
*** Lord Abbett Securities Trust - Alpha Series is a fund of funds investing in
shares of Lord Abbett Developing Growth Fund, Lord Abbett Research Fund -
Small-Cap Value Series and Lord Abbett Securities Trust International
Series.
*** Lord Abbett Balanced Series is a fund of funds investing in shares of
certain other Lord Abbett funds.
+ An investment in this Fund is neither insured nor guaranteed by the U. S.
Government.
++ An investment in this Fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the
Fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Fund. This Fund is managed to
maintain and has maintained its stable $1.00 price per share.
[LOGO]
Lord Abbett mutual fund shares are distributed by:
LORD ABBETT DISTRIBUTOR LLC
The GM Building o 767 Fifth Avenue o New York, NY o 10153-0203
LABD-3-699
(8/99)
