SUPPLEMENT TO THE STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1998
<PAGE>
SUPPLEMENT EFFECTIVE DATE JULY 2, 1998
[LOGO] Lord Abbett
Investor Insight
- --------------------------------------------------------------------------------
A Tradition of Performance Through Disciplined Investing June 1998
Bonds Remain Key To Portfolio Strategy
[PHOTO OMITTED]
Christopher J. Towle
Portfolio Manager,
Lord Abbett Bond-Debenture Fund
The extended bull market may have produced an inadvertent overweighting of
stocks in your portfolio. Since this could compromise your ability to meet
current income requirements and long-range financial goals, be sure to talk with
your investment professional as a first step in rebalancing your stock and bond
investments. Here are some things to keep in mind about bonds that may prove
useful during these financial planning sessions.
Why Have Interest Rates Declined?
Many investors remember when certificates of deposit paid interest rates in the
high teens, then ask why rates on even "high-yield" bonds have undergone a
steady decline through the years. We believe there are two important answers to
this question.
o First, the Federal Reserve's successful taming of inflation has helped the
bond market return to more reasonable interest-rate levels.
o Second, market sentiment has played a key role in inspiring more
responsible government fiscal policy.
Regarding the latter, bond investors traditionally pushed interest rates higher
in the face of government policies that seemed likely to spur increased federal
deficits. This tendency has largely evaporated -- bringing down rates -- as
responsible bi-partisan fiscal policy and a strong seven-year economic expansion
helped the government to post a budget surplus for the first time in decades.
What Do Lower Rates Mean For Fund Investors?
Bond investments involve more than the interest rates delivered by certificates
of deposit and other money market instruments. Like stocks, bonds are total
return investments capable of delivering attractive levels of current income
along with substantial capital growth. The relative importance of income and
capital growth in producing total return will change as interest rates rise or
fall.
- --------------------------------------------------------------------------------
Lower Rates Are Good For America
(REPRESENTED AS A LINE CHART IN PIECE)
3/80 12.64%
6/80 10.09%
9/80 11.86%
12/80 12.43%
3/81 13.13%
6/81 13.86%
9/81 15.84%
12/81 13.98%
3/82 14.18%
6/82 14.44%
9/82 11.73%
12/82 10.47%
3/83 10.62%
6/83 10.90%
9/83 11.39%
12/83 11.80%
3/84 12.47%
6/84 13.84%
9/84 12.43%
12/84 11.51%
3/85 11.65%
6/85 10.18%
9/85 10.27%
12/85 8.99%
3/86 7.34%
6/86 7.32%
9/86 7.42%
12/86 7.22%
3/87 7.54%
6/87 8.37%
9/87 9.59%
12/87 8.86%
3/88 8.54%
6/88 8.87%
9/88 8.94%
12/88 9.14%
3/89 9.28%
6/89 8.08%
9/89 8.29%
12/89 7.93%
3/90 8.63%
6/90 8.41%
9/90 8.79%
12/90 8.07%
3/91 8.06%
6/91 8.23%
9/91 7.45%
12/91 6.70%
3/92 7.53%
6/92 7.12%
9/92 6.35%
12/92 6.69%
3/93 6.02%
6/93 5.78%
9/93 5.38%
12/93 5.79%
3/94 6.74%
6/94 7.32%
9/94 7.60%
12/94 7.82%
3/95 7.20%
6/95 6.20%
9/95 6.18%
12/95 5.57%
3/96 6.33%
6/96 6.71%
9/96 6.70%
12/96 6.42%
3/97 6.90%
6/97 6.50%
9/97 6.10%
12/97 5.74%
3/98 5.65%
The chart above shows that interest rates (here, for 10-year Treasuries) have
undergone a dramatic decline from the early 1980s to the present day. Why does
Lord Abbett welcome these lower rates? Because, with the Federal Reserve and the
markets squarely behind them, we believe investors will be more likely to pursue
reasonable long-term returns on their money. That, in turn, should help the U.S.
economy stay on track to achieve sustainable levels of growth.
- --------------------------------------------------------------------------------
<PAGE>
Lord Abbett is committed to keeping the investment strategies of our mutual
funds in sync with changing market realities. Consequently, the trend toward
lower interest rates, which we regard as key to sustaining the fiscal health of
our country and markets, was also the major factor in our recent decision to
make small adjustments in the class share dividend rates for Lord Abbett
Bond-Debenture Fund.
- --------------------------------------------------------------------------------
Lord Abbett Bond-Debenture Fund:
Average Annual Total Returns For Periods Ending 3/31/98
- --------------------------------------------------------------------------------
1 year 3 years 5 years 10 years 20 years
The Fund* 16.6% 13.8% 10.1% 11.0% 11.0%
Lipper Average of Fixed
Income Funds 9.5% 7.0% 5.4% 6.8% 8.5%
* Reflects the percent change in net asset value of Class A shares and
includes the reinvestment of all distributions.
- --------------------------------------------------------------------------------
SEC Returns: Average annual of total return at the Class A share maximum sales
charge of 4.75% for periods ending 3/31/98.
--------- --------- --------- --------- ---------
11.10% 11.95% 9.01% 10.49% 10.69%
--------- --------- --------- --------- ---------
1 Year 3 Years 5 Years 10 Years 20 Years
Past performance is not an indication of future results. The investment return
and principal value of an investment in the Fund will fluctuate so that shares,
on any given day or when redeemed, may be worth more or less than their original
cost.
- --------------------------------------------------------------------------------
To those investors who have expressed concern about these adjustments, let me
say that we understand your feelings completely. Let me also ask you to remember
that Lord Abbett views the current environment as being particularly well-suited
to the Fund's total return investment strategy. Why? Because with interest rates
expected to remain stable or decline going forward, the price of bonds in our
portfolio will have the opportunity to rise. That can mean a stronger showing by
capital growth within Bond-Debenture Fund's total return equation.
A History of Strong Performance
Throughout its 27-year history, Lord Abbett has managed the Fund with total
return in mind across full economic cycles. The key to that strategy's sustained
effectiveness is its flexible approach to investing in the fixed-income markets.
As yields on high-quality U.S. bonds remain around 6%, the Fund is positioned to
offer income-generating investment alternatives that should be seriously
considered by investors seeking to rebalance their portfolio allocations.
Why A Larger Bond Exposure May Make Sense Today
It is often said that stock investments deserve a place in every portfolio. This
is certainly true because even retirees, who are generally more focused on
current income than younger individuals, never outgrow the need for capital
appreciation as a way to protect their assets against the corrosive effects of
inflation.
The primary role of bond investments is to provide you with a source of current
income. But how can you ensure that your level of current income will remain
stable or increase in today's lower interest rate environment? The answer is
simple: Increase the dollar amount of your bond investments.
Income = Principal x Rates
How much income do you need from bonds and how should you invest to get the best
results? Ask your investment professional these questions the next time you
review your investment portfolio's allocation. If you determine that your
exposure to stocks has become too large in recent years, ask your investment
professional whether investing in selected bond funds, managed by Lord Abbett,
could be an effective way of meeting your changing income needs.
[LOGO](R) Lord, Abbett & Co.
Investment Management
A Tradition of Performance Through Disciplined Investing
LORD ABBETT DISTRIBUTOR LLC
- --------------------------------------------------------
The GM Building 767 Fifth Avenue New York, NY 10153-0203
The views expressed in this publication represent opinions of Lord, Abbett & Co.
and are not intended to predict or depict performance of any investment. Past
performance does not guarantee future results. For additional information on
Lord Abbett Bond-Debenture Fund or any other Lord Abbett fund, including charges
and expenses, talk to your investment professional or call Lord Abbett
Distributor LLC at 800-874-3733 for a prospectus. Be sure to read the prospectus
carefully before you invest or send money. The Fund offers additional classes of
shares with distinct pricing options. For a full discussion of the differences
in pricing alternatives, please see Lord Abbett Bond-Debenture Fund's current
prospectus.
