[7 SOLID SQUARE BULLETS]
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LB SERIES FUND, INC.
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[ART OF COMPASS WITH LETTER "N" IN TOP RIGHT CORNER:
THE WORDS "CHOICE", "PROTECTION" AND "ACCUMULATION" ARE
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Annual Report
for Variable Products
December 31, 1996
[LUTHERAN BROTHERHOOD LOGO HERE]
[PHOTO OF MR. BJELLAND OMITTED]
Our Message to You
December 31, 1996
Dear Contract Owner,
The year ended December 31, 1996 was a favorable one for investors.
During that time the economy grew at a moderate pace, inflation remained
in check and interest rates were historically low. As a result, stocks
continued to earn exceptional returns, extending the bull market that
began in the fall of 1990. Although bond returns were much lower than
the previous year, they were nearer their historical averages.
You will find a detailed discussion of market performance in the
enclosed Annual Report for the LB Series Fund Inc. (the Fund), which is
the underlying investment vehicle for all variable annuity and variable
life insurance contracts issued by Lutheran Brotherhood and Lutheran
Brotherhood Variable Insurance Products Company. The report also
discusses the investment strategies that individual portfolio managers
used to take advantage of changing market conditions. In addition, you
will find audited financial statements for each portfolio.
Throughout 1996, each Fund portfolio maintained a well-diversified mix
of quality investments with good potential for long-term performance.
This served the portfolios well as ongoing inflation worries increased
market volatility and caused individual market sectors to outperform at
different times. With inflation pressure still a factor, we believe such
a strategy can continue to make the most of variable market conditions.
In 1996, many Lutheran Brotherhood members took advantage of the chance
for greater diversification by investing in the Opportunity Growth and
World Growth Portfolios -- the newest members of LB Series Fund, Inc.
These portfolios, launched on January 18, 1996, accumulated $247 million
and $174 million in assets, respectively, by year end. The small-company
U.S. stocks of the Opportunity Growth Portfolio and the foreign stocks
of the World Growth Portfolio have added important equity growth
potential to Lutheran Brotherhood's variable product offerings.
We hope this Annual Report will provide useful background information as
you review the performance of your investments. If you would like
additional help in understanding this performance, please contact your
LB representative, or call us toll-free at 1-800-423-7056.
Sincerely,
/s/ Rolf F. Bjelland
Rolf F. Bjelland
President and Chairman of the Board
LB Series Fund, Inc.
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Economic and Market Overview December 31, 1996
Ongoing growth in the economy, accompanied by steady inflation and low
interest rates, produced a favorable environment for stocks and bonds in
1996. Growth in the U.S. Gross Domestic Product (GDP) was better than
most analysts had expected, spawning continued improvements in corporate
earnings. Because manufacturing and labor capacity kept pace with this
growth, inflation was moderate and interest rates rose only modestly.
On further gains in company earnings and profitability, stock prices
advanced strongly for a second year. For the 12 months ended December
31, 1996, the S&P 500 Index had a total return of 22.98%. With lower
interest rates and awakening economies, prices for foreign stocks also
improved -- giving Morgan Stanley Capital International's Europe,
Australia and Far East (EAFE) Index a return of 6.36% for the period.
Although market interest rates fluctuated substantially throughout 1996,
they ended the year very near their beginning-of-year levels. After
cutting short-term interest rates by 0.25% in January, the Federal
Reserve left interest rates unchanged for the rest of the year.
Throughout 1996, however, reports of accelerating economic growth caused
concern that the Federal Reserve would raise interest rates to stem
inflation. As a result, returns for U.S. bonds were lower than in 1995.
For 1996 the Lehman Brothers Aggregate Bond Index had a total return of
3.63%.
Strong Demand for U.S. Securities
In this positive economic environment, demand for stocks was
particularly strong. During the year, equity mutual funds received huge
flows of new money -- boosted largely by retirement savings. Meanwhile,
stock market supplies were significantly reduced by mergers and
acquisitions, as well as corporate stock buyback programs.
The blend of stronger demand and tighter supplies gave extra support to
rising stock prices. When near-term corporate earnings disappointments
caused stock prices to correct in July, this extra support helped prices
rebound quickly and go on to achieve new highs. In the bond market,
prices were strengthened by increased demand for U.S. bonds from foreign
investors. As foreign governments pushed interest rates lower to
stimulate their economies, U.S. bonds became more attractive to overseas
investors.
National elections in November provided further encouragement to the
markets. With the balance of power between the White House and Congress
still intact, investors believed there would be no dramatic changes to
federal economic policies. There was also new hope for balancing the
federal budget -- an issue at the forefront of the election campaign.
Moderate Growth, Stable Inflation
We expect the GDP to grow at a moderate annual rate near 3% in 1997.
With ample capacity and continued productivity, inflation should also
stay near 3%. Although spikes in certain prices, such as energy costs,
could push inflation higher temporarily, strong corporate profitability
and foreign competition should keep overall prices under control.
If fears of inflation persist, there may be temporary upticks in market
interest rates. There could also be downward pressure on rates, however,
if Congress balances the federal budget. Overall, we think interest
rates should remain in a narrow range, which would help bond prices
remain relatively stable. With stable prices, returns from bonds would
come largely from coupon income.
Continued growth in corporate earnings, combined with stable inflation
and interest rates, should give stocks further room to advance. After
rising strongly for two years, returns from stocks will probably be more
modest in 1997. Since expectations for earnings are still relatively
high, stocks could experience near-term volatility if actual earnings
fall short of those expectations. In the long-term, however, demand for
stocks should remain strong -- especially from retirement savings plans.
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Opportunity Growth Portfolio Review LB Series Fund, Inc.
[GRAPHIC OMITTED: PHOTO OF MICHAEL A. BINGER]
Michael A. Binger is a Chartered Financial Analyst and portfolio manager
for the Opportunity Growth Portfolio. He has been with Lutheran
Brotherhood since 1987.
Stocks of small companies performed well in 1996, as rising equity
prices and ongoing economic growth underscored the values available in
this sector. By creating a mix of investments with exceptional
potential, we helped the Opportunity Growth Portfolio make the most of
this environment. Between its inception on January 18, 1996, and the end
of the year, the Portfolio earned a total return of 19.17%. Over the
same period, the Russell 2000 Index had a total return of 21.09%.
Building the Portfolio
When we introduced the Portfolio, prices for stocks of small companies
were rallying strongly. Having underperformed at the end of 1995, small-
company stocks were particularly attractive to investors as the economy
picked up steam. Because of their strong long-term growth potential, we
invested a large portion of the Portfolio in technology stocks. Among
our largest investments were stocks of computer software and service
firms like Systemsoft, a producer of software for laptop computers, and
ACT Networks, a manufacturer of communications switching devices. These
companies enjoyed especially strong gains during the first half of the
year.
The Portfolio also earned good returns from shares of industrial
manufacturing firms -- like Memtec, which manufactures water filtration
systems, and Northwest Pipe, which produces pipes for water
transmission. These returns, and good performances from other positions,
helped offset disappointments from holdings in retail and medical device
companies. In addition to technology and health care firms, we also
built large positions in the biotechnology sector.
Later in the year, slowing economic growth caused small-company stocks
to lag the large-company stock market. This was particularly true for
issues of the smallest firms, where the Portfolio has many investments.
Although the Portfolio did not invest in small-company energy stocks,
which did perform well, it earned good returns from positions in certain
vacation time-share, health care service and industrial firms. Finding
that the Portfolio's holdings in financial firms were not meeting
expectations, we reduced those investments and added shares in consumer-
related firms.
The Year Ahead
We believe the Opportunity Growth Portfolio is well-positioned for 1997.
If the economy continues to grow, prices for small-company stocks could
outperform the greater market as investors find further values in that
sector. If historical cycles repeat, the long-term outlook for small-
company issues remains strong.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Short-term
Securities 9%
Common Stocks 91%
Investment Objective: To seek long-term growth of capital by investing
in small-company stocks.
With a well-diversified mix of investments, the Portfolio should
participate fully in further gains for small-company shares. As was our
focus in launching the Portfolio, we will continue to search for
companies with good management and new product lines, market niches or
innovations that have produced earnings growth of at least 20% over the
previous three years.
LB Opportunity Growth Portfolio
Annualized Total Returns*
Period Ending 12/31/96
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Since Inception
1/18/96 19.17%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
Top 10 Holdings
% of
Company Portfolio
ACT Networks, Inc. 3.0%
BMC Industries 2.5%
DataWorks Corporation 2.5%
Memtec Limited 2.4%
Cannondale Corporation 2.2%
Xpedite Systems 2.2%
Guess?, Inc. 2.0%
Cameron Ashley
Building Products 1.9%
Unison Software 1.9%
Home Health Corp.
of America 1.9%
Footnote reads:
These holdings represent 22.5%
of the total investment portfolio.
The Opportunity Growth Portfolio was introduced on January 18, 1996.
Given its limited performance history, the growth of a $10,000
investment in the Opportunity Growth Portfolio is not illustrated in
this report.
World Growth Portfolio Review LB Series Fund, Inc.
[GRAPHIC OMITTED: PHOTO OF MARTIN G. WADE]
Martin G. Wade is president of Rowe Price-Fleming, the investment
subadvisor for the World Growth Portfolio. He leads a team of 12
portfolio managers who have managed the assets of the World Growth
Portfolio since its inception. Mr. Wade has 29 years of experience in
research and investment management, including 17 years with
Rowe Price-Fleming.
Taken together, foreign stock markets performed quite well in 1996.
While returns from Japan were disappointing, there were strong gains in
other Pacific markets, Europe and Latin America. By overweighting the
World Growth Portfolio in many of the stronger markets, and picking
individual stocks that investors favored, we helped the Portfolio make
the most of recent price advances overseas.
Between its inception on January 18, 1996, and the end of the year, the
World Growth Portfolio had a total return of 10.41%. That compares to a
return of 6.45% for Morgan Stanley Capital International's Europe,
Australia, Far East (EAFE) Index.**
Limiting Exposure to Japan
As a weakening economy drove stock prices lower in Japan, we reduced the
Portfolio's investments there. During the year, Japan's representation
in the EAFE Index fell from about 40% to 33%, while we cut the
Portfolio's exposure to about 20%. For the most part, we focused on
issues of large multinational corporations, which benefited from
improving economies outside Japan.
We invested some of the assets we took from Japan in other Asian markets
- -- many of which performed especially well during the year. Among the
best was Hong Kong, which benefited from ties between its currency and a
strong U.S. dollar and from anticipation of positive economic results
after its 1997 reunion with China.
[GRAPHIC OMITTED: PORTFOLIO COMPOSITION TOP 10 COUNTRIES]
% of
Country Portfolio
Japan 21.4%
United Kingdom 16.2%
Netherlands 10.5%
France 8.2%
Hong Kong 4.9%
Switzerland 4.5%
Germany 3.8%
Spain 2.6%
Sweden 2.7%
Malaysia 2.4%
Other 16.0%
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93.2%
Short-Term Securities 6.8%
We also held significant investments in Latin America, which has no
representation in the Index. After a currency crisis several years
before, local economies there rebounded strongly -- particularly in
Mexico and Brazil. Besides greater stability in their currencies, Latin
American economies have benefited from the recent North American Free
Trade Agreement with the U.S.
During the year, we kept the Portfolio's total weighting in Europe close
to that of the Index. We overweighted in the Netherlands, France and
Norway, however, where gains were particularly strong. Although lower
interest rates helped European economies improve, progress toward a
single currency has restrained growth there. Given this, we focused on
stocks of "noncyclical" blue-chip companies whose earnings do not rely
on a growing economy. Investments in media and pharmaceutical firms in
Europe did particularly well.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Short-Term
Securities 7%
Common Stocks 93%
LB World Growth Portfolio
Annualized Total Returns*
Period Ending 12/31/96
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Since Inception
1/18/96 10.41%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
Investment Objective: To seek long-term capital growth by investing
primarily in common stocks issued by established companies outside the
United States.***
New Opportunities
We think the stage is set for further gains overseas in 1997. Most
foreign economies still have room to grow and should continue to
strengthen while interest rates remain low. If, as we expect, prices for
U.S. stocks advance more slowly than they did in 1996, markets overseas
should enjoy their day in the sun.
With increased talk of corporate restructuring, Japanese stocks could
soon turn the corner and show steady, if moderate, gains. As a result,
we've added slightly to positions in Japan as attractive opportunities
have occurred. To do this, we've taken profits in markets that have
performed well -- including the Netherlands, Hong Kong and Malaysia.
We continue to feel positive about Europe, where more companies are
managing their businesses with the stockholders in mind. As in other
markets abroad, we believe individual stock selection will continue to
dominate investment returns.
[GRAPHIC OMITTED: TOP TEN HOLDINGS]
Top 10 Holdings
% of
Company Industry Portfolio
Royal Dutch Petroleum ENERGY 2.1%
Wolters Kluwer NV BASIC INDUSTRY 2.0%
Elsevier NV BASIC INDUSTRY 2.0%
SmithKline Beecham CONSUMER GROWTH 1.6%
National Westminster FINANCE 1.6%
Eaux (Cie Generale) FINANCE 1.3%
Telecomunicacoes
Brasileiras TELECOMMUNICATIONS 1.3%
Reed International FINANCE 1.3%
Astra AB FINANCE 1.1%
Novartis AG FINANCE 1.1%
Footnote reads:
These holdings represent 15.4%
of the total investment portfolio.
The World Growth Portfolio was introduced on January 18, 1996. Given its
limited performance history, the growth of a $10,000 investment in the
World Growth Portfolio is not illustrated in this report.
Growth Portfolio Review LB Series Fund, Inc.
[GRAPHIC OMITTED: PHOTO OF SCOTT A. VERGIN]
Scott A. Vergin is a Chartered Financial Analyst and portfolio manager
for the Growth Portfolio. He began managing the Portfolio in November
1994, and has managed securities at Lutheran Brotherhood since 1983.
As stocks rallied in 1996, uncertainty about the economy, inflation and
interest rates caused different market sectors to move in and out of
favor. By selecting individual stocks with new products or other
potential for outstanding growth, we helped the Growth Portfolio perform
well in this environment of "sector rotation."
During the period, the Portfolio earned a total return of 22.44%. Over
the same time, the S&P 500 Index had a return of 22.98%.
Picking Winners
When 1996 began, the economy was growing slowly. The Portfolio enjoyed
good returns from its positions in defensive sectors, whose earnings
tend to be more consistent than sectors that were tied to cycles of
economic growth. Soon, it was clear that economic growth was
accelerating -- which benefited stocks in those cyclical sectors. Later,
when growth again slowed, defensive issues and "light cyclicals"
outperformed.
During the year, the Portfolio enjoyed strong returns from many of its
technology shares -- including Intel, 3Com, Microsoft and Cisco Systems.
Health care issues such as Eli Lilly and Merck also did well, along with
oil-service firms like Halliburton and Tidewater and banks like Chase
Manhattan, Barnett and BankAmerica. The primary disappointments for 1996
fell in the retail sector, from companies like Wal-Mart and Federated
Department Stores. These stocks underperformed as the result of
lackluster discretionary spending by consumers in the last half of the
year.
Throughout the year we remained overweighted in technology stocks
relative to the market, gaining increased exposure in shares of
semiconductor firms. We also invested heavily in health care issues --
particularly shares of pharmaceutical companies. While we remained
underweighted in energy and utilities stocks, we increased the
Portfolio's exposure to energy firms somewhat as their growth potential
increased. An underweighting in consumer cyclical firms helped mute poor
returns from that sector.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term
Securities 6%
Common Stocks 94%
[GRAPHIC WORM CHART OMITTED: GROWTH OF $10,000 INVESTED
January 31, 1987 - December 31, 1996]
INSET BOX ON CHART READS:
LB Growth Portfolio
Annualized Total Returns*
Period Ending 12/31/96
- ------------------------------------------------------------
Since Inception
1/9/87 12.52%
- ------------------------------------------------------------
5 Years 13.77%
- ------------------------------------------------------------
1 Year 22.44%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
Investment Objective: To seek long-term growth of capital by investing
primarily in common stocks of established corporations.
More Selectivity to Come
We believe individual stock selection, rather than market sector picks,
will again drive performance in the coming year. As long as the economy
continues to grow, stock prices should rise. But we expect returns to be
more modest in 1997 than in the previous two years. With slower economic
growth, there will likely be more near-term disappointments in corporate
earnings, and investors will place even greater value on companies that
can produce reliable earnings or positive earnings surprises.
As a result, we will continue to look for firms whose products or market
niches promise above-average growth. As before, we expect some of the
best growth to come from technology and health care stocks and will
probably remain overweighted in those shares. Regardless of sectors,
we'll continue to choose stocks from companies that are well-managed
with high-quality products, good operating histories and strong customer
loyalty.
[GRAPHIC OMITTED : TOP TEN HOLDINGS]
Top 10 Holdings
% of
Company Portfolio
Intel Corp. 1.9%
Mobil Corp. 1.9%
American Int'l.
Group Inc. 1.6%
Merck and Co. Inc 1.5%
Chase Manhattan Corp. 1.5%
Boeing Company 1.5%
Eli Lilly & Company 1.4%
General Electric Co. 1.4%
Federal National
Mtg. Assoc. 1.4%
Cisco Systems, Inc. 1.4%
Footnote reads:
These holdings represent 15.5%
of the total investment portfolio.
High Yield Portfolio Review LB Series Fund, Inc.
[GRAPHIC OMITTED: PHOTO OF THOMAS N. HAAG]
Thomas N. Haag, assistant vice president, is a Chartered Financial
Analyst and portfolio manager for the High Yield Portfolio. He has
managed the Portfolio since January 1992.
In the year ended December 31, 1996, returns for high-yield bonds were
significantly greater than returns for investment-grade issues. With
rising interest rates in the first part of the year, and the threat of
even higher rates later on, investors favored high-yield bonds that
could provide attractive income as bond prices fell. High-yield
securities also benefited from continued growth in the economy and
corporate profits, which improved the credit quality of many issues.
By making the most of this environment, the High-Yield Portfolio earned
a total return of 11.55% for the 12 months ended December 31, 1996. That
compares to a return of 11.35% for the Lehman Brothers High-Yield Index.
Response to a Growing Economy
As the year began, the Portfolio held sizable positions in zero-coupon
securities issued by media and telecommunications firms. At the time,
slower economic growth was keeping interest rates relatively low, which
helped zeros outperform other segments of the high-yield market. These
investments also benefited from government deregulation of the
telecommunications industry.
As a strengthening economy pushed interest rates higher, and changing
supply and demand made zeros less attractive, we traded some of our
zero-coupon holdings for bonds with B credit ratings and competitive
coupons. When economic growth rates became more moderate from the second
quarter to the third quarter, we emphasized bonds from sectors that were
less sensitive to economic cycles. Later in the year, when growth rates
seemed to be accelerating once again, we emphasized issues with slightly
greater economic sensitivity.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Short-Term
Securities 2%
Common Stocks
and Stock Warrants 3%
Preferred Stocks 13%
Foreign Government
Bonds 1%
Corporate Bonds 81%
[GRAPHIC MOUNTAIN CHART OMITTED: GROWTH OF $10,000 INVESTED
NOVEMBER 30, 1987 - DECEMBER 31, 1996
INSET BOX ON CHART READS:
LB High Yield Portfolio
Annualized Total Returns*
Period Ending 12/31/96
- ----------------------------------------------------------
Since Inception
11/2/87 12.76%
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5 Years 13.47%
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1 Year 11.55%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
Investment Objective: To seek high current income and growth of capital
by investing primarily in high-yielding ("junk") corporate bonds.
During the year, we swapped some media and telecommunications issues in
the Portfolio, for others in the same sector with greater potential. We
also found attractive values in U.S. dollar-denominated securities
issued by foreign corporations.
Looking Ahead
We expect high-yield issues to perform well in 1997. If, as we
anticipate, economic growth is moderate and interest rates remain low,
higher-yielding bonds should continue to attract investors.
Believing the long-term outlook for media and telecommunications firms
is still bright, we will continue to keep a greater-than-market
weighting there. As before, we will trade up to issues with greater
potential as we find the opportunities to do so. While the economy
continues to exhibit more moderate growth, we will also rely heavily on
B-rated industrial bonds, emphasizing those of a less cyclical nature.
As always, we will continue to look for investments that offer a good
balance between credit quality and yield. Typically such issues come
from well-run companies with manageable levels of debt and sound
business plans. We look to these businesses for high-yield issues that
produce the best balance of risk and reward.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: MOODY'S BOND QUALITY
RATING DISTRIBUTION]
Moody's Bond Quality Rating Distribution
Baa 0.2%
Ba 7.3%
B 62.8%
Caa 9.9%
Not Rated 19.8%
Income Portfolio Review LB Series Fund, Inc.
[GRAPHIC OMITTED: PHOTO OF CHARLES E. HEEREN]
Charles E. Heeren, vice president, is a Chartered Financial Analyst
and portfolio manager for the Income Portfolio. He has managed the
Portfolio since its inception in January 1987.
When interest rates fluctuate, prices for investment-grade bonds with
longer maturities generally change more than prices for those with
shorter maturities. As interest rates rose in the past year, we
emphasized shorter-term instruments to help buffer the Portfolio against
falling bond prices. And, as rates began to fall, we emphasized longer-
term issues to make the most of potential price gains. In the meantime,
we took advantage of new yield opportunities brought about by these
changes in interest rates.
During the 12 months ended December 31, 1996, the Income Portfolio had a
total return of 3.21%. Over the same time, the Lehman Aggregate Bond Index
returned 3.63%.
A Changing Mix of Investments
At the start of 1996, as stronger economic growth pushed interest rates
higher, we increased the Portfolio's weighting in shorter-term issues.
Since investors favor bonds with higher yields when prices fall, we
swapped some of the Portfolio's longer-term Treasury securities for
shorter-term corporate bonds and mortgage-backed securities. With higher
market interest rates, the mortgage-backed securities performed
especially well -- since homeowners are less likely to prepay their
loans when rates are rising.
As the economy improved further, without higher inflation, we added
corporate bonds from "cyclical" sectors that tend to be more sensitive
to economic change. We also added securities issued by insurance firms,
as well as U.S. dollar-denominated "Yankee" bonds issued by foreign
banks.
In the spring of 1996, as it looked like economic growth was moderating,
we added longer-term securities again -- increasing the potential for
capital gains as interest rates fell. With market rates declining, we
reduced investments in mortgage-backed securities and corporate bonds
that could be called in by their issuers before maturity. Since the
market remained nervous about the economy and interest rates, we gave
extra attention to bonds with top credit ratings.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Short-Term
Securities 9%
Preferred Stocks 2%
U.S. Government 11%
Asset-Backed
Securities 16%
Mortgage-Backed
Securities 13%
Foreign Government
Bonds 4%
Corporate Bonds 45%
[GRAPHIC MOUNTAIN CHART OMITTED: GROWTH OF $10,000 INVESTED
JANUARY 31, 1987 - DECEMBER 31, 1996]
INSET BOX ON CHART READS:
LB Income Portfolio
Annualized Total Returns*
Period Ending 12/31/96
- ----------------------------------------------------------
Since Inception
1/9/87 8.30%
- ----------------------------------------------------------
5 Years 7.44%
- ----------------------------------------------------------
1 Year 3.21%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
Investment Objective: To seek a high level of income while preserving
principal by investing primarily in intermediate- and long-term bonds.
Although we shortened maturities in the summer of 1996, on reports of
stronger economic growth, we also added longer maturities in the fall --
when slower, more sustainable growth seemed certain. Feeling the economy
would still grow enough to enhance the credit quality of many issuers,
we also added some higher-yielding corporate bonds.
Greater Focus on Yield
If economic growth remains moderate, as we expect, there should be
greater stability in interest rates, inflation and bond prices. Under
these conditions, coupon income should comprise the bulk of Portfolio
returns. As a result, we expect to keep sizable positions in corporate
bonds, with an emphasis on high-quality, higher-yielding issues. We will
also maintain large holdings in shorter-term asset-backed securities of
high quality -- which offer stable prices as well as attractive yields.
If economic growth decelerates, making bond prices more attractive, we
may increase positions in longer-term issues. For now, we're using a
more market-neutral maturity structure and emphasizing good yields at
fair prices.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: MOODY'S BOND QUALITY RATING
DISTRIBUTION]
Moody's Bond Quality Rating Distribution
Aaa 46.4%
Aa 89.9%
A 18.8%
Baa 13.5%
Ba 8.1%
B 4.3%
Money Market Portfolio Review LB Series Fund, Inc.
[GRAPHIC OMITTED: PHOTO OF GAIL R. ONAN]
Gail R. Onan was named portfolio manager for the Money Market Portfolio
in January 1994. She has been with Lutheran Brotherhood since 1969.
Prior to her appointment as manager of the Portfolio, she served as
associate manager for the Portfolio.
Ongoing uncertainty about the economy and interest rates made money
market yields more volatile during 1996. Although the Federal Reserve
left short-term rates unchanged from February through December,
investors expected rates to change throughout the year. During this time,
we adjusted maturities of the Money Market Portfolio to make the most of
fluctuating yields, and took advantage of special yield opportunities
that arose in a variety of different instruments. This helped the
Portfolio earn a total return of 5.20% for the year.
Maximizing Yield
When 1996 began, the yield for three-month Treasury bills was 4.97% and
the Money Market Portfolio had an average maturity of 43 days. With slow
economic growth and a cut in the Federal Funds rate, short-term yields fell
to 4.90% in February. Then, following reports of stronger economic
growth, short-term yields rose to 5.33% by July.
As yields improved, we lengthened the average maturity of the
Portfolio's investments to 50 days. In doing so, we used a "barbelled"
maturity structure that balanced instruments maturing overnight with
those maturing in six to nine months. This helped us lock in attractive
yields of longer maturities as they became available, while maintaining
liquidity on the short end of the barbell to move quickly into even
higher yields as they occurred.
By September, it was clear that investors had overreacted to fears of
inflation and that short-term yields were likely to fall. To lock in
higher yields for longer periods of time, we increased the Portfolio's
average maturity. By the end of the year, lower inflation expectations
reduced the spread between the yields for longer maturities and the
yields of shorter-term issues. As a result, we again emphasized shorter-
term issues and distributed the Portfolio's investments more evenly
across the yield curve.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Variable Rate
Notes 6%
U.S. Government
Agency 2%
Medium-Term Notes 1%
Certificates
of Deposits 2%
Commercial Paper 85%
Banker's Acceptances 4%
Throughout 1996, we maintained the Portfolio's historical asset mix --
giving the greatest weight to commercial paper. When we found attractive
opportunities in letters of credit, high-quality asset-backed securities
and other short-term corporate instruments, we also made investments in
these issues. These strategies helped us maintain very high credit
quality, good liquidity and attractive yields throughout the year as the
Portfolio drew large inflows of cash.
Investment Objective: To seek current income with stability of principal
by investing in high quality, short-term debt securities.****
Future Strategies
As we head into 1997, changes in money market supply and demand have
combined with reports of stronger economic growth to push shorter-term
yields higher. In this environment, we expect to keep the Portfolio's
investments on the short side and look for attractive yield
opportunities to enhance returns. Like before, we will continue to
stress investments that offer good liquidity and high credit quality as
well as strong yields.
LB Money Market Portfolio
Annualized Total Returns*
Period Ending 12/31/96
- -----------------------------------------------------------------------
Since Inception
1/9/87 5.77%
- -----------------------------------------------------------------------
5 Years 4.25%
- -----------------------------------------------------------------------
1 Year 5.20%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
Footnotes
* The annualized total returns for the Portfolio reflect changes in
share prices, the reinvestment of all dividends and capital gains, and
the effects of compounding for the periods indicated. These returns have
not been adjusted for charges associated with the variable life
insurance and variable annuity contracts that invest in the portfolios.
(For additional information on the charges, costs and benefits
associated with the contracts, refer to the contract prospectus or
contact your LB representative.) Since performance varies, the
annualized total returns, which assume a steady rate of growth, differ
from the Portfolios' actual total returns for the years indicated. All
returns represent past performance. The value of an investment
fluctuates so that shares, when redeemed, may be worth more or less than
the original investment.
** Total returns for the EAFE index are for 1-31-96 through 12-31-96,
beginning the index's first full month of data following the inception
date of the World Growth Portfolio.
*** International investing has special risks, including currency
fluctuation and political volatility.
**** Investments in the Money Market Portfolio are neither guaranteed
nor insured by the U.S. Government and there is no assurance that the
Portfolio will maintain a stable net asset value.
This report must be preceded or accompanied by a current prospectus.
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402-3795
Price Waterhouse LLP [LOGO]
Report of Independent Accountants
To the Shareholders and Board of Directors of
LB Series Fund, Inc.
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of each
of the Portfolios (Opportunity Growth, World Growth, Growth, High Yield,
Income and Money Market) comprising the LB Series Fund, Inc. (hereafter
referred to as the "Fund") at December 31, 1996, the results of each of
their operations for the year then ended or period indicated and the
changes in each of their net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility
of management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1996 by correspondence with
the custodian and brokers and the application of alternative auditing
procedures where confirmations from brokers were not received, provide a
reasonable basis for the opinion expressed above.
/S/Price Waterhouse LLP
February 7, 1997
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
Opportunity Growth Portfolio
Portfolio of Investments
December 31, 1996
Shares Value
- -------------- -------------
<S> <C> <C>
COMMON STOCKS - 91.0% (a)
Automotive - 1.7%
61,300 Aftermarket Technology
Corp. $1,057,425 (b)
103,200 Tower Automotive, Inc. 3,225,000 (b)
-------------
4,282,425
-------------
Bank & Finance - 2.3%
318,400 ACC Consumer
Finance Corp. 3,064,600 (b)
296,650 NAL Financial Group, Inc. 2,855,256
-------------
5,919,856
-------------
Building Products &
Materials - 3.0%
347,800 Cameron Ashley Building
Products 4,869,200 (b)
180,700 Dayton Superior Corp.,
Class A 2,371,687 (b)
193,400 Mark Solutions, Inc. 459,325 (b)
-------------
7,700,212
-------------
Computer Software - 13.9%
154,800 ANSYS, Inc. 2,089,800 (b)
136,850 Avant! Corp. 4,344,988 (b)
273,100 AXENT Technologies, Inc. 4,096,500 (b)
250,850 DataWorks Corp. 6,333,963 (b)
153,000 Information Management
Resources, Inc. 3,232,125 (b)
154,700 Premis Corp. 870,188 (b)
39,500 Project Software &
Development, Inc. 1,673,812 (b)
183,700 Pure Atria Corp. 4,546,575 (b)
250,600 Softquad International, Inc. 814,450 (b)
87,700 Summit Design, Inc. 898,925 (b)
118,300 Sunquest Information
Systems, Inc. 1,685,775 (b)
178,800 Unison Software, Inc. 4,782,900 (b)
-------------
35,370,001
-------------
Computers & Office
Equipment - 0.4%
111,100 Multiple Zones
International, Inc. 1,083,225 (b)
-------------
Drugs & Health Care - 11.9%
44,700 ADAC Labs, Inc. 1,067,213
346,250 Alpha-Beta Technology, Inc. 3,657,266 (b)
119,700 Amrion, Inc. 2,708,213 (b)
195,000 Amylin Pharmaceuticals, Inc. 2,535,000 (b)
215,400 Atrix Laboratories, Inc. 2,315,550 (b)
30,800 Autoimmune, Inc. 473,550 (b)
258,600 DepoTech Corp. 4,234,575 (b)
261,100 Eclipse Surgical
Technologies, Inc. 2,284,625 (b)
208,600 GalaGen, Inc. 912,625 (b)
98,000 Isis Pharmaceuticals, Inc. 1,764,000 (b)
244,100 Matritech, Inc. 2,074,850 (b)
141,700 Orphan Medical, Inc. 1,381,575 (b)
124,800 PDT, Inc. 3,494,400 (b)
93,700 Sepracor, Inc. 1,557,762 (b)
-------------
30,461,204
-------------
Electronics - 6.2%
11,700 Burr-Brown Corp. 304,200 (b,c)
72,800 Cypress Semiconductor Corp. 1,028,300 (b)
14,300 Electro Scientific
Industries, Inc. 371,800 (b)
125,600 ESS Technology, Inc. 3,532,500 (b)
40,800 Etec Systems, Inc. 1,560,600 (b)
71,500 FSI International, Inc. 1,072,500 (b)
94,800 Integrated Silicon Solution 817,650 (b)
111,200 Intevac, Inc. 1,890,400 (b)
115,850 S3, Inc. 1,882,562 (b)
104,800 Sierra Semiconductor Corp. 1,572,000 (b)
43,500 Silicon Valley Group, Inc. 875,438 (b)
43,000 Ultrateck Stepper, Inc. 1,021,250 (b)
-------------
15,929,200
-------------
Healthcare
Management - 8.7%
337,400 American Oncology
Resources, Inc. 3,458,350 (b)
99,100 CN Biosciences, Inc. 1,820,962 (b)
308,150 Complete Management, Inc. 3,967,431 (b)
432,350 Home Health Corp. of
America, Inc. 4,728,828 (b)
122,300 Horizon Mental Health
Management, Inc. 3,393,825 (b)
55,000 UroCor, Inc. 525,938 (b)
464,900 U.S. Diagnostic Labs, Inc. 4,300,325 (b)
-------------
22,195,659
-------------
Household Products - 0.3%
50,500 First Years, Inc. (The) 820,625
-------------
Leisure &
Entertainment - 6.2%
251,350 Cannondale Corp. 5,655,375 (b)
188,800 Fairfield Communities, Inc. 4,672,800 (b)
96,100 Signature Resorts, Inc. 3,387,525 (b)
162,300 Travis Boats & Motors, Inc. 2,089,613 (b)
-------------
15,805,313
-------------
Machinery &
Equipment - 3.4%
247,200 Northwest Pipe Co. 4,017,000 (b)
163,400 Stratasys, Inc. 3,247,575 (b)
58,400 Triumph Group, Inc. 1,394,300 (b)
-------------
8,658,875
-------------
Manufacturing - 2.9%
205,900 BMC Industries, Inc. 6,485,850
165,800 Zomax Optical Media, Inc. 911,900 (b)
-------------
7,397,750
-------------
Oil & Oil Service - 1.2%
84,400 Pool Energy Services Co. 1,297,650 (b)
75,200 Pride Petroleum Services, Inc. 1,748,400 (b)
-------------
3,046,050
-------------
Pollution Control - 3.0%
361,300 IDM Environmental Corp. 1,061,319 (b)
186,650 Memtec Ltd., ADR 6,136,119
348,100 Recycling Industries, Inc. 500,394 (b)
-------------
7,697,832
-------------
Publishing & Printing - 0.3%
186,900 Printware, Inc. 841,050 (b)
-------------
Restaurants - 2.4%
252,800 BAB Holdings, Inc. 1,232,400 (b)
37,500 Logan's Roadhouse, Inc. 881,250 (b)
72,400 Lone Star Steakhouse &
Saloon 1,936,700 (b)
191,500 New World Coffee 454,812 (b)
197,000 Sagebrush, Inc. 1,526,750 (b)
-------------
6,031,912
-------------
Retail - 4.0%
45,300 Borders Group, Inc. 1,625,137 (b)
193,450 Movie Gallery, Inc. 2,514,850 (b)
42,400 Proffitt's, Inc. 1,563,500 (b)
109,700 Sports Authority, Inc. (The) 2,385,975 (b)
194,900 Strouds, Inc. 633,425 (b)
184,900 West Coast Entertainment
Corp. 1,617,875 (b)
-------------
10,340,762
-------------
Services - 6.6%
142,100 Cotelligent Group, Inc. 3,428,162 (b)
81,800 ECsoft Group plc, ADR 787,325 (b)
86,600 F.Y.I., Inc. 1,807,775 (b)
271,100 Glasgal Communications, Inc. 1,287,725 (b)
136,050 Personal Group of
America, Inc. 3,282,206 (b)
132,200 StaffMark, Inc. 1,652,500 (b)
227,000 Steiner Leisure Ltd. 4,568,375
-------------
16,814,068
-------------
Telecommunications
Equipment - 4.8%
224,600 ACE*COMM Corp. 3,369,000 (b)
211,900 ACT Networks, Inc. 7,734,350 (b)
96,200 Larscom, Inc., Class A 1,094,275
-------------
12,197,625
-------------
Telephone &
Telecommunications - 4.6%
70,700 Intermedia Communications
of Florida, Inc. 1,820,525 (b)
142,900 LCC International, Inc.,
Class A 2,643,650 (b)
185,700 Orckit Communications Ltd. 1,810,575 (b)
258,600 Xpedite Systems, Inc. 5,495,250 (b)
-------------
11,770,000
-------------
Textiles & Apparel - 3.2%
710,300 Chaus (Bernard), Inc. 1,154,237 (b)
168,974 Cutter & Buck, Inc. 1,964,323 (b)
351,200 Guess ?, Inc. 5,048,500 (b)
-------------
8,167,060
-------------
Total Common Stocks
(cost $236,623,716) 232,530,704
-------------
CORPORATE
BONDS - 0.4% (a)
$500,000 Complete Management, Inc.,
Convertible Subordinated
Debentures, 8.0%,
due 8/15/2003 526,875
1,000,000 Kushner-Locke Co.,
Convertible Subordinated
Debentures, 8.0%,
due 12/15/2000 605,000
-------------
Total Corporate Bonds
(cost $1,379,774) 1,131,875
-------------
SHORT-TERM
SECURITIES - 8.6% (a)
Commercial Paper
700,000 Ciesco L.P., 6.75%,
due 1/2/1997 699,869
5,000,000 General Electric Capital Corp.,
5.9%, due 1/2/1997 4,999,180
6,000,000 General Electric Capital Corp.,
6.65%, due 1/2/1997 5,998,892
8,200,000 PepsiCo., Inc., 6.5%,
due 1/2/1997 8,198,519
2,000,000 Warner-Lambert Co., 6.0%,
due 1/7/1997 1,998,000
-------------
Total Short-Term Securities
(at amortized cost) 21,894,460
-------------
Total Investments
(cost $259,897,950) $255,557,039 (d)
=============
Notes to Portfolio of Investments:
- ---------------------------------
(a) The categories of investments are shown as a percentage of total investments
of the Opportunity Growth Portfolio.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock and had no
separate value at December 31, 1996.
(d) At December 31, 1996, the aggregate cost of securities for federal income tax
purposes was $260,101,511 and the net unrealized depreciation of investments based
on that cost was $4,544,472 which is comprised of $16,385,510 aggregate gross
unrealized appreciation and $20,929,982 aggregate gross unrealized depreciation.
Abbreviations:
- ---------------
(ADR) -- American Depository Receipts
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
World Growth Portfolio
Portfolio of Investments
December 31, 1996
Shares Value
- -------------- -------------
<S> <C> <C>
ARGENTINA - 0.7% (a)
COMMON STOCKS
6,033 Banco de Galicia Buenos
Aires "B" ADR (USD) $146,300
5,080 Banco Frances del Rio de la
Plata ADR (USD) 139,688
1,140 Enron Global Power &
Pipeline (USD) 30,780
40,900 Naviera Perez "B" 287,585
560 Sociedad Comercial del Plata
ADR (USD) 14,420 (b)
2,820 Telecom Argentina Stet "B" 11,621
630 Telecom Argentina Stet "B"
ADR (USD) 25,436
12,030 Telefonica de Argentina
ADR (USD) 311,276
1,370 Transportadora de Gas del
Sur ADR (USD) 16,783
6,430 YPF Sociedad Anonima
ADR (USD) 162,358
-------------
Total Argentina 1,146,247
-------------
AUSTRALIA - 1.4% (a)
COMMON STOCKS
52,528 Australia Gas & Light 298,943
23,000 Australia & New Zealand
Banking Group Ltd. 144,973
25,000 Broken Hill Proprietary 356,093
1,600 Coca Cola Amatil 17,105
25,500 Commonwealth Instalment
Receipt Trustee Ltd. 158,704
7,300 Lend Lease Corp. 141,579
16,303 National Australia Bank Ltd. 191,785
53,000 National Mutual Holdings Ltd. 79,199
59,159 News Corp. 312,229
24,000 Publishing & Broadcasting 116,747
11,783 Smith (Howard) Ltd. 96,935
17,700 Western Mining 111,566
37,000 Westpac Banking 210,571
33,000 Woodside Petroleum 241,054
-------------
Total Australia 2,477,483
-------------
AUSTRIA - 0.03% (a)
COMMON STOCKS
120 EVN Energie-Versorgung
Niederoesterreich AG 18,063
610 Flughafen Wien 31,096
-------------
Total Austria 49,159
-------------
BELGIUM - 1.0% (a)
COMMON STOCKS
825 Credit Communal
Holding/Dexia 75,278 (b)
1,121 Generale de Banque S.A. 401,903
81 Generale de Banque S.A.,
VVPR (reduced tax) Strips 46
2,960 Kredietbank 970,262
104 UCB 271,083
-------------
Total Belgium 1,718,572
-------------
BRAZIL - 2.0% (a)
COMMON STOCKS
1,030 Brazil Fund (USD) 22,918
15,712 Centrais Eletricas Brasileiras
S.A. ADR (USD) 284,859
6,360 Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar GDR (USD) 112,890 (b)
320 Companhia Energetica
Brasilia (USD) 10,880
13,848 Companhia Energetica
Minas Gerais ADR (USD) 470,832
28,500 Telecomunicacoes Brasilias
ADR (USD) 2,180,250
39,020 Usinas Siderurgicas de
Minas Gerais ADR (USD) 398,980
-------------
Total Brazil 3,481,609
-------------
CANADA - 0.3% (a)
COMMON STOCKS
11,780 Alcan Aluminum 400,037
4,670 Royal Bank of Canada 164,045
-------------
Total Canada 564,082
-------------
CHILE - 0.3% (a)
COMMON STOCKS
1,635 Chile Fund (USD) 34,131
1,775 Chilectra ADR (USD) 95,184
2,000 Chilgener ADR (USD) 41,750
1,030 Companhia Telecomunicaciones
ADR (USD) 104,159
7,854 Empresa Nacional de Electric
ADR (USD) 121,737
3,495 Enersis S.A. ADR (USD) 96,986
-------------
Total Chile 493,947
-------------
CHINA - 0.4% (a)
COMMON STOCKS
15,360 Huaneng Power International
N ADR (USD) 345,600 (b)
821,000 Shanghai Petrochemical
H(HKD) 249,447
452,000 Yizheng Chemical Fibre
H (HKD) 109,866
-------------
Total China 704,913
-------------
CZECH REPUBLIC - 0.1% (a)
COMMON STOCKS
700 SPT Telecom a.s. 87,149 (b)
-------------
DENMARK- 0.2% (a)
COMMON STOCKS
2,614 Den Danske Bank 210,778
807 Tele Danmark "B" 44,523
2,120 Unidanmark "A" 109,764
-------------
Total Denmark 365,065
-------------
FINLAND - 0.2% (a)
COMMON STOCKS
6,130 Oy Nokia "A" 355,540
-------------
FRANCE- 8.2% (a)
COMMON STOCKS
2,135 Accor 270,347
3,660 Alcatel Alsthom 294,013
3,480 Assurances Generales
de France 112,345
2,893 AXA 184,001
1,890 Canal Plus 417,450
2,512 Carrefour 1,634,482
570 Castorama Dubois 98,103
757 Chargeurs International S.A. 37,496 (b)
5,230 Cie de St. Gobain 739,871
2,513 Credit Local De France 218,922
17,847 Eaux Cie Generale 2,211,742
1,580 GTM Entrepose 73,085
2,130 Guilbert S.A. 416,681
1,260 Havas S.A. 88,395
4,350 Lapeyre 249,841
1,499 Legrand 255,395
614 L'Oreal 231,234
1,067 Pathe S.A. 257,059 (b)
3,870 Pinault Printemps Redoute 1,535,022
2,470 Primagaz 290,868
920 Rexel 279,271
5,276 Sanofi 524,702
6,030 Schneider S.A. 278,808 (b)
620 Societe Generale 67,037
6,725 Societe Nationale Elf Aquitaine 612,165
1,790 Sodexho 997,032
8,110 Television Francaise 775,284
13,189 Total "B" 1,072,710
-------------
Total France 14,223,361
-------------
GERMANY - 3.8% (a)
COMMON STOCKS
339 Allianz Holdings 616,844
70 Altana 54,497
35,280 Bayer 1,439,813
4,890 Bilfinger & Berger Bau AG 179,546
240 Buderas 118,534
3,159 Deutsche Bank 147,603
18,837 Gehe AG 1,205,774
5,070 Hoechst AG 239,530
520 Hornbach Baumarkt 16,491
716 Mannesmann 310,354
1,370 Praktiker Bau und
Heimwerker Markte 27,421
3,476 Rhoen Klinikum 363,683
870 SAP AG 118,446
1,443 Schering 121,813
15,465 Veba 894,453
484 Veba International, Finance
Warrants Expiring 4/6/98 155,064
273 Volkswagen 113,543 (b)
-------------
6,123,409
-------------
PREFERRED STOCKS
1,200 Fielmann 37,432
2,490 Hornbach Holdings AG 177,996
160 Krones 58,019
1,117 SAP AG 156,066
-------------
429,513
-------------
Total Germany 6,552,922
-------------
HONG KONG - 4.9% (a)
COMMON STOCKS
194,000 Cathay Pacific Airways 306,006
103,000 Dao Heng Bank Ltd. 494,059
388,188 First Pacific 504,401
335,000 Guangdong Investments 322,678
695,000 Guangzhou Investment
Co. Ltd. 332,471
118,000 Guoco Group 660,599
380,142 Hong Kong Land
Holdings (USD) 1,056,795
897,000 Hopewell Holdings 579,869
134,000 Hutchison Whampoa 1,052,492
184,000 New World Development
Co. Ltd. 1,243,002
89,000 Swire Pacific "A" 848,633
205,000 Wharf Holdings 1,023,078
-------------
Total Hong Kong 8,424,083
-------------
INDONESIA - 0.04% (a)
COMMON STOCKS
37,000 PT Telekomunikai Indonesia 63,834
-------------
ITALY - 1.9% (a)
COMMON STOCKS
3,000 Assicurazioni Generali 56,856
74,580 Banca Fideuram 163,958
88,179 Ente Nazionale Idrocarburi 452,520
2,000 Finanziaria Autogrill SpA 1,938 (b)
31,160 IMI SpA 267,027
6,074 Industrie Natuzzi SpA
ADR (USD) 139,702
28,000 Istituto Nazionale Delle
Assicurazioni 36,472
47,600 Italgas 198,778
280 La Rinascente SpA.,
Stock Warrants 123 (b)
16,520 Mediolanum SpA 156,379 (b)
8,600 Rinascente 49,888
135,000 Societa' Finaziaria
Telefonica SpA 614,041
43,800 Societa' Finaziaria Telefonica
SpA, RNC 147,973
122,827 Telecom Italia 319,010
240,400 Telecom Italia Mobile 607,735 (b)
37,000 Telecom Italia Mobile RNC 52,805
3,000 Unicem 19,578 (b)
-------------
Total Italy 3,284,783
-------------
JAPAN - 21.4% (a)
COMMON STOCKS
2,100 Advantest Corp. 98,463
23,000 Alps Electric 250,237
54,000 Amada 419,653
72,000 Canon 1,591,572
30,000 Citizen Watch Co. 215,007
43,000 Dai Nippon Screen
Manufacturing Co. Ltd. 317,460 (b)
8,000 Daifuku 100,855
51,000 Daiichi Pharmaceutical 819,100
64,000 Daiwa House 823,418
76 DDI Corp. 502,685
160 East Japan Railway 719,800
12,100 Fanuc 387,626
78,000 Hitachi 727,398
73,000 Hitachi Zosen 283,654
6,000 Honda Motor Co. 171,488
25,000 Inax 185,217
21,000 Ishihara Sangyo Kaisha 50,773 (b)
18,000 Ito-Yokado 783,352
25,000 Kao Corp. 291,426
3,000 Kawada Industries 18,392
24,000 Kokuyo 592,695
61,000 Komatsu 500,389
22,000 Komori 467,317
33,000 Kumagai Gumi 81,781
57,000 Kuraray 526,638
23,000 Kyocera 1,433,900
33,000 Makita 461,618
43,000 Marui 776,012
65,000 Matsushita Electric Industrial 1,060,789
31,000 Mitsubishi 321,216
202,000 Mitsubishi Heavy Industries 1,604,697
23,000 Mitsubishi Paper Mills 89,966
99,000 Mitsui Fudosan 991,624
16,000 Mitsui Petrochemical Industries 82,894
24,000 Murata Manufacturing 797,859
13,000 National House Industrial 172,869
128,000 NEC 1,547,362
65,000 Nippon Denso 1,565,927
9,000 Nippon Hodo 104,136
300,000 Nippon Steel 885,934
71 Nippon Telegraph & Telecom 538,278
64,000 Nomura Securities 961,575
31,000 Pioneer Electronic 591,572
4,000 Sangetsu Co. Ltd. 83,585
44,000 Sankyo 1,246,179
7,500 Sega Enterprises 252,569
65,000 Sekisui Chemical 656,679
49,000 Sekisui House 499,266
7,000 Seven-Eleven Japan 409,809
60,000 Sharp 854,848
40,300 Shin-Etsu Chemical 734,246
12,000 Shiseido Co. Ltd. 138,848
16,100 Sony 1,055,168
93,000 Sumitomo 733,175
99,000 Sumitomo Electric 1,384,855
28,000 Sumitomo Forestry 340,903
17,000 TDK 1,108,281
129,000 Teijin 563,630
23,000 Tokio Marine & Fire Insurance 216,475
9,000 Tokyo Electronics 275,883
22,300 Tokyo Steel Manufacturing 317,719
42,000 Toppan Printing 525,861
26,000 Uny Co. 475,952
8,400 Yurtec 113,876
-------------
Total Japan 36,902,431
-------------
MALAYSIA - 2.4% (a)
COMMON STOCKS
213,000 Affin Holdings BHD 586,161
61,000 Commerce Asset
Holding BHD 458,919
191,000 MBF Capital 310,077
334,000 Multi-Purpose Holdings 648,030
284,000 Multi-Purpose Holdings
BHD, Stock Warrants 12,370 (b)
331,000 Renong BHD 587,163
7,400 Renong BHD - 4% ICULS
Rights 3,106 (b)
101,000 Technology Resources
Industries BHD 199,161 (b)
78,000 Time Engineering BHD 144,542
132,000 United Engineers 1,191,685
-------------
Total Malaysia 4,141,214
-------------
MEXICO - 1.5% (a)
COMMON STOCKS
58,000 Cementos de Mexico
ADR (USD) 449,500
17,850 Cemex S.A. de C.V. "B" 69,613
208,783 Cifra "B" ADR (USD) 249,496 (b)
40,349 Gruma "B" 246,030 (b)
3,636 Gruma S.A. GDR (USD) 88,173 (b)
7,260 Grupo Embotellador
de Mexico 10,606
700 Grupo Financiero Banamex
Accival "L" 1,378 (b)
51,680 Grupo Financiero
Banamex "B" 109,111 (b)
92,062 Grupo Industrial Maseca "B" 116,715
1,600 Grupo Televisa GDR (USD) 41,000 (b)
9,440 Kimberly-Clark Mexico "A" 186,474
7,010 Panamerican Beverages "A"
ADR (USD) 328,594
19,435 Telefonos de Mexico "L"
ADR (USD) 641,355
-------------
Total Mexico 2,538,045
-------------
NETHERLANDS - 10.5% (a)
COMMON STOCKS
14,410 ABN Amro Holdings 938,131
12,206 Ahold 763,538
12,559 CSM 698,328
199,115 Elsevier 3,367,598
17,255 Fortis Amev N.V. 604,650
1,168 Gucci Group N.V. (USD) 74,606
3,710 Hagemeyer 296,757
41,272 ING Groep N.V. 1,486,892
29,950 ING Groep N.V.,
Stock Warrants 215,106 (b)
6,050 Koninklijke PTT Nederland 230,927
2,420 Nutricia 367,941
1,940 Otra N.V. 33,373
20,215 Polygram 1,030,362
20,402 Royal Dutch Petroleum 3,579,360
5,880 Unilever 1,040,792
25,992 Wolters Kluwer 3,455,062
-------------
Total Netherlands 18,183,423
-------------
NEW ZEALAND - 0.5% (a)
COMMON STOCKS
33,100 Carter Holt Harvey 75,116
18,000 Fernz 61,718
32,000 Fletcher Challenge Building 98,409 (b)
3,000 Fletcher Challenge Energy 8,696 (b)
112,369 Fletcher Challenge
Forests Division 188,275
6,000 Fletcher Challenge Paper 12,344 (b)
86,000 Telecom Corp. of New Zealand 438,968
-------------
Total New Zealand 883,526
-------------
NORWAY - 1.6% (a)
COMMON STOCKS
2,120 Bergesen "A" 51,329
27,584 Norsk Hydro 1,477,003
17,075 Orkla "A" 1,179,304
3,350 Saga Petroleum "B" 51,994
-------------
Total Norway 2,759,630
-------------
PANAMA - 0.05% (a)
COMMON STOCKS
1,676 Banco Latinoamericano de
Exportaciones S.A. "E" 85,057
-------------
PERU - 0.03% (a)
COMMON STOCKS
3,180 Telefonica del Peru S.A.
ADR (USD) 60,023
-------------
PHILIPPINES - 0.1% (a)
COMMON STOCKS
16,000 Philippine National Bank 190,114
-------------
PORTUGAL - 0.4% (a)
COMMON STOCKS
6,825 Estabelecimentos Jeronimo
Martins & Filho SGPA S.A. 352,012
4,550 Estabelecimentos Jeronimo
Martins & Filho SGPA S.A.,
Baby Shares 218,535
6,825 Estabelecimentos Jeronimo
Martins & Filho SGPA S.A.,
Stock Appreciation Rights 115,327
1,137 Estabelecimentos Jeronimo
Martins & Filho SGPA S.A.,
Units 64,399
-------------
Total Portugal 750,273
-------------
RUSSIA - 0.02% (a)
COMMON STOCKS
2,280 Gazprom ADR (USD) 40,470 (b)
-------------
SINGAPORE - 2.4% (a)
COMMON STOCKS
14,000 City Developments Ltd. 126,063
74,000 DBS Land 272,350
22,000 Development Bank of Singapore 297,149
19,000 Far East Levingston
Shipbuilding 99,121
27,400 Fraser & Neave Ltd. 281,970
17,000 Keppel 132,423
99,000 Overseas Union Bank 764,096
4,000 Singapore Airlines 36,304
87,000 Singapore Land 481,848
33,000 Singapore Press 650,897
78,000 United Industrial 65,776
75,000 United Overseas Bank 836,132
7,000 United Overseas Bank,
Stock Warrants 24,712 (b)
-------------
Total Singapore 4,068,841
-------------
SOUTH KOREA - 0.4% (a)
COMMON STOCKS
20,300 Korea Electric Power Corp.
ADR (USD) 416,150
6,309 Korea Equity Fund (USD) 94,635
500 Pohang Iron & Steel
ADR (USD) 10,125
270 Samsung Electronics GDR
Bonus (USD) 7,223 (b)
900 Samsung Electronics
37,238 (b)
10,000 Samsung Electronics GDR,
non voting (USD) 184,500 (b)
-------------
Total South Korea 749,871
-------------
SPAIN - 2.6% (a)
COMMON STOCKS
2,275 Banco Popular Espanol 446,852
9,110 Banco Santander 583,124
2,590 Centros Comerciales
Continente S.A. 53,067 (b)
4,940 Centros Comerciales Pryca 104,641
5,012 Corporacion Bancaria de
Espana S.A. 224,300
13,510 Empresa Nacional
de Electridad 961,544
2,516 Gas Natural 585,274
38,580 Iberdrola 546,791
17,860 Repsol S.A. 685,098
40 Repsol S.A. ADR (USD) 1,525
1,683 Sociedade General de Aguas
de Barcelona S.A. 70,003
24 Sociedade General de Aguas
de Barcelona S.A. 993 (b)
7,260 Telefonica de Espana 168,603
-------------
Total Spain 4,431,815
-------------
SWEDEN - 2.7% (a)
COMMON STOCKS
2,740 ABB AB 309,359
40,600 Astra AB "B" 1,958,592
15,130 Atlas Copco "B" 368,272
10,375 Electrolux "B" 602,428
2,000 Esselte "B" 44,282
4,840 Hennes & Mauritz "B" 669,945
1,720 Sandvik "A" 46,405
17,150 Sandvik "B" 465,220
2,720 Scribona "B" 30,511
8,670 Stora Kopparberg "B" 118,229 (b)
-------------
Total Sweden 4,613,243
-------------
SWITZERLAND - 4.5% (a)
COMMON STOCKS
2,597 Adecco S.A. 651,918
1,040 ABB AG 1,293,687
2,900 CS Holding 297,908
1,295 Nestle 1,390,299
1,689 Novartis AG 1,934,432 (b)
224 Roche Holdings 1,742,966
2,696 Schwizerischer Bankverein 512,613
-------------
Total Switzerland 7,823,823
-------------
THAILAND - 0.4% (a)
COMMON STOCKS
7,950 Advanced Information
Service plc (Foreign
Registered) 67,578
29,470 Bangkok Bank 284,979
1,130 Siam Cement 35,425
13,950 Siam Commercial Bank 101,174
15,110 Thai Farmers Bank Public
Co. Ltd. 94,268 (b)
3,600 Total Access Communication
Public Co. Ltd. ADR (USD) 24,840 (b)
-------------
Total Thailand 608,264
-------------
UNITED KINGDOM - 16.2% (a)
COMMON STOCKS
136,000 Abbey National 1,780,093
72,066 Argos plc 946,970
314,000 Asda Group 661,676
62,000 British Gas 237,930
53,000 British Petroleum 635,600
121,000 Cable & Wireless 1,011,616
87,225 Cadbury Schweppes 736,713
157,000 Caradon 645,537
39,000 Coats Viyella 89,532
48,000 Compass Group 509,851
84,000 David S. Smith 448,998
23,000 East Midlands Electricity plc 260,853
47,000 Electrocomponents 371,201
8,000 GKN 137,194
84,500 Glaxo Wellcome 1,375,278
105,000 Grand Metropolitan 823,882
11,000 Heywood Williams Group 44,852
37,000 Hillsdown Holdings 126,777
24,000 John Laing "A" 114,922
121,000 Kingfisher 1,305,979
40,000 London Electricity 466,335
231,000 National Westminster Bank 2,714,853
85,000 Rank Group plc 637,828
115,000 Reed International 2,163,269
29,000 Rolls Royce 127,685
58,000 RTZ 932,054
111,000 Safeway plc 766,370
26,000 Sears 41,871
106,000 Shell Transport & Trading 1,837,793
200,000 SmithKline Beecham 2,768,545
96,000 T & N 286,174
102,000 Tesco 618,605
248,700 Tomkins 1,150,403
99,000 United News & Media 1,182,165
-------------
Total United Kingdom 27,959,404
-------------
Principal
Amount
- --------------
SHORT-TERM
SECURITIES - 6.8% (a)
Commercial Paper
$1,790,000 Ciesco L.P., 6.75%,
due 1/2/1997 (USD) 1,789,665
8,000,000 General Electric Capital
Corp., 6.65%,
due 1/2/1997 (USD) 7,998,522
2,000,000 Warner-Lambert Co.,
6.0%, due 1/7/1997 (USD) 1,998,000
-------------
Total Short-Term Securities 11,786,187
-------------
Total Investments $172,568,403 (c,d)
=============
Notes to Portfolio of Investments:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments
of the World Growth Portfolio.
(b) Currently non-income producing.
(c) Security Classification:
Percentage of
Cost Value Portfolio
------------- ------------- --------
Common Stocks &
Warrants $149,981,660 $160,352,703 93.00%
Preferred Stocks 467,665 429,513 0.20%
Short-Term 11,786,187 11,786,187 6.80%
------------- ------------- ------
Total Investments $162,235,512 $172,568,403 100.00%
============= ============= ======
(d) At December 31, 1996, the aggregate cost of securities for federal income tax
purposes was $162,500,009 and the net unrealized appreciation of investments
based on that cost was $10,068,394 which is comprised of $16,108,651 aggregate
gross unrealized appreciation and $6,040,257 aggregate gross unrealized
depreciation.
Abbreviations:
- ------------------------------------------
(ADR) -- American Depository Receipts
(GDR) -- Global Depository Receipts
(HKD) -- Denominated in Hong Kong Dollars
(USD) -- Denominated in U.S. Dollars
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
Growth Portfolio
Portfolio of Investments
December 31, 1996
Shares Value
- -------------- ---------------
<S> <C> <C>
COMMON STOCKS - 93.8% (a)
Aerospace - 2.3%
230,000 Boeing Co. $24,466,250
91,700 Raytheon Co. 4,413,062
156,800 United Technologies Corp. 10,348,800
---------------
39,228,112
---------------
Airlines - 0.6%
116,400 Continental Airlines Holding,
Inc., Class B 3,288,300 (b)
100,800 UAL Corp. 6,300,000 (b)
----------------
9,588,300
----------------
Automotive - 2.7%
383,700 Chrysler Corp. 12,662,100
200,000 Ford Motor Co. 6,375,000
201,000 General Motors Corp. 11,205,750
243,800 Goodyear Tire & Rubber
Co. (The) 12,525,225
45,400 PACCAR, Inc. 3,087,200
---------------
45,855,275
---------------
Bank & Finance - 13.9%
128,500 Allstate Corp. 7,436,938
240,900 American Express Co. 13,610,850
238,600 American International
Group, Inc. 25,828,450
245,800 Bank of New York Co., Inc. 8,295,750
176,600 BankAmerica Corp. 17,615,850
246,300 Barnett Banks, Inc. 10,129,088
104,300 Beneficial Corp. 6,610,013 (c)
278,800 Chase Manhattan Corp. 24,882,900
91,700 Crestar Financial Corp. 6,820,187 (b,c)
600,000 Federal National Mortgage
Association 22,350,000
139,600 First Bank System, Inc. 9,527,700
221,300 First Chicago NBD Corp. 11,894,875
177,200 First USA, Inc. 6,135,550
108,300 Firstar Corp. 5,685,750 (c)
182,300 Great Western Financial Corp. 5,286,700
166,200 Green Tree Financial Corp. 6,419,475
344,700 Hibernia Corp., Class A 4,567,275
92,600 ITT Hartford Group, Inc. 6,250,500
122,600 MBNA Corp. 5,087,900
96,900 Southern National Corp. 3,512,625
100,000 Summit Bancorp 4,375,000
76,600 TCF Financial Corp. 3,332,100
80,200 Torchmark Corp. 4,050,100
40,000 Wells Fargo & Co. 10,790,000
---------------
230,495,576
---------------
Broadcasting - 1.3%
89,500 Cox Radio, Inc., Class A 1,566,250 (b)
255,400 Infinity Broadcasting Corp.,
Class A 8,587,825
232,000 Tele-Communications, Inc.,
Liberty Media Group,
Series A 6,626,500 (b)
91,400 Tele-Communications, Inc.,
TCI Group, Series A 1,193,912
113,500 Young Broadcasting Corp.,
Class A 3,319,875 (b)
---------------
21,294,362
---------------
Chemicals - 1.7%
200,000 Air Products & Chemicals, Inc. 13,825,000
251,200 IMC Global, Inc. 9,828,200
91,500 Millipore Corp. 3,785,812
---------------
27,439,012
---------------
Computer Software - 4.7%
115,200 Broderbund Software, Inc. 3,427,200 (b)
195,300 Cadence Design Systems, Inc. 7,763,175 (b)
238,500 Computer Associates
International, Inc. 11,865,375 (d)
163,700 DataWorks Corp. 4,133,425
211,100 Microsoft Corp. 17,442,137 (b)
114,700 Netscape Communications
Corp. 6,523,563 (b)
118,100 Network General Corp. 3,572,525 (b)
215,500 Oracle Corp. 8,997,125 (b)
162,300 Rational Software Corp. 6,420,994 (b)
145,500 Sterling Commerce, Inc. 5,128,875 (b)
127,700 Structural Dynamics Research
Corp. 2,554,000 (b,c)
---------------
77,828,394
---------------
Computers &
Office Equipment - 5.3%
169,400 3Com Corp. 12,429,725 (b)
351,100 Cisco Systems, Inc. 22,338,737 (b)
120,000 Compaq Computer Corp. 8,910,000 (b,d)
78,200 FORE Systems, Inc. 2,570,825 (b)
202,100 Hewlett Packard Co. 10,155,525
140,000 International Business
Machines 21,140,000
145,800 Seagate Technology, Inc. 5,759,100 (b)
190,900 Sun Microsystems, Inc. 4,903,744 (b)
---------------
88,207,656
---------------
Conglomerates - 1.0%
246,800 AlliedSignal, Inc. 16,535,600
---------------
Drugs & Health Care - 10.7%
260,200 Abbott Laboratories 13,205,150
175,000 Alpha-Beta Technology, Inc. 1,848,437 (b)
104,700 Amgen, Inc. 5,693,063 (b)
73,300 Astra AB, ADR 3,591,700
279,600 Becton, Dickinson & Co. 12,127,650
237,300 Biochem Pharma, Inc. 11,924,325 (b)
142,300 Boston Scientific Corp. 8,538,000 (b)
200,000 Centocor, Inc. 7,150,000 (b)
314,000 Eli Lilly & Co. 22,922,000
312,700 Johnson & Johnson 15,556,825
314,500 Merck & Co., Inc. 24,924,125
97,200 PDT, Inc. 2,721,600
127,100 Pfizer, Inc. 10,533,413
82,200 Schering-Plough Corp. 5,322,450
98,300 STERIS Corp. 4,276,050 (b)
166,900 Teva Pharmaceutical Industries
Ltd., ADR 8,386,725
242,600 Warner-Lambert Co. 18,195,000
---------------
176,916,513
---------------
Electric Utilities - 1.0%
200,500 American Electric Power Co. 8,245,562
325,000 Entergy Corp. 9,018,750
---------------
17,264,312
---------------
Electrical Equipment - 1.5%
230,000 General Electric Co. 22,741,250
137,200 Vivid Technologies, Inc. 1,715,000 (b)
---------------
24,456,250
---------------
Electronics - 5.8%
124,100 Applied Materials, Inc. 4,459,844 (b)
145,600 Atmel Corp. 4,823,000 (b)
115,300 Etec Systems, Inc. 4,410,225 (b)
125,000 Harman International
Industries, Inc. 6,953,125
233,700 Intel Corp. 30,600,094
150,000 Maxim Integrated
Products, Inc. 6,487,500 (b)
225,700 Micron Technology, Inc. 6,573,513
109,500 Motorola, Inc. 6,720,562
169,300 Nokia Corp., ADR 9,755,913
121,600 S3, Inc. 1,976,000 (b)
142,800 Sierra Semiconductor Corp. 2,142,000 (b)
138,200 Vitesse Semiconductor Corp. 6,288,100 (b)
151,200 Xilinx, Inc. 5,566,050 (b)
---------------
96,755,926
---------------
Food & Beverage - 3.8%
355,100 Coca-Cola Co. 18,687,138
134,500 Coca-Cola Femsa S.A., ADR 3,883,688
144,200 ConAgra, Inc. 7,173,950
289,400 PepsiCo, Inc. 8,464,950
113,900 Ralston-Ralston Purina Group 8,357,412
80,000 Salomon, Inc., (Snapple, Inc.,
Equity-Linked Security) 1,150,000
400,000 Sara Lee Corp. 14,900,000
---------------
62,617,138
---------------
Healthcare
Management - 1.5%
152,300 Oxford Health Plans, Inc. 8,919,069 (b)
41,100 PacifiCare Health Systems,
Inc., Class B 3,503,775 (b)
289,000 United Healthcare Corp. 13,005,000
---------------
25,427,844
---------------
Household Products - 4.1%
221,400 Avon Products, Inc. 12,647,475
177,100 Colgate Palmolive Co. 16,337,475
309,600 Dial Corp 4,566,600
206,500 Gillette Co. 16,055,375
173,900 Procter & Gamble Co. 18,694,250
---------------
68,301,175
---------------
Leisure &
Entertainment - 2.4%
341,800 CapStar Hotel Co. 6,707,825 (b)
232,400 Disney (Walt) Co. 16,180,850
128,000 Hollywood Entertainment
Corp. 2,368,000 (b)
119,400 Hospitality Franchise
Systems, Inc. 7,134,150 (b)
91,500 Time Warner, Inc. 3,431,250
92,200 Viacom, Inc., Class B 3,215,475 (b)
---------------
39,037,550
---------------
Machinery &
Equipment - 1.5%
160,000 Caterpillar, Inc. 12,040,000
268,700 Deere & Co. 10,915,938
101,100 New Holland N.V. 2,110,462 (b)
---------------
25,066,400
---------------
Manufacturing - 0.2%
84,800 BMC Industries, Inc. 2,671,200
---------------
Mining & Metals - 2.2%
148,000 Aluminum Co. of America 9,435,000
80,700 Newmont Mining, Inc. 3,611,325
178,600 Nucor Corp. 9,108,600
175,000 Phelps Dodge Corp. 11,812,500
113,900 Steel Dynamics, Inc. 2,178,337 (b)
---------------
36,145,762
---------------
Natural Gas - 0.8%
199,500 Consolidated Natural Gas Co. 11,022,375
54,300 Union Pacific Resources
Group, Inc. 1,588,275
---------------
12,610,650
---------------
Oil & Oil Service - 7.2%
200,000 Amoco Corp. 16,100,000
173,900 Baker Hughes, Inc. 5,999,550
280,400 Chevron Corp. 18,226,000
206,900 Enron Oil & Gas Co. 5,224,225
267,500 Halliburton Co. 16,116,875
137,900 Louisiana Land and
Exploration Co. 7,394,888
250,000 Mobil Corp. 30,562,500
161,800 Noble Drilling Corp. 3,215,775 (b)
187,300 Reading & Bates Corp. 4,963,450 (b)
141,800 Tidewater, Inc. 6,416,450 (c)
85,300 Triton Energy Ltd., Class A 4,137,050 (b)
24,100 Varco International, Inc. 557,312 (b)
---------------
118,914,075
---------------
Photography - 1.0%
204,300 Eastman Kodak Co. 16,395,075
---------------
Pollution Control - 0.3%
168,800 WMX Technologies, Inc. 5,507,100
---------------
Publishing & Printing - 0.8%
173,600 Gannett Co., Inc. 12,998,300
---------------
Railroads - 0.3%
54,900 Burlington Northern Santa Fe 4,741,987
---------------
Restaurants - 0.6%
208,500 McDonald's Corp. 9,434,625
---------------
Retail - 4.8%
215,700 American Stores Co. 8,816,738 (c)
321,200 CVS Corp. 13,289,650
182,400 Federated Department Stores 6,224,400 (b)
184,700 Gap, Inc. 5,564,088
119,100 Home Depot, Inc. 5,969,888
267,000 Kroger Co. 12,415,500 (b)
174,500 Movie Gallery, Inc. 2,268,500 (b)
233,300 Safeway, Inc. 9,973,575 (b)
159,000 Sears, Roebuck & Co. 7,333,875
355,100 Wal-Mart Stores, Inc. 8,122,912
---------------
79,979,126
---------------
Services - 2.8%
244,192 AccuStaff, Inc. 5,158,556 (b)
157,700 Automatic Data
Processing, Inc. 6,761,387
40,000 BA Merchants Services, Inc. 715,000 (b)
158,300 Computer Sciences Corp. 13,000,388 (b)
26,800 DST Systems, Inc. 840,850 (b)
532,590 First Data Corp. 19,439,535
---------------
45,915,716
---------------
Telecommunications
Equipment - 3.1%
141,700 ACT Networks, Inc. 5,172,050 (b)
292,600 ADC Telecommunications, Inc. 9,107,175 (b)
157,700 Ascend Communications, Inc. 9,797,112 (b,d)
36,700 Cascade Communications
Corp. 2,023,088 (b,d)
159,200 DSC Communications Corp. 2,845,700 (b)
164,042 Lucent Technologies, Inc. 7,586,943 (b)
255,800 Tellabs, Inc. 9,624,475 (b)
70,000 U.S. Robotics Corp. 5,040,000 (b)
---------------
51,196,543
---------------
Telephone &
Telecommunications - 3.3%
341,100 Aerial Communications, Inc. 2,771,437 (b)
285,000 Ameritech Corp. 17,278,125
325,000 BellSouth Corp. 13,121,875
200,600 MCI Communications Corp. 6,557,113
327,500 MobileMedia Corp., Class A 143,281 (b)
290,000 SBC Communications, Inc. 15,007,500
---------------
54,879,331
---------------
Textiles & Apparel - 0.6%
172,200 NIKE, Inc., Class B 10,288,950
---------------
Total Common Stock
(cost $1,411,176,476) 1,553,993,835
---------------
PREFERRED
STOCK - 0.3% (a)
66,300 Microsoft Corp., Convertible
Preferred Stock, Series A
(cost $5,295,712) 5,312,287
---------------
CORPORATE
BONDS - 0.3% (a)
6,250,000 Broadband Technologies, Inc.,
Convertible Subordinated
Notes, 5.0%, due 5/15/2001
(cost $6,247,044)
4,718,750
U.S. GOVERNMENT - 0.1% (a) ---------------
1,000,000 U.S. Treasury Notes,
6.875%, due 3/31/1997 1,003,125
300,000 U.S. Treasury Notes,
8.75%, due 10/15/1997 306,562
Total U.S. Government ---------------
(cost $1,306,875) 1,309,687
---------------
SHORT-TERM
SECURITIES - 5.5% (a)
Commercial Paper
10,000,000 Coca-Cola Co., 5.9%,
due 1/7/1997 9,990,167
3,141,000 Enterprise Funding Corp.,
5.45%, due 1/23/1997 3,130,539
5,000,000 Fletcher Challenge Finance
USA, Inc., 5.4%,
due 1/28/1997 4,979,750
10,000,000 General Electric Capital Corp.,
5.42%, due 1/24/1997 9,965,372
14,330,000 Koch Industries, 7.0%,
due 1/2/1997 14,327,214
10,000,000 Norwest Financial, Inc.,
5.4%, due 1/21/1997 9,970,000
1,103,000 Oyster Creek Co., 5.7%,
due 1/22/1997 1,099,332
7,000,000 Sheffield Receivables Corp.,
5.7%, due 1/3/1997 6,997,783
20,700,000 Shell Oil Co., Series A,
6.4%, due 1/2/1997 20,696,320
10,000,000 United Parcel Service,
5.85%, 1/10/1997 9,985,375
---------------
Total Short-Term Securities
(at amortized cost) 91,141,852
---------------
Total Investments
(cost $1,515,167,959) $1,656,476,411 (e)
================
Notes to Portfolio of Investments:
- ---------------------------------
(a) The categories of investments are shown as a percentage of total investments
of the Growth Portfolio.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock and had no
separate value at December 31, 1996.
(d) At December 31, 1996, securities valued at $5,756,300 were held in escrow to
cover open call options written as follows:
<CAPTION>
Number of Exercise Expiration
Issue Contracts Price Date Value
- --------------- ---------- ------- --------- -------
<S> <C> <C> <C> <C>
Ascend
Communications, 200 $60 1/18/97 $95,000
Cascade
Communications C 100 $58 1/18/97 25,000
Compaq
Computer Corp. 200 $70 1/18/97 112,500
Computer Associates
International, I 246 $50 1/18/97 58,425
Computer Associates
International, I 252 $55 1/18/97 14,175
----- ---------
Total 998 $305,100
===== =========
(e) At December 31, 1996, the aggregate cost of securities for federal income
tax purposes was $1,521,738,773 and the net unrealized appreciation of investments
based on that cost was $134,737,638 which is comprised of $166,110,021 aggregate
gross unrealized appreciation and $31,372,383 aggregate gross unrealized
depreciation.
Abbreviations:
- -----------------
(ADR) -- American Depository Receipts
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
High Yield Portfolio
Portfolio of Investments
December 31, 1996
Principal Maturity
Amount Rate Date Value
- ---------------- ------ ---------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 81.1% (a)
Airlines - 0.5%
$4,500,000 U.S. Air, Inc., Sr. Secured Equipment Trust, Series 1993-A-3 10.375% 3/1/2013 $4,680,000
--------------
Automotive - 0.4%
7,050,000 Exide Corp., Convertible Sr. Subordinated Notes 2.9% 12/15/2005 4,212,375
--------------
Bank & Finance - 6.2%
4,750,000 Chevy Chase Savings Bank, Subordinated Debentures 9.25% 12/1/2005 4,892,500
7,800,000 Dollar Financial Group, Inc., Sr. Notes 10.875% 11/15/2006 8,073,000
10,000,000 First Nationwide Holdings, Inc., Sr. Notes 12.5% 4/15/2003 11,050,000
6,000,000 HomeSide, Inc., Sr. Secured Second Priority Bonds, Series B 11.25% 5/15/2003 6,720,000
6,000,000 Mego Mortgage Corp., Sr. Subordinated Notes 12.5% 12/1/2001 6,030,000
8,440,352 Scotsman Holdings, Sr. Notes, Payment-In-Kind, Series B 11.0% 3/1/2004 8,672,462
3,000,000 Trizec Finance Ltd., Sr. Notes 10.875% 10/15/2005 3,326,250
6,350,000 Veritas Holdings GMBH, Sr. Notes 9.625% 12/15/2003 6,413,500
8,000,000 Wilshire Financial Services Group, Inc., Notes 13.0% 1/1/2004 8,080,000
--------------
63,257,712
--------------
Broadcasting - 17.3%
4,550,000 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 8/15/2005 1,660,750
9,111,426 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 6/15/2004 3,781,242
4,750,000 Australis Holdings Pty Ltd., Units Zero Coupon 11/1/2002 2,719,375
15,000,000 Australis Media Ltd., Units Zero Coupon 5/15/2003 8,475,000
10,100,000 Benedek Communications Corp., Sr. Discount Notes Zero Coupon 5/15/2006 5,858,000
6,900,000 Cablevision Industries, Debentures, Series B 9.25% 4/1/2008 7,326,724
13,780,000 CS Wireless Systems, Inc., Sr. Discount Notes Zero Coupon 3/1/2006 5,029,700
5,400,000 EchoStar Satellite Broadcasting Corp., Sr.
Secured Discount Notes Zero Coupon 3/15/2004 4,158,000
17,554,867 Falcon Holdings Group L.P., Sr. Subordinated Notes, Series B 11.0% 9/15/2003 15,711,606
7,750,000 FrontierVision Operating Partners L.P./Frontier
Vision Capital Corp., Sr. Subordinated Notes 11.0% 10/15/2006 7,779,063
13,000,000 Groupo Televisa S.A., Sr. Discount Debentures Zero Coupon 5/15/2008 8,645,000
10,100,000 Groupo Televisa S.A., Sr. Notes 11.875% 5/15/2006 11,223,625
10,400,000 InterMedia Capital Partners IV, L.P., Sr. Notes 11.25% 8/1/2006 10,894,000
4,650,000 International CableTel, Inc., Convertible Subordinated Notes 7.25% 4/15/2005 4,992,937
5,900,000 International CableTel, Inc., Convertible Subordinated Notes 7.0% 6/15/2008 5,398,500
7,800,000 International CableTel, Inc., Sr. Deferred Notes, Series A Zero Coupon 2/1/2006 5,343,000
6,900,000 International CableTel, Inc., Sr. Notes, Series A Zero Coupon 4/15/2005 5,192,250
7,650,000 Jacor Communications, Inc., Convertible Liquid Yield
Option Notes Zero Coupon 6/12/2011 3,442,500
5,200,000 NWCG Holdings Corp., Sr. Secured Discount Notes, Series B Zero Coupon 6/15/1999 4,355,000
10,700,000 Olympus Communications, L.P., Sr. Notes 10.625% 11/15/2006 11,007,625
11,150,000 People's Choice TV Corp., Sr. Discount Notes Zero Coupon 6/1/2004 4,738,750
7,050,000 Rogers Cablesystems Ltd., Sr. Secured Second Priority Notes 9.625% 8/1/2002 7,402,500
7,000,000 Rogers Communications, Inc., Convertible Debentures 2.0% 11/26/2005 3,850,000
3,750,000 Rogers Communications, Inc., Sr. Notes 9.125% 1/15/2006 3,731,250
6,025,000 Scott Cable Communications, Inc., Subordinated Debentures 12.25% 4/15/2001 4,247,625 (C)
1,900,000 Tele-Communications International, Inc., Convertible
Subordinated Debentures 4.5% 2/15/2006 1,436,875
8,400,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series B Zero Coupon 5/15/2006 4,431,000
9,100,000 United International Holdings, Inc., Sr. Discount Notes Zero Coupon 11/15/1999 6,506,500
6,400,000 Wireless One, Inc., Sr. Notes 13.0% 10/15/2003 6,240,000
--------------
175,578,397
--------------
Building Products & Materials - 1.7%
9,450,000 Atrium Cos., Inc., Sr. Subordinated Notes 10.5% 11/15/2006 9,639,000
7,200,000 CEMEX S.A. de C.V., Notes 12.75% 7/15/2006 8,064,000
--------------
17,703,000
--------------
Computers & Office Equipment - 3.2%
4,750,000 Cirrus Logic, Inc., Sr. Subordinated Notes 6.0% 12/15/2003 4,322,500
11,725,000 Dictaphone Corp., Sr. Subordinated Notes 11.75% 8/1/2005 10,611,125
3,000,000 National Data Corp., Convertible Subordinated Notes 5.0% 11/1/2003 3,112,500
8,850,000 Unisys Corp., Sr. Notes 11.75% 10/15/2004 9,480,562
4,600,000 Unisys Corp., Sr. Notes 12.0% 4/15/2003 4,945,000
--------------
32,471,687
--------------
Construction & Home Building - 1.9%
11,750,000 Peters (J.M.) Co., Inc., Sr. Notes 12.75% 5/1/2002 11,221,250
7,750,000 The Fortress Group, Inc., Sr. Notes 13.75% 5/15/2003 8,253,750
--------------
19,475,000
--------------
Containers & Packaging - 1.0%
4,650,000 Radnor Holdings Corp., Sr. Notes 10.0% 12/1/2003 4,743,000
5,900,000 Riverwood International Corp., Sr. Subordinated Notes 10.875% 4/1/2008 5,487,000
--------------
10,230,000
--------------
Drugs & Health Care - 1.6%
4,245,800 General Medical Corp., Payment-In-Kind Debentures 12.125% 8/15/2005 4,564,235
3,550,000 Owens & Minor, Inc., Sr. Subordinated Notes 10.875% 6/1/2006 3,834,000
10,900,000 Unilab Corp., Sr. Notes 11.0% 4/1/2006 7,466,500
--------------
15,864,735
--------------
Electric Utilities - 0.6%
3,250,000 Midland Cogen Venture Fund II, Secured Lease
Obligation Bonds, Series A 11.75% 7/23/2005 3,656,250
2,000,000 Midland Cogen Venture Fund II, Subordinated Secured
Lease Obligation Bonds 13.25% 7/23/2006 2,370,000
--------------
6,026,250
--------------
Electrical Equipment - 1.8%
6,350,000 Protection One Alarm Monitoring, Convertible Sr.
Subordinated Notes 6.75% 9/15/2003 5,842,000
7,450,000 Protection One Alarm Monitoring, Sr. Subordinated
Discount Notes Zero Coupon 6/30/2005 7,114,750
4,750,000 Telex Communications, Inc., Sr. Notes 12.0% 7/15/2004 5,296,250
--------------
18,253,000
--------------
Food & Beverage - 2.0%
9,965,000 Fresh Del Monte Corp., Sr. Notes, Series B 10.0% 5/1/2003 9,516,575
6,000,000 Gorges/Quik-to-Fix Foods, Inc., Sr. Subordinated Notes 11.5% 12/1/2006 6,247,500
4,750,000 International Home Foods, Inc., Sr. Subordinated Notes 10.375% 11/1/2006 4,963,750
--------------
20,727,825
--------------
Hospital Management - 4.2%
7,250,000 Merit Behavioral Care Corp., Sr. Subordinated Notes 11.5% 11/15/2005 7,902,500
6,600,000 Paracelsus Healthcare Corp., Sr. Subordinated Notes 10.0% 8/15/2006 6,220,500
4,650,000 PhyMatrix Corp., Convertible Subordinated Debentures 6.75% 6/15/2003 3,853,687
5,850,000 Regency Health Services, Inc., Sr. Subordinated Notes 9.875% 10/15/2002 5,923,125
4,400,000 Regency Health Services, Inc., Subordinated Notes 12.25% 7/15/2003 4,697,000
5,650,000 Rotech Medical Corp., Convertible Subordinated Debentures 5.25% 6/1/2003 5,565,250
8,350,000 Unison HealthCare Corp., Sr. Notes 12.25% 11/1/2006 8,600,500
--------------
42,762,562
--------------
Household Products - 2.4%
6,850,000 BPC Holding Corp., Sr. Secured Notes, Series B 12.5% 6/15/2006 7,261,000
35,400,000 Coleman Worldwide Corp., Convertible Liquid Yield
Option Notes Zero Coupon 5/27/2013 10,354,500
6,750,000 Simmons Co., Sr. Subordinated Notes 10.75% 4/15/2006 7,053,750
--------------
24,669,250
--------------
Leisure & Entertainment - 1.2%
11,500,000 AMF Group, Inc., Sr. Subordinated Discount Notes, Series B Zero Coupon 3/15/2006 7,661,875
4,000,000 IMAX Corp., Sr. Notes 7.0% 3/1/2001 4,100,000
--------------
11,761,875
--------------
Mining & Metals - 0.7%
7,000,000 Commonwealth Aluminum Corp., Sr. Subordinated Notes 10.75% 10/1/2006 7,175,000
--------------
Oil & Gas - 3.4%
7,800,000 Abraxas Petroleum Corp., Sr. Notes 11.5% 11/1/2004 8,404,500
5,950,000 Kelley Oil & Gas Corp., Sr. Subordinated Notes 10.375% 10/15/2006 6,217,750
5,950,000 National Energy Group, Inc., Sr. Notes 10.75% 11/1/2006 6,277,250
5,704,000 Petroleum Heat & Power Co., Inc., Subordinated Debentures 12.25% 2/1/2005 6,402,740
7,000,000 Veritas DGC, Inc., Sr. Notes 9.75% 10/15/2003 7,315,000
--------------
34,617,240
--------------
Paper & Forest Products - 1.6%
4,850,000 FSW International Finance Co. B.V., Guaranteed Secured Notes 12.5% 11/1/2006 5,141,000
10,550,000 National Fiberstock Corp., Sr. Notes Series B 11.625% 6/15/2002 11,183,000
--------------
16,324,000
--------------
Pollution Control - 1.7%
6,350,000 Allied Waste, North America, Sr. Subordinated Notes 10.25% 12/1/2006 6,691,312
4,000,000 Norcal Waste Systems, Inc., Sr. Notes, Series B 13.0% 11/15/2005 4,460,000
5,700,000 U.S. Filter Corp., Convertible Subordinated Notes 4.5% 12/15/2001 5,821,125
--------------
16,972,437
--------------
Publishing & Printing - 4.3%
2,500,000 K-III Communications Corp., Sr. Notes 10.25% 6/1/2004 2,631,250
8,100,000 MDC Communications Corp., Sr. Subordinated Notes 10.5% 12/1/2006 8,393,625
13,800,000 Neodata Services, Inc., Sr. Notes, Series B 12.0% 5/1/2003 14,593,500
4,000,000 News America Holdings, Inc., Convertible Liquid
Yield Option Notes Zero Coupon 3/11/2013 1,885,000
750,000 News America Holdings, Inc., Subordinated Notes Zero Coupon 3/31/2002 686,250
7,750,000 Park Newspapers, Inc., Sr. Notes, Series B 11.875% 5/15/2004 9,174,062
5,850,000 Sullivan Graphics, Inc., Sr. Subordinated Notes 12.75% 8/1/2005 5,703,750
--------------
43,067,437
--------------
Retail - 0.8%
2,750,000 F & M Distributors, Inc., Sr. Subordinated Notes 11.5% 4/15/2003 6,875(C)
7,000,000 Lifestyle Furnishings International Ltd., Sr. Subordinated Notes 10.875% 8/1/2006 7,542,500
7,000,000 Wherehouse Entertainment, Inc., Sr. Subordinated Notes 13.0% 8/1/2002 385,000(C)
--------------
7,934,375
--------------
Retail: Food -2.0%
7,150,000 Jitnay-Jungle Stores of America, Sr. Notes 12.0% 3/1/2006 7,614,750
6,000,000 Pueblo Xtra International, Inc., Sr. Notes 9.5% 8/1/2003 5,595,000
3,850,000 Smith's Food & Drug Centers, Pass Through Certificates 8.64% 7/2/2012 3,407,250
3,000,000 TLC Beatrice International Holdings, Sr. Secured Notes 11.50% 10/1/2005 3,202,500
--------------
19,819,500
--------------
Services - 0.5%
4,200,000 Intertek Finance plc, Sr. Subordinated Notes 10.25% 11/1/2006 4,368,000
--------------
Telecommunications - 20.1%
21,600,000 American Communications Services, Sr. Discount Notes Zero Coupon 11/1/2005 12,852,000
6,700,000 Call-Net Enterprises, Inc., Sr. Discount Notes Zero Coupon 12/1/2004 5,527,500
10,650,000 Clearnet Communications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 6,656,250
4,750,000 COLT Telecom Group plc, Units Zero Coupon 12/15/2006 2,873,750
5,250,000 Comcast Cellular, Inc., Sr. Participation Redeemable Notes,
Series B Zero Coupon 3/5/2000 3,806,250
5,600,000 Comcast Cellular, Inc., Sr. Redeemable Notes Zero Coupon 3/5/2000 4,053,000
1,445,000 GST Telecommunications, Inc., Sr. Subordinated Notes Zero Coupon 12/15/2005 1,098,200
13,810,000 GST USA, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 8,493,150
14,950,000 Hyperion Telecommunications, Sr. Discount Notes, Series B Zero Coupon 4/15/2003 8,558,875
10,300,000 In-Flight Phone Corp., Sr. Discount Notes, Series B Zero Coupon 5/15/2002 2,008,500
5,350,000 IntelCom Group Holdings (U.S.A.), Inc., Sr. Discount Notes Zero Coupon 9/15/2005 3,825,250
4,700,000 Intermedia Communications of Florida, Sr. Notes, Series B 13.5% 6/1/2005 5,393,250
14,800,000 Ionica plc, Sr. Notes 13.5% 8/15/2006 14,874,000
11,750,000 IXC Communications, Inc., Sr. Notes, Series B 12.5% 10/1/2005 12,983,750
10,800,000 Microcell Telecommunications, Inc., Sr. Discount Notes Zero Coupon 6/1/2006 6,021,000
16,450,000 Millicom International Cellular, Sr. Discount Notes Zero Coupon 6/1/2006 10,281,250
11,200,000 NEXTEL Communications, Inc., Sr. Discount Notes Zero Coupon 8/15/2004 7,686,000
10,650,000 NEXTLINK Communications LLC, Sr. Discount Notes 12.5% 4/15/2006 11,475,375
10,000,000 ORBCOMM Global, L.P., Sr. Notes 14.0% 8/15/2004 10,175,000
15,050,000 PageMart Nationwide, Inc., Sr. Discount Exchange Notes Zero Coupon 2/1/2005 10,459,750
8,500,000 Paging Network, Inc., Sr. Subordinated Notes 10.0% 10/15/2008 8,659,375
8,650,000 Phonetel Technologies, Inc., Sr. Notes 12.0% 12/15/2006 8,996,000
10,600,000 RSL Communications Ltd., Units 12.25% 11/15/2006 10,759,000
2,750,000 USA Mobile Communications, Inc., Sr. Notes 9.5% 2/1/2004 2,626,250
2,850,000 USA Mobile Communications, Inc., Sr. Notes 14.0% 11/1/2004 3,206,250
10,000,000 Viatel, Inc., Sr. Discount Notes Zero Coupon 1/15/2005 6,200,000
5,750,000 WinStar Communications, Inc., Convertible Sr. Subordinated
Discount Notes Zero Coupon 10/15/2005 4,025,000
16,700,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/2005 10,270,500
--------------
203,844,475
--------------
Total Corporate Bonds (cost $813,072,996) 821,796,132
--------------
FOREIGN GOVERNMENT BONDS - 0.6% (a,e)
6,000,000 Banco Nacional de Obras y Servicios Publicos, S.N.C., Sr. Notes
(cost $5,983,402) 9.625% 11/15/2003 6,067,500
--------------
PREFERRED STOCKS - 12.7% (a)
97,751 Cablevision Systems Corp., Preferred Stock 8,797,590
50,004 Cablevision Systems Corp., Exchangeable Preferred Stock, Series H 4,687,875
31,000 California Federal Bank, Preferred Stock, Series B 3,417,750
115,000 Chevy Chase Capital Corp., Noncumulative Exchangeable Preferred
Stock, Series A 5,994,375
39,045 Communications & Power Industries, Inc., Convertible Preferred
Stock, Series B 4,345,747
4,350 Consolidated Hydro, Inc., Preferred Stock 653,588
45,000 First Nationwide Bank, Noncumulative Preferred Stock 5,158,125
49,500 Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 0
194,000 Granite Broadcasting Corp., Convertible Preferred Stock 10,961,000
396,146 Harvard Industries, Inc., Exchangeable Payment-In-Kind Preferred
Stock 5,645,081
151,000 Host Marriott Financial Trust, Convertible Preferred Stock 8,059,625
37,000 K-III Communications Corp., Exchangeable Preferred Stock 994,375
49,264 K-III Communications Corp., Exchangeable Preferred Stock, Series B 4,987,985
52,000 K-III Communications Corp., Preferred Stock, Series D 5,109,000
175,000 MFS Communication, Inc., 8% Cumulative Convertible Preferred Stock 15,968,750
73,000 Mobile Telecommunications Technologies Corp., Convertible Preferred
Stock 1,332,250
99,000 Network Imaging Corp., Convertible Preferred Stock, Series A 1,522,125
10,037 PanAmSat Corp., Convertible Preferred Stock 12,245,140
8,900 Paxson Communications Corp., Payment-In-Kind Preferred Stock 8,388,250
144,942 Riggs National Corp., Preferred Stock 4,185,200
147,500 River Bank America, Preferred Stock 3,724,375
59,000 SFX Broadcasting, Inc., 6.5% Convertible Preferred Stock, Series D 2,736,125
2,711 Silgan Holdings, Inc., Payment-In-Kind Preferred Stock 2,860,105
75,000 TIMET Capital Trust I, Convertible Preferred Stock 4,125,000
85,000 USX Corp. (Marathon Group), Convertible Preferred Stock 2,241,875
--------------
Total Preferred Stocks (cost $120,798,881) 128,141,311
--------------
COMMON STOCKS & STOCK WARRANTS - 3.3% (a,b)
16,800 American Communications Services, Stock Warrants 1,512,000
4,100 American Telecasting, Inc., Stock Warrants 4,100
37,000 American Telecasting, Inc., Stock Warrants 37,000
202,940 Arch Communications Group, Common Stock 1,902,563
134,200 Bell & Howell Co., Common Stock 3,187,250
36,960 Clearnet Communications, Inc., Stock Warrants 258,720
47,000 COLT Telecom Group plc, ADR, Common Stock 904,750
2,310 Communications & Power Industries, Inc., Common Stock 346,500(d)
7,830 Consolidated Hydro, Inc., Stock Warrants 0(d)
4,422 CS Wireless Systems, Inc., Common Stock 0(d)
79,500 Envirotest Systems Corp., Class A Common Stock 178,875
101,377 Gaylord Container Corp., Class A Common Stock 620,934
127,902 Gaylord Container Corp., Stock Warrants 791,393
18,126 Grand Union Co., Stock Warrants 4,713
36,251 Grand Union Co., Stock Warrants 1,450
65,000 Harvard Industries, Inc., Class B Common Stock 292,500
14,350 Hyperion Telecommunications, Stock Warrants 287,000
10,100 In-Flight Phone Corp., Stock Warrants 0
260,000 IntelCom Group Communications, Inc., Common Stock 4,582,500
68,300 IntelCom Group (U.S.A.), Inc., Stock Warrants 751,300
209,000 InterCel, Inc., Common Stock 2,560,250
5,900 Intermedia Communications of Florida, Stock Warrants 206,500
14,800 Ionica plc, Stock Warrants 1,554,000
38,000 JPS Textiles Group, Common Stock, Class A 380
139,371 Magellan Health Services, Common Stock 3,118,426
50,379 Memorex Telex N.V. ADR, Common Stock 3,149
1,728 Memorex Telex N.V. ADR, Stock Warrants 0
2,574 MFS Communications Co., Inc., Common Stock 140,283
43,200 Microcell Telecommunications, Inc., Conditional Warrants 27,000
43,200 Microcell Telecommunications, Inc., Initial Warrants 540,000
384,500 MobileMedia Corp., Class A Common Stock 168,219
3,086 NEXTEL Communications, Stock Warrants, Expiring 1998 31
3,750 NEXTEL Communications, Stock Warrants, Expiring 1997 38
33,250 PageMart Nationwide, Inc., Common Stock 249,375
205,000 Pagemart Wireless, Inc., Class A Common Stock 1,358,125
11,150 People's Choice TV Corp., Stock Warrants 11,150
46,600 Plantronics, Inc., Common Stock 2,097,000
23,840 Protection One Alarm Monitoring, Stock Warrants 178,800
5,000 Triangle Wire & Cable, Inc., Stock Warrants 0(d)
118,000 United International Holdings, Inc., Class A Common Stock 1,445,500
27,000 United International Holdings, Inc., Stock Warrants 540,000
361,000 Viatel, Inc., Common Stock 2,707,500
138,000 Wireless One, Inc., Common Stock 914,250
19,200 Wireless One, Inc., Stock Warrants 28,800
--------------
Total Common Stocks & Stock Warrants (cost $39,449,767) 33,512,324
--------------
Principal Maturity
Amount Rate Date
- ------------ ------ -------------
SHORT-TERM SECURITIES - 2.3% (a)
Commercial Paper
$9,000,000 General Electric Capital Corp. 6.65% 1/2/1997 8,998,337
10,350,000 New Center Asset Trust 7.0% 1/2/1997 10,347,988
4,000,000 Warner-Lambert Co. 6.0% 1/7/1997 3,996,000
--------------
Total Short-Term Securities (at amortized cost) 23,342,325
--------------
Total Investments (cost $1,002,647,372) $1,012,859,592(f)
==============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total investments of the
High Yield Portfolio.
(b) Currently non-income producing.
(c) Currently non-income producing and in default.
(d) Denotes restricted securities. These securities have been valued from the date of
acquisition through December 31, 1996, by obtaining quotations from brokers who
are active with the issues. The following table indicates the acquisition date
and cost of restricted securities the Portfolio owned as of December 31, 1996.
<CAPTION>
Acquisition
Security Date Cost
- -------------------------------------------------------------------- ---------- --------------
<S> <C> <C>
Communications & Power Industries, Inc., Common Stock 12/22/1995 $211,287
Consolidated Hydro, Inc., Stock Warrants 2/8/1994 171,277
CS Wireless Systems, Inc., Common Stock 2/16/1996 30,655
Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 6/14/1993 5,703,525
Triangle Wire & Cable, Inc., Stock Warrants 1/3/1992 500
(e) Denominated in U.S. Dollars.
(f) At December 31, 1996, the aggregate cost of securities for federal income tax purposes
was $1,004,762,583 and the net unrealized appreciation of investments based on that cost was
$8,097,009 which is comprised of $68,241,601 aggregate gross unrealized appreciation and
$60,144,592 aggregate gross unrealized depreciation.
Abbreviations:
(ADR) -- American Depository Receipts
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
Income Portfolio
Portfolio of Investments
December 31, 1996
Principal Maturity
Amount Rate Date Value
- --------- ---------- -------- -------------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 45.4% (a)
Aerospace - 1.5%
$5,000,000 Lockheed Martin Corp., Notes 7.7% 6/15/2008 $5,244,165
7,500,000 Lockheed Martin Corp., Notes 7.45% 6/15/2004 7,750,605
-------------
12,994,770
-------------
Automotive - 0.6%
5,000,000 Ford Motor Credit Co., Notes 6.375% 10/6/2000 4,979,625
-------------
Bank & Finance - 16.3%
12,500,000 Associates Corp. of North America, Notes 6.625% 5/15/1998 12,599,700
5,000,000 Associates Corp. of North America, Sr. Notes 9.125% 4/1/2000 5,385,920
4,000,000 BT Institutional Capital Trust, Capital Trust Preferred Securities 7.75% 12/1/2026 3,829,804
2,000,000 Chase Manhattan Corp., Subordinated Notes 10.375% 3/15/1999 2,165,360
2,000,000 Chase Manhattan Corp., Subordinated Notes 9.375% 7/1/2001 2,210,686
5,000,000 Chemical New York Corp., Debentures 9.75% 6/15/1999 5,384,640
2,000,000 Chevy Chase Bank, F.S.B, Subordinated Debentures 9.25% 12/1/2008 2,040,000
12,000,000 Equitable Life Assurance Society of the United States,
Surplus Notes 6.95% 12/1/2005 11,775,132
5,000,000 First Chicago, N.B.D. Institute, Capital Trust
Preferred Securities, Series B 7.75% 12/1/2026 4,880,275
1,500,000 First Nationwide Escrow Corp., Sr. Subordinated Notes 10.625% 10/1/2003 1,627,500
2,000,000 First USA Capital Trust I, Capital Trust Preferred Securities 9.33% 1/15/2027 2,056,600
6,500,000 General Electric Capital Corp., Debentures 8.85% 4/1/2005 7,317,512
10,000,000 Mellon Capital I, Capital Trust Preferred Securities 7.72% 12/1/2026 9,861,120
10,000,000 Metropolitan Life Insurance Co., Surplus Notes 7.7% 11/1/2015 10,087,600
6,000,000 Midland Bank plc, Subordinated Notes 7.625% 6/15/2006 6,207,360
8,000,000 Nationwide CSN Trust, Trust Notes 9.875% 2/15/2025 8,816,968
5,000,000 New York Life Insurance Co., Surplus Notes 6.4% 12/15/2003 4,875,180
5,000,000 Prudential Insurance Co., Surplus Notes 8.3% 7/1/2025 5,138,770
2,500,000 Reliastar Financial Corp., Sr. Notes 8.625% 2/15/2005 2,715,307
3,500,000 Riggs Capital Trust, Capital Trust Preferred Securities, Series A 8.625% 12/31/2026 3,517,500
7,000,000 Salomon, Inc., Sr. Notes 6.75% 2/15/2003 6,843,865
3,000,000 Societe-Generale- New York, Subordinated Notes 7.4% 6/1/2006 3,053,211
6,000,000 Societe-Generale- New York, Subordinated Notes 9.875% 7/15/2003 6,901,266
4,000,000 Swiss Bank Corp.- New York, Subordinated Debentures 7.5% 7/15/2025 4,030,776
4,500,000 Wells Fargo Capital, Capital Trust Preferred Securities 7.73% 12/1/2026 4,370,580
3,000,000 Wells Fargo Capital I, Capital Trust Preferred Securities 7.96% 12/15/2026 2,999,757
-------------
140,692,389
-------------
Broadcasting - 4.5%
8,000,000 Continental Cablevision, Inc., Sr. Notes 8.3% 5/15/2006 8,550,280
1,500,000 Groupo Televisa S.A., Sr. Notes, Series A 11.375% 5/15/2003 1,614,375
4,000,000 Rogers Cablesystems, Inc., Sr. Secured Second Priority Notes 9.625% 8/1/2002 4,200,000
3,000,000 Rogers Communications Inc., Sr. Notes 9.125% 1/15/2006 2,985,000
5,000,000 TCI Communications, Inc., Sr. Notes 8.65% 9/15/2004 5,126,415
7,500,000 Time Warner, Inc., Notes 9.625% 5/1/2002 8,364,765
8,000,000 Viacom, Inc., Subordinated Debentures 8.0% 7/7/2006 7,667,000
-------------
38,507,835
-------------
Building Products & Materials - 0.2%
2,000,000 Building Materials Corp. of America, Sr. Notes 8.625% 12/15/2006 2,000,000
-------------
Chemicals - 1.9%
2,500,000 ISP Holdings, Inc., Sr. Notes 9.0% 10/15/2003 2,550,000
6,000,000 Millennium America, Inc., Sr. Notes 7.0% 11/15/2006 5,853,978
4,000,000 Sociedad Quimica y Minera de Chile S.A., Loan
Participation Certificates 7.7% 9/15/2006 4,097,968
4,000,000 Uniroyal Chemical Co., Sr. Notes 9.0% 9/1/2000 4,190,000
-------------
16,691,946
-------------
Computers & Office Equipment - 1.1%
10,000,000 International Business Machines Corp., Debentures 7.125% 12/1/2096 9,524,680
-------------
Conglomerates - 0.2%
2,000,000 FMC Corp., Sr. Debentures 7.75% 7/1/2011 2,060,020
-------------
Electric Utilities - 1.3%
2,000,000 El Paso Electric Co., First Mortgage Bonds, Series D 8.9% 2/1/2006 2,120,000
2,000,000 El Paso Electric Co., First Mortgage Bonds, Series E 9.4% 5/1/2011 2,150,000
6,500,000 Empresa Electrica Pehuienche S.A., Notes 7.3% 5/1/2003 6,607,205
-------------
10,877,205
-------------
Electrical Equipment - 0.9%
5,000,000 Westinghouse Electric Corp., Notes 8.375% 6/15/2002 5,145,700
3,000,000 Westinghouse Electric Corp., Sr. Debentures 8.625% 8/1/2012 3,017,235
-------------
8,162,935
-------------
Hospital Management - 1.4%
3,500,000 Allegiance Corp., Debentures 7.8% 10/15/2016 3,528,262
7,000,000 MedPartners, Inc., Sr. Notes 7.375% 10/1/2006 6,984,915
1,500,000 Paracelsus Healthcare Corp., Sr. Subordinated Notes 10.0% 8/15/2006 1,413,750
-------------
11,926,927
-------------
Household Products - 0.7%
5,000,000 Procter & Gamble, Guaranteed ESOP Debentures 9.36% 1/1/2021 6,094,855
-------------
Machinery & Equipment - 0.5%
4,000,000 Newport News Shipbuilding, Inc., Sr. Subordinated Notes 9.25% 12/1/2006 4,145,000
-------------
Mining & Metals - 0.5%
4,000,000 AK Steel Corp., Sr. Notes 9.125% 12/15/2006 4,105,000
-------------
Natural Gas - 1.8%
4,000,000 Coastal Corp., Sr. Debentures 9.75% 8/1/2003 4,585,608
5,000,000 Coastal Corp., Sr. Notes 10.375% 10/1/2000 5,606,030
5,000,000 Columbia Gas Systems, Inc., Series A Notes 6.39% 11/28/2000 4,954,795
-------------
15,146,433
-------------
Petroleum - 3.4%
2,500,000 CITGO Petroleum Corp., Sr. Notes 7.875% 5/15/2006 2,569,360
2,000,000 Flores & Rucks, Inc., Sr. Subordinated Notes 9.75% 10/1/2006 2,125,000
6,174,258 Mobil Oil Corp., ESOP Sinking Fund Debentures 9.17% 2/29/2000 6,472,925
3,000,000 Oryx Energy Co., Notes 8.125% 10/15/2005 3,061,866
4,000,000 Oryx Energy Co., Notes 8.375% 7/15/2004 4,156,120
7,000,000 Petroliam Nasional BHD, Notes 7.75% 8/15/2015 7,230,650
3,000,000 United Meridian Corp., Sr. Subordinated Notes 10.375% 10/15/2005 3,285,000
-------------
28,900,921
-------------
Pollution Control - 0.2%
2,000,000 Allied Waste, North America, Sr. Subordinated Notes 10.25% 12/1/2006 2,107,500
-------------
Retail - 4.6%
8,500,000 Dayton Hudson Corp., Notes 6.4% 2/15/2003 8,333,332
6,000,000 Federated Department Stores, Sr. Notes 10.0% 2/15/2001 6,516,732
5,250,000 Revco D.S., Inc., Sr. Notes 9.125% 1/15/2000 5,492,812
6,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes 6.56% 11/20/2003 5,908,242
10,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes, Series II 6.86% 7/3/2001 10,109,840
3,000,000 Simon DeBartolo Group, L.P., Notes 6.875% 11/15/2006 2,921,460
-------------
39,282,418
-------------
Services - 0.7%
6,000,000 Electronic Data Systems Corp., Notes 6.85% 5/15/2000 6,077,826
-------------
Telecommunications - 1.5%
5,000,000 AirTouch Communications, Inc., Notes 7.5% 7/15/2006 5,157,045
4,500,000 Paging Network, Inc., Sr. Subordinated Notes 10.0% 10/15/2008 4,584,375
3,000,000 Teleport Communications Group, Inc., Sr. Notes 9.875% 7/1/2006 3,225,000
-------------
12,966,420
-------------
Telephone - 0.8%
6,000,000 New York Telephone Co., Debentures 9.375% 7/15/2031 6,793,854
-------------
Textiles & Apparel - 0.8%
7,000,000 Levi Strauss & Co., Notes 6.8% 11/1/2003 6,980,862
-------------
Total Corporate Bonds (cost $385,202,255) 391,019,421
-------------
FOREIGN GOVERNMENT BONDS - 4.3% (a,c)
5,500,000 African Development Bank, Subordinated Notes 6.875% 10/15/2015 5,283,949
3,500,000 Banco Nacional de Obras y Servicios Publicos, S.N.C., Sr. Notes 9.625% 11/15/2003 3,539,375
5,000,000 British Columbia Hydro & Power, Debentures 12.5% 9/1/2013 5,674,345
5,000,000 Inter American Development Bank, Notes 7.0% 6/15/2025 4,932,975
5,000,000 Korea Electric Power Corp., Debentures 7.75% 4/1/2013 5,096,485
6,000,000 Ontario Province, Canada, Debentures 11.75% 4/25/2013 6,692,640
6,000,000 Ontario Province, Canada, Sr. Bonds 7.375% 1/27/2003 6,252,834
-------------
Total Foreign Government Bonds (cost $38,566,622) 37,472,603
-------------
ASSET-BACKED SECURITIES - 15.7% (a)
12,000,000 AT&T Universal Card Master Trust, Class A, Series 1995-2 5.95% 10/17/2002 11,870,760
8,000,000 Bridgestone/Firestone Master Trust, Series 96-1-A 6.17% 7/1/2003 7,968,240
9,000,000 Capita Equipment Receivables Trust, Series 1996-1, Class A4 6.28% 6/15/2000 9,023,760
7,500,000 Chase Manhattan Credit Card, Series 1996-3, Class A 7.04% 2/15/2004 7,696,575
16,000,000 Chase Manhattan Credit Card, Series 1996-4, Class A 6.73% 2/15/2002 16,241,600
10,974,332 Chase Manhattan Grantor Trust, Series 1996-B-A 6.61% 9/15/2002 11,098,123
20,000,000 Deutsche Floorplan Receivables Master Trust, Series 1994-1-A 5.8% 2/15/2001 20,071,000
10,000,000 Discover Card Master Trust I, Series 1996-3-A 6.05% 8/18/2008 9,481,800
7,500,000 NationsBank Credit Card Master Trust, Series 1995-A 6.45% 4/15/2003 7,551,225
12,000,000 Standard Credit Master Trust 1, Credit Card Participation
Certificates, Series 1995-9-A 6.55% 10/7/2007 11,802,120
15,000,000 World Financial Network Credit Card Master Trust, Series 1996-B 6.95% 4/15/2006 15,300,000
8,000,000 World Omni Automobile Lease Trust Certificates,
Series 1996-B, Class A3 6.25% 11/15/2002 8,023,120
-------------
Total Asset-Backed Securities (cost $135,791,920) 136,128,323
-------------
MORTGAGE-BACKED SECURITIES - 13.1% (a)
22,425,936 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 2011 21,626,654
19,965,886 Government National Mortgage Association,
Modified Pass Through Certificates 7.0% 2024-2026 19,569,686
75,000,000 Government National Mortgage Association,
Modified Pass Through Certificates 6.5% 2026 71,484,375 (d)
-------------
Total Mortgage-Backed Securities (cost $112,574,250) 112,680,715
-------------
U.S. GOVERNMENT - 11.3% (a)
53,000,000 U.S. Treasury Bonds 7.25-12.0% 2003-2022 62,573,581
30,000,000 U.S. Treasury Notes 6.25-7.875% 2001-2004 32,170,614
15,000,000 U.S. Treasury Strips Zero Coupon 5/15/2023 2,520,495
-------------
97,264,690
-------------
PREFERRED STOCKS - 1.7% (a)
60,000 Chevy Chase Capital Corp., Noncumulative
Exchangeable Preferred Stock, Series A 3,127,500
5,000 Fresenius Medical Care Capital Trust, Preferred Stock 5,087,500
20,000 K-III Communications Corp., Preferred Stock, Series D 1,965,000
20,000 Microsoft Corp., Convertible Preferred Stock, Series A 1,602,500
100,000 TransCanada Pipelines, Ltd., Preferred Stock 2,562,500
-------------
Total Preferred Stocks (cost $14,097,500) 14,345,000
-------------
OPTIONS ON U.S. TREASURY BOND FUTURES - 0.01% (a)
U.S. Treasury Bond Futures, 150 call option contracts,
exercise price of $116, expires February 22, 1997
(cost $189,086) 77,344(e)
-------------
Principal Maturity
Amount Rate Date
- ---------------- ------ ------------------
SHORT-TERM SECURITIES - 8.5% (a)
Commercial Paper - 7.3% 6.5% 1/2/1997
$21,200,000 A.I. credit corp. 21 196,172
10,000,000 Asset Securitization Cooperative Corp. 5.33% 1/21/1997 9,970,389
10,000,000 Cargill Financial Services Corp. 5.45% 1/16/1997 9,977,292
9,930,000 CIT Group Holdings, Inc. 7.25% 1/2/1997 9,928,000
12,330,000 St. Paul Cos., Inc. 6.5% 1/2/1997 12,327,774
-------------
63,399,627
-------------
U.S. Government Agency - 1.2%
10,000,000 Federal Home Loan Mortgage Discount Notes 5.4% 1/17/1997 9,976,000
-------------
Total Short-Term Securities (at amortized cost) 73,375,627
Total Investments (cost $855,205,675) $862,363,723(f)
=============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total investments of
the Income Portfolio.
(b) Denotes variable rate obligations for which current yield is shown.
(c) Denominated in U.S. dollars.
(d) Denotes investments purchased on a when-issued basis.
(e) At December 31, 1996, options on U.S. Treasury Bond Futures valued at
$77,344 were in escrow to cover open call options written as follows:
<CAPTION>
Number of Exercise Expiration
Contracts Price Date Value
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures 150 4/28/1904 2/22/97 $30,469
(f) At December 31, 1996, the aggregate cost of securities for federal income tax purposes
was $855,376,117 and the net unrealized appreciation of investments based on that cost was
$6,987,606 which is comprised of $11,487,706 aggregate gross unrealized appreciation and
$4,500,100 aggregate gross unrealized depreciation.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
LB Series Fund, Inc.
Money Market Portfolio
Portfolio of Investments
December 31, 1996
Principal Yield to Maturity
Amount Maturity Date Value
----------- ----------- -------- ------------
<S> <C> <C> <C> <C>
BANKER'S ACCEPTANCES - 3.8% (a,c)
$1,000,000 Bankers Trust Co., N.A., New York 5.76% 3/24/1997 $987,244
3,000,000 Bankers Trust Co., N.A., New York 5.37% 3/12/1997 2,969,200
------------
Total Banker's Acceptances 3,956,444
------------
COMMERCIAL PAPER - 85.1% (a,c)
Banking-Domestic - 6.7%
1,000,000 AES Barbers Point, Inc., (Bank of America NT&SA,
Direct Pay Letter of Credit) 5.62% 1/17/1997 997,511
2,000,000 Allegheny University Hospitals, (PNC Bank, N.A.,
Direct Pay Letter of Credit) 5.60% 2/18/1997 1,985,200
2,000,000 Formosa Plastics Corp. USA, Series B, (Bank of America
NT&SA, Direct Pay Letter of Credit) 5.40% 1/15/1997 1,995,831
2,000,000 Hyundai Motor Finance Co., (Bank of America NT&SA,
Direct Pay Letter of Credit) 5.41% 1/21/1997 1,994,067
------------
6,972,609
------------
Banking-Foreign - 11.0%
2,000,000 Comision Federal de Electricidad, Series A, (Westdeutsche
Landesbank Girozentrale, Direct Pay Letter of Credit) 5.40% 2/18/1997 1,985,760
2,000,000 Corporacion Andina de Formento (Barclays Bank plc,
Direct Pay Letter of Credit) 5.54% 2/3/1997 1,989,917
1,000,000 Finance One Funding Corp., (Credit Suisse,
Direct Pay Letter of Credit) 5.52% 4/17/1997 984,188
1,500,000 Finance One Funding Corp., (Credit Suisse,
Direct Pay Letter of Credit) 5.45% 2/13/1997 1,490,325
2,000,000 Fletcher Challenge Finance USA, Inc., (National
Westminster Bank plc, Direct Pay Letter of Credit) 5.50% 3/27/1997 1,974,358
2,000,000 FPL Fuels, Inc., (Barclays Bank plc, Direct Pay Letter of Credit) 5.39% 1/24/1997 1,993,177
1,000,000 U.S. Prime Property, Inc., (ABN AMRO Bank N.V.,
Direct Pay Letter of Credit) 5.42% 4/8/1997 985,639
------------
11,403,364
------------
Computer & Office Equipment - 4.2%
2,000,000 Electronic Data Systems Corp. 5.42% 3/3/1997 1,981,971
2,000,000 IBM Credit Corp. 5.36% 1/27/1997 1,992,330
385,000 International Business Machines Corp. 5.42% 1/8/1997 384,597
------------
4,358,898
------------
Cosmetics & Toiletries - 4.2%
4,000,000 Gillette Co. 5.42% 1/8/1997 3,995,800
345,000 Gillette Co. 5.40% 1/8/1997 344,642
------------
4,340,442
------------
Drugs & Healthcare - 2.0%
140,000 Schering Corp. 5.44% 1/29/1997 139,412
2,000,000 Warner-Lambert Co. 5.37% 3/20/1997 1,977,120
------------
2,116,532
------------
Education - 7.2%
1,500,000 Duke University 5.51% 2/25/1997 1,487,510
2,000,000 Duke University 5.36% 2/5/1997 1,989,694
4,000,000 Yale University 5.43% 3/4/1997 3,963,144
------------
7,440,348
------------
Finance-Automotive - 3.9%
100,000 Ford Motor Credit Co. 5.47% 3/24/1997 98,770
1,000,000 General Motors Acceptance Corp. 5.75% 3/11/1997 989,286
1,000,000 General Motors Acceptance Corp. 5.70% 3/21/1997 987,821
2,000,000 General Motors Acceptance Corp. 5.61% 2/20/1997 1,984,833
------------
4,060,710
------------
Finance-Commercial - 4.4%
2,000,000 CIT Group Holdings, Inc. 5.37% 1/28/1997 1,992,035
1,000,000 CIT Group Holdings, Inc. 7.00% 1/2/1997 999,806
458,000 General Electric Capital Corp. 5.39% 1/17/1997 456,915
1,000,000 General Electric Capital Corp. 5.48% 5/16/1997 980,050
152,000 General Electric Capital Corp. 5.48% 3/17/1997 150,284
------------
4,579,090
------------
Finance-Consumer - 7.7%
2,000,000 AVCO Financial Services, Inc. 5.39% 2/24/1997 1,984,100
2,000,000 AVCO Financial Services, Inc. 5.37% 1/28/1997 1,992,020
2,000,000 Beneficial Corp. 5.38% 2/10/1997 1,988,178
2,000,000 Beneficial Corp. 5.37% 1/22/1997 1,993,805
------------
7,958,103
------------
Finance-Retail - 4.3%
2,000,000 Sears Roebuck Acceptance Corp. 5.38% 2/13/1997 1,987,315
2,000,000 Sears Roebuck Acceptance Corp. 5.52% 1/16/1997 1,995,500
510,000 Sears Roebuck Acceptance Corp. 5.46% 1/31/1997 507,705
------------
4,490,520
------------
Finance-Structured - 11.1%
1,000,000 Asset Securitization Cooperative Corp. 5.44% 2/19/1997 992,677
1,400,000 CXC, Inc. 5.47% 1/8/1997 1,398,516
2,000,000 Delaware Funding Corp. 5.37% 1/14/1997 1,996,158
1,000,000 Delaware Funding Corp. 5.51% 1/10/1997 998,630
2,000,000 Enterprise Funding Corp. 5.63% 1/21/1997 1,993,778
2,000,000 Enterprise Funding Corp. 5.39% 1/22/1997 1,993,793
500,000 Enterprise Funding Corp. 5.55% 2/20/1997 496,181
1,708,176 Norwest Automobile Trust, Series 1996-A-1 5.59% 12/5/1997 1,708,176
------------
11,577,909
------------
Food & Beverage - 1.6%
1,700,000 CPC International, Inc. 6.01% 1/9/1997 1,697,733
------------
Industrial - 2.9%
2,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.) 5.38% 2/3/1997 1,990,247
1,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.) 5.41% 2/6/1997 994,640
------------
2,984,887
------------
Insurance - 1.2%
730,000 A.I.G. Funding, Inc. 5.57% 7/21/1997 708,194
240,000 MetLife Funding, Inc. 5.51% 3/7/1997 237,638
165,000 MetLife Funding, Inc. 5.50% 1/30/1997 164,276
100,000 Prudential Funding Corp. 5.47% 1/2/1997 99,985
------------
1,210,093
------------
Leisure & Entertainment - 1.4%
1,500,000 Disney (Walt) Co. 5.94% 3/21/1997 1,481,238
------------
Natural Gas - 0.7%
722,000 Northern Illinois Gas Co. 5.64% 2/14/1997 717,058
------------
Petroleum - 2.3%
2,420,000 Koch Industries, Inc. 7.00% 1/2/1997 2,419,529
------------
Sovereign/Foreign Government - 4.4%
2,581,000 Kingdom of Sweden 5.74% 2/3/1997 2,567,514
1,000,000 Kingdom of Sweden 5.58% 6/27/1997 973,598
1,000,000 Kingdom of Sweden 5.49% 3/27/1997 987,368
------------
4,528,480
------------
U.S. Municipal - 3.9%
2,000,000 California Pollution Control Finance Authority
(Guaranteed Shell Oil Co.) 5.48% 2/12/1997 2,000,000
2,000,000 California Pollution Control Finance Authority
(Guaranteed Shell Oil Co.) 5.48% 3/14/1997 2,000,000
------------
4,000,000
------------
Total Commercial Paper 88,337,543
------------
CERTIFICATES OF DEPOSIT - 1.9% (a,c)
Euro Dollar
1,000,000 ABN AMRO Bank, N.V. 5.47% 1/2/1997 999,998
1,000,000 Morgan Guaranty Trust Co., New York 5.63% 8/12/1997 1,000,289
------------
Total Certificates of Deposit 2,000,287
------------
MEDIUM TERM NOTE - 1.4% (a,c)
1,500,000 CIT Group Holdings, Inc., Medium Term Note 5.55% 3/21/1997 1,500,390
------------
U.S. GOVERNMENT AGENCY DISCOUNT NOTE - 1.9% (a,c)
2,000,000 Federal Home Loan Mortgage Corp., Discount Notes 5.52% 3/14/1997 1,978,480
------------
ADJUSTABLE RATE NOTES - 5.8% (a,b)
2,000,000 Federal Home Loan Bank, Consolidated Bonds 5.49% 1/23/1997 1,999,393
2,000,000 First Bank, N.A., Minneapolis, Bank Note 5.52% 1/20/1997 1,999,059
2,000,000 PNC Bank, N.A., Pittsburgh, Medium Term Bank Notes 5.28% 1/2/1997 1,999,020
------------
Total Adjustable Rate Notes 5,997,472
------------
OTHER - 0.1% (a,b)
60,000 Federated Master Trust 5.15% 1/2/1997 60,000
------------
Total Investments (at amortized cost) $103,830,616 (d)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total investments of
the Money Market Portfolio.
(b) Denotes variable rate obligations for which the current yield and the next
scheduled interest reset date are shown.
(c) Yield to maturity is calculated at date of purchase.
(d) Also represents cost for federal income tax purposes.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
LB Series Fund, Inc.
Opportunity Growth Portfolio
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $259,897,950) $255,557,039
Cash 270,013
Receivable for investment securities sold 2,100,260
Dividend and interest receivable 51,403
------------
Total assets 257,978,715
------------
LIABILITIES:
Payable for investment securities purchased 11,427,416
============
NET ASSETS $246,551,299
============
NET ASSETS CONSIST OF:
Paid-in capital (21,430,739 shares of capital
stock outstanding) $254,590,079
Accumulated net realized loss from sale
of investments (3,697,869)
Unrealized net depreciation of investments (4,340,911)
------------
NET ASSETS $246,551,299
============
Net asset value and public offering price per share
($246,551,299 (divided by) 21,430,739 shares of capital
stock outstanding) $11.50
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the period from January 18, 1996 to
December 31, 1996
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $23,926
Interest income 826,436
------------
Total income 850,362
------------
Expenses --
Investment advisory fee 505,507
------------
Net investment income 344,855
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 4,508,424
Net realized loss on closed or expired
option contracts written (15,761)
------------
Net realized gain on investments 4,492,663
Net change in unrealized depreciation of investments (4,340,911)
------------
Net gain on investments 151,752
------------
Net increase in net assets resulting
from operations $496,607
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the period from
January 18, 1996
(effective date) to
December 31, 1996
--------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $344,855
Net realized gain (loss) on investments 4,492,663
Net change in unrealized appreciation or depreciation
of investments (4,340,911)
------------
Net increase in net assets resulting from operations 496,607
------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income (344,855)
Net realized gain on investments (8,190,532)
------------
Total distributions (8,535,387)
------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 247,867,947
Reinvested dividend distributions 8,535,387
Cost of shares redeemed (1,813,255)
------------
Net increase in net assets from capital stock transactions 254,590,079
------------
Net increase in net assets 246,551,299
NET ASSETS:
Beginning of period --
------------
End of period $246,551,299
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB Series Fund, Inc.
World Growth Portfolio
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
<S> <C>
ASSETS:
Investments in securities, at value
(cost $162,235,512) $172,568,403
Cash (including foreign currency holdings
of $1,385,183) 1,387,642
Receivable for investment securities sold 330,866
Dividend and interest receivable 209,655
------------
Total assets 174,496,566
------------
LIABILITIES:
Payable for investment securities purchased 401,688
Unrealized depreciation of foreign
currency contracts held 2,330
------------
Total liabilities 404,018
------------
NET ASSETS $174,092,548
============
NET ASSETS CONSIST OF:
Paid-in capital (15,900,731 shares of
capital stock outstanding) $163,854,167
Accumulated net realized loss from sale
of investments and foreign
currency transactions (103,395)
Unrealized net appreciation of investments and
on translation of assets and liabilities
in foreign currencies 10,341,776
------------
NET ASSETS $174,092,548
============
Net asset value and public offering price per share
($174,092,548 (divided by) 15,900,731 shares of
capital stock outstanding) $10.95
=======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the period from January 18, 1996 to
December 31, 1996
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $205,229) $1,412,086
Interest income 549,909
------------
Total income 1,961,995
------------
Expenses --
Investment advisory fee 761,089
------------
Net investment income 1,200,906
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investment transactions 101,590
Net realized gain on foreign currency transactions 26,954
------------
Net realized gain on investments and foreign
currency transactions 128,544
------------
Net change in unrealized appreciation of investments 10,332,890
Net change in unrealized appreciation on translation
of assets and liabilities in foreign currencies 8,886
------------
Net change in unrealized appreciation of
investments and on translation of assets and
liabilities in foreign currencies 10,341,776
------------
Net gain on investments and foreign currency 10,470,320
------------
Net increase in net assets resulting
from operations $11,671,226
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the period from
January 18, 1996
(effective date) to
December 31, 1996
--------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $1,200,906
Net realized gain on investments
and foreign currency transactions 128,544
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and liabilities
in foreign currencies 10,341,776
------------
Net increase in net assets resulting from operations 11,671,226
------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income (1,432,845)
------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 163,860,588
Reinvested dividend distributions 1,432,845
Cost of shares redeemed (1,439,266)
------------
Net increase in net assets from capital stock transactions 163,854,167
------------
Net increase in net assets 174,092,548
NET ASSETS:
Beginning of period --
------------
End of period $174,092,548
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB Series Fund, Inc.
Growth Portfolio
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $1,515,167,959) $1,656,476,411
Receivable for investment securities sold 25,986,202
Dividend and interest receivable 1,759,631
--------------
Total assets 1,684,222,244
--------------
LIABILITIES:
Open options written, at value
(premium received $334,242) 305,100
Payable for investment securities purchased 25,336,207
--------------
Total liabilities 25,641,307
--------------
NET ASSETS $1,658,580,937
==============
NET ASSETS CONSIST OF:
Paid-in capital (85,832,808 shares of
capital stock outstanding) $1,292,877,108
Accumulated net realized gain from
sale of investments 224,366,235
Unrealized net appreciation of investments 141,337,594
--------------
NET ASSETS $1,658,580,937
==============
Net asset value and public offering price per share
($1,658,580,937 (divided by) 85,832,808 shares of
capital stock outstanding) $19.32
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1996
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $19,181,790
Interest income 6,299,587
-----------
Total income 25,481,377
-----------
Expenses --
Investment advisory fee 5,622,221
-----------
Net investment income 19,859,156
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 225,071,076
Net realized gain on closed or expired
option contracts written 946,804
-----------
Net realized gain on investments 226,017,880
Net change in unrealized appreciation of investments 40,726,963
-----------
Net gain on investments 266,744,843
-----------
Net increase in net assets resulting
from operations $286,603,999
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended December 31, 1996 and 1995
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $19,859,156 $14,366,663
Net realized gain on investments 226,017,880 178,314,745
Net change in unrealized appreciation or depreciation
of investments 40,726,963 93,851,521
-------------- --------------
Net increase in net assets resulting from operations 286,603,999 286,532,929
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income (19,859,156) (14,366,663)
Net realized gain on investments (156,587,523) --
-------------- --------------
Total distributions (176,446,679) (14,366,663)
-------------- --------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 226,899,132 176,315,837
Reinvested dividend distributions 176,446,679 14,366,663
Cost of shares redeemed (28,066,347) (11,526,193)
-------------- --------------
Net increase in net assets from capital stock transactions 375,279,464 179,156,307
-------------- --------------
Net increase in net assets 485,436,784 451,322,573
NET ASSETS:
Beginning of period 1,173,144,153 721,821,580
-------------- --------------
End of period $1,658,580,937 $1,173,144,153
============== ==============
</TABLE>
<TABLE>
<CAPTION>
LB Series Fund
High Yield Portfolio
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
<S> <C>
ASSETS:
Investments in securities, at value
(cost $1,002,647,372) $1,012,859,592
Cash 1,724,182
Receivable for investment securities sold 1,188,375
Interest and dividend receivable 14,171,809
--------------
Total assets 1,029,943,958
--------------
LIABILITIES:
Payable for investment securities purchased 3,207,442
--------------
Total liabilities 3,207,442
--------------
NET ASSETS $1,026,736,516
==============
NET ASSETS CONSIST OF:
Paid-in capital (102,107,904 shares of
capital stock outstanding) $1,023,694,789
Accumulated net realized loss from sale
of investments (7,170,493)
Unrealized net appreciation of investments 10,212,220
--------------
NET ASSETS $1,026,736,516
==============
Net asset value and public offering price per share
($1,026,736,516 (divided by) 102,107,904 shares of
capital stock outstanding) $10.06
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1996
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $84,287,225
Dividend income 8,357,979
-----------
Total income 92,645,204
-----------
Expenses --
Investment advisory fee 3,624,036
-----------
Net investment income 89,021,168
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 19,530,710
Net change in unrealized appreciation of investments (9,358,262)
-----------
Net gain on investments 10,172,448
-----------
Net increase in net assets resulting
from operations $99,193,616
===========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended December 31, 1996 and 1995
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $89,021,168 $68,300,887
Net realized gain (loss) on investment transactions 19,530,710 (17,634,503)
Net change in unrealized appreciation or depreciation
of investments (9,358,262) 70,247,942
-------------- --------------
Net increase in net assets resulting from operations 99,193,616 120,914,326
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income (89,021,168) (68,300,887)
-------------- --------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 156,539,510 95,025,930
Reinvested dividend distributions 89,367,857 68,106,629
Cost of shares redeemed (21,833,105) (18,896,967)
-------------- --------------
Net increase in net assets from capital stock transactions 224,074,262 144,235,592
-------------- --------------
Net increase in net assets 234,246,710 196,849,031
NET ASSETS:
Beginning of period 792,489,806 595,640,775
-------------- --------------
End of period $1,026,736,516 $792,489,806
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB Series Fund, Inc.
Income Portfolio
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
<S> <C>
ASSETS:
Investments in securities, at value
(cost $855,205,675) $862,363,723
Cash 57,409
Interest and dividend receivable 10,758,904
------------
Total assets 873,180,036
------------
LIABILITIES:
Open options written, at value
(premium received $99,197) 30,469
Payable for investment securities purchased 71,989,583
------------
Total liabilities 72,020,052
------------
NET ASSETS $801,159,984
============
NET ASSETS CONSIST OF:
Paid-in capital (82,175,962 shares of
capital stock outstanding) $819,799,248
Accumulated net realized loss from sale
of investments (25,866,039)
Unrealized net appreciation of investments 7,226,775.00
------------
NET ASSETS $801,159,984
============
Net asset value and public offering price per share
($801,159,984 (divided by) 82,175,962 shares of
capital stock outstanding) $9.75
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1996
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $53,738,639
Dividend income 207,112
-----------
Total income 53,945,751
-----------
Expenses --
Investment advisory fee 3,107,396
-----------
Net investment income 50,838,355
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investment transactions (4,092,922)
Net realized gain on closed or expired
option contracts written 86,977
Net realized gain on closed futures contracts 267,289
-----------
Net realized loss on investments (3,738,656)
Net change in unrealized depreciation of investments (21,236,306)
-----------
Net loss on investments (24,974,962)
-----------
Net increase in net assets resulting
from operations $25,863,393
===========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended December 31, 1996 and 1995
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $50,838,355 $45,596,598
Net realized gain (loss) on investment transactions (3,738,656) 14,948,726
Net change in unrealized appreciation or depreciation
of investments (21,236,306) 57,100,261
------------ ------------
Net increase in net assets resulting from operations 25,863,393 117,645,585
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income (50,838,355) (45,596,598)
------------ ------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 80,241,834 72,115,092
Reinvested dividend distributions 51,093,053 45,455,976
Cost of shares redeemed (67,256,668) (35,776,663)
------------ ------------
Net increase in net assets from capital stock transactions 64,078,219 81,794,405
------------ ------------
Net increase in net assets 39,103,257 153,843,392
NET ASSETS:
Beginning of period 762,056,727 608,213,335
------------ ------------
End of period $801,159,984 $762,056,727
============ ============
</TABLE>
<TABLE>
<CAPTION>
LB Series Fund, Inc.
Money Market Portfolio
Financial Statements
Statement of Assets and Liabilities
December 31, 1996
<S> <C>
ASSETS:
Investments in securities, at amortized
cost and value $103,830,616
Cash 5,591.00
Interest receivable 84,419.00
--------------
Total assets 103,920,626.00
--------------
NET ASSETS $103,920,626
==============
NET ASSETS CONSIST OF:
Paid-in capital (103,920,626 shares of
capital stock outstanding) $103,920,626
==============
Net asset value and public offering price per share
($103,920,626 (divided by) 103,920,626 shares of
capital stock outstanding) $1.00
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1996
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $4,457,893
Expenses --
Investment advisory fee 325,432
Net investment income $4,132,461
==========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended December 31, 1996 and 1995
1996 1995
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $4,132,461 $2,658,387
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income (4,132,461) (2,658,387)
------------ ------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 75,776,304 52,883,017
Reinvested dividend distributions 4,152,037 2,645,101
Cost of shares redeemed (42,157,682) (31,260,652)
------------ ------------
Net increase in net assets from capital stock transactions 37,770,659 24,267,466
------------ ------------
Net increase in net assets 37,770,659 24,267,466
NET ASSETS:
Beginning of period 66,149,967 41,882,501
------------ ------------
End of period $103,920,626 $66,149,967
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB Series Fund, Inc.
Financial Highlights
For a share outstanding throughout each period (a)
For the period from
January 18, 1996
(effective date) to
OPPORTUNITY GROWTH PORTFOLIO December 31, 1996
-------------------
<S> <C>
Net asset value, beginning of period $10.00
-------
Income From Investment Operations --
Net investment income 0.02
Net realized and unrealized gain
(loss) on investments (b) 1.90
-------
Total from investment operations 1.92
-------
Less Distributions --
Dividends from net investment income (0.02)
Distributions from net realized
gain on investments (0.40)
-------
Total distributions (0.42)
-------
Net asset value, end of period $11.50
=======
Total investment return at net asset value (c) 19.17%
Net assets, end of period ($ millions) $246.6
Ratio of expenses to average net assets 0.40%(d)
Ratio of net investment income to
average net assets 0.27%(d)
Portfolio turnover rate 155%
Average Commission Rate (e) $0.0342
</TABLE>
<TABLE>
<CAPTION>
For the period from
January 18, 1996
(effective date) to
WORLD GROWTH PORTFOLIO December 31, 1996
--------------------
<S> <C>
Net asset value, beginning of period $10.00
-------
Income From Investment Operations --
Net investment income 0.08
Net realized and unrealized gain
(loss) on investments (b) 0.96
-------
Total from investment operations 1.04
-------
Less Distributions --
Dividends from net investment income (0.09)
-------
Net asset value, end of period $10.95
=======
Total investment return at net asset value (c) 10.41%
Net assets, end of period ($ millions) $174.1
Ratio of expenses to average net assets 0.85%(d)
Ratio of net investment income to
average net assets 1.34%(d)
Portfolio turnover rate 9%
Average Commission Rate (e) $0.0265
</TABLE>
<TABLE>
<CAPTION>
GROWTH PORTFOLIO 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $18.27 $13.51 $14.76 $13.89 $14.85
------- ------- ------- ------- -------
Income From Investment Operations --
Net investment income 0.24 0.24 0.20 0.29 0.23
Net realized and unrealized gain
(loss) on investments (b) 3.43 4.76 (0.87) 1.08 0.85
------- ------- ------- ------- -------
Total from investment operations 3.67 5.00 (0.67) 1.37 1.08
------- ------- ------- ------- -------
Less Distributions --
Dividends from net investment income (0.24) (0.24) (0.20) (0.29) (0.23)
Distributions from net realized
gain on investments (2.38) -- (0.38) (0.21) (1.81)
------- ------- ------- ------- -------
Total distributions (2.62) (0.24) (0.58) (0.50) (2.04)
------- ------- ------- ------- -------
Net asset value, end of period $19.32 $18.27 $13.51 $14.76 $13.89
======= ======= ======= ======= =======
Total investment return at net asset value (c) 22.44% 37.25% -4.66% 10.10% 8.13%
Net assets, end of period ($ millions) $1,658.6 $1,173.1 $721.8 $534.5 $231.0
Ratio of expenses to average net assets 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to
average net assets 1.41% 1.53% 1.52% 2.17% 1.90%
Portfolio turnover rate 223% 184% 135% 243% 230%
Average Commission Rate (e) $0.0629 n/a n/a n/a n/a
</TABLE>
<TABLE>
<CAPTION>
HIGH YIELD PORTFOLIO 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.94 $9.18 $10.76 $9.62 $9.07
------- ------- ------- ------- -------
Income From Investment Operations --
Net investment income 0.98 0.96 0.97 0.96 1.02
Net realized and unrealized gain
(loss) on investments (b) 0.12 0.76 (1.40) 1.16 0.71
------- ------- ------- ------- -------
Total from investment operations 1.10 1.72 (0.43) 2.12 1.73
------- ------- ------- ------- -------
Less Distributions --
Dividends from net investment income (0.98) (0.96) (0.97) (0.96) (1.02)
Distributions from net realized
gain on investments -- -- (0.18) (0.02) (0.16)
------- ------- ------- ------- -------
Total distributions (0.98) (0.96) (1.15) (0.98) (1.18)
------- ------- ------- ------- -------
Net asset value, end of period $10.06 $9.94 $9.18 $10.76 $9.62
======= ======= ======= ======= =======
Total investment return at net asset value (c) 11.55% 19.62% -4.38% 22.91% 20.08%
Net assets, end of period ($ millions) $1,026.7 $792.5 $595.6 $444.5 $154.3
Ratio of expenses to average net assets 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to
average net assets 9.83% 9.94% 9.75% 9.29% 10.69%
Portfolio turnover rate 107% 67% 44% 68% 80%
</TABLE>
<TABLE>
<CAPTION>
INCOME PORTFOLIO 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.08 $9.04 $10.36 $9.87 $10.01
------- ------- ------- ------- -------
Income From Investment Operations --
Net investment income 0.63 0.65 0.64 0.63 0.73
Net realized and unrealized gain
(loss) on investments (b) (0.33) 1.04 (1.11) 0.49 0.15
------- ------- ------- ------- -------
Total from investment operations 0.30 1.69 (0.47) 1.12 0.88
------- ------- ------- ------- -------
Less Distributions --
Dividends from net investment income (0.63) (0.65) (0.64) (0.63) (0.73)
Distributions from net realized
gain on investments -- -- (0.21) -- (0.29)
------- ------- ------- ------- -------
Total distributions (0.63) (0.65) (0.85) (0.63) (1.02)
------- ------- ------- ------- -------
Net asset value, end of period $9.75 $10.08 $9.04 $10.36 $9.87
======= ======= ======= ======= =======
Total investment return at net asset value (c) 3.21% 19.36% -4.68% 11.66% 9.23%
Net assets, end of period ($ millions) $801.2 $762.1 $608.2 $566.9 $254.7
Ratio of expenses to average net assets 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to
average net assets 6.54% 6.81% 6.78% 6.23% 7.29%
Portfolio turnover rate 150% 132% 139% 153% 115%
</TABLE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO 1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- -------
Net investment income from investment operations 0.05 0.06 0.04 0.03 0.03
Less: Dividends from net investment income (0.05) (0.06) (0.04) (0.03) (0.03)
------- ------- ------- ------- -------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return (c) 5.20% 5.71% 4.00% 2.87% 3.53%
Net assets, end of period ($ millions) $103.9 $66.1 $41.9 $24.9 $26.6
Ratio of expenses to average net assets 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to
average net assets 5.07% 5.55% 4.03% 2.83% 3.45%
Notes to Financial Highlights:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in aggregate gains
and losses of portfolio securities due to the timing of sales and redemption of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
(e) Average commission rate is based on total broker commissions incurred in connection with execution of
portfolio transactions during the period, divided by the sum of all portfolio shares purchased and sold
during the period that were subject to a commission. Broker commissions are treated as capital items
that increase the cost basis of securities purchased, or reduce the proceeds of securities sold.
See accompanying notes to the financial statements.
</TABLE>
Notes to Fianancial Statements
December 31, 1996
(1) ORGANIZATION
The LB Series Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as a diversified, open-end investment company. The
Fund is divided into six separate series (the "Portfolio(s)"), each with
its own investment objective and policies. The six Portfolios of the
Fund are: Opportunity Growth Portfolio, World Growth Portfolio, Growth
Portfolio, High Yield Portfolio, Income Portfolio and Money Market
Portfolio. The assets of each portfolio are segregated and each has a
separate class of capital stock. The Fund serves as the investment
vehicle to fund benefits for variable life insurance and variable
annuity contracts issued by Lutheran Brotherhood and Lutheran
Brotherhood Variable Insurance Products Company (LBVIP), an indirect
wholly owned subsidiary of Lutheran Brotherhood. The Opportunity Growth
and World Growth Portfolio's registration was declared effective by the
Securities Exchange Commission and began operations as separate series
of the LB Series Fund, Inc. on January 18, 1996. On January 18, 1996,
Lutheran Brotherhood invested $2,000,000 in each of the Opportunity
Growth and World Growth Portfolios and acquired 200,000 shares of
capital stock in each portfolio.
(2) SIGNIFICANT ACCOUNTING POLICIES
Investment Security Valuations
Securities traded on U.S. or foreign securities exchanges or included in
a national market system are valued at the last quoted sales price at
the close of each business day. Securities traded on the over-the-
counter market and listed securities for which no price is readily
available are valued at prices within the range of the current bid and
asked prices considered best to represent the value in the
circumstances, based on quotes that are obtained from an independent
pricing service or by dealers that make markets in the securities. The
pricing service, in determining values of securities, takes into
consideration such factors as current quotations by broker/dealers,
coupon, maturity, quality, type of issue, trading characteristics, and
other yield and risk factors it deems relevant in determining
valuations. Exchange listed options and futures contracts are valued at
the last quoted sales price. For all Portfolios other than the Money
Market Portfolio, short-term securities with maturities of 60 days or
less are valued at amortized cost; those with maturities greater than 60
days are valued at the mean between bid and asked price. Short-term
securities held by the Money Market Portfolio are valued on the basis of
amortized cost (which approximates market value), whereby a security is
valued at its cost initially, and thereafter valued to reflect a
constant amortization to maturity of any discount or premium. The Money
Market Portfolio follows procedures necessary to maintain a constant net
asset value of $1.00 per share. All other securities for which market
values are not readily available are appraised at fair value as
determined in good faith by or under the direction of the Board of
Directors.
Repurchase Agreements
The Fund may engage in repurchase agreement transactions in pursuit of
its investment objectives. When the Fund engages in such transactions,
it is policy to require the custodian bank to take possession of all
securities held as collateral in support of repurchase agreement
investments. In addition, the Fund monitors the market value of the
underlying collateral on a daily basis. If the seller defaults or if
bankruptcy proceedings are initiated with respect to the seller, the
realization or retention of the collateral may be subject to legal
proceedings.
Investment Income
Interest income is determined on the basis of interest or discount
earned on any short-term securities and interest earned on all other
debt securities, including amortization of discount or premium. Dividend
income is recorded on the ex-dividend date. For payment-in-kind
securities, income is recorded on the ex-dividend date in the amount of
the value received.
Options, Financial Futures and Forward Foreign Currency Contracts
The Fund, with the exception of the Money Market Portfolio, may buy put
and call options, write covered call options and buy and sell futures
contracts. The Fund intends to use such derivative instruments as hedges
to facilitate buying or selling securities or to provide protection
against adverse movements in security prices or interest rates. The
World Growth Portfolio may also enter into options and futures contracts
on foreign currencies and forward foreign currency contracts to protect
against adverse foreign exchange rate fluctuation.
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sale for a written call option or the cost of
a security for purchased put and call options is adjusted by the amount
of premium received or paid.
Upon entering into a futures contract, the Fund is required to deposit
initial margin, either cash or securities in an amount equal to a
certain percentage of the contract value. Subsequent variation margin
payments are made or received by the Fund each day. The variation margin
payments are equal to the daily changes in the contract value and are
recorded as unrealized gains and losses. The Fund realizes a gain or
loss when the contract is closed or expires.
Forward foreign currency contracts are valued daily and unrealized
appreciation or depreciation is recorded daily as the difference between
the contract exchange rate and the closing forward rate applied to the
face amount of the contract. A realized gain or loss is recorded at the
time a forward contract is closed.
Foreign Currency Translations
Securities and other assets and liabilities of the World Growth
Portfolio that are denominated in foreign currencies are translated into
U.S. dollars at the daily closing rate of exchange. Foreign currency
amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date.
Currency gains and losses are recorded from sales of foreign currency,
exchange gains or losses between the trade date and settlement dates on
securities transactions, and other translation gains or losses on
dividends, interest income and foreign withholding taxes. The effect of
changes in foreign exchange rates on realized and unrealized security
gains or losses are not segregated from gains and losses that arise from
changes in market prices of investments, and are included with the net
realized and unrealized gain or loss on investments.
Federal Income Taxes
It is the Fund's policy to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income on a timely basis,
including any net realized gain on investments each year. It is also the
intention of the Fund to distribute an amount sufficient to avoid
imposition of any federal excise tax. Accordingly, no provision for
federal income tax is necessary. Each portfolio is treated as a separate
taxable entity for federal income tax purposes.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. To
the extent the Fund engages in such transactions, it will do so for the
purpose of acquiring securities consistent with its investment
objectives and policies and not for the purpose of investment leverage
or to speculate on interest rate changes. On the trade date, assets of
the Fund are segregated on the Fund's records in a dollar amount
sufficient to make payment for the securities to be purchased. Income is
not accrued until settlement date.
Dollar Roll Transactions
The Income Portfolio enters into dollar roll transactions, with respect
to mortgage securities issued by GNMA, FNMA and FHLMC, in which the
Portfolio sells mortgage securities and simultaneously agrees to
repurchase similar (same type, coupon and maturity) securities at a
later date at an agreed upon price. During the period between the sale
and repurchase, the Portfolio forgoes principal and interest paid on the
mortgage securities sold. The Portfolio is compensated by the interest
earned on the cash proceeds of the initial sale and from negotiated fees
paid by brokers offered as an inducement to the Portfolio to "roll over"
its purchase commitments. The Income Portfolio earned $653,713 from such
fees.
Distributions to Shareholders
Dividends from net investment income, if available, are declared and
reinvested daily for the High Yield, Income and Money Market Portfolios,
quarterly for the Growth Portfolio, and annually for the Opportunity
Growth and World Growth Portfolios. With the exception of the Money
Market Portfolio, net realized gains from securities transactions, if
any, are distributed at least annually after the close of the Fund's
fiscal year. Short-term gains and losses of the Money Market Portfolio
are included in interest income and distributed daily. Dividends and
capital gains are recorded on the ex-dividend date.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
distributions, the year in which amounts are distributed may differ from
the year that the income or net realized gains were recorded by the
Fund.
It is the policy of the Fund to reclassify the net effect of permanent
differences between book and taxable income to trust capital accounts on
the statements of assets and liabilities. As a result of permanent book-
to-tax differences for the year ended December 31, 1996, accumulated net
realized gain or loss from the sale of investments was decreased by
$231,939 and undistributed net investment income was increased by
$231,939 for the World Growth Portfolio. These reclassifications have no
effect on net assets, net asset value per share, the change in net
assets resulting from operations, or on the amount of income available
for distribution to shareholders.
Other
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are determined on the
identified cost basis, which is the same basis used for federal income
tax purposes.
(3) INVESTMENT ADVISORY FEES AND OTHER EXPENSES
Investment Advisory Fees
Each Portfolio pays Lutheran Brotherhood, the Fund's investment advisor,
a fee for its advisory services. The fees are accrued daily and paid
monthly. The fees are based on the following annual rates of average
daily net assets: Opportunity Growth, Growth, High Yield, Income and
Money Market Portfolios, 0.40%; World Growth Portfolio, 0.85%.
Lutheran Brotherhood has entered into a sub-advisory agreement with Rowe
Price - Fleming International, Inc. for the performance of various sub-
advisory services for the World Growth Portfolio. For these services,
Lutheran Brotherhood pays a portion of an annual sub-advisory fee that
is based on the following annual rates of combined average daily net
assets of the Lutheran Brotherood World Growth Fund and the World Growth
Portfolio: 0.75% for the first $20 million in assets; 0.60% for the next
$30 million, and 0.50% for assets over $50 million. When combined annual
average assets exceed $200 million, the fee will be equal to 0.50% of
all of the World Growth Portfolio's annual average daily net assets.
Other Expenses
All other expenses associated with operating the Fund are paid or
reimbursed to the Fund by LB and LBVIP pursuant to an Expense
Reimbursement Agreement. The Expense Reimbursement Agreement can be
terminated at any time by the mutual agreement of the Fund, LB and
LBVIP, but the Fund, LB and LBVIP currently contemplate that the Expense
Reimbursement Agreement will continue so long as the Fund remains in
existence.
The Fund has adopted a deferred compensation plan which allows the
independent directors of the Fund to defer the receipt of all or a
portion of directors fees that are payable on or after January 1, 1996.
Participation in the plan is voluntary. Amounts that are deferred are
invested in the Lutheran Brotherhood Family of Funds until distribution
in accordance with the plan.
Certain officers and non-independent directors of the Fund are officers
of Lutheran Brotherhood and officers or directors of LBVIP; however,
they receive no compensation from the Fund.
(4) SECURITIES LENDING
To generate additional income, the Fund may participate in a securities
lending program administered by the Fund's custodian bank. Securities
are periodically loaned to brokers, banks or other institutional
borrowers of securities, for which collateral in the form of cash, U.S.
government securities, or letter of credit is received by the custodian
in an amount at least equal to the market value of securities loaned.
Collateral received in the form of cash is invested in short-term
investments by the custodian from which earnings are shared between the
borrower, the custodian and the Fund at negotiated rates. The risks to
the Fund are that it may experience delays in recovery or even loss of
rights in the collateral should the borrower of securities fail
financially. There were no security loans during the year ended December
31, 1996.
(5) DISTRIBUTIONS FROM CAPITAL GAINS
During the year ended December 31, 1996, a distribution from net
realized capital gains of $156,587,523 was paid by the Growth Portfolio.
This distribution relates to net capital gains realized during the year
ended December 31, 1995.
(6) CAPITAL LOSS CARRYOVER
During the year ended December 31, 1996, the High Yield Portfolio
utilized $20,382,802 of its capital loss carryover against net realized
capital gains. At December 31, 1996, the High Yield and Income
Portfolios had accumulated net realized capital loss carryovers expiring
as follows:
High Yield Income
Year Portfolio Portfolio
-------- ------------ --------------
2002 -- $21,666,184
2003 $5,055,282 --
2004 -- 3,667,020
------------ ------------
$5,055,282 $25,333,204
------------ ------------
To the extent these Portfolios realize future net capital gains, taxable
distributions will be reduced by any unused capital loss carryovers.
Temporary differences of $3,697,869, $264,497, $6,625,013, $2,115,211
and $532,835 existed between accumulated net realized capital gains or
losses for financial statement and tax purposes as of December 31, 1996
for the Opportunity Growth, World Growth, Growth, High Yield and Income
Portfolios, respectively. These differences are due primarily to
deferral of capital losses for tax purposes.
(7) INVESTMENT TRANSACTIONS
Purchases and Sales of Investment Securities
For the year ended December 31, 1996, the cost of purchases and the
proceeds from sales of investment securities other than U.S. Government
and short term securities were as follows:
In thousands
----------------------------------
Portfolio Purchases Sales
- ------------------------------------------------------------------------
Opportunity Growth $ 413,268 $ 179,194
World Growth 157,872 7,525
Growth 3,128,687 2,890,296
High Yield 1,125,381 914,903
Income 575,421 420,227
Purchases and sales of U.S. Government securities were:
In thousands
----------------------------------
Portfolio Purchases Sales
- ------------------------------------------------------------------------
Growth $ 7,904 $ 13,233
Income 562,417 695,266
Investments in Restricted Securities
The High Yield Portfolio owns restricted securities that were purchased
in private placement transactions without registration under the
Securities Act of 1933. Unless such securities subsequently become
registered, they generally may be resold only in privately negotiated
transactions with a limited number of purchasers. The aggregate value of
restricted securities was $346,500 at December 31, 1996 which
represented 0.03% of net assets of the High Yield Portfolio.
Investments in High Yielding Securities
The High Yield Portfolio invests primarily in high yielding fixed income
securities. The Income Portfolio may from time to time invest up to 25%
of its total assets in high-yielding securities. These securities will
typically be in the lower rating categories or will be non-rated and
generally will involve more risk than securities in the higher rating
categories. Lower rated or unrated securities are more likely to react
to developments affecting market risk and credit risk than are more
highly rated securities, which react primarily to movements in the
general level of interest rates.
Investments in Options and Futures Contracts
The movement in the price of the instrument underlying an option or
futures contract may not correlate perfectly with the movement in the
prices of the portfolio securities being hedged. A lack of correlation
could render the Fund's hedging strategy unsuccessful and could result
in a loss to the Fund. In the event that a liquid secondary market would
not exist, the Fund could be prevented from entering into a closing
transaction which could result in additional losses to the Fund.
<TABLE>
<CAPTION>
Open Option Contracts
The number of contracts and premium amounts associated with call option
contracts written during the year ended December 31, 1996 were as
follows:
Opportunity Growth Portfolio Growth Portfolio Income Portfolio
---------------------------- ------------------------- -------------------------
Number of Premium Number of Premium Number of Premium
Contracts Amount Contracts Amount Contracts Amount
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 -- -- -- -- -- --
Opened 532 100,924 17,785 3,102,639 11,825 730,514
Closed (532) (100,924) (10,784) (1,993,875) (11,275) (513,869)
Expired -- -- (4,742) (476,033) (400) (117,448)
Exercised -- -- (1,261) (298,489) -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1996 -- $ -- 998 $334,242 150 $99,197
============ ============ ============ ============ ============ ============
</TABLE>
Foreign Denominated Investments
The World Growth Portfolio invests primarily in foreign denominated
stocks. Foreign denominated assets and currency contracts may involve
more risks than domestic transactions, including: currency risk,
political and economic risk, regulatory risk, and market risk. The
Portfolio may also invest in securities of companies located in emerging
markets. Future economic or political developments could adversely
affect the liquidity or value, or both, of such securities.
(8) CAPITAL STOCK
Authorized capital stock consists of two billion shares as follows:
Shares Par
Portfolio Authorized Value
------------------ ---------------- -----------
Opportunity Growth 200,000,000 $ 0.01
World Growth 200,000,000 $ 0.01
Growth 600,000,000 $ 0.01
High Yield 200,000,000 $ 0.01
Income 400,000,000 $ 0.01
Money Market 400,000,000 $ 0.01
The shares of each portfolio have equal rights and privileges with all
shares of that portfolio. Shares in the Fund are currently sold only to
separate accounts of Lutheran Brotherhood and LBVIP.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Opportunity World High Money
Growth Growth Growth Yield Income Market
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding at
December 31, 1994 N/A N/A 53,435,175 64,885,392 67,282,998 41,882,501
Shares sold N/A N/A 10,639,507 9,776,871 7,399,297 52,883,017
Shares issued on reinvestment
of dividends and distributions N/A N/A 860,983 7,060,502 4,735,997 2,645,101
Shares redeemed N/A N/A (738,038) (1,980,407) (3,804,100) (31,260,652)
------------ ------------ ------------ ------------ ------------ ------------
Shares outstanding at
December 31, 1995 -- -- 64,197,627 79,742,358 75,614,192 66,149,967
Shares sold 20,829,993 15,909,365 12,716,616 15,616,822 8,257,064 75,776,304
Shares issued on reinvestment
of dividends and distributions 741,927 130,856 10,462,909 8,924,334 5,273,056 4,152,037
Shares redeemed (141,181) (139,490) (1,544,344) (2,175,610) (6,968,350) (42,157,682)
------------ ------------ ------------ ------------ ------------ ------------
Shares outstanding at
December 31, 1996 21,430,739 15,900,731 85,832,808 102,107,904 82,175,962 103,920,626
============ ============ ============ ============ ============ ============
</TABLE>
LB Series Fund, Inc.
Opportunity Growth Portfolio
World Growth Portfolio
Growth Portfolio
High Yield Portfolio
Income Portfolio
Money Market Portfolio
Directors
Rolf F. Bjelland
Charles W. Arnason
Herbert F. Eggerding, Jr.
Connie M. Levi
Bruce J. Nicholson
Ruth E. Randall
Officers
Rolf F. Bjelland James M. Odland
Chairman and President Assistant Secretary
Otis F. Hilbert Randall L. Wetherille
Secretary and Vice President Assistant Secretary
James R. Olson Wade M. Voigt
Vice President Treasurer
James M. Walline Rand E. Mattsson
Vice President Assistant Treasurer
Richard B. Ruckdashel
Vice President
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the
current prospectuses.
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