Lord Abbett Bond-Debenture Fund
1999 Annual Report
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A mutual fund with a multi-faceted approach to seeking high income
[LOGO]
Visit our Web Site and get: up-to-date statistics and other useful information
at www.lordabbett.com
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Lord Abbett Bond-Debenture Fund
[PHOTO]
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.
"The Fund earns Standard & Poor's Select Fund designation for the
disciplined approach of its management team, for its considered investment
style, and for the Fund's risk-adjusted historical performance record."
Standard & Poor's Select Fund reports
November 1999
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Average Annual Rates of Total Return as of 12/31/99(1)
Historically Consistent [GRAPHIC OMITTED]
Total Returns
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Flexibility The Fund's flexible investment policy enables it to adapt to
changing economic conditions. (See page 4 for the Fund's
portfolio composition.)
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Dividend Distribution Yields on 12/31/99(2)
High Current
Income [GRAPHIC OMITTED]
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Average Annual
Total Returns Average annual total returns for periods ended 12/31/99 at the
Class A share maximum sales charge of 4.75%, with all
distributions reinvested:
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The Fund's SEC yield for the 30 days ended 12/31/99 was 7.32%.
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 and assumes the
reinvestment of all distributions. 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>
Report to Shareholders
For the Year Ended December 31, 1999
[PHOTO]
Robert S. Dow
Chairman
January 15, 2000
"We feel that bonds represent an excellent value given today's level of
inflation..."
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Lord, Abbett & Co. is proud to announce we have received a DALBAR award for
providing consistently good service to shareholders, the 1999 Key Honor Award
for Mutual Fund Service. DALBAR, Inc., an independent research firm and
evaluator of mutual fund service, presents the awards to financial services
firms that provide consistently solid service to clients.
Lord Abbett Bond-Debenture Fund completed its fiscal year on December 31,
1999, with net assets of approximately $3.7 billion. Below is an overview
of Class share performance for the period.
Year Ended December 31, 1999
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Class A Class B Class C Class P Class Y
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Net asset value $9.05 $9.05 $9.06 $9.06 $9.04
Dividends $0.75 $0.69 $0.69 $0.74 $0.78
Total return(1) 3.91% 3.29% $3.17% 3.86% 4.27%
The fourth quarter of 1999 was difficult for bond investors. The U.S.
Federal Reserve Board (the "Fed") raised short-term interest rates for the
third consecutive time, reversing the three rate reductions that occurred
in 1998. As the economy continued to exhibit signs of strong growth and
record levels of employment, investors remained fearful that inflationary
pressures could develop as a result of the continued expansion of the U.S.
economy. While credit spreads -- the difference in yield between bonds of
the same maturity but different quality -- did tighten some (contracted),
they continued to remain wide during the quarter.
We spent the fourth quarter trying to avoid the risk of rising interest
rates by keeping our exposure to Treasurys to a minimum and slightly
increasing our allocation to convertible bonds -- securities that can be
exchanged for stock of the issuing corporation at specified prices. Since
we anticipate that the recovery in the global economy will continue, we
invested in some multinational technology manufacturing and semiconductor
companies that we believe offered bonds of good values.
Despite challenging market conditions and a 2% increase in interest rates
during the past 15 months, high-yield bonds were among the best performers
in the U.S. bond market. We maintained an allocation of over 63% of the
Fund to high-yield bonds as they continued to offer a tremendous yield
advantage over Treasurys.(2) We also found good value in the bonds of
technology, telecommunications, media, and cable companies. Conversely, we
were disappointed by the bonds of small companies, which struggled with
less access to capital and increasing default rates. Investors seemed to
prefer the more liquid bonds of larger companies.
Our holdings in convertible securities also helped the portfolio's
performance. On the heels of strong corporate earnings, persistent U.S.
economic growth and recent stock market advances, we took profits on some
of the portfolio's convertible securities that had increased significantly
in price. We maintained a moderate exposure to mortgage-backed securities,
investing mainly in new, higher-coupon FNMA bonds that were acquired below
par (face value).
Outlook on Inflation
We will continue to closely monitor the Fed for further rate increases. We
feel that bonds represent an excellent value given today's level of
inflation, and should continue to be attractive if inflation remains in the
area of 2% to 3%. While we do not anticipate a meaningful decline in
interest rates in the short term, we remain encouraged by economic
indicators such as low inflation and the U.S. Government budget surplus.
Typically, these signs indicate that the U.S. economy is slowing, which
should bode well for bond investors.
Thank you for investing with Lord Abbett and in Bond-Debenture Fund. We
value the trust that you place in us, and look forward to serving your
investment needs in the years to come. We wish you all the best in the new
millennium.
(1) Total return is the percent change in net asset value, assuming the
reinvestment of all distributions.
(2) Unlike U.S. Treasury securities, the high-yield/lower-rated bonds in
which the Fund invests are neither insured nor guaranteed by the U.S.
Government and are regarded as involving a greater degree of risk.
1
<PAGE>
Aiming for High Total Returns
Seeking High Returns
Dividend distribution rates were 8.29% and 7.89% (based on the Class A
share net asset value and maximum offering price, respectively, on
12/31/99, 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: 4/1/71-12/31/99(1)
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Total Value High Current Yield Avg. GPI
10,765 10,675 10,275
11,413 11,596 10,625
10,313 10,387 11,650
9,789 9,209 12,975
12,689 11,299 13,875
16,613 14,590 14,550
17,777 15,607 15,525
18,269 15,900 16,925
19,547 16,614 19,175
21,283 17,250 21,675
22,412 18,361 23,500
128,585 23,996 24,400
33,416 27,838 25,325
35,073 30,185 26,325
42,442 36,771 27,325
46,946 41,897 27,625
47,828 42,777 28,850
54,427 48,398 30,125
57,181 48,039 31,525
52,852 43,303 33,450
73,116 59,333 34,475
84,810 69,764 35,475
98,356 83,005 36,450
94,553 79,992 37,425
111,099 93,327 38,375
123,498 106,253 39,650
139,175 120,087 40,325
145,805 119,583 40,975
151,495 125,024 42,075
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.
(3) Calculated from 3/31/71.
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: 4/1/71-12/31/99(2)
<TABLE>
<CAPTION>
Value of
$100,000
Year Annual Investment with Inflation
Ended Dividends all Distributions (Consumer
Dec. 31 Reinvested Reinvested Price Index)
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<S> <C> <C> <C> <C> <C
$100,000 invested at 1971(3) $ 3,450 $103,588 $102,750-| From the early
1970s through
the Fund's inception 1972 7,460 110,073 106,250 | the early
1980s, the U.S.
grew to over $1 1973 8,204 99,239 115,500 | economy
experienced rapidly
million 1974 9,163 94,202 129,750 | --- rising inflation
and interest
1975 9,719 122,105 138,750 | rates. The Fund
kept pace with
1976 10,970 159,867 145,500 | inflation over
this turbulent
1977 11,883 171,064 155,250 | period.
1978 14,100 175,803 169,250 |
1979 16,410 188,105 191,750 |
1980 18,614 204,818 215,750 |
1981 22,844 215,671 235,000 |
1982 27,279 275,072 244,000-|
1983 31,092 321,561 253,250-| As the rate of
inflation and
1984 37,521 337,510 263,250 | interest rates
declined in the
1985 43,150 408,427 273,250 | 1980s, the Fund
outperformed
1986 48,531 451,763 276,250 |--- the CPI by an
average of 6.7%
1987 51,214 460,251 288,500 | per year.
1988 53,120 523,756 301,250 |
1989 59,178 550,254 315,250-|
1990 66,312 508,602 334,500-|
1991 71,085 703,596 344,750 | During the
economic expansion
1992 77,910 816,148 354,750 |--- of the
1990s, the Fund
1993 82,556 946,487 364,500 | outperformed the
CPI by an
1994 86,858 909,890 374,250 | average of 8.0%
per year.
1995 95,753 1,069,120 383,750 |
1996 103,439 1,188,430 396,500 |
1997 104,367 1,339,297 403,250 |
1998 108,089 1,403,094 409,750 |
1999 115,572 1,457,857 420,750-|
Total Dividends
Reinvested: $1,395,843
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Average Annual Rate of Return: 9.77% 5.14%
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</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
Current Dividend Distribution Rates: 8.29% and 7.89% (based on the Class A share
net asset value and maximum offering price, respectively, on 12/31/99, and the
monthly dividend of $.0625, annualized). See Important Information on page 5.
The Fund's 3-Way Focus
1. High-yield Corporate Debt and Straight-preferred Stocks: 64.3%(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: 19.2%(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: 16.5%(1) High-quality
issues, corporate issues and U.S. Government-backed securities provide a
dependable stream of high current income.
A History of the Fund's Portfolio Blend
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Consistency of Performance...Over the Long Term
The Fund produced positive total returns 18 out of the last 20 calendar
years(2)(3)
Over the Short Term Over the last 20 calendar years between 1979 and 1999, Lord
Abbett Bond-Debenture Fund shareholders holding the Fund for any 3-year period
earned average annual total returns of at least 9% per year(3)
Over the Long Term Over the last 20 calendar years between 1979 and 1999, Lord
Abbett Bond-Debenture Fund shareholders holding the Fund for any 10-year period
earned average annual total returns of at least 9% per year(3)
Average Annual Total Returns for 10-Year Periods Ending December 31(2):
<TABLE>
<CAPTION>
1979- 1980- 1981- 1982- 1983- 1984- 1985- 1986- 1987- 1988- 1989- 1990-
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11.0% 10.8% 9.0% 12.0% 11.0% 10.9% 9.9% 9.6% 9.6% 10.7% 9.8% 10.2%
</TABLE>
(1) Percent of net assets on 12/31/99. The Fund's portfolio is actively managed
and subject to change.
(2) At net asset value.
(3) All periods end December 31. Assumes investment in Class A shares at
maximum offering price. Total return is the percent change in value,
assuming the reinvestment of all distributions. Past performance does not
guarantee future results.
4
<PAGE>
Important Information
SEC yield is calculated on the Class A share maximum offering price of
$9.50 on 12/31/99, using a standard method which does not take into account
certain portfolio strategies. The Fund's distribution rate may differ from
its SEC yield if the Fund purchases securities at a premium and distributes
to shareholders interest income that has not been reduced for amortization
of premiums on those securities. This practice is consistent with
applicable tax elections made by the Fund, but may result in a decrease in
the net asset value of shares of the Fund if 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 3/31/00, this report must be accom panied by Lord
Abbett's Performance Quarterly for the most recently completed calendar
quarter.
<TABLE>
<CAPTION>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
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Long-Term Investments in Securities 99.76%
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Investment-Grade Corporate Bonds 4.22%
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<S> <C>
<C> <C>
Broadcasters .90% CBS, Inc. 8 7/8/2022 $
3,000 $ 3,058,770
Fox/Liberty Networks LLC Zero Coupon due 2007**
12,800 10,368,000
Fox/Liberty Networks LLC 8 7/8/2007
20,000 20,550,000
Total 33,976,770
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Cable TV .62% Fundy Cable Ltd. Sr. Secured 2nd Priority Notes 11/2005 (F)
15,000 16,237,500
Lenfest Communications Inc. 8 1/4/2008
7,000 7,035,000
Total 23,272,500
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Diversified Media .38% Cox Communications Inc. 6 7/8/2005
15,000 14,555,550
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Energy .31% Perez Companc SA 9/2004+ (F)
12,500 11,638,500
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Home Builders .19% Lennar Corp. 7 5/8/2009
8,000 7,252,640
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Technology .74% Computer Associates International, Inc. 6 3/8/2005
30,000 27,972,900
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Telecommunications 1.08% Orange plc 8/2008 (F)
20,000 20,200,000
Telefonica De Argentina 9 1/8/2008 + (F)
23,500 20,562,500
Total 40,762,500
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Total Investments in Investment-GradeCorporate Bonds (Cost
$165,163,200) 159,431,360
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High-Yield Corporate Debt 63.85%
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Airlines .77% America West Airlines Inc. 10 3/4/2005
15,000 14,775,000
Canadian Airlines Corp. Sr. Secured Notes 10/2005 (F)
5,000 3,975,000
Continental Airlines 8/2005
6,250 5,781,250
Piedmont Aviation Inc. 10.35/2011
2,000 1,896,440
US Air Inc. Equipment Trust Certificate 1987 Series D 10 1/2/2004
859 851,587
US Air Inc. Equipment Trust Certificate 1987 Series E 10 1/2/2004
927 919,000
US Air Inc. Equipment Trust Certificate 1987 Series F 10 1/2/2004
848 840,682
Total 29,038,959
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Auto Parts .35% Lear Corp. 8.11/2009+
14,000 13,273,820
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5
<PAGE>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
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Automotive 2.93% Accuride Corp. 9 1/4/2008 $
12,750 $ 11,793,750
Atlantic Express Transportation Corp. Sr. Secured Notes 10 3/4/2004
6,200 6,045,000
Collins & Aikman Products Co. 11 1/2/2006
15,000 14,925,000
Diamond Triumph Auto 9 1/4/2008+
10,000 7,050,000
Dura Operating Corp. 9/2009
15,000 14,212,500
Navistar Financial Corp. 9/2002
10,000 10,075,000
Navistar International Corp. 8/2008
12,500 11,937,500
Oshkosh Truck Corp. 8 3/4/2008
15,000 14,625,000
Safelite Glass Corp. 9 7/8/2006
10,000 550,000
Tenneco, Inc. 11 5/8/2009+
10,000 10,250,000
Venture Holdings Trust 9 1/2/2005
10,000 9,150,000
Total 110,613,750
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Banking .73% B.F. Saul REIT Sr. Secured Notes 9 3/4/2008
17,500 16,187,500
Ocwen Federal Bank FSB 12/2005
7,000 6,790,000
Ocwen Financial Corp. 11 7/8/2003
5,100 4,717,500
Total 27,695,000
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Broadcasters 6.19% Chancellor Media Corp. 9 3/8/2004
25,000 25,750,000
Chancellor Media Corp. 10 1/2/2007
5,000 5,475,000
Allbritton Communications Co. 9 3/4/2007
25,500 25,627,500
American Radio System 9/2006
13,500 14,247,360
Cumulus Media Inc. 10 3/8/2008
9,000 9,450,000
Frontiervision Operating Partners 11/2006
10,000 10,625,000
Granite Broadcasting Corp. 10 3/8/2005
12,500 12,812,500
Gray Communication System Inc. 10 5/8/2006
4,000 4,150,000
Grupo Televisa SA 11 7/8/2006 (F)
15,000 16,050,000
Grupo Televisa SA Zero Coupon due 2008** (F)
23,000 20,642,500
Interep National Radio Sales, Inc. 10/2008
11,000 10,725,000
Sinclair Broadcasting Group, Inc. 10/2005
52,000 52,000,000
Sinclair Broadcasting Group, Inc. 8 3/4/2007
7,500 7,012,500
TV Azteca SA de CV 10 1/2/2007 (F)
22,000 19,305,000
Total 233,872,360
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Building Materials 1.17% American Builders & Contractors Supply Co. Inc. 10 5/8/2007
7,500 6,937,500
American Standard Inc. 8 1/4/2009
13,500 13,010,625
Euramax International plc 11 1/4/2006 (F)
10,000 10,300,000
Kevco, Inc. 10 3/8/2007
10,000 2,550,000
Nortek, Inc. 8 7/8/2008
12,000 11,460,000
Total 44,258,125
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Cable TV 7.20% Bresnan Communications Group Zero Coupon due 2009**
15,000 10,462,500
CSC Holdings Inc. 9 1/4/2005
20,000 20,550,000
Century Communications Corp. 9 1/2/2005
25,000 25,125,000
Charter Communications Holdings 8 5/8/2009
25,000 23,250,000
Charter Communications LLC Zero Coupon due 2011**
25,000 14,781,250
Comcast UK Cable Partners Ltd. Zero Coupon due 2007**(F)
10,000 9,575,000
Echostar DBS Corp. 9 3/8/2009
5,000 5,062,500
Frontiervision Holdings LP Zero Coupon due 2007**
8,250 7,383,750
Frontiervision Holdings Capital Zero Coupon due 2007**
11,750 10,516,250
Globo Communicacoes e Participacos Ltd. 10 5/8/2008+ (F)
10,000 8,475,000
Mediacom LLC 8 1/2/2008
22,000 20,625,000
NTL Communications Corp. Zero Coupon due 2008**
22,000 15,565,000
6
<PAGE>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
- ------------------------------------------------------------------------------------------------------------------------------------
NTL Inc. 10/2007 $
15,000 $ 15,637,500
Renaissance Media Group Zero Coupon due 2008**
15,000 10,575,000
Telewest Communications plc Zero Coupon due 2007** (F)
22,000 20,680,000
Telewest Communications plc Zero Coupon due 2009+**(F)
20,000 13,100,000
United Pan - Europe Communications Zero Coupon due 2009**(F)
38,000 21,660,000
United Pan - Europe Communications 11 1/4/2009+ (F)
18,000 18,810,000
Total 271,833,750
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Capital Goods 1.71% Alvey Systems, Inc. 11 3/8/2003
6,955 7,267,975
Aviation Sales Co. 8 1/8/2008
10,000 8,550,000
BE Aerospace, Inc. 9 7/8/2006
20,000 19,400,000
BE Aerospace, Inc. 8/2008
10,000 8,750,000
Clark Materials Handling Co. 10 3/4/2006
1,000 315,000
International Wire Group Inc. 11 3/4/2005
10,000 10,375,000
National Equipment Services 10/2004
10,000 10,075,000
Total 64,732,975
- ----------------------------------------------------------------------------------------------------------------------==============
Chemicals 2.02% Atlantis Group, Inc. 11/2003
5,000 5,025,000
Huntsman Corp. 9 1/2/2007+
15,450 14,754,750
Huntsman ICI Chemicals 10 1/8/2009+
6,000 6,180,000
Lyondell Chemical Co. Sr. Secured Notes 9 5/8/2007
5,000 5,150,000
Lyondell Chemical Co. Sr. Secured Notes 9 7/8/2007
5,000 5,125,000
NL Industries, Inc. 11 3/4/2003
5,350 5,550,625
Pioneer American Acquisition Corp. Sr. Secured Notes 9 1/4/2007
7,500 5,962,500
Pioneer Americas 7 7/8/2006
4,518 3,840,361
Pioneer Americas 8.66/2006
2,440 2,073,795
Pioneer Americas 9.18/2006
361 307,229
Pioneer Americas 9 3/8/2006
23 19,202
Sovereign Specialty Chemicals, Inc. 9 1/2/2007
4,500 4,545,000
Sterling Chemical, Inc. 11 3/4/2006
15,000 11,325,000
Texas Petrochemicals Corp. 11 1/8/2006
7,500 6,562,500
Total 76,420,962
- ----------------------------------------------------------------------------------------------------------------------==============
Consumer Products 1.25% Cathay International Ltd. 13/2008+**(F)
6,000 3,120,000
Chattem, Inc. 8 7/8/2008
17,000 15,980,000
Rayovac Corp. 10 1/4/2006
9,250 9,712,500
Riddell Sports Inc. 10 1/2/2007
12,000 10,440,000
The Scotts Co. 8 5/8/2009+
8,000 7,840,000
Total 47,092,500
- ----------------------------------------------------------------------------------------------------------------------==============
Containers 1.07% Portola Packaging, Inc. 10 3/4/2005
7,550 7,625,500
Stone Container Corp. 10 3/4/2002
10,000 10,337,500
U.S. Can Corp. 10 1/8/2006
15,000 15,375,000
Vicap SA 11 3/8/2007 (F)
7,500 6,975,000
Total 40,313,000
- ----------------------------------------------------------------------------------------------------------------------==============
Diversified Financial
Services .31% Willis Corroon Corp. 9/2009
14,000 11,725,000
- ----------------------------------------------------------------------------------------------------------------------==============
Diversified Media 1.05% The Ackerley Group, Inc. 9/2009
15,000 14,737,500
CEI Citicorp Holdings SA 9 3/4/2007 (F)
5,000 4,275,000
Heritage Media Corp. 8 3/4/2006
10,000 10,200,000
Lamar Media Corp. 9 5/8/2006
10,000 10,375,000
Total 39,587,500
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7
<PAGE>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities .37% AEI Holding Co. 10 1/2/2005+ $
12,000 $ 9,060,000
P&L Coal Holdings Corp. 8 7/8/2008
5,000 4,912,500
Total 13,972,500
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Emerging Market Sovereign Debt Mexican United States 9 7/8/2007 (F)
10,000 10,490,000
1.23% Panama (Republic of) 8 7/8/2027 (F)
20,000 16,850,000
Republic of Argentina 11 3/8/2017 (F)
12,500 12,593,750
Republic of Venezuela 9 1/4/2027 (F)
10,000 6,650,000
Total 46,583,750
- ----------------------------------------------------------------------------------------------------------------------==============
Energy 2.84% Chesapeake Energy Corp. 9 5/8/2005
9,000 8,550,000
CODA Energy, Inc. 10 1/2/2006
10,000 10,300,000
Cross Timbers Oil Co. 9 1/4/2007
5,000 5,000,000
Gulf Canada Resources Ltd. 9 1/4/2004 (F)
12,700 12,761,341
HS Resources, Inc. 9 7/8/2003
10,000 10,025,000
KCS Energy, Inc. 11/2003++
9,300 7,393,500
KCS Energy, Inc. 8 7/8/2008++
15,000 4,875,000
Lomak Petroleum Inc. 8 3/4/2007
10,000 9,225,000
Metro Gas SA 12/2000 (F)
7,500 7,687,500
Petroleos Mexicanos 9/2007+ (F)
10,000 9,710,000
Plains Resources Inc. 10 1/4/2006+
4,000 3,900,000
Pogo Producing Co. 8 3/4/2007
10,000 9,550,000
Vintage Petroleum, Inc. 8 5/8/2009
8,500 8,181,250
Total 107,158,591
- ----------------------------------------------------------------------------------------------------------------------==============
Entertainment .19% Loews Cineplex Entertainment Corp. 8 7/8/2008
8,000 7,080,000
- ----------------------------------------------------------------------------------------------------------------------==============
Food 2.52% AmeriKing, Inc. 10 3/4/2006
7,300 6,789,000
Aurora Foods Inc. 9 7/8/2007
2,500 2,543,750
Aurora Foods Inc. 9 7/8/2007
11,500 11,701,250
Coca-Cola Femsa SA 8.95/2006 (F)
10,000 10,100,000
Del Monte Foods Co. Zero Coupon due 2007**
20,000 15,300,000
Delta Beverage Group Inc. 9 3/4/2003
6,400 6,432,000
Doane Pet Care Co. 9 3/4/2007
5,859 5,873,648
Leiner Health Products Inc. 9 5/8/2007
17,500 13,146,875
Pepsi-Gemex SA 9 3/4/2004 (F)
15,000 15,037,500
Twin Laboratories, Inc. 10 1/4/2006
8,400 8,421,000
Total 95,345,023
- ----------------------------------------------------------------------------------------------------------------------==============
Gaming 2.76% Aztar Corp. 8 7/8/2007
18,000 17,370,000
Empress Entertainment Inc. 8 1/8/2006
5,000 5,050,000
Harrah's Operating Co. Inc. 7 7/8/2005
15,000 14,737,500
Harrah's Operating Co. Inc. 7 1/2/2009
10,000 9,406,400
Isle of Capri Casinos, Inc. 8 3/4/2009
5,000 4,662,500
Mohegan Tribal Gaming Authority 8 3/4/2009
25,000 24,937,500
Park Place EntertainmentCorp. 7 7/8/2005
12,000 11,490,000
Trump Atlantic City Assoc. Funding Inc. 1st Mtg. Notes 11 1/4/2006
20,000 16,500,000
Total 104,153,900
- ----------------------------------------------------------------------------------------------------------------------==============
Healthcare 1.05% Fresenius Medical Capital Trust II 7 7/8/2008
7,500 7,012,500
Integrated Health Services, Inc. 9 1/2/2007++
20,000 1,600,000
Prime Medical Services Inc. 8 3/4/2008
12,500 11,562,500
Tenet Healthcare Corp. 8 5/8/2007
20,000 19,350,000
Total 39,525,000
- ----------------------------------------------------------------------------------------------------------------------==============
8
<PAGE>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
- ------------------------------------------------------------------------------------------------------------------------------------
Homebuilders .71% D. R. Horton Inc. 10/2006 $
15,000 $ 15,375,000
M.D.C. Holdings, Inc. 8 3/8/2008
12,500 11,562,500
Total 26,937,500
- ----------------------------------------------------------------------------------------------------------------------==============
Hotels .50% Host Marriott Travel Plazas Sr. Secured Notes 9 1/2/2005
5,000 5,245,700
HMH Properties Sr. Secured Notes 7 7/8/2008
15,000 13,575,000
Total 18,820,700
- ----------------------------------------------------------------------------------------------------------------------==============
Minerals/Metals .13% Kaiser Aluminum & Chemical Corp. 10 7/8/2006
5,000 5,037,500
- ----------------------------------------------------------------------------------------------------------------------==============
Miscellaneous .01% Prime Succession, Inc. 10 3/4/2004
2,000 530,000
- ----------------------------------------------------------------------------------------------------------------------==============
Paper 1.85% APP International Finance 11 3/4/2005 (F)
1,000 835,000
Crown Paper Co. 11/2005
12,000 7,620,000
Fonda Group Inc. 9 1/2/2007
9,000 7,605,000
Four M Corp. Sr. Secured Notes 12/2006
8,500 7,947,500
Indah Kiat International Finance Co. 12 1/2/2006 (F)
6,000 4,980,000
Packaging Corp. of America 9 5/8/2009
14,000 14,420,000
S.D. Warren Co. 12/2004
10,000 10,512,500
Tembec Industries Inc. 8 5/8/2009 (F)
16,000 16,080,000
Total 70,000,000
- ----------------------------------------------------------------------------------------------------------------------==============
Pollution Control .35% Allied Waste North America Inc. 7 7/8/2009
15,000 13,275,000
- ----------------------------------------------------------------------------------------------------------------------==============
Publishing/Printing .41% Mail-Well, Inc. 8 3/4/2008
8,000 7,800,000
R.H. Donnelly Inc. 9 1/8/2008
7,800 7,683,000
Total 15,483,000
- ----------------------------------------------------------------------------------------------------------------------==============
Retail .66% Advanced Stores Co., Inc. 10 1/4/2008
5,000 4,325,000
Amazon.Com Inc. Zero Coupon due 2008**
12,000 7,980,000
Norton McNaughton Inc. 12 1/2/2005
5,000 4,275,000
United Stationers Inc. 12 3/4/2005
7,653 8,284,372
Total 24,864,372
- ----------------------------------------------------------------------------------------------------------------------==============
Services 1.98% Avis Rent A Car Inc. 11/2009
5,000 5,275,000
Budget Group Inc. 9 1/8/2006
5,000 4,675,000
Iron Mountain Inc. 10 1/8/2006
20,000 20,450,000
Iron Mountain Inc. 8 3/4/2009
20,000 19,150,000
Iron Mountain Inc. 8 1/4/2011
3,600 3,312,000
Kinder Care Learning Center 9 1/2/2009
7,500 7,350,000
Pierce Leahy Corp. 9 1/8/2007
10,000 9,900,000
UNICCO Service Co. 9 7/8/2007
5,000 4,625,000
Total 74,737,000
- ----------------------------------------------------------------------------------------------------------------------==============
Steel/Metals 1.25% AK Steel Holding Corp. 9 1/8/2006
10,000 10,175,000
Armco Inc. 9/2007
10,000 10,187,500
Hylsa SA De CV 9 1/4/2007+ (F)
5,500 4,895,000
Republic Technologies Int'l 13 3/4/2009+
10,000 6,650,000
WCI Steel, Inc. 10/2004
15,000 15,375,000
Total 47,282,500
- ----------------------------------------------------------------------------------------------------------------------==============
Supermarkets .27% Stater Brothers Holdings Inc. 10 3/4/2006
10,000 10,150,000
Victory Markets, Inc. 12 1/2/2000++
5,000 75,000
Total 10,225,000
- ----------------------------------------------------------------------------------------------------------------------==============
Technology 2.80% DynCorp Inc. 9 1/2/2007
13,500 11,947,500
Entex Information Services Inc. 12 1/2/2006
10,000 4,550,000
Exodus Communications, Inc. 10 3/4/2009+
10,000 10,225,000
9
<PAGE>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
- ------------------------------------------------------------------------------------------------------------------------------------
Fisher Scientific International Inc. 9/2008 $
17,000 $ 16,362,500
L-3 Communications Corp. 10 3/8/2007
15,000 15,525,000
Packard BioScience Co. 9 3/8/2007
10,000 8,625,000
United Defense Industries Inc. 8 3/4/2007
15,000 14,400,000
Verio Inc. 11 1/4/2008
9,000 9,495,000
Verio Inc. 10 5/8/2009+
5,000 5,125,000
Viasystems Group, Inc. 9 3/4/2007
17,000 9,435,000
Total 105,690,000
- ----------------------------------------------------------------------------------------------------------------------==============
Telecommunications 14.18% AMSC Acquisition Co. Inc. 12 1/4/2008
10,000 7,900,000
Hyperion Telecommunications Inc. Sr. Secured Notes 12 1/4/2004
10,000 10,875,000
Call-Net Enterprises, Inc. Zero Coupon due 2008** (F)
20,000 9,950,000
Cencall Communications Corp. 10 1/8/2004**
20,000 20,550,000
Clearnet Communications Zero Coupon due 2009** (F)
20,000 12,050,000
Dobson Communications Corp. 11 3/4/2007
7,000 8,102,500
Espirit Telecom Group plc 10 7/8/2008 (F)
15,000 14,925,000
GST USA Inc. Sr. Secured Notes Zero Coupon due 2005**
32,500 23,887,500
Global Crossing Holdings Ltd. 9 5/8/2008 (F)
21,000 21,105,000
ICG Holdings Inc. Zero Coupon due 2005**
40,000 35,000,000
Intermedia Communications Inc. Zero Coupon due 2007**
50,000 37,250,000
Intermedia Communications Inc. Zero Coupon due 2009**
23,800 14,399,000
KPNQWEST BV 8 1/8/2009 (F)
16,000 15,440,000
Logix Communications Enterprises Inc. 12 1/4/2008
7,250 5,673,125
MasTec Inc. 7 3/4/2008
5,500 5,197,500
McLeodUSA Inc. Zero Coupon due 2007**
30,000 24,750,000
Metromedia Fiber Network, Inc. 10/2009
5,000 5,125,000
NTL Inc Zero Coupon due 2009 (F) GBP
5,000 4,631,811
Nextel Communications, Inc. Zero Coupon due 2008**
35,000 25,025,000
Nextel Communications, Inc. 9 3/8/2009+
24,000 23,700,000
NEXTLINK Communications, Inc. 10 3/4/2008
25,000 26,000,000
NEXTLINK Communications, Inc. Zero Coupon due 2009**
13,250 8,215,000
Orbital Imaging Corp. 11 5/8/2005
10,000 6,750,000
Price Communications Wireless Inc. Sr. Secured Notes 9 1/8/2006
6,000 6,150,000
Qwest Communications International Inc. Zero Coupon due 2008**
13,000 10,010,000
RSL Communications plc 12/2008 (F)
25,000 25,312,500
Rogers Cantel Inc. Sr. Secured Notes 8.30/2007 (F)
30,000 30,225,000
SBA Communications Corp. Zero Coupon due 2008**
20,000 12,300,000
Splitrock Services Inc. 11 3/4/2008
1,500 1,387,500
Time Warner Telecom Inc. 9 3/4/2008
12,000 12,420,000
Versatel Telecom BV 11 7/8/2009 (F)
5,000 5,125,000
Viatel, Inc. 11 1/4/2008
17,000 17,170,000
Voicestream Wire Co. 10 3/8/2009+
10,000 10,350,000
Western Wireless Corp. 10 1/2/2007
16,600 17,513,000
Williams Communications Group, Inc. 10 7/8/2009
20,000 21,050,000
Total 535,514,436
- ----------------------------------------------------------------------------------------------------------------------==============
Textiles 1.04% Delta Mills Inc. 9 5/8/2007
5,500 3,877,500
GFSI, Inc. 9 5/8/2007
12,500 7,812,500
Guess Inc. 9 1/2/2003
13,500 13,635,000
Interface Inc. 9 1/2/2005
15,000 13,875,000
Total 39,200,000
- ----------------------------------------------------------------------------------------------------------------------==============
Total Investments in High-Yield Corporate Debt (Cost
$2,604,438,151) 2,411,873,473
- ----------------------------------------------------------------------------------------------------------------------==============
10
<PAGE>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
- ------------------------------------------------------------------------------------------------------------------------------------
Convertible Debt 13.66%
- ------------------------------------------------------------------------------------------------------------------------------------
Automotive .10% MascoTech Inc. 4 1/2/2003 $
5,000 $ 3,693,750
- ----------------------------------------------------------------------------------------------------------------------==============
Broadcasters .39% Clear Channel Communications 1 1/2/2002
3,470 3,559,561
Clear Channel Communications 2 5/8/2003
4,000 5,960,000
Jacor Communications Inc. Zero Coupon due 2018
7,500 5,081,325
Total 14,600,886
- ----------------------------------------------------------------------------------------------------------------------==============
Cable TV .86% Echostar Communications Corp. 4 7/8/2007+
13,050 15,935,747
NTL Inc. 5 3/4/2009+
15,000 16,566,300
Total 32,502,047
- ----------------------------------------------------------------------------------------------------------------------==============
Capital Goods .36% Credit Suisse First Boston 2 5/8/2003
7,500 7,068,750
Credit Suisse First Boston 2 1/4/2004
7,500 6,731,250
Total 13,800,000
- ----------------------------------------------------------------------------------------------------------------------==============
Diversified Media .58% Interpublic Group of Companies Inc. 1.80/2004
3,500 5,354,300
Interpublic Group of Companies Inc. 1.80/2004+
7,500 11,473,500
Interpublic Group of Companies Inc. 1.87/2006+
4,275 4,962,762
Total 21,790,562
- ----------------------------------------------------------------------------------------------------------------------==============
Drugs 2.00% Elan Corp. Zero Coupon due 2018+ (F)
40,000 20,900,000
Human Genome Sciences, Inc. 5/2006+
3,000 3,615,000
Rite Aid Corp. 5 1/4/2002
8,000 5,484,960
Roche Holdings Inc. Zero Coupon due 2010+
50,000 30,375,000
Swiss Bank Corp. 2 1/2/2002+ (F)
6,000 5,685,000
Swiss Life Finance Ltd. 2/2003+ (F)
10,000 9,862,500
Total 75,922,460
- ----------------------------------------------------------------------------------------------------------------------==============
Energy 1.15% Devon Energy Corp. 4.95/2008
16,000 15,503,328
Loews Corp. 3 1/8/2007
6,000 4,938,420
Parker Drilling Co. 5 1/2/2004
13,000 9,197,500
Swift Energy Co. 6 1/4/2006
10,000 7,775,000
Texaco Capital Inc. 3 1/2/2004
6,250 5,906,250
Total 43,320,498
- ----------------------------------------------------------------------------------------------------------------------==============
Insurance .74% AXA SA 2 1/2/2014 (F) EUR
1,930 3,249,217
American International Group Inc. 2 1/4/2004
13,000 20,379,970
CII Financial Inc. 7 1/2/2001
6,000 4,260,000
Total 27,889,187
- ----------------------------------------------------------------------------------------------------------------------==============
Leisure .16% AMF Bowling Inc. Zero Coupon due 2018
11,996 629,790
Hilton Hotel Corp. 5/2006
7,000 5,390,000
Total 6,019,790
- ----------------------------------------------------------------------------------------------------------------------==============
Miscellaneous .46% Merrill Lynch & Co. 1 1/2/2005
15,000 17,381,250
- ----------------------------------------------------------------------------------------------------------------------==============
Publishing/Printing .52% Scholastic Corp. 5/2005+
5,000 4,876,400
Times Mirror Co. Zero Coupon due 2017
30,000 14,812,500
Total 19,688,900
- ----------------------------------------------------------------------------------------------------------------------==============
Technology 5.29% ASE Test Ltd. 1/2004+ (F)
10,000 10,900,000
Affiliated Computers Services Inc. 4/2005+
8,000 10,027,040
Arbor Software Corp. 4 1/2/2005
5,500 5,225,000
Arbor Software Corp. 4 1/2/2005+
8,500 8,075,000
ASM Lithography Holding 4 1/4/2004+ (F)
10,000 12,097,100
Bea Systems, Inc. 4/2006+
10,000 11,689,800
Businessland, Inc. 5 1/2/2007
5,255 3,809,875
11
<PAGE>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
- ------------------------------------------------------------------------------------------------------------------------------------
EMC Corp. 6/2004 $
8,380 $ 11,190,652
Exodus Communications 4 3/4/2008+
8,000 11,079,040
LSI Logic Corp. 4 1/4/2004
2,000 4,558,760
Lattice Semiconductor Co. R.P. 4 3/4/2006+
2,500 3,297,600
Metamor Worldwide, Inc. 2.94/2004
20,000 17,350,000
Mindspring Enterprises Inc. 5/2006
3,500 3,335,255
National Data Corp. 5/2003
20,000 18,436,600
Orbital Sciences Corp. 5/2002+
10,000 8,576,400
Photronics, Inc. 6/2004
5,000 5,868,750
Sanmina Corp. 4 1/4/2004+
10,800 14,208,804
Solectron Corp. Zero Coupon due 2019
2,500 1,911,950
Solectron Corp. Zero Coupon due 2019+
25,000 19,119,500
STMicroelectronics NV Zero Coupon due 2009 (F)
12,000 16,537,920
Thermo Instrument System Inc. 4 1/2/2003+
3,000 2,467,560
Total 199,762,606
- ----------------------------------------------------------------------------------------------------------------------==============
Telecommunications 1.05% Bell Atlantic Financial Service 5 3/4/2003+
4,500 4,550,040
Broadband Technologies, Inc. 5/2001+
3,000 1,515,000
CommScope Inc. 4/2006+
6,000 6,441,360
DoubleClick Inc. 4 3/4/2006+
3,000 9,337,110
Safeguard Scientifics Inc. 5/2006+
4,000 9,085,160
USinternetworking Inc. 7/2004+
3,000 8,767,500
Total 39,696,170
- ----------------------------------------------------------------------------------------------------------------------==============
Total Investments in Convertible Debt (Cost
$455,229,414) 516,068,106
- ----------------------------------------------------------------------------------------------------------------------==============
Preferred and Convertible-Preferred Stocks, Common Stocks and Warrants 5.83% Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Banking .30% California Federal Capital Pfd. 9.125%
500,000 11,281,250
Crossland Savings FSB Brooklyn Conv. Pfd. $1.8125
375,000 60,000
Total 11,341,250
- ----------------------------------------------------------------------------------------------------------------------==============
Broadcasters .31% MediaOne Group Inc. Conv. Pfd. 7%
150,000 7,200,000
Sinclair Broadcast Group, Inc. Conv. Pfd. 6%
127,000 4,452,938
Total 11,652,938
- ----------------------------------------------------------------------------------------------------------------------==============
Cable TV .48% UnitedGlobalCom Inc. Conv. Pfd. 7%+
200,000 17,950,000
- ----------------------------------------------------------------------------------------------------------------------==============
Capital Goods .15% Ingersoll-Rand Co. Conv. Pfd. 6.75%
225,000 5,737,500
- ----------------------------------------------------------------------------------------------------------------------==============
Chemicals .11% Monsanto Co. Conv. Pfd. 6.50%
128,000 4,240,000
- ----------------------------------------------------------------------------------------------------------------------==============
Containers .14% Owens-Illinois Inc. Conv. Pfd. 4.75%
166,000 5,187,500
- ----------------------------------------------------------------------------------------------------------------------==============
Diversified Financial
Services .88% Jefferson-Pilot Corp. Conv. Pfd. 7.25%
215,000 18,006,250
National Australia Bank Ltd. Conv. Pfd. 7.875%
200,000 5,525,000
WBK STRYPES Trust Conv. Pfd. 10%
300,000 9,693,900
Total 33,225,150
- ----------------------------------------------------------------------------------------------------------------------==============
Diversified Media .32% Cox Communications Inc. Conv. Pfd. 7%
175,000 11,900,000
- ----------------------------------------------------------------------------------------------------------------------==============
Electric Utilities .25% Texas Utilities Co. Conv. Pfd. 9.25%
220,000 9,597,500
- ----------------------------------------------------------------------------------------------------------------------==============
Energy .37% KN Energy Inc. Conv. Pfd. 8.25%
150,000 4,875,000
Kerr-Mcgee Corp. Conv. Pfd. 5.50%
252,000 8,316,000
Lomak Financing Trust Conv. Pfd. 5.75%+
54,300 943,463
Total 14,134,463
- ----------------------------------------------------------------------------------------------------------------------==============
Entertainment .20% Seagram Co. Ltd. Conv. Pfd. 7.50%
169,000 7,605,000
- ----------------------------------------------------------------------------------------------------------------------==============
Healthcare .34% AMDOCS Automatic Co. Conv. Pfd. 6.75%
400,000 12,850,000
- ----------------------------------------------------------------------------------------------------------------------==============
12
<PAGE>
Statement of Net Assets
December 31, 1999
Investments
Shares Value
- ------------------------------------------------------------------------------------------------------------------------------------
Homebuilders .16% Walden Residential Properties, Inc. Wts. expiring 1/1/2002*
400,000 $ 2,000
Walden Residential Properties, Inc. Pfd. 9.20% with Wts.
expiring 12/31/2001
400,000 6,225,000
Total 6,227,000
- ----------------------------------------------------------------------------------------------------------------------==============
Insurance .82% American General Corp. Conv. Pfd. 6%
150,000 14,118,750
Amerus Life Holdings, Inc. Conv. Pfd. 7%
355,000 8,076,250
Lincoln National Corp. Conv. Pfd. 7.75%
396,000 8,712,000
Total 30,907,000
- ----------------------------------------------------------------------------------------------------------------------==============
Paper .69% Georgia-Pacific (Georgia-Pacific Group) Conv. Pfd. 7.50%
350,000 17,850,000
International Paper Capital Trust Conv. Pfd. 5.25%
150,000 8,195,400
Total 26,045,400
- ----------------------------------------------------------------------------------------------------------------------==============
Retail .14% CVS Auto Exchange Trust Conv. Pfd. 6%
75,000 5,343,750
- ----------------------------------------------------------------------------------------------------------------------==============
Telecommunications .17% American Mobile Satellite Corp. Wts. expiring 4/1/2008+*
10,000 402,500
GST Telecommunications, Inc.*
135,000 1,223,437
Intermedia Communications Inc. Wts. expiring 6/1/2000+*
5,000 561,250
Nextel Communications, Inc.
20,140 2,076,938
Orbital Imaging Corp. Wts. expiring 3/1/2005+*
10,000 200,000
Splitrock Services, Inc. Wts. expiring 7/15/2008*
1,500 141,720
Viatel, Inc.
33,657 1,804,857
Total 6,410,702
- ----------------------------------------------------------------------------------------------------------------------==============
Total Investments in Preferred and Convertible-Preferred Stocks,
Common Stocks and Warrants (Cost
$224,697,576) 220,355,153
- ----------------------------------------------------------------------------------------------------------------------==============
Asset-Backed Securities .28% Principal Amount
(000)
- ------------------------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services Inc. 7/2010
572 553,791
Sears Credit Account Master Trust 6.20/2006
10,000 9,940,600
Total Investments in Asset-Backed Securities (Cost
$10,611,096) 10,494,391
- ----------------------------------------------------------------------------------------------------------------------==============
Commercial Mortgage-Backed Securities 1.94%
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Asset Trust 7.55/2010
5,000 5,014,365
Credit Suisse First Boston 6.52/2007
23,120 22,123,736
Credit Suisse First Boston 6.30/2008
20,000 18,501,580
Credit Suisse First Boston 7.29/2009
10,000 9,861,140
DLJ Commercial Mortgage Corp. 6.41/2008
5,000 4,674,870
GMAC Commercial Mortgage Securities Inc. 6.42/2008
4,150 3,867,165
LB Commercial Conduit Mortgage Trust 6.21/2008
5,000 4,591,705
Prudential Securities Secured Financing Corp. 6.51/2008
5,000 4,695,385
Total Investments in Commercial Mortgage-Backed Securities (Cost
$76,783,413) 73,329,946
- ----------------------------------------------------------------------------------------------------------------------==============
Mortgage-Backed Securities 3.28%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 6 1/2/2029
23,712 22,422,941
Federal National Mortgage Association 6 1/2/2028
21,904 20,698,828
Federal National Mortgage Association 7/2029
24,935 24,171,163
Federal National Mortgage Association 6 1/2 due on an announced basis
60,000 56,653,200
Total Investments in Mortgage-Backed Securities (Cost
$127,684,636) 123,946,132
- ----------------------------------------------------------------------------------------------------------------------==============
U.S. Government and Agency Issues 6.70%
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 9 1/2/2000
80,000 80,312,800
Federal National Mortgage Association 8 1/2/2005
18,645 18,674,086
U.S. Treasury Note 8 1/2/2000
35,000 35,142,100
U.S. Treasury Note 7 1/2/2002
65,000 66,807,650
U.S. Treasury Note 71/2/2005
50,000 52,289,000
Total Investments in U.S. Government and Agency Issues (Cost
$260,107,829) 253,225,636
- ----------------------------------------------------------------------------------------------------------------------==============
Total Long-Term Investments in Securities (Cost
$3,924,715,315) 3,768,724,197
- ----------------------------------------------------------------------------------------------------------------------==============
13
<PAGE>
Statement of Net Assets
December 31, 1999
Principal
Amount
Investments
(000) Value
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Investments .12% American Express Credit Corp. 4.25% due 1/3/2000 (Cost $4,485,000) $
4,485 $ 4,485,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments 99.88% (Cost
$3,929,200,315) 3,773,209,197
====================================================================================================================================
Other Assets, Less Liabilities
.12% 4,413,407
====================================================================================================================================
Net Assets
100.00%
$3,777,622,604
====================================================================================================================================
Class A Shares-Net asset value ($2,328,530,790 / 257,415,187 shares
outstanding) $9.05
Maximum offering price (net asset value plus sales charge of 4.75% of the offering
price) $9.50
Class B Shares-Net asset value ($840,533,157 / 92,902,767 shares
outstanding) $9.05
Class C Shares-Net asset value ($557,148,772 / 61,508,277 shares
outstanding) $9.06
Class P Shares-Net asset value ($229,333 / 25,328 shares
outstanding) $9.05
Class Y Shares-Net asset value ($51,180,552 / 5,664,667 shares
outstanding) $9.04
*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.
++Defaulted securities.
(F)Foreign Security.
EUR Euro
GBP British Pound
See Notes to Financial Statements.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
Investment Income Year
Ended December 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
Income Interest (net of foreign tax withholding of
$6,079) $326,461,019
Dividends
13,128,217
Total
income 339,589,236
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses Management
fee 17,075,989
12b-1 distribution plan-Class
A 7,628,106
12b-1 distribution plan-Class
B 7,803,829
12b-1 distribution plan-Class
C 5,534,946
12b-1 distribution plan-Class
P 443
Shareholder
servicing 4,206,950
Reports to
shareholders 407,508
Professional
161,997
Directors'
fees 91,897
Registration
290,920
Other
213,594
Total expenses before
reductions 43,416,179
- -----------------------------------------------------------------------------------------------------------------------------------
Expense
reductions (302,167)
- -----------------------------------------------------------------------------------------------------------------------------------
Net
expenses 43,114,012
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment
income 296,475,224
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Loss on Investments and Foreign Currency Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized loss from investment and foreign currency
transactions (88,204,475)
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and foreign currency
holdings (75,599,179)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments and foreign currency
transactions (163,803,654)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations $132,671,570
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year
Ended Year Ended
December
31, December 31,
Increase (Decrease) in Net Assets
1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
Operations Net investment income $
296,475,224 $ 247,358,781
Net realized gain (loss)from investment and foreign currency transactions
(88,204,475) 52,159,873
Net change in unrealized depreciation of investments and foreign currency holdings
(75,599,179) (161,964,155)
Net increase in net assets resulting from operations
132,671,570 137,554,499
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income included in price of share transactions
- - 2,086,963
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A
(192,354,033) (174,256,684)
Class B
(58,055,378) (36,713,105)
Class C
(41,241,035) (33,996,539)
Class P
(7,532) (3)
Class Y
(3,278,597) (1,070,186)
Total
(294,936,575) (246,036,517)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sales of shares
952,817,978 1,130,478,848
Net asset value of shares issued in reinvestment of dividends
195,455,819 144,066,481
Total
1,148,273,797 1,274,545,329
- -----------------------------------------------------------------------------------------------------------------------------------
Cost of shares reacquired
(748,509,944) (494,210,448)
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets derived from capital share transactions
399,763,853 780,334,881
- -----------------------------------------------------------------------------------------------------------------------------------
Increase in net assets
237,498,848 673,939,826
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets Beginning of year
3,540,123,756 2,866,183,930
End of year (including undistributed net investment income of
$7,139,745 and $5,601,096, respectively)
$3,777,622,604 $3,540,123,756
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Year
Ended December 31,
Per Share Operating Performance: 1999 1998 1997
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $9.45 $9.76 $9.41
$9.29 $8.71
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income .75(b) .76(b) .75(b)
.81 .85
Net realized and unrealized gain (loss)on investments
and foreign currency transactions (.40) (.31) .40
.17 .606
Total from investment operations .35 .45 1.15
.98 1.456
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.75) (.76) (.80)
(.86) (.876)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.05 $9.45 $9.76
$9.41 $9.29
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.91% 4.76% 12.70%
11.16% 17.50%
====================================================================================================================================
Ratios to Average Net Assets:
Expenses(e) .92% .88% .89%
.89% .82%
Net investment income 8.17% 7.85% 7.89%
8.77% 9.41%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class B
Shares Class C Shares
- --------------------------------------------------------------------------------------
- --------------------------------------------
Year Ended 12/31, 8/1/96(d) Year Ended
12/31, 7/15/96(d)
Per Share Operating Performance: 1999 1998 1997 to 12/31/96 1999 1998
1997 to 12/31/96
- --------------------------------------------------------------------------------------
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $9.44 $9.75 $9.41 $9.13 $9.46 $9.77
$9.41 $9.05
- --------------------------------------------------------------------------------------
- --------------------------------------------
Income from investment
operations
Net investment income .69(b) .69(b) .68(b) .34 .69(b) .69(b)
.69(b) .35
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions (.39) (.31) .38 .26 (.40) (.31)
.39 .33
Total from investment operations .30 .38 1.06 .60 .29 .38
1.08 .68
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net
investment income (.69) (.69) (.72) (.32) (.69) (.69)
(.72) (.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.05 $9.44 $9.75 $9.41 $9.06 $9.46
$9.77 $9.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.29% 3.98% 11.85% 6.57%(c) 3.17% 3.98%
11.97% 7.86%(c)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses(e) 1.60% 1.60% 1.63% .70%(c) 1.60% 1.60%
1.58% .75%(c)
Net investment income 7.49% 7.13% 7.06% 3.37%(c) 7.49% 7.13%
7.16% 3.72%(c)
====================================================================================================================================
(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 year.
(c) Not annualized.
(d) Commencement of offering respective class shares.
(e) The ratios for 1998 and 1999 include expenses paid through an expense offset arrangement.
See Notes to Financial Statements.
17
</TABLE>
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class P Shares
Class Y Shares
- -----------------------------------------------------------------------------------------------------------------------------------
YearEnded 12/31 8/21/98(d) Year Ended
12/31 3/27/98(d)
Per Share Operating Performance: 1999 to 12/31/98
1999 to 12/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
<C> <C>
Net asset value, beginning of year $9.45 $9.54
$9.44 $9.98
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income(b) .73 .25
.78 .59
Net realized and unrealized loss on investments
and foreign currency transactions (.39) (.09)
(.40) (.54)
Total from investment operations .34 .16
.38 .05
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions
Dividends from net investment income (.74) (.25)
(.78) (.59)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.05 $9.45
$9.04 $9.44
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.86% 1.73%(c)
4.27% .55%(c)
====================================================================================================================================
Ratios to Average Net Assets:
Expenses(e) 1.05% .38%(c)
.60% .46%(c)
Net investment income 8.10% 2.90%(c)
8.52% 6.24%(c)
- -----------------------------------------------------------------------------------------------------------------------------------
Year
Ended December 31,
Supplemental Data for AllClasses: 1999 1998 1997
1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000) $3,777,623 $3,540,124 $2,866,184
$2,129,421 $1,339,508
Portfolio turnover rate 67.93% 86.48% 89.14%
106.79% 134.90%
====================================================================================================================================
(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 arrangement.
See Notes to Financial Statements.
18
</TABLE>
<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 manage ment 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-the-counter market if, in the judgment of the Company's officers, that
market more accurately reflects the market value of bonds and notes. Securities
traded only in the over-the-counter market are valued at the mean between the
bid and asked prices, except that securities admitted to trading on the NASDAQ
National Market System are valued at the last sales price if it is determined
that such price more accurately reflects the value of such securities.
Short-term securities are valued at amortized cost which approxi mates 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 se curities are
purchased or sold (trade date). Realized gains and losses from investment
transactions are calculated on the identified cost basis. Interest income
including discount amortization on zero coupon bonds 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 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. 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 forward 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 currency 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 $122,000 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 for each month at the following annual rates: 0.50% on the
first $500 million and 0.45% on assets over $500 million. At December 31, 1999,
the management fee payable was $1,364,197.
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 ofClass 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%, respec tively, of the average daily net asset value of
the Class P shares. Class Y does not have a plan. At December 31, 1999, the
12b-1 fees payable with respect to all classes of shares aggregated $2,712,026.
Distributor received $1,865,825 representing payment of commissions on sales of
Class A shares after deducting $11,144,269 allowed to auth orized 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 declared and paid monthly. Capital gain
distributions, if any, will be made annually. At December 31, 1999, accumulated
net realized loss for financial re porting purposes aggregated $97,391,784.
The Company had a capital loss carryforward as of December 31, 1999 of
approximately $101,251,695 of which $11,240,802 expires in 2003 and $90,010,893
in 2007. No capital gain distribution is expected to be paid to shareholders
until net gains have been realized in excess of such amounts.
19
<PAGE>
Notes to Financial Statements
Income and capital gains dis tributions are determined in accordance with income
tax regulations which may differ from methods used to determine 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 $4,023,738,447 at December 31, 1999. Trans
actions in shares of capital stock were as follows:
Year Ended Year Ended
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Class A Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 46,204,380 $ 427,164,662 57,590,947 $552,957,628
Shares issued to
shareholders in
reinvestment of
dividends 14,347,378 131,444,164 10,683,812 101,432,633
Total 60,551,758 558,608,826 68,274,759 654,390,261
- --------------------------------------------------------------------------------
Shares reacquired (48,782,581) (447,064,212) (34,857,399) (333,882,819)
Increase 11,769,177 $ 111,544,614 33,417,360 $320,507,442
- --------------------------------------------------------------------------------
Year Ended Year Ended
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Class B Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 32,292,536 $ 298,330,831 36,377,830 $349,838,761
Shares issued to
shareholders in
reinvestment of
dividends 3,749,435 34,311,846 2,140,183 20,422,737
Total 36,041,971 332,642,677 38,518,013 370,261,498
- --------------------------------------------------------------------------------
Shares reacquired (14,195,926) (129,722,785) (5,892,847) (56,423,776)
Increase 21,846,045 $ 202,919,892 32,625,166 $313,837,722
- --------------------------------------------------------------------------------
Year Ended Year Ended
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Class C Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 22,171,975 $ 205,282,312 20,409,568 $197,171,682
Shares issued to
shareholders in
reinvestment of
dividends 2,880,804 26,417,246 2,202,269 21,140,927
Total 25,052,779 231,699,558 22,611,837 218,312,609
- --------------------------------------------------------------------------------
Shares reacquired (18,654,738) (171,504,635) (10,531,098) (101,040,511)
Increase 6,398,041 $ 60,194,923 12,080,739 $117,272,098
- --------------------------------------------------------------------------------
August 21, 1998
(Commencement of
Year Ended offering Class P shares) to
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Class P Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 25,320 $229,776 13 $125
Shares issued to
shareholders in
reinvestment of
dividends 636 5,778 - -
Total 25,956 235,554 13 125
- --------------------------------------------------------------------------------
Shares reacquired (642) (5,812) - -
Increase 25,314 $229,742 13 $125
- --------------------------------------------------------------------------------
March 27, 1998
(Commencement of
Year Ended offering Class Y shares) to
December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Class Y Shares Amount Shares Amount
- --------------------------------------------------------------------------------
Sales of shares 2,382,642 $21,810,397 3,146,376 $30,510,652
Shares issued to
shareholders in
reinvestment of
dividends 359,490 3,276,785 112,756 1,070,184
Total 2,742,132 25,087,182 3,259,132 31,580,836
- --------------------------------------------------------------------------------
Shares reacquired (23,664) (212,500) (312,933) (2,863,342)
Increase 2,718,468 $24,874,682 2,946,199 $28,717,494
- --------------------------------------------------------------------------------
5. Purchases and Sales of Securities
Purchases and sales of investment securities (other than U.S. Govern ment
obligations, short-term investments and foreign currency transactions)
aggregated $2,541,016,707 and $2,527,461,028, respectively. Purchases and sales
of U.S. Government obli gations aggregated $244,619,809 and $256,238,063,
respectively. As of December 31, 1999, net unrealized depreciation for federal
income tax purposes aggregated $155,991,118, of which $131,881,422 related to
appreciated securities and $287,872,540 related to depreciated securities. For
federal income tax purposes, the identified cost of investments owned at
December 31, 1999 was substantially the same as the cost for financial reporting
purposes.
At December 31, 1999, the Company had outstanding forward currency contracts to
sell foreign currency as follows:
Value at
Foreign Currency Settlement Date Current Unrealized
Sell Contracts Local Currency U.S.Dollars Value Appreciation
- --------------------------------------------------------------------------------
British Pounds,
expiring 3/13/00 7,450,000 $12,182,612 $12,055,298 $127,314
- --------------------------------------------------------------------------------
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. Direct ors' fees payable at
December 31, 1999, under a deferred compensation plan, were $536,872.
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 was at an annual rate of
.06% during the year. Effective December 17, 1999, this fee was increased to
0.09% per annum. There were no loans outstanding pursuant to this Facility at
December 31, 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 December 31, 1999, the related statements of
operations for the year then ended and of changes in net assets for each of the
years in the two-year period then ended and the financial highlights for each of
the periods presented. These financial state ments and the financial highlights
are the responsibility of the Company's manage ment. 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 exam ining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.
Our procedures included confirmation of securities owned at December 31, 1999 by
correspondence with the custodian and brokers. 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 the Lord Abbett
Bond-Debenture Fund, Inc. at December 31, 1999, the results of their operations,
the changes in their net assets and their financial highlights for the periods
presented in conformity with generally accepted accounting principles.
[GRAPHIC OMITTED]
New York, New York
February 25, 2000
Copyright(C)2000 by Lord Abbett Bond-Debenture Fund, Inc., 90 Hudson Street,
Jersey City, NJ 07302-3973
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
Growth Large-Cap Research Fund - Balanced World Bond- National U. S.
Government
Opportunities Growth Fund Large-Cap Series** Debenture Series California
Securities Money
Fund Research Fund- Series Global Fund - Connecticut Market
Fund +++
Small-Cap Value Growth & Income Series Florida
Series Income Series High Yield Fund Georgia
Alpha Series* Affiliated Fund Bond-Debenture Hawaii
Developing International Fund Michigan
Growth Fund Series Limited Duration Minnesota
Lord Abbett Mid-Cap U. S. Government Missouri
Developing Value Fund Securities Series+ New Jersey
Growth Fund Global Fund- U. S. Government) New York
is closed to Equity Series Securities Series+ Pennsylvania
new investors 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
under stand your investment objectives and, ultimately, offering fund recom
mendations 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, in cluding 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:
www.lordabbett.com
** 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
90 Hudson Street o Jersey City, New Jersey 07302-3973
LABD-2-1299
(3/00)
