Lord Abbett
Bond-Debenture Fund
Prospectus
May 1, 2000
[logo]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Table of Contents
The Fund
What you should know Goal 2
about the Fund Principal Strategy 2
Main Risks 2
Performance 3
Fees and Expenses 5
Your Investment
Information for managing Purchases 6
your Fund account Sales Compensation 8
Opening Your Account 9
Redemptions 10
Distributions and Taxes 10
Services For Fund Investors 11
Management 12
For More Information
How to learn more Other Investment Techniques 13
about the Fund Glossary of Shaded Terms 13
Recent Performance 15
Financial Information
Financial Highlights 16
Line Graph Comparison 17
Compensation For Your Dealer 18
How to learn more about the Back Cover
Fund and other Lord Abbett Funds
<PAGE>
The Fund
GOAL
The Fund's investment objective is to seek high current income and the
opportunity for capital appreciation to produce a high total return.
PRINCIPAL STRATEGY
To pursue its goal, the Fund normally invests in high yield and investment
grade debt securities, securities convertible into common stock and
preferred stocks. Under normal circumstances, the Fund invests at least 65%
of its total assets in fixed income securities of various types. At least
20% of the Fund's assets must be invested in any combination of investment
grade securities, U.S. Government securities and cash equivalents.
We believe that a high total return (current income and capital
appreciation) may be derived from an actively managed, diversified
portfolio of investments. Through port-folio diversification, credit
analysis and attention to current developments and trends in interest rates
and economic conditions, we attempt to reduce the risks. We seek unusual
values, using fundamental, bottom-up research to identify undervalued
securities. In recent years, the Fund has found good value in high yield
securities, sometimes called "lower-rated bonds" or "junk bonds," and has
invested more than half its assets in those securities. Higher yield on
debt securities can occur during periods of high inflation when the demand
for borrowed money is high. Also, buying lower-rated bonds when we believe
the credit risk is likely to decrease, may generate higher returns.
While typically fully invested, at times we may take a temporary defensive
position by investing some of the Fund's assets in cash and short-term debt
securities. This could reduce the benefit from any upswing in the market
and prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
investing in debt securities. The value of an investment in the Fund will
change as interest rates fluctuate in response to market movements. When
interest rates rise, the prices of debt securities are likely to decline,
and when interest rates fall, the prices of debt securities tend to rise.
Longer-term debt securities are usually more sensitive to interest rate
changes. Put another way, the longer the maturity of a security, the
greater the effect a change in interest rates is likely to have on its
price.
There is also the risk that an issuer of a debt security will fail to make
timely payments of principal or interest to the Fund, a risk that is
greater with junk bonds. Some issuers, particularly of junk bonds, may
default as to principal and/or interest payments after the Fund purchases
their securities. This may result in losses to the Fund. In addition, the
market for high yield securities generally is less liquid than the market
for higher-rated securities.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to Lord Abbett Bond-Debenture Fund, Inc.
About the Fund. The Fund is a professionally managed portfolio primarily holding
securities purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all funds, it cannot guarantee results.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
2 The Fund
<PAGE>
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year. This chart does not reflect the sales
charges applicable to Class A shares. If the sales charges were reflected,
returns would be less.
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Bar Chart (per calendar year) - Class A Shares
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[GRAPHIC OMITTED]
Best Quarter 1st Q `91 13.8% Worst Quarter 3rd Q `90 -8.2%
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The Fund 3
<PAGE>
The table below shows how the average annual total returns of the Fund's
Class A, B, C and P shares compared to those of a broad-based securities
market index and three more narrowly based indices. Although the Fund's
portfolio blend has changed through the years, historically it was composed
primarily of three categories of securities: (1) high-yield corporate debt
(including straight preferred stocks); (2) equity-related securities; and
(3) high-grade debt. Because no single index existed that combined these
categories in a manner similar to the Fund, we compared the Fund's
performance to that of three indices which included elements of the
categories: First Boston High Yield Index ("High Yield Index"); Value Line
Convertible Index ("Value Line Index"); and Salomon Brothers Broad
Investment Bond Index ("Salomon Index"). The Fund now intends to replace
the Value Line Index and the Salomon Index with the Lehman Aggregate Bond
Index. The Lehman Aggregate Bond Index is not only a broader based
securities market index but is also more commonly used in fund performance
comparisons and more accessible to shareholders. The Fund's returns reflect
payment of the maximum applicable front-end or deferred sales charges.
<TABLE>
<CAPTION>
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Average Annual Total Returns Through December 31, 1999
==========================================================================================
Share Class 1 Year 5 Years 10 Years Since Inception(1)
<S> <C> <C> <C> <C>
Class A shares -1.00% 8.83% 9.70% -
- ------------------------------------------------------------------------------------------
Class B shares -1.51% - - 6.76%
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Class C shares 2.21% - - 7.76%
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Class P shares 3.86% - - 4.12%
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Lehman Aggregate Bond Index(2) -0.82% 7.73% 7.70% 6.63%(3)
6.41%(4)
1.38%(5)
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Salomon Index(2) -0.84% 7.75% 7.76% 6.64%(3)
6.43%(4)
1.46%(5)
- ------------------------------------------------------------------------------------------
High Yield Index(2) 3.28% 9.07% 11.06% 3.21%(3)
3.33%(4)
4.54%(5)
- ------------------------------------------------------------------------------------------
Value Line Index(2) 19.50% 14.56% 15.25% 3.40%(3)
-3.10%(4)
10.05%(5)
- ------------------------------------------------------------------------------------------
</TABLE>
(1) The date of inception for each class is: A - 4/1/71; B - 8/1/96; C -
7/15/96 and P - 8/21/98.
(2) Performance for the unmanaged indices does not reflect any fees or
expenses. The performance of the indices is not necessarily representative
of the Fund's performance.
(3) Represents total return for the period 8/31/96 to 12/31/99, to correspond
with Class B inception date.
(4) Represents total return for the period 7/31/96 to 12/31/99, to correspond
with Class C inception date.
(5) Represents total return for the period 8/31/98 to 12/31/99, to correspond
with Class P inception date.
4 The Fund
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
=====================================================================================================
Fee Table
=====================================================================================================
Class A Class B(2) Class C Class P
Shareholder Fees (Fees paid directly from your investment)
- -----------------------------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(as a % of offering price) 4.75% none none none
- -----------------------------------------------------------------------------------------------------
Maximum Deferred Sales Charge none(1) 5.00% 1.00%(1) none
- -----------------------------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of average net assets)(3)
- -----------------------------------------------------------------------------------------------------
Management Fees (See "Management") 0.46% 0.46% 0.46% 0.46%
- -----------------------------------------------------------------------------------------------------
Distribution (12b-1) and Service Fees(4) 0.35% 1.00% 1.00% 0.45%
- -----------------------------------------------------------------------------------------------------
Other Expenses 0.14% 0.14% 0.14% 0.14%
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Total Operating Expenses 0.95% 1.60% 1.60% 1.05%
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</TABLE>
(1) A contingent deferred sales charge of 1.00% may be assessed on certain
redemptions of (a) Class A shares made within 24 months following any
purchases made without a sales charge, and (b) Class C shares if they are
redeemed before the first anniversary of their purchase.
(2) Class B shares will convert to Class A shares on the eighth anniversary of
your original purchase of Class B shares.
(3) The annual operating expenses have been restated from fiscal year amounts
to reflect current fees.
(4) Because 12b-1 fees are paid out on an ongoing basis, over time they will
increase the cost of your investment and may cost you more than paying
other types of sales charges.
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Example
================================================================================
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund at
maximum sales charge, if any, for the time periods indicated and then redeem all
of your shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs (including any applicable contingent deferred
sales charges) would be:
<TABLE>
<CAPTION>
Share Class 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Class A shares $567 $763 $ 976 $1,586
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Class B shares $663 $805 $1,071 $1,726
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Class C shares $263 $505 $ 871 $1,900
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Class P shares $107 $334 $ 579 $1,283
====================================================================================
You would have paid the following expenses if you did not redeem your shares:
Class A shares $567 $763 $ 976 $1,586
====================================================================================
Class B shares $163 $505 $ 871 $1,726
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Class C shares $163 $505 $ 871 $1,900
====================================================================================
Class P shares $107 $334 $ 579 $1,283
====================================================================================
</TABLE>
Management fees are payable to Lord, Abbett & Co. ("Lord Abbett") for the Fund's
investment management.
12b-1 fees refer to fees incurred for activities that are primarily intended to
result in the sale of Fund shares and service fees for shareholder account
service and maintenance.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Fund 5
<PAGE>
Your Investment
PURCHASES
The Fund offers in this prospectus four classes of shares: Class A, B ,C,
and P, each with different expenses and dividends. You may purchase shares
at the net asset value ("NAV") per share determined after we receive your
purchase order submitted in proper form. A front-end sales charge may be
added to the NAV in the case of the Class A shares. There is no front-end
sales charge in the case of the Class B, C, and P shares, although there
may be a contingent deferred sales charge ("CDSC") on Class B and Class C
shares as described below.
You should read this section carefully to determine which class of shares
represents the best investment option for your particular situation. It may
not be suitable for you to place a purchase order for Class B shares of
$500,000 or more or a purchase order for Class C shares of $1,000,000 or
more. You should discuss pricing options with your investment professional.
For more information, see "Alternative Sales Arrangements" in the Statement
of Additional Information.
We reserve the right to withdraw all or any part of the offering made by
this prospectus or to reject any purchase order. We also reserve the right
to waive or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
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Share Classes
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Class A o normally offered with a front-end sales charge
Class B o no front-end sales charge, however, a CDSC is applied to shares
sold prior to the sixth anniversary of purchase
o higher annual expenses than Class A shares
o automatically converts to Class A shares after eight years
Class C o no front-end sales charge, however, a CDSC is applied to shares
sold prior to the first anniversary of purchase
o higher annual expenses than Class A shares
Class P o available to certain pension or retirement plans and pursuant to
a Mutual Fund Fee Based Program
- --------------------------------------------------------------------------------
Front-End Sales Charges - Class A Shares
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Compute
As a % of As a % of OfferingPrice
Your Investment Offering Price Your Investment Divide NAV by
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.75% 4.99% .9525
- -------------------------------------------------------------------------------------------------------------------
$100,000 to $249,999 3.95% 4.11% .9605
- -------------------------------------------------------------------------------------------------------------------
$250,000 to $499,999 2.75% 2.83% .9725
- -------------------------------------------------------------------------------------------------------------------
$500,000 to $999,999 1.95% 1.99% .9805
- -------------------------------------------------------------------------------------------------------------------
$1,000,000 and over No Sales Charge 1.0000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
NAV per share for each class of Fund shares is calculated each business day at
the close of regular trading on the New York Stock Exchange ("NYSE"), normally
4:00 p.m. Eastern time. Purchases and sales of Fund shares are executed at the
NAV next determined after the Fund receives your order in proper form. In
calculating NAV, securities for which market quotations are available are valued
at those quotations. Securities for which such quotations are not available are
valued at fair value under procedures approved by the Board of the Fund.
6 Your Investment
<PAGE>
Reducing Your Class A Front-End Sales Charges. Class A shares may be
purchased at a discount if you qualify under either of the following
conditions:
o Rights of Accumulation -- A Purchaser may apply the value of the
shares already owned to a new purchase of Class A shares of any
Eligible Fund in order to reduce the sales charge.
o Letters of Intention -- A Purchaser of Class A shares may purchase
additional shares of any Eligible Fund over a 13-month period and
receive the same sales charge as if you had purchased all shares at
once. Shares purchased through reinvestment of dividends or
distributions are not included. A Letter of Intention can be backdated
90 days. Current holdings under Rights of Accumulation may be included
in a Letter of Intention.
For more information on eligibility for these privileges, read the
applicable sections in the attached application.
Class A Share Purchases Without A Front-End Sales Charge. Class A shares
may be purchased without a front-end sales charge under any of the
following conditions:
o purchases of $1 million or more *
o purchases by Retirement Plans with at least 100 eligible employees *
o purchases under a Special Retirement Wrap Program *
o purchases made with dividends and distributions on Class A shares of
another Eligible Fund
o purchases representing repayment under the loan feature of the Lord
Abbett-sponsored prototype 403(b) Plan for Class A shares
o purchases by employees of any consenting securities dealer having a
sales agreement with Lord Abbett Distributor
o purchases under a Mutual Fund Fee Based Program
o purchases by trustees or custodians of any pension or profit sharing
plan, or payroll deduction IRA for the employees of any consenting
securities dealer having a sales agreement with Lord Abbett
Distributor
o purchases by each Lord Abbett-sponsored fund's Directors or Trustees
(including retired Directors or Trustees), officers of each Lord
Abbett-sponsored fund, employees and partners of Lord Abbett. These
categories of purchasers also include other family members of such
purchasers.
See the Statement of Additional Information for a listing of other
categories of purchasers who qualify for Class A share purchases without a
front-end sales charge.
* These categories may be subject to a CDSC.
Class A Share CDSC. If you buy Class A shares under one of the starred (o)
categories listed above and you redeem any of them within 24 months after
the month in which you initially purchased them, the Fund normally will
collect a CDSC of 1%.
The Class A share CDSC generally will be waived for the following
conditions:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess distribution under Retirement Plans
(documentation may be required)
o redemptions continuing as investments in another fund participating in
a Special Retirement Wrap Program
Retirement Plans include employer-sponsored retirement plans under the Internal
Revenue Code, excluding Individual Retirement Accounts.
Lord Abbett offers a variety of Retirement Plans. Call 800-253-7299 for
information about:
o Traditional, Rollover, Roth and Education IRAs
o Simple IRAs, SEP-IRAs, 401(k) and 403(b) accounts
o Defined Contribution Plans
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent for the
Fund to work with investment professionals wj8
ho buy and/or sell shares of the Fund on behalf of their clients. Generally,
Lord Abbett Distributor does not sell Fund shares directly to investors.
Benefit Payment Documentation (Class A CDSC only)
o under $50,000 - no documentation necessary
Your Investment 7
<PAGE>
Class B Share CDSC. The CDSC for Class B shares normally applies if you
redeem your shares before the sixth anniversary of their initial purchase.
The CDSC declines the longer you own your shares, according to the
following schedule:
- --------------------------------------------------------------------------------
Contingent Deferred Sales Charges - Class B Shares
- --------------------------------------------------------------------------------
Anniversary(1) of the day on Contingent Deferred Sales Charge
which the purchase order on redemption (as % of amount
was accepted subject to charge)
On Before
- --------------------------------------------------------------------------------
1st 5.0%
- --------------------------------------------------------------------------------
1st 2nd 4.0%
- --------------------------------------------------------------------------------
2nd 3rd 3.0%
- --------------------------------------------------------------------------------
3rd 4th 3.0%
- --------------------------------------------------------------------------------
4th 5th 2.0%
- --------------------------------------------------------------------------------
5th 6th 1.0%
- --------------------------------------------------------------------------------
on or after the 6th (2) None
- --------------------------------------------------------------------------------
(1) The anniversary is the same calendar day in each respective year after the
date of purchase. For example, the anniversary for shares purchased on May
1 will be May 1 of each succeeding year.
(2) Class B shares will automatically convert to Class A shares on the eighth
anniversary of the purchase of Class B shares.
Different conversion schedules may apply to Class B shares purchased by or on
behalf of retirement plans in connection with certain special programs or
platforms created and maintained by certain broker-dealer firms.
The Class B share CDSC generally will be waived under the following
circumstances:
o benefit payments under Retirement Plans in connection with loans,
hardship withdrawals, death, disability, retirement, separation from
service or any excess contribution or distribution under Retirement
Plans
o Eligible Mandatory Distributions under 403(b) Plans and individual
retirement accounts o death of the shareholder
o redemptions of shares in connection with Div-Move and Systematic
Withdrawal Plans (up to 12% per year)
See "Systematic Withdrawal Plan" under "Services For Fund Investors" below
for more information on CDSCs with respect to Class B shares.
Class C Share CDSC. The 1% CDSC for Class C shares normally applies if you
redeem your shares before the first anniversary of the purchase of such
shares.
Class P Shares. Class P shares have lower annual expenses than Class B and
Class C shares, no front-end sales charge, and no CDSC. Class P shares are
currently sold and redeemed at NAV (a) pursuant to a Mutual Fund Fee Based
Program, or (b) to the trustees of, or employer-sponsors with respect to,
pension or retirement plans with at least 100 eligible employees (such as a
plan under Section 401(a), 401(k) or 457(b) of the Internal Revenue Code)
which engage an investment professional providing or participating in an
agreement to provide certain recordkeeping, administrative and/or
sub-transfer agency services to the Fund on behalf of the Class P
shareholders.
SALES COMPENSATION
As part of its plan for distributing shares, the Fund and Lord Abbett
Distributor pay sales and service compensation to Authorized Institutions
that sell the Fund's shares and service its shareholder accounts.
Sales compensation originates from two sources, as shown in the table "Fees
and Expenses:" sales charges which are paid directly by shareholders; and
12b-1 distribution
o over $50,000 - reason for benefit payment must be received in writing. Use
the address indicated under "Opening your Account"
8 Your Investment
<PAGE>
fees that are paid out of the Fund's assets. Service compensation
originates from 12b-1 service fees. The total 12b-1 fees payable with
respect to each share class are up to .35% of Class A shares (plus
distribution fees of up to 1.00% on certain qualifying purchases), 1.00% of
Class B and Class C shares, and .45% of Class P shares. The amounts payable
as compensation to Authorized Institutions, such as your dealer, are shown
in the chart at the end of this prospectus. The portion of such
compensation paid to Lord Abbett Distributor is discussed under "Sales
Activities" and "Service Activities." Sometimes we do not pay compensation
where tracking data is not available for certain accounts or where the
Authorized Institution waives part of the compensation. In such cases, we
may not require payment of any otherwise applicable CDSC.
We may pay Additional Concessions to Authorized Institutions from time to
time.
Sales Activities. We may use 12b-1 distribution fees to pay Authorized
Institutions to finance any activity which is primarily intended to result
in the sale of shares. Lord Abbett Distributor uses its portion of the
distribution fees attributable to the Fund's Class A and Class C shares for
activities which are primarily intended to result in the sale of such Class
A and Class C shares, respectively. These activities include, but are not
limited to, printing of prospectuses and statements of additional
information and reports for other than existing shareholders, preparation
and distribution of advertising and sales material, expenses of organizing
and conducting sales seminars, Additional Concessions to Authorized
Institutions, the cost necessary to provide distribution-related services
or personnel, travel, office expenses, equipment and other allocable
overhead.
Service Activities. We may pay 12b-1 service fees to Authorized
Institutions for any activity which is primarily intended to result in
personal service and/or the maintenance of shareholder accounts. Any
portion of the service fees paid to Lord Abbett Distributor will be used to
service and maintain shareholder accounts.
OPENING YOUR ACCOUNT
MINIMUM INITIAL INVESTMENT
o Regular Account $1,000
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o Individual Retirement Accounts and
403(b) Plans under the Internal Revenue Code $250
- --------------------------------------------------------------------------------
o Uniform Gift to Minor Account $250
- --------------------------------------------------------------------------------
o Invest-A-Matic $250
- --------------------------------------------------------------------------------
For Retirement Plans and Mutual Fund Fee Based Programs no minimum
investment is required, regardless of share class.
You may purchase shares through any independent securities dealer who has a
sales agreement with Lord Abbett Distributor or you can fill out the
attached application and send it to the Fund at the address stated below.
You should carefully read the paragraph below entitled "Proper Form" before
placing your order to ensure that your order will be accepted.
Lord Abbett Bond-Debenture Fund, Inc.
P.O. Box 219100
Kansas City, MO 64121
By Exchange. Telephone the Fund at 800-821-5129 to request an exchange from
any eligible Lord Abbett-sponsored fund.
CDSC, regardless of class, is not charged on shares acquired through
reinvestment of dividends or capital gains distributions and is charged on the
original purchase cost or the current market value of the shares at the time
they are being sold, which-ever is lower. In addition, repayment of loans under
Retirement Plans and 403(b) Plans will constitute new sales for purposes of
assessing the CDSC.
To minimize the amount of any CDSC, the Fund redeems shares in the following
order:
1. shares acquired by reinvestment of dividends and capital gains (always free
of a CDSC)
2. shares held for six years or more (Class B) or two years or more after the
month of purchase (Class A) or one year or more (Class C)
3. shares held the longest before the sixth anniversary of their purchase
(Class B) or before the second anniversary after the month of purchase
(Class A) or before the first anniversary of their purchase (Class C).
Your Investment 9
<PAGE>
Proper Form. An order submitted directly to the Fund must contain: (1) a
completed application, and (2) payment by check. When purchases are made by
check, redemption proceeds will not be paid until the Fund or transfer
agent is advised that the check has cleared, which may take up to 15
calendar days. For more information call the Fund at 800-821-5129.
REDEMPTIONS
By Broker. Call your investment professional for instructions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative should call the Fund at
800-821-5129.
By Mail. Submit a written redemption request indicating the name(s) in
which the account is registered, the Fund's name, the class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding
proper documentation call 800-821-5129.
Normally a check will be mailed to the name(s) and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Under unusual circumstances, the
Fund may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities laws.
To determine if a CDSC applies to a redemption, see "Class A share CDSC,"
"Class B share CDSC" or "Class C share CDSC."
DISTRIBUTIONS AND TAXES
The Fund normally pays dividends from its net investment income monthly and
distributes net capital gains (if any) as "capital gains distributions"
annually. Your distributions will be reinvested in the Fund unless you
instruct the Fund to pay them to you in cash. There are no sales charges on
reinvestments. The tax status of distributions is the same for all
shareholders regardless of how long they have owned Fund shares or whether
distributions are reinvested or paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information on the tax treatment of distributions, including the source of
dividends and distributions of capital gains by the Fund, will be mailed to
shareholders each year. Because everyone's tax situation is unique, you
should consult your tax adviser regarding the treatment of distributions
under the federal, state and local tax rules that apply to you, as well as
the tax consequences of gains or losses from the redemption or exchange of
your shares.
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Fund. Accordingly, the Fund reserves the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Fund also may revoke the privilege for all shareholders upon 60
days' written notice.
10 Your Investment
<PAGE>
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
Buying or selling shares automatically is easy with the services described
below. With each service, you select a schedule and amount, subject to
certain restrictions. You may set up most of these services when filling
out your application or by calling 800-821-5129.
- --------------------------------------------------------------------------------
For investing
Invest-A-Matic You may make fixed, periodic investments ($50 minimum) into
(Dollar-cost your Fund account by means of automatic money transfers from
checking averaging) your bank account. See the attached application for
instructions.
Div-Move You may automatically reinvest the dividends and
distributions from your account into another account in any
Eligible Fund ($50 minimum).
For selling shares
Systematic You can make regular withdrawals from most Lord Abbett
Withdrawal funds. Automatic cash withdrawals will be paid to you from
Plan ("SWP") your account in fixed or variable amounts. To establish a
plan, the value of your shares must be at least $10,000,
except for Retirement Plans for which there is no minimum.
Class B shares The CDSC will be waived on redemptions of up to 12% of the
current net asset value of your account at the time of your
SWPrequest. For Class B share redemptions over 12% per year,
the CDSC will apply to the entire redemption. Please contact
the Fund for assistance in minimizing the CDSC in this
situation.
Class B and Redemption proceeds due to a SWP for Class B and Class C
C shares shares will be redeemed in the order described under "CDSC"
under "Purchases."
- --------------------------------------------------------------------------------
OTHER SERVICES
Telephone Investing. After we have received the attached application
(selecting "yes" under Section 8C and completing Section 7), you may
instruct us by phone to have money transferred from your bank account to
purchase shares of the Fund for an existing account. The Fund will purchase
the requested shares when it receives the money from your bank.
Exchanges. You or your investment professional may instruct the Fund to
exchange shares of any class for shares of the same class of any Eligible
Fund. Instruction may be provided in writing or by telephone, with proper
identification, by calling 800-821-5129. The Fund must receive instructions
for the exchange before the close of the NYSE on the day of your call, in
which case you will get the NAV per share of the Eligible Fund determined
on that day. Exchanges will be treated as a sale for federal tax purposes.
Be sure to read the current prospectus for any Fund into which you are
exchanging.
Reinvestment Privilege. If you sell shares of the Fund, you have a one-time
right to reinvest some or all of the proceeds in the same class of any
Eligible Fund within 60 days without a sales charge. If you paid a CDSC
when you sold your shares, you will be credited with the amount of the
CDSC. All accounts involved must have the same registration.
Account Statements. Every Lord Abbett investor automatically receives
quarterly account statements.
Householding. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual and semi-annual report, unless
additional reports are specifically requested in writing to the Fund.
Small Accounts. Our Board may authorize closing any account in which there are
fewer than 25 shares if it is in the Fund's best interest to do so.
Eligible Guarantor is any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an eligible guarantor.
Your Investment 11
<PAGE>
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Fund at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same classes of any Eligible Fund.
MANAGEMENT
The Fund's investment adviser is Lord, Abbett & Co., 90 Hudson Street,
Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one of the
nation's oldest mutual fund complexes, with approximately $35 billion in
more than 40 mutual fund portfolios and other advisory accounts. For more
information about the services Lord Abbett provides to the Fund, see the
Statement of Additional Information.
Lord Abbett is entitled to an annual management fee based on the Fund's
average daily net assets. The fee is calculated and payable monthly. The
management fee is calculated at the following annual rates:
.50 of 1% on the first $500 million in assets,
.45 of 1% on assets over $500 million.
Based on this calculation, the management fee paid to Lord Abbett for the
fiscal year ended December 31, 1999 was at an effective annual rate of .46
of 1%. The Fund pays all expenses not expressly assumed by Lord Abbett.
Investment Managers. Lord Abbett uses a team of investment managers and
analysts acting together to manage the Fund's investments. Christopher J.
Towle, Partner of Lord Abbett, heads the team, the other senior members of
which include Richard Szaro, Michael Goldstein and Thomas Baade. Messrs.
Towle and Szaro have been with Lord Abbett since 1988 and 1983,
respectively. Mr. Goldstein has been with Lord Abbett since 1997. Before
joining Lord Abbett, Mr. Goldstein was a bond trader for Credit Suisse BEA
Associates from August 1992 through April 1997. Mr. Baade joined Lord
Abbett in 1998; prior to that he was a credit analyst with Greenwich Street
Advisors.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. The Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
12 Your Investment
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the Fund and their risks.
Adjusting Investment Exposure. The Fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. The Fund may use these transactions to change the risk
and return characteristics of the Fund's portfolio.
If we judge market conditions incorrectly or use a strategy that does not
correlate well with the Fund's investments, it could result in a loss, even
if we intended to lessen risk or enhance returns. These transactions may
involve a small investment of cash compared to the magnitude of the risk
assumed and could produce disproportionate gains or losses.
Convertible Securities. The Fund may invest in convertible bonds and
convertible stocks. These investments tend to be more volatile than debt
securities but tend to be less volatile and produce more income than their
underlying common stocks.
Foreign Securities. The Fund may invest up to 20% of its net assets in
foreign securities. Foreign securities are securities primarily traded in
countries outside the United States. Foreign markets and the securities
traded in them are not subject to the same degree of regulation as U.S.
markets. Securities clearance and settlement procedures may be different in
foreign countries. There may be less trading volume in foreign markets,
subjecting the securities traded in them to higher price fluctuations.
Transaction costs may be higher in foreign markets. The Fund may hold
foreign securities which trade on days when the Fund does not sell shares.
As a result, the value of the Fund's portfolio securities may change on
days an investor may not purchase or sell Fund shares.
Foreign issuers are generally not subject to similar, uniform accounting,
auditing and financial reporting requirements as U.S. issuers. Foreign
investments may be affected by changes in currency rates or currency
controls. Certain foreign countries may limit the Fund's ability to remove
its assets from the country. With respect to certain foreign countries,
there is a possibility of nationalization, expropriation or confiscatory
taxation, imposition of withholding or other taxes, and political or social
instability which could affect investments in those countries.
Short-Term Fixed Income Securities. The Fund is authorized to invest
temporarily in certain short-term fixed income securities. Such securities
may be used to invest uncommitted cash balances, to maintain liquidity to
meet shareholder redemptions, or to take a temporary defensive position
against market declines. These securities include: obligations of the U.S.
Government and its agencies and instrumentalities; commercial paper, bank
certificates of deposit, and bankers' acceptances; and repurchase
agreements collateralized by these securities.
GLOSSARY OF SHADED TERMS
Additional Concessions. Lord Abbett Distributor may, for specified periods,
allow dealers to retain the full sales charge for sales of shares, or may
pay an additional concession to a dealer who sells a minimum dollar amount
of our shares and/or shares of other Lord Abbett-sponsored funds. In some
instances, such additional concessions will be offered only to certain
dealers expected to sell significant amounts of shares. Additional
For More Information 13
<PAGE>
payments may be paid from Lord Abbett Distributor's own resources or from
distribution fees received from the Fund and will be made in the form of
cash or, if permitted, non-cash payments. The non-cash payments will
include business seminars at Lord Abbett's headquarters or other locations,
including meals and entertainment, or the receipt of merchandise. The cash
payments may include payment of various business expenses of the dealer.
In selecting dealers to execute portfolio transactions for the Fund's
portfolio, if two or more dealers are considered capable of obtaining best
execution, we may prefer the dealer who has sold our shares and/or shares
of other Lord Abbett-sponsored funds.
Authorized Institutions. Institutions and persons permitted by law to
receive service and/or distribution fees under a Rule 12b-1 plan are
"Authorized Institutions." Lord Abbett Distributor is an Authorized
Institution.
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund except
for: (1) certain tax-free, single-state funds where the exchanging
shareholder is a resident of a state in which such fund is not offered for
sale; (2) Lord Abbett Equity Fund; (3) Lord Abbett Series Fund; and (4)
Lord Abbett U.S. Government Securities Money Market Fund ("GSMMF") (except
for holdings in GSMMF which are attributable to any shares ex-changed from
the Lord Abbett family of funds). An Eligible Fund also is any Authorized
Institution's affiliated money market fund satisfying Lord Abbett
Distributor as to certain omnibus accounts and other criteria.
Eligible Mandatory Distributions. If Class B shares represent a part of an
individual's total IRA or 403(b) investment, the CDSC will be waived only
for that part of a manda-tory distribution which bears the same relation to
the entire mandatory distribution as the Class B share investment bears to
the total investment.
Legal Capacity. This term refers to the authority of an individual to act
on behalf of an entity or other person(s). For example, if a redemption
request were to be made on behalf of the estate of a deceased shareholder,
John W. Doe, by a person (Robert A. Doe) who has the legal capacity to act
for the estate of the deceased shareholder because he is the executor of
the estate, then the request must be executed as follows: Robert A. Doe,
Executor of the Estate of John W. Doe. That signature using that capacity
must be by an Eligible Guarantor.
Similarly, if (for example) a redemption request is made on behalf of the
ABC Corporation by a person (Mary B. Doe) who has the legal capacity to act
on the behalf of the Corporation, because she is the president of the
Corporation, the request must be executed as follows: ABC Corporation by
Mary B. Doe, President. That signature using that capacity must be
guaranteed by an Eligible Guarantor (see example in right column).
Mutual Fund Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) have an arrangement with Lord Abbett
Distributor in accordance with certain standards approved by Lord Abbett
Distributor, providing specifically for the use of our shares (and
sometimes providing for acceptance of orders for such shares on our behalf)
in particular investment products made available for a fee to clients of
such entities, or (2) charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
Purchaser. The term "purchaser" includes: (1) an individual; (2) an
individual and his or her spouse and children under the age of 21; and (3)
a trustee or other fiduciary purchasing shares for a single trust estate or
single fiduciary account (including a pension, profit-sharing plan, or
other employee benefit trust qualified under Section 401 of the Internal
Revenue Code - more than one qualified employee benefit trust of a single
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate --
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation --
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
14 For More Information
<PAGE>
employer, including its consolidated subsidiaries, may be considered a
single trust, as may qualified plans of multiple employers registered in
the name of a single bank trustee as one account), although more than one
beneficiary is involved.
Special Retirement Wrap Program. A program sponsored by an Authorized
Institution showing one or more characteristics distinguishing it, in the
opinion of Lord Abbett Distributor from a Mutual Fund Fee Based Program.
Such characteristics include, among other things, the fact that an
Authorized Institution does not charge its clients any fee of a consulting
or advisory nature that is economically equivalent to the distribution fee
under the Class A 12b-1 Plan and the fact that the program relates to
participant-directed Retirement Plans.
RECENT PERFORMANCE
The following is a discussion of recent performance for the twelve-month
period ending December 31, 1999.
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 reduce 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 good value.
Despite challenging market conditions and a significant rise 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. 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).
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.
For More Information 15
<PAGE>
Financial Information
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended December 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended December 31, 1999, and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single fund share.
<TABLE>
<CAPTION>
====================================================================================================================================
Class A Shares Class B Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, Year Ended
December 31,
Per Share Operating Performance: 1999 1998 1997 1996 1995 1999 1998
1997 1996(d)
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $9.45 $9.76 $9.41 $9.29 $8.71 $9.44 $9.75
$9.41 $9.13
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .75(b) .76(b) .75(b) .81 .85 .69(b) .69(b)
.68(b) .34
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency transactions (.40) (.31) .40 .17 .606 (.39) (.31)
.38 .26
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .35 .45 1.15 .98 1.456 .30 .38
1.06 .60
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.75) (.76) (.80) (.86) (.876) (.69) (.69)
(.72) (.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.05 $9.45 $9.76 $9.41 $9.29 $9.05 $9.44
$9.75 $9.41
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.91% 4.76% 12.70% 11.16% 17.50% 3.29% 3.98%
11.85% 6.57%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses(e) .92% .88% .89% .89% .82% 1.60% 1.60%
1.63% .70%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 8.17% 7.85% 7.89% 8.77% 9.41% 7.49% 7.13%
7.06% 3.37%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Shares Class P
Shares
Year Ended December 31, Year Ended
December 31,
Per Share Operating Performance: 1999 1998 1997 1996(d)
1999 1998(d)
<S> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of year $9.44 $9.77 $9.41 $9.05
$9.45 $9.54
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .69(b) .69(b) .69(b) .35
.73(b) .25(b)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency transactions (.40) (.31) .39 .33
(.39) (.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .29 .38 1.08 .68
.34 .16
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (.69) (.69) (.72) (.32)
(.74) (.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $9.06 $9.46 $9.77 $9.41
$9.05 $9.45
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(a) 3.17% 3.98% 11.97% 7.86%(c)
3.86% 1.73%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses(e) 1.60% 1.60% 1.58% .75%(c)
1.05% .38%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment Income 7.49% 7.13% 7.16% 3.72%(c)
8.10% 2.90%(c)
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
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%
- ------------------------------------------------------------------------------------------------------------------------------------
</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 operations for class shares: B - August 1, 1996, C - July
15, 1996 and P - August 21, 1998.
(e) The ratios for 1998 and 1999 include expenses paid through an expense
offset arrangement.
16 Financial Information
<PAGE>
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the Lehman Aggregate Bond Index, Salomon Index,
High-Yield Index, and Value Line Index, assuming reinvestment of all
dividends and distributions. Although the Fund's portfolio blend has
changed through the years, historically it was composed primarily of three
categories of securities: (1) high-yield corporate debt (including straight
preferred stocks); (2) equity-related securities; and (3) high-grade debt.
Because no single index existed that combined these categories in a manner
similar to the Fund, we compared the Fund's performance to that of three
indices which included elements of the categories: High Yield Index; Value
Line Index; and Salomon Index. The Fund now intends to replace the Value
Line Index and the Salomon Index with the Lehman Aggregate Bond Index. The
Lehman Aggregate Bond Index is not only a broader based securities market
index but is also more commonly used in fund performance comparisons and
more accessible to shareholders.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
NAV MAX High Yield Value Line Salomon
12-31-89 10,000 9,525 10,000 10,000 10,000
12-31-90 9,243 8,805 9,362 8,686 10,909
12-31-91 12,787 12,180 13,458 11,228 12,651
12-31-92 14,832 14,128 15,702 13,618 13,611
12-31-93 17,201 16,385 18,671 16,532 14,957
12-31-94 16,536 15,751 18,492 15,884 14,531
12-31-95 19,430 18,508 21,710 20,185 17,226
12-31-96 21,598 20,572 24,404 23,463 17,850
13-31-97 24,339 23,184 27,481 27,700 19,571
12-31-98 25,499 24,288 27,638 26,230 21,277
12-31-99 26,494 25,236 28,545 31,345 21,099
================================================================================
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending December 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(3) -1.00% 8.83% 9.70%
- --------------------------------------------------------------------------------
Class B(4) -1.51% - 6.76%
- --------------------------------------------------------------------------------
Class C(5) 2.21% - 7.76%
- --------------------------------------------------------------------------------
Class P(6) 3.86% - 4.12%
- --------------------------------------------------------------------------------
(1) Reflects the deduction of the maximum initial sales charge of 4.75%.
(2) Performance for the unmanaged Lehman Aggregate Bond Index (source: Lipper,
Inc.), Salomon Index (source: Chase Global Data Service), High-Yield Index
(source: Callan Associates), and Value Line Index (source: Morgan Stanley)
does not reflect any fees or expenses.
(3) Represents total return which is the percent change in value, after
deduction of the maximum initial sales charge of 4.75% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending December 31, 1999 using the SEC-required uniform method to
compute such return.
(4) The Class B shares commenced operations on 8/1/96. Performance reflects the
deduction of a CDSC of 5% (for one year) and 3% (for the life of the
class).
(5) The Class C shares commenced operations on 7/15/96. Performance reflects
the deduction of a CDSC of 1% (for one year) and 0% (for the life of the
class).
(6) The Class P shares were first offered on 8/21/98. Performance is at net
asset value.
Financial Information 17
<PAGE>
Compensation for your dealer
<TABLE>
<CAPTION>
====================================================================================================================================
First Year Compensation
Front-end
sales charge Dealer's
paid by investors concession Service fee(1) Total
compensation(2)
Class A investments (% of offering price) (% of offering price) (% of net investment) (% of
offering price)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C>
Less than $100,000 4.75% 4.00% 0.25%
4.24%
- ------------------------------------------------------------------------------------------------------------------------------------
$100,000 - $249,999 3.95% 3.25% 0.25%
3.49%
- ------------------------------------------------------------------------------------------------------------------------------------
$250,000 - $499,999 2.75% 2.25% 0.25%
2.74%
- ------------------------------------------------------------------------------------------------------------------------------------
$500,000 - $999,999 1.95% 1.75% 0.25%
2.00%
- ------------------------------------------------------------------------------------------------------------------------------------
$1 million or more(3) or Retirement Plan - 100 or more
eligible employees(3) or Special Retirement Wrap Program(3)
- ------------------------------------------------------------------------------------------------------------------------------------
First $5 million no front-end sales charge 1.00% 0.25%
1.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Next $5 million above that no front-end sales charge 0.55% 0.25%
0.80%
- ------------------------------------------------------------------------------------------------------------------------------------
Next $40 million above that no front-end sales charge 0.50% 0.25%
0.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Over $50 million no front-end sales charge 0.25% 0.25%
0.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B investments Paid at time of sale (% of net asset value)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 3.75% 0.25%
4.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Class C investments
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.75% 0.25%
1.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Class P investments Percentage of average net assets
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20%
0.45%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Annual Compensation After first Year
Class A investments Percentage of average net assets(5)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25%
0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Class B investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge none 0.25%
0.25%
- ------------------------------------------------------------------------------------------------------------------------------------
Class C investments(4)
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.65% 0.25%
0.90%
- ------------------------------------------------------------------------------------------------------------------------------------
Class P investments
- ------------------------------------------------------------------------------------------------------------------------------------
All amounts no front-end sales charge 0.25% 0.20%
0.45%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The service fee for Class A and P shares is paid quarterly and for Class A
shares may not exceed 0.15% if sold prior to June 1, 1990. The first year's
service fee on Class B and C shares is paid at the time of sale.
(2) Reallowance/concession percentages and service fee percentages are
calculated from different amounts, and therefore may not equal total
compensation percentages if combined using simple addition. Additional
Concessions may be paid to Authorized Institutions, such as your dealer,
from time to time.
(3) Concessions are paid at the time of sale on all Class A shares sold during
any 12-month period starting from the day of the first net asset value
sale. With respect to (a) Class A share purchases at $1 million or more,
sales qualifying at such level under rights of accumulation and statement
of intention privileges are included and (b) for Special Retirement Wrap
Programs, only new sales are eligible and exchanges into the Fund are
excluded.Certain purchases of Class A shares are subject to a CDSC.
(4) Class B and C shares are subject to CDSCs.
(5) With respect to Class B, C and P shares, 0.25%, 0.90% and 0.45%,
respectively, of the average annual net asset value of such shares
outstanding during the quarter (including distribution reinvestment shares
after the first anniversary of their issuance) is paid to Authorized
Institutions, such as your dealer. These fees are paid quarterly in
arrears. In the case of C shares for fixed-income portfolios, such as the
Fund, 0.10% of the average annual net asset value of such shares is
retained by Lord Abbett Distributor, thus reducing from 0.75% to 0.65%
after the first year. Lord Abbett Distributor uses this 0.10% for expenses
primarily intended to result in the sale of such Fund's shares.
18 Financial Information
<PAGE>
More information on the Fund is available free upon request, including the
following:
ANNUAL/SEMI-ANNUAL REPORT
Describes the Fund, lists portfolio holdings and contains a letter from the
Fund's manager discussing recent market conditions and the Fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Fund and its policies. A current SAI is on
file with the Securities and Exchange Commission ("SEC") and is
incorporated by reference (is legally considered part of this prospectus).
Lord Abbett Bond-Debenture Fund, Inc.
90 Hudson Street
Jersey City, NJ 07302-3973
--------------------------
SEC file number: 811-2145
To obtain information:
By telephone. Call the Fund at:
800-426-1130
By mail. Write to the Fund at:
The Lord Abbett Family of Funds
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund documents can be viewed online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 202-942-8090) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009 or by
sending your request electronically to [email protected].
LABDF-1-500
(5/00)
<PAGE>
<PAGE>
LORD ABBETT
Statement of Additional Information May 1, 2000
Lord Abbett
Bond-Debenture
Fund, Inc.
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord Abbett Distributor LLC
("Lord Abbett Distributor") at 90 Hudson Street, Jersey City, New Jersey,
07302-3973. This Statement relates to, and should be read in conjunction with,
the Prospectus dated May 1, 2000.
Shareholder inquiries should be made by directly contacting the Fund or by
calling 800-821-5129. The Annual Report to Shareholders is available,
withoutcharge, upon request by calling that number. In addition, you can make
inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Policies 2
2. Directors and Officers 4
3. Investment Advisory and Other Services 7
4. Portfolio Transactions 8
5. Purchases, Redemptions and
Shareholder Services 9
6. Performance 17
7. Taxes 18
8. Information About the Fund 19
9. Financial Statements 20
10. Appendix 20
1
<PAGE>
1.
Investment Policies
The Lord Abbett Bond-Debenture Fund, Inc. (the "Company" or the "Fund") is a
diversified open-end investment management company registered under the
Investment Company Act of 1940, as amended (the "Act").
Fundamental Investment Restrictions. The Fund is subject to the following
investment restrictions, which cannot be changed without approval of a majority
of the Fund's outstanding shares.
The Fund may not:
(1) borrow money, except that (i) the Fund may borrow from banks (as
defined in the Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (ii) the Fund may borrow up to an
additional 5% of its total assets for temporary purposes, (iii)
the Fund may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of portfolio securities and
(iv) the Fund may purchase securities on margin to the extent
permitted by applicable law;
(2) pledge its assets (other than to secure borrowings, or to the
extent permitted by the Fund's investment policies as permitted by
applicable law);
(3) engage in the underwriting of securities, except pursuant to a
merger or acquisition or to the extent that, in connection with
the disposition of its portfolio securities, it may be deemed to
be an underwriter under federal securities laws;
(4) make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in
government obligations, commercial paper, pass-through
instruments, certificates of deposit, bankers acceptances,
repurchase agreements or any similar instruments shall not be
subject to this limitation, and except further that the Fund may
lend its portfolio securities, provided that the lending of
portfolio securities may be made only in accordance with
applicable law;
(5) buy or sell real estate (except that the Fund may invest in
securities directly or indirectly secured by real estate or
interests therein or issued by companies which invest in real
estate or interests therein) or commodities or commodity contracts
(except to the extent the Fund may do so in accordance with
applicable law and without registering as a commodity pool
operator under the Commodity Exchange Act as, for example, with
futures contracts);
(6) with respect to 75% of the gross assets of the Fund, buy
securities of one issuer representing more than (i) 5% of the
Fund's gross assets, except securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or (ii) own
more than 10% of the voting securities of such issuer;
(7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding
securities of the U.S. Government, its agencies and
instrumentalities); or
(8) issue senior securities to the extent such issuance would violate
applicable law.
Compliance with the investment restrictions in this Section will be determined
at the time of purchase or sale of the portfolio investment.
Non-Fundamental Investment Restrictions. In addition to the policies in the
Prospectus and the investment restrictions above which cannot be changed without
shareholder approval, the Fund is subject to the following non-fundamental
investment policies which may be changed by the Board of Directors without
shareholder approval.
2
<PAGE>
The Fund may not:
(1) borrow in excess of 33 1/3% of its total assets (including the
amount borrowed), and then only as a temporary measure for
extraordinary or emergency purposes;
(2) make short sales of securities or maintain a short position except
to the extent permitted by applicable law;
(3) invest knowingly more than 15% of its net assets (at the time of
investment) in illiquid securities, except for securities
qualifying for resale under Rule 144A of the Securities Act of
1933, deemed to be liquid by the Board of Directors;
(4) invest in the securities of other investment companies except as
permitted by applicable law;
(5) invest in securities of issuers which, with their predecessors,
have a record of less than three years' continuous operations, if
more than 5% of the Fund's total assets would be invested in such
securities (this restriction shall not apply to mortgage-backed
securities, asset-backed securities or obligations issued or
guaranteed by the U. S. Government, its agencies or
instrumentalities);
(6) hold securities of any issuer if more than 1/2 of 1% of the
securities of such issuer are owned beneficially by one or more
officers or directors of the Fund or by one or more partners or
members of the Fund's underwriter or investment adviser if these
owners in the aggregate own beneficially more than 5% of the
securities of such issuer;
(7) invest in warrants if, at the time of the acquisition, its
investment in warrants, valued at the lower of cost or market,
would exceed 5% of the Fund's total assets (included within such
limitation, but not to exceed 2% of the Fund's total assets, are
warrants which are not listed on the New York or American Stock
Exchange or a major foreign exchange);
(8) invest in real estate limited partnership interests or interests
in oil, gas or other mineral leases, or exploration or other
development programs, except that the Fund may invest in
securities issued by companies that engage in oil, gas or other
mineral exploration or other development activities;
(9) write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's
prospectus and statement of additional information, as they may be
amended from time to time;
(10) buy from or sell to any of its officers, directors, employees, or
its investment adviser or any of its officers, directors, partners
or employees, any securities other than shares of the Fund's
common stock; or
(11) invest more than 10% of the market value of its gross assets at
the time of investment in debt securities which are in default as
to interest or principal.
Although it has no current intention to do so, the Fund may invest in financial
futures and options on financial futures.
3
<PAGE>
Portfolio Turnover Rate. For the year ended December 31, 1999, our portfolio
turnover was 67.93% versus 86.48% for the prior year.
2.
Directors and Officers
The Board of Directors of the Fund is responsible for the management of the
business and affairs of the Fund.
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), 90
Hudson Street, Jersey City, New Jersey 07302-3973. He has been associated with
Lord Abbett for over five years and is also an officer ,director or trustee of
the thirteen other Lord Abbett-sponsored funds.
*Robert S. Dow, age 55, Chairman and President
*Mr. Dow is an "interested person" as defined in the Act.
The following outside directors are also directors or trustees of thirteen other
Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow, Director
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner Inc. (since 1998). Formerly, Acting Chief Executive
Officer of Courtroom Television Network. (1997-1998). Formerly, President and
Chief Executive Officer of Time Warner Cable Programming, Inc. (1991-1997).
Prior to that, President and Chief Operating Officer of Home Box Office. Age 58.
William H. T. Bush, Director
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri.
Co-founder and Chairman of the Board of financial advisory firm of
Bush-O'Donnell & Company (since 1986). Age 61.
Robert B. Calhoun, Jr., Director
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Director
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
4
<PAGE>
Partner in the law firm of Wildman, Harrold, Allen & Dixon (since 1990). Age 69.
John C. Jansing, Director
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
C. Alan MacDonald, Director
415 Round Hill Road
Greenwich, Connecticut
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Manging Director of The Directorship, Inc., a consultancy in
board management and corporate governance (1997-1999). Prior to that General
Partner of The Marketing Partnership, Inc., a full service marketing consulting
firm (1994 - 1997). Prior to that, Chairman and Chief Executive Officer of
Lincoln Snacks, Inc., manufacturer of branded snack foods (1992 - 1994). His
career spans 36 years at Stouffers and Nestle with eighteen of the years as
Chief Executive Officer. Currently serves as Director of DenAmerica Corp., J.B.
Williams Company, Inc., Fountainhead Water Company and Exigent Diagnostics. Age
66.
Hansel B. Millican, Jr., Director
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Currently serves as Director of Polyvision. Age 71.
Thomas J. Neff, Director
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as Director of Ace, Ltd. (NYSE). Age 62.
The second column of the following table sets forth the compensation accrued by
the Company for outside directors/trustees. The third column sets forth
information with respect to the pension or retirement benefits accrued by all
Lord Abbett-sponsored funds for outside directors/trustees. The fourth column
sets forth the total compensation paid by all Lord Abbett-sponsored funds to the
outside directors/trustees, and amounts payable but deferred at the option of
the director/trustee, but does not include amounts accrued under the third
column. No director/trustee of the Funds associated with Lord Abbett and no
officer of the Funds received any compensation from the Funds for acting as a
director/trustee or officer.
5
<PAGE>
<TABLE>
<CAPTION>
For the Fiscal Year Ended December 31, 1999
-------------------------------------------
(1) (2) (3) (4)
Pension or For Year Ended
Retirement Benefits December 31, 1999
Accrued by the Total Compensation
Aggregate Fund and Paid by the Fund and
Compensation Thirteen Other Lord Thirteen Other Lord
Accrued by Abbett-sponsored Abbett-sponsored
Name of Director the Fund(1) Funds(2) Funds3
- -------------------------- ----------- -------------------- ---------------------
<S> <C> <C> <C>
E. Thayer Bigelow $9,812 $17,622 $57,720
William H. T. Bush $9,860 $15,846 $58,000
Robert B. Calhoun Jr. $9,690 $12,276 $57,000
Stewart S. Dixon $9,945 $32,420 $58,500
John C. Jansing $9,733 $41,1084 $57,250
C. Alan MacDonald $9,775 $26,763 $57,500
Hansel B. Millican, Jr. $9,775 $37,822 $57,500
Thomas J. Neff $10,142 $20,313 $59,660
</TABLE>
1. Outside directors'/trustees' fees, including attendance fees for board and
committee meetings, are allocated among all Lord Abbett-sponsored funds based
on the net assets of each Fund. A portion of the fees payable by the Fund to
its outside directors/trustees may be deferred under a plan ("equity-based
plan") that deems the deferred amounts to be invested in shares of the Fund
for later distribution to the directors/trustees. The amounts of the
aggregate compensation payable by the Fund in accordance with the
equity-based plan as of December 31, 1999 deemed invested in Fund shares,
including dividends reinvested and changes in net asset value applicable to
such deemed investments were: Mr. Bigelow, $52,221; Mr. Bush, $3,066, Mr.
Calhoun, $18,862, Mr. Dixon, $68,618, Mr. Jansing, $114,482, Mr. MacDonald,
$71,365, Mr. Millican, $156,454 and Mr. Neff, $138,617. If the amounts deemed
invested in Fund shares were added to each director's actual holdings of Fund
shares as of December 31, 1999, each would own, the following: Mr. Bigelow,
$316,415, Mr. Bush, $3,066, Mr. Calhoun, $18,862, Mr. Dixon, $73,647,
Mr. Jansing, $121,747, Mr. MacDonald, $627,452, Mr. Millican, $679,742,
and Mr. Neff, $143,609.
2. The amounts in Column 3 were accrued by the Lord Abbett-sponsored funds for
the twelve months ended October 31, 1999.
3. This column shows aggregate compensation, including directors/trustees' fees
and attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1999, including fees directors/trustees' have chosen to
defer but does not include amounts accrued under the equity based plan and
shown in Column 3.
4. The equity-based plans superseded a previously approved retirement plan for
all directors/trustees. Directors/trustees had the option to convert their
accrued benefits under the retirement plan. All of the current outside
directors/trustees except one made such an election. Mr. Jansing chose to
continue to receive benefits under the retirement plan, which provides that
outside directors/trustees may receive annual retirement benefits for life
equal to their final annual retainer following retirement at or after age 72
with at least ten years of service. Thus, if Mr. Jansing were to retire and
the annual retainer payable by the funds were the same as it is today, he
would receive annual retirement benefits of $50,000.
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Messrs. Brown, Carper, Hilstad,
Morris, Towle and Walsh are partners of Lord Abbett; the others are employees.
None have received compensation from the Funds.
6
<PAGE>
Executive Vice President:
Christopher Towle, age 42
Vice Presidents:
Thomas J. Baade, age 35 (with Lord Abbett since 1998, formerly a credit analyst
with Greenwich Street Advisors)
Zane E. Brown, age 48
Joan A. Binstock, age 46 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP)
Daniel E. Carper, age 48
Michael S. Goldstein, age 31 (with Lord Abbett since 1997 - formerly involved in
Fixed Income trading and analysis at BEA Associated and Portfolio Administrator
for The Chase Manhattan Bank)
Paul A. Hilstad, age 57, Vice President and Secretary (with Lord Abbett since
1995; formerly Senior Vice President and General Counsel of American Capital
Management & Research, Inc.)
Lawrence H. Kaplan, age 43 (with Lord Abbett since 1997 - formerly Vice
President and Chief Counsel of Salomon Brothers Asset Management Inc. from 1995
to 1997; prior thereto, Senior Vice President, Director and General Counsel of
Kidder Peabody Asset Management, Inc.)
Robert G. Morris, age 55
A. Edward Oberhaus III, age 40
Tracie E. Richter, age 31 (with Lord Abbett since 1999, formerly Vice President
- - head of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice
President of Bankers Trust from 1996 to 1998, prior thereto tax associate of
Goldman Sachs).
Richard S. Szaro, age 57
Treasurer:
Donna M. McManus, age 39 (with Lord Abbett since 1996, formerly a Senior Manager
at Deloitte & Touche LLP)
As of April 15, 2000, the Fund's officers and directors, as a group, owned less
than 1% of the Fund's outstanding shares and there were no record holders of 5%
or more of the Fund's outstanding shares.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The following general partners of Lord Abbett are officers
and/or directors of the Fund: Zane E. Brown, Daniel E. Carper, Robert S. Dow,
Paul A. Hilstad, Robert G. Morris, and Christopher Towle.
The other general partners are: Stephen I. Allen, John E. Erard, Robert P.
Fetch, Daria L. Foster, Robert I. Gerber, W. Thomas Hudson, Stephen J. McGruder,
Michael B. McLaughlin, Robert J. Noelke, R. Mark Pennington and John J. Walsh.
The address of each partner is 90 Hudson Street, Jersey City, New Jersey
07302-3973.
7
<PAGE>
The services performed by Lord Abbett are described in the Prospectus under
"Management." Under the Management Agreement, the Fund is obligated to pay Lord
Abbett a monthly fee, based on its average daily net assets for each month, at
the annual rate of .50 of 1% of the first $500 million of average daily net
assets and .45% of 1% of assets over $500 million. This fee is allocated among
the classes based on the proportionate shares of such average daily net assets.
For the fiscal years ended December 31, 1999, 1998 and 1997, the management fees
paid to Lord Abbett amounted to $17,075,989, $14,835,355, and $11,621,344,
respectively.
We pay all expenses not expressly assumed by Lord Abbett, including, without
limitation, 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio transactions.
Lord Abbett Distributor LLC, a New York limited liability company ("Lord Abbett
Distributor"), and a subsidiary of Lord Abbett, 90 Hudson Street, Jersey City,
New Jersey 07302, serves as the principal underwriter for the Funds.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York, is the Fund's
custodian. In accordance with the requirements of Rule 17f-5, the Fund's
directors have approved arrangements permitting the Fund's foreign assets not
held by BNY or its foreign branches to be held by certain qualified foreign
banks and depositories.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281 are
the independent auditors of the Fund and must be approved at least annually by
our Board of Directors to continue in such capacity. Deloitte & Touche LLP
perform audit services for the Fund, including the examination of financial
statements included in our Annual Report to Shareholders.
United Missouri Bank of Kansas City, N.A., Tenth and Grand, Kansas City,
Missouri, acts as the transfer agent and dividend disbursing agent for the Fund.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction including
brokerage commissions and dealer markups and markdowns and taking into account
the full range and quality of the brokers' services. Consistent with obtaining
best execution, the Fund may pay, as described below, a higher commission than
some brokers might charge on the same transaction. This policy governs the
selection of brokers or dealers and the market in which the transaction is
executed. To the extent permitted by law, we may, if considered advantageous,
make a purchase from or sale to another Lord Abbett-sponsored fund without the
intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts --
investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for obtaining best
execution.
We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, the highest
level of brokerage services available. While we do not always seek the lowest
possible commissions on particular trades, we believe that our commission rates
are in line with the rates that many other institutions pay. Our traders are
authorized to pay brokerage commissions in excess of those that other brokers
might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other
8
<PAGE>
accounts they manage. Such services include showing us trading opportunities
including blocks, a willingness and ability to take positions in securities,
knowledge of a particular security or market, proven ability to handle a
particular type of trade, confidential treatment, promptness and reliability.
Some of our brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information databases. Such services may be used
by Lord Abbett in servicing all their accounts, and not all of such services
will necessarily be used by Lord Abbett in connection with their management of
the Fund; conversely, such services furnished in connection with brokerage on
other accounts managed by Lord Abbett may be used in connection with their
management of the Fund; and not all of such services will necessarily be used by
Lord Abbett in connection with their advisory services to such other accounts.
We have been advised by Lord Abbett that research services received from brokers
cannot be allocated to any particular account, are not a substitute for Lord
Abbett's services but are supplemental to their own research effort and, when
utilized, are subject to internal analysis before being incorporated by Lord
Abbett into their investment process. As a practical matter, it would not be
possible for Lord Abbett to generate all of the information presently provided
by brokers. While receipt of research services from brokerage firms has not
reduced Lord Abbett's normal research activities, the expenses of Lord Abbett
could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers. No commitments are made regarding the
allocation of brokerage business to or among brokers, and trades are executed
only when they are dictated by investment decisions of the Fund to purchase or
sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred. When, in the
opinion of the investment adviser, two or more brokers (either directly or
through their correspondent clearing agents) are in a position to obtain the
best price and execution, preference may be given to brokers who have sold
shares of a Fund or who have provided investment research, statistical, or other
related services to the investment adviser.
If other clients of Lord Abbett buy or sell the same security at the same time
as we do, transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
During the fiscal years ending December 31, 1999, 1998 and 1997, the Fund paid
total commissions to independent broker-dealers of $57,555, $121,122 and
$105,776.
5.
Purchases, Redemptions
and Shareholder Services
Information concerning how we value our shares for the purchase and redemption
of our shares is contained in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value as of the close
of the New York Stock Exchange ("NYSE") on each day that the NYSE is open for
trading by dividing our total net assets by the number of shares outstanding at
the time of calculation. The NYSE is closed on Saturdays and Sundays and the
following holidays -- New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
9
<PAGE>
The Fund values its portfolio securities at market value as of the close of the
NYSE. Market value will be determined as follows: securities listed or admitted
to trading privileges on the New York or American Stock Exchange or on the
NASDAQ National Market System are valued at the last sales price, or, if there
is no sale on that day, at the mean between the last bid and asked prices, or,
in the case of bonds, in the over-the-counter market if, in the judgment of the
Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
For each class of shares the net asset value will be determined by taking the
net asset value and dividing by the shares outstanding.
The maximum offering price of Class A shares on December 31, 1999 was computed
as follows:
Class A
-------
Net asset value per share (net assets divided
by shares outstanding) $9.05
Maximum offering price per share (net asset
value divided by .9525) $9.50
The Fund has entered into a distribution agreement with Lord Abbett Distributor
under which Lord Abbett Distributor is obligated to use its best efforts to find
purchasers for the shares of the Fund, and to make reasonable efforts to sell
the shares so long as, in Lord Abbett Distributor's judgment, a substantial
distribution can be obtained by reasonable efforts.
For the last three fiscal years Lord Abbett, as the Fund's principal
underwriter, received net commissions after allowance of a portion of the sales
charge to independent dealers with respect to Class A shares as follows:
Year Ended December 31,
1999 1998 1997
---- ---- ----
Gross sales charge $13,010,094 $17,440,941 $12,867,756
Amount allowed to dealers $11,144,269 $14,988,816 $11,119,368
----------- ----------- -----------
Net commissions
received by Lord Abbett $ 1,865,825 $ 2,452,125 $ 1,748,388
============ =========== ===========
Conversion of Class B Shares. The conversion of Class B shares on the eighth
anniversary of their purchase is subject to the continuing availability of a
private letter ruling from the Internal Revenue Service, or an opinion of
counsel or tax adviser, to the effect that the conversion of Class B shares does
not constitute a taxable event for the holder under Federal income tax law. If
such a revenue ruling or opinion is no longer available, the automatic
conversion feature may be suspended, in which event no further conversions of
Class B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a sales
charge or fee, such exchange could constitute a taxable event for the holder.
ALTERNATIVE SALES ARRANGEMENTS
Classes of Shares. The Fund offers investors five different classes of shares.
This Prospectus offers four of those classes designated Class A, B, C and P. The
different classes of shares represent investments in the same portfolio of
10
<PAGE>
securities but are subject to different expenses and will likely have different
share prices. Investors should read this section carefully to determine which
class represents the best investment option for their particular situation.
Class A Shares. If you buy Class A shares, you pay an initial sales charge on
investments of less than $1 million (or on investments for employer-sponsored
retirement plans under the Internal Revenue Code (hereinafter referred to as
"Retirement Plans") with less than 100 eligible employees or on investments that
do not qualify to be under a "special retirement wrap program" as a program
sponsored by an authorized institution showing one or more characteristics
distinguishing it, in the opinion of Lord Abbett Distributor, from a mutual fund
wrap fee program. If you purchase Class A shares as part of an investment of at
least $1 million (or for Retirement Plans with at least 100 eligible employees
or under a special retirement wrap program) in shares of one or more Lord
Abbett-sponsored funds, you will not pay an initial sales charge, but if you
redeem any of those shares within 24 months after the month in which you buy
them, you may pay to the Fund a contingent deferred sales charge ("CDSC") of 1%
except for redemptions under a special retirement wrap program. Class A shares
are subject to service and distribution fees that are currently estimated to
total annually approximately 0.28 of 1% of the annual net asset value of the
Class A shares. The initial sales charge rates, the CDSC and the Rule 12b-1 plan
applicable to the Class A shares are described below.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the sixth anniversary of
buying them, you will normally pay a CDSC to Lord Abbett Distributor LLC ("Lord
Abbett Distributor"). That CDSC varies depending on how long you own shares.
Class B shares are subject to service and distribution fees at an annual rate of
1% of the annual net asset value of the Class B shares. The CDSC and the Rule
12b-1 plan applicable to the Class B shares are described in "Buying Class B
Shares" below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but if you redeem your shares before the first anniversary of
buying them, you will normally pay the Fund a CDSC of 1%. Class C shares are
subject to service and distribution fees at an annual rate of 1% of the annual
net asset value of the Class C shares. The CDSC and the Rule 12b-1 plan
applicable to the C shares are described in "Buying Class C Shares" below.
Class P Shares. If you buy Class P shares, you pay no sales charge at the time
of purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 plan
applicable to the Class P shares is described in "Class P Rule 12b-1 Plan."
Class P shares are available to a limited number of investors.
Which Class of Shares Should You Choose? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
better suited to your needs depends on a number of factors which you should
discuss with your financial adviser. The Fund's class-specific expenses and the
effect of the different types of sales charges on your investment will affect
your investment results over time. The most important factors are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares.
In the following discussion, to help provide you and your financial adviser with
a framework in which to choose a class, we have made some assumptions using a
hypothetical investment in the Fund. We used the sales charge rates that apply
to Class A, Class B and Class C, and considered the effect of the higher
distribution fees on Class B and Class C expenses (which will affect your
investment return). Of course, the actual performance of your investment cannot
be predicted and will vary, based on the Fund's actual investment returns, the
operating expenses borne by each class of shares, and the class of shares you
purchase. The factors briefly discussed below are not intended to be investment
advice, guidelines or recommendations, because each investor's financial
considerations are different. The discussion below of the factors to consider in
purchasing a particular class of shares assumes that you will purchase only one
class of shares and not a combination of shares of different classes.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with
11
<PAGE>
certainty, knowing how long you expect to hold your investment will assist you
in selecting the appropriate class of shares. For example, over time, the
reduced sales charges available for larger purchases of Class A shares may
offset the effect of paying an initial sales charge on your investment, compared
to the effect over time of higher class-specific expenses on Class B or Class C
shares for which no initial sales charge is paid. Because of the effect of
class-based expenses, your choice should also depend on how much you plan to
invest.
Investing for the Short Term. If you have a short-term investment horizon (that
is, you plan to hold your shares for not more than six years), you should
probably consider purchasing Class A or Class C shares rather than Class B
shares. This is because of the effect of the Class B CDSC if you redeem before
the sixth anniversary of your purchase, as well as the effect of the Class B
distribution fee on the investment return for that class in the short term.
Class C shares might be the appropriate choice (especially for investments of
less than $100,000), because there is no initial sales charge on Class C shares,
and the CDSC does not apply to amounts you redeem after holding them one year.
However, if you plan to invest more than $100,000 for the short term, then the
more you invest and the more your investment horizon increases toward six years,
the more attractive the Class A share option may become. This is because the
annual distribution fee on Class C shares will have a greater impact on your
account over the longer term than the reduced front-end sales charge available
for larger purchases of Class A shares. For example, Class A might be more
appropriate than Class C for investments of more than $100,000 expected to be
held for 5 or 6 years (or more). For investments over $250,000 expected to be
held 4 to 6 years (or more), Class A shares may become more appropriate than
Class C. If you are investing $500,000 or more, Class A may become more
desirable as your investment horizon approaches 3 years or more.
For most investors who invest $1 million or more or for Retirement Plans with at
least 100 eligible employees or for investments pursuant to a special retirement
wrap program, in most cases Class A shares will be the most advantageous choice,
no matter how long you intend to hold your shares. For that reason, it may not
be suitable for you to place a purchase order for Class B shares of $500,000 or
more or a purchase order for Class C shares of $1,000,000 or more. In addition,
it may not be suitable for you to place an order for Class B or C shares for a
Retirement Plan with at least 100 eligible employees or for a special retirement
wrap program. You should discuss this with your financial advisor.
Investing for the Longer Term. If you are investing for the longer term (for
example, to provide for future college expenses for your child) and do not
expect to need access to your money for seven years or more, Class B shares may
be an appropriate investment option, if you plan to invest less than $100,000.
If you plan to invest more than $100,000 over the long term, Class A shares will
likely be more advantageous than Class B shares or Class C shares, as discussed
above, because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in Class
A shares under the Fund's Rights of Accumulation.
Of course, these examples are based on approximations of the effect of current
sales charges and expenses on a hypothetical investment over time, and should
not be relied on as rigid guidelines.
Are There Differences in Account Features That Matter to You? Some account
features are available in whole or in part to Class A, Class B and Class C
shareholders. Other features (such as Systematic Withdrawal Plans) might not be
advisable in non-Retirement Plan accounts for Class B shareholders (because of
the effect of the CDSC on the entire amount of a withdrawal if it exceeds 12%
annually) and in any account for Class C shareholders during the first year of
share ownership (due to the CDSC on withdrawals during that year). See
"Systematic Withdrawal Plan" under "Shareholder Services" in the Prospectus for
more information about the 12% annual waiver of the CDSC. You should carefully
review how you plan to use your investment account before deciding which class
of shares you buy. For example, the dividends payable to Class B and Class C
shareholders will be reduced by the expenses borne solely by each of these
classes, such as the higher distribution fee to which Class B and Class C shares
are subject, as described below.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, or
any other person who is entitled
12
<PAGE>
to receive compensation for selling Fund shares may receive different
compensation for selling one class than for selling another class. As discussed
in more detail below, such compensation is primarily paid at the time of sale in
the case of Class A and B shares and is paid over time, so long as shares remain
outstanding, in the case of Class C shares. It is important that investors
understand that the primary purpose of the CDSC for the Class B shares and the
distribution fee for Class B and Class C shares is the same as the purpose of
the front-end sales charge on sales of Class A shares: to compensate brokers and
other persons selling such shares. The CDSC, if payable, supplements the Class B
distribution fee and reduces the Class C distribution fee expenses for the Fund
and Class C shareholders.
Rule 12b-1 Plans
Class A, B, C and P. As described in the Prospectus, the Fund has adopted a
Distribution Plan and Agreement pursuant to Rule 12b-1 of the Act for each of
the Fund Classes: the "A Plan", the "B Plan" , "C Plan" and "P Plan",
respectively. In adopting each Plan and in approving its continuance, the Board
of Directors has concluded that there is a reasonable likelihood that each Plan
will benefit its respective Class and these Classes's shareholders. The expected
benefits include greater sales and lower redemptions of Class shares, which
should allow each Class to maintain a consistent cash flow, and a higher quality
of service to shareholders by authorized institutions than would otherwise be
the case. During the last fiscal year, the Fund accrued or paid through Lord
Abbett to authorized institutions $ 7,628,106 under the A Plan, $ 7,803,829
under the B Plan, $5,534,946 under the C Plan and $443 under the P Plan. Lord
Abbett used all amounts received under each Plan for payments to dealers for (i)
providing continuous services to shareholders, such as answering shareholder
inquiries, maintaining records, and assisting shareholders in making
redemptions, transfers, additional purchases and exchanges and (ii) their
assistance in distributing shares of the Fund.
Each Plan requires the directors to review, on a quarterly basis, written
reports of all amounts expended pursuant to the Plan and the purposes for which
such expenditures were made. Each Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the directors,
including a majority of the directors who are not interested persons of the Fund
and who have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("outside directors"), cast in
person at a meeting called for the purpose of voting on the Plan. No Plan may be
amended to increase materially above the limits set forth therein the amount
spent for distribution expenses thereunder without approval by a majority of the
outstanding voting securities of the applicable class and the approval of a
majority of the directors, including a majority of the outside directors. Each
Plan may be terminated at any time by vote of a majority of the outside
directors or by vote of a majority of its Class's outstanding voting securities.
Contingent Deferred Sales Charges. A Contingent Deferred Sales Charge ("CDSC")
(i) applies regardless of class, (ii) will not apply to shares purchased by the
reinvestment of dividends or capital gains distributions; (iii) will be assessed
on the lesser of the net asset value of the shares at the time of redemption or
the original purchase price and (iv) will not be imposed on the amount of your
account value represented by the increase in net asset value over the initial
purchase price (including increases due to the reinvestment of dividends and
capital gains distributions) and upon early redemption of shares. In the case of
Class A shares, this increase is represented by shares having an aggregate
dollar value in your account. In the case of Class B and C shares, this increase
is represented by that percentage of each share redeemed where the net asset
value exceeded the initial purchase price.
Class A Shares. As stated in the Prospectus, subject to certain exceptions, a
CDSC of 1% is imposed with respect to those Class A shares (or Class A shares of
another Lord Abbett-sponsored fund or series acquired through exchange of such
shares) on which the Fund has paid the one-time distribution fee of 1% if such
shares are redeemed out of the Lord Abbett-sponsored family of funds within a
period of 24 months from the end of the month in which the original sale
occurred.
Class B Shares. As stated in the Prospectus, subject to certain exceptions, if
Class B shares (or Class B shares of another Lord Abbett-sponsored fund or
series acquired through exchange of such shares) are redeemed out of the Lord
Abbett-sponsored family of funds for cash before the sixth anniversary of their
purchase, a CDSC will be deducted from the redemption proceeds. The Class B CDSC
is paid to Lord Abbett Distributor to reimburse its expenses, in whole or in
part, for providing distribution-related service to the Fund in connection with
the sale of Class B shares.
13
<PAGE>
To determine whether the CDSC applies to a redemption, the Fund redeems shares
in the following order: (1) shares acquired by reinvestment of dividends and
capital gains distributions, (2) shares held on or after the sixth anniversary
of their purchase, and (3) shares held the longest before such sixth
anniversary.
The amount of the contingent deferred sales charge will depend on the number of
years since you invested and the dollar amount being redeemed, according to the
following schedule:
<TABLE>
<CAPTION>
Anniversary of the Day on Contingent Deferred Sales Charge
Which the Purchase Order Was Accepted on Redemptions (As % of Amount Subject to Charge)
<S> <C>
Before the 1st 5.0%
On the 1st, before the 2nd 4.0%
On the 2nd, before the 3rd 3.0%
On the 3rd, before the 4th 3.0%
On the 4th, before the 5th 2.0%
On the 5th, before the 6th 1.0%
On or after the 6th anniversary None
</TABLE>
In the table, an "anniversary" is the same calendar day in each respective year
after the date of purchase. For example, the anniversaries for shares purchased
on May 1 will be May 1 of each succeeding year.
Class C Shares. As stated in the Prospectus, subject to certain exceptions, if
Class C shares are redeemed for cash before the first anniversary of their
purchase, the redeeming shareholder will be required to pay to the Fund on
behalf of Class C shares a CDSC of 1% of the lower of cost or the then net asset
value of Class C shares redeemed. If such shares are exchanged into the same
class of another Lord Abbett-sponsored fund and subsequently redeemed before the
first anniversary of their original purchase, the charge will be collected by
the other fund on behalf of this Fund's Class C shares.
General. The percentage (1% in the case of Class A and C shares and 5% through
1% in the case of Class B shares) used to calculate CDSCs described above for
the Class A, Class B and Class C shares is sometimes hereinafter referred to as
the "Applicable Percentage."
Class P Shares. If you buy Class P shares, you pay no sales chare at the time of
purchase, and if you redeem your shares you pay no CDSC. Class P shares are
subject to service and distribution fees at an annual rate of .45 of 1% of the
average daily net asset value of the Class P shares. The Rule 12b-1 Plan
applicable to the Class P shares is described in "Class P Rule 12b-1 Plan".
Class P shares are available to a limited number of investors.
With respect to Class A and Class B shares, no CDSC is payable on redemptions by
participants or beneficiaries from employer-sponsored retirement plans under the
Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service and for returns of
excess contributions to retirement plan sponsors. With respect to Class A shares
purchased pursuant to a special retirement wrap program, no CDSC is payable on
redemptions which continue as investments in another fund participating in the
program. With respect to Class B shares, no CDSC is payable for redemptions (i)
in connection with Systematic Withdrawal Plan and Div-Move services as described
below under those headings, (ii) in connection with mandatory distribution under
403(b) plans and IRAs and (iii) in connection with death of the shareholder. In
the case of Class A and Class C shares, the CDSC is received by the Fund and is
intended to reimburse all or a portion of the amount paid by the Fund if the
shares are redeemed before the Fund has had an opportunity to realize the
anticipated benefits of having a long-term shareholder account in the Fund. In
the case of Class B shares, the CDSC is received by Lord Abbett Distributor and
is intended to reimburse its expenses of providing distribution-related service
to the Fund (including recoupment of the commission payments made) in connection
with the sale of Class B shares before Lord Abbett Distributor has had an
opportunity to realize its anticipated reimbursement by having such a long-term
shareholder account subject to the B Plan distribution fee.
14
<PAGE>
The other funds and series which participate in the Telephone Exchange Privilege
(except (a) Lord Abbett U.S. Government Securities Money Market Fund, Inc.
("GSMMF"), (b) certain series of Lord Abbett Tax-Free Income Fund and Lord
Abbett Tax-Free Income Trust for which a Rule 12b-1 Plan is not yet in effect,
and (c) any authorized institution's affiliated money market fund satisfying
Lord Abbett Distributor as to certain omnibus account and other criteria,
hereinafter referred to as an "authorized money market fund" or "AMMF"
(collectively, the "Non-12b-1 Funds") have instituted a CDSC for each class on
the same terms and conditions. No CDSC will be charged on an exchange of shares
of the same class between Lord Abbett funds or between such funds and AMMF. Upon
redemption of shares out of the Lord Abbett family of funds or out of AMMF, the
CDSC will be charged on behalf of and paid: (i) to the fund in which the
original purchase (subject to a CDSC) occurred, in the case of the Class A and
Class C shares and (ii) to Lord Abbett Distributor if the original purchase was
subject to a CDSC, in the case of the Class B shares. Thus, if shares of a Lord
Abbett fund are exchanged for shares of the same class of another such fund and
the shares of the same class tendered ("Exchanged Shares") are subject to a
CDSC, the CDSC will carry over to the shares of the same class being acquired,
including GSMMF and AMMF ("Acquired Shares"). Any CDSC that is carried over to
Acquired Shares is calculated as if the holder of the Acquired Shares had held
those shares from the date on which he or she became the holder of the Exchanged
Shares. Although the Non-12b-1 Funds will not pay a distribution fee on their
own shares, and will, therefore, not impose their own CDSC, the Non-12b-1 Funds
will collect the CDSC (a) on behalf of other Lord Abbett funds, in the case of
the Class A and Class C shares and (b) on behalf of Lord Abbett Distributor, in
the case of the Class B shares. Acquired Shares held in GSMMF and AMMF which are
subject to a CDSC will be credited with the time such shares are held in GSMMF
but will not be credited with the time such shares are held in AMMF. Therefore,
if your Acquired Shares held in AMMF qualified for no CDSC or a lower Applicable
Percentage at the time of exchange into AMMF, that Applicable Percentage will
apply to redemptions for cash from AMMF, regardless of the time you have held
Acquired Shares in AMMF.
In no event will the amount of the CDSC exceed the Applicable Percentage of the
lesser of (i) the net asset value of the shares redeemed or (ii) the original
cost of such shares (or of the Exchanged Shares for which such shares were
acquired). No CDSC will be imposed when the investor redeems (i) shares
representing an aggregate dollar amount of your account, in the case of Class A
shares, (ii) that percentage of each share redeemed, in the case of Class B and
C shares, derived from increases in the value of the shares above the total cost
of shares being redeemed due to increases in net asset value, (iii) shares with
respect to which no Lord Abbett fund paid a 12b-1 fee and, in the case of Class
B shares, Lord Abbett Distributor paid no sales charge or service fee (including
shares acquired through reinvestment of dividend income and capital gains
distributions) or (iv) shares which, together with Exchanged Shares, have been
held continuously for 24 months from the end of the month in which the original
sale occurred (in the case of Class A shares); for six years or more (in the
case of Class B shares) and for one year or more (in the case of Class C
shares). In determining whether a CDSC is payable, (a) shares not subject to the
CDSC will be redeemed before shares subject to the CDSC and (b) of the shares
subject to a CDSC, those held the longest will be the first to be redeemed.
Exchanges. The Prospectus briefly describes the Telephone Exchange Privilege.
You may exchange some or all of your shares of any class for those in the same
class of: (i) Lord Abbett-sponsored funds currently offered to the public with a
sales charge (front-end, back-end or level ), (ii) GSMMF or (iii) AMMF, to the
extent offers and sales may be made in your state. You should read the
prospectus of the other fund before exchanging. In establishing a new account by
exchange, shares of the Fund being exchanged must have a value equal to at least
the minimum initial investment required for the other fund into which the
exchange is made.
Shareholders in other Lord Abbett-sponsored funds and AMMF have the same right
to exchange their shares for the corresponding class of the Fund's shares.
Exchanges are based on relative net asset values on the day instructions are
received by the Fund in Kansas City if the instructions are received prior to
the close of the NYSE in proper form. No sales charges are imposed except in the
case of exchanges out of GSMMF or AMMF (unless a sales charge (front-end,
back-end or level) was paid on the initial investment in a Lord Abbett-sponsored
fund). Exercise of the exchange privilege will be treated as a sale for federal
income tax purposes, and, depending on the circumstances, a gain or loss may be
recognized. In the case of an exchange of shares that have been held for 90 days
or less where no sales charge is payable on the exchange, the original sales
charge incurred with respect to the exchanged shares will be taken into account
in determining gain or loss on the exchange only to the extent such charge
exceeds the sales charge that would
15
<PAGE>
have been payable on the acquired shares had they been acquired for cash rather
than by exchange. The portion of the original sales charge not so taken into
account will increase the basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are AMMF and other Lord Abbett-sponsored funds which are eligible for the
exchange privilege, except Lord Abbett Series Fund ("LASF") which offers its
shares only in connection with certain variable annuity contracts, Lord Abbett
Equity Fund ("LAEF") which is not issuing shares. The exchange privilege will
not be available with respect to any otherwise "Eligible Funds" the shares of
which are not available to new investors of the type requesting the exchange.
Letter of Intention. Under the terms of the Letter of Intention, as described in
the Prospectus you may invest $100,000 or more over a 13-month period in shares
of a Lord Abbett-sponsored fund (other than shares of LAEF, LASF, GSMMF and
AMMF, unless holdings in GSMMF and AMMF are attributable to shares exchanged
from a Lord Abbett-sponsored
fund offered with a front-end, back-end or level
sales charge). Shares currently owned by you are credited as purchases (at their
current offering prices on the date the Statement is signed) toward achieving
the stated investment and reduced initial sales charge for Class A shares. Class
A shares valued at 5% of the amount of intended purchases are escrowed and may
be redeemed to cover the additional sales charge payable if the Letter is not
completed. The Letter of Intention is neither a binding obligation on you to
buy, nor on the Fund to sell, the full amount indicated.
Rights of Accumulation. As stated in the Prospectus, purchasers (as defined in
the Prospectus) may accumulate their investment in Lord Abbett-sponsored funds
(other than LAEF, LASF, GSMMF, and AMMF unless holdings in GSMMF or AMMF are
attributable to shares exchanged from a Lord Abbett-sponsored fund offered with
a front-end, back-end or level sales charge) so that a current investment, plus
the purchaser's holdings valued at the current maximum offering price, reach a
level eligible for a discounted sales charge for Class A shares.
Net Asset Value Purchases of Class A Shares. Our Class A shares may be purchased
at net asset value by our directors, employees of Lord Abbett, employees of our
shareholder servicing agent and employees of any securities dealer having a
sales agreement with Lord Abbett who consents to such purchases or by the
director or custodian under any pension or profit-sharing plan or Payroll
Deduction IRA established for the benefit of such persons or for the benefit of
employees of any national securities trade organization to which Lord Abbett
belongs or any company with an account(s) in excess of $10 million managed by
Lord Abbett on a private-advisory-account basis. For purposes of this paragraph,
the terms "directors" and "employees" include a director's or employee's spouse
(including the surviving spouse of a deceased director or employee). The terms
"our directors" and "employees of Lord Abbett" also include retired directors
and employees and other family members thereof.
Our Class A shares also may be purchased at net asset value (a) at $1 million or
more, (b) with dividends and distributions from Class A shares of other Lord
Abbett-sponsored funds, except for LAEF and LASF, (c) under the loan feature of
the Lord Abbett-sponsored prototype 403(b) plan for share purchases representing
the repayment of principal and interest, (d) by certain authorized brokers,
dealers, registered investment advisers or other financial institutions who have
entered into an agreement with Lord Abbett Distributor in accordance with
certain standards approved by Lord Abbett Distributor, providing specifically
for the use of our shares in particular investment products made available for a
fee to clients of such brokers, dealers, registered investment advisers and
other financial institutions, ("mutual fund wrap fee program"), (e) by
employees, partners and owners of unaffiliated consultants and advisors to Lord
Abbett, Lord Abbett Distributor or Lord Abbett-sponsored funds who consent to
such purchase if such persons provide service to Lord Abbett, Lord Abbett
Distributor or such funds on a continuing basis and are familiar with such
funds, (f) through Retirement Plans with at least 100 eligible employees, (g) in
connection with a merger, acquisition or other reorganization (h) through a
"special retirement wrap program" sponsored by an authorized institution having
one or more characteristics distinguishing it, in the opinion of Lord Abbett
Distributor, from a mutual fund wrap program. Such characteristics include,
among other things, the fact that an authorized institution does not charge its
clients any fee of a consulting or advisory nature that is economically
equivalent to the distribution fee under Class A 12b-1 Plan and the fact
16
<PAGE>
that the program relates to participant-directed Retirement Plan. Shares are
offered at net asset value to these investors for the purpose of promoting
goodwill with employees and others with whom Lord Abbett Distributor and/or the
Fund has business relationships.
Redemptions. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Fund to carry out the order. The signature(s) and
any legal capacity of the signer(s) must be guaranteed by an eligible guarantor.
See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Board of Directors may authorize redemption of all of the shares in any
account in which there are fewer than 25 shares. Before authorizing such
redemption, the Board must determine that it is in our economic best interest or
necessary to reduce disproportionately burdensome expenses in servicing
shareholder accounts. At least 6 months' prior written notice will be given
before any such redemption, during which time shareholders may avoid redemption
by bringing their accounts up to the minimum set by the Board.
Div-Move. Under the Div-Move service described in the Prospectus, you can invest
the dividends paid on your account of any class into an existing account of the
same class in any other Eligible Fund. The account must be either your account,
a joint account for you and your spouse, a single account for your spouse, or a
custodial account for your minor child under the age of 21. You should read the
prospectus of the other fund before investing.
Invest-A-Matic. The Invest-A-Matic method of investing in the Fund and/or any
other Eligible Fund is described in the Prospectus. To avail yourself of this
method you must complete the application form, selecting the time and amount of
your bank checking account withdrawals and the funds for investment, include a
voided, unsigned check and complete the bank authorization.
Systematic Withdrawal Plans. The Systematic Withdrawal Plan ("SWP") also is
described in the Prospectus. You may establish a SWP if you own or purchase
uncertificated shares having a current offering price value of at least $10,000.
Lord Abbett prototype retirement plans have no such minimum. With respect to
Class B shares the CDSC will be waived on redemptions of up to 12% per year of
the current net asset value of your account at the time the SWP is established.
For Class B share redemptions over 12% per year, the CDSC will apply to the
entire redemption. Therefore, please contact the Fund for assistance in
minimizing the CDSC in this situation. With respect to Class C shares, the CDSC
will be waived on and after the first anniversary of their purchase. The SWP
involves the planned redemption of shares on a periodic basis by receiving
either fixed or variable amounts at periodic intervals. Since the value of
shares redeemed may be more or less than their cost, gain or loss may be
recognized for income tax purposes on each periodic payment. Normally, you may
not make regular investments at the same time you are receiving systematic
withdrawal payments because it is not in your interest to pay a sales charge on
new investments when in effect a portion of that new investment is soon
withdrawn. The minimum investment accepted while a withdrawal plan is in effect
is $1,000. The SWP may be terminated by you or by us at any time by written
notice.
Retirement Plans. The Prospectus indicates the types of retirement plans for
which Lord Abbett provides forms and explanations. Lord Abbett makes available
the retirement plan forms including 401(k) plans and custodial agreements for
IRAs (Individual Retirement Accounts, including Traditional, Education, Roth and
SIMPLE IRAs and Simplified Employee Pensions), 403(b) plans and qualified
pension and profit-sharing plans. The forms name Investors Fiduciary Trust
Company as custodian and contain specific information about the plans excluding
401(k) plans. Explanations of the eligibility requirements, annual custodial
fees and allowable tax advantages and penalties are set forth in the relevant
plan documents. Adoption of any of these plans should be on the advice of your
legal counsel or qualified tax adviser.
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<PAGE>
6.
Performance
The Fund computes the average annual compounded rate of total return for each
class during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to the computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by one thousand
dollars which represents a hypothetical initial investment. The calculation
assumes deduction of the maximum sales charge (as described in the next
paragraph) from the amount invested and reinvestment of all income dividends and
capital gains distributions on the reinvestment dates at prices calculated as
stated in the Prospectus. The ending redeemable value is determined by assuming
a complete redemption at the end of the period covered by the average annual
total return computation.
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment (unless the return is shown at net asset value). For Class B
shares, the payment of the applicable CDSC (5.0% prior to the first anniversary
of purchase, 4.0% prior to the second anniversary of purchase, 3.0% prior to the
third and fourth anniversaries of purchase, 2.0% prior to the fifth anniversary
of purchase, 1.0% prior to the sixth anniversary of purchase and no CDSC on and
after the sixth anniversary of purchase) is applied to the Fund's investment
result for that class for the time period shown (unless the total return is
shown at net asset value). For Class C shares, the 1.0% CDSC is applied to the
Fund's investment result for that class for the time period shown prior to the
first anniversary of purchase (unless the total return is shown at net asset
value). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested at net asset value per share, and
that the investment is redeemed at the end of the period.
Using the computation described above, the following table indicates the average
annual compounded rates of total return for each class of shares of the Fund,
for the one year, five years, ten years, or since inception where applicable.
Past performance is not indicative of future results.
<TABLE>
<CAPTION>
Since
1Year 5 Year 10Year Inception
----- ------ ------ ---------
<S> <C> <C> <C> <C>
Bond-Debenture Fund
Class A shares -1.00% 8.83% 9.70% -
Class B shares -1.51% - - 6.76%
Class C shares 2.21% - - 7.76%
Class P shares 3.86% - - 4.12%
</TABLE>
Yield quotation for each Class is based on a 30-day period ended on a specified
date, computed by dividing our net investment income per share earned during the
period by the maximum offering price per share of such Class on the last day of
the period. This is determined by finding the following quotient: take the
Class' dividends and interest earned during the period minus its expenses
accrued for the period and divide by the product of (i) the average daily number
of shares of such Class outstanding during the period that were entitled to
receive dividends and (ii) the maximum offering price per share of such Class on
the last day of the period. To this quotient add one. This sum is multiplied by
itself five times. Then one is subtracted from the product of this
multiplication and the remainder is multiplied by two. Yield for the Class A
shares reflects the deduction of the maximum initial sales charge, but may also
be shown based on the Fund's net asset value per share. Yields for Class B and C
shares do not reflect the deduction of the CDSC.
For the 30-day period ended December 31, 1999, the yield for the Class A, B and
C shares of the Fund were: 7.32%, 7.03% and 7.03%, respectively.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
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<PAGE>
7.
Taxes
The Fund intends to elect and to qualify for special tax treatment afforded
regulated investment companies under the Internal Revenue Code of 1986 (the
"Code"). If it so qualifies, the Fund (but not its shareholders) will be
relieved of federal income taxes on the amount it distributes to shareholders.
If in any taxable year the Fund does not qualify as a regulated investment
company, all of its taxable income will be taxed to the Fund at regular
corporate rates.
The Fund contemplates declaring as dividends substantially all of its net
investment income. Dividends paid by the Fund from its investment income and
distributions out of short-term capital gains are taxable to shareholders as
ordinary income from dividends, whether received in cash or reinvested in
additional shares of the Fund. Distributions paid by the Fund of its net
realized long-term capital gains are taxable to shareholders as capital gain,
also whether received in cash or reinvested in shares. The Fund will send each
shareholder annual information concerning the tax treatment of dividends and
other distributions.
Upon sale, exchange or redemption of shares of the Fund, a shareholder will
recognize short- or long-term capital gain or loss, depending upon the
shareholder's holding period in the Fund's shares. However, if a shareholder's
holding period in his shares is six months or less, any capital loss realized
from a sale or exchange of such shares must be treated as long-term capital loss
to the extent of dividends classified as "capital gains dividends" received with
respect to such shares. The maximum tax rates applicable to net capital gains
recognized by individuals and other non-corporate taxpayers are (i) the same as
ordinary income rates for capital assets held for one year or less and (ii) 20%
for capital assets held for more than one year. Capital gains or losses
recognized by corporate shareholders are subject to tax at the ordinary income
tax rates applicable to corporations.
Losses on the sale of shares are not deductible if, within a period beginning 30
days before the date of the sale and ending 30 days after the date of the sale,
the taxpayer acquires shares that are substantially identical.
Some shareholders may be subject to a 31% withholding tax on reportable
dividends, capital gains distributions and redemption payments ("backup
withholding"). Generally, shareholders subject to backup withholding will be
those for whom a certified taxpayer identification number is not on file with
the Fund or who, to the Fund's knowledge, have furnished an incorrect number.
When establishing an account, an investor must certify under penalties of
perjury that such number is correct and that he is not otherwise subject to
backup withholding.
The writing of call options and other investment techniques and practices which
the Fund may utilize may affect the character and timing of the recognition of
gains and losses. Such transactions may increase the amount of short-term
capital gain realized by the Fund, which is taxed as ordinary income when
distributed to shareholders.
The Fund may be subject to foreign withholding taxes, which would reduce the
yield on its investments. It is generally expected that Fund shareholders who
are subject to U.S. federal income tax will not be entitled to claim a federal
income tax credit or deduction for foreign income taxes paid by the Fund.
The Fund will also be subject to a 4% non-deductible excise tax on certain
amounts not distributed or treated as having been distributed on a timely basis
each calendar year. The Fund intends to distribute to shareholders each year an
amount adequate to avoid the imposition of such excise tax.
Dividends paid by the Fund will qualify for the dividends-received deduction for
corporations to the extent they are derived from dividends paid by domestic
corporations. Corporate shareholders must have held their shares in the Fund for
more than 45 days to qualify for the deduction for dividends paid by the Fund.
Gain and loss realized by the Fund on certain transactions, including sales of
foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gain or loss is attributable to changes in
exchange rates for foreign currencies. Accordingly,
19
<PAGE>
distributions taxable as ordinary income will include the net amount, if any, of
such foreign exchange gain and will be reduced by the net amount, if any, of
such foreign exchange loss.
If the Fund purchases shares in certain foreign investment entities called
"passive foreign investment companies," the Fund may be subject to U.S. federal
income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on the Fund in respect of deferred taxes arising from
such distributions or gains. If the Fund were to make a "qualified electing
fund" election with respect to its investment in a passive foreign investment
company, in lieu of the foregoing requirements, the Fund might be required to
include in income each year a portion of the ordinary earnings and net capital
gains of the passive foreign investment company, even if such amount were not
distributed to the Fund. Alternatively, if the Fund were to make a
"mark-to-market" election with respect to the investment would be considered
realized at the end of each taxable year of the Fund even if the Fund continued
to hold the investment, and would be treated as ordinary income or loss to the
Fund.
The foregoing discussion relates solely to U.S. federal income tax law as
applicable to U.S. persons (U.S. citizens or residents and United States
domestic corporations, partnerships, trusts and estates). Each shareholder who
is not a U.S. person should consult his tax adviser regarding the U.S. and
foreign tax consequences of the ownership of shares of the Fund, including the
applicable rate of U.S. withholding tax on dividends representing ordinary
income and net short-term capital gains, and the applicability of U.S. gift and
estate taxes
8.
Information About the Fund
Lord Abbett Bond-Debenture Fund, Inc. was organized in 1970 and was incorporated
under Maryland law on January 23, 1976. The Fund has 1,000,000,000 shares of
authorized capital stock consisting of five classes of shares. This statement of
additional information offers four of those classes (A, B, C and P), $0.001 par
value. The Board of Directors will allocate these authorized shares of capital
stock among the classes from time to time. All shares have equal noncumulative
voting rights and equal rights with respect to dividends, assets and
liquidation, except for certain class-specific expenses. They are fully paid and
nonassessable when issued and have no preemptive or conversion rights. Although
no present plans exist to do so, further series may be added in the future. The
Act , requires that where more than one series exists, each series must be
preferred over all other series in respect of assets specifically allocated to
such series.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class affected by such
matter. Rule 18f-2 further provides that a class shall be deemed to be affected
by a matter unless the interests of each class in the matter are substantially
identical or the matter does not affect any interest of such class. However, the
Rule exempts the selection of independent public accountants, the approval of a
contract with a principal underwriter and the election of directors from its
separate voting requirements.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Act, or unless called by a majority of the Board of
Directors or by stockholders holding at least one quarter of the stock of the
Fund outstanding and entitled to vote at the meeting. When any such annual
meeting is held, the stockholders will elect directors and vote on the approval
of the independent auditors of the Fund.
20
<PAGE>
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from trading on material and non-public
information. The Code imposes certain similar requirements and restrictions on
the independent directors and trustees of each Lord Abbett-sponsored mutual fund
to the extent contemplated by the recommendations of the Advisory Group.
9.
Financial Statements
The financial statements for the fiscal year ended December 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Report to Shareholders of Lord Abbett
Bond-Debenture Fund, Inc. are incorporated herein by reference to such financial
statements and report, in reliance upon the authority of Deloitte & Touche LLP
as experts in auditing and accounting.
10.
Appendix
Corporate Bond Ratings
Moody's Investors Service, Inc.'s Corporate Bond Ratings
Aaa - Bonds which are rated Aaa are judged to be of the best quality and carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds which are rated Aa are judged to be of high-quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
21
<PAGE>
B - Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds that are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds that are rated C are the lowest-rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Standard & Poor's Corporation's Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and in the majority of instances they
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB-B-CCC-CC-C - Debt rated BB, B, CCC, CC and C is regarded as having
predominately speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation and
'CCC' the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
D - Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
22
<PAGE>
<PAGE>
Lord Abbett Bond-Debenture Fund
Lord Abbett Developing Growth Fund
Lord Abbett Mid-Cap Value Fund
Class Y Shares
Prospectus
May 1, 2000
[logo]
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Only Class Y shares of certain funds are offered to the general public and
available in all states. Please call 800-821-5129 for further information.
<PAGE>
Table of Contents
The Funds
Information about goal, principal Bond-Debenture Fund 2
strategy, main risks, performance and Developing Growth Fund 5
fees and expenses Mid-Cap Value Fund
Your Investment
Information for managing Purchases 11
your fund account Redemptions 12
Distributions and Taxes 12
Services For Fund Investors 13
Management 13
For More Information
How to learn more Other Investment Techniques 15
about the Funds Glossary of Shaded Terms 16
Recent Performance 16
Financial Information
Financial highlights and Bond-Debenture Fund 19
line graph comparison Developing Growth Fund 21
of each Fund Mid-Cap Value Fund 23
How to learn more about the Back Cover
Funds and other Lord Abbett Funds
<PAGE>
Bond-Debenture Fund
GOAL
The Fund's investment objective is to seek high current income and the
opportunity for capital appreciation to produce a high total return.
PRINCIPAL STRATEGY
To pursue its goal, the Fund normally invests in high yield and investment
grade debt securities, securities convertible into common stock and
preferred stocks. Under normal circumstances, the Fund invests at least 65%
of its total assets in fixed income securities of various types. At least
20% of the Fund's assets must be invested in any combination of investment
debt securities, U.S. Government securities and cash equivalents.
We believe that a high total return (current income and capital
appreciation) may be derived from an actively managed, diversified
portfolio of investments. Through port-folio diversification, credit
analysis and attention to current developments and trends in interest rates
and economic conditions, we attempt to reduce the risks. We seek unusual
values, using fundamental, bottom-up research to identify undervalued
securities. In recent years, the Fund has found good value in high yield
securities, sometimes called "lower-rated bonds" or "junk bonds," and has
invested more than half its assets in those securities. Higher yield on
debt securities can occur during periods of high inflation when the demand
for borrowed money is high. Also, buying lower-rated bonds when we believe
the credit risk is likely to decrease, may generate higher returns.
While typically fully invested, at times we may take a temporary defensive
position by investing some of the Fund's assets in cash and short-term debt
securities. This could reduce the benefit from any upswing in the market
and prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
investing in debt securities. The value of an investment in the Fund will
change as interest rates fluctuate in response to market movements. When
interest rates rise, the prices of debt securities are likely to decline,
and when interest rates fall, the prices of debt securities tend to rise.
Longer-term debt securities are usually more sensitive to interest rate
changes. Put another way, the longer the maturity of a security, the
greater the effect a change in interest rates is likely to have on its
price.
There is also the risk that an issuer of a debt security will fail to make
timely payments of principal or interest to the Fund, a risk that is
greater with junk bonds. Some issuers, particularly of junk bonds, may
default as to principal and/or interest payments after the Fund purchases
their securities. This may result in losses to the Fund. In addition, the
market for high yield securities generally is less liquid than the market
for higher-rated securities.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to Lord Abbett Bond-Debenture Fund, Inc.
About The Fund. The Fund is a professionally managed portfolio primarily holding
securities purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all funds, it cannot guarantee results.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
2 The Funds
<PAGE>
Bond-Debenture Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares
- --------------------------------------------------------------------------------
1999 - 4.3%
[GRAPHIC OMITTED]
Worst Quarter 3rd Q `98 -4.9%
Best Quarter 4th Q `98 4.9%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class Y shares compared to those of a broad-based securities market index
and three more narrowly based indices. Although the Fund's portfolio blend
has changed through the years, historically it was composed primarily of
three categories of securities: (1) high-yield corporate debt (including
straight preferred stocks); (2) equity-related securities; and (3)
high-grade debt. Because no single index existed that combined these
categories in a manner similar to the Fund, we compared the Fund's
performance to that of three indices which included elements of the
categories: First Boston High Yield Index ("High Yield Index"); Value Line
Convertible Index ("Value Line Index"); and Salomon Brothers Broad
Investment Bond Index ("Salomon Index"). The Fund now intends to replace
the Value Line Index and the Salomon Index with the Lehman Aggregate Bond
Index. The Lehman Aggregate Bond Index is not only a broader based
securities market index but is also more commonly used in fund performance
comparisons and more accessible to shareholders.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(1)
Class Y shares 4.27% 2.72%
- --------------------------------------------------------------------------------
Lehman Aggregate Bond Index(2) -.82% 3.47%(3)
- --------------------------------------------------------------------------------
Salomon Index(2) -.84% 3.46%(3)
- --------------------------------------------------------------------------------
High Yield Index(2) 3.28% .48%(3)
- --------------------------------------------------------------------------------
Value Line Index(2) 19.50% 4.31%(3)
- --------------------------------------------------------------------------------
(1) The date of inception for Class Y shares is 3/27/98.
(2) Performance for the unmanaged indices does not reflect any fees or
expenses. The performance of the indices is not necessarily representative
of the Fund's performance.
(3) This represents total return for the period 3/31/98 - 12/31/99, to
correspond with Class Y inception date.
The Funds 3
<PAGE>
Bond-Debenture Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
- --------------------------------------------------------------------------------
Fee Table
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets) Management Fees (See "Management") 0.46%
- --------------------------------------------------------------------------------
Other Expenses 0.14%
- --------------------------------------------------------------------------------
Total Operating Expenses 0.60%
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $61 $192 $336 $750
- --------------------------------------------------------------------------------
Management fees are payable to Lord, Abbett & Co. ("Lord Abbett") for the Fund's
investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
4 The Funds
<PAGE>
Developing Growth Fund
GOAL
The Fund's investment objective is long-term growth and capital through a
diversified and actively managed portfolio consisting of developing growth
companies, many of which are traded over the counter.
PRINCIPAL STRATEGY
To pursue its goal, the Fund primarily invests in the common stocks of
companies with above-average, long-term growth potential, particularly
smaller companies considered to be in the developing growth phase. The Fund
uses a bottom-up stock selection process, which means that it focuses on
the investment fundamentals of companies, rather than reacting to stock
market events. The Fund is broadly diversified over many industries and
economic sectors. Normally, the Fund invests at least 65% of its total
assets in securities of small companies.
The Fund tries to identify companies that it believes are strongly
positioned in the developing growth phase. This we define as the period of
swift development after a company's start-up phase when growth occurs at a
rate rarely equaled by established companies in their mature years. Of
course, because the actual growth of a company cannot be foreseen, we may
not always be correct in our judgment.
While typically fully invested, we may take a temporary defensive position
by investing some of the Fund's assets in cash and short-term debt
securities. This could reduce the benefit from any upswing in the market
and prevent the Fund from achieving its investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing. The value of your investment will fluctuate in response
to movements in the stock market in general, and to the changing prospects
of individual companies in which the Fund invests.
The Fund has particular risks associated with growth stocks. Different
types of stocks shift in and out of favor depending on market and economic
conditions. Although growth companies may grow faster than other companies,
they may have greater volatility in their stock prices. In addition, if the
Fund's assessment of a company's potential for growth or market
conditions is wrong, it could suffer losses or produce poor performance
relative to other funds, even in a rising market.
Investing in small companies generally involves greater risks than
investing in the stocks of large companies. Small companies may have less
experienced management and unproven track records. They may rely on limited
product lines and have limited financial resources. These factors may make
them more susceptible to setbacks or economic downturns. In addition, small
company stocks tend to have fewer shares outstanding and trade less
frequently than the stocks of larger companies. As a result, there may be
less liquidity in the prices of small company stocks, subjecting them to
greater price fluctuations than larger company stocks.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to Lord Abbett Developing Growth Fund, Inc.
About the Fund. The Fund is a professionally managed portfolio primarily holding
securities purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all mutual funds, it cannot guarantee results.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used bythe Fund and
their risks.
The Funds 5
<PAGE>
Developing Growth Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class Y shares
from calendar year to calendar year.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class Y Shares
- --------------------------------------------------------------------------------
1998 - 8.6%
1999 - 38.9%
[GRAPHIC OMITTED]
Best Quarter 1st Q `98 28.4% Worst Quarter 3rd Q `98 -22.0%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class Y shares compare to those of a broad-based securities market index.
- --------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- --------------------------------------------------------------------------------
Share Class 1 Year Since Inception(1)
- --------------------------------------------------------------------------------
Class Y shares 38.85% 23.78%
- --------------------------------------------------------------------------------
Russell 2000 Index(2) 21.26% 8.70%
(1) The date of inception for Class Y shares is 12/30/97.
(2) Performance for the unmanaged index does not any reflect fees or expenses.
The performance of the index is not necessarily representative of the
Fund's performance.
6 The Funds
<PAGE>
Developing Growth Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
- --------------------------------------------------------------------------------
FEE TABLE
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.53%
- --------------------------------------------------------------------------------
Other Expenses 0.26%
- --------------------------------------------------------------------------------
Total Operating Expenses 0.79%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $81 $252 $439 $978
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
The Funds 7
<PAGE>
Mid-Cap Value Fund
GOAL
The Fund seeks capital appreciation through investments, primarily in
equity securities, which are believed to be undervalued in the marketplace.
PRINCIPAL STRATEGY
Normally, at least 65% of the Fund's total assets will consist of
investments in mid-sized companies, with market capitalizations of roughly
$500 million to $10 billion. Generally, the Fund, using a value approach,
tries to identify stocks of companies that have the potential for
significant market appreciation, due to growing recognition of improvement
in their financial results, or increasing anticipation of such improvement.
In trying to identify those companies, we look for such factors as:
o changes in economic and financial environment
o new or improved products or services
o new or rapidly expanding markets
o changes in management or structure of the company
o price increases for the company's products or services
o improved efficiencies resulting from new technologies or changes in
distribution
o changes in government regulations, political climate or competitive
conditions
While typically fully invested, we may take a temporary defensive position
in cash and short-term debt securities. This could reduce the benefit from
any upswing in the market and prevent the Fund from realizing its
investment objective.
MAIN RISKS
The Fund is subject to the general risks and considerations associated with
equity investing, as well as the particular risks associated with value
stocks. The value of your investment will fluctuate in response to
movements in the stock market in general and to the changing prospects of
individual companies in which the Fund invests. Our portfolio may perform
differently than the market as a whole and other types of stocks, such as
growth stocks. This is because different types of stocks tend to shift in
and out of favor depending on market and economic conditions. The market
may fail to recognize the intrinsic value of particular stocks for a long
time. In addition, if the Fund's assessment of a company's value or
prospects for exceeding earnings expectations or market conditions is
wrong, the Fund could suffer losses or produce poor performance relative to
other funds, even in a rising market.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The Fund is not a complete investment program and may
not be appropriate for all investors. You could lose money by investing in
the Fund.
We or the Fund refers to Lord Abbett Mid-Cap Value Fund, Inc.
About the Fund. The Fund is a professionally managed portfolio primarily holding
securities purchased with the pooled money of investors. It strives to reach its
stated goal, although as with all mutual funds, it cannot guarantee results.
Value stocks are stocks of com-panies which we believe the market undervalues
according to certain financial measurements of their intrinsic worth or business
prospects.
Growth stocks exhibit faster-than-average gains in earnings and are expected to
continue profit growth at a high level, but also tend to be more volatile than
value stocks.
You should read this entire prospectus, including "Other Investment Techniques,"
which concisely describes the other investment strategies used by the Fund and
their risks.
8 The Funds
<PAGE>
Mid-Cap Value Fund
PERFORMANCE
The bar chart and table below provide some indication of the risks of
investing in the Fund by illustrating the variability of the Fund's
returns. Each assumes reinvestment of dividends and distributions. The
Fund's past performance is not necessarily an indication of how the Fund
will perform in the future.
The bar chart shows changes in the performance of the Fund's Class A shares
from calendar year to calendar year.
- --------------------------------------------------------------------------------
Bar Chart (per calendar year) - Class A Shares
- --------------------------------------------------------------------------------
1989 - 20.1%
1990 - -4.6%
1991 - 27.4%
1992 - 13.5%
1993 - 14.0%
1994 - -3.3%
1995 - 26.1%
1996 - 21.2%
1997 - 31.5%
1998 - -0.5%
1999 - 4.2%
[GRAPHIC OMITTED]
Best Quarter 2nd Q `99 17.6% Worst Quarter 3rd Q `98 -17.3%
- --------------------------------------------------------------------------------
The table below shows how the average annual total returns of the Fund's
Class A shares compared to those of two broad-based securities market
indices.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Average Annual Total Returns Through December 31, 1999
- ------------------------------------------------------------------------------------------
Share Class 1 Year 5 Years 10 Years Since Inception(1)
<S> <C> <C> <C> <C>
Class A shares -1.70% 14.48% 11.56% -
- ------------------------------------------------------------------------------------------
Russell Mid-Cap Index ("RMC Index")(2) 18.23% 21.86% 15.92%(3) -
S&P Mid-Cap Barra Value Index(2) 2.32% 18.16% -(4) -
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Because Class Y shares are new, the bar chart and table show returns for
Class A shares. Returns for Class Y shares will be somewhat higher because
Class Y shares have lower expenses. The date of inception for Class Y
shares is 5/3/99.
(2) Performance for the unmanaged indices does not reflect any fees or
expenses. The performance of indices is not necessarily representative of
the Fund's performance.
(3) This represents total return for the period 12/31/89 - 12/31/99, to
correspond with Class A inception date.
(4) Performance for the S&P Mid-Cap Barra Value Index for the ten-year period
is not available.
The Funds 9
<PAGE>
Mid-Cap Value Fund
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
- --------------------------------------------------------------------------------
Fee Table
- --------------------------------------------------------------------------------
Class Y
Shareholder Fees (Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge on Purchases
- --------------------------------------------------------------------------------
(as a % of offering price) none
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge none
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Expenses deducted from Fund assets) (as a % of
average net assets)
- --------------------------------------------------------------------------------
Management Fees (See "Management") 0.70%
- --------------------------------------------------------------------------------
Other Expenses 0.32%
- --------------------------------------------------------------------------------
Total Operating Expenses 1.02%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Example
- --------------------------------------------------------------------------------
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. This example, like that in
other funds' prospectuses, assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
Share Class 1 Year 3 Years 5 Years 10 Years
Class Y shares $104 $325 $563 $1,248
- --------------------------------------------------------------------------------
Management fees are payable to Lord Abbett for the Fund's investment management.
Other expenses include fees paid for miscellaneous items such as shareholder
service fees and professional fees.
Your Investment 11
<PAGE>
Your Investment
PURCHASES
Class Y shares. You may purchase Class Y shares at the net asset value
("NAV") per share next determined after we receive and accept your purchase
order submitted in a proper form. No sales charges apply.
We reserve the right to withdraw all or part of the offering made by this
prospectus or to reject any purchase order. We also reserve the right to
waive or change minimum investment requirements. All purchase orders are
subject to our acceptance and are not binding until confirmed or accepted
in writing.
Who May Invest? Eligible purchasers of Class Y shares include: (1) certain
authorized brokers, dealers, registered investment advisers or other
financial institutions ("entities") who either (a) have an arrangement with
Lord Abbett Distributor in accordance with certain standards approved by
Lord Abbett Distributor, providing specifically for the use of our Class Y
shares in particular investment products made available for a fee to
clients of such entities or (b) charge an advisory, consulting or other fee
for their services and buy shares for their own accounts or the accounts of
their clients ("Mutual Fund Fee Based Programs"); (2) the trustee or
custodian under any deferred compensation or pension or profit-sharing plan
or payroll deduction IRA established for the benefit of the employees of
any company with an account(s) in excess of $10 million managed by Lord
Abbett or its sub-advisers on a private-advisory-account basis; (3)
institutional investors, such as retirement plans, companies, foundations,
trusts, endowments and other entities where the total amount of potential
investable assets exceeds $50 million that were not introduced to Lord
Abbett by persons associated with a broker or dealer primarily involved in
the retail securities business. Additional payments may be made by Lord
Abbett out of its own resources with respect to certain of these sales.
How Much Must You Invest? You may buy our shares through any independent
securities dealer having a sales agreement with Lord Abbett Distributor,
our exclusive selling agent. Place your order with your investment dealer
or send the money to the Fund you selected (P.O. Box 219100, Kansas City,
Missouri 64121). The minimum initial investment is $1 million except for
Mutual Fund Fee Based Program, which has no minimum. This offering may be
suspended, changed or withdrawn by Lord Abbett Distributor which reserves
the right to reject any order.
Buying Shares Through Your Dealer. Orders for shares received by a Fund
prior to the close of the NYSE, or received by dealers prior to such close
and received by Lord Abbett Distributor prior to the close of its business
day, will be confirmed at NAV effective at such NYSE close. Orders received
by dealers after the NYSE closes and received by Lord Abbett Distributor in
proper form prior to the close of its next business day are executed at the
NAV effective as of the close of the NYSE on that next business day. The
dealer is responsible for the timely transmission of orders to Lord Abbett
Distributor. A business day is a day on which the NYSE is open for trading.
Buying Shares By Wire. To open an account, call 800-821-5129 Ext. 34028,
Institutional Trade Dept., to set up your account and to arrange a wire
transaction. Wire to: United Missouri Bank of Kansas City, N.A., Routing
number - 101000695, bank account number: 9878002611, FBO: (account name)
and (your Lord Abbett account number). Specify the complete name of the
Fund, note Class Y shares and include your new account number
NAV per share for each Fund is calculated each business day at the close of
regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m.
Eastern Time. Purchases and sales of Fund shares are executed at the NAV next
determined after the Fund receives your order in proper form. In calculating
NAV, securities for which market quotations are available are valued at those
quotations. Securities for which such quotations are not available are valued at
fair value under procedures approved by the Board.
Lord Abbett Distributor LLC ("Lord Abbett Distributor") acts as agent for the
Funds to work with investment professionals that buy and/or sell shares of the
Funds on behalf of their clients. Generally, Lord Abbett Distributor does not
sell Fund shares directly to investors.
Exchange Limitations. Exchanges should not be used to try to take advantage of
short-term swings in the market. Frequent exchanges create higher expenses for
the Funds. Accordingly, each Fund reserves the right to limit or terminate this
privilege for any shareholder making frequent exchanges or abusing the
privilege. The Funds also may revoke the privilege for all shareholders upon 60
days' written notice.
Your Investment 11
<PAGE>
and your name. To add to an existing account, wire to: United Missouri Bank
of Kansas City, N.A., routing number - 101000695, bank account number:
9878002611, FBO: (account name) and (your Lord Abbett account number).
Specify the complete name of the Fund, note Class Y shares and include your
account number and your name.
REDEMPTIONS
By Broker. Call your investment professional for directions on how to
redeem your shares.
By Telephone. To obtain the proceeds of a redemption of $50,000 or less
from your account, you or your representative can call the Funds at
800-821-5129.
By Mail. Submit a written redemption request indicating, the name(s) in
which the account is registered, the Fund's name, the class of shares, your
account number, and the dollar value or number of shares you wish to sell.
Include all necessary signatures. If the signer has any Legal Capacity, the
signature and capacity must be guaranteed by an Eligible Guarantor. Certain
other legal documentation may be required. For more information regarding
proper documentation call 800-821-5129.
Normally a check will be mailed to the name and address in which the
account is registered (or otherwise according to your instruction) within
three business days after receipt of your redemption request. Your account
balance must be sufficient to cover the amount being redeemed or your
redemption order will not be processed. Under unusual circumstances, each
Fund may suspend redemptions, or postpone payment for more than seven days,
as permitted by federal securities laws.
By Wire. In order to receive funds by wire, our servicing agent must have
the wiring instructions on file. To verify that this feature is in place,
call 800-821-5129 Ext. 34028, Institutional Trading Dept. (minimum wire:
$1,000). Your wire redemption request must be received by the Fund before
the close of the NYSE for money to be wired on the next business day.
DISTRIBUTIONS AND TAXES
The Funds normally pay dividends from their net investment income as
follows: monthly, for Bond-Debenture Fund; and annually, for Developing
Growth Fund, and Mid-Cap Value Fund. Each Fund distributes net capital
gains (if any) as "capital gains distributions" at least annually. Your
distributions will be reinvested in your Fund unless you instruct the Fund
to pay them to you in cash. The tax status of distributions is the same for
all shareholders regardless of how long they have owned Fund shares or
whether distributions are reinvested or paid in cash.
Except in tax-advantaged accounts, any sale, redemption or exchange of Fund
shares may be taxable to the shareholder.
Information on the tax treatment of distributions, including the source of
dividends and distributions of capital gains by the Funds, will be mailed
to shareholders each year. Because everyone's tax situation is unique, you
should consult your tax adviser regarding the treatment of distributions
under the federal, state and local tax rules that apply to you.
Eligible Guarantor is any broker or bank that is a member of the medallion stamp
program. Most major securities firms and banks are members of this program. A
notary public is not an Eligible Guarantor.
12 Your Investment
<PAGE>
SERVICES FOR FUND INVESTORS
AUTOMATIC SERVICES
We offer the following shareholder services:
Telephone Exchange Privilege. Class Y shares may be exchanged without a
service charge for Class Y shares of any Eligible Fund among the Lord
Abbett-sponsored funds.
Account Statements. Every Lord Abbett investor automatically receives
quarterly account statements.
Householding. Shareholders with the same last name and address will receive
a single copy of a prospectus and an annual or semi-annual report, unless
additional reports are specifically requested in writing to the Funds.
Account Changes. For any changes you need to make to your account, consult
your investment professional or call the Funds at 800-821-5129.
Systematic Exchange. You or your investment professional can establish a
schedule of exchanges between the same classes of any Eligible Fund.
MANAGEMENT
The Funds' investment adviser is Lord, Abbett & Co., located at 90 Hudson
St., Jersey City, NJ 07302-3973. Founded in 1929, Lord Abbett manages one
of the nation's oldest mutual fund complexes, with approximately $35
billion in more than 40 mutual fund portfolios and other advisory accounts.
For more information about the services Lord Abbett provides to the Funds,
see the Statement of Additional Information.
Lord Abbett is entitled to a management fee at the annual rate of each
Fund's average daily net assets shown below. The fees are calculated and
payable monthly.
Bond-Debenture Fund
.50 of 1% on the first $500 million of average daily net assets,
.45 of 1% on assets over $500 million.
Based on this calculation, the management fee paid to Lord Abbett for the
fiscal year ended December 31, 1999, was at an annual rate of .46 of 1% of
the Fund's average daily net assets.
Developing Growth Fund
.75 of 1% on the first $100 million of average daily net assets,
.50 of 1% on assets over $100 million.
Based on this calculation, the management fee paid to Lord Abbett for the
fiscal year ended January 31, 2000, was at an annual rate of .53 of 1% of
the Fund's average daily net assets.
Mid-Cap Value Fund
.75 of 1% on the first $200 million of average daily net assets,
.65 of 1% on the next $300 million,
.50 of 1% on assets over $500 million.
Based on this calculation, the management fee paid to Lord Abbett for the
fiscal year ended December 31, 1999, was at an annual rate of .70 of 1% of
the Fund's average daily net assets.
Each Fund pays all expenses not expressly assumed by Lord Abbett.
Telephone Transactions. You have this privilege unless you refuse it in writing.
For your security, telephone transaction requests are recorded. We will take
measures to verify the identity of the caller, such as asking for your name,
account number, social security or taxpayer identification number and other
relevant information. Each Fund will not be liable for following instructions
communicated by telephone that it reasonably believes to be genuine.
Transactions by telephone may be difficult to implement in times of drastic
economic or market change.
Your Investment 13
<PAGE>
Investment Managers. Lord Abbett uses a team of investment managers and
analysts acting together to manage each Fund's investments.
Bond-Debenture Fund. Christopher J. Towle, Partner of Lord Abbett, heads
the team, the other senior members of which include Richard Szaro, Michael
Goldstein and Thomas Baade. Messrs. Towle and Szaro have been with Lord
Abbett since 1988 and 1983, respectively. Mr. Goldstein has been with Lord
Abbett since 1997. Before joining Lord Abbett, Mr. Goldstein was a bond
trader for Credit Suisse BEA Associates from August 1992 through April
1997. Mr. Baade joined Lord Abbett in 1998; prior to that he was a credit
analyst with Greenwich Street Advisors.
Developing Growth Fund. Stephen J. McGruder, Partner of Lord Abbett, heads
the team, the other senior members of which include Lesley-Jane Dixon and
Rayna Lesser. Mr. McGruder and Ms. Dixon have been with Lord Abbett since
1995, Ms. Lesser has been with Lord Abbett since 1996 and Ms. Hughes since
1998. Prior to joining Lord Abbett, Mr. McGruder was a portfolio manager
with Wafra Investment Advisory Group. Ms. Dixon was an equity analyst with
Wafra Investment Advisory Group before joining Lord Abbett. Ms. Lesser
joined Lord Abbett directly from Barnard College.
Mid-Cap Value Fund. Edward K. von der Linde, Investment Manager, heads the
team, the other senior members are Eileen Banko, Howard Hansen, and David
Builder. Both Mr. von der Linde and Ms. Banko have been with Lord Abbett
for more than five years. Mr. Hansen joined Lord Abbett in 1995; prior to
that he was an analyst at Alfred Berg Inc. from 1990 - 1995. Mr. Builder
joined Lord Abbett in 1998; prior to that he was an analyst at Bear Stearns
from 1996 - 1998 and at Weiss, Peck & Greer from 1994 - 1995.
14 Your Investment
<PAGE>
For More Information
OTHER INVESTMENT TECHNIQUES
This section describes some of the investment techniques that might be used
by the Funds, and their risks.
Adjusting Investment Exposure. Each Fund may, but is not required to, use
various strategies to change its investment exposure to adjust to changing
security prices, interest rates, currency exchange rates, commodity prices
and other factors. Each fund may use these transactions to change the risk
and return characteristics of its portfolio. If we judge market conditions
incorrectly or use a strategy that does not correlate well with the Fund's
investments, it could result in a loss, even if we intended to lessen risk
or enhance returns. These transactions may involve a small investment of
cash compared to the magnitude of the risk assumed and could produce
disproportionate gains or losses. Also, these strategies could result in
losses if the counterparty to a transaction does not perform as promised.
Convertible Securities. The Bond-Debenture Fund may invest in convertible
bonds and convertible stocks. These investments tend to be more volatile
than debt securities but tend to be less volatile and produce more income
than their underlying common stocks.
Foreign Securities. The Bond-Debenture Fund may invest up to 20% of its net
assets in foreign securities. Developing Growth Fund and Mid-Cap Value Fund
may each invest up to 10% of their assets in foreign securities. Foreign
securities are securities primarily traded in countries outside the United
States. Foreign markets and the securities traded in them are not subject
to the same degree of regulation as U.S. markets. Securities clearance and
settlement procedures may be different in foreign countries. There may be
less trading volume in foreign markets, subjecting the securities traded in
them to higher price fluctuations. Transaction costs may be higher in
foreign markets. A Fund may hold foreign securities which trade on days
when the Fund does not sell shares. As a result, the value of a Fund's
portfolio securities may change on days an investor may not purchase or
sell Fund shares.
Foreign issuers are generally not subject to similar, uniform accounting,
auditing and financial reporting requirements as U.S. issuers. Foreign
investments may be affected by changes in currency rates or currency
controls. Certain foreign countries may limit a Fund's ability to remove
its assets from the country. With respect to certain foreign countries,
there is a possibility of nationalization, expropriation or confiscatory
taxation, imposition of withholding or other taxes, and political or social
instability which could affect investments in those countries.
Short-Term Fixed-Income Securities. Each is authorized to invest
temporarily in certain short-term fixed income securities. Such securities
may be used to invest uncommitted cash balances, to maintain liquidity to
meet shareholder redemptions, or to take a temporary defensive position
against market declines. These securities include: oblig-ations of the U.S.
Government and its agencies and instrumentalities; commercial paper, bank
certificates of deposit, and bankers' acceptances; and repurchase
agreements collateralized by these securities.
For More Information 15
<PAGE>
GLOSSARY OF SHADED TERMS
Eligible Fund. An Eligible Fund is any Lord Abbett-sponsored fund offering
Class Y shares.
Eurodollar. Eurodollars are U.S. currency held in banks outside the United
States, mainly in Europe, and commonly used for settling international
transactions. Some securities are issued in Eurodollars--that is, with a
promise to pay interest in dollars deposited in foreign bank accounts.
Legal Capacity. This term refers to the authority of an individual to act
on behalf of an entity or other person(s). For example, if a redemption
request were to be made on behalf of the estate of a deceased shareholder,
John W. Doe, by a person (Robert A. Doe) who has the legal capacity to act
for the estate of the deceased shareholder because he is the executor of
the estate, then the request must be executed as follows: Robert A. Doe,
Executor of the Estate of John W. Doe. That signature using that capacity
must be guaranteed by an Eligible Guarantor.
To give another example, if a redemption request were to be made on behalf
of the ABC Corporation by a person (Mary B. Doe) who has the legal capacity
to act on behalf of the Corporation, because she is the president of the
corporation, the request must be executed as follows: ABC Corporation by
Mary B. Doe, President. That signature using that capacity must be
guaranteed by an Eligible Guarantor (see example in right column).
Mutual Fund Fee Based Program. Certain unaffiliated authorized brokers,
dealers, registered investment advisers or other financial institutions
("entities") who either (1) have an arrangement with Lord Abbett
Distributor in accordance with certain standards approved by Lord Abbett
Distributor, providing specifically for the use of our shares (and
sometimes providing for acceptance of orders for such shares on our behalf)
in particular investment products made available for a fee to clients of
such entities, or (2) charge an advisory, consulting or other fee for their
services and buy shares for their own accounts or the accounts of their
clients.
RECENT PERFORMANCE
The following is a discussion of recent performance for the twelve-month
period ending December 31, 1999.
Bond-Debenture Fund. 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 of good value.
Despite challenging market conditions and a significant rise 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
GUARANTEED SIGNATURE. An acceptable form of guarantee would be as follows:
In the case of the estate --
Robert A. Doe
Executor of the Estate of
John W. Doe
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
In the case of the corporation --
ABC Corporation
Mary B. Doe
By Mary B. Doe, President
[Date]
SIGNATURE GUARANTEED
MEDALLION GUARANTEED
NAME OF GUARANTOR
[SIGNATURE ILLEGIBLE]
- --------------------------------------------------
AUTHORIZED SIGNATURE
(960) X 9 6 0 3 4 7 0
SECURITIES TRANSFER AGENTS MEDALLION PROGRAM'sm'
SR
16 For More Information
<PAGE>
they continued to offer a tremendous yield advantage over Treasurys. 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 moderate exposure to mortgage-backed securities,
investing mainly in new, higher-coupon FNMA bonds that were acquired below
par (face value).
We will continue to closely monitor the Fed for further rate increases. We
feel that bonds represent an excellent value give 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.
The following is a discussion of recent performance for the twelve-month
period ending January 31, 2000.
Developing Growth Fund. The Fund ended its fiscal year with solid
performance, as the stocks of small growth-oriented companies rebounded
from their difficulties in the early part of 1999. Throughout the period,
our investment team remained true to its investment strategy, focusing on
acquiring the stocks of well-run small companies with strong current
earnings and future earnings growth potential. Due to capacity constraints,
and in order to maintain the integrity of our investment philosophy, the
Developing Growth Fund closed its doors to all new investors at the end of
business on January 31, 2000. Current investors may continue to add to
existing accounts.
Our investments in technology-related companies significantly contributed
to the Fund's strong performance during the year. In particular, the Fund
was helped by our holdings in technology outsourcing companies - those that
help corporate America implement and operate Internet businesses and
wireless communication companies.
Conversely, stocks of companies in the Fund whose earnings did not meet
Wall Street expectations did not perform well. Many of these companies were
impacted by business slowdowns as they were forced to focus on potential
Y2K problems. Investors reacted in the extreme to any company that fell
short of earnings expectations, causing its stock price to fall sharply.
The strong performance of the stocks of small technology companies in
recent months increased our technology weighting. While valuations for
technology stocks have reached high levels in some cases, our research
suggests that the demand for technology goods and services warrants
continued exposure to the stocks of some new companies.
We believe we are entering a favorable environment for small growth
companies, as the economy continues to exhibit signs of steady growth and
low inflation. Our research indicates that substantial value exists in many
of these smaller companies, as they currently offer greater growth
potential and better value than the average large company growth stock.
For More Information 17
<PAGE>
The following is a discussion of recent performance for the twelve-month
period ending December 31, 1999.
Mid-Cap Value Fund. The 1999 year started with several months of volatile
stock market performance, which was most likely caused by the after-effects
of 1998's collapse of the Long Term Capital hedge fund and South American
financial panics. The stocks of technology and telecommunications companies
dominated the indicies during the first quarter of 1999. A shift occurred
in the second quarter when, in what we see as a harbinger of things to
come, value stocks outperformed growth stocks. The third quarter of 1999
was fairly uneventful until near its end, when the stocks of technology,
telecommunications and biotech companies began a new run that extended
through the end of the year. During the fourth quarter of 1999, the gains
made through value investing faded as momentum investing once again took
hold.
Despite the success of momentum investing, we stayed with out discipline of
investing in seasoned, mid-sized U.S. and multinational companies in sound
financial condition. The Fund's performance was driven primarily by our
investments in the stocks of energy companies and select technology
companies. At the end of 1998 and the beginning of 1999, the stocks of many
energy companies (oil and gas, refining) were selling at attractive
discounts. We took advantage of the "fire sale" prices and built a
substantial position in the energy sector. These investments saw sizeable
returns as oil prices rose from around $10 a barrel at the beginning of the
year up to the $20 a barrel range as 1999 ended. We also continued to
reduce our exposure to the stocks of financial companies during the first
half of 1999, largely avoiding the weak performance of this group caused by
rising interest rates in the second half of the year.
<PAGE>
Bond-Debenture Fund
Financial Information
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended December 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended December 31, 1999, and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class Y Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
December 31,
Per Share Operating Performance:
1999 1998(a)
<S>
<C> <C>
Net asset value, beginning of year
$9.44 $9.98
- ------------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income(c)
.78 .59
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments
- ------------------------------------------------------------------------------------------------------------------------------------
and foreign currency transactions
(.40) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations
.38 .05
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income
(.78) (.59)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year
$9.04 $9.44
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(b)
4.27% 0.55%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses(e)
.60% .46%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
8.52% 6.24%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended
December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes:
1999 1998
Net Assets, end of year (000)
$3,777,623 $3,540,124
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
67.93% 86.48%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commencement of offering Class Y shares - 3/27/98.
(b) Total return assumes the reinvestment of all distributions.
(c) Calculated using average shares outstanding during the period.
(d) Not annualized.
(e) The ratios for 1998 and 1999 include expenses paid through an expense
offset arrangement.
Financial Information 19
<PAGE>
Bond-Debenture Fund
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the Lehman Aggregate Bond Index, Salomon Index,
High-Yield Index, and Value Line Index, assuming reinvestment of all
dividends and distributions. Although the Fund's portfolio blend has
changed through the years, historically it was composed primarily of three
categories of securities: (1) high-yield corporate debt (including straight
preferred stocks); (2) equity-related securities; and (3) high-grade debt.
Because no single index existed that combined these categories in a manner
similar to the Fund, we compared the Fund's performance to that of three
indices which included elements of the categories: High Yield Index; Value
Line Index; and Salomon Index. The Fund now intends to replace the Value
Line Index and the Salomon Index with the Lehman Aggregate Bond Index. The
Lehman Aggregate Bond Index is not only a broader based securities market
index but is also more commonly used in fund performance comparisons and
more accessible to shareholders.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending December 31, 1999
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(2) -1.00% 8.83% 9.70%
- --------------------------------------------------------------------------------
Class Y(3) 4.27% - 2.72%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged Lehman Aggregate Bond Index (source: Lipper,
Inc.), Salomon Index (source: Chase Global Data Service), High-Yield Index
(source: Callan Associates), and Value Line Index (source: Morgan Stanley)
does not reflect any fees or expenses. Performance of the indices is not
necessarily representative of the Fund's performance.
(2) This shows total return which is the percent change in value, after
deduction of the maximum initial sales charge of 4.75% applicable to Class
A shares, with all dividends and distributions reinvested for the periods
shown ending December 31, 1999 using the SEC-required uniform method to
compute such return.
(3) The Class Y shares were first offered on 3/27/98. Performance is at net
asset value.
20 Financial Information
<PAGE>
Developing Growth Fund
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended January 31, 2000 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended January 31, 2000, and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class Y Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended January 31,
Per Share Operating Performance: 2000
1999 1998(d)
<S> <C>
<C> <C>
Net asset value, beginning of year $16.30
$14.27 $14.12
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss(a) (.05)
(.03) --(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
- ------------------------------------------------------------------------------------------------------------------------------------
gain on investments 4.14
2.11 .15
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.09
2.08 .15
- ------------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gain (.69)
(.05) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $19.70
$16.30 $14.27
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return(b) 25.88%
14.59% 1.06%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets:
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses .81%(f)
.72%(f) .06%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.26)%
(.22)% (.02)%(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended January 31,
- ------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data For All Classes: 2000
1999 1998
Net Assets, end of year (000) $2,912,681
$1,344,203 $553,086
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 50.13%
30.89% 33.60%
</TABLE>
(a) Calculated using average shares outstanding during the period.
(b) Total return assumes the reinvestment of all distributions.
(c) Not annualized.
(d) Commencement of offering Class Y shares - 12/30/97.
(e) Amount less than $.01.
(f) The ratios for 1999 and 2000 include expenses paid through an expense
offset arrangement.
Financial Information 21
<PAGE>
Developing Growth Fund
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the Russell 2000 Index, assuming reinvestment of
all dividends and distributions.
- --------------------------------------------------------------------------------
NAV Russell 2000
1-31-91 11,466 9,621
1-31-92 16,226 13,929
1-31-93 15,852 15,774
1-31-94 18,454 18,706
1-31-95 17,947 17,582
1-31-96 26,961 22,847
1-31-97 34,603 27,177
1-31-98 43,043 32,088
1-31-99 49,170 32,194
1-31-00 61,623 37,905
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending January 31, 2000
1 Year 5 Years 10 Years (or Life)
- --------------------------------------------------------------------------------
Class A(2) 18.10% 26.48% 19.24%
- --------------------------------------------------------------------------------
Class Y(3) 25.88% - 19.77%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged index does not reflect any fees or expenses.
The performance of the index is not necessarily representative of the
Fund's performance.
(2) This shows total return which is the percent change in net asset value,
with all dividends and distributions reinvested for the period shown ending
January 31, 2000 using the SEC-required uniform method to compute total
return. The Class A share inception date is 10/10/73.
(3) The Class Y shares were first offered on 12/30/97. Performance is at net
asset value.
22 Financial Information
<PAGE>
Mid-Cap Value Fund
FINANCIAL HIGHLIGHTS
This table describes the Fund's performance for the fiscal periods
indicated. "Total return" shows how much your investment in the Fund would
have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These Financial Highlights have
been audited by Deloitte & Touche LLP, the Fund's independent auditors, in
conjunction with their annual audit of the Fund's financial statements.
Financial statements for the fiscal year ended December 31, 1999 and the
Independent Auditors' Report thereon appear in the Annual Report to
Shareholders for the fiscal year ended December 31, 1999 and are
incorporated by reference into the Statement of Additional Information,
which is available upon request. Certain information reflects financial
results for a single Fund share.
- --------------------------------------------------------------------------------
Class Y Shares
- --------------------------------------------------------------------------------
Year Ended December 31,
Per Share Operating Performance: 1999(b)
Net asset value, beginning of year $13.06
- --------------------------------------------------------------------------------
Income from investment operations
- --------------------------------------------------------------------------------
Net investment income(c) .05
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments .14
- --------------------------------------------------------------------------------
Total from investment operations .19
- --------------------------------------------------------------------------------
Dividends and Distributions
- --------------------------------------------------------------------------------
Dividends from net investment income --
- --------------------------------------------------------------------------------
Net asset value, end of period $13.25
- --------------------------------------------------------------------------------
Total Return(a)(d) 1.45%(c)
- --------------------------------------------------------------------------------
Ratios to Average Net Assets:(d)
- --------------------------------------------------------------------------------
Expenses .69%(c)
- --------------------------------------------------------------------------------
Net investment income .41%(c)
- --------------------------------------------------------------------------------
Year Ended December 31,
- --------------------------------------------------------------------------------
Supplemental Data For All Classes: 1999
Net Assets, end of year (000) $394,106
- --------------------------------------------------------------------------------
Portfolio turnover rate 64.76%
- --------------------------------------------------------------------------------
(a) Total return assumes the reinvestment of all distributions.
(b) Commencement of offering Class Y shares - 5/3/99.
(c) Calculated using average shares outstanding during the year.
(d) Not annualized.
(e) The ratios 1999 include expenses paid through an expense
offset arrangement.
Financial Information 23
<PAGE>
Mid-Cap Value Fund
LINE GRAPH COMPARISON
Immediately below is a comparison of a $10,000 investment in Class A shares
to the same investment in the RMC Index assuming reinvestment of all
dividends and distributions.
- --------------------------------------------------------------------------------
12/31/89 10,000 9,422 10,000
12/31/90 9,536 8,985 8,850
12/31/91 12,145 11,443 12,524
12/31/92 13,780 12,983 14,570
12/31/93 15,702 14,794 16,654
12/31/94 15,191 14,312 16,305
12/31/95 19,152 18,045 21,923
12/31/96 23,218 21,876 26,088
12/31/97 30,540 28,774 33,656
12/31/98 30,403 28,645 37,052
12/31/99 31,691 29,858 43,807
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
Average Annual Total Return At Maximum Applicable
Sales Charge For The Periods Ending December 31, 1999
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Class A(2) -1.70% 14.48% 11.56%
- --------------------------------------------------------------------------------
(1) Performance for the unmanaged index does not reflect any fees or expenses.
The performance of the index is not necessarily representative of the
Fund's performance.
(2) This shows total return which is the percent change in value, at net asset
value, with all dividends and distributions reinvested for the periods
shown ending December 31, 1999 using the SEC-required uniform method to
compute total return. Because Class Y shares are new, the line graph
comparison and the total returns shown are for Class A shares at net asset
value. Returns for Class Y shares will be somewhat higher because Y shares
have lower expenses. The Class A share inception date is 6/28/83.
24 Financial Information
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
More information on these Funds is available free upon request, including
the following:
ANNUAL/SEMI-ANNUAL REPORT
Describes each Fund, lists portfolio holdings and contains a letter from
each Fund's manager discussing recent market conditions and each Fund's
investment strategies.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
Provides more details about the Funds and their policies. A current SAI is
on file with the Securities and Exchange Commission ("SEC")and is
incorporated by reference (is legally considered part of this prospectus).
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Mid-Cap Value Fund, Inc.
90 Hudson Street
Jersey City, NJ 07302-3973
---------------------------
SEC file numbers: 811-2145, 811-2871, 811-3691
To obtain information:
By telephone. Call the Funds at: 800-426-1130
By mail. Write to the Funds at:
The Lord Abbett Family of Funds
90 Hudson Street
Jersey City, NJ 07302-3973
Via the Internet.
Lord, Abbett & Co.
www.lordabbett.com
Text only versions of Fund documents can be viewed online or downloaded from:
SEC
www.sec.gov
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 202-942-8090) or by sending your request and a duplicating
fee to the SEC's Public Reference Section, Washington, DC 20549-6009 or by
sending your request electronically to [email protected].
LAPROSP-Y6-1-300
(3/00)
<PAGE>
- --------------------------------------------------------------------------------
LORD, ABBETT & CO.
- --------------------------------------------------------------------------------
Statement of Additional Information May 1, 2000
Lord Abbett Bond-Debenture Fund, Inc.
Lord Abbett Developing Growth Fund, Inc.
Lord Abbett Mid-Cap Value Fund, Inc.
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus for
the Class Y shares of Lord Abbett Bond-Debenture Fund, Inc. ("Bond-Debenture
Fund"), Lord Abbett Developing Growth Fund, Inc. ("Developing Growth Fund"), and
Lord Abbett Mid-Cap Value Fund, Inc. ("Mid-Cap Value Fund"), individually ("we"
or the "Fund"), collectively (the "Funds"), may be obtained from your securities
dealer or from Lord Abbett Distributor LLC ("Lord Abbett Distributor") at 90
Hudson Street, Jersey City, New Jersey, 07302-3973. This Statement relates to,
and should be read in conjunction with, the Prospectus dated May 1, 2000.
Shareholder inquiries should be made by directly contacting the Fund or by
calling 800-821-5129. Each Fund's Annual Report to Shareholders is available,
without charge, upon requests by calling that number. In addition, you can make
inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Objective and Policies 2
2. Directors and Officers 5
3. Investment Advisory and Other Services 10
4. Portfolio Transactions 11
5. Purchases, Redemptions and Shareholder Services 12
6. Performance 13
7. Taxes 13
8. Information About the Funds 14
9. Financial Statements 14
<PAGE>
1.
Investment Objective and Policies
Fundamental Investment Restrictions. Each Fund is subject to the following
investment restrictions, which cannot be changed without approval of a majority
of each Fund's outstanding shares.
Each Fund may not:
(1) borrow money, except that (i) each Fund may borrow from banks (as defined
in the Investment Company Act of 1940 ("the Act")) in amounts up to 33 1/3%
of its total assets (including the amount borrowed), (ii) each Fund may
borrow up to an additional 5% of its total assets for temporary purposes,
(iii) each Fund may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of portfolio securities and (iv) each
Fund may purchase securities on margin to the extent permitted by
applicable law);
(2) pledge its assets (other than to secure such borrowings, or to the extent
permitted by the Fund's investment policies, as permitted by applicable
law;
(3) engage in the underwriting of securities, except pursuant to a merger or
acquisition or to the extent that, in connection with the disposition of
its portfolio securities, it may be deemed to be an underwriter under
federal securities laws;
(4) make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in government
obligations, commercial paper, pass-through instruments, certificates of
deposit, bankers acceptances, repurchase agreements or any similar
instruments shall not be subject to this limitation, and except further
that each Fund may lend its portfolio securities, provided that the lending
of portfolio securities may be made only in accordance with applicable law;
(5) buy or sell real estate (except that each Fund may invest in securities
directly or indirectly secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein)
commodities or commodity contracts (except to the extent each Fund may do
so in accordance with applicable law and without registering as a commodity
pool operator under the Commodity Exchange Act as, for example, with
futures contracts);
(6) with respect to 75% of the gross assets of each Fund, buy securities of one
issuer representing more than (i) 5% of the Fund's gross assets, except
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or (ii) 10% of the voting securities of such issuer;
(7) invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding securities of
the U.S. Government, its agencies and instrumentalities); or
(8) issue senior securities to the extent such issuance would violate
applicable law.
Compliance with the investment restrictions in this Section will be determined
at the time of purchase or sale of the portfolio investment.
Non-Fundamental Investment Restrictions. In addition to the policies in the
Prospectus and the investment restrictions above which cannot be changed without
shareholder approval, each Fund is subject to the following non-fundamental
investment policies which may be changed by the Board of Directors without
shareholder approval.
Each Fund may not:
(1) borrow in excess of 33 1/3% of its total assets (including the amount
borrowed), and then only as a temporary measure for extraordinary or
emergency purposes;
2
<PAGE>
(2) make short sales of securities or maintain a short position except to the
extent permitted by applicable law;
(3) invest knowingly more than 15% of its net assets (at the time of
investment) in illiquid securities, except for securities qualifying for
resale under Rule 144A of the Securities Act of 1933, deemed to be liquid
by the Board of Directors;
(4) invest in securities of other investment companies as defined in the Act,
except as permitted by applicable law;
(5) invest in securities of issuers which, with their predecessors, have a
record of less than three years of continuous operation, if more than 5% of
each Fund's total assets would be invested in such securities (this
restriction shall not apply to mortgaged-backed securities, asset-backed
securities or obligations issued or guaranteed by the U. S. Government, its
agencies or instrumentalities);
(6) hold securities of any issuer when more than 1/2 of 1% of the securities of
such issuer are owned beneficially by one or more of each Fund's officers
or directors or by one or more partners or members of each Fund's
underwriter or investment adviser if these owners in the aggregate own
beneficially more than 5% of such securities of such issuer;
(7) invest in warrants if, at the time of acquisition, its investment in
warrants, valued at the lower of cost or market, would exceed 5% of each
Fund's total assets (included within such limitation, but not to exceed 2%
of the Funds total assets, are warrants which are not listed on the New
York or American Stock Exchange or a major foreign exchange);
(8) invest in real estate limited partnership interests or interests in oil,
gas or other mineral leases, or exploration or development programs, except
that each Fund may invest in securities issued by companies that engage in
oil, gas or other mineral exploration or development activities;
(9) write, purchase or sell puts, calls, straddles, spreads or combinations
thereof, except to the extent permitted in a Fund's prospectus and
statement of additional information, as may be amended from time to time;
or
(10) buy from or sell to any of a Fund's officers, directors, employees, or its
investment adviser or any of a Fund's officers, directors, partners or
employees, any securities other than shares of each Fund.
With respect to Developing Growth Fund, it did not invest in repurchase
agreements or lend portfolio securities during the last fiscal year and has no
present intent to do so.
Although they have no current intention to do so, the Funds may invest in
financial futures and options on financial futures.
For the fiscal year ended January 31, 2000, the portfolio turnover rate for
Developing Growth Fund was 50.13%, versus 30.89% for the prior fiscal year; for
the fiscal year ended December 31, 1999, the portfolio turnover rate for
Bond-Debenture Fund was 67.93%, versus 86.48% for the prior year; and for the
fiscal year ended December 31, 1999, the portfolio turnover rate for Mid-Cap
Value Fund was 64.76%, versus 46.58% for the prior year.
INVESTMENT TECHNIQUES
Stock Index Futures Contracts (Developing Growth Fund). The Fund believes it can
reduce the volatility inherent in its portfolio through the use of stock index
futures contracts. (A stock index futures contract is an agreement pursuant to
which two parties agree, one to receive and the other to pay, on a specified
date an amount of cash equal to a specified dollar amount -- established by an
exchange or board of trade -- times the difference between the value of the
index at the close of the last trading day of the contract and the price at
which the futures contract is originally written. No consideration is paid or
received at the time the contract is entered into, only the good faith deposit
described herein.) When Lord Abbett, our investment manager, anticipates a
general decline in the sector of the stock market which includes our portfolio
assets, we can reduce risk by hedging the effect of such decline on our ability
to sell assets at best price or otherwise hedge a decision to delay the sale of
portfolio securities. Such hedging would be possible if there were an
established, regularly-quoted stock index for equities of the character in which
we invest and if an active public market were to develop on a stock exchange or
board of trade in futures contracts based on such index.
3
<PAGE>
The market value of a futures contract is based primarily on the value of the
underlying index. Changes in the value of the index will cause roughly
corresponding changes in the market price of the futures contract, except as
otherwise described below. If a stock index is established which is made up of
securities whose market characteristics closely parallel the market
characteristics of the securities in our portfolio, then the market value of a
futures contract on that index should fluctuate in a way closely resembling the
market fluctuation of our portfolio. Thus, if we should sell futures contracts,
a decline in the market value of the portfolio will be offset by an increase in
the value of the short futures position to the extent of the hedge (i.e., the
percentage of the portfolio value represented by the value of the futures
position). Conversely, when we are in a strong cash position (for example,
through substantial sales of our shares) and wish to invest the cash in
anticipation of a rising market, we could rapidly hedge against the expected
market increase by buying futures contracts to offset the cash position and thus
cushion the adverse effect of attempting to buy individual securities in a
rising market.
The public markets for existing stock index futures contracts, such as those
using the Standard & Poor's 100 Index and 500 Index traded on the Chicago
Mercantile Exchange or those using the New York Stock Exchange Composite Index
traded on the New York Stock Exchange ("NYSE"), are active and have developed
substantial liquidity and we expect a similar market to develop for stock index
futures on a representative group of over-the-counter stocks. The existence of
an active market would permit us to close out our position in futures contracts
by purchasing an equal and opposite position in the public market. Under futures
contracts currently in use, the purchaser would be required to segregate in a
separate account, as a good faith deposit, cash or Treasury bills in an amount
set by a board of trade or exchange (currently approximately 5% of the contract
value). Each day during the contract period we would either pay or receive an
amount of cash equal to the daily change in the total value of the contracts.
The amount which we may segregate upon entering into a futures contract may not
exceed, together with the amounts on deposit under all outstanding contracts, 5%
of the value of our total assets, nor may we enter into additional futures
contracts if, as a result, the aggregate amount committed under all our open
futures contracts would exceed more than one-third of the value of such assets.
There are several risks in connection with the use of futures contracts as a
hedging device. One risk is the imperfect correlation between the composition of
our portfolio securities and the applicable stock index. If the value of the
futures contract moves more than the value of the stock being hedged, we would
experience either a loss or a gain on the futures contract which would not be
completely offset by movements in the value of the securities which are the
subject of the hedge. Another risk is that the value of futures contracts may
not correlate perfectly with movement in the stock index due to certain market
distortions. Although we will enter into futures contracts strictly to hedge our
portfolio or cash positions, other investors use these investment vehicles for
other, sometimes more speculative, purposes. At times, excess speculation in the
futures market can distort the normal market relationship between the price of
the futures contract and the value of the index. If we decide to enter into or
close out our futures position during a period of such excess speculation, the
hedging strategy will be more or less successful, depending on the direction and
amount of this distortion, than otherwise would be the case. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between movements in the stock index and movements in the
price of stock index futures contracts, a correct forecast of general market
trends by Lord Abbett may still not result in a successful hedging transaction.
It is possible that, when we sell futures contracts to hedge our portfolio
against a decline in the market, the market, as measured by the stock index, may
advance while the value of securities held in our portfolio may decline. If this
occurs, we will lose money on the futures contracts and also experience a
decline in value in our portfolio securities. However, Lord Abbett believes that
over time the value of a diversified portfolio will tend to move in the same
direction as the market index upon which the futures contracts are based.
4
<PAGE>
Where futures contracts are purchased to hedge against a possible increase in
the price of stock before we are able to invest our cash position in stock in an
orderly fashion, it is possible that the market may decline instead and we would
realize a loss; if we then decide not to invest in stock at that time because of
concern as to possible further market decline or for other reasons, we would
realize a loss on the futures contract that would be offset, to the extent the
cash position had not been invested in stocks being hedged.
Positions in futures contracts may be closed out only on an exchange or board of
trade which provides a market for such contracts. Although we intend to purchase
or sell futures contracts only if an active market has developed and is
continuing, there is no assurance that a liquid market on an exchange or board
of trade will exist for any particular contract or at any particular time. In
such event, it may not be possible to close out a futures position, and in the
event of adverse price movements, we would continue to be required to make daily
cash payments marking our position to market. However, since futures contracts
would have been used to hedge portfolio securities and such securities would not
be sold until the futures contracts had been terminated, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures contract.
We may incur additional brokerage commissions through entering into futures
contracts, although we also can save on commissions by hedging through such
contracts rather than through buying or selling individual securities in
anticipation of market moves. Successful use by us of futures contracts will
depend upon Lord Abbett's ability to predict movements in the direction of the
over-the-counter market generally, which requires different skills and
techniques than predicting changes in the prices of individual stocks.
Segregated Accounts (Developing Growth Fund). To the extent required to comply
with Securities and Exchange Commission Release 10666 and any related SEC
policies, when purchasing a futures contract, or writing a put option,
Developing Growth Fund will maintain in a segregated account at it custodian
bank cash, U.S. Government and other permitted securities to cover its position.
5
<PAGE>
2.
Directors and Officers
The Board of Directors of each Fund is responsible for the management of the
business and affairs of each Fund.
The following director is a partner of Lord, Abbett & Co. ("Lord Abbett"), 90
Hudson Street, Jersey City, New Jersey 07302-3973. He has been associated with
Lord Abbett for over five years and is also an officer, director or trustee of
the thirteen other Lord Abbett-sponsored funds.
*Robert S. Dow, age 55, Chairman and President
*Mr. Dow is an "interested person" as defined in the Act.
The following outside directors are also directors or trustees of thirteen other
Lord Abbett-sponsored funds referred to above.
E. Thayer Bigelow, Director
245 Park Avenue, Suite 2414
New York, New York
Senior Adviser, Time Warner Inc.(since 1998). Formerly, Acting Chief Executive
Officer of Courtroom Television Network (1997 - 1998). Formerly, President and
Chief Executive Officer of Time Warner Cable Programming, Inc. (1991 - 1997).
Prior to that, President and Chief Operating Officer of Home Box Office, Inc.
Age 58.
William H. T. Bush, Director
Bush-O'Donnell & Co., Inc.
101 South Hanley Road, Suite 1025
St. Louis, Missouri
Co-founder and Chairman for the Board of financial advisory firm of
Bush-O'Donnell & Company (since 1986). Age 61.
Robert B. Calhoun, Jr., Director
Monitor Clipper Partners
650 Madison Avenue, 9th Floor
New York, New York
Managing Director of Monitor Clipper Partners (since 1997) and President of The
Clipper Group L.P., both private equity investment funds (since 1990). Age 57.
Stewart S. Dixon, Director
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon (since 1990). Age 69.
John C. Jansing, Director
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 74.
6
<PAGE>
C. Alan MacDonald, Director
415 Round Hill Road
Greenwich, Connecticut
Currently involved in golf development management on a consultancy basis (since
1999). Formerly, Managing Director of The Directorship Inc., a consultancy in
board management and corporate governance (1997-1999). Prior to that General
Partner of The Marketing Partnership, Inc., a full service marketing consulting
firm (1994 - 1997). Prior to that, Chairman and Chief Executive Officer of
Lincoln Snacks, Inc., manufacturer of branded snack foods (1992 - 1994). His
career spans 36 years at Stouffers and Nestle with eighteen of the years as
Chief Executive Officer. Currently serves as Director of DenAmerica Corp., J.B.
Williams Company, Inc., Fountainhead Water Company and Exigent Diagnostics. Age
66.
Hansel B. Millican, Jr., Director
Rochester Button Company
1328 Broadway (Suite 816)
New York, New York
President and Chief Executive Officer of Rochester Button Company (since 1991).
Currently serves as Director of Polyvision. Age 71.
Thomas J. Neff, Director
Spencer Stuart
277 Park Avenue
New York, New York
Chairman of Spencer Stuart, an executive search consulting firm (since 1976).
Currently serves as Director of Ace, Ltd. (NYSE) Age 62.
For the Fiscal Year Ended January 31, 2000 (Developing Growth Fund)
For the Fiscal Year Ended December 31, 1999 (Bond-Debenture Fund)
For the Fiscal Year Ended December 31, 1999 (Mid-Cap Value Fund)
The following table sets forth the compensation accrued for each Fund's outside
directors.
Aggregate
Compensation
Accrued by
Name of Directors each Fund/1
- ----------------- -----------
Developing Bond- Mid-Cap
Growth Debenture Value
Fund Fund Fund
---- ---- ----
E. Thayer Bigelow $2,468 $ 9,758 $1,119
William H. T. Bush $1,183 $ 4,675 $ 536
Robert B. Calhoun, Jr. $1,441 $ 5,695 $ 653
Stewart S. Dixon $2,430 $ 9,605 $1,102
John C. Jansing(4) $2,387 $ 9,435 $1,082
C. Alan MacDonald $2,365 $ 9,350 $1,073
Hansel B. Millican, Jr. $2,387 $ 9,435 $1,082
Thomas J. Neff $2,430 $ 9,605 $1,102
The following table sets forth information with respect to the pension or
retirement benefits accrued by all Lord Abbett-sponsored funds for outside
directors/trustees.
7
<PAGE>
Pension or Retirement Benefits
Accrued by each Fund and Thirteen
Other Lord Abbett-sponsored
Name of Directors Funds/2
- ----------------- -------
E. Thayer Bigelow $17,622
William H. T. Bush $15,846
Robert B. Calhoun, Jr. $12,276
Stewart S. Dixon $32,420
John C. Jansing $41,1084
C. Alan MacDonald $26,763
Hansel B. Millican, Jr. $37,822
Thomas J. Neff $20,313
The following table sets forth the total compensation paid by all Lord
Abbett-sponsored funds to the outside directors/trustees, and amounts payable
but deferred at the option of the director/trustee, but does not include
amounts accrued under the third column. No director/trustee of the Funds
associated with Lord Abbett and no officer of the Funds received any
compensation from the Funds for acting as a director/trustee or officer.
For Year Ended December 31, 1999
Total Compensation Paid by each Fund
and Thirteen Other Lord Abbett-sponsored
Name of Directors Funds/3
- ----------------- -------
E. Thayer Bigelow $57,720
William H. T. Bush $58,000
Robert B. Calhoun $57,000
Stewart S. Dixon $58,500
John C. Jansing $57,250
C. Alan MacDonald $57,500
Hansel B. Millican, Jr. $57,500
Thomas J. Neff $59,660
1. Outside directors'/trustees' fees, including attendance fees for board and
committee meetings, are allocated among all Lord Abbett-sponsored funds
based on the net assets of each Fund. A portion of the fees payable by the
Fund to its outside directors/trustees may be deferred under a plan
("equity-based plan") that deems the deferred amounts to be invested in
shares of each Fund for later distribution to the directors/trustees. The
amounts of the aggregate compensation payable by each Fund in accordance
with the equity-based plan as of its most recent fiscal year end deemed
invested in Fund shares, including dividends reinvested and changes in net
asset value applicable to such deemed investments, were as follows: The
amounts of the aggregate compensation payable by the Developing Growth Fund
as of January 31, 2000 deemed invested in Fund shares, including dividends
reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $3,724; Mr. Dixon, $29,166; Mr. Jansing,
$65,878; Mr. MacDonald, $22,129; Mr. Millican, $ 67,603 and Mr. Neff, $
68,005. If the amounts deemed invested in Fund shares were added to each
director's actual holdings of Fund shares as of January 31, 1999, each
would own, the following: Mr. Bigelow, 260 shares; Mr. Dixon, 3,125 shares;
Mr. Jansing, 22,764 shares; Mr. MacDonald, 1,550 shares; Mr. Millican,
4,737 shares; and Mr. Neff, 8,420 shares.
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The amounts of the aggregate compensation payable by the Bond-Debenture
Fund as of December 31, 1999 deemed invested in Fund shares, including
dividends reinvested and changes in net asset value applicable to such
deemed investments, were: Mr. Bigelow, $ 31,694; Mr. Calhoun, $5,735; Mr.
Dixon, $ 32,763; Mr. Jansing, $ 100,161; Mr. MacDonald, $ 41,389; Mr.
Millican, $ 100,939 and Mr. Neff, $ 103,424. If the amounts deemed invested
in Fund shares were added to each director's actual holdings of Fund shares
as of December 31, 1998, each would own, the following: Mr. Bigelow, 3,353
shares; Mr. Calhoun, 607 shares; Mr. Dixon, 3,467 shares; Mr. Jansing,
10,599 shares; Mr. MacDonald, 4,379 shares; Mr. Millican, 10,681 shares;
and Mr. Neff, 10,944 shares.
The amounts of the aggregate compensation payable by Mid-Cap Value as of
December 31, 1999 deemed invested in company shares, including dividends
reinvested and changes in net asset value applicable to such deemed
investments, were: Mr. Bigelow, $4,687; Mr. Dixon, $26,673; Mr. Jansing,
$61,420; Mr. MacDonald, $20,483; Mr. Millican, $63,087; and Mr. Neff,
$63,325. If the amounts deemed invested in Fund shares were added to each
director's actual holdings of Fund shares as of December 31, 1998 each
would own, the following: Mr. Bigelow, 0 shares; Mr. Dixon, 31 shares; Mr.
Jansing, 4,631 shares; Mr. MacDonald, 0 shares; Mr. Millican, 0 shares; and
Mr. Neff, 915 shares.
2. This column indicates the amounts accrued by the Lord Abbett-sponsored
funds for the twelve months ended October 31, 1999.
3. This shows aggregate compensation, including directors/trustees' fees and
attendance fees for board and committee meetings, of a nature referred to
in footnote one, accrued by the Lord Abbett-sponsored funds during the year
ended December 31, 1999, including fee directors/trustees' have chosen to
defer but does not include amounts accrued under the equity-based plan.
4. The equity-based plans superseded a previously approved retirement plan for
all directors/trustees. Directors/trustees had the option to convert their
accrued benefits under the retirement plan. All of the current outside
directors/trustees except one made such an election. Mr. Jansing chose to
continue to receive benefits under the retirement plan, which provides that
outside directors/trustees may receive annual retirement benefits for life
equal to their final annual retainer following retirement at or after age
72 with at least ten years of service. Thus, if Mr. Jansing were to retire
and the annual retainer payable by the Funds were the same as it is today,
he would receive annual retirement benefits of $50,000.
Except where indicated, the following executive officers of the Funds have been
associated with Lord Abbett for over five years. Messrs. Carper, Hilstad,
Morris, and Walsh are partners of Lord Abbett; the others are employees. None
have received compensation from the Funds.
Executive Vice Presidents:
Stephen J. McGruder, age 55 (Developing Growth Fund)
Christopher Towle, age 42 (Bond-Debenture Fund)
Edward K. von der Linde, age 39 (Mid-Cap Value Fund)
Vice Presidents:
Paul A. Hilstad, age 57, Vice President and Secretary (all Funds) (with Lord
Abbett since 1995 - formerly Senior Vice President and General Counsel of
American Capital Management & Research, Inc.)
Thomas J. Baade, age 35 (Bond-Debenture Fund) (with Lord Abbett since 1998 -
formerly Vice President of Smith Barney from 1990 to 1998)
Zane Brown, age 48 (Bond-Debenture Fund)
Joan A. Binstock, age 46 (with Lord Abbett since 1999, formerly Chief Operating
Officer of Morgan Grenfell from 1996 to 1999, prior thereto Principal of Ernst &
Young LLP)
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Daniel E. Carper, age 48 (all Funds)
Michael S. Goldstein, age 31 (with Lord Abbett since 1997 - formerly involved in
Fixed Income trading and analysis at BEA Associated and Portfolio Administrator
for The Chase Manhattan Bank (Bond-Debenture Fund)
Howard Hansen, age 37 (Mid-Cap Value Fund)
Cinda C. Hughes, age 36 (Developing Growth) (with Lord Abbett since 1998 -
formerly Director, Equity Research of Phoenix Duff & Phelps from 1996 to 1998;
prior thereto Analyst, PaineWebber from 1993 to 1996)
Thomas W. In, age 31 (Developing Growth) (with Lord Abbett since 1997 - formerly
Assistant Vice President of Deutsche Morgan Grenfell from 1994 to 1997)
Lawrence H. Kaplan, age 43 (all Funds) (with Lord Abbett since 1997 - formerly
Vice President and Chief Counsel of Salomon Brothers Asset Management Inc. from
1995 to 1997; prior thereto, Senior Vice President, Director and General Counsel
of Kidder Peabody Asset Management, Inc.)
Robert G. Morris, age 55 (Bond-Debenture Fund, Mid-Cap Value Fund)
A. Edward Oberhaus III, age 40 (all Funds)
Tracie E. Richter, 32 (with Lord Abbett since 1999, formerly Vice President head
of Fund Administration of Morgan Grenfell from 1998 to 1999, Vice President - of
Bankers Trust from 1996 to 1998, prior thereto tax associate of Goldman Sachs).
Richard S. Szaro, age 55 (Bond-Debenture Fund)
John J. Walsh, age 63 (all Funds)
Treasurer:
Donna M. McManus, age 39 (all Funds) Treasurer (with Lord Abbett since 1996,
formerly a Senior Manager at Deloitte & Touche LLP).
As of April 15, 2000, our officers and directors as a group owned less than 1%
of each Fund's outstanding shares the record holders of 5% or more of each
Fund's outstanding shares are as follows:
The Funds' By-Laws provide that a Fund shall not hold annual meetings of
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Act, as amended (the "Act"), or unless called by a
majority of a Board of Directors or by stockholders holding at least one quarter
of the stock of a Fund outstanding and entitled to vote at the meeting. When any
such annual meeting is held, the stockholders will elect directors and vote on
the approval of the independent auditors of a Fund.
3.
Investment Advisory and Other Services
As described under "Management" in the Prospectus, Lord Abbett is the Funds'
investment manager. The general partners of Lord Abbett who are officers and/or
directors of the Funds are as follows: Zane E. Brown; Daniel E. Carper; Robert
S. Dow; Paul A. Hilstad; Stephen J. McGruder; Robert G. Morris; Christopher J.
Towle; and John J. Walsh.
The other general partners are: Stephen I. Allen, John E. Erard, Robert P.
Fetch, Daria L. Foster, Robert I. Gerber, W. Thomas Hudson, Michael B.
McLaughlin, Robert J. Noelke, and R. Mark Pennington. The address of each
partner is 90 Hudson Street, Jersey City, New Jersey 07302-3973.
The services performed by Lord Abbett are described under "Management" in the
Prospectus.
Under the Management Agreement, Developing Growth Fund is obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .75 of 1% of the portion of our net assets not in excess of
$100,000,000 and .50 of 1% of such assets over $100,000,000. This fee is
allocated among all class shares based on each class' proportionate shares of
such average daily net assets. For the fiscal years ended January 31, 2000, 1999
and 1998, the management fees paid to Lord Abbett amounted to $10,423,188,
$4,444,605, and $2,325,894, respectively.
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Under its Management Agreement, Bond-Debenture Fund is obligated to pay Lord
Abbett a monthly fee, based on average daily net assets for each month, at the
annual rate of .50 of 1% of the Fund's first $500 million of average daily net
assets and .45% of such assets over $500 million. This fee is allocated among
all classes based on each class' proportionate shares of such average daily net
assets. For the fiscal years ended December 31, 1999, 1998 and 1997, the
management fees paid to Lord Abbett by Bond-Debenture Fund amounted to,
$17,075,989, $14,835,355 and $11,621,344, respectively.
Under its Management Agreement, Mid-Cap Value Fund is obligated to pay Lord
Abbett a monthly fee, based on average daily net assets at the annual rate of
.75 of 1% on the first $200 million; .65 of 1% on the next $300 million; and .50
of 1% on the excess over $500 million. For the fiscal years ended December 31,
1999, 1998 and 1997, the management fees paid to Lord Abbett by Mid-Cap Value
Fund amounted to $2,792,854, $2,693,928 and $2,102,611.
We pay all expenses not expressly assumed by Lord Abbett, including without
limitation 12b-1 expenses, outside directors' fees and expenses, association
membership dues, legal and auditing fees, taxes, transfer and dividend
disbursing agent fees, shareholder servicing costs, expenses relating to
shareholder meetings, expenses of preparing, printing and mailing stock
certificates and shareholder reports, expenses of registering our shares under
federal and state securities laws, expenses of preparing, printing and mailing
prospectuses to existing shareholders, insurance premiums, brokerage and other
expenses connected with executing portfolio security transactions.
Lord Abbett Distributor LLC, A New York limited liability company ("Lord Abbett
Distributor"), and a subsidiary of Lord Abbett, 90 Hudson Street, Jersey City,
New Jersey 07302, serves as the principal underwriter for the Funds.
Deloitte & Touche LLP, Two World Financial Center, New York, New York 10281, are
the independent auditors of the Funds and must be approved at least annually by
the Board of Directors to continue in such capacity. Deloitte & Touche LLP
perform audit services for the Funds, including the examination of financial
statements included in our Annual Report to Shareholders.
The Bank of New York ("BNY"), 48 Wall Street, New York, New York 10286, is the
Funds' custodian. In accordance with the requirements of Rule 17f-5 under the
Act, the Funds' directors have approved arrangements permitting the Funds'
foreign assets not held by BNY or its foreign branches to be held by certain
qualified foreign banks and depositories.
United Missouri Bank of Kansas City, N.A., Tenth and Grand, Kansas City,
Missouri, acts as the transfer agent and dividend disbursing agent for the Fund.
4.
Portfolio Transactions
Our policy is to obtain best execution on all our portfolio transactions, which
means that we seek to have purchases and sales of portfolio securities executed
at the most favorable prices, considering all costs of the transaction,
including brokerage commissions and dealer markups and markdowns and taking into
account the full range and quality of the brokers' services. Consistent with
obtaining best execution, we generally pay, as described below, a higher
commission than some brokers might charge on the same transactions. Our policy
with respect to best execution governs the selection of brokers or dealers and
the market in which the transaction is executed. To the extent permitted by law,
we may, if considered advantageous, make a purchase from or sale to another Lord
Abbett-sponsored fund without the intervention of any broker-dealer.
Broker-dealers are selected on the basis of their professional capability and
the value and quality of their brokerage and research services. Normally, the
selection is made by traders who are officers of the Fund and also are employees
of Lord Abbett. These traders do the trading as well for other accounts
- --investment companies (of which they are also officers) and other investment
clients -- managed by Lord Abbett. They are responsible for obtaining best
execution.
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We pay a commission rate that we believe is appropriate to give maximum
assurance that our brokers will provide us, on a continuing basis, with the
highest level of brokerage services available. While we do not always seek the
lowest possible commissions on particular trades, we believe that our commission
rates are in line with the rates that many other institutions pay. Our traders
are authorized to pay brokerage commissions in excess of those that other
brokers might accept on the same transactions in recognition of the value of the
services performed by the executing brokers, viewed in terms of either the
particular transaction or the overall responsibilities of Lord Abbett with
respect to us and the other accounts they manage. Such services include showing
us trading opportunities including blocks, a willingness and ability to take
positions in securities, knowledge of a particular security or market proven
ability to handle a particular type of trade, confidential treatment, promptness
and reliability.
Some of these brokers also provide research services at least some of which are
useful to Lord Abbett in their overall responsibilities with respect to us and
the other accounts they manage. Research includes the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts and trading equipment and
computer software packages, acquired from third-party suppliers, that enable
Lord Abbett to access various information databases. Such services may be used
by Lord Abbett in servicing all their accounts, and not all of such services
will necessarily be used by Lord Abbett in connection with their management of
the Funds; conversely, such services furnished in connection with brokerage on
other accounts managed by Lord Abbett may be used in connection with their
management of the Funds, and not all of such services will necessarily be used
by Lord Abbett in connection with their advisory services to such other
accounts. We have been advised by Lord Abbett that research services received
from brokers cannot be allocated to any particular account, are not a substitute
for Lord Abbett's services but are supplemental to their own research effort and
when utilized, and are subject to internal analysis before being incorporated by
Lord Abbett into their investment process. As a practical matter, it would not
be possible for Lord Abbett to generate all of the information presently
provided by brokers. While receipt of research services from brokerage firms has
not reduced Lord Abbett's normal research activities, the expenses of Lord
Abbett could be materially increased if it attempted to generate such additional
information through its own staff and purchased such equipment and software
packages directly from the suppliers.
No commitments are made regarding the allocation of brokerage business to or
among brokers, and trades are executed only when they are dictated by investment
decisions of the Funds to purchase or sell portfolio securities.
If two or more broker-dealers are considered capable of offering the equivalent
likelihood of best execution, the broker-dealer who has sold our shares and/or
shares of other Lord Abbett-sponsored funds may be preferred. If other clients
of Lord Abbett buy or sell the same security at the same time as we do,
transactions will, to the extent practicable, be allocated among all
participating accounts in proportion to the amount of each order and will be
executed daily until filled so that each account shares the average price and
commission cost of each day. Other clients who direct that their brokerage
business be placed with specific brokers or who invest through wrap accounts
introduced to Lord Abbett by certain brokers may not participate with us in the
buying and selling of the same securities as described above. If these clients
wish to buy or sell the same security as we do, they may have their transactions
executed at times different from our transactions and thus may not receive the
same price or incur the same commission cost as we do.
During the fiscal years ended January 31, 1999, 1998 and 1997, Developing Growth
Fund paid total commissions to independent broker-dealers of $4,920,536,
$1,930,696 and $1,696,590, respectively.
During the fiscal years ended December 31, 1998, 1997 and 1996, the
Bond-Debenture Fund paid total commissions to independent broker-dealers of
$19,393,923, $14,773,720 and $8,760,174, respectively.
During the fiscal years ending December 31, 1998, 1997 and 1996, the Mid-Cap
Value Fund paid total commissions to independent broker-dealers of $1,258,888,
$992,190 and $554,002, respectively.
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5.
Purchases, Redemptions
and Shareholder Services
The Funds value their portfolio securities at market value as of the close of
the NYSE. Market value will be determined as follows: securities listed or
admitted to trading privileges on the New York or American Stock Exchange or on
the NASDAQ National Market System are valued at the last sales price, or, if
there is no sale on that day, at the mean between the last bid and asked prices,
or, in the case of bonds, in the over-the-counter market if, in the judgment of
a Fund's officers, that market more accurately reflects the market value of the
bonds. Over-the-counter securities not traded on the NASDAQ National Market
System are valued at the mean between the last bid and asked prices. Securities
for which market quotations are not available are valued at fair market value
under procedures approved by the Board of Directors.
Information concerning how we value our shares for the purchase and redemption
of our shares is described in the Prospectus under "Purchases" and
"Redemptions," respectively.
As disclosed in the Prospectus, we calculate our net asset value and are
otherwise open for business on each day that the NYSE is open for trading. The
NYSE is closed on Saturdays and Sundays and the following holidays -- New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
The net asset value per share for the Class Y shares will be determined by
taking Class Y shares (net assets divided by shares outstanding). Our Class Y
shares will be offered at net asset value.
The Funds have entered into distribution agreements with Lord Abbett Distributor
LLC, a New York limited liability company and subsidiary of Lord Abbett under
which Lord Abbett Distributor is obligated to use its best efforts to find
purchasers for the shares of the Funds, and to make reasonable efforts to sell
Fund shares so long as, in Lord Abbett Distributor's judgment, a substantial
distribution can be obtained by reasonable efforts.
CLASS Y SHARE EXCHANGES. The Prospectus describes the Telephone Exchange
Privilege. You may exchange some or all of your Class Y shares for Class Y
shares of any other eligible Lord Abbett-sponsored fund currently offering Class
Y shares to the public. Currently those other funds consist of Lord Abbett
Affiliated Fund, Inc., Lord Abbett Research Fund, Inc. - Small-Cap Research Fund
and Growth Opportunities Fund, Lord Abbett Securities Trust - International
Fund, and Lord Abbett Investment Trust - High Yield Fund, Core Fund and
Strategic Core Fund.
REDEMPTIONS. A redemption order is in proper form when it contains all of the
information and documentation required by the order form or supplementally by
Lord Abbett Distributor or the Funds to carry out the order. The signature(s)
and any legal capacity of the signer(s) must be guaranteed by an eligible
guarantor. See the Prospectus for expedited redemption procedures.
The right to redeem and receive payment, as described in the Prospectus, may be
suspended if the NYSE is closed (except for weekends or customary holidays),
trading on the NYSE is restricted or the Securities and Exchange Commission
deems an emergency to exist.
Our Boards of Directors for the Funds may authorize redemption of all of the
shares in any account in which there are fewer than 25 shares. Before
authorizing such redemption, the Board must determine that it is in our economic
best interest or necessary to reduce disproportionately burdensome expenses in
servicing shareholder accounts. At least 30 days' prior written notice will be
given before any such redemption, during which time shareholders may avoid
redemption by bringing their accounts up to the minimum set by the Board.
6.
Past Performance
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The Fund computes the average annual compounded rate of total return for Class Y
shares during specified periods that would equate the initial amount invested to
the ending redeemable value of such investment by adding one to the computed
average annual total return, raising the sum to a power equal to the number of
years covered by the computation and multiplying the result by one thousand
dollars, which represents a hypothetical initial investment. The calculation
assumes applicable sales charge deduction from the initial amount invested and
reinvestment of all income dividends and capital gains distributions on the
reinvestment dates at prices calculated as stated in the Prospectus. The ending
redeemable value is determined by assuming a complete redemption at the end of
the period(s) covered by the total return computation for the period.
In calculating total returns for Class Y shares no sales charge is deducted from
the initial investment and the return is shown at net asset value. Total returns
also assume that all dividends and capital gains distributions during the period
are reinvested at net asset value per share, and that the investment is redeemed
at the end of the period.
Class Y share performance. Using the computation method described above, the
Developing Growth Fund's annual total return for the year ended January 31, 1999
and the period of inception (December 30, 1997) to January 31, 1998 was 14.59%
and 1.06% (non-annualized), respectively, and for Bond-Debenture Fund the
non-annualized total return for the period of inception (March 27, 1998) to
December 31, 1998 was .55%.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
Taxes
The value of any shares redeemed each Fund or otherwise sold may be more or less
than your tax basis in the shares at the time of disposition. Any gain generally
will be taxable for federal income tax purposes. Any loss realized on the
disposition of a Fund's shares which you have held for six months or less will
be treated for tax purposes as a long-term capital loss to the extent of any
capital gains distributions which you received with respect to such shares.
Losses on the sale of shares are not deductible if, within a period beginning 30
days before the date of the sale and ending 30 days after the date of the sale,
the taxpayer acquires shares that are substantially identical.
A Fund may be subject to foreign withholding taxes which would reduce the yield
on its investments. It is generally expected that shareholders of a Fund who are
subject to United States federal income tax will not be entitled to claim a
federal income tax credit or deduction for foreign income taxes paid by such
Funds.
Gain and loss realized by a Fund on certain transactions, including sales of
foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
If a Fund purchase shares in certain foreign investment entities called "PFICs"
or "passive foreign investment companies," it may be subject to United States
federal income tax on a portion of any "excess distribution" or gain from the
disposition of such shares, even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on either the Fund or its shareholders in respect of
deferred taxes arising from such distributions or gains. If a Fund were to make
a "qualified electing fund" election with respect to its investment in a passive
foreign investment company in lieu of the foregoing requirements, such Fund
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the qualified electing fund, even if such
amount were not distributed to such Fund.
Each Fund will be subject to a 4% nondeductible excise tax on certain amounts
not distributed on treated as having been distributed on a timely basis calendar
year. Each Fund intends to distribute to shareholders each year an amount
adequate to avoid the imposition of such excise tax.
Dividends paid by a Fund will qualify for the dividends-received deduction for
corporations, to the extent they are derived from dividends paid by domestic
corporations.
The foregoing discussion relates solely to U.S. Federal income tax law as
applicable to United States persons (United States citizens or residents and
United States domestic corporations, partnerships, trusts and estates). Each
shareholder who is not a United States person should consult his tax adviser
regarding the U.S. and foreign tax consequences of the ownership of shares of a
Fund, including a 30% (or lower treaty rate) United States withholding tax on
dividends representing ordinary income and net short-term capital gains, and the
applicability of United States gift and estate taxes.
8.
Information About the Funds
Our Boards of Directors have authority to create and classify shares in separate
series, without further action by shareholders. To date, the Boards of Directors
have authorized five classes of shares for Developing Growth Fund,
Bond-Debenture Fund, and Mid-Cap Value Fund (Class A, B, C, P and Y). The Board
of a Fund will allocate a Fund's shares among its classes from time to time. All
shares of a Fund have equal noncumulative voting rights and equal rights with
respect to dividends, assets and liquidation, except for certain class-specific
expenses. They are fully paid and nonassessable when issued and have no
preemptive or conversion rights. Although no present plans exist to do so,
further series may be added to one or more of the Funds in the future. The
Investment Company Act of 1940, as amended (the "Act"), requires that where more
than one series exists for a Fund, each series must be preferred over all other
series in respect of assets specifically allocated to such series.
Rule 18f-2 under the Act provides that any matter required to be submitted, by
the provisions of the Act or applicable state law or otherwise, to the holders
of the outstanding voting securities of an investment company such as the Fund
shall not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each class or series affected
by such matter. Rule 18f-2 further provides that a class or series shall be
deemed to be affected by a matter unless the interests of each class or series
in the matter are substantially identical or the matter does not affect any
interest of such class or series. However, the Rule exempts the selection of
independent public accountants, the approval of a contract with a principal
underwriter and the election of directors from its separate voting requirements.
The directors and officers of Lord Abbett-sponsored mutual funds, together with
the partners and employees of Lord Abbett, are permitted to purchase and sell
securities for their personal investment accounts. In engaging in personal
securities transactions, however, such persons are subject to requirements and
restrictions contained in the Fund's Code of Ethics which complies, in
substance, with each of the recommendations of the Investment Company
Institute's Advisory Group on Personal Investing. Among other things, the Code
requires that Lord Abbett partners and employees obtain advance approval before
buying or selling securities, submit confirmations and quarterly transaction
reports, and obtain approval before becoming a director of any company; and it
prohibits such persons from investing in a security seven days before or after
any Lord Abbett-sponsored fund or Lord Abbett-managed account considers a trade
or trades in such security, from profiting on trades of the same security within
60 days and from trading on material and non-public information. The Code
imposes certain similar requirements and restrictions on the independent
directors of each Lord Abbett-sponsored mutual fund to the extent contemplated
by the recommendations of the Advisory Group.
9.
Financial Statements
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The financial statements for the fiscal year ended January 31, 2000 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 2000 Annual Report to Shareholders of Lord Abbett
Developing Growth Fund, Inc. are incorporated herein by reference to such
financial statements and report, in reliance upon the authority of Deloitte &
Touche LLP as experts in auditing and accounting.
The financial statements for the fiscal year ended December 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Report to Shareholders of Lord Abbett
Bond-Debenture Fund, Inc. are incorporated herein by reference to such financial
statements and report, in reliance upon the authority of Deloitte & Touche LLP
as experts in auditing and accounting.
The financial statements for the fiscal year ended December 31, 1999 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1999 Annual Report to Shareholders of Lord Abbett
Mid-Cap Value Fund, Inc. are incorporated herein by reference to such financial
statements and report, in reliance upon the authority of Deloitte & Touche LLP
as experts in auditing and accounting.
<PAGE>
