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BLACK BAR]
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LB SERIES FUND, INC.
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CHOICE [BULLET] PROTECTION [BULLET] ACCUMULATION]
Annual Report
for Variable Products
December 31, 1997
[LUTHERAN BROTHERHOOD LOGO OMITTED]
[GRAPHIC OMITTED: PHOTO OF ROLF F. BJELLAND]
Our Message To You
December 31, 1997
Dear Shareholder:
Enclosed is the Annual Report for the LB Series Fund, Inc., 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
covers the 12-months ended December 31, 1997. Inside, you'll find an
overview of the economic and market climate that drove returns from
stocks, bonds, and money market instruments during the year. There are
also commentaries by individual portfolio managers that describe the
strategies used to make the most of this environment. Financial
statements for each portfolio follow at the end of the report.
In 1997, investors once again earned exceptional returns from stocks
and bonds that far outpaced historical averages. Market volatility
increased during the year, however, as investors second guessed trends
in economic growth, inflation and interest rates. Because the economic
climate remained ideal for most of the year, the markets rebounded
quickly from each period of weakness.
This was the case in October of 1997, when currency and economic
problems in Asia rocked stock markets across the globe. On October 27,
the Dow Jones Industrial Average fell 7% -- an eerie reminder of the
one-day price drop of 23% that had occurred in October of 1987. In
1987, as in 1997, stock prices quickly regained lost ground --
providing substantial rewards for investors who stayed in the market.
From their low in October 1987 to their high in August 1997, stock
prices, as measured by the Standard & Poor's 500 Index, gained more
than 350%.
In recent years, Lutheran Brotherhood has made several moves to give
you greater control over your investments. As part of our
commitment to provide a broad range of investment options, we
introduced the new Mid Cap Growth Portfolio to the LB Series Fund,
Inc. Launched on January 30, 1998, the Portfolio invests primarily in
common stocks of medium-sized companies. The earnings of these
companies tend to be more stable than earnings of smaller companies
and have greater growth potential than earnings of larger firms. The
Mid Cap Portfolio looks for quality companies with records of superior
growth, market leadership, proven business concepts, sound management
and strong financials.
In addition, we've developed two computer software programs to
simplify your financial planning. The Lutheran Brotherhood
AssetMatchsm program allows you and your LBSC registered
representative to blend a diversified portfolio of investments suited
to your specific objectives, time horizon and tolerance for risk. The
Lutheran Brotherhood Retirement Planner, available from your LBSC
Registered Representative, can help you 1) identify how much income
you'll need to retire, 2) decide whether you're on track for that
goal, and 3) take the actions necessary to turn your goal into
reality.
If you'd like more information on AssetMatch, the Lutheran Brotherhood
Retirement Planner, or the Mid Cap Growth Portfolio, please call us
toll-free at 1-800-423-7056.
Sincerely,
/S/ ROLF F. BJELLAND
Rolf F. Bjelland
President and Chairman
LB Series Fund, Inc.
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CHOICE [BULLET] PROTECTION [BULLET] ACCUMULATION]
Economic and Market Overview
Investors were again well rewarded in 1997. With a nearly ideal
economic mixture of moderate growth, healthy corporate earnings and
low inflation, returns for stocks and bonds remained well above
historical averages. Although inflation jitters and a financial
"earthquake" in Asia raised market volatility around the world, the
Standard & Poor's 500 Index posted a total return of 33.36%, and the
Lehman Brothers Aggregate Bond Index returned 9.65%.
A Nurturing Environment
The U.S. economy is closer to achieving the textbook goals of full
employment, growth and price stability than it has been in over three
decades. Real Gross Domestic Product grew in 1997 by 3.9%, while
inflation, as measured by the Consumer Price Index, fell to 1.7% and
the unemployment rate finished at 4.7%. After raising short-term
interest rates a modest 0.25% in March, the Federal Reserve left rates
unchanged for the rest of the year. This, plus stronger demand for
bonds and tighter supplies of U.S. Treasury issues in the midst of
falling inflation, pushed down the yield for 30-year Treasuries from
6.64% to 5.92% at year end.
Meanwhile, corporate earnings remained better than analysts expected.
Stocks also benefited from a positive balance of market supply and
demand. As cash continued to flow into stock mutual funds, heavy
corporate merger activity and widespread stock repurchase programs far
outpaced the addition of new shares from an active market in initial
public offerings.
Stock returns were more modest overseas, with Morgan Stanley Capital
International's Europe, Australia, Far East (EAFE) Index earning a 12-
month total return of 2.06%. Although stocks in Europe earned strong
returns as economies in that region improved, stocks in Japan, the
rest of the Far East, and emerging markets suffered significant
setbacks from worsening currency and debt problems in Asia.
Sector Performance
The rally in U.S. stock prices benefited some market sectors more than
others. Concerned that either higher inflation or lower exports might
curb corporate earnings, investors tended to favor stocks of larger
companies whose earnings are more reliable. In the second and third
quarters, however, when prices for large-company issues had grown
quite expensive, investors discovered value in many small-company
shares. This helped the Russell 2000 Index, a market benchmark for
small-cap stocks, return 22.36% for the year.
In the bond market, U.S. Treasury issues outperformed corporate
securities. This was due, in part, to uncertainty about corporate
earnings and, in part, to the "flight to quality" that occurred late
in the year, as Asia's troubles drove foreign investors to markets
with greater stability. During the year, yields for long-term
corporate bonds fell an average of 0.45%, versus a drop of 0.72% for
long-term Treasuries. Because the benefits of lower inflation are
greater for long-term issues than short-term issues, long-term bonds
outperformed for the year.
Slower Growth Ahead
Although the world's financial markets have mostly digested Asia's
recent woes, we expect further adjustments as the long-term effects of
those problems unfold. As in recent months, the greatest impact on
investments will probably take place in the Far East -- with markets
like Thailand, Malaysia and Indonesia continuing to bear most of the
burden. Although emerging markets in Latin America may also suffer,
the overall strength of their economies should make them relatively
resilient.
In the United States and Europe, there should be even less fallout
from Asia's problems. U.S. exports to the Far East account for only 5%
of domestic goods and services. In addition, real (inflation-adjusted)
earnings and income are rising and should improve further if inflation
continues to fall. This should support additional spending by U.S.
businesses and consumers.
Lower exports may reduce earnings for some U.S. companies, keeping
stock prices volatile. However, the market has made adjustments over
the past several quarters in anticipation of slower corporate
earnings. As Asia's problems cut import costs for many U.S. firms,
inflation and interest rates could continue to fall. This might set
the stage for further gains in stock prices. These gains should be
more modest than the outstanding advances of recent years. In a
climate of low inflation, falling budget deficits, and a positive
balance of demand and supply, prices for bonds may also continue to
rise.
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.
Investment Objective:
To seek long-term growth of capital by investing primarily in common
stocks of small companies.
Portfolio Facts
Inception Date: 1/18/96
Total Assets
(in millions): $391.5
The stock market's advance in 1997 greatly benefited stocks of small
companies, which earned returns far above their historical averages.
Throughout the year, however, investors worried frequently that future
earnings might not meet analysts' expectations. When investors were
most concerned about earnings, they tended to favor stocks of larger
companies with strong earnings records. This caused large-company
issues to outperform small companies in the first and last quarters of
the year. However, early in the second quarter, as large issues became
expensive, investors turned to shares of smaller firms. This helped
small-company issues outperform large companies in the second and
third quarters of the year.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
Top 10 Holdings % of Portfolio
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FPA Medical Management, Inc. 1.9%
Signature Resorts, Inc. 1.8%
Steiner Leisure Ltd. 1.7%
Horizon Health Corp. 1.4%
Coach USA, Inc. 1.4%
AXENT Technologies, Inc. 1.4%
Silverleaf Resorts, Inc. 1.4%
US Office Products Company 1.4%
Atrix Laboratories, Inc. 1.3%
ICN Pharmaceuticals, Inc. 1.3%
These holdings represent 15% of the Fund's total investment portfolio.
Within the small-cap sector, investors tended to favor stocks whose
prices were particularly attractive compared with the earnings
potential of their companies. As a result, "value" stocks in the
sector outperformed "growth" stocks, where the Opportunity Growth
Portfolio focuses its investments. During the year, we managed the
Portfolio to minimize the adverse effects of this investment climate,
while maintaining the basic investment strategies that have
outperformed over time. However, the strong preference for value by
investors caused the Portfolio to underperform significantly for the
year. For the 12- months ended December 31, 1997, the Portfolio had a
total return (based on NAV) of 0.93%, versus 22.36% for the Russell
2000 Index.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Common Stocks 89.0%
Corporate Bonds 0.7%
Short-Term Securities 10.3%
Focus on Earnings
Throughout 1997 we continued to emphasize stocks in industries with
above-average potential for growth over time. This included companies
with strong earnings, quality management and unique products. With
investors very concerned about earnings, we examined every holding for
any sign of long-term earnings problems. Believing that technology and
health care stocks enjoy some of the best opportunities for growth in
the American economy, we chose to remain overweighted in those
sectors.
[GRAPHIC BAR CHART OMITTED: TOP 10 SECTORS]
Top 10 Sectors
Consumer Growth 36.7%
Technology 20.7%
Financial 15.4%
Energy 6.5%
Capital Goods 6.3%
Consumer Cyclical 3.9%
Basic Industry 3.9%
Credit Cyclical 2.8%
Transportation 2.4%
Consumer Staples 1.4%
Footnote reads:
These sectors represent 100% of the Fund's
total investment portfolio.
To give the Portfolio further diversification, however, we trimmed
some positions in technology and health care firms in favor of shares
in energy and financial firms whose prices were especially attractive.
In the financial sector, we emphasized purchases of real estate
investment trusts. In the energy sector, we focused on oil exploration
and production companies.
As part of the natural evolution for a small-company stock fund whose
assets are increasing, we began to de-emphasize micro-cap issues ($200
million or less in market capitalization), and added investments in
firms with market capitalizations over $500 million. Over time, this
should help to reduce volatility in the Portfolio, but should have
little effect on its potential for long-term growth.
[GRAPHIC WORM CHART OMITTED:
Performance Through December 31, 1997
GROWTH OF $10,000 INVESTED SINCE 1/31/96]
Performance Through December 31, 1997
Growth of $10,000 Invested Since 1/31/96
Russell 2000
Opp. Growth w/ reinvest CPI Valued
Month End Total Total Total
Date Value Value Value
- ---------------------------------------------------------------------
1/31/96 $10,000 $10,000 $10,000
2/28/96 10,416 10,312 10,032
3/31/96 10,722 10,525 10,084
4/30/96 11,944 11,089 10,123
5/31/96 12,716 11,525 10,142
6/30/96 11,871 11,052 10,149
7/31/96 10,855 10,087 10,168
8/31/96 11,499 10,673 10,188
9/30/96 12,342 11,090 10,220
10/31/96 11,364 10,920 10,253
11/30/96 10,954 11,369 10,272
12/31/96 11,302 11,667 10,272
1/31/97 11,528 11,901 10,304
2/28/97 10,533 11,613 10,337
3/31/97 9,415 11,065 10,363
4/30/97 9,009 11,095 10,376
5/31/97 10,338 12,329 10,369
6/30/97 10,887 12,858 10,382
7/31/97 11,454 13,456 10,395
8/31/97 11,721 13,764 10,415
9/30/97 13,018 14,772 10,440
10/31/97 12,246 14,123 10,466
11/30/97 11,776 14,032 10,460
12/31/97 11,407 14,277 10,447
INSET LEGEND READS:
Opportunity Growth Portfolio
$11,407
Russell 2000 Index
$14,277
Consumer Price Index
$10,447
INSET BOX ON CHART READS:
Opportunity Growth
Portfolio
Annualized Total Returns*
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Since Inception
1/18/96 9.90%
1 Year 0.93%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
Looking Homeward
If investors remain concerned about earnings, prices for stocks of
small companies may remain quite choppy. Prices for technology stocks
may be especially volatile, since many technology companies have a
large export business with Asia. With continued growth and low
inflation, however, small-cap stocks could perform relatively well.
Small-cap stocks remain much cheaper than stocks of larger companies,
and smaller companies tend to focus more on domestic sales which, with
the exception of technology firms, makes them less vulnerable to the
Asian economic crisis.
As before, we will emphasize stocks with above-average potential for
long-term growth -- stressing shares of companies that concentrate
their businesses in the United States. We plan to remain cautious
about the technology sector, given its greater exposure to problems
in Asia.
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. Martin has been working in research and
investment management since 1968 and has been with Rowe Price-Fleming
since 1979.
Investment Objective:
To seek long-term capital growth by investing primarily in common
stocks issued by established companies outside the United States.**
Portfolio Facts
Inception Date: 1/18/96
Total Assets
(in millions): $287.2
During 1997 there were exceptional performances by many stocks in
Europe and Latin America. These gains offset sharp losses from stocks
in Asia, and the return-dampening affects of a stronger U.S. dollar,
to provide modest returns for U.S. investors venturing abroad.
European stocks in Morgan Stanley Capital International's Europe,
Australia, Far East (EAFE) Index returned 38% in local currency terms
- -- benefiting from increased European economic strength and a wave of
mergers and acquisitions. Despite a fourth-quarter slump in sympathy
with plummeting Asian markets, stocks in Latin America also returned
38% in local currency terms, as investors recognized the attractive
stock market values there.
[GRAPHIC OMITTED: PORTFOLIO COMPOSITION TOP 10 COUNTRIES]
Portfolio Composition
Top 10 Countries
- -----------------------------
Japan 18.6%
United Kingdom 17.7%
Netherlands 10.8%
France 9.0%
Switzerland 6.9%
Germany 5.8%
Italy 3.9%
Sweden 3.5%
Brazil 2.4%
Spain 2.4%
These holdings represent 81.0%
of the Fund's total investment portfolio.
Already shackled by a fragile economy, stocks in Japan were hit hard
as the currencies and economies of other Asian nations deteriorated.
For the year, the Japanese market lost 14% when measured in local
currency terms and 24% when measured in U.S. dollars. Other Asian
markets (excluding Japan) lost 19% in local currency terms and 31% in
U.S. dollar terms.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Common Stocks & Warrants 94.1%
Preferred Stocks 0.6%
Short-Term Securities 5.3%
During the year, we under-weighted the World Growth Portfolio in
Japanese stocks in comparison to the EAFE Index. We overweighted
holdings in Latin America, which is not represented in the Index. This
helped the Portfolio earn a total return (based on NAV) of 2.81% for
the 12-months ended December 31, 1997, versus a return of 2.06% for
the Index.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
% of
Top 10 Holdings Country Portfolio
- --------------------------------------------------------------------
Royal Dutch Petroleum Netherlands 2.6%
National Westminster Bank United Kingdom 2.4%
Novartis AG Switzerland 2.2%
SmithKline Beecham plc United Kingdom 2.0%
Wolters Kluwer Netherlands 1.7%
Telecomunicacoes
Brasilias ADR (USD) Brazil 1.6%
Eaux Cie Generale France 1.5%
Roche Holdings Switzerland 1.5%
Reed International plc United Kingdom 1.4%
Shell Transport & Trading United Kingdom 1.4%
These holdings represent 18.3% of the Fund's total investment
portfolio.
Less Emphasis on Asia
At the start of 1997, Japanese stocks represented 21% of Portfolio
assets, compared with 32% of the EAFE Index. Because the Japanese
economy was weak, we favored stocks of companies that do a large
portion of their business outside of Japan -- such as Sony, TDK and
Honda. These issues outperformed other Japanese stocks for most of the
year. Although we started the year with an overweighting in the
emerging markets of Asia, such as Malaysia and Singapore, we reduced
positions there as the outlook for their stocks worsened. By the end
of 1997 the Portfolio was underweighted in emerging Asian markets
compared to the EAFE Index.
European stocks accounted for 54% of Portfolio assets at the start of
the year, versus a representation in the EAFE Index of 57%. We
maintained a similar weighting in Europe for most of the year.
Throughout 1997 we looked for European issues with strong potential
for long-term earnings growth at attractive valuations. Although these
issues lagged earlier in the year, especially in the Netherlands and
Germany, they made positive contributions in the months that followed.
[GRAPHIC WORM CHART OMITTED:
Performance Through December 31, 1997
GROWTH OF $10,000 INVESTED SINCE 1/31/96]
Performance Through December 31, 1997
Growth of $10,000 Invested Since 1/31/96
MSCI EAFE
World Growth w/ reinvest CPI Valued
Month End Total TOTAL TOTAL
Date Value VALUE VALUE
- --------------------------------------------------------------------
1/31/96 $10,000 $10,000 $10,000
2/28/96 9,974 10,036 10,032
3/31/96 10,098 10,252 10,084
4/30/96 10,355 10,552 10,123
5/31/96 10,336 10,360 10,142
6/30/96 10,468 10,421 10,149
7/31/96 10,137 10,119 10,168
8/31/96 10,290 10,143 10,188
9/30/96 10,534 10,415 10,220
10/31/96 10,481 10,311 10,253
11/30/96 10,965 10,723 10,272
12/31/96 11,025 10,588 10,272
1/31/97 10,871 10,220 10,304
2/28/97 10,983 10,389 10,337
3/31/97 10,967 10,430 10,363
4/30/97 11,035 10,487 10,376
5/31/97 11,738 11,172 10,369
6/30/97 12,239 11,791 10,382
7/31/97 12,568 11,985 10,395
8/31/97 11,433 11,092 10,415
9/30/97 12,195 11,715 10,440
10/31/97 11,306 10,816 10,466
11/30/97 11,276 10,708 10,460
12/31/97 11,335 10,805 10,447
INSET LEGEND READS:
World Growth Portfolio
$11,335
MSCI EAFE Index
$10,805
Consumer Price Index
$10,447
INSET BOX ON CHART READS:
World Growth Portfolio
Annualized Total Returns*
- ----------------------------------------------------------
Since Inception
1/18/96 6.69%
1 Year 2.81%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
For most of the year we kept 4% to 6% of the Portfolio's assets in
Latin America. We focused these investments on Brazil -- emphasizing
large utility stocks, like Telecomunicacoes Brasilias, which are major
beneficiaries of that country's privatization reform. Mexico
represented our second largest allocation in the region.
Becoming More Selective
We believe that Asia's economic troubles may remain a drag on world
stock prices through the first half of 1998. Because investors are
concerned about the impact of these troubles on exports and earnings
in other regions of the world, stock evaluation and selection will be
even more important than it was in 1997.
Because European companies tend to have a more limited exposure to
Asia, we believe stocks in Europe should continue to perform well.
While equity markets in Latin America may be volatile, they could also
thrive on further economic growth. By remaining focused on Europe and
Latin America, cautiously optimistic in Asia, and very selective in
the stocks that we hold, we hope to help the Portfolio make the most
of this investment climate.
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.
Investment Objective:
To seek long-term growth of capital by investing primarily in common
stocks of established corporations.
Portfolio Facts
Inception Date: 1/9/87
Total Assets
(in millions): $2,426.1
In another year of outstanding gains for stocks, investors
increasingly favored shares with exceptional earnings potential. By
emphasizing such issues, the Growth Portfolio performed well in this
environ-ment. For the 12-months ended December 31, 1997, the Portfolio
earned a total return (based on NAV) of 30.18%. Over the same period,
the Standard & Poor's 500 Index returned 33.36%.
Sticking with Technology and Health Care
As in 1996, we found many opportunities for above-average growth in
the technology and health care sectors. During 1997, the Portfolio
also enjoyed strong performances from pharmaceutical stocks like
Pfizer, Bristol-Myers and Eli Lilly. Although technology stocks were
quite volatile, there were solid returns from shares of companies like
Cisco Systems, Microsoft, BMC Software, and Peoplesoft. Though
disappointing in the second half of 1997, oil-services stocks like
Halliburton and Baker Hughes performed well in the first half. After
lagging earlier in 1997, retail stocks like Dayton Hudson and Wal-mart
made positive contributions later in the year.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
Top 10 Holdings % of Portfolio
- --------------------------------------------------------------
General Electric Co. 1.6%
Merck & Co., Inc. 1.6%
Cisco Systems, Inc. 1.5%
International Business Machines 1.3%
Disney (Walt) Co. 1.3%
Procter & Gamble Co. 1.3%
Coca-Cola Co. 1.3%
Gillette Co. 1.2%
Bristol-Myers Squibb Co. 1.2%
Eli Lilly & Co. 1.1%
Footnote reads:
These holdings represent 13.4% of the Fund's total investment
portfolio.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Common Stocks 92.1%
Short-Term Securities 7.4%
Preferred Stocks 0.3%
Corporate Bonds 0.2%
Over the year we increased investments in financial stocks -- which
benefited from falling interest rates, as well as mergers and
acquisitions in the industry. We enhanced diversification in this
sector by adding shares of real estate investment trusts. We also
boosted investments in transportation shares -- adding positions in
airlines like American, United and Continental.
To make these purchases we took profits in oil-services stocks that
had performed well. We also reduced shares of technology and basic
materials companies. In these, and other sectors, we eliminated firms
whose dependence on exports to Asia might jeopardize future earnings
growth.
[GRAPHIC BAR CHART OMITTED: TOP 10 SECTORS]
Top 10 Sectors
Technology 22.2%
Consumer Growth 21.8%
Financial 19.5%
Consumer Staples 9.5%
Energy 5.7%
Capital Goods 4.7%
Basic Industry 4.2%
Consumer Cyclical 4.1%
Utilities 4.0%
Conglomerates 2.5%
Footnote reads:
These sectors represent 98.2% of the Fund's
total investment portfolio.
Further Selectivity Likely
If Asia's troubles persist, and the growth in earnings slows, stock
prices could remain quite volatile. After an unprecedented three years
of market returns in excess of 20%, gains for U.S. stocks will
probably be more modest in 1998. In a choppy market environment, the
selection of individual stocks may become much more important than the
weightings of industry sectors -- as investors give increasing
scrutiny to company earnings reliability and exposure to Asia.
[GRAPHIC WORM CHART OMITTED:
Performance Through December 31, 1997
GROWTH OF $10,000 INVESTED SINCE 12/31/87]
Performance Through December 31, 1997
Growth of $10,000 Invested Since 12/31/87
S & P 500
Growth w/ reinvest CPI Valued
Month End Total Total Total
Date Value Value Value
- --------------------------------------------------------------------
12/31/87 $10,000 $10,000 $10,000
1/31/88 10,168 10,434 10,026
2/29/88 10,786 10,900 10,052
3/31/88 10,821 10,569 10,095
4/30/88 10,686 10,701 10,147
5/31/88 10,561 10,770 10,182
6/30/88 10,986 11,273 10,225
7/31/88 10,793 11,244 10,269
8/31/88 10,453 10,846 10,312
9/30/88 10,734 11,312 10,381
10/31/88 10,791 11,640 10,416
11/30/88 10,585 11,454 10,425
12/31/88 10,831 11,657 10,442
1/31/89 11,520 12,522 10,494
2/28/89 11,302 12,190 10,537
3/31/89 11,590 12,480 10,598
4/30/89 12,168 13,145 10,667
5/31/89 12,641 13,650 10,728
6/30/89 12,424 13,583 10,754
7/31/89 13,479 14,823 10,780
8/31/89 14,013 15,098 10,797
9/30/89 14,087 15,037 10,832
10/31/89 13,376 14,701 10,884
11/30/89 13,668 14,985 10,910
12/31/89 13,709 15,346 10,927
1/31/90 12,642 14,330 11,040
2/28/90 12,935 14,489 11,092
3/31/90 13,360 14,882 11,153
4/30/90 13,164 14,525 11,170
5/31/90 14,565 15,912 11,196
6/30/90 14,672 15,817 11,256
7/31/90 14,376 15,778 11,300
8/31/90 13,188 14,337 11,404
9/30/90 12,353 13,642 11,499
10/31/90 12,328 13,598 11,568
11/30/90 13,087 14,460 11,594
12/31/90 13,439 14,864 11,594
1/31/91 14,304 15,527 11,664
2/28/91 15,357 16,610 11,681
3/31/91 15,762 17,018 11,698
4/30/91 15,762 17,075 11,716
5/31/91 16,606 17,786 11,750
6/30/91 15,764 16,980 11,785
7/31/91 16,625 17,792 11,802
8/31/91 17,221 18,192 11,837
9/30/91 17,070 17,889 11,889
10/31/91 17,452 18,153 11,906
11/30/91 16,866 17,398 11,941
12/31/91 18,995 19,390 11,950
1/31/92 18,957 19,050 11,967
2/28/92 19,138 19,273 12,010
3/31/92 18,666 18,898 12,071
4/30/92 18,737 19,477 12,088
5/31/92 18,894 19,543 12,106
6/30/92 18,472 19,257 12,149
7/31/92 19,087 20,069 12,175
8/31/92 18,686 19,637 12,210
9/30/92 18,944 19,865 12,244
10/31/92 19,433 19,958 12,288
11/30/92 20,409 20,608 12,305
12/31/92 20,540 20,867 12,296
1/31/93 20,895 21,060 12,357
2/28/93 20,839 21,324 12,400
3/31/93 21,419 21,775 12,444
4/30/93 21,027 21,273 12,478
5/31/93 21,569 21,807 12,496
6/30/93 21,590 21,879 12,513
7/31/93 21,529 21,814 12,513
8/31/93 22,320 22,620 12,548
9/30/93 22,525 22,446 12,574
10/31/93 22,724 22,933 12,626
11/30/93 22,113 22,690 12,634
12/31/93 22,615 22,974 12,634
1/31/94 23,326 23,771 12,669
2/28/94 22,695 23,103 12,712
3/31/94 21,593 22,101 12,756
4/30/94 21,565 22,403 12,773
5/31/94 21,592 22,733 12,782
6/30/94 20,856 22,176 12,825
7/31/94 21,353 22,927 12,860
8/31/94 22,325 23,851 12,912
9/30/94 21,963 23,265 12,946
10/31/94 22,273 23,807 12,955
11/30/94 21,397 22,923 12,972
12/31/94 21,561 23,260 12,972
1/31/95 22,036 23,882 13,024
2/28/95 22,903 24,794 13,076
3/31/95 23,555 25,535 13,120
4/30/95 24,238 26,299 13,163
5/31/95 24,987 27,311 13,189
6/30/95 26,080 27,947 13,215
7/31/95 27,478 28,895 13,215
8/31/95 27,562 28,953 13,250
9/30/95 28,424 30,172 13,276
10/31/95 28,502 30,084 13,319
11/30/95 29,546 31,381 13,310
12/31/95 29,596 31,986 13,302
1/31/96 30,313 33,096 13,380
2/29/96 30,946 33,381 13,423
3/31/96 31,053 33,708 13,492
4/30/96 32,164 34,220 13,544
5/31/96 32,872 35,066 13,570
6/30/96 32,444 35,202 13,579
7/31/96 31,047 33,661 13,605
8/31/96 32,267 34,361 13,631
9/30/96 34,230 36,288 13,674
10/31/96 34,815 37,312 13,718
11/30/96 37,028 40,117 13,744
12/31/96 36,229 39,323 13,744
1/31/97 38,624 41,804 13,787
2/28/97 38,137 42,110 13,830
3/31/97 36,342 40,375 13,865
4/30/97 38,032 42,801 13,882
5/31/97 40,728 45,374 13,873
6/30/97 42,461 47,411 13,891
7/31/97 46,220 51,185 13,908
8/31/97 44,383 48,308 13,934
9/30/97 46,839 50,970 13,969
10/31/97 45,282 49,288 14,003
11/30/97 46,507 51,550 13,995
12/31/97 47,162 52,437 13,995
INSET LEGEND READS:
Growth Portfolio
$47,162
S & P 500 Index
$52,437
Consumer Price Index
$13,995
INSET BOX ON CHART READS:
Growth Portfolio
Annualized Total Returns*
- ----------------------------------------------------------
10 Years 16.78%
5 Years 18.09%
1 Year 30.18%
*See accompanying notes to Portfolio Management Reviews.
In this climate, we will continue to be highly selective in our choice
of holdings for the Growth Portfolio. As always, we will look for the
"cherry picking" opportunities that accompany most periods of market
weakness -- focusing on companies that can benefit from near-term
catalysts for long-term growth, such as new products or improving
industry conditions.
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. Tom has been with Lutheran
Brotherhood since 1986.
Investment Objective:
To seek high current income and growth of capital by investing
primarily in high-yielding ("junk") corporate bonds.***
Portfolio Facts
Inception Date: 11/2/87
Total Assets
(in millions): $1,344.6
In a nearly perfect investment climate of falling interest rates and
continued economic growth, high-yield corporate bonds outperformed
other income-oriented securities in 1997. Although high-yield issues
underperformed when bond prices fell between February and April, and
when Asia's economic troubles threatened stock prices at year-end, the
sector benefited for 1997 as a whole from positive earnings growth and
strong investor demand for issues with higher yields.
[GRAPHIC BAR CHART OMITTED: MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 0.0%
Aa 0.0%
A 0.0%
Baa 1.7%
Ba 13.5%
B 65.3%
Caa 9.6%
Ca 0.2%
C 0.0%
D 0.7%
Not Rated 9.0%
Within the high-yield sector, longer-term bonds and issues of
media/telecommunications firms performed especially well. By remaining
overweighted in these securities, the High Yield Portfolio made the
most of the bond market rally and outperformed its benchmark. For the
12-months ended December 31, 1997, the Portfolio earned a total return
(based on NAV) of 14.10%. That compares with a return of 12.76% for
the Lehman Brothers High-Yield Index.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Non-Convertible Preferred Stocks 8.2%
Short-Term Securities 4.3%
Corporate Bonds 80.9%
Common Stocks & Warrants 2.4%
Convertible Preferred Stocks 4.2%
Boosting Quality
and Diversification
The Portfolio has been heavily invested in media/telecommunications
and zero-coupon issues for several years -- believing that industry
deregulation, among other factors -- can enhance the long-term
performance potential for those securities. Although the somewhat
lower credit quality and longer maturities of these issues further
increases their upside potential, it also makes them more vulnerable
to the kind of price corrections that took place early in 1997.
To decrease the Portfolio's overall volatility, we took advantage of
market strength between April and October, trimming the Portfolio's
media/telecommunications holdings when their prices rebounded,
simultaneously locking in current profits on those issues. For further
stability, we bought bonds with higher credit ratings and shorter
maturities.
Among the investments we added were issues of energy and financial
firms -- as well as companies with earnings tied to a growing economy.
These issues performed well as oil prices rose, interest rates fell,
and the economy continued to expand. In the final months of the year
we also added debt of utility firms, which benefited from the
worldwide "flight to quality" that resulted from the economic turmoil
in Asia.
[GRAPHIC BAR CHART OMITTED: TOP 10 SECTORS]
Top 10 Sectors
Consumer Growth 23.8%
Technology 22.9%
Financial 10.6%
Consumer Staples 9.5%
Energy 6.9%
Basic Industry 6.1%
Utilities 3.7%
Consumer Cyclical 3.4%
Transportation 3.1%
Credit Cyclical 2.5%
Footnote reads:
These sectors represent 92.5% of the Fund's
total investment portfolio.
Despite these changes, the Portfolio remained strongly committed to
media/telecommunications bonds, as well as investments with longer
maturities. By year's end, the Portfolio was underweighted in zero-
coupon bonds with an increased weighting of firms in "light cyclical"
industries that can thrive in a slower-growing economy.
[GRAPHIC WORM CHART OMITTED:
Performance Through December 31, 1997
GROWTH OF $10,000 INVESTED SINCE 12/31/87]
Performance Through December 31, 1997
Growth of $10,000 Invested Since 12/31/87
Lehman High
Series HYLD Yield Index CPI Valued
Month End Total Total Total
Date Value Value Value
- --------------------------------------------------------------------
12/31/87 $10,000 $10,000 $10,000
1/31/88 10,410 10,334 10,026
2/29/88 10,827 10,669 10,052
3/31/88 10,679 10,558 10,095
4/30/88 10,678 10,638 10,147
5/31/88 10,663 10,654 10,182
6/30/88 10,909 10,810 10,225
7/31/88 10,965 10,881 10,269
8/31/88 10,960 10,865 10,312
9/30/88 11,069 11,002 10,381
10/31/88 11,190 11,135 10,416
11/30/88 11,179 11,200 10,425
12/31/88 11,333 11,253 10,442
1/31/89 11,598 11,451 10,494
2/28/89 11,677 11,476 10,537
3/31/89 11,598 11,387 10,598
4/30/89 11,539 11,435 10,667
5/31/89 11,850 11,656 10,728
6/30/89 12,168 11,801 10,754
7/31/89 12,144 11,786 10,780
8/31/89 12,252 11,826 10,797
9/30/89 12,034 11,627 10,832
10/31/89 11,711 11,351 10,884
11/30/89 11,744 11,329 10,910
12/31/89 11,688 11,347 10,927
1/31/90 11,463 11,103 11,040
2/28/90 11,255 10,874 11,092
3/31/90 11,348 11,159 11,153
4/30/90 11,358 11,140 11,170
5/31/90 11,715 11,355 11,196
6/30/90 11,886 11,630 11,256
7/31/90 12,091 11,943 11,300
8/31/90 11,708 11,263 11,404
9/30/90 11,247 10,441 11,499
10/31/90 10,900 9,893 11,568
11/30/90 11,087 10,201 11,594
12/31/90 11,254 10,259 11,594
1/31/91 11,370 10,541 11,664
2/28/91 12,120 11,694 11,681
3/31/91 12,649 12,383 11,698
4/30/91 13,079 12,890 11,716
5/31/91 13,223 12,914 11,750
6/30/91 13,580 13,296 11,785
7/31/91 13,940 13,721 11,802
8/31/91 14,164 14,037 11,837
9/30/91 14,399 14,232 11,889
10/31/91 14,912 14,707 11,906
11/30/91 15,139 14,784 11,941
12/31/91 15,229 14,997 11,950
1/31/92 15,856 15,525 11,967
2/28/92 16,299 15,908 12,010
3/31/92 16,583 16,105 12,071
4/30/92 16,732 16,166 12,088
5/31/92 17,017 16,394 12,106
6/30/92 17,117 16,548 12,149
7/31/92 17,466 16,798 12,175
8/31/92 17,721 17,018 12,210
9/30/92 17,928 17,192 12,244
10/31/92 17,576 16,950 12,288
11/30/92 17,901 17,163 12,305
12/31/92 18,287 17,359 12,296
1/31/93 19,023 17,864 12,357
2/28/93 19,332 18,178 12,400
3/31/93 19,751 18,413 12,444
4/30/93 19,869 18,573 12,478
5/31/93 20,222 18,794 12,496
6/30/93 20,908 19,189 12,513
7/31/93 21,115 19,375 12,513
8/31/93 21,285 19,538 12,548
9/30/93 21,284 19,588 12,574
10/31/93 22,008 19,984 12,626
11/30/93 22,098 20,080 12,634
12/31/93 22,477 20,329 12,634
1/31/94 23,171 20,770 12,669
2/28/94 23,088 20,716 12,712
3/31/94 22,211 19,933 12,756
4/30/94 21,926 19,798 12,773
5/31/94 22,037 19,807 12,782
6/30/94 22,130 19,869 12,825
7/31/94 21,969 20,038 12,860
8/31/94 22,139 20,180 12,912
9/30/94 22,025 20,182 12,946
10/31/94 22,088 20,230 12,955
11/30/94 21,616 19,976 12,972
12/31/94 21,489 20,123 12,972
1/31/95 21,558 20,397 13,024
2/28/95 22,400 21,097 13,076
3/31/95 22,623 21,325 13,120
4/30/95 23,179 21,866 13,163
5/31/95 23,674 22,478 13,189
6/30/95 23,788 22,629 13,215
7/31/95 24,543 22,914 13,215
8/31/95 24,647 22,985 13,250
9/30/95 24,881 23,268 13,276
10/31/95 24,998 23,412 13,319
11/30/95 25,289 23,618 13,310
12/31/95 25,700 23,989 13,302
1/31/96 26,299 24,411 13,380
2/28/96 26,963 24,431 13,423
3/31/96 26,708 24,414 13,492
4/30/96 26,889 24,467 13,544
5/31/96 27,189 24,614 13,570
6/30/96 26,971 24,818 13,579
7/31/96 26,780 24,933 13,605
8/31/96 27,210 25,202 13,631
9/30/96 28,141 25,809 13,674
10/31/96 28,063 26,008 13,718
11/30/96 28,354 26,520 13,744
12/31/96 28,668 26,711 13,744
1/31/97 29,012 26,973 13,787
2/28/97 29,436 27,397 13,830
3/31/97 28,498 26,988 13,865
4/30/97 28,503 27,272 13,882
5/31/97 29,595 27,855 13,873
6/30/97 30,443 28,243 13,891
7/31/97 31,489 29,019 13,908
8/31/97 31,593 28,952 13,934
9/30/97 32,576 29,526 13,969
10/31/97 32,287 29,552 14,003
11/30/97 32,391 29,836 13,995
12/31/97 32,709 30,099 13,995
INSET LEGEND READS:
High Yield Portfolio
$32,709
Lehman High Yield Index
$30,099
Consumer Price Index
$13,995
INSET BOX ON CHART READS:
High Yield Portfolio
Annualized Total Returns*
- ----------------------------------------------------------
10 Years 12.58%
5 Years 12.33%
1 Year 14.10%
*See accompanying notes to Portfolio Management Reviews.
Solid Returns,
Greater Stability
The extra attention to quality and stability should serve the
Portfolio well in 1998 -- especially if Asia's economic problems cause
further concern about U.S. growth. For the most part, however, we
expect high-yield issues to earn solid returns in an environment of
continued growth, low inflation, and stable interest rates.
If the prices of media/telecommunications issues become more
attractive, we may add to investments in that sector. Conversely, if
prices in that sector rise significantly, we may take further profits
there. In either case, we expect to remain overweighted in these
issues -- believing that they continue to offer added performance
potential.
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. Chuck has been with
Lutheran Brotherhood since 1976.
Investment Objective:
To seek a high level of income while preserving principal by investing
primarily in intermediate and long-term bonds.
Portfolio Facts
Inception Date: 1/9/87
Total Assets
(in millions): $880.4
Even as bonds rallied in 1997, investors remained nervous about future
growth and inflation. This caused frequent changes in the spreads
between yields of different sectors of the bond market. During the
year we adjusted the investment mix of the Income Portfolio to make
the most of these changes. We also gave greater attention to longer-
term issues -- which enjoy added benefit from lower inflation. With
these strategies, the Portfolio earned a total return (based on NAV)
of 8.75% for the 12-months ended December 31, 1997. Over the same
time, the Lehman Aggregate Bond Index returned 9.65%.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
% of
Top 10 Holdings Security Portfolio
- -------------------------------------------------------------------
Government National Mortgage Association Mortgage-backed 4.3%
Federal National Mortgage Association Mortgage-backed 3.5%
U.S. Treasury Note U.S. Government 3.3%
U.S. Treasury Bond U.S. Government 2.9%
Deutsche Floorplan Receivables
Master Trust, Series 1994-1-A Asset-backed 2.2%
World Omni Auto Lease Trust Asset-backed 2.0%
U.S. Treasury Bond U.S. Government 1.8%
World Financial Network Credit Card
Master Trust, Series 1996-B Asset-backed 1.7%
Federal Home Loan Mortgage Corp.,
Participation Certificates Mortgage-backed 1.5%
Equitable Life Assurance Society of the
United States, Surplus Notes Corporate Bonds 1.4%
Footnote reads:
These holdings represent 24.6% of the Fund's total investment
portfolio.
Greater Commitment
to Corporates
Early in 1997, strong economic growth rekindled fears that inflation
would lead to higher interest rates. As a result, bond prices declined
to levels that made them attractive for purchase. In this environment,
we bought longer-term corporate issues -- focusing on the debt of
banks, insurance firms and utilities. These issues performed well in
the months that followed, as falling interest rates led to higher bond
prices.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Foreign Government Bonds 3.3%
U.S. Government 11.0%
Asset-Backed Securities 14.6%
Common Stocks 0.4%
Mortgage-Backed Securities 11.3%
Corporate Bonds 50.9%
Preferred Stocks 1.6%
Short-Term Securities 6.9%
We trimmed corporates somewhat in March and April, concerned that the
sector might be especially vulnerable to new fears of inflation.
Subsequently, we made some selective purchases of attractively-priced
bonds. In doing so, we continued to favor debt of utility and
financial firms. When their prices were especially appealing, we
bought corporate issues with slightly lower credit ratings --
believing the issues might benefit from rating upgrades as the economy
continued to grow.
In the final months of the year, the economic crisis in Asia created a
"flight to quality" that favored U.S. Treasury securities over
corporate bonds. With investors growing nervous about future corporate
earnings, we traded some corporates in the Portfolio for longer-term
Treasuries and gave greater attention to corporates with strong credit
quality. We also reduced investments in mortgage-backed securities --
especially those with higher coupons -- due to an increased level of
home loan prepayments as interest rates fell.
[GRAPHIC BAR CHART OMITTED: MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Government/Aaa 41.3%
Aa 5.7%
A 20.2%
Baa 14.8%
Ba 14.3%
B 3.7%
Caa 0.0%
Ca 0.0%
C 0.0%
We continued to hold dollar-denominated "yankee" bonds issued in the
United States by foreign firms and governments. Some of these bonds
were from Asian issuers, and underperformed in the last quarter.
Nonetheless, they had excellent credit ratings when the Asian crisis
began and we believe they could rebound strongly as the crisis is
resolved.
[GRAPHIC WORM CHART OMITTED:
Performance Through December 31, 1997
GROWTH OF $10,000 INVESTED SINCE 12/31/87]
Performance Through December 31, 1997
Growth of $10,000 Invested Since 12/31/87
Lehman Aggregate
Series Income Bond Index CPI Valued
Month End Total Total Total
Date Value Value Value
- --------------------------------------------------------------------
12/31/87 $10,000 $10,000 $10,000
1/31/88 10,372 10,352 10,026
2/29/88 10,500 10,475 10,052
3/31/88 10,331 10,377 10,095
4/30/88 10,244 10,321 10,147
5/31/88 10,147 10,252 10,182
6/30/88 10,385 10,499 10,225
7/31/88 10,330 10,443 10,269
8/31/88 10,351 10,470 10,312
9/30/88 10,632 10,708 10,381
10/31/88 10,870 10,909 10,416
11/30/88 10,739 10,776 10,425
12/31/88 10,807 10,788 10,442
1/31/89 10,971 10,943 10,494
2/28/89 10,814 10,864 10,537
3/31/89 10,876 10,911 10,598
4/30/89 11,088 11,139 10,667
5/31/89 11,328 11,432 10,728
6/30/89 11,686 11,780 10,754
7/31/89 11,887 12,031 10,780
8/31/89 11,780 11,853 10,797
9/30/89 11,793 11,913 10,832
10/31/89 11,967 12,206 10,884
11/30/89 12,098 12,322 10,910
12/31/89 12,128 12,355 10,927
1/31/90 12,002 12,208 11,040
2/28/90 12,042 12,247 11,092
3/31/90 12,082 12,256 11,153
4/30/90 11,926 12,143 11,170
5/31/90 12,291 12,503 11,196
6/30/90 12,480 12,704 11,256
7/31/90 12,632 12,879 11,300
8/31/90 12,427 12,707 11,404
9/30/90 12,349 12,812 11,499
10/31/90 12,466 12,975 11,568
11/30/90 12,758 13,254 11,594
12/31/90 12,967 13,460 11,594
1/31/91 13,138 13,627 11,664
2/28/91 13,436 13,743 11,681
3/31/91 13,598 13,838 11,698
4/30/91 13,793 13,987 11,716
5/31/91 13,953 14,069 11,750
6/30/91 13,974 14,062 11,785
7/31/91 14,157 14,257 11,802
8/31/91 14,483 14,565 11,837
9/30/91 14,797 14,861 11,889
10/31/91 14,957 15,026 11,906
11/30/91 15,061 15,164 11,941
12/31/91 15,529 15,614 11,950
1/31/92 15,472 15,402 11,967
2/28/92 15,574 15,502 12,010
3/31/92 15,584 15,415 12,071
4/30/92 15,637 15,526 12,088
5/31/92 15,937 15,820 12,106
6/30/92 16,157 16,038 12,149
7/31/92 16,534 16,365 12,175
8/31/92 16,697 16,530 12,210
9/30/92 16,895 16,727 12,244
10/31/92 16,623 16,505 12,288
11/30/92 16,688 16,508 12,305
12/31/92 16,961 16,770 12,296
1/31/93 17,314 17,092 12,357
2/28/93 17,677 17,391 12,400
3/31/93 17,782 17,465 12,444
4/30/93 17,913 17,587 12,478
5/31/93 17,945 17,610 12,496
6/30/93 18,315 17,928 12,513
7/31/93 18,479 18,031 12,513
8/31/93 18,812 18,346 12,548
9/30/93 18,869 18,396 12,574
10/31/93 19,038 18,464 12,626
11/30/93 18,834 18,307 12,634
12/31/93 18,940 18,406 12,634
1/31/94 19,220 18,654 12,669
2/28/94 18,804 18,330 12,712
3/31/94 18,185 17,877 12,756
4/30/94 17,990 17,734 12,773
5/31/94 18,024 17,732 12,782
6/30/94 17,891 17,693 12,825
7/31/94 18,278 18,045 12,860
8/31/94 18,324 18,067 12,912
9/30/94 18,002 17,801 12,946
10/31/94 17,936 17,785 12,955
11/30/94 17,940 17,746 12,972
12/31/94 18,053 17,868 12,972
1/31/95 18,380 18,222 13,024
2/28/95 18,801 18,656 13,076
3/31/95 18,907 18,770 13,120
4/30/95 19,231 19,032 13,163
5/31/95 20,064 19,769 13,189
6/30/95 20,229 19,913 13,215
7/31/95 20,112 19,870 13,215
8/31/95 20,365 20,110 13,250
9/30/95 20,561 20,305 13,276
10/31/95 20,878 20,569 13,319
11/30/95 21,203 20,878 13,310
12/31/95 21,547 21,170 13,302
1/31/96 21,671 21,310 13,380
2/28/96 21,214 20,939 13,423
3/31/96 21,005 20,792 13,492
4/30/96 20,875 20,676 13,544
5/31/96 20,862 20,634 13,570
6/30/96 21,122 20,911 13,579
7/31/96 21,164 20,967 13,605
8/31/96 21,087 20,932 13,631
9/30/96 21,498 21,296 13,674
10/31/96 21,997 21,769 13,718
11/30/96 22,451 22,141 13,744
12/31/96 22,246 21,935 13,744
1/31/97 22,315 22,003 13,787
2/28/97 22,421 22,058 13,830
3/31/97 22,091 21,813 13,865
4/30/97 22,350 22,140 13,882
5/31/97 22,585 22,351 13,873
6/30/97 22,911 22,617 13,891
7/31/97 23,588 23,227 13,908
8/31/97 23,339 23,030 13,934
9/30/97 23,714 23,371 13,969
10/31/97 23,904 23,710 14,003
11/30/97 24,011 23,819 13,995
12/31/97 24,192 24,059 13,995
INSET LEGEND READS:
Income Portfolio
$24,192
Lehman Aggregate Bond Index
$24,059
Consumer Price Index
$13,995
INSET BOX ON CHART READS:
Income Portfolio
Annualized Total Returns*
- ----------------------------------------------------------
10 Years 9.24%
5 Years 7.35%
1 Year 8.75%
Footnote reads:
*See accompanying notes to Portfolio Management Reviews.
Getting Defensive
Bonds should continue to perform well in the months ahead. If growth
slows, and inflation remains low, as we expect, bond prices could
rally further. Bonds should also benefit as the anticipated federal
budget surplus shrinks supplies of new Treasury issues. In addition,
budget surpluses generally result in declines in interest rates.
Given the attractive yield spreads between corporates and Treasuries,
we expect to remain slightly overweighted in corporates. We may,
however, increase the weighting of Treasuries in the Portfolio if the
economy slows or relative yields in these two sectors change. Although
credit ratings for corporate bonds should remain intact, further
concern about earnings could cause some corporates to underperform. To
protect the Portfolio against this event, we will give more attention
to higher-quality issues and to debt of firms whose earnings can grow
in a slowing economy.
Money Market Portfolio Review LB Series Fund, Inc.
[GRAPHIC PHOTO OMITTED: 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. Gail has been with
Lutheran Brotherhood since 1969.
Investment Objective:
To seek current income with stability of principal by investing in
high quality, short-term debt securities.****
Portfolio Facts
Inception Date: 1/9/87
Total Assets
(in millions): $121.2
While yields for other fixed-income sectors trended downward in 1997,
yields for money market funds ended the year slightly higher.
Nevertheless, money market yields fluctuated during the period, as
investors tried to predict the Federal Reserve's management of short-
term interest rates. After starting 1997 with an average yield of
4.89%, money market funds in the IBC Donoghue's Index rose to 5.06%
after the Fed boosted short-term rates in March. Money market yields
remained steady for the rest of 1997, but moved higher
during December, ending the year at 5.12%.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
% of
Top 10 Holdings Industry Portfolio
- -------------------------------------------------------------------
Merck and Co., Inc. Industrial 4.3%
IBM Credit Corp. Computer & Office
Equipment 4.1%
Gulf Coast Waste
Disposal Authority U.S. Municipal 3.3%
Metrocrest Hospital
Authority, Series 1989 Banking-Domestic 3.0%
City of New York Government
Bonds, Fiscal 1995, Series B U.S. Municipal 2.6%
U.S. Prime Property, Inc. Banking-Foreign 1.8%
Abbey National Treasury
Service PLC Banking-Foreign 1.7%
Bank of America, National
Trust & Savings Association Banking-Domestic 1.7%
Illinois Student Assistance
Commission U.S. Municipal 1.7%
California Pollution Control
Finance Authority U.S. Municipal 1.7%
Footnote reads:
These holdings represent 25.9% of the Fund's total investment
portfolio.
Throughout this time there were also changes in spreads between yields
of different instruments. By adjusting the mix of investments and
maturities in the Money Market Portfolio to optimize these changes,
and the general fluctuation in yields, we helped the Portfolio earn a
total return of 5.43% for the 12-months ended December 31, 1997.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Bank Notes 3.3%
Medium Term Notes 1.7%
Certificates of Deposit 0.8%
Commercial Paper 86.1%
Variable Rate Notes 7.5%
Other 0.6%
Maximizing Yield Opportunities
With strong economic growth and the prospect of higher interest rates,
we emphasized shorter-maturity issues in the first half of the year.
This let us invest more quickly in higher yields as they became
available. To maintain a solid yield as we waited for rates to rise,
we balanced issues having shorter maturities of 30 days or less with
issues having longer maturities of six to 12 months. We also invested
in floating-rate issues, whose interest rates reset frequently.
We continued this strategy through the summer. Even though interest
rates stabilized, we did not feel the yields for longer maturities
were especially attractive. In the fall, we let the Portfolio's
maturity structure shorten -- preparing to take advantage of the
higher yields that commonly occur late in a calendar year. As yields
became more attractive in November and December, we locked them in
with longer maturities. Balancing liquidity needs of the Portfolio and
attractive yields for longer investments, at year-end the Portfolio
had a weighted average investment maturity of 47 days.
During the year we also enhanced the Portfolio's yield by adding
taxable municipal paper, which is issued by state and local
governments for commercial projects with credit enhancements from
major corporations and banks. In addition, the Portfolio enjoyed
strong returns from U.S. dollar-denominated investments of foreign
issuers. None of these instruments represented credits from Asia,
however, shielding the Portfolio from exposure to the Asian economic
crisis in the final quarter.
[GRAPHIC OMITTED: MONEY MARKET PORTFOLIO]
Money Market Portfolio
Annualized Total Returns*
Period Ending 12/31/97
- ----------------------------------------------------------
10 Years 5.68%
5 Years 4.64%
1 Year 5.43%
Seven-Day Yields+
- ----------------------------------------------------------
Current 5.60%
Effective 5.76%
A Good Mix for the
Months Ahead
We expect to maintain the current maturity structure and asset mix in
the months ahead. As before, we'll look for opportunities to lock in
attractive yields with longer maturities. Although inflation may
remain low, we do not expect a substantial decrease in short-term
interest rates. If rising wages put upward pressure on inflation, and
it looks like market rates might rise, we would probably reduce
maturities once again.
Notes to Portfolio Management Reviews
*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.
**International investing has special risks, including currency
fluctuation and political volatility.
***High-yield bonds carry greater volatility and risk than
investment-grade bonds.
****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.
+Seven-day yields of the LB Money Market Portfolio refer to the
income generated by an investment in the Portfolio over a
specified seven-day period. Effective yields reflect the
reinvestment of income. Yields are subject to daily fluctuation
and should not be considered an indication of future results.
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 [GRAPHIC OMITTED] 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, 1997, the results of each of
their operations for the year then ended 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 and 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, 1997 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
Price Waterhouse LLP
February 11, 1998
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
OPPORTUNITY GROWTH PORTFOLIO
Portfolio of Investments
December 31, 1997
Shares Value
------------ --------------
<S> <C> <C>
COMMON STOCKS - 89.0% (a)
Airlines - 0.2%
35,800 America West Holdings Corp. $666,775 (b)
--------------
Automotive - 2.3%
42,400 Aftermarket Technology Corp. 768,500 (b)
48,000 Exide Corp. 1,242,000
86,500 Group 1 Automotive, Inc. 783,906 (b)
338,000 Lithia Motors, Inc. 4,985,500 (b)
26,000 Stoneridge, Inc. 416,000 (b)
32,800 Tower Automotive, Inc. 1,379,650 (b)
--------------
9,575,556
--------------
Bank & Finance - 9.0%
28,500 Affiliated Managers Group, Inc. 826,500 (b)
120,000 Annaly Mortgage Management, Inc. 1,320,000
11,600 Berkley (WR) Corp. 508,950
33,100 CMAC Investment Corp. 1,998,412
5,800 Community First Bank Shares, Inc. 308,850
34,900 Delta Financial Corp. 466,787
71,800 Dime Bancorp, Inc. 2,171,950
7,800 FirstFed Financial Corp. 302,250
144,000 Franchise Mortgage Acceptance Co. LLC 2,646,000 (b)
30,000 Fremont General Corp. 1,642,500
53,400 Frontier Insurance Group, Inc. 1,221,525
67,500 IMC Mortgage Co. 801,563 (b)
131,300 Imperial Credit Commercial
Mortgage Investment Corp. 1,920,262
37,100 IPC Holdings Ltd. 1,194,156
115,700 New Century Financial Corp. 1,185,925
58,000 North Fork Bancorporation, Inc. 1,946,625 (c)
42,900 Peoples Heritage Financial Group, Inc. 1,973,400
13,000 Provident Financial Group, Inc. 630,500
137,260 Resource Bancshares
Mortgage Group, Inc. 2,239,054
283,500 Southern Pacific Funding Corp. 3,720,937
34,800 Sovereign Bancorp, Inc. 722,100
29,100 Sterling Financial Corp. 632,925
35,400 TIG Holdings, Inc. 1,174,838
29,600 Union Planters Corp. 2,010,950
85,300 UST Corp. 2,367,075
23,400 Vesta Insurance Group, Inc. 1,389,375
--------------
37,323,409
--------------
Broadcasting - 1.4%
20,900 Chancellor Media Corp. 1,559,663 (b)
15,800 Emmis Broadcasting Corp.,
Class A 720,875
138,100 Four Media Co. 1,242,900 (b)
33,400 Sinclair Broadcast Group, Inc. 1,557,275
15,800 Westwood One, Inc. 586,575
--------------
5,667,288
--------------
Building Products & Materials - 2.3%
66,600 Advanced Lighting
Technologies, Inc. 1,265,400 (b)
240,000 Dayton Superior Corp.,
Class A 3,960,000 (b)
31,300 Shaw Group, Inc. 719,900 (b)
18,600 Texas Industries, Inc. 837,000 (b)
113,400 Watsco, Inc. 2,799,563
--------------
9,581,863
--------------
Chemicals - 0.6%
32,200 Crompton & Knowles Corp. 853,300
17,900 Cytec Industries, Inc. 840,181 (b)
27,900 Lilly Industries, Inc. 575,438
--------------
2,268,919
--------------
Computer Software - 4.5%
72,400 Activision, Inc. 1,294,150
54,300 Autodesk, Inc. 2,009,100
329,200 AXENT Technologies, Inc. 5,678,700 (b)
72,200 Cognicase, Inc. 875,425 (b)
46,800 Electronic Arts, Inc. 1,769,625
175,000 Macromedia, Inc. 1,454,687
29,400 Mercury Interactive Corp. 786,450
96,800 MicroProse, Inc. 211,750 (b)
105,000 Midway Games, Inc. 1,909,688
78,700 Rational Software Corp. 895,213
73,700 Summit Design, Inc. 764,638 (b)
20,300 Viasoft, Inc. 857,675
--------------
18,507,101
--------------
Computers & Office Equipment - 3.3%
57,100 CHS Electronics, Inc. 977,837 (b)
101,300 CKS Group, Inc. 1,430,862 (b)
51,800 FORE Systems, Inc. 789,950 (b)
28,300 Gateway 2000, Inc. 923,288 (b)
64,700 Harbinger Corp. 1,819,687
136,700 Hypercom Corporation 1,930,888 (b)
52,000 Integrated Measurement
Systems, Inc. 890,500 (b)
43,500 MRV Communications, Inc. 1,038,563 (b)
133,400 System Software
Associates, Inc. 1,167,250 (b)
37,700 Waters Corp. 1,418,462 (b)
86,300 Western Digital Corp. 1,386,194 (b,c)
--------------
13,773,481
--------------
Construction - 0.1%
30,500 UNIFAB International, Inc. 587,125 (b)
--------------
Drugs & Health Care - 5.8%
95,100 ADAC Labs, Inc. 1,878,225
369,500 Atrix Laboratories, Inc. 5,450,125 (b)
209,600 DepoTech Corp. 746,700 (b)
369,000 Eclipse Surgical
Technologies, Inc. 2,167,875 (b)
111,200 ICN Pharmaceuticals, Inc. 5,427,950
248,600 IRIDEX Corp. 1,895,575
18,900 Isis Pharmaceuticals, Inc. 232,706 (b)
130,800 Kendle International, Inc. 2,190,900
373,600 Matritech, Inc. 1,821,300 (b)
48,200 Miravant Medical Technologies 1,928,000 (b)
--------------
23,739,356
--------------
Electrical Equipment - 0.9%
30,900 Chicago Miniature Lamp, Inc. 1,042,875 (b)
51,300 Elsag Bailey Process
Automation N.V. 846,450 (b)
113,000 OSI Systems, Inc. 1,384,250 (b)
27,900 Power-One, Inc. 383,625 (b)
--------------
3,657,200
--------------
Electronics - 3.9%
146,300 Cypress Semiconductor Corp. 1,243,550 (b)
54,300 DII Group, Inc. 1,479,675 (b)
155,700 ESS Technology, Inc. 1,182,347 (b)
11,400 Etec Systems, Inc. 530,100 (b)
34,400 GenRad, Inc. 1,038,450 (b)
28,500 Integrated Circuit Systems, Inc. 812,250 (b)
204,200 Integrated Silicon Solution 1,557,025 (b)
174,000 International Manufacturing
Services, Inc. 1,261,500 (b)
38,300 IFR Systems, Inc. 593,650 (c)
98,900 Kulicke & Soffa
Industries, Inc. 1,842,012 (b)
48,900 National Semiconductor Corp. 1,268,344 (b)
46,100 Semitool, Inc. 602,181
78,400 Sensormatic Electronics Corp. 1,288,700
12,700 Speedfam International, Inc. 336,550 (b)
50,300 ThermoQuest Corp. 911,687 (b)
--------------
15,948,021
--------------
Food & Beverage - 0.5%
43,100 Authentic Specialty Foods, Inc. 587,237 (b)
41,400 J & J Snack Foods Corp. 677,925 (b)
58,000 Worthington Foods, Inc. 812,000
--------------
2,077,162
--------------
Healthcare Management - 4.5%
95,900 American Oncology Resources, Inc. 1,534,400 (b)
269,250 Complete Management, Inc. 3,769,500 (b)
408,900 FPA Medical Management, Inc. 7,615,762 (b)
301,150 Home Health Corp. of America, Inc. 3,124,431 (b)
158,700 Renex Corp. 833,175 (b)
422,100 U.S. Diagnostic Labs, Inc. 1,556,494 (b)
--------------
18,433,762
--------------
Hospital Management - 2.0%
253,700 Horizon Health Corp. 5,898,525
144,600 PhyMatrix Corp. 2,277,450
--------------
8,175,975
--------------
Household Products - 0.5%
49,900 Benckiser NV 2,052,137 (b)
--------------
Industrial - 0.8%
48,300 Innovative Valve Technologies, Inc. 978,075 (b)
118,900 TETRA Technologies, Inc. 2,504,331
--------------
3,482,406
--------------
Leisure & Entertainment - 6.6%
247,650 Cannondale Corp. 5,386,387 (b)
33,734 Fairfield Communities, Inc. 1,488,493 (b)
60,300 Preview Travel, Inc. 456,019 (b)
334,700 Signature Resorts, Inc. 7,321,563 (b)
228,800 Silverleaf Resorts, Inc. 5,605,600
231,500 Steiner Leisure Ltd. 7,147,562
--------------
27,405,624
--------------
Machinery & Equipment - 1.6%
170,200 Denison International plc 2,935,950
10,000 Input/Output, Inc. 296,875
215,500 Miller Industries, Inc. 2,316,625
49,300 Stewart & Stevenson Services, Inc. 1,257,150
--------------
6,806,600
--------------
Manufacturing - 1.2%
194,800 BMC Industries, Inc. 3,141,150
181,500 Zomax Optical Media, Inc. 1,678,875 (b)
--------------
4,820,025
--------------
Medical Products - 0.4%
74,800 Physician Sales & Service, Inc. 1,608,200 (b)
--------------
Mining & Metals - 2.3%
237,400 Battle Mountain Gold Co. 1,394,725
48,100 Birmingham Steel Corp. 757,575
113,000 Cambior, Inc. 663,875
17,400 Carpenter Technology Corp. 836,288
282,600 Dayton Mining Corp. 547,537 (b)
14,600 Getchell Gold Corp. 350,400 (b)
118,600 Greenstone Resources Ltd. 578,175 (b)
226,100 Meridian Gold, Inc. 664,169 (b)
42,600 Placer Dome, Inc. 540,487
32,700 Reliance Steel & Aluminum Co. 972,825
46,400 Steel Dynamics, Inc. 742,400 (b)
46,000 Titanium Metals Corp. 1,328,250 (b)
12,700 Universal Stainless &
Alloy Products, Inc. 184,150 (b)
--------------
9,560,856
--------------
Natural Gas - 0.6%
90,200 The Meridian Resource Corp. 862,538 (b)
57,200 United Meridian Corp. 1,608,750 (b)
--------------
2,471,288
--------------
Oil & Oil Service - 5.7%
19,400 Cooper Cameron Corp. 1,183,400 (b)
218,100 Domain Energy Corp. 3,435,075
117,900 Eagle Geophysical, Inc. 1,532,700
22,800 EVI Inc. 1,179,900 (b)
82,000 Forcenergy, Inc. 2,147,375
45,200 Global Marine, Inc. 1,107,400 (b)
117,400 Lomak Petroleum, Inc. 1,907,750
54,300 Marine Drilling Companies, Inc. 1,126,725 (b)
35,800 Nuevo Energy Co. 1,458,850
30,300 Ocean Energy, Inc. 1,494,169
31,600 Pool Energy Services Co. 703,100 (b)
45,300 Pride International, Inc. 1,143,825 (b)
34,200 Rowan Companies, Inc. 1,043,100 (b)
129,060 Swift Energy Co. 2,718,326
62,500 Vintage Petroleum, Inc. 1,187,500
--------------
23,369,195
--------------
Paper & Forest Products - 0.4%
57,200 Mead Corp. 1,601,600
--------------
Pollution Control - 3.0%
90,800 Allied Waste Industries, Inc. 2,116,775
431,100 IDM Environmental Corp. 3,017,700 (b)
381,400 Recycling Industries, Inc. 2,288,400 (b)
169,800 U.S. Filter Corp. 5,083,388
--------------
12,506,263
--------------
Real Estate Investment Trust - 4.7%
106,900 American General Hospitality Corp. 2,859,575
27,700 Apartment Investment & Management Co. 1,017,975
38,500 First Industrial Realty Trust, Inc. 1,390,812
103,800 Glimcher Realty Trust 2,341,988
44,900 Highwoods Properties, Inc. 1,669,719
156,600 InnKeepers USA Trust 2,427,300
132,600 Kilroy Realty Corp. 3,812,250
130,181 Patriot American Hospitality, Inc. 3,750,840
--------------
19,270,459
--------------
Restaurants - 1.2%
57,500 Apple South, Inc. 754,687
163,700 Buffets, Inc. 1,534,688
17,300 Dave & Busters, Inc. 389,250 (b)
319,700 New World Coffee 599,438 (b)
37,400 Outback Steakhouse, Inc. 1,075,250 (b)
36,600 Planet Hollywood
International, Inc. 484,950 (b)
--------------
4,838,263
--------------
Retail - 5.0%
10,800 Consolidated Stores Corp. 474,525 (b)
29,000 Dole Food, Inc. 1,326,750
35,100 Dollar General Corp. 1,272,375
19,700 Dominicks Supermarkets, Inc. 719,050 (b)
132,300 Food Lion, Inc. 1,091,475
48,100 Hot Topic, Inc. 1,094,275
139,400 Paul Harris Stores, Inc. 1,402,712
33,000 Ross Stores, Inc. 1,200,375
41,200 Stein Mart, Inc. 1,102,100 (b)
237,800 Sunglass Hut International 1,501,113
102,200 The Children's Place
Retail Stores, Inc. 523,775
129,200 Travis Boats & Motors, Inc. 3,116,950
284,000 US Office Products Company. 5,573,500
224,300 West Coast Entertainment Corp. 336,450 (b)
--------------
20,735,425
--------------
Services - 8.1%
174,600 Coach USA, Inc. 5,849,100
29,000 Computer Horizons Corp. 1,305,000 (b)
67,600 CORESTAFF, Inc. 1,791,400
268,500 Corporate Express, Inc. 3,456,938
148,000 Cotelligent Group, Inc. 2,830,500 (b)
99,900 F.Y.I., Inc. 2,297,700 (b)
111,100 Gartner Group, Inc. 4,138,475 (b)
42,800 ImageMAX,, Inc. 433,350 (b)
196,900 NovaCare Employee Services, Inc. 1,575,200 (b)
68,800 OfficeMax, Inc. 980,400
144,900 PharMerica, Inc. 1,503,337 (b)
133,200 PMT Services, Inc. 1,848,150
126,000 Professional Staff plc 2,142,000
65,500 SPR, Inc. 1,113,500 (b)
34,500 Syntel, Inc. 491,625
70,100 Vestcom International, Inc. 1,568,488
--------------
33,325,163
--------------
Telecommunications Equipment - 2.5%
126,200 DSC Communications Corp. 3,028,800
57,500 Gilat Satellite Networks Ltd. 1,645,938
211,100 Larscom, Inc. 2,005,450 (b)
29,900 Nice - Systems Ltd. 1,255,800 (b)
128,200 Orckit Communications Ltd. 2,387,725 (b)
--------------
10,323,713
--------------
Telephone & Telecommunications - 2.3%
197,700 Aerial Communications, Inc. 1,408,612
72,600 LCC International, Inc., Class A 1,052,700 (b)
127,800 LCI International, Inc. 3,929,850
99,500 STARTEC Global
Communications Corp. 2,226,313 (b)
57,500 Teledata Communications Ltd. 1,049,375 (b)
--------------
9,666,850
--------------
Textiles & Apparel - 0.2%
43,200 Tefron Ltd. 993,600
--------------
Trucking - 0.6%
51,700 Heartland Express, Inc. 1,389,438 (b)
30,200 USFreightways Corp. 981,500
--------------
2,370,938
--------------
Total Common Stocks
(cost $369,785,286) 367,191,598
--------------
<CAPTION>
Principal
Amount
--------------
CORPORATE BONDS - 0.7% (a)
$ 2,675,000 Complete Management, Inc.,
Convertible Subordinated
Debentures, 8%,
Due 8/15/2003
(cost $3,451,953) $ 2,835,500
--------------
SHORT-TERM SECURITIES - 10.3% (a)
Commercial Paper
4,900,000 American Express Credit Corp.,
6.15%, Due 1/7/1998 4,894,977
10,000,000 Centerior Fuel Corp., 6.25%,
Due 1/5/1998 9,993,056
6,800,000 Disney (Walt) Co., 6.6%,
Due 1/2/1998 6,798,753
1,000,000 Enterprise Funding Corp.,
5.75%, Due 1/30/1998 995,368
8,800,000 Ford Motor Credit Co.,
6.75%, Due 1/2/1998 8,798,350
10,600,000 Koch Industries, Inc.,
6.75%, Due 1/2/1998 10,598,012
501,000 Triple-A One Funding Corp.,
6.35%, Due 1/5/1998 500,647
--------------
Total Short-Term Securities
(at amortized cost) 42,579,163
--------------
Total Investments
(cost $415,816,402) $412,606,261
==============
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, 1997
(d) At December 31, 1997, the aggregate cost of securities for federal
income tax purposes was $418,268,235 and the net unrealized
depreciation of investments based on that cost was $5,661,974 which
is comprised of $35,673,692 aggregate gross unrealized appreciation
and $41,335,666 aggregate gross unrealized depreciation.
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, 1997
Shares Value
------------ --------------
<S> <C> <C>
ARGENTINA - 1.0% (a)
COMMON STOCKS
10,613 Banco de Galicia Buenos Aires
'B' ADR (USD) $273,285
10,799 Banco Frances del Rio de la
Plata ADR (USD) 295,623
72,535 Naviera Perez 'B' 517,998
16,490 Telefonica de Argentina ADR (USD) 614,253
36,566 YPF Sociedad Anonima ADR (USD) 1,250,100
--------------
Total Argentina 2,951,259
--------------
AUSTRALIA - 1.8% (a)
COMMON STOCKS
73,528 Australia Gas & Light 512,764
8,000 Brambles Industries Ltd. 158,766
57,849 Broken Hill Proprietary 537,269
25,684 Colonial Ltd., Options Expiring 2/2/98 1,205 (b)
58,400 Commonwealth Bank of Australia 669,895
78,000 FXF Trust 13,217 (b)
111,000 John Fairfax Holdings Ltd. 231,502
19,485 Lend Lease Corp. 380,980
22,868 National Australia Bank Ltd. 319,397
92,401 News Corp. 510,083
78,000 Publishing & Broadcasting 351,483
190,000 Telstra Corp. Ltd. 401,217 (b)
50,700 Western Mining 176,784
57,000 Westpac Banking 364,662
55,000 Woodside Petroleum 387,856
--------------
5,017,080
--------------
PREFERRED STOCKS
29,830 News Corp. 147,640
--------------
Total Australia 5,164,720
--------------
BELGIUM - 1.4% (a)
COMMON STOCKS
2,693 Credit Communal Holding/Dexia 361,601
2,091 Generale de Banque S.A. 910,026
81 Generale de Banque S.A.,
VVPR (reduced tax) Strips 22
5,730 Kredietbank 2,404,834
104 UCB 343,289
--------------
Total Belgium 4,019,772
--------------
BRAZIL - 2.4% (a)
COMMON STOCKS
1,030 Brazil Fund (USD) 21,630
23,712 Centrais Eletricas Brasileiras
S.A. ADR (USD) 589,836
10,360 Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar GDR (USD) 200,725
320 Companhia Energetica Brasilia (USD) 13,920
20,848 Companhia Energetica Minas
Gerais ADR (USD) 906,888
2,800 Companhia Siderurgica Nacional (ADR) 72,275
40,500 Telecomunicacoes Brasilias ADR (USD) 4,715,719
76,020 Usinas Siderurgicas de Minas
Gerais ADR (USD) 418,110
--------------
Total Brazil 6,939,103
--------------
CANADA - 0.3% (a)
COMMON STOCKS
16,090 Alcan Aluminum 444,740
5,900 Royal Bank of Canada 312,949
--------------
Total Canada 757,689
--------------
CHILE - 0.3% (a)
COMMON STOCKS
8,522 Chilectra ADR (USD) 231,159
5,940 Chilgener ADR (USD) 145,530
10,755 Empresa Nacional de
Electric ADR (USD) 190,229
7,608 Enersis S.A. ADR (USD) 220,632
3,474 Santa Isabel (ADR) 60,795
--------------
Total Chile 848,345
--------------
CHINA - 0.3% (a)
COMMON STOCKS
41,360 Huaneng Power International
'N' ADR (USD) 959,035 (b)
--------------
CZECH REPUBLIC - 0.03% (a)
COMMON STOCKS
700 SPT Telecom a.s. 74,886 (b)
--------------
DENMARK - 0.3% (a)
COMMON STOCKS
4,054 Den Danske Bank 540,186
807 Tele Danmark 'B' 50,055
4,510 Unidanmark 'A' 331,080
--------------
Total Denmark 921,321
--------------
FINLAND - 0.2% (a)
PREFERRED STOCKS
8,960 Oy Nokia 'A' 636,131
--------------
FRANCE - 9.0% (a)
COMMON STOCKS
2,005 Accor 372,783
8,909 Alcatel Alsthom 1,132,406
7,520 Assurances Generales de France 398,459
11,640 AXA 900,681
2,570 Canal Plus 477,832
1,041 Carrefour 543,115
10,250 Cie de St. Gobain 1,456,135
7,034 Credit Commercial de France 482,101
1,539 Credit Local de France 178,231
2,513 Credit Local de France -
Dexia France 291,029
31,977 Eaux Cie Generale 4,463,019
5,160 Groupe Danone 921,658
2,820 GTM Entrepose 189,765
2,880 Guilbert S.A. 410,574
2,730 Havas S.A. 196,409
5,500 Lapeyre 302,941
2,319 Legrand 461,989
1,094 L'Oreal 428,075
1,877 Pathe S.A. 364,266
4,931 Pinault Printemps Redoute 2,630,795
587 Primagaz 49,059
14,319 Sanofi 1,594,040
22,810 Schneider S.A. 1,238,566
5,253 Societe Generale 715,703
9,045 Societe Nationale Elf Aquitaine 1,052,006
1,746 Sodexho 935,010
166 Sodexho Allinance SA (New) 86,744 (b)
9,320 Television Francaise 952,364
27,309 Total 'B' 2,972,069
--------------
Total France 26,197,824
--------------
GERMANY - 5.8% (a)
COMMON STOCKS
6,510 Allianz AG 1,686,350
28,122 Bayer 1,050,501
22,272 Bayerische Hypotheken - und
Wechse - Bank 1,087,013
17,022 Bayerische Vereinsbank AG 1,113,699
6,720 Bilfinger & Berger Bau AG 208,442
400 Buderas 179,216
10,380 Commerzbank AG 408,518
24,741 Deutsche Bank AG 1,746,634
30,878 Deutsche Telekom 581,017
7,730 Dresdner Bank AG 356,647
17,778 Dresdner Bank AG Warrants
Expiring 4/30/2002 316,238 (b)
29,347 Gehe AG 1,468,206
9,000 Hoechst AG 315,184
520 Hornbach Baumarkt 14,742
942 Mannesmann 475,988
4,716 Rhoen Klinikum 461,389
4,290 SAP AG 1,303,252
9,593 Siemens AG 567,917
36,705 Veba AG 2,499,437
603 Volkswagen 339,218
--------------
16,179,608
--------------
PREFERRED STOCKS
1,200 Fielmann 26,682
1,450 Fresenius AG 266,795
2,490 Hornbach Holdings AG 172,326
1,077 SAP AG 352,325
--------------
818,128
--------------
Total Germany 16,997,736
--------------
HONG KONG - 2.3% (a)
COMMON STOCKS
40,000 Cheung Kong Holdings Ltd. 261,969
67,000 China Light & Power Co. Ltd. 371,790
169,000 Doa Heng Bank Ltd. 420,919
12,188 First Pacific 5,898
374,142 Hong Kong Land Holdings (USD) 718,353
12,000 Hong Kong Shanghai Bank Holdings 295,780
272,000 Hutchison Whampoa 1,705,923
360,039 New World Development Co. Ltd. 1,245,199
41,000 Sun Hung Kai Properties Ltd. 285,714
139,000 Swire Pacific 'A' 762,356
356,000 Wharf Holdings 781,004
--------------
Total Hong Kong 6,854,905
--------------
INDIA - 0.2% (a)
COMMON STOCKS
27,000 Mahanager Telephone
Nigam Ltd. (GDR) 423,900 (b)
--------------
ITALY - 3.9% (a)
COMMON STOCKS
41,000 Assicurazioni Generali 1,007,038
52,000 Banca Commerciale Italiana 180,780
459,177 Credito Italiano 1,415,947
297,491 Ente Nazionale Idrocarburi 1,686,735
64,160 IMI SpA 761,651
9,074 Industrie Natuzzi SpA ADR (USD) 187,151
71,600 Italgas 295,466
35,729 Mediolanum SpA 672,570
17,600 Rinascente 131,328
530,400 Telecom Italia Mobile 2,448,115
72,000 Telecom Italia Mobile RNC 204,726
357,903 Telecom Italia SpA 2,286,209
--------------
Total Italy 11,277,716
--------------
JAPAN - 18.6% (a)
COMMON STOCKS
4,940 Advantest Corp. 279,972
42,000 Alps Electric 395,650
73,000 Amada 271,157
144,000 Canon 3,352,684
45,000 Citizen Watch Co. 301,562
71,000 Dai Nippon Screen
Manufacturing Co. Ltd. 326,262
13,000 Daifuku 63,223
85,000 Daiichi Pharmaceutical 956,958
103,000 Daiwa House 544,306
140 DDI Corp. 369,917
242 East Japan Railway 1,091,660
19,600 Fanuc 741,549
137,000 Hitachi 975,798
95,000 Hitachi Zosen 152,064
8,000 Honda Motor Co. 293,482
25,000 Inax 72,566
21,000 Ishihara Sangyo Kaisha 23,321 (b)
34,000 Ito-Yokado 1,731,638
63,000 Kao Corp. 907,100
33,000 Kokuyo 568,660
90,000 Komatsu 451,482
31,000 Komori 460,596
33,000 Kumagai Gumi 17,944
88,000 Kuraray 727,885
44,000 Kyocera 1,994,945
56,000 Makita 536,111
90,000 Marui 1,399,249
140,000 Matsushita Electric Industrial 2,047,944
92,000 Mitsubishi 725,741
424,000 Mitsubishi Heavy Industries 1,766,531
23,000 Mitsubishi Paper Mills 32,236
207,000 Mitsui Fudosan 1,997,549
16,000 Mitsui Petrochemical Industries 29,410
42,000 Murata Manufacturing 1,055,066
18,000 National House Industrial 123,382
246,000 NEC 2,618,825
128,000 Nippon Denso 2,303,745
17,000 Nippon Hodo 54,683
503,000 Nippon Steel 743,502
106 Nippon Telegraph & Telecom 909,244
133,000 Nomura Securities 1,772,383
42,000 Pioneer Electronic 646,550
4,000 Sangetsu Co. Ltd. 41,051
89,000 Sankyo Co. 2,010,799
10,400 Sega Enterprises 187,976
107,000 Sekisui Chemical 543,318
65,000 Sekisui House 417,669
11,000 Seven-Eleven Japan 778,433
116,000 Sharp Corp. 797,794
73,300 Shin-Etsu Chemical 1,397,848
32,000 Shiseido Co. Ltd. 436,241
32,300 Sony 2,869,572
152,000 Sumitomo 849,812
195,000 Sumitomo Electric 2,658,344
36,000 Sumitomo Forestry 176,181
31,000 TDK 2,336,218
183,000 Teijin 382,622
32,000 Tokio Marine & Fire Insurance 362,717
16,900 Tokyo Electronics 541,028
31,800 Tokyo Steel Manufacturing 107,404
68,000 Toppan Printing 885,349
34,000 Uny Co. 466,110
8,400 Yurtec 51,531
--------------
Total Japan 54,132,549
--------------
MALAYSIA - 0.01% (a)
COMMON STOCKS
64,000 Time Engineering BHD 16,455
--------------
MEXICO - 1.7% (a)
COMMON STOCKS
75,000 Cementos de Mexico ADR (USD) 675,000
47,850 Cemex 'B' 255,540
37,473 Cifra 'B' ADR (USD) 84,900
73,436 Gruma 'B' 291,178 (b)
11,260 Gruma S.A. GDR (USD) 168,900 (b)
700 Grupo Financiero Banamex
Accival 'L' 1,804
108,680 Grupo Financiero Banamex 'B' 325,212
140,062 Grupo Industrial Maseca 'B' 144,739
8,600 Grupo Televisa GDR (USD) 332,713 (b)
110,408 Kimberly-Clark Mexico 'A' 540,377
29,435 Telefonos de Mexico 'L'
ADR (USD) 1,650,200
20,700 TV Azteca S.A. ADR (USD) 467,044 (b)
--------------
Total Mexico 4,937,607
--------------
NETHERLANDS - 10.8% (a)
COMMON STOCKS
86,746 ABN Amro Holdings N.V. 1,689,871
2,290 Akzo Nobel 394,833
12,589 Baan Co. N.V. 415,437 (b)
18,060 Baan Co. N.V. 591,416 (b)
26,559 CSM 1,178,857
225,499 Elsevier 3,647,753
30,375 Fortis Amev N.V. 1,324,267
10,231 Gucci Group N.V. (USD) 428,423
83,482 ING Groep N.V. 3,516,072
20,765 ING Groep N.V.,
Stock Warrants 217,517 (b)
16,094 Koninklijke Ahold NV 419,881
18,700 Koninklijke Nutricia Verenigde
Bedrijven NV 567,184
8,490 Koninklijke PTT Nederland 354,230
1,940 Otra N.V. 27,746
25,975 Polygram 1,242,608
138,258 Royal Dutch Petroleum 7,589,138
43,890 Unilever NV 2,705,718
38,967 Wolters Kluwer 5,033,145
--------------
Total Netherlands 31,344,096
--------------
NEW ZEALAND - 0.3% (a)
COMMON STOCKS
74,000 Air New Zealand Ltd. 148,240
73,130 Fletcher Challenge Building 149,470
63,042 Fletcher Challenge Energy 220,730
87,000 Telecom Corp. of New Zealand 421,813
--------------
Total New Zealand 940,253
--------------
NORWAY - 1.9% (a)
COMMON STOCKS
5,570 Bergesen 'A' 131,222
48,654 Norsk Hydro 2,368,208
33,855 Orkla 'A' 2,910,710
6,910 Saga Petroleum 'B' 104,785
--------------
Total Norway 5,514,925
--------------
PANAMA - 0.3% (a)
COMMON STOCKS
1,676 Banco Latinoamericano de
Exportaciones S.A. 'E' 69,345
22,020 Panamerican Beverages 'A'
ADR (USD) 718,404
--------------
Total Panama 787,749
--------------
PERU - 0.09% (a)
COMMON STOCKS
5,710 Credicorp Ltd. 102,780
6,361 Telefonica del Peru S.A.
ADR (USD) 148,291
--------------
Total Peru 251,071
--------------
PORTUGAL - 0.4% (a)
COMMON STOCKS
13,650 Jeronimo Martins 433,121
20,475 Jeronimo Martins (New Shares) 649,682 (b)
--------------
Total Portugal 1,082,803
--------------
RUSSIA - 0.07% (a)
COMMON STOCKS
2,280 Gazprom ADR (USD) 55,005
1,880 Lukoil Holding AB 173,430
--------------
Total Russia 228,435
--------------
SINGAPORE - 0.6% (a)
COMMON STOCKS
28,000 City Developments Ltd. 129,576
22,600 Oversea - Chinese Banking
Corp. Ltd. 131,403
67,200 Overseas Union Bank 257,158
122,000 Singapore Land 267,814
52,000 Singapore Press 650,964
60,000 United Overseas Bank 332,839
--------------
Total Singapore 1,769,754
--------------
SOUTH KOREA - 0.1% (a)
COMMON STOCKS
53,991 Korea Equity Fund (USD) 357,690
12 Samsung Electronics
GDR (USD) 168
--------------
Total South Korea 357,858
--------------
SPAIN - 2.4% (a)
COMMON STOCKS
12,260 Banco Bilbao Vizcaya S.A. 396,730
13,430 Banco Popular Espanol S.A. 938,822
37,492 Banco Santander SA 1,252,604
8,790 Centros Comerciales Pryca 130,970
8,152 Corporacion Bancaria de
Espana S.A. 496,023
46,304 Endesa S.A. 822,135
9,366 Gas Natural SDG, S.A. 485,667
59,060 Iberdrola 777,258
13,325 Repsol S.A. 568,510
40,337 Telefonica de Espana 1,151,729
--------------
Total Spain 7,020,448
--------------
SWEDEN - 3.5% (a)
COMMON STOCKS
57,930 ABB AB 685,830
158,010 Astra AB 2,656,751
32,540 Atlas Copco 'B' 969,245
18,765 Electrolux 'B' 1,302,222
7,770 Esselte 'B' 157,555
6,582 Granges AB 103,208 (b)
41,220 Hennes & Mauritz AB 1,817,025
243,661 Nordbanken Holding AB 1,377,899 (b)
4,860 Sandvik 'A' 138,334
29,620 Sandvik 'B' 846,829
2,720 Scribona 'B' 30,318
--------------
Total Sweden 10,085,216
--------------
SWITZERLAND - 6.9% (a)
COMMON STOCKS
1,060 ABB AG 1,331,166
4,317 Adecco S.A. 1,251,197
4,140 Credit Suisse Group 640,323
2,595 Nestle 3,887,527
3,878 Novartis AG 6,289,940
444 Roche Holdings 4,407,487
620 Schweizerische Bankgesellschaft 896,140
4,716 Schwizerischer Bankverein 1,465,278
--------------
Total Switzerland 20,169,058
--------------
UNITED KINGDOM - 17.7% (a)
COMMON STOCKS
117,000 Abbey National 2,106,212
116,066 Argos plc 1,047,558
362,000 Asda Group 1,064,961
91,764 BG plc 412,979
89,000 British Petroleum 1,177,339
222,000 Cable & Wireless 1,950,797
159,225 Cadbury Schweppes 1,607,032
257,800 Caradon plc 749,483
62,000 Centrica plc 91,142 (b)
95,000 Compass Group 1,168,721
114,000 David S. Smith 371,681
79,000 Electrocomponents 587,801
13,000 GKN 266,266
169,500 Glaxo Wellcome 4,040,975
11,000 Heywood Williams Group 37,761
64,000 Hillsdown Holdings 155,578
58,000 John Laing 'A' 307,230
242,000 Kingfisher 3,378,623
423,000 National Westminster Bank 7,031,148
167,000 Rank Group plc 929,869
439,000 Reed International plc 4,182,134
84,000 Rolls Royce 324,230
105,000 RTZ 1,294,331
204,000 Safeway plc 1,149,290
595,000 Shell Transport & Trading 4,173,018
562,400 SmithKline Beecham plc 5,796,481
133,000 T & N 557,054
168,000 Tesco 1,385,329
470,700 Tomkins 2,226,599
186,000 United News & Media 2,117,150
--------------
Total United Kingdom 51,688,772
--------------
VENEZUELA - 0.1% (a)
COMMON STOCKS
8,372 Compania Anonima Nacional
Telefonos de Venezuela
ADR (USD) 348,485
--------------
<CAPTION>
Principal
Amount
--------------
SHORT-TERM SECURITIES - 5.3% (a)
Commercial Paper
$ 2,500,000 Disney (Walt) Co. 6.6%
Due 1/2/98 2,499,542
13,000,000 Ford Motor Credit Co. 6.75%
Due 1/2/98 12,997,563
--------------
Total Short term Securities
(at amortized cost) 15,497,105
--------------
Total Investments $291,196,981 (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:
<CAPTION>
Percentage of
Cost Value Portfolio
-------------- -------------- --------------
Common Stocks &
Warrants $264,019,189 $274,097,977 94.1%
Preferred Stocks 1,327,487 1,601,899 0.6%
Short-Term 15,497,105 15,497,105 5.3%
-------------- -------------- ---------
Total Investments $280,843,781 $291,196,981 100.0%
============== ============== =========
(d) At December 31, 1997, the aggregate cost of securities for federal
income tax purposes was $281,637,883 and the net unrealized
appreciation of investments based on that cost was $9,559,098 which
is comprised of $36,645,610 aggregate gross unrealized appreciation
and $27,086,512 gross unrealized depreciation.
Abbreviations:
(ADR) - American Depository Receipts
(GDR) - Global Depository Receipts
(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, 1997
Shares Value
------------ ------------
<S> <C> <C>
COMMON STOCKS - 92.1% (a)
Aerospace - 0.6%
138,600 Boeing Co. $6,782,738
14,743 Raytheon Company 727,014
92,500 United Technologies Corp. 6,735,156
--------------
14,244,908
--------------
Airlines - 1.5%
85,000 AMR Corp. 10,922,500
150,800 Continental Airlines
Holding, Inc., Class B 7,257,250 (b)
283,500 Southwest Airlines Co. 6,981,187
130,000 UAL Corp. 12,025,000 (b)
--------------
37,185,937
--------------
Automotive - 1.7%
295,800 Chrysler Corp. 10,408,462
254,300 General Motors Corp. 15,416,938
115,400 Goodyear Tire & Rubber Co. (The) 7,342,325
186,000 Lear Corp. 8,835,000
--------------
42,002,725
--------------
Bank & Finance - 16.3%
195,000 Allstate Corp. 17,720,625
231,700 American Express Co. 20,679,225
245,300 American International Group, Inc. 26,676,375
92,000 Banco Rio de La Plata S.A. 1,288,000 (b)
325,000 Bank of New York Co., Inc. 18,789,062
220,000 BankAmerica Corp. 16,060,000
249,700 Barnett Banks, Inc. 17,947,188
185,000 Chase Manhattan Corp. 20,257,500
190,000 Citicorp 24,023,125
159,900 CoreStates Financial Corporation 12,801,994
203,400 Crestar Financial Corp. 11,593,800
496,200 Federal Home Loan
Mortgage Corp. 20,809,387
340,000 Federal National Mortgage
Association 19,401,250
223,200 First Chicago NBD Corp. 18,637,200
95,000 First Union Corp. 4,868,750
323,000 Hibernia Corp., Class A 6,076,437
150,000 Household International, Inc. 19,134,375
278,300 Lehman Brothers Holdings, Inc. 14,193,300
293,300 MBNA Corp. 8,010,756
133,000 Mellon Bank Corp. 8,063,125
171,300 PaineWebber Group, Inc. 5,920,556
93,600 PMI Group 6,768,450
64,600 Provident Bankshares Corporation 4,126,325
235,000 Summit Bancorp 12,513,750
189,800 SunAmerica, Inc. 8,113,950
46,300 The CIT Group, Inc. 1,493,175 (b)
318,660 Travelers Group, Inc. 17,167,807
240,000 U.S. Bancorp 26,865,000
160,480 Washington Mutual, Inc. 10,240,630
--------------
400,241,117
--------------
Broadcasting - 0.7%
224,900 CBS Corp. 6,620,494
15,000 Echostar Communications Corp. 251,250 (b)
250,000 Tele-Communications, Inc.,
Liberty Media Group, Series A 9,062,500 (b)
106,200 TV Azteca, S.A. de C.V. 2,396,137
--------------
18,330,381
--------------
Chemicals - 2.0%
180,000 Air Products & Chemicals, Inc. 14,805,000
228,300 Avery Dennison Corp. 10,216,425
251,300 E.I. du Pont de Nemours and Co. 15,093,706
222,200 Praxair, Inc. 9,999,000
--------------
50,114,131
--------------
Computer Software - 5.1%
321,200 Autodesk, Inc. 11,884,400
271,800 BMC Software, Inc. 17,836,875 (b)
65,000 Check Point Software
Technologies Ltd. 2,648,750
393,450 Computer Associates
International, Inc. 20,803,669
87,800 J.D. Edwards & Company 2,590,100
175,000 Microsoft Corp. 22,618,750 (b)
78,200 Netscape Communications Corp. 1,906,125
335,400 Oracle Corp. 7,483,612 (b)
200,600 Parametric Technology Corp. 9,503,425 (b)
328,700 PeopleSoft, Inc. 12,819,300 (b)
188,400 Security Dynamics Technologies, Inc. 6,735,300 (b)
175,600 Symantec Corp. 3,852,225 (b)
124,500 Viasoft, Inc. 5,260,125
--------------
125,942,656
--------------
Computers & Office Equipment - 4.1%
121,700 Bay Networks, Inc. 3,110,956 (b)
88,400 CDW Computer Centers, Inc. 4,607,850 (b)
101,800 Compaq Computer Corp. 5,745,337
194,000 FORE Systems, Inc. 2,958,500 (b)
143,100 Gateway 2000, Inc. 4,668,638 (b)
311,500 Hewlett Packard Co. 19,468,750
299,900 Hypercom Corporation 4,236,087 (b)
316,300 International Business Machines 33,073,119
73,800 MRV Communications, Inc. 1,761,975
125,000 Storage Technology Corp. 7,742,187 (b)
313,500 Sun Microsystems, Inc. 12,500,813 (b)
40,800 Xylan Corp. 617,100 (b)
--------------
100,491,312
--------------
Conglomerates - 2.9%
530,200 AlliedSignal, Inc. 20,644,663
394,800 Dover Corp. 14,262,150
338,100 Thermo Electron Corp. 15,045,450 (b)
469,300 Tyco International Ltd. 21,147,831
--------------
71,100,094
--------------
Drugs & Health Care - 8.6%
326,500 Abbott Laboratories 21,406,156
110,000 American Home Products Corp. 8,415,000
300,500 Becton, Dickinson & Co. 15,025,000
300,000 Biochem Pharma, Inc. 6,262,500 (b)
300,700 Bristol-Myers Squibb Co. 28,453,738
193,100 Cephalon, Inc. 2,196,513 (b)
403,100 Eli Lilly & Co. 28,065,838
23,400 Guidant Corporation 1,456,650
216,900 Johnson & Johnson 14,288,288
358,900 Merck & Co., Inc. 38,133,125
242,900 Pfizer, Inc. 18,111,231
226,800 Schering-Plough Corp. 14,089,950
112,000 Warner-Lambert Co. 13,888,000 (b)
--------------
209,791,989
--------------
Electrical Equipment - 2.4%
546,300 General Electric Co. 40,084,763
275,000 Honeywell, Inc. 18,837,500
--------------
58,922,263
--------------
Electronics - 1.7%
288,600 Cypress Semiconductor Corp. 2,453,100 (b)
300,000 Intel Corp. 21,075,000
126,300 Kulicke & Soffa Industries, Inc. 2,352,338 (b)
115,700 Linear Technology Corp. 6,667,213
207,800 National Semiconductor Corp. 5,389,813 (b)
109,300 Speedfam International, Inc. 2,896,450 (b)
39,300 Vitesse Semiconductor Corp. 1,483,575 (b)
--------------
42,317,489
--------------
Food & Beverage - 4.6%
69,900 Campbell Soup Co. 4,062,938
465,000 Coca-Cola Co. 30,980,625
138,500 ConAgra, Inc. 4,544,531
69,800 General Mills, Inc. 4,999,425
129,300 Hershey Foods Corp. 8,008,519
184,600 Nabisco Holdings, Inc. 8,941,563
546,100 PepsiCo, Inc. 19,898,519
86,400 Ralston-Ralston Purina Group 8,029,800
381,200 Sara Lee Corp. 21,466,325
--------------
110,932,245
--------------
Healthcare Management - 1.1%
147,900 Capital Senior Living Corp. 1,543,706 (b)
241,700 FPA Medical Management, Inc. 4,501,663 (b)
384,400 Tenet Healthcare Corporation 12,733,250 (b)
174,400 United Healthcare Corp. 8,665,500
--------------
27,444,119
--------------
Household Products - 4.6%
203,000 Avon Products, Inc. 12,459,125
107,100 Benckiser NV 4,404,488 (b)
183,000 Colgate Palmolive Co. 13,450,500
305,000 Gillette Co. 30,633,438
202,000 Kimberly-Clark Corp. 9,961,125
391,400 Procter & Gamble Co. 31,238,613
165,200 Unilever N.V., ADR 10,314,675
--------------
112,461,964
--------------
Leisure & Entertainment - 3.0%
208,000 American Skiing Company 3,094,000 (b)
83,000 CapStar Hotel Co. 2,847,937 (b)
321,000 Disney (Walt) Co. 31,799,063
348,200 Host Marriott Corp. 6,833,425
152,600 Royal Caribbean Cruises Ltd. 8,135,488
255,600 Signature Resorts, Inc. 5,591,250 (b)
255,400 Time Warner, Inc. 15,834,800
--------------
74,135,963
--------------
Machinery & Equipment - 1.5%
137,300 Case Corp. 8,298,069
35,600 Cummins Engine Co., Inc. 2,102,625
248,500 Deere & Co. 14,490,656
69,600 PACCAR, Inc. 3,654,000
160,100 Parker-Hannifin Corp. 7,344,588
--------------
35,889,938
--------------
Manufacturing - 0.1%
113,900 BMC Industries, Inc. 1,836,638
--------------
Mining & Metals - 0.9%
160,000 Aluminum Co. of America 11,260,000
152,000 British Steel plc (ADR) 3,258,500
525,000 Homestake Mining Co. 4,659,375
187,500 Placer Dome, Inc. 2,378,906
--------------
21,556,781
--------------
Oil & Oil Service - 5.7%
123,400 Apache Corp. 4,326,712
246,500 Baker Hughes, Inc. 10,753,563
127,000 British Petroleum Co. plc 10,120,312
75,800 Camco International, Inc. 4,827,512
283,100 Chevron Corp. 21,798,700
114,800 Diamond Offshore Drilling, Inc. 5,524,750
347,900 Halliburton Co. 18,069,056
201,000 Input/Output, Inc. 5,967,188
271,600 Mobil Corp. 19,606,125
228,400 Noble Affiliates, Inc. 8,051,100
124,600 Santa Fe International Corp. 5,069,662
262,200 Texaco, Inc. 14,257,125
92,600 Total SA 5,139,300
166,400 Unocal Corp. 6,458,400
--------------
139,969,505
--------------
Paper & Forest Products - 0.5%
176,700 Boise Cascade Corp. 5,345,175
50,000 International Paper Co. 2,156,250
185,000 Mead Corp. 5,180,000
--------------
12,681,425
--------------
Photography - 0.4%
180,800 Eastman Kodak Co. 10,994,900
--------------
Pollution Control - 0.9%
421,300 USA Waste Services, Inc. 16,536,025
205,600 U.S. Filter Corp. 6,155,150
--------------
22,691,175
--------------
Publishing & Printing - 0.8%
201,100 Gannett Co., Inc. 12,430,494
99,200 New York Times Co. 6,559,600
--------------
18,990,094
--------------
Real Estate Investment Trust - 1.7%
172,500 Bedford Property Investors, Inc. 3,773,437
173,323 Equity Office Properties Trust 5,470,507
206,800 General Growth Properties 7,470,650
203,000 Glenborough Realty Trust, Inc. 6,013,875
166,200 Glimcher Realty Trust 3,749,888
198,600 InnKeepers USA Trust 3,078,300
185,800 Kilroy Realty Corp. 5,341,750
200,000 Prentiss Properties Trust 5,587,500
83,200 Sunstone Hotel Investors, Inc. 1,435,200
--------------
41,921,107
--------------
Restaurants - 0.5%
101,700 Boston Chicken, Inc. 654,694 (b)
213,400 Outback Steakhouse, Inc. 6,135,250
183,700 Wendy's International, Inc. 4,420,281
--------------
11,210,225
--------------
Retail - 5.3%
195,400 Borders Group, Inc. 6,118,463 (b)
168,500 Circuit City Stores, Inc. 5,992,281
96,900 Costco Companies, Inc. 4,324,162
274,600 CVS Corp. 17,591,563
123,100 Dayton Hudson Corp. 8,309,250
251,800 Federated Department Stores 10,843,137 (b)
114,000 General Nutrition Companies 3,876,000
400,200 Kroger Co. 14,782,388 (b)
156,200 Polo Ralph Lauren Corp. 3,797,612
400,000 Safeway, Inc. 25,300,000 (b)
239,700 Sunglass Hut International 1,513,106
385,350 US Office Products Company 7,562,494
525,000 Wal-Mart Stores, Inc. 20,704,688
--------------
130,715,144
--------------
Services - 2.6%
298,492 AccuStaff, Inc. 6,865,316 (b)
231,300 Budget Group, Inc. 7,994,306 (b)
750,000 Cendant Corporation 25,781,250 (b)
160,000 Computer Sciences Corp. 13,360,000 (b)
302,400 First Data Corp. 8,845,200
36,900 Stewart Enterprises, Inc. 1,720,462
--------------
64,566,534
--------------
Telecommunications Equipment - 5.2%
383,900 ADC Telecommunications, Inc. 16,027,825 (b)
140,000 CIENA Corp. 8,557,500
672,300 Cisco Systems, Inc. 37,480,725 (b)
253,800 DSC Communications Corp. 6,091,200
193,300 Lucent Technologies, Inc. 15,439,838
153,800 Motorola, Inc. 8,776,212
277,300 NextLevel Systems, Inc. 4,956,737
140,000 Nokia Corp., ADR 9,800,000
380,000 Tellabs, Inc. 20,092,500 (b)
--------------
127,222,537
--------------
Telephone & Telecommunications - 5.1%
200,000 Ameritech Corp. 16,100,000
109,600 AT&T Corp. 6,713,000
241,500 BellSouth Corp. 13,599,469
106,200 GTE Corp. 5,548,950
351,700 LCI International, Inc. 10,814,775
122,700 MasTec, Inc. 2,806,763 (b)
263,200 MCI Communications Corp. 11,268,250
327,500 MobileMedia Corp., Class A 40,937 (b)
207,500 SBC Communications, Inc. 15,199,375
95,000 Telecomunicacoes Brasileir
S.A. Telebras ADR 11,061,563
306,300 Teleport Communications Group, Inc. 16,808,212 (b)
258,500 Vanguard Cellular Systems, Inc. 3,295,875
328,100 WorldCom, Inc. 9,925,025 (b)
--------------
123,182,194
--------------
Total Common Stock
(cost $1,996,722,267) 2,259,087,490
--------------
PREFERRED STOCK - 0.3% (a)
134,100 EchoStar Communications Corporation
(cost $6,690,000) 6,235,650 (b)
--------------
<CAPTION>
Principal
Amount
--------------
CORPORATE BONDS - 0.2% (a)
$ 6,250,000 Broadband Technologies, Inc.,
Convertible Subordinated Notes
(cost $6,251,582) 3,968,750
--------------
SHORT-TERM SECURITIES - 7.4% (a)
Commercial Paper - 5.7%
3,797,000 Disney (Walt) Co., 6.1%,
Due 1/5/1998 3,794,426
10,500,000 Gillette Co., 6.75%,
Due 1/2/1998 10,498,031
28,800,000 Harvard University., 6.75%,
Due 1/2/1998 28,794,600
10,000,000 Hewlett Packard Co., 5.9%,
Due 1/7/1998 9,990,167
20,000,000 Koch Industries, Inc., 6.25%,
Due 1/5/1998 19,986,111
10,000,000 Monsanto Co., 5.97%,
Due 1/16/1998 9,975,125
6,490,000 Monsanto Co., 6.1%,
Due 1/7/1998 6,483,402
12,600,000 New Center Asset Trust,
6.75%, Due 1/2/1998 12,597,637
3,500,000 Peregrine Investment Holdings Ltd.,
6.45%, Due 1/13/1998 3,492,475
12,600,000 Sheffield Receivables Corp., 5.95%,
Due 1/23/1998 12,554,185
5,000,000 TMI-1 Fuel Corp., 6.5%,
Due 1/7/1998 4,994,583
8,000,000 UBS Finance (Delaware) Inc.,
7.0%, Due 1/2/1998 7,998,444
9,700,000 Warner-Lambert Co., 6.02%,
Due 1/6/1998 9,691,890
--------------
Total Commercial Paper 140,851,076
--------------
U.S. Government Agency - 1.7%
10,000,000 Federal Home Loan Bank,
Consolidated Discount Notes,
5.65%, Due 1/14/1998 9,979,597
20,000,000 Federal Home Loan Bank,
Consolidated Discount Notes,
5.68%, Due 1/20/1998 19,940,044
10,000,000 Federal National Mortgage
Association, Consolidated
Discount Notes, 5.64%,
Due 2/25/1998 9,913,833
--------------
Total U.S. Government Agency 39,833,474
--------------
Total Short-Term Securities
(at amortized cost) 180,684,550
--------------
Total Investments
(cost $2,190,348,401) $2,449,976,440 (c)
==============
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) At December 31, 1997, the aggregate cost of securities for federal
income tax purposes was $2,198,670,538 and the net unrealized
appreciation of investments based on that cost was $251,305,902
which is comprised of $321,745,403 aggregate gross unrealized
appreciation and $70,439,501 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
HIGH YIELD PORTFOLIO
Portfolio of Investments
December 31, 1997
Principal Maturity
Amount Rate Date Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 80.9% (a)
Aerospace - 0.3%
$4,200,000 Stellex Industries, Inc., Sr. Subordinated Notes 9.5% 11/1/2007 $4,263,000
-------------
Airlines - 1.1%
3,100,000 Constellation Finance, LLC, Airline Receivable Asset Backed Notes 9.8% 1/1/2001 3,131,000
3,000,000 Northwest Airlines, Inc., Notes 8.375% 3/15/2004 3,088,773
4,200,000 Northwest Airlines, Inc., Notes 8.7% 3/15/2007 4,349,293
3,000,000 U.S. Air, Inc., Sr. Secured Equipment Trust, Series 1993-A-3 10.375% 3/1/2013 3,356,250
-------------
13,925,316
-------------
Automotive - 0.5%
3,000,000 Chief Auto Parts, Inc., Sr. Notes 10.5% 5/15/2005 2,955,000
3,050,000 Delco Remy International, Inc., Sr. Notes 8.625% 12/15/2007 3,107,187
-------------
6,062,187
-------------
Bank & Finance - 7.6%
5,550,000 AmeriCredit Corp., Sr. Notes 9.25% 2/1/2004 5,550,000
3,550,000 Chevy Chase Savings Bank, Subordinated Debentures 9.25% 12/1/2005 3,656,500
4,200,000 Delta Financial Corp., Sr. Notes 9.5% 8/1/2004 4,200,000
7,200,000 Dollar Financial Group, Inc., Sr. Notes, Series A 10.875% 11/15/2003 7,812,000
6,000,000 Emergent Group, Inc., Sr. Notes 10.75% 9/15/2004 5,977,500
11,850,000 First Nationwide Holdings, Inc., Sr. Notes 12.5% 4/15/2003 13,538,625
3,896,000 HomeSide, Inc., Sr. Secured Second Priority Bonds, Series B 11.25% 5/15/2003 4,636,240
9,100,000 Mego Mortgage Corp., Sr. Subordinated Notes 12.5% 12/1/2001 7,598,500
4,250,000 Metris Companies, Inc., Sr. Notes 10% 11/1/2004 4,335,000
3,800,000 Residential Reinsurance Ltd., Notes 11.869% 1/15/1998 3,887,875 (e)
4,800,000 Riggs Capital Trust II, Trust Preferred Securities, Series C 8.875% 3/15/2027 5,213,030
4,800,000 Southern Pacific Funding, Sr. Notes 11.5% 11/1/2004 4,824,000
2,010,000 Trizec Finance Ltd., Sr. Notes 10.875% 10/15/2005 2,261,250
3,000,000 Veritas Capital Trust, Trust Preferred Securities 10% 1/1/2028 3,037,500
7,800,000 Veritas Holdings GMBH, Sr. Notes 9.625% 12/15/2003 8,346,000
7,500,000 Williams Scotsman, Inc., Sr. Notes 9.875% 6/1/2007 7,837,500
7,800,000 Wilshire Financial Services Group, Inc., Notes 13.0% 1/1/2004 7,975,500
-------------
100,687,020
-------------
Broadcasting - 10.8%
4,500,000 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 8/15/2005 1,327,500
3,136,850 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 6/15/2004 1,050,845
3,600,000 Australis Holdings Pty Ltd., Sr. Discount Notes Zero Coupon 11/1/2002 2,088,000
16,502,221 Australis Media Ltd., Sr. Discount Notes Zero Coupon 5/15/2003 7,260,977
3,000,000 Cablevision Systems Corp., Sr. Notes 7.875% 12/15/2007 3,075,000
3,600,000 Century Communications Corp., Sr. Notes 8.375% 12/15/2007 3,609,000
9,750,000 Chancellor Media Corp., Sr. Subordinated Notes 8.125% 12/15/2007 9,591,562
6,000,000 CS Wireless Systems, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2006 1,590,000
5,450,000 Diamond Cable Co., Sr. Discount Notes Zero Coupon 9/30/2004 4,905,000
2,400,000 Echostar DBS Corp., Sr. Secured Notes 12.5% 7/1/2002 2,604,000
7,800,000 EchoStar Satellite Broadcasting Corp., Sr. Secured Discount Notes Zero Coupon 3/15/2004 6,669,000
9,896,158 Falcon Holdings Group L.P., Sr. Subordinated Notes, Series B 11.0% 9/15/2003 10,737,331
10,800,000 Groupo Televisa S.A., Sr. Notes 11.875% 5/15/2006 12,271,500
8,500,000 Intermedia Capital Partners, Sr. Notes 11.25% 8/1/2006 9,350,000
5,900,000 International CableTel, Inc., Convertible Subordinated Notes 7.0% 6/15/2008 5,892,625
6,300,000 International CableTel, Inc., Sr. Notes, Series A Zero Coupon 4/15/2005 5,276,250
4,800,000 Jacor Communications, Inc., Convertible Liquid Yield Option Notes Zero Coupon 6/12/2011 3,546,000
3,050,000 James Cable Partners, L.P., Sr. Notes 10.75% 8/15/2004 3,233,000
4,200,000 NTL, Inc., Sr. Notes, Series B 10.0% 2/15/2007 4,441,500
6,000,000 Olympus Communications, L.P., Sr. Notes 10.625% 11/15/2006 6,675,000
7,050,000 Rogers Cablesystems Ltd., Sr. Secured Second Priority Notes 9.625% 8/1/2002 7,543,500
4,000,000 Rogers Cantel, Inc., Sr. Secured Notes 8.3% 10/1/2007 3,990,000
7,000,000 Rogers Communications, Inc., Convertible Debentures 2.0% 11/26/2005 4,191,250
3,000,000 Rogers Communications, Inc., Sr. Notes 9.125% 1/15/2006 3,060,000
703,583 Scott Cable Communications, Jr. Subordinated Notes, Payment-In-Kind 16.0% 7/18/2002 138,078
3,000,000 Sinclair Broadcast Group, Sr. Subordinated Notes 8.75% 12/15/2007 3,015,000
3,000,000 Sinclair Broadcast Group, Sr. Subordinated Notes 9% 7/15/2007 3,075,000
2,500,000 UIH Australia/Pacific, Inc., Sr. Discount Notes Zero Coupon 5/15/2006 1,662,500
4,900,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series B Zero Coupon 5/15/2006 3,258,500
7,200,000 United International Holdings, Inc., Sr. Discount Notes Zero Coupon 11/15/1999 6,012,000
4,900,000 Wireless One, Inc., Sr. Notes 13.0% 10/15/2003 1,788,500
-------------
142,928,418
-------------
Building Products & Materials - 1.3%
6,150,000 Atrium Companies, Inc., Sr. Subordinated Notes 10.5% 11/15/2006 6,503,625
6,000,000 CEMEX S.A. de C.V., Notes 12.75% 7/15/2006 7,200,000
3,600,000 Nortek, Inc., Sr. Notes 9.125% 9/1/2007 3,672,000
-------------
17,375,625
-------------
Chemicals - 0.4%
4,800,000 Sovereign Specialty Chemicals, Inc., Sr. Subordinated Notes 9.5% 8/1/2007 4,944,000
-------------
Computers & Office Equipment - 1.2%
5,250,000 Dictaphone Corp., Sr. Subordinated Notes 11.75% 8/1/2005 5,118,750
3,600,000 Unisys Corp., Sr. Notes 12.0% 4/15/2003 4,095,000
6,000,000 Unisys Corp., Sr. Notes 11.75% 10/15/2004 6,885,000
-------------
16,098,750
-------------
Construction & Home Building - 1.2%
9,600,000 Peters (J.M.) Co., Inc., Sr. Notes 12.75% 5/1/2002 10,176,000
5,400,000 The Fortress Group, Inc., Sr. Notes 13.75% 5/15/2003 6,129,000
-------------
16,305,000
-------------
Containers & Packaging - 1.3%
1,850,000 Radnor Holdings Corp. 10.0% 12/1/2003 1,928,625
4,750,000 Radnor Holdings Corp., Sr. Notes 10.0% 12/1/2003 4,951,875
2,866,000 Silgan Holdings, Inc., Subordinated Debentures, Payment-In-Kind 13.25% 7/15/2006 3,281,570
3,100,000 Vicap, S.A. de C.V., Sr. Guaranteed Notes 10.25% 5/15/2002 3,255,000
3,700,000 Vicap, S.A. de C.V., Sr. Guaranteed Notes 11.375% 5/15/2007 3,996,000
-------------
17,413,070
-------------
Drugs & Health Care - 0.6%
4,100,000 ICN Pharmaceuticals, Inc., Sr. Notes 9.25% 8/15/2005 4,366,500
3,550,000 Owens & Minor, Inc., Sr. Subordinated Notes 10.875% 6/1/2006 3,931,625
-------------
8,298,125
-------------
Electric Utilities - 2.2%
2,400,000 AES Corp., Sr. Subordinated Notes 8.5% 11/1/2007 2,412,000
2,100,000 CMS Energy Corp., Sr. Notes 7.625% 11/15/2004 2,100,388
7,200,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 7,420,010
5,100,000 Espirito Santo Centrais Eletricas S.A.-ELCELSA, Sr. Notes 10.0% 7/15/2007 4,577,250
3,550,000 Midland Cogen Venture Fund II, Secured Lease Obligation Bonds, Series A 11.75% 7/23/2005 4,259,666
3,000,000 Midland Cogen Venture Fund II, Subordinated Secured Lease
Obligation Bonds 13.25% 7/23/2006 3,809,193
4,200,000 Panda Global Energy Co., Sr. Secured Notes 12.5% 4/15/2004 3,843,000
-------------
28,421,507
-------------
Electrical Equipment - 1.7%
4,900,000 EV International, Inc., Sr. Subordinated Notes, Series A 11.0% 3/15/2007 5,034,750
5,400,000 Protection One Alarm Monitoring, Inc.,
Convertible Sr. Subordinated Notes 6.75% 9/15/2003 6,405,750
4,800,000 Protection One Alarm Monitoring, Inc.,
Sr. Subordinated Discount Notes Zero Coupon 6/30/2005 5,184,000
6,100,000 Telex Communications, Inc., Unsecured Sr. Notes 10.5% 5/1/2007 6,130,500
-------------
22,755,000
-------------
Food & Beverage - 3.1%
4,800,000 Ameriserve Food Distribution, Inc., Sr. Notes 8.875% 10/15/2006 4,848,000
1,200,000 CFP Holdings, Inc., Sr. Notes, Series B 11.625% 1/15/2004 1,206,000
4,200,000 Cott Corp., Sr. Notes 8.5% 5/1/2007 4,284,000
9,000,000 Fresh Del Monte Corp., Sr. Notes, Series B 10.0% 5/1/2003 9,405,000
9,000,000 Gorges/Quik-to-Fix Foods, Sr. Subordinated Notes, Series B 11.5% 12/1/2006 9,540,000
7,300,000 Imperial Holly Corp., Sr. Subordinated Notes 9.75% 12/15/2007 7,382,125
3,600,000 Southern Foods Group, L.P., Sr. Subordinated Notes 9.875% 9/1/2007 3,771,000
-------------
40,436,125
-------------
Hospital Management - 2.2%
7,900,000 Integrated Health Services, Inc., Sr. Subordinated Notes 9.25% 1/15/2008 8,077,750
6,600,000 Merit Behavioral Care Corp., Sr. Subordinated Notes 11.5% 11/15/2005 7,689,000
4,200,000 PhyMatrix Corp., Convertible Subordinated Debentures 6.75% 6/15/2003 3,874,500
4,300,000 Tenet Healthcare Corp., Sr. Subordinated Notes 8.625% 1/15/2007 4,450,500
5,400,000 Vencor, Inc., Sr. Subordinated Notes 8.625% 7/15/2007 5,420,250
-------------
29,512,000
-------------
Household Products - 1.6%
6,850,000 BPC Holding Corp., Sr. Secured Notes, Series B 12.5% 6/15/2006 7,569,250
3,000,000 Converse, Inc., Convertible Subordinated Notes 7% 6/1/2004 1,920,000
3,000,000 Sealy Mattress Company, Sr. Discount Notes Zero Coupon 12/15/2007 1,830,000
3,000,000 Sealy Mattress Company, Sr. Subordinated Notes 9.875% 12/15/2007 3,090,000
6,000,000 Simmons Co., Sr. Subordinated Notes 10.75% 4/15/2006 6,345,000
-------------
20,754,250
-------------
Industrial - 0.3%
4,200,000 Navistar Financial Corp., Sr. Subordinated Notes, Series B 9.0% 6/1/2002 4,373,250
-------------
Leisure & Entertainment - 2.9%
7,471,000 AMF Group, Inc., Sr. Subordinated Discount Notes, Series B Zero Coupon 3/15/2006 5,911,429
3,000,000 CapStar Hotel Company, Convertible Subordinated Notes 4.75% 10/15/2004 3,003,750
3,000,000 CapStar Hotel Company, Sr. Subordinated Notes 8.75% 8/15/2007 3,105,000
7,200,000 HMH Properties, Inc., Sr. Secured Notes 8.875% 7/15/2007 7,614,000
3,000,000 IMAX Corp., Sr. Notes 10.0% 3/1/2001 3,165,000
6,100,000 Lodgenet Entertainment, Sr. Notes 10.25% 12/15/2006 6,328,750
3,100,000 Production Resource Group LLC, Sr. Subordinated Notes 11.5% 1/15/2008 3,123,250
5,400,000 Signature Resorts, Inc., Sr. Subordinated Notes 9.75% 10/1/2007 5,427,000
-------------
37,678,179
-------------
Machinery & Equipment - 0.6%
4,200,000 Motors and Gears, Inc., Sr. Notes, Series C 10.75% 11/15/2006 4,483,500
3,000,000 Scotsman Group, Inc., Sr. Subordinated Notes 8.625% 12/15/2007 3,022,500
-------------
7,506,000
-------------
Mining & Metals - 1.4%
4,850,000 Altos Hornos de Mexico, Bonds, Series B 11.875% 4/30/2004 5,044,000
6,600,000 CSN Iron Panama, Guaranteed Notes 9.125% 6/1/2007 5,643,000
6,600,000 Westmin Resources Ltd., Sr. Notes 11.0% 3/15/2007 7,260,000
-------------
17,947,000
-------------
Oil & Gas - 5.6%
10,200,000 Abraxas Petroleum Corp., Sr. Notes, Series B 11.5% 11/1/2004 11,194,500
6,200,000 Belden & Blake Corp., Sr. Subordinated Notes 9.875% 6/15/2007 6,293,000
6,100,000 Benton Oil & Gas, Sr. Notes 9.375% 11/1/2007 6,267,750
4,800,000 Coho Energy, Inc., Sr. Subordinated Notes 8.875% 10/15/2007 4,836,000
4,200,000 Cross Timbers Oil Co., Sr. Subordinated Notes 8.75% 11/1/2009 4,289,250
9,050,000 National Energy Group, Inc., Sr. Notes, Series C 10.75% 11/1/2006 9,479,875
1,800,000 Newpark Resources, Inc., Sr. Subordinated Notes 8.625% 12/15/2007 1,838,250
4,250,000 Perez Companc S.A., Notes 8.125% 7/15/2007 4,101,250
6,167,000 Petroleum Heat & Power Co., Inc., Subordinated Debentures 12.25% 2/1/2005 6,136,165
5,100,000 Pride Petroleum Services, Inc., Sr. Notes 9.375% 5/1/2007 5,508,000
4,850,000 Snyder Oil Corp., Sr. Subordinated Notes 8.75% 6/15/2007 4,947,000
6,000,000 Southwest Royalties, Inc., Sr. Notes 10.5% 10/15/2004 6,000,000
3,650,000 Trico Marine Services, Inc., Sr. Unsecured Notes, Series E 8.5% 8/1/2005 3,718,437
-------------
74,609,477
-------------
Paper & Forest Products - 3.6%
6,100,000 Ainsworth Lumber Co. Ltd., Sr. Secured Notes, Payment-In-Kind 12.5% 7/15/2007 6,161,000
3,600,000 APP Finance (II) Mauritius Ltd., Guaranteed Preferred Securities,
Series B 12.0% 2/15/2004 3,105,000
4,900,000 APP International Finance, Guaranteed Secured Notes 11.75% 10/1/2005 4,520,250
3,000,000 Doman Industries Ltd., Sr. Notes 9.25% 11/15/2007 2,940,000
6,700,000 Fonda Group, Inc., Sr. Subordinated Notes, Series B 9.5% 3/1/2007 6,331,500
4,850,000 FSW International Finance Co. B.V., Guaranteed Secured Notes 12.5% 11/1/2006 3,698,125
8,100,000 National Fiberstok Corp., Sr. Notes Series B 11.625% 6/15/2002 8,545,500
3,600,000 Pindo Deli Finance Mauritius, Sr. Notes 10.25% 10/1/2002 3,222,000
5,900,000 Tembec Finance Corp., Sr. Notes 9.875% 9/30/2005 6,091,750
3,000,000 Tjiwi Kimia Financial Mauritius, Guaranteed Sr. Notes 10.0% 8/1/2004 2,520,000
-------------
47,135,125
-------------
Pollution Control - 0.3%
4,000,000 Norcal Waste Systems, Inc., Sr. Notes, Series B 13.5% 11/15/2005 4,620,000
-------------
Publishing & Printing - 2.6%
2,700,000 ITT PubliMedia BV, Sr. Subordinated Notes 9.375% 9/15/2007 2,868,480
2,500,000 K-III Communications Corp., Sr. Notes 10.25% 6/1/2004 2,687,500
7,500,000 MDC Communications Corp., Sr. Subordinated Notes 10.5% 12/1/2006 7,968,750
10,800,000 Neodata Services, Inc., Sr. Notes, Series B 12.0% 5/1/2003 11,664,000
4,000,000 News America Holdings, Inc., Convertible Liquid Yield Option Notes Zero Coupon 3/11/2013 1,870,000
750,000 News America Holdings, Inc., Subordinated Notes Zero Coupon 3/31/2002 721,875
5,850,000 Sullivan Graphics, Inc., Sr. Subordinated Notes 12.75% 8/1/2005 5,937,750
-------------
33,718,355
-------------
Retail - 1.6%
3,900,000 County Seat Stores, Inc., Units 12.75% 11/1/2004 4,036,500
2,750,000 F & M Distributors, Inc., Sr. Subordinated Notes 11.5% 4/15/2003 41,250 (c)
6,000,000 Hollywood Entertainment Corp., Sr. Subordinated Notes, Series B 10.625% 8/15/2004 5,910,000
6,000,000 Lifestyle Furnishings International Ltd., Sr. Subordinated Notes 10.875% 8/1/2006 6,675,000
4,800,000 TravelCenters of America, Inc., Sr. Subordinated Notes 10.25% 4/1/2007 5,064,000
-------------
21,726,750
-------------
Retail - Food - 2.6%
6,000,000 Fleming Companies, Inc., Sr. Subordinated Notes 10.625% 7/31/2007 6,360,000
1,800,000 Jitney-Jungle Stores of America, Sr. Subordinated Notes 10.375% 9/15/2007 1,876,500
4,300,000 Jitney-Jungle Stores of America, Sr. Notes 12.0% 3/1/2006 4,902,000
6,100,000 Pueblo Xtra International, Inc., Sr. Notes, Series C 9.5% 8/1/2003 5,825,500
6,100,000 Ralph's Grocery Co., Sr. Notes 10.45% 6/15/2004 6,862,500
7,600,000 Smith's Food & Drug Centers, Pass Through Certificates 8.64% 7/2/2012 8,170,000
-------------
33,996,500
-------------
Services - 1.2%
3,000,000 Discovery Zone, Inc., Units 13.5% 8/1/2002 3,135,000
9,100,000 KinderCare Learning Centers, Inc., Sr. Subordinated Notes 9.5% 2/15/2009 9,100,000
4,200,000 Unicco Service/Finance, Sr. Subordinated Notes 9.875% 10/15/2007 4,205,250
-------------
16,440,250
-------------
Telecommunications - 17.8%
4,800,000 American Communications Services, Inc., Sr. Notes 13.75% 7/15/2007 5,712,000
3,650,000 CenCall Communications Corp., Sr. Redeemable Discount Notes Zero Coupon 1/15/2004 3,294,125
8,400,000 Clearnet Communications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 6,657,000
6,000,000 Comcast Cellular Holdings, Inc., Sr. Notes 9.5% 5/1/2007 6,285,000
5,450,000 Esprit Telecom Group, plc, Sr. Notes 11.5% 12/15/2007 5,640,750
3,600,000 Globalstar LP/Capital Corp., Sr. Notes 10.75% 11/1/2004 3,528,000
3,000,000 GST Equipment Funding, Inc., Sr. Secured Notes 13.25% 5/1/2007 3,450,000
1,445,000 GST Telecommunications, Inc., Sr. Subordinated Notes Zero Coupon 12/15/2005 1,257,150
6,150,000 GST USA, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 4,735,500
4,250,000 Hermes Europe Railtel B.V., Sr. Notes 11.5% 8/15/2007 4,706,875
300,000 HighwayMaster Communications, Inc., Sr. Notes 13.75% 9/15/2005 306,000
4,300,000 HighwayMaster Communications, Inc., Sr. Notes 13.75% 9/15/2005 4,386,000
2,400,000 Hyperion Telecommunications, Inc., Sr. Secured Notes 12.25% 9/1/2004 2,664,000
6,200,000 Hyperion Telecommunications, Sr. Discount Notes, Series B Zero Coupon 4/15/2003 4,541,500
6,050,000 IntelCom Group (U.S.A.), Inc., Sr. Discount Ntoes Zero Coupon 5/1/2006 4,567,750
3,000,000 Intermedia Communication 8.875% 11/1/2007 3,090,000
4,900,000 Intermedia Communications, Inc., Sr. Notes 8.5% 1/15/2008 4,924,500
10,300,000 Ionica plc, Sr. Notes 13.5% 8/15/2006 8,806,500
1,200,000 Iridium LLC/Capital Corp., Sr. Notes 11.25% 7/15/2005 1,182,000
4,200,000 Iridium LLC/Capital Corp., Sr. Notes, Series A 13.0% 7/15/2005 4,410,000
4,850,000 Iridium LLC/Capital Corp., Sr. Notes, Series B 14.0% 7/15/2005 5,286,500
6,100,000 IXC Communications, Inc., Sr. Notes, Series B 12.5% 10/1/2005 7,060,750
3,000,000 Jordan Telecommunication Products, Sr. Notes 9.875% 8/1/2007 3,082,500
3,600,000 Knology Holdings, Inc., Units Zero Coupon 10/15/2007 1,980,000
10,800,000 McCaw International Ltd., Sr. Discount Notes Zero Coupon 4/15/2007 6,426,000
6,000,000 MGC Communications, Inc., Units 13.0% 10/1/2004 6,060,000
10,200,000 Microcell Telecommunications, Inc., Sr. Discount Notes Zero Coupon 6/1/2006 6,885,000
12,600,000 Millicom International Cellular, Sr. Discount Notes Zero Coupon 6/1/2006 9,292,500
3,600,000 Netia Holdings BV, Sr. Discount Notes Zero Coupon 11/1/2007 2,043,000
5,400,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 9/15/2007 3,429,000
3,000,000 Nextel Communications, Sr. Discount Notes Zero Coupon 10/31/2007 1,845,000
4,800,000 NEXTLINK Communications LLC, Sr. Discount Notes 12.5% 4/15/2006 5,496,000
2,400,000 NEXTLINK Communications, Inc., Sr. Notes 9.625% 10/1/2007 2,496,000
9,000,000 PageMart Nationwide, Inc., Sr. Discount Exchange Notes Zero Coupon 2/1/2005 7,717,500
5,500,000 Phonetel Technologies, Inc., Sr. Notes 12.0% 12/15/2006 5,733,750
3,650,000 Poland Telecom Finance BV 14% 12/1/2007 3,786,875
3,050,000 Price Communications Wireless, Sr. Subordinated Notes 11.75% 7/15/2007 3,324,500
5,400,000 Primus Telecommunications Group, Inc., Sr. Notes 11.75% 8/1/2004 5,832,000
9,650,000 RSL Communications Ltd., Units 12.25% 11/15/2006 10,566,750
4,200,000 Telegroup, Inc., Sr. Discount Notes Zero Coupon 11/1/2004 3,276,000
4,850,000 Teletrac, Inc., Sr. Notes 14% 8/1/2007 4,631,750
4,800,000 Teligent, Inc., Sr. Notes 11.5% 12/1/2007 4,836,000
14,400,000 UNIFI Communications, Inc., Sr. Notes 14.0% 3/1/2004 12,888,000
4,900,000 USA Mobile Communications, Inc., Sr. Notes 14.0% 11/1/2004 5,439,000
6,600,000 USN Communications, Inc., Sr. Discount Notes Zero Coupon 8/15/2004 5,049,000
2,400,000 VIALOG Corp., Units 12.75% 11/15/2001 2,520,000
8,400,000 Viatel, Inc., Sr. Discount Notes Zero Coupon 1/15/2005 6,909,000
4,500,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/2005 3,577,500
3,000,000 WinStar Communications, Inc., Unsecured Sr. Notes 14.5% 10/15/2005 3,975,000
-------------
235,589,525
-------------
Textiles & Apparel - 1.8%
4,300,000 Anvil Knitwear, Inc., Sr. Notes, Series B 10.875% 3/15/2007 4,439,750
1,900,000 Brazos Sportswear, Inc., Sr. Notes 10.5% 7/1/2007 1,900,000
6,050,000 CMI Industries, Inc., Sr. Subordinated Notes 9.5% 10/1/2003 5,974,375
4,200,000 Delta Mills, Inc., Sr. Notes 9.625% 9/1/2007 4,284,000
4,200,000 Dyersburg Corp., Sr. Subordinated Notes 9.75% 9/1/2007 4,410,000
3,100,000 Pillowtex Corp., Sr. Subordinated Notes 9% 12/15/2007 3,193,000
-------------
24,201,125
-------------
Transportation - 1.5%
4,200,000 Allied Holdings, Inc., Sr. Notes, Series B 8.625% 10/1/2007 4,315,500
8,650,000 Equimar Shipholdings Ltd., First Priority Mortgage Notes 9.875% 7/1/2007 8,131,000
4,200,000 Panoceanic Bulk Carriers, Ltd., 1st Preferred Shipping Notes 12% 12/15/2007 4,158,000
4,500,000 TFM, S.A. de C.V., Sr. Discount Debentures Zero Coupon 6/15/2009 2,868,750
-------------
19,473,250
-------------
Total Corporate Bonds (cost $1,037,836,385) 1,069,194,179
-------------
<CAPTION>
Shares Value
- ----------- -------------
PREFERRED STOCKS - 12.4% (a)
Convertible - 4.2%
59,000 AES Trust II, Convertible Preferred Stock $3,045,875
48,000 Big Flower Trust I, Convertible Preferred Stock 2,418,000
60,000 CalEnergy Capital Trust III, Convertible Preferred Stock 2,602,500
125,000 Echostar Communications Corp., Convertible Preferred Stock, Series C 5,812,500
60,000 Evergreen Media Corp., Convertible Preferred Stock 4,642,500
174,500 Granite Broadcasting Corp., Convertible Preferred Stock 8,463,250
90,000 Host Marriott Financial Trust, Convertible Preferred Stock 5,490,000
50,000 Intermedia Communication 1,418,750
83,800 Network Imaging Corp., Convertible Preferred Stock, Series A 712,300
61,000 Sinclair Broadcast Group, Inc., Convertible Preferred Stock 3,477,000
54,000 TIMET Capital Trust I, Convertible Preferred Stock 2,727,000
150,000 USX Corp. (Marathon Group), Convertible Preferred Stock 2,943,750
115,400 WorldCom, Inc., Convertible Preferred Stock 12,117,000
-------------
55,870,425
-------------
Non-Convertible - 8.2%
3,197 American Communications Services, Payment-In-Kind Preferred Stock 3,236,962
31,000 Benedek Communications Corp., Sr. Exchangeable Preferred Stock 4,030,000
28,417 Cablevision Systems Corp., Preferred Stock 3,289,268
55,963 Cablevision Systems Corp., Redeemable Exchangeable Preferred Stock, Series H 6,645,606
42,000 California Federal Bank, Non-cumulative Preferred Stock 4,756,500
47,137 Chancellor Media Corp., Payment-In-Kind Preferred Stock 5,432,539
105,000 Chevy Chase Capital Corp., Noncumulative Exchangeable Preferred Stock, Series A 5,460,000
46,372 Communications & Power Industries, Inc., Convertible Preferred Stock, Series B 4,880,653
2,162 Echostar Communications Corp., Exchangeable Payment-In-Kind Preferred Stock 2,226,860
49,500 Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 0 (b,d)
396,146 Harvard Industries, Inc., Exchangeable Payment-In-Kind Preferred Stock 693,256
3,102 Hyperion Telecommunications, Inc., Payment-In-Kind Preferred Stock, Series B 3,117,510
6,653 ICG Holdings, Inc., Preferred Stock 7,833,908
3,242 Intermedia Communications, Inc., Preferred Stock 3,971,450
3,089 IXC Communications, Inc., Payment-In-Kind Preferred Stock 3,614,130
1,800 J Crew Group, Preferred Stock 1,620,000
15,000 Jitney-Jungle Stores of America, Sr. Exchangeable Preferred Stock, Class A 2,280,000
97,199 NEXTLINK Communications, Inc., Payment-In-Kind Preferred Stock 6,050,638
6,418 Paxson Communications Corp., Payment-In-Kind Preferred Stock 6,482,180
240,000 Petroleum Heat & Power Co., Inc., Exchangeable Preferred Stock, Series B 4,860,000
50,696 Primedia, Inc., Payment-In-Kind Preferred Stock, Series B 5,475,180
33,000 Primedia, Inc., Preferred Stock 3,308,250
46,000 Primedia, Inc., Preferred Stock, Series D 4,853,000
147,500 River Bank America, Preferred Stock 3,503,125
44,651 SFX Broadcasting, Inc., Payment-In-Kind Preferred Stock 5,101,377
6,000,000 SIG Capital Trust I, Preferred Stock 6,120,000
-------------
108,842,392
-------------
Total Preferred Stocks (cost $161,128,412) 164,712,817
-------------
COMMON STOCKS & STOCK WARRANTS - 2.4% (a,b)
16,800 American Communications Services, Stock Warrants 1,604,400
3,600 American Telecasting, Inc., Stock Warrants 1,800
34,000 American Telecasting, Inc., Stock Warrants 17,000
175,000 Arch Communications Group, Common Stock 896,875
3,600 Australis Holdings Pty Ltd., Stock Warrants 36
17,150 Australis Media Ltd., Stock Warrants 172
156,000 Bell & Howell Co., Common Stock 3,773,250
35,475 Clearnet Communications, Inc., Stock Warrants 212,850
2,310 Communications & Power Industries, Inc., Common Stock 346,500
7,830 Consolidated Hydro, Inc., Stock Warrants 0 (d)
10,989 Consolidated Hydro, Inc., Stock Warrants, Class B 98,901 (d)
7,133 Consolidated Hydro, Inc., Stock Warrants, Class C 49,931 (d)
3,267 CS Wireless Systems, Inc., Common Stock 3
30,000 Echostar Communications Corp., Class A Common Stock 502,500
101,377 Gaylord Container Corp., Class A Common Stock 582,918
127,902 Gaylord Container Corp., Stock Warrants 735,437
18,126 Grand Union Co., Stock Warrants 181 (d)
36,251 Grand Union Co., Stock Warrants 363 (d)
65,000 Harvard Industries, Inc., Class B Common Stock 40,625
4,600 HighwayMaster Communications, Inc., Stock Warrants 55,200
13,800 Hyperion Telecommunications, Stock Warrants 828,000
139,000 IntelCom Group Communications, Inc., Common Stock 3,787,750
68,300 IntelCom Group (U.S.A.), Inc., Stock Warrants 1,212,325
5,900 Intermedia Communications of Florida, Stock Warrants 649,000
14,800 Ionica plc, Stock Warrants 1,184,000
3,000 Iridium World Communications, Stock Warrants 360,000
38,000 JPS Textiles Group, Common Stock, Class A 380 (d)
125,000 Magellan Health Services, Common Stock 2,687,500
10,800 McCaw International Ltd., Stock Warrants 27,000
50,379 Memorex Telex N.V., ADR, Common Stock 254
1,728 Memorex Telex N.V., ADR, Stock Warrants 0 (d)
40,800 Microcell Telecommunications, Inc., Stock Warrants 408
40,800 Microcell Telecommunications, Inc., Stock Warrants 558,144
384,500 MobileMedia Corp., Class A Common Stock 48,063
3,750 NEXTEL Communications, Stock Warrants 3,750
3,086 NEXTEL Communications, Stock Warrants 370
33,250 PageMart Nationwide, Inc., Common Stock 266,000
174,000 Pagemart Wireless, Inc., Class A Common Stock 1,370,250
50,300 Plantronics, Inc., Common Stock 2,012,000
155,000 Powertel, Inc., Common Stock 2,596,250
4,800 Primus Telecommunications Group, Inc., Stock Warrants 60,000
23,840 Protection One Alarm Monitoring, Stock Warrants 332,568
9,000 RSL Communications Ltd., Stock Warrants 765,000
4,850 Teletrac Holdings, Inc., Stock Warrants 266,750
5,000 Triangle Wire & Cable, Inc., Stock Warrants 0 (d)
7,400 UIH Australia/Pacific, Inc., Stock Warrants 5,920
14,400 UNIFI Communications, Inc., Stock Warrants 216,000
118,000 United International Holdings, Inc., Class A Common Stock 1,357,000
27,000 United International Holdings, Inc., Stock Warrants 324,000
66,000 USN Communications, Inc., Stock Warrants 660
240,666 Viatel, Inc., Common Stock 1,203,330
6,363 Wherehouse Entertainment, Inc., Class B Stock Warrants 15,908
6,363 Wherehouse Entertainment, Inc., Class C Stock Warrants 9,545
36,654 Wherehouse Entertainment, Inc., Stock Warrants, Class A 403,194
138,000 Wireless One, Inc., Common Stock 276,000
19,200 Wireless One, Inc., Stock Warrants 192
-------------
Total Common Stocks & Stock Warrants (cost $38,340,141) 31,746,453
-------------
<CAPTION>
Principal Maturity
Amount Rate Date Value
---------- ---------- ---------- ----------
SHORT-TERM SECURITIES - 4.3% (a)
Commercial Paper
$ 1,800,000 American Express Credit Corp. 6.15% 1/7/1998 $1,798,155
8,200,000 American Express Credit Corp. 6.1% 1/7/1998 8,191,663
10,000,000 Centerior Fuel Corp. 6.25% 1/5/1998 9,993,056
1,825,000 Delaware Funding Corp. 5.75% 1/30/1998 1,816,547
29,400,000 Koch Industries, Inc. 6.75% 1/2/1998 29,394,488
5,000,000 Triple-A One Funding Corp. 6.5% 1/9/1998 4,992,778
-------------
Total Short-Term Securities (at amortized cost) 56,186,687
-------------
Total Investments (cost $1,293,491,625) $1,321,840,136 (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, 1997, 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, 1997.
</TABLE>
<TABLE>
<CAPTION>
Acquisition
Security Date Cost
---------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Consolidated Hydro, Inc., Stock Warrants 2/8/1994 $171,277
Consolidated Hydro, Inc., Stock Warrants, Class B 11/18/1997 2,061,665
Consolidated Hydro, Inc., Stock Warrants, Class C 11/18/1997 0
Grand Union Co., Stock Warrants 6/20/1995 7,250
Grand Union Co., Stock Warrants 6/20/1995 3,625
Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 6/14/1993 5,703,525
JPS Textiles Group, Common Stock, Class A 1/13/1994 1,512,500
Memorex Telex N.V., ADR, Stock Warrants 3/25/1994 3,456
Triangle Wire & Cable, Inc., Stock Warrants 1/3/1992 500
</TABLE>
(e) Denotes variable rate obligations for which the current yield and
the next scheduled interest reset dates are shown.
(f) At December 31, 1997, the aggregate cost of securities for federal
tax purposes was $1,294,351,941 and the net unrealized appreciation
of investments based on that cost was $27,488,195 which is comprised
of $86,908,312 aggregate gross unrealized appreciation and
$59,420,117 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
INCOME PORTFOLIO
Portfolio of Investments
December 31, 1997
Principal Maturity
Amount Rate Date Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 50.9% (a)
Aerospace - 0.5%
$4,500,000 United Defense Industries, Inc., Sr. Subordinated Notes 8.75% 11/15/2007 $4,550,625
-------------
4,550,625
-------------
Automotive - 1.1%
5,000,000 Ford Motor Credit Co., Notes 6.375% 10/6/2000 5,024,510
5,000,000 General Motors Acceptance Corp., Unsecured Notes 7.125% 5/1/2003 5,192,270
-------------
10,216,780
-------------
Bank & Finance - 14.0%
6,000,000 Aon Capital A, Capital Securities 8.205% 1/1/2027 6,785,790
5,000,000 Associates Corp. of North America, Sr. Notes 9.125% 4/1/2000 5,305,900
4,500,000 Banc One Corp., Subordinated Debentures 8.0% 4/29/2027 5,137,114
2,000,000 Chase Manhattan Corp., Subordinated Notes 10.375% 3/15/1999 2,097,612
6,000,000 Chase Manhattan Corp., Subordinated Notes 9.375% 7/1/2001 6,602,790
5,000,000 Chemical New York Corp., Debentures 9.75% 6/15/2099 5,255,195
12,000,000 Equitable Life Assurance Society of the United States, Surplus Notes 6.95% 12/1/2005 12,236,592
8,000,000 GenAmerica Capital I, Capital Securities 8.525% 6/30/2002 8,510,776
6,500,000 General Electric Capital Corp., Debentures 8.85% 4/1/2005 7,481,097
6,000,000 Mellon Capital I, Capital Trust Preferred Securities 7.72% 12/1/2026 6,263,892
10,000,000 Metropolitan Life Insurance Co., Surplus Notes 7.7% 11/1/2015 10,620,700
5,000,000 New York Life Insurance Co., Surplus Notes 6.4% 12/15/2003 5,022,865
9,000,000 Prudential Insurance Co. of America, Capital Notes 6.875% 4/15/2003 9,107,514
8,000,000 Prudential Insurance Co., Surplus Notes 8.3% 7/1/2025 8,912,144
7,500,000 Societe Generale Real Estate Investment Trust, LIBOR Bonds, Series A 7.64% 12/29/2049 7,529,265
6,000,000 Societe-Generale- New York, Subordinated Notes 9.875% 7/15/2003 6,959,322
5,000,000 Societe-Generale- New York, Subordinated Notes 7.4% 6/1/2006 5,225,345
7,500,000 Wells Fargo Capital, Capital Trust Preferred Securities 7.73% 12/1/2026 7,656,975
-------------
126,710,888
-------------
Broadcasting - 3.8%
4,000,000 Cablevision Systems Corp., Sr. Notes 7.875% 12/15/2007 4,100,000
3,000,000 Chancellor Media Corp., Sr. Subordinated Notes 8.125% 12/15/2007 2,951,250
3,500,000 Groupo Televisa S.A., Sr. Notes, Series A 11.375% 5/15/2003 3,832,500
5,800,000 Rogers Cablesystems, Inc., Sr. Secured Second Priority Notes 9.625% 8/1/2002 6,206,000
8,000,000 TKR Cable I, Inc., Sr. Debentures 10.5% 10/30/2007 8,893,152
5,000,000 Viacom, Inc., Subordinated Debentures 8.0% 7/7/2006 5,068,750
3,000,000 Westinghouse Electric Corp., Notes 8.875% 6/1/2001 3,170,427
-------------
34,222,079
-------------
Computers & Office Equipment - 1.2%
10,000,000 International Business Machines Corp., Debentures 7.125% 12/1/2096 10,450,980
-------------
Containers & Packaging - 0.5%
4,000,000 Owens-Illinois, Inc., Sr. Notes 7.85% 5/15/2004 4,205,012
-------------
Drugs & Health Care - 1.6%
5,000,000 Allegiance Corp., Debentures 7.8% 10/15/2016 5,453,915
1,500,000 Athena Neurosciences, Inc., Convertible Bonds 4.75% 11/15/2004 1,501,875
5,000,000 McKesson Finance Company of Canada, Sr. Notes 6.55% 11/1/2002 5,071,380
2,000,000 Playtex Products Inc., Unsecured Sr. Notes 8.875% 7/15/2004 2,042,500
1,500,000 Roche Holdings, Inc., Convertible Notes Zero Coupon 4/20/2010 832,500
-------------
14,902,170
-------------
Electric Utilities - 7.3%
2,000,000 AES Corp., Sr. Subordinated Notes 10.25% 7/15/2006 2,185,000
6,000,000 CalEnergy Company, Inc., Sr. Notes 7.63% 10/15/2007 6,107,166
1,500,000 Calpine Corp., Sr. Notes 8.75% 7/15/2007 1,537,500
5,000,000 Cleveland Electric Illumination Co., First Mortgage Bonds 7.625% 8/1/2002 5,169,995
7,000,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 7,213,899
5,500,000 Commonwealth Edison Co., Notes 7.625% 1/15/2007 5,794,640
5,000,000 Connecticut Light & Power Co., First Refunding Mortgage Bonds,
Series 97C 7.75% 6/1/2002 5,062,895
5,000,000 Consolidated Edison Co. NY, Inc., Debentures 6.45% 12/1/2007 4,999,620
4,000,000 El Paso Electric Co., First Mortgage Bonds, Series D 8.9% 2/1/2006 4,425,000
6,500,000 Empresa Electrica Pehuienche S.A., Notes 7.3% 5/1/2003 6,688,754
10,000,000 Korea Electric Power Corp., Debentures 6.75% 8/1/2027 7,487,480
4,000,000 NRG Energy, Inc., Sr. Notes 7.5% 6/15/2007 4,147,948
5,000,000 Texas Utilities Electric Company, Debentures 7.17% 8/1/2007 5,204,170
-------------
66,024,067
-------------
Electronics - 0.1%
750,000 Motorola, Inc., Convertible Liquid Yield Option Notes Zero Coupon 9/27/2013 570,937
-------------
Food & Beverage - 1.3%
2,000,000 AmeriServe Food Distribution, Inc., Sr. Notes 8.875% 10/15/2006 2,020,000
10,000,000 Archer Daniels Midland Co., Bonds 6.75% 12/15/2027 10,047,450
-------------
12,067,450
-------------
Hospital Management - 1.3%
3,000,000 Integrated Health Services, Inc., Sr. Subordinated Notes 9.25% 1/15/2008 3,067,500
4,000,000 Quorum Health Group, Inc., Sr. Subordinated Notes 8.75% 11/1/2005 4,145,000
2,500,000 Tenet Healthcare Corp., Sr. Notes 8.625% 12/1/2003 2,653,808
2,000,000 Tenet Healthcare Corp., Sr. Subordinated Notes 10.125% 3/1/2005 2,192,500
-------------
12,058,808
-------------
Household Products - 0.7%
5,000,000 Procter & Gamble, Guaranteed ESOP Debentures 9.36% 1/1/2021 6,442,660
-------------
Leisure & Entertainment - 0.8%
6,000,000 Time Warner, Inc., Debentures 9.125% 1/15/2013 7,110,000
-------------
Oil & Gas - 1.9%
3,000,000 Gulf Canada Resources Ltd., Sr. Subordinated Debentures 9.625% 7/1/2005 3,270,000
4,000,000 Newfield Exploration Company, Sr. Notes 7.45% 10/15/2007 4,051,208
1,000,000 Ocean Energy, Inc., Sr. Notes 8.875% 7/15/2007 1,065,000
9,000,000 Triton Energy Ltd., Sr. Notes 8.75% 4/15/2002 9,119,943
-------------
17,506,151
-------------
Oil & Oil Service - 0.1%
1,000,000 Baker Hughes, Inc., Convertible Liquid Yield Option Notes Zero Coupon 5/5/2008 860,000
350,000 Diamond Offshore Drilling, Inc., Convertible Subordinated Notes 3.75% 2/15/2007 473,375
-------------
1,333,375
-------------
Paper & Forest Products - 0.3%
3,500,000 Indah Kiat Finance Mauritius, Sr. Guaranteed Notes 10.0% 7/1/2007 2,948,750
-------------
Petroleum - 2.7%
3,000,000 Flores & Rucks, Inc., Sr. Subordinated Notes 9.75% 10/1/2006 3,311,250
4,635,150 Mobil Oil Corp., ESOP Sinking Fund Debentures 9.17% 2/29/2000 4,795,619
3,000,000 Oryx Energy Co., Notes 8.375% 7/15/2004 3,243,216
10,500,000 Petroliam Nasional BHD, Notes 7.75% 8/15/2015 9,669,702
3,000,000 United Meridian Corp., Sr. Subordinated Notes 10.375% 10/15/2005 3,330,000
-------------
24,349,787
-------------
Pollution Control - 0.2%
1,500,000 USA Waste Services, Inc., Convertible Subordinated Notes 4.0% 2/1/2002 1,642,500
-------------
Publishing & Printing - 0.6%
3,500,000 Belo (A.H.) Corp., Sr. Notes 7.125% 6/1/2007 3,636,255
1,500,000 Omnicom Group Inc., Convertible Subordinated Debentures 2.25% 1/16/2013 1,571,250
-------------
5,207,505
-------------
Railroads - 1.7%
5,000,000 Norfolk Southern Corp., Bonds 7.8% 5/152027 5,657,960
5,500,000 Norfolk Southern Corp., Notes 6.875% 5/1/2001 5,609,120
4,000,000 Norfolk Southern Corp., Notes 6.95% 5/1/2002 4,102,716
-------------
15,369,796
-------------
Retail - 6.4%
1,250,000 Costco Companies, Inc., Convertible Subordinated Notes Zero Coupon 8/19/2017 745,312
250,000 Costco Companies, Inc., Subordinated Notes Zero Coupon 8/19/2007 149,063
8,500,000 Dayton Hudson Corp., Notes 6.4% 2/15/2003 8,541,880
6,000,000 Federated Department Stores, Inc., Sr. Debentures 6.79% 7/15/2027 6,123,084
4,000,000 Federated Department Stores, Sr. Notes 8.5% 6/15/2003 4,371,172
3,000,000 Fleming Companies, Inc., Sr. Subordinated Notes 10.5% 12/1/2004 3,157,500
6,800,000 Kroger Co. (The), Sr. Notes 8.15% 7/15/2006 7,498,054
8,000,000 Penney (J.C.) Co., Inc., Notes 6.95% 4/1/2000 8,147,456
2,500,000 Rite Aid Corp., Capital Notes 5.25% 9/15/2002 2,700,000
6,000,000 Sears Roebuck Acceptance Corp, Medium Term Notes, Series III 7.03% 6/4/2003 6,197,562
10,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes, Series II 6.86% 7/3/2001 10,196,730
-------------
57,827,813
-------------
Services - 0.8%
750,000 CUC International, Inc., Convertible Subordinated Notes 3.0% 2/15/2002 940,313
6,000,000 Electronic Data Systems Corp., Notes 6.85% 5/15/2000 6,106,236
750,000 Interpublic Group of Companies, Convertible Subordinated Debentures 1.80% 9/16/2004 617,812
-------------
7,664,361
-------------
Telephone - 1.2%
3,000,000 Philippine Long Distance Telephone, Notes 7.85% 3/6/2007 2,647,500
8,000,000 US West Capital Funding, Inc., Notes 6.85% 1/15/2002 8,140,088
-------------
10,787,588
-------------
Textiles & Apparel - 0.8%
7,000,000 Levi Strauss & Co., Notes 6.8% 11/1/2003 7,164,927
-------------
Total Corporate Bonds (cost $451,761,795) 461,335,009
-------------
FOREIGN GOVERNMENT BONDS - 3.3% (a,c)
5,000,000 British Columbia Hydro & Power, Debentures 12.5% 9/1/2013 $5,411,695
7,500,000 Korea Development Bank (The), Bonds 7.25% 5/15/2006 5,909,422
5,000,000 Korea Development Bank, Bonds 7.125% 9/17/2001 4,259,945
3,000,000 Korea Development Bank, Unsecured Bonds 6.625% 11/21/2003 2,415,633
6,000,000 Ontario Province, Canada, Debentures 11.75% 4/25/2013 6,397,020
2,500,000 Ontario Province, Canada, Sr. Bonds 7.375% 1/27/2003 2,627,900
3,000,000 Republic Of Poland, Unsecured Bonds 4.0% 10/27/2014 2,598,750 (b)
-------------
Total Foreign Government Bonds (cost $33,157,871) 29,620,365
-------------
ASSET-BACKED SECURITIES - 14.6% (a)
12,000,000 AESOP Funding II L.L.C., Rental Car Notes, Series 1997-1, Class A-2 6.4% 10/20/2003 12,117,600
11,000,000 Chase Manhattan Credit Card, Series 1996-4, Class A 6.73% 2/15/2002 11,119,130
7,223,736 Chase Manhattan Grantor Trust, Series 1996-B-A 6.61% 9/15/2002 7,282,031
5,000,000 CS First Boston Mortgage Security Corp., 1996-2 Class A4 6.62% 9/25/2009 5,037,400
5,000,000 CS First Boston Mortgage Security Corp., Series 1997-1-A3 6.91% 5/25/2007 5,047,200
5,000,000 CS First Boston Mortgage Security Corp., Series 1997-1-A4 7.15% 5/25/2010 5,115,550
20,000,000 Deutsche Floorplan Receivables Master Trust, Series 1994-1-A 5.6% 2/15/2001 20,052,000 (b)
10,000,000 Discover Card Master Trust I, Series 1996-3-A 6.05% 8/18/2008 9,856,800
10,000,000 Proffitt's Credit Card Master Trust 6.5% 12/15/2005 10,132,900
12,000,000 Standard Credit Master Trust 1, Credit Card Participation 6.55% 10/7/2007 12,190,440
15,000,000 World Financial Network Credit Card Master Trust, Series 1996-B 6.95% 4/15/2006 15,504,285
18,000,000 World Omni Auto Lease Trust 6.9% 6/25/2003 18,285,300
-------------
Total Asset-Backed Securities (cost $130,020,236) 131,740,636
-------------
MORTGAGE-BACKED SECURITIES - 11.3% (a)
32,425,897 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 2011 - 2012 31,977,727 (d)
32,000,000 Federal National Mortgage Association, Participation Certificates 6.5% 1/15/2028 31,620,000 (d)
38,935,367 Government National Mortgage Association, Modified Pass Through 6.5% 2/15/2027 38,596,240
-------------
Total Mortgage-Backed Securities (cost $100,490,604) 102,193,967
-------------
U.S. GOVERNMENT - 11.0% (a)
50,000,000 U.S. Treasury Bonds 6.375% - 12.0% 8/15/2027 61,428,938
34,500,000 U.S. Treasury Notes 6.25% - 7.875% 2003 - 2004 37,815,347
-------------
Total U.S. Government (cost $95,191,895) 99,244,285
-------------
<CAPTION>
Shares
- -----------
COMMON STOCKS - 0.4% (a)
7,500 Banc One Corp., Common Stock 407,344
10,000 CarrAmerica Realty Corp., Common Stock 316,875
6,000 Cresent Real Estate Equities, Common Stock 236,250
5,000 Federal National Mortgage Association, Common Stock 285,313
10,000 First Industrial Realty Trust, Inc., Common Stock 361,250
15,000 First Union Corp., Common Stock 768,750
5,000 Highwoods Properties, Inc., Common Stock 185,938
10,000 Simon Debartolo Group, Inc., Common Stock 326,875
4,000 Spieker Properties, Inc., Common Stock 171,500
-------------
Total Common Stocks (cost $2,811,774) 3,060,095
-------------
PREFERRED STOCKS - 1.6% (a)
35,000 AES Trust II., Convertible Preferred Stock 1,806,875
15,000 AirTouch Communications, Inc., Convertible Preferred Stock 934,687
20,000 Conseco, Inc., Convertible Preferred Stock 1,025,000
22,500 Houston Industries, Inc., Preferred Stock 1,283,906
10,000 McKesson Financing Trust, Convertible Preferred Stock 717,500
25,000 National Australia Banks, Preferred Stock 710,938
45,000 Newell Financial Trust I., Convertible Preferred Stock 2,351,250
10,000 Primedia Inc., Preferred Stock 1,002,500
20,000 Primedia Inc., Preferred Stock, Series D 2,110,000
17,500 Security Capital Industrial Trust Ltd., Preferred Stock 557,812
17,500 Security Capital Pacific Trust, Preferred Stock 573,125
15,000 Unocal Capital Trust, Preferred Stock 838,125
-------------
Total Preferred Stocks (cost $13,261,559) 13,911,718
-------------
<CAPTION>
Principal Maturity
Amount Rate Date
---------- ---------- ----------
SHORT-TERM SECURITIES - 6.9% (a)
Commercial Paper - 5.7%
$10,000,000 Commercial Credit Co. 5.85% 1/20/1998 9,969,125
24,500,000 Gillette Co. 6.75% 1/2/1998 24,495,406
14,800,000 Merck & Co., Inc. 6.25% 1/5/1998 14,789,722
2,500,000 Met-Life Funding, Inc. 5.72% 1/23/1998 2,491,261
-------------
51,745,514
-------------
U.S. Government Agency - 1.2%
10,769,000 Federal Home Loan Bank, Consolidated Discount Notes 5.69% 1/14/1998 10,746,873
-------------
Total Short-Term Securities (at amortized cost) 62,492,387
-------------
Total Investments (cost $889,188,121) $903,598,462 (e)
=============
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, 1997, the aggregate cost of securities for federal
income tax purposes was $889,725,087 and the net unrealized
appreciation of investments based on that cost was $13,873,375
which is comprised of $22,741,014 aggregate gross unrealized
appreciation and $8,867,639 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
MONEY MARKET PORTFOLIO
Portfolio of Investments
December 31, 1997
Principal Maturity
Amount Rate Date Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BANK NOTES - 3.3% (a)
$2,000,000 Bank of America, National Trust & Savings Association 5.84% 5/5/1998 $2,000,523
2,000,000 Wachovia Bank North Carolina, N.A. 6.20% 4/6/1998 1,999,504
-------------
4,000,027
-------------
COMMERCIAL PAPER - 86.1% (a)
Banking-Domestic - 4.4%
1,661,000 CommEd Fuel Company, Inc. (First National Bank of Chicago,
Direct Pay Letter of Credit) 5.93% 1/5/1998 1,659,911
3,650,000 Metrocrest Hospital Authority, Series 1989 (Bank of New York,
Direct Pay Letter of Credit) 5.72% 2/3/1998 3,631,138
-------------
5,291,049
-------------
Banking-Foreign - 17.8%
2,000,000 Banco BCN Barclays (Bahamas) (Barclay's Bank, plc,
Direct Pay Letter of Credit 5.94% 1/20/1998 1,993,783
2,000,000 CEMEX, S.A. de C.V. (Credit Suisse, Direct Pay Letter of Credit) 5.67% 1/16/1998 1,995,342
1,500,000 China Merchants (Cayman) Inc. (Credit Suisse,
Direct Pay Letter of Credit) 5.81% 2/23/1998 1,487,368
2,000,000 China Merchants (Cayman) Inc. (Credit Suisse,
Direct Pay Letter of Credit) 5.73% 2/17/1998 1,985,273
2,000,000 Comision Federal De Electricidad (Westdeutsche Landesbank,
Direct Pay Letter of Credit) 5.85% 2/26/1998 1,982,049
2,000,000 Comision Federal De Electricidad (Westdeutsche Landesbank,
Direct Pay Letter of Credit) 5.87% 3/13/1998 1,977,201
1,400,000 Glencore Finance (Bermuda) Ltd (Union Bank of Switzerland,
Direct Pay Letter of Credit) 5.69% 2/4/1998 1,392,648
1,000,000 Glencore Finance (Bermuda) Ltd (Union Bank of Switzerland,
Direct Pay Letter of Credit) 5.71% 2/4/1998 994,739
1,500,000 Indiana Development Board Parish Calcasieu, Series 1996
(ABN AMRO Bank, Direct Pay Letter of Credit) 5.75% 2/18/1998 1,500,000
2,000,000 UBS Finance (Delaware) Inc. (Union Bank of Switzerland) 7.00% 1/2/1998 1,999,611
2,240,000 U.S. Prime Property, Inc. (ABN AMRO, Direct Pay Letter of Credit) 5.65% 3/9/1998 2,216,988
2,000,000 U.S. Prime Property, Inc. (ABN AMRO, Direct Pay Letter of Credit) 5.72% 2/12/1998 1,987,027
-------------
21,512,029
-------------
Computer & Office Equipment - 0.4%
500,000 IBM Credit Corp. 5.73% 3/9/1998 494,817
-------------
Education - 7.4%
2,000,000 Harvard University 6.75% 1/2/98 1,999,625
2,000,000 Leland Stanford Jr. University 5.75% 4/2/98 1,972,043
1,000,000 Leland Stanford Jr. University 5.71% 4/23/98 982,764
1,000,000 Yale University 5.80% 3/2/98 990,467
1,000,000 Yale University 5.86% 3/23/98 987,018
2,000,000 Yale University 5.85% 2/25/98 1,982,339
-------------
8,914,256
-------------
Finance-Automotive - 1.3%
200,000 Ford Motor Credit Co. 6.51% 1/8/1998 199,747
300,000 General Motors Acceptance Corp 6.27% 1/14/1998 299,323
225,000 General Motors Acceptance Corp 5.94% 1/8/1998 224,742
900,000 General Motors Acceptance Corp 6.23% 1/21/1998 896,900
-------------
1,620,712
-------------
Finance-Commercial - 6.9%
310,000 General Electric Capital Corp. 5.69% 2/19/1998 307,654
130,000 General Electric Capital Corp. 5.76% 5/6/1998 127,490
2,000,000 General Electric Credit Capital Services
(GTD General Electric Capital Corp.) 5.85% 3/3/1998 1,980,446
2,000,000 General Electric Credit Capital Services
(GTD General Electric Capital Corp.) 5.73% 3/5/1998 1,980,330
2,000,000 Norwest Financial, Inc. 5.64% 1/29/1998 1,991,382
2,000,000 Norwest Financial, Inc. 5.70% 2/26/1998 1,982,609
-------------
8,369,911
-------------
Finance-Consumer - 9.6%
1,500,000 Associates Corp of North America 5.80% 1/14/1998 1,496,885
1,000,000 Associates Financial Services (GTD Associates Corp of North America) 6.11% 1/7/1998 998,983
1,100,000 Associates Financial Services Co Puerto Rico
(GTD Associates Corp of North America) 5.71% 2/12/1998 1,092,788
2,000,000 Associates Financial Services Co Puerto Rico
(GTD Associates Corp of North America) 5.93% 1/20/1998 1,993,772
2,000,000 AVCO Financial Services Inc. 5.76% 1/23/1998 1,993,021
2,000,000 Penney (J.C.) Funding Corp. 5.77% 2/19/1998 1,984,538
2,000,000 Penney (J.C.) Funding Corp. 5.67% 1/30/1998 1,990,994
-------------
11,550,981
-------------
Finance-Structured - 11.0%
2,000,000 Delaware Funding Corp. 6.03% 1/16/1998 1,995,000
620,000 Delaware Funding Corp. 6.00% 1/20/1998 618,043
1,000,000 Delaware Funding Corp. 5.91% 2/20/1998 991,875
2,000,000 Preferred Receivables Funding 5.88% 1/20/1998 1,993,846
2,000,000 Preferred Receivables Funding 6.03% 1/20/1998 1,993,667
293,000 Triple-A One Funding 6.17% 1/15/1998 292,300
2,000,000 Triple-A One Funding 5.93% 1/14/1998 1,995,739
459,000 Triple-A One Funding 6.19% 1/5/1998 458,685
1,000,000 Triple-A One Funding 6.51% 1/9/1998 998,556
2,000,000 Triple-A One Funding 5.95% 1/9/1998 1,997,369
-------------
13,335,080
-------------
Financial Services - 0.3%
300,000 USAA Capital Corp. 5.80% 2/19/1998 297,652
-------------
Food & Beverage - 0.8%
1,000,000 Heinz (H.J.) Co. 5.79% 2/24/1998 991,390
-------------
Industrial - 14.1%
2,000,000 Chevron Transport Corp. (GTD Chevron Corp.) 5.83% 2/5/1998 1,988,761
2,000,000 Chevron Transport Corp. (GTD Chevron Corp.) 5.73% 2/25/1998 1,982,828
2,000,000 Dupont (E.I.) de Nemours 5.75% 6/2/1998 1,953,387
1,900,000 Dupont (E.I.) de Nemours 6.14% 1/9/1998 1,897,416
5,200,000 Merck and Co, Inc. 6.26% 1/5/1998 5,196,389
2,000,000 Monsanto Co. 5.81% 5/11/1998 1,959,194
2,000,000 Monsanto Co. 5.62% 2/4/1998 1,989,592
-------------
16,967,567
-------------
Insurance - 2.5%
1,000,000 A.I. Credit Corp. 5.67% 1/15/1998 997,849
410,000 Met-Life Funding Inc. 5.84% 3/25/1998 404,565
1,242,000 Met-Life Funding Inc. 5.78% 1/29/1998 1,236,474
385,000 Met-Life Funding Inc. 5.83% 3/17/1998 380,388
-------------
3,019,276
-------------
Sovereign/Foreign Government - 0.4%
500,000 Sweden (Kingdom of) 5.76% 3/16/1998 494,193
-------------
Transportation - 0.2%
272,000 UPS Service of America, Inc. 5.68% 2/13/1998 270,198
-------------
U.S. Municipal - 9.0%
2,000,000 California Pollution Control Finance Authority
(GTD Shell Oil Co.) 5.80% 3/6/1998 2,000,000
4,020,000 Gulf Coast Waste Disposal Authority (GTD Amoco Oil) 5.81% 3/12/1998 4,020,000
3,100,000 City of New York Government Bonds, Fiscal 1995, Series B
(GTD FGIC SPI) 5.94% 2/20/1998 3,100,000
1,800,000 City of Whiting, Indiana Series 1995, Sewage & Waste Disposal
(GTD Amoco Oil Co.) 5.85% 4/9/1998 1,800,000
-------------
10,920,000
-------------
Total Commercial Paper 104,049,111
-------------
CERTIFICATES OF DEPOSIT - 0.8% (a)
Domestic
1,000,000 Bankers Trust Company, New York 6.00% 8/28/1998 999,813
-------------
MEDIUM TERM NOTES - 1.7% (a)
2,000,000 Abbey National Treasury Service PLC 5.72% 4/2/1998 2,000,941
-------------
VARIABLE RATE NOTES - 7.5% (a,b)
2,000,000 Federal Home Loan Bank 5.87% 1/7/1998 1,998,987
5,000,000 IBM Credit Corp. 5.61% 2/16/1998 4,998,361
2,000,000 Illinois Student Assistance Commission 5.92% 1/7/1998 2,000,000
-------------
8,997,348
-------------
OTHER - 0.6% (a,b)
380,000 Federal Home Loan Bank, Discount Notes 5.83% 2/18/1998 377,112
290,000 Federated Master Trust 5.38% 1/2/1998 290,000
-------------
667,112
-------------
Total Investments (at amortized cost) $120,714,352 (c)
=============
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) Also represents cost for federal income tax purposes.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
OPPORTUNITY GROWTH PORTFOLIO
Financial Statements
Statement of Assets and Liabilities
December 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $415,816,402) $412,606,261
Cash 128,375
Receivable for investment securities sold 3,080,652
Dividend and interest receivable 384,355
------------
Total assets 416,199,643
------------
LIABILITIES:
Payable for investment securities purchased 24,735,860
------------
NET ASSETS $391,463,783
============
NET ASSETS CONSIST OF:
Paid-in capital (33,897,420 shares of capital
stock outstanding) $393,535,909
Accumulated net realized gain from sale
of investments 1,138,015
Unrealized net depreciation of investments (3,210,141)
------------
NET ASSETS $391,463,783
============
Net asset value and public offering price per share
($391,463,783 divided by 33,897,420 shares
of capital stock outstanding) $11.55
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 840,684
Interest income 2,578,577
------------
Total income 3,419,261
------------
Expenses --
Investment advisory fee 1,301,986
------------
Net investment income 2,117,275
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investment transactions 4,242,763
Net realized gain on closed or expired option
contracts written 593,121
------------
Net realized gain on investments 4,835,884
Net change in unrealized depreciation
of investments 1,130,770
------------
Net gain on investments 5,966,654
------------
Net increase in net assets resulting
from operations $ 8,083,929
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Periods Ended December 31, 1997 and 1996
For the period from
January 18, 1996
Year Ended (effective date) to
December 31, 1997 December 31, 1996
----------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 2,117,275 $ 344,855
Net realized gain on investments 4,835,884 4,492,663
Net change in unrealized appreciation or depreciation
of investments 1,130,770 (4,340,911)
------------ ------------
Net increase in net assets resulting from operations 8,083,929 496,607
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income (2,117,275) (344,855)
Net realized gain on investments -- (8,190,532)
------------ ------------
Total distributions (2,117,275) (8,535,387)
------------ ------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 144,261,099 247,867,947
Reinvested dividend distributions 2,117,275 8,535,387
Cost of shares redeemed (7,432,544) (1,813,255)
------------ ------------
Net increase in net assets from capital stock transactions 138,945,830 254,590,079
------------ ------------
Net increase in net assets 144,912,484 246,551,299
NET ASSETS:
Beginning of period 246,551,299 --
------------ ------------
End of period $391,463,783 $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, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $280,843,781) $291,196,981
Cash (including foreign currency holdings
of $4,351,368) 4,388,680
Dividend and interest receivable 377,982
------------
Total assets 295,963,643
------------
LIABILITIES:
Payable for investment securities purchased 8,745,977
Unrealized depreciation of foreign currency
contracts held 13,919
------------
Total liabilities 8,759,896
------------
NET ASSETS $287,203,747
============
NET ASSETS CONSIST OF:
Paid-in capital (25,826,988 shares of capital
stock outstanding) $276,919,829
Accumulated net realized loss from sale
of investments
and foreign currency transactions (105,500)
Unrealized net appreciation of investments and
on translation of assets
and liabilities in foreign currencies 10,389,418
------------
NET ASSETS $287,203,747
============
Net asset value and public offering price per share
($287,203,747 divided by 25,826,988 shares of
capital stock outstanding) $11.12
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $528,766) $ 3,932,945
Interest income 791,942
------------
Total income 4,724,887
------------
Expenses --
Investment advisory fee 2,080,364
------------
Net investment income 2,644,523
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investment transactions 805,176
Net realized loss on foreign currency transactions (38,950)
------------
Net realized gain on investments and foreign
currency transactions 766,226
------------
Net change in unrealized appreciation of investments 20,309
Net change in unrealized appreciation on translation
of assets and liabilities in foreign currencies 27,332
------------
Net change in unrealized appreciation of investments
and on translation of assets and liabilities in
foreign currencies 47,641
------------
Net gain on investments and foreign currency 813,867
------------
Net increase in net assets resulting
from operations $ 3,458,390
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Periods Ended December 31, 1997 and 1996
For the period from
January 18, 1996
Year Ended (effective date) to
December 31, 1997 December 31, 1996
----------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $2,644,523 $1,200,906
Net realized gain on investments
and foreign currency transactions 766,226 128,544
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and liabilities
in foreign currencies 47,641 10,341,776
------------ ------------
Net increase in net assets resulting from operations 3,458,390 11,671,226
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS --
Net investment income (3,251,752) (1,432,845)
Net realized gain on investments (161,102) --
------------ ------------
Total distributions (3,412,854) (1,432,845)
------------ ------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 112,489,907 163,860,588
Reinvested dividend distributions 3,412,854 1,432,845
Cost of shares redeemed (2,837,098) (1,439,266)
------------ ------------
Net increase in net assets from capital stock transactions 113,065,663 163,854,167
------------ ------------
Net increase in net assets 113,111,199 174,092,548
NET ASSETS:
Beginning of period 174,092,548 --
------------ ------------
End of period $287,203,747 $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, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $2,190,348,401) $2,449,976,440
Cash 9,259
Receivable for investment securities sold 15,171,183
Dividend and interest receivable 2,457,355
--------------
Total assets 2,467,614,237
--------------
LIABILITIES:
Payable for investment securities purchased 41,476,557
--------------
Total liabilities 41,476,557
--------------
NET ASSETS $2,426,137,680
==============
NET ASSETS CONSIST OF:
Paid-in capital (112,406,211 shares of capital
stock outstanding) $1,792,272,399
Accumulated net realized gain from sale
of investments 374,237,243
Unrealized net appreciation of investments 259,628,038
--------------
NET ASSETS $2,426,137,680
==============
Net asset value and public offering price per share
($2,426,137,680 divided by 112,406,211 shares
of capital stock outstanding) $21.58
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 22,808,333
Interest income 8,462,581
------------
Total income 31,270,914
------------
Expenses --
Investment advisory fee 8,300,117
------------
Net investment income 22,970,797
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investment transactions 388,493,658
Net realized gain on closed or expired option
contracts written 1,319,749
------------
Net realized gain on investments 389,813,407
Net change in unrealized appreciation
of investments 118,290,444
------------
Net gain on investments 508,103,851
------------
Net increase in net assets resulting
from operations $531,074,648
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended December 31, 1997 and 1996
1997 1996
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 22,970,797 $ 19,859,156
Net realized gain on investments 389,813,407 226,017,880
Net change in unrealized appreciation or depreciation
of investments 118,290,444 40,726,963
-------------- --------------
Net increase in net assets resulting from operations 531,074,648 286,603,999
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income (22,970,797) (19,859,156)
Net realized gain on investments (239,942,399) (156,587,523)
-------------- --------------
Total distributions (262,913,196) (176,446,679)
-------------- --------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 268,095,814 226,899,132
Reinvested dividend distributions 262,913,196 176,446,679
Cost of shares redeemed (31,613,719) (28,066,347)
-------------- --------------
Net increase in net assets from capital stock transactions 499,395,291 375,279,464
-------------- --------------
Net increase in net assets 767,556,743 485,436,784
NET ASSETS:
Beginning of period 1,658,580,937 1,173,144,153
-------------- --------------
End of period $2,426,137,680 $1,658,580,937
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
HIGH YIELD PORTFOLIO
Financial Statements
Statement of Assets and Liabilities
December 31, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $1,293,491,625) $1,321,840,136
Cash 57,008
Receivable for investment securities sold 2,161,619
Interest and dividend receivable 22,439,683
--------------
Total assets 1,346,498,446
--------------
LIABILITIES:
Payable for investment securities purchased 1,935,750
--------------
Total liabilities 1,935,750
--------------
NET ASSETS $1,344,562,696
==============
NET ASSETS CONSIST OF:
Paid-in capital (128,831,291 shares of capital
stock outstanding) $1,296,384,079
Undistributed net investment income 852,897
Accumulated net realized gain from sale
of investments 18,977,209
Unrealized net appreciation of investments 28,348,511
--------------
NET ASSETS $1,344,562,696
==============
Net asset value and public offering price per share
($1,344,562,696 divided by 128,831,291 shares of
capital stock outstanding) $10.44
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $106,752,190
Dividend income 11,318,144
------------
Total income 118,070,334
------------
Expenses --
Investment advisory fee 4,734,301
------------
Net investment income 113,336,033
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investment transactions 26,147,702
Net change in unrealized appreciation of investments 18,136,291
------------
Net gain on investments 44,283,993
------------
Net increase in net assets resulting
from operations $157,620,026
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended December 31, 1997 and 1996
1997 1996
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 113,336,033 $ 89,021,168
Net realized gain on investment transactions 26,147,702 19,530,710
Net change in unrealized appreciation or depreciation
of investments 18,136,291 (9,358,262)
-------------- --------------
Net increase in net assets resulting from operations 157,620,026 99,193,616
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income (112,483,136) (89,021,168)
-------------- --------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 180,112,872 156,539,510
Reinvested dividend distributions 112,483,136 89,367,857
Cost of shares redeemed (19,906,718) (21,833,105)
-------------- --------------
Net increase in net assets from capital stock transactions 272,689,290 224,074,262
-------------- --------------
Net increase in net assets 317,826,180 234,246,710
NET ASSETS:
Beginning of period 1,026,736,516 792,489,806
-------------- --------------
End of period (including undistributed net investment
income of $852,897 and $0 respectively) $1,344,562,696 $1,026,736,516
============== ==============
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, 1997
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $889,188,121) $903,598,462
Cash 77,238
Receivable for investment securities sold 11,930,172
Interest and dividend receivable 12,278,500
------------
Total assets 927,884,372
------------
LIABILITIES:
Payable for investment securities purchased 47,444,804
------------
NET ASSETS $880,439,568
============
NET ASSETS CONSIST OF:
Paid-in capital (88,782,557 shares of capital
stock outstanding) $884,551,031
Accumulated net realized loss from sale
of investments (18,521,803)
Unrealized net appreciation of investments 14,410,340
------------
NET ASSETS $880,439,568
============
Net asset value and public offering price per share
($880,439,568 divided by 88,782,557 shares of
capital stock outstanding) $9.92
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 57,412,253
Dividend income 970,682
------------
Total income 58,382,935
------------
Expenses --
Investment advisory fee 3,298,189
------------
Net investment income 55,084,746
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 7,274,687
Net realized gain on closed or expired option
contracts written 234,154
Net realized loss on closed futures contracts (164,605)
------------
Net realized gain on investments 7,344,236
Net change in unrealized appreciation
of investments 7,183,565
------------
Net gain on investments 14,527,801
------------
Net increase in net assets resulting
from operations $ 69,612,547
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended December 31, 1997 and 1996
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 55,084,746 $ 50,838,355
Net realized gain (loss) on investment transactions 7,344,236 (3,738,656)
Net change in unrealized appreciation or depreciation
of investments 7,183,565 (21,236,306)
------------ ------------
Net increase in net assets resulting from operations 69,612,547 25,863,393
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income (55,084,746) (50,838,355)
------------ ------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 65,602,599 80,241,834
Reinvested dividend distributions 55,084,746 51,093,053
Cost of shares redeemed (55,935,562) (67,256,668)
------------ ------------
Net increase in net assets from capital stock transactions 64,751,783 64,078,219
------------ ------------
Net increase in net assets 79,279,584 39,103,257
NET ASSETS:
Beginning of period 801,159,984 762,056,727
------------ ------------
End of period $880,439,568 $801,159,984
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
MONEY MARKET PORTFOLIO
Financial Statements
Statement of Assets and Liabilities
December 31, 1997
<S> <C>
ASSETS:
Investments in securities, at amortized cost
and value $120,714,352
Cash 3,429
Interest receivable 449,374
------------
Total assets 121,167,155
------------
NET ASSETS $121,167,155
============
NET ASSETS CONSIST OF:
Paid-in capital (121,167,155 shares of capital
stock outstanding) $121,167,155
============
Net asset value and public offering price per share
($121,167,155 divided by 121,167,155 shares of
capital stock outstanding) $1.00
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1997
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 6,411,601
------------
Expenses --
Investment advisory fee 452,465
------------
Net investment income $ 5,959,136
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended December 31, 1997 and 1996
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 5,959,136 $ 4,132,461
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
Net investment income (5,959,136) (4,132,461)
------------ ------------
CAPITAL STOCK TRANSACTIONS --
Proceeds from sale of shares 76,690,617 75,776,304
Reinvested dividend distributions 5,959,136 4,152,037
Cost of shares redeemed (65,403,224) (42,157,682)
------------ ------------
Net increase in net assets from capital stock transactions 17,246,529 37,770,659
------------ ------------
Net increase in net assets 17,246,529 37,770,659
NET ASSETS:
Beginning of period 103,920,626 66,149,967
------------ ------------
End of period $121,167,155 $103,920,626
============ ============
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 1997 December 31, 1996
------------------------ ------------------------
<S> <C> <C>
Net asset value, beginning of period $11.50 $10.00
-------- --------
Income From Investment Operations --
Net investment income 0.06 0.02
Net realized and unrealized gain
(loss) on investments 0.05 1.90
-------- --------
Total from investment operations 0.11 1.92
-------- --------
Less Distributions --
Dividends from net investment income (0.06) (0.02)
Distributions from net realized
gain on investments -- (0.40)
-------- --------
Total distributions (0.06) (0.42)
-------- --------
Net asset value, end of period $11.55 $11.50
======== ========
Total investment return at net asset value (b) 0.93% 19.17%
Net assets, end of period ($ millions) $391.5 $246.6
Ratio of expenses to average net assets 0.40% 0.40%(c)
Ratio of net investment income to
average net assets 0.65% 0.27%(c)
Portfolio turnover rate 147% 155%
Average Commission Rate (d) $0.0531 $0.0342
<CAPTION>
For the period from
January 18, 1996
(effective date) to
WORLD GROWTH PORTFOLIO 1997 December 31, 1996
------------------------ ------------------------
<S> <C> <C>
Net asset value, beginning of period $10.95 $10.00
-------- --------
Income From Investment Operations --
Net investment income 0.10 0.08
Net realized and unrealized gain
(loss) on investments 0.21 0.96
-------- --------
Total from investment operations 0.31 1.04
-------- --------
Less Distributions --
Dividends from net investment income (0.13) (0.09)
Distributions from net realized
gain on investments (0.01) --
-------- --------
Total distributions (0.14) (0.09)
-------- --------
Net asset value, end of period $11.12 $10.95
======== ========
Total investment return at net asset value (b) 2.81% 10.41%
Net assets, end of period ($ millions) $287.2 $174.1
Ratio of expenses to average net assets 0.85% 0.85%(c)
Ratio of net investment income to
average net assets 1.08% 1.34%(c)
Portfolio turnover rate 19% 9%
Average Commission Rate (d) $0.0245 $0.0265
See accompanying notes to the Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
Financial Highlights (continued)
GROWTH PORTFOLIO 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $19.32 $18.27 $13.51 $14.76 $13.89
-------- -------- -------- -------- --------
Income From Investment Operations --
Net investment income 0.21 0.24 0.24 0.20 0.29
Net realized and unrealized gain
(loss) on investments 4.97 3.43 4.76 (0.87) 1.08
-------- -------- -------- -------- --------
Total from investment operations 5.18 3.67 5.00 (0.67) 1.37
-------- -------- -------- -------- --------
Less Distributions --
Dividends from net investment income (0.21) (0.24) (0.24) (0.20) (0.29)
Distributions from net realized
gain on investments (2.71) (2.38) -- (0.38) (0.21)
-------- -------- -------- -------- --------
Total distributions (2.92) (2.62) (0.24) (0.58) (0.50)
-------- -------- -------- -------- --------
Net asset value, end of period $21.58 $19.32 $18.27 $13.51 $14.76
======== ======== ======== ======== ========
Total investment return at net asset value (b) 30.18% 22.44% 37.25% -4.66% 10.10%
Net assets, end of period ($ millions) $2,426.1 $1,658.6 $1,173.1 $721.8 $534.5
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 1.11% 1.41% 1.53% 1.52% 2.17%
Portfolio turnover rate 193% 223% 184% 135% 243%
Average Commission Rate (d) $0.0600 $0.0629 n/a n/a n/a
<CAPTION>
HIGH YIELD PORTFOLIO 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.06 $ 9.94 $ 9.18 $10.76 $ 9.62
-------- -------- -------- -------- --------
Income From Investment Operations --
Net investment income 0.98 0.98 0.96 0.97 0.96
Net realized and unrealized gain
(loss) on investments 0.37 0.12 0.76 (1.40) 1.16
-------- -------- -------- -------- --------
Total from investment operations 1.35 1.10 1.72 (0.43) 2.12
-------- -------- -------- -------- --------
Less Distributions --
Dividends from net investment income (0.97) (0.98) (0.96) (0.97) (0.96)
Distributions from net realized
gain on investments -- -- -- (0.18) (0.02)
-------- -------- -------- -------- --------
Total distributions (0.97) (0.98) (0.96) (1.15) (0.98)
-------- -------- -------- -------- --------
Net asset value, end of period $10.44 $10.06 $ 9.94 $ 9.18 $10.76
======== ======== ======== ======== ========
Total investment return at net asset value (b) 14.10% 11.55% 19.62% -4.38% 22.91%
Net assets, end of period ($ millions) $1,344.6 $1,026.7 $792.5 $595.6 $444.5
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 9.58% 9.83% 9.94% 9.75% 9.29%
Portfolio turnover rate 105% 107% 67% 44% 68%
See accompanying notes to the financial highlights.
<CAPTION>
LB SERIES FUND, INC.
Financial Highlights (continued)
INCOME PORTFOLIO 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.75 $10.08 $ 9.04 $10.36 $ 9.87
-------- -------- -------- -------- --------
Income From Investment Operations --
Net investment income 0.65 0.63 0.65 0.64 0.63
Net realized and unrealized gain
(loss) on investments 0.17 (0.33) 1.04 (1.11) 0.49
-------- -------- -------- -------- --------
Total from investment operations 0.82 0.30 1.69 (0.47) 1.12
-------- -------- -------- -------- --------
Less Distributions --
Dividends from net investment income (0.65) (0.63) (0.65) (0.64) (0.63)
Distributions from net realized
gain on investments -- -- -- (0.21) --
-------- -------- -------- -------- --------
Total distributions (0.65) (0.63) (0.65) (0.85) (0.63)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.92 $ 9.75 $10.08 $ 9.04 $10.36
======== ======== ======== ======== ========
Total investment return at net asset value (b) 8.75% 3.21% 19.36% -4.68% 11.66%
Net assets, end of period ($ millions) $880.4 $801.2 $762.1 $608.2 $566.9
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 6.68% 6.54% 6.81% 6.78% 6.23%
Portfolio turnover rate 117% 150% 132% 139% 153%
<CAPTION>
MONEY MARKET PORTFOLIO 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<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 0.05 0.06 0.04 0.03
Less: Dividends from net investment income (0.05) (0.05) (0.06) (0.04) (0.03)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return (b) 5.43% 5.20% 5.71% 4.00% 2.87%
Net assets, end of period ($ millions) $121.2 $103.9 $66.1 $41.9 $24.9
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 5.27% 5.07% 5.55% 4.03% 2.83%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of a sales charge.
(c) Computed on an annualized basis.
(d) 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.
The accompanying notes are an integral part of the financial statements.
</TABLE>
LB SERIES FUND, INC.
Notes to Financial Statements
December 31, 1997
(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 (LB) 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 each in 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.
Foreign Currency Translations
The accounting records of the Fund are maintained in U.S. dollars.
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.
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.
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 $1,230,547 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.
Net investment income (loss) and net realized gain (loss) amy differ
for financial statement and tax purposes. 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, 1997, accumulated net realized gain or loss from the
sale of investments was decreased by $607,229 and undistributed net
investment income was increased by $607,229 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
Investment transactions are accounted for on the date the investments
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.
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
(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 LB World Growth Fund and the LB
Series Fund, Inc. - World Growth Portfolio at the following rates:
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 converts to a flat fee of
0.50% of the 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 director fee deferral plan which allows the
independent directors of the Fund to defer the receipt of all or a
portion of their director fees. 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.
(5) DISTRIBUTIONS FROM CAPITAL GAINS
During the year ended December 31, 1997, a distribution from net
realized capital gains of $161,102 and $239,942,399 were paid by the
World Growth Portfolio and the Growth Portfolio, respectively. These
distributions relate to net capital gains realized during the year
ended December 31, 1996.
(6) CAPITAL LOSS CARRYOVER
During the year ended December 31, 1997, the High Yield Portfolio
fully utilized the remaining $5,055,282 of its capital loss
carryover, and the Income Portfolio utilized $7,605,392 of its
capital loss carryover against net realized capital gains. At
December 31, 1997, the Income Portfolio had an accumulated net
realized capital loss carryover of $17,727,812 expiring as follows:
Income
Year Portfolio
-------- -----------
2002 $14,060,792
2003 --
2004 3,667,020
-----------
$17,727,812
-----------
To the extent that the Income Portfolio realizes future net capital
gains, taxable distributions will be reduced by any unused capital
loss carryovers. Temporary timing differences of $4,065,540,
$2,586,307, $8,377,908, $860,316 and $793,991 existed between
accumulated net realized capital gains or losses for financial
statement and tax purposes as of December 31, 1997 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, 1997, 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 $ 549,839 $ 418,868
World Growth 157,671 43,564
Growth 3,879,956 3,671,009
High Yield 1,379,617 1,168,435
Income 658,918 603,649
Purchases and sales of U.S. Government securities were:
In thousands
----------------------------------
Portfolio Purchases Sales
- ---------------------------------------------------------------------
Growth $ 21,515 $ 33,414
Income 316,003 301,779
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 $149,756 at December 31,
1997, which represented 0.01% of the 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.
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.
Open Option Contracts
The number of contracts and premium amounts associated with call
option contracts written during the year ended December 31, 1997 were
as follows:
<TABLE>
<CAPTION>
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, 1996 -- -- 998 $ 334,242 150 $ 99,196
Opened 4,790 $1,726,050 23,405 3,915,387 3,034 1,022,090
Closed (1,256) (479,278) (15,423) (2,889,305) (2,584) (962,263)
Expired (639) (177,149) (5,441) (595,583) (600) (159,023)
Exercised (2,895) (1,069,623) (3,539) (764,741) -- --
------------ ---------- ---------- ---------- ----------- ----------
Balance at December 31, 1997 -- $ -- -- $ -- -- $ --
============ ========== ========== ========== =========== ==========
</TABLE>
(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 Income Money
Growth Growth Growth Yield Fund Market
----------- ----------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
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
Shares sold 12,916,456 9,868,979 13,519,744 17,651,288 6,711,456 76,690,617
Shares issued on reinvestment
of dividends and distributions 183,341 307,190 14,633,525 11,014,219 5,644,954 5,959,136
Shares redeemed (633,116) (249,912) (1,579,866) (1,942,120) (5,749,815) (65,403,224)
------------ ---------- ---------- ---------- ----------- ------------
Shares outstanding at
December 31, 1997 33,897,420 25,826,988 112,406,211 128,831,291 88,782,557 121,167,155
========== ========== =========== =========== ========== ===========
</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.
Noel K. Estenson
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.
