SUPPLEMENT DATED MAY 22, 1995 TO THE CURRENT STATEMENT OF ADDITIONAL INFORMATION
FOR LORD ABBETT BOND-DEBENTURE FUND, INC.
<PAGE>
INVESTMENT MANAGEMENT
A TRADITION OF PERFORMANCE THROUGH DISCIPLINED INVESTING.
<PAGE>
"We believe that an investment firm worthy of the name fosters a sound
professional relationship between the House and the Client."
<PAGE>
PARTNERSHIP AT LORD, ABBETT & CO.
INDEPENDENCE AND EXCELLENCE
Established in 1929, Lord, Abbett & Co. is guided by a long tradition of
independence and excellence. We are a partnership and all of our partners are
active in the daily management of the Firm. Attributes such as dedication,
accountability, involvement and performance define our organization and and
characterize the way we invest.
Assets under management currently total about $16 billion, consisting of a
family of mutual funds and separately-managed equity, fixed-income and balanced
accounts for corporations, institutions and individuals.
<PAGE>
"THE MOST IMPORTANT
ELEMENT IN SECURING THE FIRMS FUTURE:
ALWAYS PUT THE INVESTOR FIRST."
RONALD P. LYNCH,
MANAGING PARTNER
[Picture]
Seated:
Ronald P. Lynch,
Managing Partner
Standing, left to right:
Thomas S. Henderson,
Partner and Portfolio Manager
Daniel E. Carper,
Partner in charge of Sales and Marketing
Robert S. Dow,
Partner in charge of Fixed Income and Portfolio Manager
<PAGE>
LORD ABBETT'S INVESTMENT PHILOSOPHY
[Picture]
SEATED:
ROBERT S. DOW,
PARTNER IN CHARGE OF FIXED INCOME AND PORTFOLIO MANAGER
STANDING, LEFT TO RIGHT:
ROBERT G. MORRIS,
DIRECTOR OF EQUITY INVESTMENTS
JULIE M. CANNELL,
ASSOCIATE DIRECTOR OF EQUITY RESEARCH
ZANE E. BROWN,
DIRECTOR OF FIXED INCOME AND PORTFOLIO MANAGER
EQUITY MANAGEMENT
For decades, value has been at the heart of our approach to investing. We invest
for the long term in the securities of companies whose earnings potential, cash
flow or net assets are underpriced in the marketplace. Often this means sifting
through companies that are out of favor with Wall Street and the investing
public to identify the best relative values. Our objective is to obtain
above-average total returns consistently, with less volatility than the market.
What distinguishes us as value managers is the investment process used to
find securities that we believe are positioned to benefit from change. This
process combines quantitative, fundamental and economic analysis in the
disciplined selection of securities.
<PAGE>
LORD ABBETT'S INVESTMENT PHILOSPHY
"INVESTING IN SECURITIES THAT ARE UNDERVALUED HAS PRODUCED COMPETITIVE,
CONSISTENT LONG-TERM RETURNS WITH BELOW-MARKET RISK."
ROBERT S. DOW,
PARTNER IN CHARGE OF
FIXED INCOME AND
PORTFOLIO MANAGER
FIXED-INCOME MANAGEMENT
We utilize a total return approach to fixed-income management, with an emphasis
on current income. Maturities and sectors are adjusted to reflect our outlook
for inflation, interest rates, changes in Federal Reserve policy and cyclical
market pressures. Call protection, issuers creditworthiness and prepayment risk
are important considerations in determining intrinsic value. We also believe
bonds can become mispriced for non-economic reasons, which creates
opportunities for value investors.
BALANCED MANAGEMENT
Our balanced portfolios combine our fundamentally-driven, value-oriented equity
management with an actively managed, primarily high-quality, fixed-income
portfolio. The ratio of stocks to bonds is determined at periodic strategy
meetings based on our assessment of the risk-adjusted prospects for both
markets.
<PAGE>
A TALENTED INVESTMENT TEAM
Our investment effort is built on in-house research. We do our own market and
securities analyses and we make our own financial forecasts. On-site plant
inspections and discussions with senior corporate management are an important
part of evaluating the companies currently held in our portfolios as well as
those we are considering for investment. These efforts add perspective on a
companys costs, long-term strategies and the competitive dynamics a company has
within its industry.
Our portfolio managers, research analysts and economist work closely in all
aspects of investment decision making. We currently have a staff of 38
investment professionals, who average 19 years of experience in the business and
8 years of tenure with Lord, Abbett & Co.
<PAGE>
INTERNATIONAL EXPERTISE
"INVESTMENT POTENTIAL SHIFTS THROUGHOUT THE WORLD. GLOBAL INVESTING ALLOWS
INVESTORS TO CAPITALIZE ON GROWTH OPPORTUNITIES ABROAD."
E. WAYNE NORDBERG,
PARTNER AND
PORTFOLIO MANAGER
[Picture]
LEFT TO RIGHT:
E. WAYNE NORDBERG,
PARTNER AND PORTFOLIO MANAGER
ZANE E. BROWN,
DIRECTOR OF FIXED INCOME AND PORTFOLIO MANAGER
BURTON ZWICK,
SENIOR ECONOMIST
We maintain an advisory relationship with Dunedin Fund Managers Limited of
Scotland, which adds a global dimension to our resources. Dunedin and its
predecessors have been managing global investments since 1873.
Dunedin's investment philosophy complements Lord Abbett's: Dunedin's
decision-making process is based on fundamental research, which is applied to
the global markets. Throughout its history, Dunedin has derived its strength and
reputation from its high-quality staff and its record of superior returns.
<PAGE>
CONSISTENCY OF PERFORMANCE
Our performance is the results of a collaborative effort where everyone works
toward a common goal uncommon investment results. We believe that by striving
for consistent performance through our focus on value investing, we will
continually increase the assets we manage. We have not diluted our efforts by
expansion into any other enterprises. Money management is Lord Abbetts only
business.
"TAKING AN INVESTOR
TO HIS OR HER STATED
GOALTHATS OUR DENITION
OF PERFORMANCE."
THOMAS S. HENDERSON,
PARTNER AND
PORTFOLIO MANAGER
[Picture]
LEFT TO RIGHT:
THOMAS S. HENDERSON,
PARTNER AND PORTFOLIO MANAGER
ROBERT G. MORRIS,
DIRECTOR OF EQUITY INVESTMENTS
VICTOR W. PIZZOLATO,
SENIOR SECURITIES TRADER
<PAGE>
LORD, ABBETT & CO.
INVESTMENT
MANAGERS & UNDERWRITERS
SINCE 1929
WE INVITE YOU TO CALL LORD, ABBETT & CO.
800-426-1130
<PAGE>
OUR FAMILY OF FUNDS
LORD, ABBETT & CO.
Investment Management
[P1]
A Tradition of Performance
Through Disciplined Investing
<PAGE>
Founded in 1929, Lord, Abbett & Co. was one of the nation's first mutual
fund managers. While many things have changed since then, we have remained
committed to:
. Putting the investor first - our future depends on it.
. Providing investors with investment options - the Lord Abbett Family of
Funds consists of 25 portfolios to meet a variety of investment needs.
. Working with financial professionals - who provide valuable, informed
advice and help investors select the appropriate funds for their needs.
. Investing with a disciplined, value approach - we believe it is the best
way to achieve competitive returns and reduce portfolio risk.
. Attracting and retaining a qualified staff of investment professionals -
which currently consists of 41 professionals who average 19 years of
industry experience and 9 years of tenure with Lord, Abbett & Co.
This commitment has helped us earn the trust of financial professionals,
mutual fund investors, private investors, corporations and institutions.
"The most important element
[P2] in securing the Firm's future:
Ronald P. Lynch, always put the investor first."
Managing Partner
Ronald P. Lynch,
Managing Partner
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
About Lord, Abbett & Co............................................... 1
Selecting A Fund...................................................... 3
Fund Data
. Fund Performance............................................. 4
. Growth Funds................................................. 5
. Growth & Income Funds........................................ 6
. Balanced Fund................................................ 6
. Income Funds................................................. 7
. Tax-Free Income Funds........................................ 8
. Limited-Term Income Funds.................................... 12
Service & Flexibility................................................. 13
</TABLE>
<PAGE>
ABOUT
LORD,
ABBETT
WHO INVESTS IN THE LORD ABBETT FAMILY OF FUNDS? & CO.
- -------------------------------------------------------------------------
Number Of
Accounts*
. FIDUCIARIES
Trusts...................................................... 25,810
Custodians for minors....................................... 24,487
Pension, Profit-Sharing, and 401(k) Retirement Plans........ 24,099
457 Retirement & 403(b) Plans............................... 7,975
Estates..................................................... 1,192
. INSTITUTIONS
Accounts held in Broker/Dealer Street Name.................. 170,297
Corporations................................................ 2,410
Charitable & religious organizations........................ 993
Banks, credit unions & other financial organizations........ 982
Clubs & fraternal organizations............................. 330
Cemeteries.................................................. 148
Government Agencies......................................... 104
Colleges & universities..................................... 79
Nursing homes & hospitals................................... 69
. INDIVIDUALS
Single & joint accounts..................................... 200,831
IRAs........................................................ 85,517
-------
TOTAL 545,323
Lord Abbetts current and retired employees and their families have over $175
million invested in the Lord Abbett Family of Funds.
*As of 3/31/95.
Lord Abbett currently manages over
$16 billion for private investors,
corporations and institutions. [G1]
Assets under management
break out as follows:
1
<PAGE>
ABOUT
LORD,
ABBETT
& CO. WHAT MAKES LORD ABBETT DIFFERENT?
-----------------------------------------------------------------
AN INVESTMENT PHILOSOPHY ROOTED IN VALUE
A focus on value investing is the cornerstone of our investment
philosophy. Simply put, value investing is bargain hunting.
What distinguishes Lord, Abbett & Co. from other equity value managers
is our disciplined, three-step investment process used to identify and
invest in bargain-priced securities. Our goal is to provide investors
with portfolios that offer competitive total returns with less
volatility than the market.
OUR DISCIPLINED INVESTMENT PROCESS
. Quantitive Research is performed
to identify the most attractively
priced stocks. These "Targets of
Opportunity" undergo further
analyses.
. Fundamental Research helps . A Macro-Economic/Interest-
assess a company's resources Rate Screen helps portfolio
and determines if, given these managers identify opportunities
resources, a company's afforded by economic or
strategic plan is realistic. interest-rate influences.
In the management of fixed-income portfolios, our goal is total return
with an emphasis on current income. Based on our outlook for inflation,
interest rates and changes in Federal Reserve policy, we look for
undervalued securities. Active portfolio management strategies,
including adjusting maturities and sectors, and analyzing an issuer's
creditworthiness and prepayment risk, help us identify opportunities in
the fixed-income markets.
These same investment disciplines are used to manage our global mutual
funds. Dunedin Fund Managers Limited of Scotland serves as sub-adviser
and adds a global dimension to our resources. Dunedin and its
predecessors have been managing money since 1873.
"Our goal in investing in undervalued
[P3] securities is to produce competitive long-term
returns with reduced market risk."
Robert G. Morris,
Director of Equity Investments
left to right:
Julie M. Cannell,
Associate Director of
Equity Research
Robert G. Morris,
Director of Equity Investments
2
<PAGE>
SELECTING
A FUND
THE LORD ABBETT INVESTMENT SPECTRUM
- -------------------------------------------------------------------
The Lord Abbett Family of Funds consists of 25 portfolios
designed to meet various investment objectives. Shareholders
may reallocate assets among our funds at any time.
<TABLE>
<CAPTION>
GROWTH INCOME
- ------ ------------
Growth Growth & Balanced Income Tax-Free Limited-Term-
Funds Income Funds Fund Funds Income Funds Income Funds
- ------ ------------ -------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Developing Affiliated Fund Investment U.S. Government -National Investment Trust
Growth Fund Trust- Securities Fund -California Limited Duration
Fundamental Balanced -Connecticut U.S. Government
Value Value Fund Series Bond-Debenture -Florida Securities Series
Appreciation Fund -Georgia
Fund -Hawaii U.S. Government
Global Fund- -Michigan Securities Money
Global Fund- Income Series -Minnesota Market Fund
Equity Series -Missouri
-New Jersey
-New York
-Pennsylvania
-Texas
-Washington
</TABLE>
For more complete information on any of these funds, including charges,
risk factors, expenses assumed and fees waived, please contact your
financial adviser or call Lord, Abbett & Co. at 800-874-3733 for a
prospectus. Please read the prospectus carefully before investing.
"Having access to a complete family of funds
gives the professional financial adviser the
flexibility to build an individualized portfolio
from a combination of funds to meet each [P4]
client's unique investment objective."
Daniel E. Carper,
Partner in Charge of Marketing and Sales
left to right:
Stephen I. Allen,
Partner, National Sales
Manager
Daniel E. Carper,
Partner in Charge of
Marketing and Sales
3
<PAGE>
FUND
DATA
FUND PERFORMANCE (AS OF 3/31/95)
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<TABLE>
<CAPTION>
Average Annual Rates of Return at Maximum
Sales Charge for the Periods Ended 3/31/95
------------------------------------------------
Inception 10 Years or
Date Symbol 1 Year 3 Years 5 Years Since Inception
--------- ------ ------ ------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Growth Funds
------------
Developing Growth Fund 10/10/73 LAGWX 6.00% 6.06% 10.89% 7.79%
Value Appreciation Fund 6/28/83 LAVLX 1.20 7.49 9.39 11.74
Global Fund--Equity Series 9/30/88 LAGEX -6.60 6.68 4.70 5.54*
Growth & Income Funds
---------------------
Affiliated Fund 5/14/34 LAFFX 10.00 10.77 9.70 12.68
Fundamental Value Fund 7/8/86 LDFVX 7.20 8.94 9.19 9.70*
Balanced Fund
-------------
Investment Trust--Balanced Series 12/27/94 LABFX** - - - 0.90*+
Income Funds
------------
U.S. Government Securities Fund 9/19/32 LAGVX -1.60 4.28 7.54 9.17++
Bond-Debenture Fund 4/1/71 LBNDX -3.60 6.79 10.71 9.70
Global Fund--Income Series 9/30/88 LAGIX 3.50 6.32 8.85 8.19*
Tax-Free Income Funds
---------------------
National Series 4/2/84 LANSX 0.50 4.86 6.81 9.10
California Fund 9/3/85 LCFIX -0.90 4.40 6.67 7.96*
Connecticut Series 4/1/91 LACTX 0.60 5.31 - 6.55*
Florida Series 9/25/91 LAFLX 0.70 5.52 - 5.27*
Georgia Series 12/27/94 LAGAX** - - - 1.20*+
Hawaii Series 10/28/91 LAHIX 0.80 5.10 - 5.36*
Michigan Series 12/1/92 LAMIX 1.00 - - 4.57*
Minnesota Series 12/27/94 LAMNX** - - - 0.20*+
Missouri Series 5/31/91 LAMOX 0.00 4.86 - 6.47*
New Jersey Series 1/2/91 LANJX 1.10 5.85 - 7.32*
New York Series 4/2/84 LANYX -1.70 4.34 6.55 8.70
Pennsylvania Series 2/3/92 LAPAX 1.20 5.73 - 5.49*
Texas Series 1/20/87 LATIX 1.90 5.25 7.22 7.29*
Washington Series 4/15/92 LAWAX 0.80 - - 5.11*
Limited-Term Income Funds
-------------------------
Investment Trust--Limited Duration
U.S. Government Securities Series 11/4/93 LALDX** -0.40 - - -2.00*
U.S. Government Securities Money
Market Fund 6/27/79 LACXX 4.17 3.01 4.12 5.55
</TABLE>
* Since inception.
** Proposed.
+ Not annualized.
++ Prior to 10/15/85, the Fund invested in both corporate and U.S.
Government securities. Since that date, the Fund has invested in
U.S. Government securities exclusively. Average annual total return
from that date is 8.32%.
Performance results shown above reflect the percent change in
value assuming the reinvestment of all distributions. The results
quoted herein represent past performance which is no indication of
future results. The investment return and principal value of an
investment in the funds will fluctuate so that shares, on any given
day or when redeemed, may be worth more or less than their original
cost. The maximum sales charge is 3.00% for investments under $100,000
in the Limited Duration U.S. Government Securities Series; 5.75% for
investments under $50,000 in any of the growth or growth & income
funds; and 4.75% for investments under $100,000 in the Balanced Series
and in any of the remaining income funds except for the Money Market
Fund (which has no sales charge). See the prospectus of the fund you
are interested in for a discussion of fees waived and expense
subsidies.
4
<PAGE>
FUND
DATA
GROWTH FUNDS
- -------------------------------------------------------------------------
LORD ABBETT DEVELOPING GROWTH FUND Inception: 10/10/73
-------------------------------------------------------------------------
The goal of the Fund is to allow shareholders Average Annual Total
to participate in the future of selected small Returns as of 3/31/95
companies with above-average prospects for growth.
Composition: A portfolio of stocks of small companies.
Goal: To provide you with long-term price appreciation.
Net Assets: $138.9 million
Initial [G2]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested annually (if declared)
LORD ABBETT VALUE APPRECIATION FUND Inception: 6/28/83
--------------------------------------------------------------------------
The Fund is one of only a few funds that focuses Average Annual Total
on out-of-favor midsized companies (those with Returns as of 3/31/95
market capitalizations of roughly $500 million
to $3 billion).
Composition: A portfolio of undervalued stocks of midsized companies.
Goal: To provide you with growth of capital.
Net Assets: $194.5 million
Initial [G3]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested annually
LORD ABBETT GLOBAL FUND - EQUITY SERIES Inception: 9/30/88
--------------------------------------------------------------------------
Global diversification gives the Series the Average Annual Total
potential to benefit from favorable economic Returns as of 3/31/95
trends and undervalued securities throughout
the world.
Composition: A portfolio of undervalued stocks from around the world.
Goal: To provide you with long-term growth and income.
Net Assets: $80.6 million
Initial [G4]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested semi-annually
Country Diversification
on 3/31/95
[G5]
All results are at net asset value. See "Fund Performance" on page 4 for
performance at the applicable maximum sales charge. For a description of
fees waived and expense subsidies, see the prospectus of the fund you are
interested in.
5
<PAGE>
FUND
DATA
GROWTH & INCOME FUNDS
- -------------------------------------------------------------------------
LORD ABBETT'S AFFILIATED FUND Inception: 5/14/34
---------------------------------------------------------------------------
The Fund utilizes a disciplined investment approach Average Annual Total
to identify out-of-favor stocks of large, blue-chip Returns as of 3/31/95
companies.
Composition: A portfolio of undervalued stocks of
large, well-seasoned companies.
Goal: To provide you with long-term growth
of capital and income without excessive
price fluctuations.
Net Assets: $4.4 billion
Initial [G6]
Investment: $250 minimum
Dividends: Paid or reinvested quarterly
LORD ABBETT FUNDAMENTAL VALUE FUND Inception: 7/8/86
---------------------------------------------------------------------------
The Fund invests in out-of-favor stocks of Average Annual Total
large and midsized companies. This policy allows Returns as of 3/31/95
management to look at opportunities in a very
large universe.
Composition: A portfolio of stocks of large and
midsized companies.
Goal: To provide you with growth of capital and income.
Net Assets: $35.6 million
Initial [G7]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested semi-annually
BALANCED FUND
- -------------------------------------------------------------------------
LORD ABBETT INVESTMENT TRUST--BALANCED SERIES Inception: 12/27/94
---------------------------------------------------------------------------
Composition: A portfolio that combines fundamentally
driven, value-oriented stocks with
actively-managed fixed-income investments. [NEW]
Goal: To provide you with current income and
long-term growth of capital.
Initial
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly
All results are at net asset value. See "Fund Performance" on page 4 for
performance at the applicable maximum sales charge. For a description of
fees waived and expense subsidies, see the prospectus of the fund you are
interested in.
6
<PAGE>
FUND
DATA
INCOME FUNDS
- --------------------------------------------------------------------------
Lord Abbett U.S. Government Securities Fund Inception: 9/19/32
---------------------------------------------------------------------------
Invests exclusively in obligations issued Average Annual Total
or backed by the U.S. Government, its agencies or Returns as of 3/31/95
instrumentalities.
Composition: A portfolio of U.S. Government securities.
Goal: To provide you with high current income.
Net Assets: $3.2 billion
Initial [G8]
Investment: $500 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly
* Prior to 10/15/85, the Fund invested in both corporate and U.S.
Government securities. Since that date, the Fund has invested exclusively
in U.S. Government securities. Average annual total return from that date
is 8.9%.
LORD ABBETT BOND-DEBENTURE FUND Inception: 4/1/71
---------------------------------------------------------------------------
The Fund emphasizes convertible issues and lower Average Annual Total
rated debt. The Fund focuses on the most attractive Returns as of 3/31/95
sectors of the bond market based on Lord Abbetts
judgment with respect to anticipated changes in
interest rates, the economy and the financial markets.
Composition: A portfolio of lower rated corporate bonds, equity-related
securities and high-grade bonds.
Goal: To provide you with high current income and capital growth
to produce high total returns.
Net Assets: $1.0 billion
Initial [G9]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly Portfolio Composition
on 3/31/95
[G10]
All results are at net asset value. See "Fund Performance" on page 4 for
performance at the applicable maximum sales charge. For a description of
fees waived and expense subsidies, see the prospectus of the fund you are
interested in.
7
<PAGE>
FUND
DATA
INCOME FUNDS (Continued)
---------------------------------------------------------------------
Lord Abbett Global Fund Income Series Inception: 9/30/88
-----------------------------------------------------------------------
The Series seeks high real returns (i.e., yield Average Annual Total
minus inflation) by primarily investing in high- Returns as of 3/31/95
quality debt securities issued or guaranteed by
the U.S. or other foreign governments or their
agencies; high-quality U.S. and foreign
corporate debt and debt obligations of banks and
bank holding companies.
Composition: A portfolio of high-quality international and U.S. debt.
Goal: To provide you with high current income. Although not a
primary objective, the Series also is managed for growth
of capital.
Net Assets: $252.6 million
Initial [G11]
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly
Portfolio quality Country Diversification
on 3/31/95 on 3/31/95
[G12] [G13]
TAX-FREE INCOME FUNDS
- --------------------------------------------------------------------------
Lord Abbett manages several tax-free funds to provide you with high
current income exempt from federal income taxes and, for single-state
portfolios, exemption from state income and/or personal property taxes
(if applicable). All of Lord Abbett's tax-free income funds focus on
high-quality securities.
NATIONAL SERIES INCEPTION: 4/2/84
------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal income taxes. Returns as of 3/31/95
Net Assets: $655.8 million
Initial [G14]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio quality
on 3/31/95
[G15]
* Includes holdings which are not rated by an independent ratings
service but are, in Lord Abbett's opinion, of comparable quality.
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
tax-free portfolios. All results are at net asset value. A portion of
income derived from tax-free portfolios may be subject to the
Alternative Minimum Tax. See "Fund Performance" on page 4 for
performance at the maximum sales charge and page 12 for important
information.
8
<PAGE>
FUND
DATA
TAX-FREE INCOME FUNDS (Continued)
- --------------------------------------------------------------------------
CALIFORNIA FUND Inception: 9/3/85
---------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal and Returns as of 3/31/95
California income taxes.
Net Assets: $308.9 million
Initial [G16]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G17]
CONNECTICUT SERIES Inception: 4/1/91
---------------------------------------------------------------------------
Goal: To provide you with income
exempt from federal and
Connecticut income taxes.
Net Assets: $111.0 million
Initial [G18]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G19]
FLORIDA SERIES Inception: 9/25/91
---------------------------------------------------------------------------
Goal: To provide you with income
free from federal income taxes
with shares free from Florida
personal property tax.
Net Assets: $180.7 million
Initial [G20]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G21]
GEORGIA SERIES Inception: 12/27/94
---------------------------------------------------------------------------
Goal: To provide you with income free from
federal and Georgia income taxes. [NEW]
Shares of the Georgia Series are
subject to the Georgia intangibles
tax.
Initial
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
tax-free portfolios. All results are at net asset value. A portion of
income derived from tax-free portfolios may be subject to the Alternative
Minimum Tax. See Fund Performance on page 4 for performance at the maximum
sales charge and page 12 for important information.
9
<PAGE>
FUND
DATA
TAX-FREE INCOME FUNDS (Continued)
- --------------------------------------------------------------------------------
HAWAII SERIES Inception: 10/28/91
---------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal and Returns as of 3/31/95
Hawaii income taxes.
Net Assets: $87.6 million
Initial [G22]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G23]
MICHIGAN SERIES Inception: 12/1/92
---------------------------------------------------------------------
Goal: To provide you with income Portfolio Quality
free from federal and Michigan on 3/31/95
income taxes with shares FUND IS
free from Michigan UNDER
personal property tax. 3 YEARS OLD
Net Assets: $49.8 million [G24]
Initial
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly
MINNESOTA SERIES Inception: 12/27/94
---------------------------------------------------------------------
Goal: To provide you with income exempt from federal and
Minnesota income taxes.
Initial [NEW]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly
MISSOURI SERIES Inception: 5/31/91
---------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal and Returns as of 3/31/95
Missouri income taxes.
Net Assets: $127.2 million [G25]
Initial
Investment: $1,000 minimum Portfolio Quality
Dividends: Paid or reinvested monthly on 3/31/95
[G26]
* Includes holdings which are not rated by an independent ratings service
but are, in Lord Abbett's opinion, of comparable quality.
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
tax-free portfolios. All results are at net asset value. A portion of
income derived from tax-free portfolios may be subject to the Alternative
Minimum Tax. See "Fund Performance" on page 4 for performance at the
maximum sales charge and page 12 for important information.
10
<PAGE>
FUND
DATA
TAX-FREE INCOME FUNDS (Continued)
- --------------------------------------------------------------------------------
NEW JERSEY SERIES Inception: 1/2/91
--------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal and Returns as of 3/31/95
New Jersey income taxes.
Net Assets: $188.0 million
Initial [G27]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G28]
NEW YORK SERIES Inception: 4/2/84
--------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal, New York Returns as of 3/31/95
State and City income taxes.
Net Assets: $332.9 million
Initial [G29]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G30]
PENNSYLVANIA SERIES Inception: 2/3/92
--------------------------------------------------------------------------
Goal: To provide you with income free Average Annual Total
from federal and Pennsylvania Returns as of 3/31/95
income taxes with shares
free from Pennsylvania
personal property tax.
Net Assets: $89.0 million
Initial [G31]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G32]
TEXAS SERIES Inception: 1/20/87
--------------------------------------------------------------------------
Goal: To provide you with income Average Annual Total
exempt from federal Returns as of 3/31/95
income taxes.
Net Assets: $101.6 million
Initial [G33]
Investment: $1,000 minimum
Dividends: Paid or reinvested monthly Portfolio Quality
on 3/31/95
[G34]
* Includes holdings which are not rated by an independent ratings service
but are, in Lord Abbetts opinion, of comparable quality.
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
tax-free portfolios. All results are at net asset value. A portion of
income derived from tax-free portfolios may be subject to the Alternative
Minimum Tax. See Fund Performance on page 4 for performance at the
maximum sales charge and page 12 for important information.
11
<PAGE>
FUND
DATA
TAX-FREE INCOME FUNDS (Continued)
---------------------------------------------------------------------------
WASHINGTON SERIES Inception: 4/15/92
------------------------------------------------------------------------
Goal: To provide you with income
exempt from federal Portfolio Quality
income taxes. on 3/31/95
Net Assets: $73.9 million FUND IS
Initial UNDER
Investment: $1,000 minimum 3 YEARS OLD
Dividends: Paid or reinvested monthly [G35]
Limited-Term Income Funds
---------------------------------------------------------------------------
Lord Abbett Investment Trust -
Limited Duration U.S. Government Securities Series Inception: 11/4/93
------------------------------------------------------------------------
The Fund aims for higher total returns than shorter
term instruments, such as Treasury bills. In addition, FUND IS
the Fund strives to provide total returns that outpace UNDER
inflation and shorter term savings vehicles. Unlike a money 3 YEARS OLD
market fund, the Fund does not seek to maintain a stable
share price. The Fund also will not have the income potential
of a fund investing in longer term securities.
Composition: A portfolio of primarily short- and intermediate-duration
U.S. Government securities and high-quality securities.
Goal: To provide you with high income (relative to money market
instruments) with less fluctuation in principal than long-
term U.S. Government securities.
Net Assets: $7.8 million
Initial
Investment: $1,000 minimum; $250 for IRAs
Dividends: Paid or reinvested monthly
Please see the prospectus of the fund you are interested in for a
description of fees waived and expense subsidies for certain Lord Abbett
portfolios. All results are at net asset value. A portion of income
derived from tax-free portfolios may be subject to the Alternative
Minimum Tax. See Fund Performance on page 4 for performance at the
maximum sales charge.
Each tax-free portfolio may invest up to 20% of its net assets in
residual interest bonds (RIBs). A RIB, sometimes referred to as an
inverse floater, is a debt instrument with a floating or variable
interest rate that moves in the opposite direction of the interest rate
on another security or the value of an index. Changes in the interest
rate on the other security or index inversely affect the residual
interest paid on the RIB, with the result that when interest rates rise,
RIBs give lower interest payments and their values fall faster than
other similar fixed-rate bonds. But when interest rates fall, not only
do RIBs give higher interest payments, their values also rise faster
than other similar fixed-rate bonds. The market for RIBs is relatively
new.
12
<PAGE>
FUND
DATA
LIMITED-TERM INCOME FUNDS (Continued)
- --------------------------------------------------------------------------------
LORD ABBETT U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND Inception: 6/27/79
-------------------------------------------------------------------------
(formerly Lord Abbett Cash Reserve Fund) Average Annual Total
Returns as of 3/31/95
Primarily invests in obligations issued or
backed by the U.S. Government, its agencies
or instrumentalities.
COMPOSITION: A portfolio of short-term U.S. Government securities.
GOAL: To provide you with high current income on your cash
reserves, while preserving capital and maintaining liquidity.
NET ASSETS: $145.6 million
INITIAL [G36]
INVESTMENT: $1,000 minimum; $250 for IRAs
DIVIDENDS: Paid or reinvested monthly
An investment in this Fund is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the Fund will maintain a
constant net asset value of $1.00 per share. This Fund is managed to
maintain, and has maintained, its stable $1.00 per share price.
All results are at net asset value. For a description of fees waived and
expense subsidies, see the prospectus of the fund you are interested in.
SERVICE &
FEXIBILITY
AT YOUR SERVICE
- --------------------------------------------------------------------------------
DISTRIBUTION OPTIONS:
-------------------------------------------------------------------------
. REINVEST: You can reinvest dividends and capital gains distributions to
purchase additional shares in each Fund. Reinvested dividends and
distributions continue working for you.
. DIVIDEND-MOVE: You can invest dividends ($50 or more) from one fund
into another fund. If no account exists in the second fund, one can be
established by investing $250.
. CASH: You can receive dividends and/or capital gains in cash.
AUTOMATIC INVESTMENT PLANS:
-------------------------------------------------------------------------
. INVEST-A-MATIC (DOLLAR-COST AVERAGING): A set dollar amount ($50 or
more) can be deducted from your bank account and invested in any
fund(s) automatically - monthly, quarterly or semi-annually ($250
minimum initial investment).
. SYSTEMATIC WITHDRAWAL PLAN: A check for a specific dollar amount can be
sent to you (or deposited in your bank account) monthly, quarterly,
semi-annually or annually, from an account with a balance of at least
$10,000.
. SYSTEMATIC EXCHANGE: A set dollar amount of $50 or more can be
automatically exchanged between funds monthly, quarterly, semi-annually
or annually, to dollar-cost average. If no account exists in the second
fund, a $250 initial investment requirement must be met.
13
<PAGE>
SERVICE &
FLEXIBILITY
AT YOUR SERVICE (Continued)
--------------------------------------------------------------------
SHAREHOLDER PRIVILEGES:
--------------------------------------------------------
. Lifetime Discounts or Rights of Accumulation*:
You and your family may qualify for a discount
on purchases of one fund or a combination of
funds based on the total assets you have invested
in the Lord Abbett Family. See the prospectus(es)
for further information.
. Letter of Intention (LOI)*: You and your family
can sign a non-binding 13-month statement of
intention to invest a fixed-dollar amount in the
Family, in order to qualify for the maximum discount.
. Exchange Privileges: You can reposition your
assets by exchanging shares of one fund for
another fund in the Family by calling 800-521-5315.
The exchange privilege can be modified or terminated.
. Account Information: You have access to an
automated telephone information service that
provides data on your fund investments.
. Free Checkwriting Privileges: You can write
checks (bank drafts) for $500 or more. Your
account continues to earn interest until checks
clear. (Applies to Lord Abbett U.S. Government
Securities Money Market Fund only.)
Lord Abbett Retirement Plan Services:
--------------------------------------------------------
Lord Abbett has been a pioneer in the mutual fund
retirement planning market. We have maintained a
structured retirement planning department for over
two decades under the direction of ERISA attorneys.
Lord Abbett offers a full menu of retirement
planning services. IRS-approved sign-up documents
are available for IRA, Rollover IRA, SEP-IRA, 403(b)
and Defined Contribution Retirement Plans. A complete
TurnKey package is available for 401(k) plans.
Reports Provided by the Lord Abbett
Family of Funds:
---------------------------------------------------------
Shareholders receive annual (audited) and semi-annual
reports for their fund(s), and year-to-date statements
reflecting every transaction, current share balance and
the cost basis for purchases made within the year.
* Does not include initial purchases of shares of
Lord Abbett U.S. Government Securities Money Market
Fund purchased without a sales charge.
Additional Information
--------------------------------------------------------------------
If used as sales material after 6/30/95, this
piece must be accompanied by Lord Abbett's
Performance Quarterly for the most recently
completed calendar quarter. Results quoted herein
represent past performance and are no guarantee
of future results.
For additional information and literature
(including a prospectus) for any Lord Abbett
mutual fund, call your financial adviser or Lord,
Abbett & Co. at 800-874-3733. A prospectus
contains important information, including sales
charges, expenses, and a full discussion of risk
factors, and should be read carefully before you
invest.
Lord, Abbett & Co.
Investment Management
The GM Building . 767 Fifth Avenue . New York, NY . 10153-0203
800-426-1130
LAFOFB-40-395
14
<PAGE>
FUND ACTION
THE MUTUAL FUND NEWS REPORT THAT SPARKS IDEAS
WE WERE PLEASED THAT OUR MANAGING
PARTNER RECEIVED THIS HONOR. I WANTED
TO SHARE THIS ARTICLE WITH YOU.
MIKE MCLAUGHLIN
DIRECTOR OF MARKETING
EXCERPTED FROM
VOLUME 6, NUMBER 1,
JANUARY 3, 1995
SPECIAL REPORT:
RONALD P. LYNCH
NAMED FUND LEADER
OF 1994
SPECIAL REPORT: RONALD P. LYNCH
NAMED FUND LEADER OF 1994
1994 was a watershed year for the fund industry. The press fell out of
love with mutual funds. News of INVESCOs insider trading flap, derivatives
debacles, multiple money fund rescues and Fidelity's price reporting snafu
peppered the country's newspapers. It was a year the industry needed a statesman
at its helm. And fortunately it was a year the industry had one. That statesman
was Lord Abbett's managing partner Ron Lynch.
As chairman of the Investment Company Institute, Ron Lynch kept a steady
hand on the industrys tiller throughout a tempestuous 1994. When regulators and
the press began questioning industry ethical standards, Lynch faced the issue
head-on. He quickly assembled a Blue Ribbon Panel to study intra-industry
trading practices and make recommendations for possible improvement. The result?
Accolades from SEC Chairman Arthur Levitt, who praised the industry for its
quick and diligent response.
More importantly, Lynch's actions underscored the industrys dedication to
high ethical standards and fiduciary responsibility. It is because of Lynch's
successful skippering of the industry through rough waters that Fund Action is
naming him the 1994 Fund Leader of the Year.
HE'S A QUIET LEADER WHO LEADS WITH MORAL SUASION.
OPPENHEIMERS JON FOSSEL
Perseverance and consensus building, say friends and associates, are the
qualities that best characterize Lynch. Whether he's forging a business strategy
with his partners at Lord Abbett or piloting the ICI, he gets the job done. And
in getting the job done, he studies all the angles and strives to build a
consensus among constituents. Constructive compromise, not coercion, is Lynch's
stock in trade.
HE PUT ASIDE WHATEVER HIS GROUP OR ANY INDIVIDUAL FUND GROUP MIGHT THINK WAS
BEST FOR THEMSELVES.
BOB GRAHAM OF AIM
Nipping issues in the bud before they become full-blown problems has been
Lynch's modus operandi. And, those who speak for the industry must, like Lynch,
be willing to fight to maintain its integrity.
When INVESCO fired portfolio manager John Kaweske for failing to report
personal trades, the industry faced press reports and congressional inquiries
regarding its ethical standards. Reporters immediately set to work trying to
ferret out similar abuses at other advisory firms. Lynch took a proactive step.
He formed a Blue Ribbon Panel of fund company chiefs. Its mission was to examine
the personal trading issue, and make recommendations that would raise investor
confidence in the industrys ability to police itself.
"We raised the bar so that it is very difficult for abuses to occur," says
Lynch proudly. And what particularly pleases him is that the industry took the
bull by the horns.
The results of the panel exemplify Lynch's talents as a consensus builder.
Panel members represented differing opinions on personal trading within the
industry. Weaving our way around that to get a balance was quite a challenge,
says T.Rowe Price chief Jim Riepe. "Ron's concern was to come up with a solution
that was best for the industry," points out Bob Graham of AIM. "He put aside
whatever his group or any individual fund group might think was best for
themselves." Some have criticized the Blue Ribbon Panel for being too harsh.
Lynch responds, "I'd rather err on the side of being too strict. Riepe agrees:
"It has preempted any harsher reaction by the regulators, by Congress or by the
press."
Colleagues who watched Lynch work with the ICI's Blue Ribbon Panel weren't
surprised by his consensus-building skills. Many had previously observed him
forge a meeting of the minds between the SEC and the industry on Rule 12b-1.
Lynch was vice chairman of the National Association of Securities Dealers group
that revamped the 12b-1 Rule. Lynch boosters suggest that his efforts kept 12b-1
plans from being squelched by an unappreciative SEC.
Back in 1988, the regulators proposed rules to rein in 12b-1 plans. "Our
proposal was greeted with horror by the industry moguls on Wall Street," says
Kathy McGrath, then SEC director of Investment Management.
Lynch decided it would be better for those who were affected by changes in
Rule 12b-1 to do something about it. "I went to the industry and told them that
if we didn't get it done, someone would want to do it for us," he says. The
debate centered around how to rejigger 12b-1 fees so that the industry and the
SEC would accept them. Lynch and others approached the NASD with their proposal
to study the 12b-1 plan problem.
The NASD gave its Investment Companies Committee the thumbs up to
examine 12b-1 fees. Lynch chaired the committee from 1989 to 1991.
In 1990 the Investment Companies Committee announced rule changes of
mind-boggling complexity. The bottom line was that annual sales charges and
service charges paid by a fund to distributors could not exceed 1%. "Our aim was
to get financial parity between front-end and back-end shares," says Lynch. The
industry and the SEC were satisfied.
"HE IS ONE OF THOSE PEOPLE
WHO GETS THINGS DONE."
CHARLIE JOHNSON, FRANKLIN
A key to the success of the 12b-1 issue was Lynch's constant contact with
the SEC. He gave them regular updates on the NASD committees progress. "He's a
wonderful and delightful person to work with," says McGrath. "And he's as
honest as the day is long."
Franklin chief Charlie Johnson, an old friend of Lynch's, worked on the
12b-1 issue with him. "He was very much responsible for grasping the problems
and bringing to fruition the whole 12b-1 Rule that the NASD adopted," says
Johnson. "He is one of those people who gets things done."
Ron Lynch's laundry list of achievements begins before he started his
career at Lord Abbett. First he put himself through Cornell University, where he
received a BS in economics. A short while later, Lynch hooked up with Lord
Abbett. A regional sales manager at 28, he was 10 years younger than any other
professional at the firm. Lynch's first wholesale region covered New England,
New York and Pennsylvania. Lynch then moved to the warmer climes of California
where he headed sales in the West then a relatively untapped market. After eight
years, Lynch returned to New York, but not before he had doubled Lord Abbett's
share of the market out West. When he returned to Lord Abbett in New York, Lynch
was made a senior partner. In 1983, he became managing partner.
When Lynch takes time off from mutual funds, he's fundraising for his alma
mater, Cornell. He's vice chairman of the board of trustees and the chair of the
investment committee, responsible for a $1.8 billion endowment. Lynch has a
special interest in the Cornell University Medical Center, where he's on the
Joint Board and the Board of Overseers.
He and his wife Susan have three sons. The two younger Lynchs are
following in their father's academic footsteps at Cornell. The eldest, Ron Lynch
Jr., has already caught the fund bug. He is a wholesaler for Chase Manhattan's
Vista Funds on the West Coast. -- S.E. Canaday
For more complete information on any Lord Abbett-managed fund, call 800-874-3733
for a prospectus. A prospectus contains information on a fund, including charges
and expenses and should be read carefully before investing in a fund.
LORD, ABBETT & CO.
INVESTMENT MANAGEMENT
A TRADITION OF PERFORMANCE THROUGH DISCIPLINED INVESTING
EXCERPTED FROM FUND ACTION, COPYRIGHT 1995 FUND WORLD, INC. ALL RIGHTS RESERVED.
<PAGE>
GRAPHIC APPENDIX
P1 LORD ABBETT & CO. COMPANY LOGO
P2 PICTURE OF COMPANY CHAIRMAN, RONALD P. LYNCH
G1 PIE CHART - 41.8% EQUITY
38.8% TAXABLE FIXED INCOME
19.4% TAX-FREE FIXED INCOME
P3 PICTURE OF LORD ABBETT PERSONNEL DESCRIBED UNDER PICTURE
P4 PICTURE OF LORD ABBETT PERSONNEL DESCRIBED UNDER PICTURE
G2 BAR GRAPH - 3 YEARS - 8.2%
5 YEARS - 12.2%
10 YEARS - 8.4%
G3 BAR GRAPH - 3 YEARS - 9.6%
5 YEARS - 10.7%
10 YEARS - 12.4%
G4 BAR GRAPH - 3 YEARS - 8.8%
5 YEARS - 6.0%
LIFE - 6.5%
G5 PIE CHART - 29.2% PACIFIC RIM
25.8% USA
18.4% EUROPE
12.5% CASH/EQUIVALENT
11.9% UK
2.1% EMERGING MARKETS
0.1% CANADA
G6 BAR GRAPH - 3 YEARS - 13.0%
5 YEARS - 11.0%
10 YEARS - 13.3%
G7 BAR GRAPH - 3 YEARS - 11.1%
5 YEARS - 10.5%
LIFE - 10.5%
G8 BAR GRAPH - 3 YEARS - 6.1%
5 YEARS - 8.6%
10 YEARS - 9.7%*
G9 BAR GRAPH - 3 YEARS - 8.5%
5 YEARS - 11.8%
10 YEARS - 10.2%
G10 PIE CHART - 65.3% LOWER RATED DEBT
18.5% EQUITY-RELATED SECURITIES
16.2% HIGH-GRADE DEBT
(INCLUDING OTHER ASSETS, LESS LIABILITIES)
G11 BAR GRAPH - 3 YEARS - 8.0%
5 YEARS - 9.9%
LIFE - 9.0%
G12 PIE CHART - 91.5% AAA
8.5% AA
G13 PIE CHART - 43.8% USA
38.7% EUROPE
17.5% FAR EAST
G14 PIE CHART - 67.8% AAA
18.4% AA
7.6% A
6.2% BBB
G15 BAR GRAPH - 3 YEARS - 6.6%
5 YEARS - 7.9%
10 YEARS - 9.6%
G16 PIE CHART - 69.3% AAA
22.4% AA
8.3% A
G17 BAR GRAPH - 3 YEARS - 6.1%
5 YEARS - 7.7%
LIFE - 8.5%
G18 PIE CHART - 61.6% AAA
19.0% AA
16.8% A
2.6% BBB
G19 BAR GRAPH - 3 YEARS - 7.1%
LIFE - 7.9%
G20 PIE CHART - 70.0% AAA
16.4% AA
13.0% A
0.6% BBB
G21 BAR GRAPH - 3 YEARS - 7.3%
LIFE - 6.8%
G22 PIE CHART - 77.9% AAA
12.7% AA
9.4% A
G23 BAR GRAPH - 3 YEARS - 6.9%
LIFE - 6.9%
G24 PIE CHART - 64.4% AAA
14.4% AA
17.0% A
4.2% BBB
G25 PIE CHART - 74.7% AAA
16.0% AA
4.6% A
4.7% BBB
G26 BAR GRAPH - 3 YEARS - 6.6%
LIFE - 7.8%
G27 PIE CHART - 71.0% AAA
17.5% AA
6.2% A
5.3% BBB*
G28 BAR GRAPH - 3 YEARS - 7.6%
LIFE - 8.6%
G29 PIE CHART - 60.9% AAA
14.0% AA
19.6% A
5.5% BBB
G30 BAR GRAPH - 3 YEARS - 6.0%
5 YEARS - 7.6%
10 YEARS - 9.2%
G31 PIE CHART - 70.6% AAA
11.8% AA
14.8% A
2.8% BBB
G32 BAR GRAPH - 3 YEARS - 7.5%
LIFE - 7.2%
G33 PIE CHART - 54.7% AAA
28.9% AA
15.9% A
0.5% BBB*
G34 BAR GRAPH - 3 YEARS - 7.0%
5 YEARS - 8.3%
LIFE - 7.9%
G35 PIE CHART - 81.9% AAA
9.0% AA
9.1% A
G36 BAR GRAPH - 3 YEARS - 3.0%
5 YEARS - 4.1%
10 YEARS - 5.6%
<PAGE>
LORD ABBETT MAY 1, 1995
STATEMENT OF ADDITIONAL INFORMATION
LORD ABBETT
BOND-DEBENTURE
FUND, INC.
- ------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. A Prospectus may
be obtained from your securities dealer or from Lord, Abbett & Co. at The
General Motors Building, 767 Fifth Avenue, New York, New York 10153-0203. This
Statement relates to, and should be read in conjunction with, the Prospectus
dated May 1, 1995.
Lord Abbett Bond-Debenture Fund, Inc. (sometimes referred to as "we" or the
"Fund") was organized in 1970 and was incorporated under Maryland law on January
23, 1976. Our authorized capital stock consists of a single class of 300,000,000
shares, $1.00 par value. All shares have equal noncumulative voting rights and
equal rights with respect to dividends, assets and liquidation. They are fully
paid and nonassessable when issued and have no preemptive or conversion rights.
Shareholder inquiries should be made by writing directly to the Fund or by
calling 800-821-5129. In addition, you can make inquiries through your dealer.
TABLE OF CONTENTS Page
1. Investment Objective and Policies 2
2. Directors and Officers 3
3. Investment Advisory and Other Services 5
4. Portfolio Transactions 6
5. Purchases, Redemptions and Shareholder Services 7
6. Past Performance 11
7. Taxes 12
8. Information About the Fund 12
9. Financial Statements 13
10. Appendix 13
<PAGE>
1.
Investment Objective and Policies
The Fund's investment objective and policies are described in the Prospectus on
the cover page and under "How We Invest." In addition to those policies
described in the Prospectus, we are subject to the following investment
restrictions which cannot be changed without shareholder approval. We may not:
(1) sell short or buy on margin, although we may obtain short-term credit as
needed to clear purchases of securities; (2) buy or sell put or call options,
although we may buy, hold or sell warrants acquired with debt securities; (3)
borrow in excess of 5% of our gross assets taken at cost or market value,
whichever is lower at the time of borrowing, and then only as a temporary
measure for extraordinary or emergency purposes; (4) act as an underwriter of
securities issued by others, except where we may be deemed to be an underwriter
by selling a portfolio security requiring registration under the Securities Act
of 1933; (5) invest knowingly more than 15% of our gross assets in illiquid
securities; (6) make loans, except for (a) time or demand deposits with banks,
(b) purchasing commercial paper or publicly-offered debt securities at original
issue or otherwise, (c) short-term repurchase agreements with sellers of
securities we have bought and (d) loans of our portfolio securities to
registered broker-dealers if 100% secured by cash or cash equivalents, made in
full compliance with applicable regulations and which, in management's opinion,
do not expose us to significant risks or impair our qualification for
pass-through tax treatment under the Internal Revenue Code; (7) pledge,
mortgage, or hypothecate our assets; (8) buy or sell real estate (including
limited partnership interests but excluding securities of companies, such as
real estate investment trusts, which deal in real estate or interests therein)
or oil, gas or other mineral leases, or commodities, or commodity contracts
although we may buy securities of companies that deal in such interests
(however, we may hold and sell any of the aforementioned or any other property
acquired through ownership of other securities, although we may not purchase
securities for the purpose of acquiring those interests); (9) buy securities
issued by any other open-end investment company (except pursuant to a plan of
merger, consolidation or acquisition of assets), although we may invest up to 5%
of our gross assets, taken at market value at the time of investment, in
closed-end investment companies, provided such purchase is made in the open
market and does not involve the payment of a fee or commission greater than the
customary broker's commission; (10) invest more than 5% of our gross assets,
taken at market value at the time of investment, in securities of companies with
less than three years' continuous operation, including predecessor companies;
(11) with respect to 75% of our gross assets, buy the securities of any issuer
if the purchase causes us (a) to have more than 5% of our gross assets invested
in the securities of such issuer (except obligations of the United States, its
agencies or instrumentalities) or (b) to own more than 10% of the outstanding
voting securities of such issuer; (12) hold securities of any issuer, any of
whose officers, directors or security holders is an officer, director or partner
of our investment adviser or an officer or director of the Fund, if after the
purchase of the securities of such issuer by us, one or more of such persons
owns beneficially more than 1/2 of 1% of the securities of such issuer and such
persons together own beneficially more than 5% of such securities; (13)
concentrate our investments in a particular industry, though, if it is deemed
appropriate to our investment objective, up to 25% of the market value of our
gross assets at the time of investment may be invested in any one industry
classification we use for investment purposes; (14) buy from or sell to any of
our officers, directors, employees, or our investment adviser or any of its
officers, directors, partners or employees, any securities other than shares of
our common stock; or (15) invest more than 10% of the market value of our gross
assets at the time of investment in debt securities which are in default as to
interest or principal.
With respect to investment restriction (5) above, securities subject to legal or
contractual restrictions on resale, which are determined by the Board of
Directors, or by Lord Abbett pursuant to delegated authority, to be liquid are
considered liquid securities.
Other Investment Restrictions (which can be changed without shareholder
approval)
- --------------------------------------------------------------------------------
Pursuant to Texas regulations, we will not invest more than 5% of our assets in
warrants and not more than 2% of such value in warrants not listed on the New
York or American Stock Exchanges, except when they form a unit with other
securities. As a matter of operating policy, we will not invest more than 5% of
our net assets in rights.
2
<PAGE>
PORTFOLIO TURNOVER RATE
For the year ended December 31, 1994, our portfolio turnover was 147.98% versus
159.79% for the prior year.
2.
DIRECTORS AND OFFICERS
The following directors are partners of Lord, Abbett & Co., The General Motors
Building, 767 Fifth Avenue, New York, New York 10153-0203. They have been
associated with Lord Abbett for over five years and are also officers and/or
directors or trustees of the fifteen other Lord Abbett-sponsored funds. They are
"interested persons" as defined in the Investment Company Act of 1940, as
amended (the "Act"), and as such, may be considered to have an indirect
financial interest in the Rule 12b-1 Plan described in the Prospectus.
Ronald P. Lynch, age 59, President and Chairman
Robert S. Dow, age 50, Vice President
The following outside directors are also directors or trustees of the fifteen
other Lord Abbett-sponsored funds referred to above except for Lord Abbett
Research Fund, Inc., of which only Messrs. Millican and Neff are directors.
E. Thayer Bigelow
Time Warner Cable
300 First Stamford Place
Stamford, Connecticut
President and Chief Executive Officer of Time Warner Cable Programming, Inc.
Formerly President and Chief Operating Officer of Home Box Office, Inc. Age 53.
Stewart S. Dixon
Wildman, Harrold, Allen & Dixon
225 W. Wacker Drive (Suite 2800)
Chicago, Illinois
Partner in the law firm of Wildman, Harrold, Allen & Dixon. Age 64.
John C. Jansing
162 S. Beach Road
Hobe Sound, Florida
Retired. Former Chairman of Independent Election Corporation of America, a proxy
tabulating firm. Age 69.
C. Alan MacDonald
The Marketing Partnership, Inc.
27 Signal Road
Stamford, Connecticut
General Partner, The Marketing Partnership, Inc., a full service marketing
consulting firm that specializes in strategic planning and customer-specific
marketing. Formerly Acquisition Consultant, The Noel Group, a private consulting
firm (1994). Formerly Chairman and Chief Executive Officer of Lincoln Foods,
Inc., manufacturer of branded snack foods (1992-1994). Formerly President and
Chief Executive Officer of Nestle Foods Corporation, a subsidiary of Nestle S.A.
(Switzerland). Age 61.
3
<PAGE>
Hansel B. Millican, Jr.
Rochester Button Company
1100 Noblin Avenue
South Boston, Virginia
President and Chief Executive Officer of Rochester Button Company. Age 65.
Thomas J. Neff
277 Park Avenue
New York, New York
President of Spencer Stuart & Associates, an executive search consulting firm.
Age 57.
The second column of the following table sets forth the compensation accrued for
the Fund's outside directors. The third and fourth columns set forth information
with respect to the retirement plan for outside directors maintained by the Lord
Abbett-sponsored funds. The fifth column sets forth the total compensation
payable by such funds to the outside directors. The information provided is for
the fiscal year ended December 31, 1994. No director of the Fund associated with
Lord Abbett and no officer of the Fund received any compensation from the Fund
for acting as a director or officer.
<TABLE>
<CAPTION>
For the Fiscal Year December 31, 1994
(1) (2) (3) (4) (5)
Pension or Estimated Annual
Retirement Benefits Benefits Upon
Accrued as Expenses Retirement Proposed Total Compensation
by the Fund to be Paid by the Fund Accrued by the Fund and
Aggregate and Fifteen Other and Fifteen Other Fifteen Other Lord
Compensation Lord Abbett-sponsored Lord Abbett-sponsored Abbett-sponsored
Name of Director from the Fund (1) Funds (2) Funds(2) Funds (3)
---------------- ----------------- --------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
E. Thayer Bigelow 4 $694 None $33,600 $8,400
Thomas F. Creamer 5 $2,287 $27,578 $33,600 $29,650
Stewart S. Dixon $3,442 $22,595 $33,600 $43,600
John C. Jansing $3,354 $28,636 $33,600 $42,500
C. Alan MacDonald $3,275 $27,508 $33,600 $41,500
Hansel B. Millican, Jr. $3,296 $24,842 $33,600 $41,750
Thomas J. Neff $3,250 $16,214 $33,600 $41,200
<FN>
1. Outside directors' fees, including attendance fees for board and committee
meetings, are allocated among all Lord Abbett-sponsored funds based on net
assets of each fund. Fees payable by the Fund to its outside directors are
being deferred under a plan that deems the deferred amounts to be invested
in shares of the Fund for later distribution to the directors. The amounts
accrued by the Fund for the year ended December 31, 1994, are as set forth
after each outside Director's name above. The total amount accrued for each
outside Director since the beginning of his tenure with the Fund, together
with dividends reinvested and changes in net asset value applicable to such
deemed investments, were as follows as of December 31, 1994: Mr. Bigelow,
$694; Mr. Creamer, $38,881; Mr. Dixon, $45,569; Mr. Jansing, $45,368; Mr.
MacDonald, $28,819; Mr. Millican, $45,665; and Mr. Neff, $45,872.
2. Each Lord Abbett-sponsored fund has a retirement plan providing that
outside directors will receive annual retirement benefits for life equal to
80% of their final annual retainers following retirement at or after age 72
with at least 10 years of service. Each plan also provides for a reduced
benefit upon early retirement under certain circumstances, a pre-retirement
death benefit and actuarially reduced joint-and-survivor spousal benefits.
The amounts stated, except in the case of Mr. Creamer, would be payable
annually under such retirement plans if the director were to retire at age
72 and the annual retainers payable by such funds were the same as they are
today. The amounts accrued in column 3 were accrued by the Lord
Abbett-sponsored funds
4
<PAGE>
during the fiscal year ended December 31, 1994 with respect to the
retirement benefits in column 4.
3. This column shows aggregate compensation, including director's 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, 1994.
4. Mr. Bigelow was elected a director of the Fund on October 19, 1994.
5. Mr. Creamer retired as a director of the Fund effective September 21, 1994.
The stated amount of his retirement income (column 4) is the annual amount
payable to him by the Lord Abbett-sponsored funds before reduction for a
joint-and-survivor spousal benefit.
</FN>
</TABLE>
Except where indicated, the following executive officers of the Fund have been
associated with Lord Abbett for over five years. Of the following, Messrs.
Allen, Carper, Cutler, Dow, Henderson, Nordberg and Walsh are partners of Lord
Abbett; the others are employees: Morais A. Taylor, age 42, Executive Vice
President, Kenneth B. Cutler, age 62, Vice President and Secretary; Stephen I.
Allen, age 41, Daniel E. Carper age, 43, Robert S. Dow, age 50, Thomas S.
Henderson, age 63, E. Wayne Nordberg, age 57, John J. Walsh, age 58, Jeffery H.
Boyd, age 38 (with Lord Abbett since 1994 - formerly partner in the law firm of
Robinson & Cole), John J. Gargana, Jr., age 63, Thomas F. Konop, age 53 Victor
W. Pizzolato, age 62, Vice Presidents; and Keith F. O'Connor, age 39, Treasurer.
The Fund's By-Laws provide that the Fund shall not hold an annual meeting of its
stockholders in any year unless one or more matters are required to be acted on
by stockholders under the Act, or unless called by a majority of the Board of
Directors or by stockholders holding at least one quarter of the stock of the
Fund outstanding and entitled to vote at the meeting. When any such annual
meeting is held, the stockholders will elect directors and vote on the approval
of the independent auditors of the Fund.
As of April 1, 1994, our officers and directors as a group owned less than 1% of
our outstanding shares.
3.
Investment Advisory and Other Services
As described under "Our Management" in the Prospectus, Lord Abbett is the Fund's
investment manager. The eight general partners of Lord Abbett, all of whom are
officers and/or directors of the Fund, are: Stephen I. Allen, Daniel E. Carper,
Kenneth B. Cutler, Robert S. Dow, Thomas S. Henderson, Ronald P. Lynch, E. Wayne
Nordberg and John J. Walsh. The address of each partner is The General Motors
Building, 767 Fifth Avenue, New York, New York 10153- 0203.
The services performed by Lord Abbett are described in the Prospectus under "Our
Management". Under the Management Agreement, we are obligated to pay Lord Abbett
a monthly fee, based on average daily net assets for each month, at the annual
rate of .50 of 1% of the Fund's first $500 million of average daily net assets
and .45% of such assets over $500 million. For the fiscal years ended December
31, 1994, 1993, and 1992, respectively, the management fees paid to Lord Abbett
amounted to $4,786,098, $4,091,742 and $3,196,124, 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.
We have agreed with the State of California to limit operating expenses
(including management fees but excluding taxes, interest, extraordinary expenses
and brokerage commissions) to 2 1/2% of average annual net assets up to
$30,000,000, 2% of the next $70,000,000 of such assets and 1 1/2% of such assets
in excess of $100,000,000. The expense limitation is a condition on the
registration of investment company shares for sale in the state, and applies so
long as our shares are registered for sale in that state.
5
<PAGE>
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. They perform audit services
for the Fund including the examination of financial statements included in our
annual report to shareholders.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street, New York,
New York 10005, is the Fund's custodian. In accordance with the requirements of
Rule 17f-5 under the Act, the Fund's directors have approved arrangements
permitting the Fund's foreign assets not held by Morgan or its foreign branches
to be held by certain qualified foreign banks and depositories.
4.
Portfolio Transactions
Our policy is 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, consistent with
obtaining best execution, except to the extent that we may pay a higher
commission as described below. 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.
We select broker-dealers on the basis of their professional capability and the
value and quality of their brokerage and research services. Normally, the
selection is made by our traders who are officers of the Fund and also are
employees of Lord Abbett. Our 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 the negotiation of
prices and commissions.
A broker may receive a commission for portfolio transactions exceeding the
amount another broker would have charged for the same transaction if our traders
determine that such amount is reasonable in relation to the value of the
brokerage and research services performed by the executing broker viewed in
terms of either the particular transaction or the broker's overall
responsibilities with respect to us and other accounts managed by Lord Abbett.
Brokerage services may include such factors as showing us trading opportunities
including blocks, 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, reliability and
quotation and pricing services. Research may include the furnishing of analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. Such research may be
used by Lord Abbett in servicing all their accounts, and not all of such
research will necessarily be used by Lord Abbett in connection with their
services to us; conversely, research furnished in connection with brokerage on
other accounts managed by Lord Abbett may be used in connection with their
services to us, and not all of such research will necessarily be used by Lord
Abbett in connection with their services to such other accounts. We have been
advised by Lord Abbett that, although such research is often useful, no dollar
value can be ascribed to it nor can it be accurately ascribed or allocated to
any account and it is not a substitute for services provided by them to us; nor
does it materially reduce or otherwise affect the expenses incurred by Lord
Abbett in the performance of such services. We make no commitments regarding the
allocation of brokerage business to or among dealers.
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.
If we tender portfolio securities pursuant to a cash tender offer, we will seek
to recapture any fees or commissions involved by designating Lord Abbett as our
agent so that the fees may be passed back to us. As other legally permissible
opportunities come to our attention for the direct or indirect recapture by us
of brokerage commissions or similar fees paid on portfolio transactions, our
directors will determine whether we should or should not seek such recapture.
6
<PAGE>
We do not seek "reciprocal" dealer business (for the purpose of applying
commissions in whole or in part for our benefit or otherwise) from
broker-dealers as consideration for the direction to them of portfolio business.
During the fiscal years ending December 31, 1994, 1993 and 1992, respectively,
we paid total commissions to independent dealers of $4,482,094, $5,739,293 and
$3,633,194, respectively.
5.
Purchases, Redemptions
and Shareholder Services
The Fund values its portfolio securities at market value as of the close of the
New York Stock Exchange ("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.
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, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
The maximum offering price of our shares on December 31, 1994 was computed as
follows:
Net asset value per share (net assets divided by shares outstanding) $8.71
Maximum offering price per share (net asset value divided by .9525) $9.14
The Fund has entered into a distribution agreement with Lord Abbett under which
Lord Abbett is obligated to use its best efforts to find purchasers for the
shares of the Fund, and to make reasonable efforts to sell Fund shares so long
as, in Lord Abbett's judgment, a substantial distribution can be obtained by
reasonable efforts.
7
<PAGE>
For the last three fiscal years, Lord Abbett, as our principal underwriter,
received net commissions after allowance of a portion of the sales charge to
independent dealers as follows:
Year Ended December 31,
-----------------------
1994 1993 1992
---- ---- ----
Gross sales charge $7,717,386 $8,973,226 $5,298,064
Amount allowed to
dealers $6,648,480 $7,739,343 $4,541,439
---------- ---------- ----------
Net commissions
received by
Lord Abbett $1,068,906 $1,233,883 $756,625
========== ========== =========
As described in the Prospectus, the Fund has adopted a Distribution Plan and
Agreement (the "Plan") pursuant to Rule 12b-1 of the Act. In adopting the Plan
and in approving its continuance, the Board of Directors has concluded that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The expected benefits include greater sales and lower redemptions
of Fund shares, which should allow the Fund to maintain a consistent cash flow,
and a higher quality of service to shareholders by dealers than would otherwise
be the case. During the last fiscal year, the Fund accrued or paid through Lord
Abbett to dealers $2,350,013 under the Plan. Lord Abbett uses all amounts
received under the Plan for payments to dealers for (i) providing continuous
services to the Fund's 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.
The Plan requires the Board of Directors to review, on a quarterly basis,
written reports of all amounts expended pursuant to the Plan and the purpose for
which such expenditures were made. The Plan shall continue in effect only if its
continuance is specifically approved at least annually by vote of the Fund's
Board of Directors and of the Fund's 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 such Plan and
agreements. The Plan may not be amended to increase materially the amount spent
for distribution expenses without approval by a majority of the Fund's
outstanding voting securities and the approval of a majority of the directors,
including a majority of the Fund's outside directors. The Plan may be terminated
at any time by vote of a majority of the Fund's outside directors or by vote of
a majority of the Fund's outstanding voting securities.
As stated in the Prospectus, a 1% contingent deferred reimbursement charge
("CDRC") is imposed with respect to those shares (or shares of another Lord
Abbett-sponsored fund or series acquired through exchange of such shares) on
which the Fund has paid the one-time 1% 12b-1 sales distribution fee 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.
No CDRC is payable on redemptions by tax-qualified plans under section 401 of
the Internal Revenue Code for benefit payments due to plan loans, hardship
withdrawals, death, retirement or separation from service with respect to plan
participants. The CDRC 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
large, long-term shareholder account in the Fund. Shares of a fund or series on
which such 1% sales distribution fee has been paid may not be exchanged into a
fund or series with a Rule 12b-1 plan for which the payment provisions have not
been in effect for at least one year.
The other Lord Abbett-sponsored funds and series which participate in the
Telephone Exchange Privilege (except Lord Abbett U.S. Government Securities
Money Market Fund, Inc. ("GSMMF") and certain series of Lord Abbett Tax-Free
8
<PAGE>
Income Fund, Inc. and Lord Abbett Tax-Free Income Trust for which a Rule 12b-1
Plan is not yet in effect (collectively, the "Series")) have instituted a CDRC
on the same terms and conditions. No CDRC will be charged on an exchange of
shares between Lord Abbett funds. Upon redemption out of the Lord Abbett family
of funds the CDRC will be charged on behalf of and paid to the fund in which the
original purchase (subject to a CDRC) occurred. Thus, if shares of a Lord Abbett
fund are exchanged for shares of another such fund and the shares tendered
("Exchanged Shares") are subject to a CDRC, the CDRC will carry over to the
shares being acquired, including GSMMF ("Acquired Shares"). Any CDRC 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 GSMMF and the Series will not pay a 1% sales
distribution fee on $1 million purchases of their own shares, and will therefore
not impose their own CDRC, GSMMF will collect the CDRC on behalf of other Lord
Abbett funds. Acquired shares held in GSMMF which are subject to a CDRC will be
credited with the time such shares are held in that fund.
In no event will the amount of the CDRC exceed 1% 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 CDRC will be
imposed when the investor redeems (i) amounts derived from increases in the
value of the account above the total cost of shares being redeemed due to
increases in net asset value, (ii) shares with respect to which no Lord Abbett
fund paid a 1% sales distribution fee on issuance (including shares acquired
through reinvestment of dividend income and capital gains distributions) or
(iii) 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
determining whether a CDRC is payable, (a) shares not subject to the CDRC will
be redeemed before shares subject to the CDRC and (b) of shares subject to a
CDRC, those held the longest will be the first to be redeemed.
Under the terms of the Statement of Intention to invest $100,000 or more over a
13-month period as described in the Prospectus, shares of Lord Abbett-sponsored
funds (other than shares of Lord Abbett Equity Fund ("LAEF"), Lord Abbett Series
Fund ("LASF"), Lord Abbett Research Fund if not offered to the general public
("LARF"), and GSMMF, unless holdings in GSMMF are attributable to shares
exchanged from a Lord Abbett-sponsored fund offered with a sales charge or from
a fund in the Lord Abbett Counsel Group) 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. Shares valued at 5% of the amount of
intended purchases are escrowed and may be redeemed to cover the additional
sales charge payable if the Statement is not completed. The Statement of
Intention is neither a binding obligation on you to buy, nor on the Fund to
sell, the full amount indicated.
As stated in the Prospectus, purchasers (as defined in the Prospectus) may
accumulate their investment in Lord Abbett- sponsored funds (other than LAEF,
LARF, LASF, and GSMMF, unless holdings in GSMMF are attributable to shares
exchanged from a Lord Abbett-sponsored fund offered with a front-end sales
charge or from Lord Abbett Counsel Group) 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.
As stated in the Prospectus, our 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 trustee 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 other family members and
retired directors and employees.
Our shares also may be purchased at net asset value (a) at $1 million or more,
(b) with dividends and distributions from other Lord Abbett-sponsored funds,
except for LARF, LAEF, LASF and Lord Abbett Counsel Group, (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
9
<PAGE>
who have entered into an agreement with Lord Abbett in accordance with certain
standards approved by Lord Abbett, 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, and (e) by employees, partners and owners of unaffiliated
consultants and advisors to Lord Abbett or Lord Abbett-sponsored funds who
consent to such purchase if such persons provide service to Lord Abbett or such
funds on a continuing basis and are familiar with such funds. Shares are offered
at net asset value to these investors for the purpose of promoting goodwill with
employees and others with whom Lord Abbett and/or the Fund have business
relationships.
Our shares also may be purchased at net asset value, subject to appropriate
documentation, through a securities dealer where the amount invested represents
redemption proceeds from shares ("Redeemed Shares") of a registered open-end
management investment company not distributed or managed by Lord Abbett (other
than a money market fund), if such redemption has occurred no more than prior to
the purchase of our shares, the Redeemed Shares were held for at least six
months prior to redemption and the proceeds of redemption were maintained in
cash or a money market fund prior to purchase. Purchasers should consider the
impact, if any, of contingent deferred sales charges in determining whether to
redeem shares for subsequent investment in our shares. Lord Abbett may suspend,
change or terminate this purchase option at any time.
Our shares may be issued at net asset value in exchange for the assets, subject
to possible tax adjustment, of a personal holding company or an investment
company. There are economies of selling efforts and sales-related expenses with
respect to offers to these investors and those referred to above.
The Prospectus briefly describes the Telephone Exchange Privilege. You may
exchange some or all of your shares for those of Lord Abbett-sponsored funds
currently offered to the public with a sales charge and GSMMF, 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 fund into which the exchange is
made.
Shareholders in such other funds have the same right to exchange their shares
for 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 (unless a sales charge was
paid on the initial investment). Exercise of the exchange privilege will be
treated as a sale for federal income tax purposes, and, depending on the
circumstances, a gain or loss may be recognized. In the case of an exchange of
shares that have been held for 90 days or less where no sales charge is payable
on the exchange, the original sales charge incurred with respect to the
exchanged shares will be taken into account in determining gain or loss on the
exchange only to the extent such charge exceeds the sales charge that would have
been payable on the acquired shares had they been acquired for cash rather than
by exchange. The portion of the original sales charge not so taken into account
will increase the basis of the acquired shares.
Shareholders have the exchange privilege unless they refuse it in writing. You
should not view the exchange privilege as a means for taking advantage of
short-term swings in the market, and we reserve the right to terminate or limit
the privilege of any shareholder who makes frequent exchanges. We can revoke or
modify the privilege for all shareholders upon 60 days' prior notice. "Eligible
Funds" are other Lord Abbett-sponsored funds which are eligible for the exchange
privilege, except LASF which currently offers its shares only in connection with
certain variable annuity contracts, LAEF which is not issuing shares, LARF and
Lord Abbett Counsel Group.
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 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.
10
<PAGE>
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 six 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.
Under the Div-Move service described in the Prospectus, you can invest the
dividends paid on your account into an existing account 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.
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.
The Systematic Withdrawal Plan (the "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. 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.
The Prospectus indicates the types of retirement plans for which Lord Abbett
provides forms and explanations. Lord Abbett makes available the retirement plan
forms and custodial agreements for IRAs (Individual Retirement Accounts
including Simplified Employee Pensions), 403(b) plans and qualified pension and
profit-sharing plans, including 401(k) plans. The forms name Investors Fiduciary
Trust Company as custodian and contain specific information about the plans.
Explanations of the eligibility requirements, annual custodial fees and
allowable tax advantages and penalties are set forth in the relevant plan
documents. Adoption of any of these plans should be on the advice of your legal
counsel or qualified tax adviser.
6.
Past Performance
The Fund computes the average annual compounded rate of total return 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 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 covered by
the average annual total return computation.
Using the method described above to compute average annual compounded rates of
total return for the Fund's last one, five and ten fiscal-years ending on
December 31, 1994 are as follows: -8.50%, 9.51% and 9.89%, respectively.
Our yield quotation 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 our maximum offering price per share on the last day of the period.
This is determined by finding the following quotient: take the Fund's dividends
and interest earned during the period minus its expenses accrued for the period
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and divide by the product of (i) the average daily number of Fund shares
outstanding during the period that were entitled to receive dividends and (ii)
the Fund's maximum offering price per share 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. For the 30-day period ended December 31, 1994, the yield for
the Fund was 9.47%.
These figures represent past performance, and an investor should be aware that
the investment return and principal value of a Fund investment will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than their
original cost. Therefore, there is no assurance that this performance will be
repeated in the future.
7.
Taxes
The value of any shares redeemed by the Fund or repurchased or otherwise sold
may be more or less than your tax basis in the shares at the time the
redemption, repurchase or sale is made. Any gain or loss will generally be
taxable for federal income tax purposes. Any loss realized on the sale,
redemption or repurchase of Fund shares which you have held for six months or
less will be treated for tax purposes as a long-term capital loss to the extent
of any capital gains distributions which you received with respect to such
shares. Losses on the sale of stock or securities are not deductible if, within
a period beginning 30 days before the date of the sale and ending 30 days after
the date of the sale, the taxpayer acquires stock or securities that are
substantially identical.
The Fund will be subject to a 4% non-deductible excise tax on certain amounts
not distributed (and not treated as having been distributed) on a timely basis
in accordance with a calendar-year distribution requirement. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of such excise tax. Dividends paid by the Fund will qualify for the
dividends-received deduction for corporations to the extent they are derived
from dividends paid by domestic corporations.
As described in the Prospectus under "Risk Factors", the Fund may be subject to
foreign withholding taxes which would reduce the yield on its investments. Tax
treaties between certain countries and the United States may reduce or eliminate
such taxes. It is expected that Fund shareholders who are subject to United
States federal income tax will not be entitled to claim a federal income tax
credit or deduction for foreign income taxes paid by the Fund.
Gains and losses realized by the Fund on certain transactions, including sales
of foreign debt securities and certain transactions involving foreign currency,
will be treated as ordinary income or loss for federal income tax purposes to
the extent, if any, that such gains or losses are attributable to changes in
exchange rates for foreign currencies. Accordingly, distributions taxable as
ordinary income will include the net amount, if any, of such foreign exchange
gains and will be reduced by the net amount, if any, of such foreign exchange
losses.
8.
Information About the Fund
The directors, trustees and officers of Lord Abbett-sponsored mutual funds,
together with the partners and employees of Lord Abbett, are permitted to
purchase and sell securities for their personal investment accounts. In engaging
in personal securities transactions, however, such persons are subject to
requirements and restrictions contained in the Fund's Code of Ethics which
complies, in substance, with each of the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing. Among other things,
the Code requires that Lord Abbett partners and employees obtain advance
approval before buying or selling securities, submit confirmations and quarterly
transaction reports, and obtain approval before becoming a director of any
company; and it prohibits such persons from investing in a security 7 days
before or after any Lord Abbett-sponsored fund or Lord Abbett-managed account
considers a trade or trades in such security, from profiting on trades of the
same security within 60 days and from trading on material and non-public
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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, 1994 and the
report of Deloitte & Touche LLP, independent auditors, on such financial
statements contained in the 1994 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.
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.
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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.
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