<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
LB SERIES FUND, INC.
(Name of Registrant as Specified In Its Charter)
LB SERIES FUND, INC.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
LB Series Fund, Inc.
625 Fourth Avenue South
Minneapolis, MN 55415
October 13, 1998
Dear Contract Owner:
Please find enclosed a notice of a special meeting of shareholders of the
Growth Portfolio, Opportunity Growth Portfolio, Mid Cap Growth Portfolio, World
Growth Portfolio, High Yield Portfolio, Income Portfolio and Money Market
Portfolio (collectively, the "Portfolios"), each a series of LB Series Fund,
Inc. (the "Fund"), which is scheduled for December 1, 1998, together with a
proxy statement discussing the matters to be voted on at the meeting and a
voting instruction form. Please take the time to read the proxy statement and
cast your vote.
We are asking contract owners for voting instructions regarding the
election of directors of LB Series Fund, Inc. In addition to the existing
Directors, the nominees include two new individuals with outstanding credentials
who are being nominated for the first time to serve as directors: Jodi L.
Harpstead and Richard A. Hauser.
We are also asking contract owners for voting instructions regarding a
series of proposals to amend or eliminate certain investment restrictions that
currently apply to one or more of the Portfolios. The Board of Directors
believes that approval of these proposals will enhance the ability of Lutheran
Brotherhood to manage the Portfolios in a changing regulatory and investment
environment, reduce the need for future shareholder meetings and facilitate
monitoring of compliance with investment restrictions applicable to the
Portfolios.
The Board of Directors has unanimously recommended that contract owners
vote for each of the proposals in the enclosed proxy statement. Should you have
any questions, please feel free to call us at (800) 423-7056. We will be happy
to answer any questions you may have.
I URGE EACH CONTRACT OWNER TO PROMPTLY MARK, SIGN AND RETURN THE ENCLOSED
VOTING INSTRUCTIONS FORM.
Sincerely,
ROLF F. BJELLAND
Chairman and President
<PAGE> 3
GROWTH PORTFOLIO
OPPORTUNITY GROWTH PORTFOLIO
MID CAP GROWTH PORTFOLIO
WORLD GROWTH PORTFOLIO
HIGH YIELD PORTFOLIO
INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
OF
LB SERIES FUND, INC.
625 FOURTH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55415
------------------------
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON DECEMBER 1, 1998
------------------------
A Special Meeting of Shareholders of each of the Growth Portfolio,
Opportunity Growth Portfolio, Mid Cap Growth Portfolio, World Growth Portfolio,
High Yield Portfolio, Income Portfolio and Money Market Portfolio (collectively,
the "Special Meeting"), each a series of LB Series Fund, Inc. (the "Fund"), will
be held at the Lutheran Brotherhood Building, 625 Fourth Avenue South,
Minneapolis, Minnesota on December 1, 1998, at 8:30 a.m. local time for the
following purposes:
1. To elect Directors of the Fund.
2. To amend or eliminate certain investment policies as follows:
A. To amend the fundamental investment restriction on borrowing and the
issuance of senior securities.
B. To amend the fundamental investment restriction on lending.
C. To amend the fundamental investment restriction on real estate and
commodities.
D. To eliminate the fundamental investment restriction on reverse
repurchase agreements.
E. To eliminate the fundamental investment restriction on the pledge of
assets.
F. To eliminate the fundamental investment restriction on restricted
securities, illiquid securities and unseasoned issuers.
G. To eliminate the fundamental investment restriction on control
securities.
H. To eliminate the fundamental investment restriction on short sales.
I. To eliminate the fundamental investment restriction on investments
in other investment companies.
J. To eliminate the fundamental investment restriction on investments
in oil and gas interests, common stock and other equity securities
of the Money Market Portfolio.
K. To eliminate the fundamental investment restriction on portfolio
maturity of the Money Market Portfolio.
3. To ratify the selection of PricewaterhouseCoopers LLP as the Fund's
independent accountants.
4. To consider and act upon any matter incidental to the foregoing and to
transact such other business as may properly come before the Special
Meeting and all adjournments.
<PAGE> 4
The Board of Directors of the Fund has fixed the close of business on
October 2, 1998 as the record date for the determination of shareholders
entitled to notice of, and to vote at, the Special Meeting and all adjournments.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER
THAN NOVEMBER 27, 1998.
By Order of the Board of Directors
Otis F. Hilbert, Secretary
Minneapolis, Minnesota
October 13, 1998
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
YOU CAN HELP THE FUND AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP
LETTERS BY PROMPTLY RETURNING THE ENCLOSED VOTING INSTRUCTIONS. IF YOU ARE
UNABLE TO BE PRESENT IN PERSON, PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED
VOTING INSTRUCTIONS. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE> 5
GROWTH PORTFOLIO
OPPORTUNITY GROWTH PORTFOLIO
MID CAP GROWTH PORTFOLIO
WORLD GROWTH PORTFOLIO
HIGH YIELD PORTFOLIO
INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
OF
LB SERIES FUND, INC.
625 FOURTH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55415
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of the LB Series Fund, Inc. (the "Fund") to be
used at a Special Meeting of Shareholders (collectively, the "Special Meeting")
of each of the Growth Portfolio, Opportunity Growth Portfolio, Mid Cap Growth
Portfolio, World Growth Portfolio, High Yield Portfolio, Income Portfolio and
Money Market Portfolio (each, a "Portfolio," and collectively, the "Portfolios")
to be held at the Lutheran Brotherhood Building, 625 Fourth Avenue South,
Minneapolis, Minnesota 55415, on December 1, 1998, at 8:30 a.m. local time and
at any adjournments of the Special Meeting.
The following table identifies each proposal set forth in the Notice of
Special Meeting of Shareholders and the checkmark (X) indicates the shareholders
of the Portfolio(s) that are being solicited to approve the proposal.
<TABLE>
<CAPTION>
GROWTH PORTFOLIO
OPPORTUNITY GROWTH PORTFOLIO
MID CAP GROWTH PORTFOLIO
WORLD GROWTH PORTFOLIO
HIGH YIELD PORTFOLIO
PROPOSAL INCOME PORTFOLIO MONEY MARKET PORTFOLIO
- ------------------------------------------------ ---------------------------- ----------------------
<S> <C> <C>
1. Election of Directors X X
2. Amendment and Elimination of Certain
Investment Policies
A. Borrowing and senior securities X X
B. Lending X X
C. Real estate and commodities X X
D. Reverse repurchase agreements X X
E. Pledge of assets X X
F. Restricted securities, illiquid
securities and unseasoned issuers X X
G. Control securities X X
H. Short sales X X
I. Investment in other investment companies X X
J. Investments in oil and gas interests,
common stock and other equity securities X
K. Portfolio maturity X
3. Ratification of Independent Accountants X X
</TABLE>
<PAGE> 6
Shares of the Portfolios are currently sold only to separate accounts (the
"Accounts") of Lutheran Brotherhood and Lutheran Brotherhood Variable Insurance
Products Company ("LBVIP") to fund benefits under variable life insurance and
variable annuity contracts issued by Lutheran Brotherhood and LBVIP (the
"Contracts"). Lutheran Brotherhood is the investment adviser to the Portfolios
and in that capacity also provides certain administrative services to the
Portfolios. Lutheran Brotherhood and LBVIP, as the owners of the assets in the
Accounts, will vote all of the shares of the Portfolios in accordance with the
properly executed voting instructions of Contract owners. Any such shares of a
Portfolio attributable to a Contract for which no timely voting instructions are
received, and any shares of that Portfolio held by Lutheran Brotherhood, LBVIP
or any of their affiliates for their own account, will be voted by Lutheran
Brotherhood or LBVIP in proportion to the voting instructions that are received
with respect to all Contracts participating in the Portfolio. If the voting
instruction form is returned but no instructions are given, the shares of the
Portfolio to which the form relates will be voted FOR all the proposals. This
Proxy Statement and the accompanying Notice of Special Meeting of Shareholders
and voting instruction form are first being mailed on or about October 13, 1998
to Contract owners as of the record date.
The Contract owners permitted to give voting instructions to Lutheran
Brotherhood and LBVIP and the number of shares for which instructions may be
given will be determined as of October 13, 1998, the record date for the Special
Meeting. The table below reflects the total number of shares of each Portfolio
issued and outstanding as of the record date.
<TABLE>
<CAPTION>
PORTFOLIO NUMBER OF SHARES
--------- ----------------
<S> <C>
Growth Portfolio............................................ 141,632,017.22
Opportunity Growth Portfolio................................ 33,880,768.64
Mid Cap Growth Portfolio.................................... 7,630,421.65
World Growth Portfolio...................................... 28,463,344.84
High Yield Portfolio........................................ 152,818,794.35
Income Portfolio............................................ 100,197,563.52
Money Market Portfolio...................................... 161,657,646.82
</TABLE>
Each shareholder is entitled to the same number of votes as the number of
full and fractional shares held by such shareholder. Each share is entitled to
one vote.
Each Portfolio will participate separately in the Special Meeting, although
proxies are being solicited through use of a combined Proxy Statement. With
respect to proposal 1 (regarding the election of the Directors of the Fund) and
proposal 3 (regarding the ratification of the selection of
PricewaterhouseCoopers LLP as the Fund's independent accountants) shareholders
of each Portfolio of the Fund will vote together with each other Portfolio of
the Fund. With respect to proposals 2A through 2I (regarding the amendment or
elimination of certain investment restrictions), shareholders of each Portfolio
will vote separately. With respect to proposals 2J and 2K (regarding the
elimination of certain investment restrictions), only shareholders of the Money
Market Portfolio will be entitled to vote.
Any Contract owner giving voting instructions may revoke them at any time
prior to their use. A Contract owner may change voting instructions by (1)
giving written notice of revocation to an officer of the Fund, (2) returning to
an officer of the Fund a properly executed later dated voting instruction form,
or (3) attending the Special Meeting, requesting return of any previously
delivered voting instructions and voting in person. Attendance and voting at the
Special Meeting will not in and of itself constitute a revocation of voting
instructions. Signed voting instructions received by the Board of Directors in
time for voting and not so revoked will be voted in accordance with the
restrictions noted thereon . Unless instructions to the contrary are marked on
the voting instruction form, the voting instructions will be voted FOR all the
proposals. The voting instruction form grants discretion to the persons named
thereon, as proxies, to take such further action as they
2
<PAGE> 7
may determine appropriate in connection with any other matter which may properly
come before the Special Meeting or any adjournments. The Board of Directors does
not currently know of any matter to be considered at the Special Meeting other
than the matters set forth in the Notice of Special Meeting of Shareholders.
For purposes of considering proposals 1 and 3, a majority of the aggregate
number of shares of the Fund entitled to vote constitutes a quorum. For purposes
of considering proposals 2A through 2K, a majority of the shares of a Portfolio
entitled to vote at the Special Meeting in person or represented by proxy
constitutes a quorum of such Portfolio.
A plurality of the aggregate votes cast in person or by proxy of the
Special Meeting at which a quorum is present will be required for the election
of each Director. Approval of proposals 2A through 2K requires the affirmative
vote of the holders of a "majority of the outstanding voting securities" of the
Portfolio entitled to vote on the proposal, as such term is defined in the
Investment Company Act of 1940, as amended ("1940 Act"). For that purpose, a
vote of the holders of a "majority of the outstanding voting securities" of the
Portfolio means the lesser of (1) the vote of 67% or more of the shares of the
Portfolio present at the Special Meeting if the holders of more than 50% of the
outstanding Portfolio shares are present or represented by proxy, or (2) the
vote of the holders of more than 50% of the outstanding shares of the Portfolio.
Approval of proposal 3 requires the affirmative vote of a majority of the shares
of the Fund voted at the Special Meeting.
The Board of Directors expects to make this solicitation primarily by mail.
However, in addition to the solicitation of voting instructions by mail, the
officers of the Fund and members of the Board of Directors and persons
affiliated with Lutheran Brotherhood, the Fund's investment adviser, may,
without remuneration, solicit voting instructions personally or by telephone,
telegram or other electronic means. The Fund may also retain a proxy
solicitation firm to assist in any special, personal solicitation of voting
instructions. The costs of solicitation and expenses incurred in connection with
preparing this Proxy Statement, including any cost of retaining a proxy
solicitation firm, will be borne by the Fund. Pursuant to a reimbursement
agreement with the Fund, Lutheran Brotherhood and LBVIP have agreed to reimburse
the Fund for this cost.
The financial statements of each Portfolio for the year ended December 31,
1997 are included in the Fund's annual report for the year ended December 31,
1997, which has been previously sent to Contract owners. The financial
statements for each Portfolio for the six months ended June 30, 1998 are
included in the Fund's semi-annual report for the six months ended June 30,
1998, which has been previously sent to Contract owners. THE FUND WILL FURNISH
UPON REQUEST AND WITHOUT CHARGE TO ANY CONTRACT OWNER A COPY OF SUCH REPORTS. A
CONTRACT OWNER MAY ALSO OBTAIN A COPY OF SUCH REPORTS BY WRITING TO LB SERIES
FUND, INC., 625 FOURTH AVENUE SOUTH, MINNEAPOLIS, MINNESOTA 55415 OR BY CALLING
TOLL FREE (800) 423-7056.
3
<PAGE> 8
As of October 2, 1998, the following persons or entities were the
beneficial and/or record owners of 5% or more of the shares of the indicated
Portfolio:
<TABLE>
<CAPTION>
GROWTH OPPORTUNITY MID CAP
PORTFOLIO GROWTH PORTFOLIO GROWTH PORTFOLIO
--------------------------- ---------------------------- ---------------------------
NUMBER % OF NUMBER % OF NUMBER % OF
SHAREHOLDER OF SHARES OUTSTANDING OF SHARES OUTSTANDING OF SHARES OUTSTANDING
----------- ------------- ----------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lutheran Brotherhood Variable
Insurance Products Company -- LBVIP
Variable Annuity Account I 85,298,803.108 60.23% 14,353,411.076 42.36% 3,214,086.020 42.12%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood Variable
Insurance Products Company -- LBVIP
Variable Insurance Account 5,346,014.049 3.77% 1,043,340.510 3.08% 188,898.149 2.48%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood --
LB Variable Annuity Account I 48,490,383.903 34.24% 17,194,845.713 50.75% 4,015,555.956 52.63%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood --
LB Variable Insurance Account I 2,426,542.413 1.71% 1,289,171.340 3.81% 211,881.528 2.78%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood Variable
Insurance Products Company -- LBVIP
Variable Insurance Account II 70,273.744 0.05% N/A N/A N/A N/A
625 Fourth Avenue South
Minneapolis, MN 55415
</TABLE>
<TABLE>
<CAPTION>
WORLD HIGH YIELD
GROWTH PORTFOLIO PORTFOLIO INCOME PORTFOLIO
--------------------------- ---------------------------- ---------------------------
NUMBER % OF NUMBER % OF NUMBER % OF
SHAREHOLDER OF SHARES OUTSTANDING OF SHARES OUTSTANDING OF SHARES OUTSTANDING
----------- ------------- ----------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lutheran Brotherhood Variable
Insurance Products Company -- LBVIP
Variable Annuity Account I 12,366,897.937 43.45% 90,134,373.028 58.98% 64,607,421.834 64.48%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood Variable
Insurance Products Company -- LBVIP
Variable Insurance Account 740,847.362 2.60% 3,958,795.906 2.59% 1,771,530.199 1.77%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood --
LB Variable Annuity Account I 14,524,689.835 51.03% 56,431,703.044 36.93% 33,030,227.628 32.97%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood --
LB Variable Insurance Account I 830,909.703 2.92% 2,227,139.240 1.46% 741,407.826 0.74%
625 Fourth Avenue South
Minneapolis, MN 55415
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
WORLD HIGH YIELD
GROWTH PORTFOLIO PORTFOLIO INCOME PORTFOLIO
--------------------------- ---------------------------- ---------------------------
NUMBER % OF NUMBER % OF NUMBER % OF
SHAREHOLDER OF SHARES OUTSTANDING OF SHARES OUTSTANDING OF SHARES OUTSTANDING
----------- ------------- ----------- -------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lutheran Brotherhood Variable
Insurance Products Company -- LBVIP
Variable Insurance Account II N/A N/A 66,783.128 0.04% 46,976.035 0.05%
625 Fourth Avenue South
Minneapolis, MN 55415
<CAPTION>
MONEY
MARKET PORTFOLIO
-----------------------------
NUMBER OF % OF
SHAREHOLDER SHARES OUTSTANDING
----------- -------------- -----------
<S> <C> <C>
Lutheran Brotherhood Variable Insurance Products Company --
LBVIP Variable Annuity Account I 84,852,890.870 52.49%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood Variable Insurance Products Company --
LBVIP Variable Insurance Account 2,630,274.050 1.63%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood -- LB Variable Annuity Account I 72,599,295.100 44.91%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood -- LB Variable Insurance Account I 1,550,027.220 0.95%
625 Fourth Avenue South
Minneapolis, MN 55415
Lutheran Brotherhood Variable Insurance Products Company --
LBVIP Variable Insurance Account II 25,159.580 0.02%
625 Fourth Avenue South
Minneapolis, MN 55415
</TABLE>
5
<PAGE> 10
PROPOSAL 1
ELECTION OF DIRECTORS
The shareholders of the Fund are being asked to elect the nominees named
below to serve as Directors of the Fund. All shares represented by valid proxies
will be voted in favor of the election of the nominees, unless authority to vote
therefor is withheld. The nominees named have agreed to serve as Directors if
elected. If for any reason any of the nominees should not be available for
election as contemplated, the proxies may, unless otherwise limited, be voted to
elect such substitute nominees, if any, as may be designated by the Board of
Directors, subject to the applicable provisions of the Investment Company Act of
1940, as amended (the "1940 Act"). Messrs. Bjelland and Eggerding, Ms. Levi and
Dr. Randall have been previously elected by shareholders. Messrs. Estenson and
Nicholson currently serve as Directors and are being presented for shareholder
election for the first time. This election will help assure continued compliance
with 1940 Act provisions regarding the election of Directors. Background
information on all of the Directors has been provided.
<TABLE>
<CAPTION>
YEAR FIRST BECAME
NOMINEE STANDING FOR ELECTION BY SHAREHOLDERS POSITION WITH FUND DIRECTOR
- --------------------------------------------- ------------------ -----------------
<S> <C> <C>
Rolf J. Bjelland*....................... Chairman, Director and President 1986
Herbert F. Eggerding, Jr................ Director 1990
Noel K. Estenson........................ Director 1997
Jodi L. Harpstead....................... (1) --
Richard A. Hauser....................... (1) --
Connie M. Levi.......................... Director 1993
Bruce J. Nicholson*..................... Director 1995
Ruth E. Randall......................... Director 1987
</TABLE>
- ---------------
* Individual who is deemed to be an "interested person" of the Fund under the
1940 Act because of his affiliation with Lutheran Brotherhood and its
affiliates as described below.
(1) Ms. Harpstead and Mr. Hauser are being nominated for the first time to serve
as Directors of the Fund.
Information on all the nominees is set forth below in alphabetical order.
ROLF F. BJELLAND is Executive Vice President and Chief Investment Officer
of Lutheran Brotherhood. Mr. Bjelland also serves as Director and President of
Lutheran Brotherhood Research Corp. ("LB Research"), Director and Executive Vice
President of Lutheran Brotherhood Financial Corporation; Director of LB
Securities; Director, Vice President and Chief Investment Officer of LBVIP; and
Director of Lutheran Brotherhood Real Estate Products Company. Mr. Bjelland is
also Chairman, Trustee and President of The Lutheran Brotherhood Family of
Funds. Mr. Bjelland is 60.
HERBERT F. EGGERDING, JR. serves as a management consultant to several
privately owned companies and was formerly Executive Vice President and Chief
Financial Officer of Petrolite Corporation. Mr. Eggerding's other principal
business affiliation is Director of Lutheran Charities Foundation of St. Louis,
Missouri. Mr. Eggerding is also a Trustee of The Lutheran Brotherhood Family of
Funds. Mr. Eggerding is 61.
NOEL K. ESTENSON'S principal occupation during the past five years has been
President and Chief Executive Officer of CENEX, Inc. Mr. Estenson's other
principal business affiliations include Vice Chairman of CF Industries; Board
member of the National Cooperative Refinery Association; Board member of Farm
Credit Leasing; and Board member of the National Council of Farmer Cooperatives.
Mr. Estenson is also a Trustee of The Lutheran Brotherhood Family of Funds. Mr.
Estenson is 59.
6
<PAGE> 11
JODI L. HARPSTEAD is Vice President of U.S. Cardiac Rhythm Management for
Medtronic, Inc. Ms. Harpstead previously served as Boston District Pacing Sales
Manager and Vice President, U.S. Pacing Marketing for Medtronic. Ms. Harpstead
is also a Member of the Board of Delta Dental Plan of Minnesota. Ms. Harpstead
is 41.
RICHARD A. HAUSER is a partner with the law firm of Baker & Hostetler, LLP.
Previously, Mr. Hauser served as Chairman of the Pennsylvania Avenue Development
Corporation, Washington, DC. Mr. Hauser is also a Director of The Luther
Institute. Mr. Hauser is 55.
CONNIE M. LEVI is retired and was formerly President of the Greater
Minneapolis Chamber of Commerce. Previously, Ms. Levi served in the Minnesota
House of Representatives from 1978 to 1986, including in the capacity as
majority leader. Ms. Levi is a Director of Norstan, Inc. of Minnesota. Ms. Levi
has been a member or director of numerous governmental, public service and
non-profit boards and organizations. Ms. Levi is also a Trustee of The Lutheran
Brotherhood Family of Funds. Ms. Levi is 59.
BRUCE J. NICHOLSON is Executive Vice President and Chief Operating Officer
of Lutheran Brotherhood, Executive Vice President and Chief Operating Officer of
Lutheran Brotherhood Financial Corporation and Director and Chief Operating
Officer, LBVIP. Mr. Nicholson is also Director of LB Research; Director of LB
Securities; Director of Lutheran Brotherhood Real Estate Products Company; and
Trustee of The Lutheran Brotherhood Family of Funds. Mr. Nicholson is 52.
RUTH E. RANDALL is retired and was formerly Interim Dean, Division of
Continuing Studies, University of Nebraska -- Lincoln; Associate Dean, Teachers
College, and Professor, Department of Education Administration, Teachers
College, University of Nebraska -- Lincoln. Dr. Randall also previously served
as Commissioner of Education for the State of Minnesota and as a Director or
member of numerous governmental, public service and non-profit boards and
organizations. Dr. Randall is also a Trustee of The Lutheran Brotherhood Family
of Funds. Dr. Randall is 69.
A nominee elected as a Director will serve as such until any successor is
elected and qualified. A Director serves until he or she retires, resigns or is
removed as provided in the By-laws of the Fund, as amended (the "By-laws").
Under the By-laws, a person may not serve as Director beyond the earlier of the
end of the month in which he or she attains the age of 70 years or the end of
the month in which he or she completes 15 continuous years of service as a
Director, except that the limitation on 15 continuous years of service shall not
apply to any person who was originally elected as a Director before September 6,
1989. The Fund is not required to hold regularly scheduled annual meetings for
the election of Directors.
The following persons are principal officers, but not Directors, of the
Fund:
JAMES R. OLSON has served as Vice President of the Fund since 1993. Mr.
Olson is Senior Vice President of Lutheran Brotherhood, Vice President of LBVIP,
Vice President of LB Research, Vice President of LB Securities, Vice President
of Lutheran Brotherhood Real Estate Products Company, and Vice President of The
Lutheran Brotherhood Family of Funds. He is 56.
RICHARD B. RUCKDASHEL has served as Vice President of the Fund since 1995.
Mr. Ruckdashel is Vice President of Lutheran Brotherhood, Vice President of
LBVIP, Vice President of LB Securities and Vice President of The Lutheran
Brotherhood Family of Funds. He is 43.
JAMES M. WALLINE has served as Vice President of the Fund since 1987. Mr.
Walline is Vice President of Lutheran Brotherhood, Vice President of LB
Research, Vice President of LBVIP, and Vice President of The Lutheran
Brotherhood Family of Funds. He is 53.
7
<PAGE> 12
WADE M. VOIGT has served as Treasurer of the Fund since 1987. Mr. Voigt is
Assistant Vice President of Mutual Fund Accounting for Lutheran Brotherhood and
Treasurer of The Lutheran Brotherhood Family of Funds. He is 42.
OTIS F. HILBERT has served as Secretary and Vice President of the Fund
since 1986. Mr. Hilbert is Vice President of Lutheran Brotherhood, Vice
President and Secretary of LB Securities, Secretary of LB Research, Vice
President and Secretary of Lutheran Brotherhood Real Estate Products Company,
Vice President and Assistant Secretary of LBVIP, and Secretary and Vice
President of The Lutheran Brotherhood Family of Funds. He is 61.
FREDERICK P. JOHNSON has served as Vice President of the Fund since June
10, 1998. Mr. Johnson is Assistant Vice President of Lutheran Brotherhood,
Assistant Vice President of LBVIP, Assistant Vice President of LB Securities and
Assistant Vice President of LB Research. He is 36.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1997, the Board of Directors held
a total of 4 meetings. The Board of Directors has two committees: an Audit
Committee and a Contracts Committee. All Trustees attended 75% or more of all
meetings of the Board of Directors and committees of which they were members
during the fiscal year ended December 31, 1997.
The present members of the Audit Committee are Ms. Levi (Chairman) and
Messrs. Eggerding, Estenson and Dr. Randall. The Audit Committee assists the
Board of Directors in fulfilling its duties relating to accounting and financial
reporting practices and serves as a direct line of communication between the
Board of Directors and the Fund's independent accountants. The Audit Committee
is responsible for recommending the engagement or retention of the Fund's
independent accountants, reviewing with the independent accountants the plan and
the results of the auditing engagement, approving professional services provided
by the independent accountants prior to the performance of such services,
considering the range of audit and non-audit fees, reviewing the independence of
the independent accountants, reviewing the scope and results of procedures of
internal auditing, and reviewing the system of internal accounting control. The
Audit Committee of the Board of Directors held 4 meetings during the fiscal year
ended December 31, 1997.
The present members of the Contracts Committee are Mr. Eggerding
(Chairman), Mr. Estenson, Ms. Levi and Dr. Randall. The function of the
Contracts Committee is to assist the Board of Directors in fulfilling its duties
with respect to the review and approval of contracts between the Fund and other
entities, including entering into new contracts and the renewal of existing
contracts. The Contracts Committee considers investment advisory, distribution,
transfer agency, administrative service and custodial contracts, and such other
contracts as the Board of Directors deems necessary or appropriate for the
continuation of operations of each Portfolio. The Contracts Committee held 4
meetings during the fiscal year ended December 31, 1997. The Contracts Committee
also acts in the capacity of a nominating committee whose duties include
consideration of recommendations on nominations for Directors, review of the
composition of the Board, and recommendations respecting attendance, frequency
of meetings and similar matters. The Contracts Committee will consider nominees
recommended by shareholders; shareholders may submit recommendations to the
attention of the Secretary of the Fund, 625 Fourth Avenue South, Minneapolis,
Minnesota 55415.
REMUNERATION OF DIRECTORS
Directors who are not interested persons of the Fund receive an annual
retainer of $23,500 and a fee of $9,000 per year to attend meetings of the Board
of Directors and the Board of Trustees of The Lutheran Brotherhood Family of
Funds. Messrs. Bjelland and Nicholson, who are interested persons of the Fund,
receive no fees from the Fund. The Directors receive no pension or retirement
benefits in connection with their service to the Fund.
8
<PAGE> 13
For the fiscal year ended December 31, 1997, the Directors of the Fund
received the following amounts of compensation either directly or in the form of
payments made into a deferred compensation plan:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL TOTAL PAID BY
NAME AND POSITION COMPENSATION AS PART OF FUND BENEFITS UPON THE FUND AND
OF PERSON FROM FUND EXPENSES RETIREMENT FUND COMPLEX(1)
----------------- ------------ ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Rolf F. Bjelland(2)............. $ 0 $0 $0 $ 0
Chairman and Director
Herbert F. Eggerding, Jr........ $14,005 $0 $0 $31,500
Director
Noel K. Estenson................ $ 7,179 $0 $0 $16,250
Director
Connie M. Levi.................. $14,005 $0 $0 $31,500
Director
Bruce J. Nicholson(2)........... $ 0 $0 $0 $ 0
Director
Ruth E. Randall................. $14,005(3) $0 $0 $31,500
Director
</TABLE>
- ---------------
(1) The "Fund Complex" includes LB Series Fund, Inc. and The Lutheran
Brotherhood Family of Funds.
(2) "Interested person" of the Fund as defined in the 1940 Act.
(3) The total amount of deferred compensation payable to Dr. Randall was $19,639
at December 31, 1997.
REQUIRED VOTE
A plurality of the aggregate votes cast in person or by proxy at the
Special Meeting at which a quorum is present, is required for the election of
each Director. Shareholders of all Portfolios will vote together as a single
class on proposal 1.
RECOMMENDED SHAREHOLDER ACTION
The Board of Directors, including those Directors who are not interested
person of the Fund, unanimously recommends that shareholders vote FOR proposal
1.
PROPOSAL 2
PROPOSALS TO AMEND OR ELIMINATE
CERTAIN INVESTMENT RESTRICTIONS
The Board of Directors has proposed that shareholders approve the amendment
or elimination of certain fundamental investment restrictions of the Portfolios.
The proposed changes are based on recommendations of Lutheran Brotherhood which
were reviewed and approved by the Board of Directors, subject to shareholder
approval, at a meeting held on September 16, 1998.
Under the 1940 Act, a registered investment company is required to recite
its policy with respect to certain investment activities. Under the 1940 Act, an
investment policy that is classified as "fundamental" may not be changed without
the approval of a fund's shareholders. A non-fundamental policy may be changed
by the directors without shareholder approval. In the past, the Fund adopted
certain fundamental investment restrictions for each Portfolio that reflected
then current practices in the mutual fund industry. These industry practices
were in part based on the requirements of state "blue sky" laws that were
applicable to retail mutual
9
<PAGE> 14
funds. However, as a result of the National Securities Markets Improvements Act
of 1996 ("NSMIA"), state law restrictions on permissible investments no longer
apply to registered investment companies and many mutual funds have taken action
to amend or eliminate investment restrictions to reflect that development.
Consequently, the Board of Directors of the Fund has determined that it would be
in the best interest of each Portfolio to amend or eliminate certain investment
restrictions.
The Board of Directors believes that the ability of Lutheran Brotherhood to
manage the Portfolios in a changing regulatory or investment environment will be
enhanced by approval of these proposals. In addition, the Board of Directors
believes that approval of these proposals will reduce the need for future
shareholder meetings, thereby reducing the Portfolios' ongoing costs of
operations. Furthermore, the Board believes that increased standardization among
the investment restrictions of the Fund and The Lutheran Brotherhood Family of
Funds will help to promote operational efficiencies and facilitate monitoring of
compliance with such investment restrictions.
At the Special Meeting, shareholders of each Portfolio will vote upon each
of the proposals separately. Each change to a Portfolio's fundamental investment
restrictions will become effective as soon as practicable following approval by
shareholders. Although the proposed changes to each Portfolio's investment
restrictions generally give broader authority to make certain investments or
engage in certain practices than do the current investment restrictions of the
Portfolio, Lutheran Brotherhood does not currently intend to change in any
material way the investment strategy or operations of any Portfolio.
PROPOSAL 2A
TO AMEND THE FUNDAMENTAL
INVESTMENT RESTRICTION ON BORROWING
AND THE ISSUANCE OF SENIOR SECURITIES
The fundamental investment restriction of each Portfolio regarding
borrowing and the issuance of senior securities currently reads as follows:
"None of the Portfolios will purchase securities on margin or
otherwise borrow money or issue senior securities except that a Portfolio,
in accordance with its investment objectives and policies, may enter into
reverse repurchase agreements and purchase securities on a when-issued and
delayed delivery basis, within the limitations set forth under "Money
Market Portfolio". The Fund may also obtain such short-term credit as it
needs for the clearance of securities transactions, and may borrow from a
bank, for the account of any Portfolio, as a temporary measure to
facilitate redemptions (but not for leveraging or investment) an amount
that does not exceed 5% of the value of the Portfolio's total assets
(including the amount borrowed) less liabilities (not including the amount
owed as a result of borrowing) at the time the borrowing is made.
Investment securities will not be purchased while borrowings are
outstanding. Interest paid on borrowings will not be available for
investment. The deposit or payment by a Portfolio of initial or variation
margin in connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin."
The Board of Directors proposes that the existing investment restriction be
deleted and that the following new fundamental investment restrictions be
adopted:
"None of the Portfolios may borrow money, except that a Portfolio may
borrow money (through the issuance of debt securities or otherwise) in an
amount not exceeding one-third of the Portfolio's total assets immediately
after the time of such borrowing."
10
<PAGE> 15
"None of the Portfolios may issue senior securities, except as
permitted under the Investment Company Act of 1940 or any exemptive order
or rule issued by the Securities and Exchange Commission."
Under the current investment restriction, a Portfolio may not borrow money
except for the clearance of securities transactions, the purchase of securities
on a when issued and delayed delivery basis, and on a temporary basis to
facilitate redemptions (but only up to 5% of its total assets). In addition, a
Portfolio may not make additional investments (also known as leveraging its
portfolio) while borrowings are outstanding. Under the proposed restriction a
Portfolio would be able to borrow up to one third of its total assets for any
purpose consistent with its investment objective and policies. The proposed
restriction on borrowing is consistent with the current limitations imposed
under the 1940 Act. Although a Portfolio has the authority to engage in leverage
under the terms of the proposed restriction, the Board of Directors intends to
adopt the following non-fundamental investment restriction if Proposal 2A is
adopted that will limit the ability of a Portfolio to purchase securities while
borrowings are outstanding:
"None of the Portfolios will purchase any security while borrowings,
including reverse repurchase agreements, representing more than 5% of the
Portfolio's total assets are outstanding."
The Board of Directors would have the flexibility to eliminate or modify
this non-fundamental investment restriction regarding leverage, but has no
current intention to do so.
The proposed investment restriction on senior securities clarifies that a
Portfolio may issue senior securities to the extent permitted under the 1940 Act
and exemptive orders issued by the SEC. The issuance of senior securities may
include borrowings from banks and the issuance of multiple classes of shares.
The revised investment restrictions would eliminate the prohibition on the
purchase of securities on margin. Margin purchases involve the purchase of
securities with money borrowed from a broker. "Margin" is the cash or eligible
securities that the borrower places with a broker as collateral against the
loan. Margin purchases as a form of borrowing would be subject to the
Portfolio's general borrowing restrictions.
PROPOSAL 2B
TO AMEND THE FUNDAMENTAL
INVESTMENT RESTRICTION ON LENDING
The fundamental investment restriction of each Portfolio with respect to
lending currently reads as follows:
"None of the portfolios will lend money, except that loans of up to
10% of the value of each Portfolio may be made through the purchase of
privately placed bonds, debentures, notes and other evidences of
indebtedness of a character customarily acquired by institutional investors
that may or may not be convertible into stock or accompanied by warrants or
rights to acquire stock. Repurchase agreements and the purchase of publicly
traded debt obligations are not considered to be "loans" for this purpose
and may be entered into or purchased by a Portfolio in accordance with its
investment objectives and policies."
The Board of Directors proposes that the existing investment restriction be
amended to read as follows:
"None of the Portfolios may lend any of its assets except portfolio
securities. The purchase of corporate or U.S. or foreign governmental
bonds, debentures, notes, certificates of indebtedness, repurchase
agreements or other debt securities of an issuer permitted by a Portfolio's
investment objective and policies will not be considered a loan for
purposes of this limitation."
11
<PAGE> 16
Under the existing investment restriction, a Portfolio may only invest up
to 10% of its assets in privately placed bonds, debentures, notes and other debt
securities customarily acquired by institutional investors. The proposed
investment restriction would eliminate this percentage restriction by providing
that the purchase of debt securities, whether publicly treated or privately
placed, will not be considered loans.
PROPOSAL 2C
TO AMEND THE FUNDAMENTAL INVESTMENT
RESTRICTION ON REAL ESTATE AND COMMODITIES
Under each Portfolio's current fundamental investment restriction regarding
investments in real estate and commodities:
"None of the Portfolios will buy or sell real estate, mortgages,
commodities or commodity contracts, although the Portfolios may buy and
sell securities which are secured by real estate and securities of real
estate investment trusts and of other issuers that engage in real estate
operations, and except that the Portfolios may enter into financial futures
contracts, may purchase put options on financial futures contracts and may
purchase and sell call options on financial futures contracts, if such
transactions are for purposes of hedging the Fund's portfolio."
The Board of Directors proposes to amend the investment restriction to read
as follows:
"None of the Portfolios will buy or sell real estate, commodities or
commodity contracts, although the Portfolios may buy and sell securities or
other instruments which are secured by real estate and securities of real
estate investment trusts and of other issuers that engage in real estate
operations, and except that the Portfolios may enter into financial futures
contracts, may purchase put options on financial futures contracts and may
purchase and sell call options on financial futures contract."
The proposed investment restriction would clarify that a Portfolio may
invest in mortgage loans and other instruments that are secured by real estate.
The proposed investment restriction also deletes the requirement that a
Portfolio enter into financial futures contracts and similar transactions solely
for hedging purposes. A Portfolio's ability to engage in futures transactions,
however, remains subject to certain limitations. Under applicable rules of the
Commodity Futures Trading Commission ("CFTC"), a Portfolio may not enter into a
futures transaction if it would cause the aggregate amount of initial margin
deposits and related option premiums for non-hedging purposes to exceed 5% of
the value of its assets. The Board of Directors believes that the proposed
amendment will increase Lutheran Brotherhood's ability to engage in futures
transactions, consistent with a Portfolio's investment objective and policies.
PROPOSAL 2D
TO ELIMINATE THE FUNDAMENTAL INVESTMENT
RESTRICTION ON REVERSE REPURCHASE AGREEMENTS
Under the Portfolio's current investment restrictions with respect to
reverse repurchase agreements:
None of the Portfolios will enter into reverse repurchase agreements
if, as a result, the Portfolio's obligations with respect to reverse
repurchase agreements would exceed 10% of the Portfolio's net assets
(defined to mean total assets at market value less liabilities other than
reverse repurchase agreements).
Proposal 2D would eliminate the investment restriction regarding reverse
repurchase agreements. Reverse repurchase agreements involve the sale of
securities held by the Portfolio with an agreement to repurchase the securities
at an agreed upon price and date, which reflect a rate of interest paid for the
use of
12
<PAGE> 17
funds for the period. The Board of Directors believes that a separate investment
restriction with respect to reverse repurchase agreements is unnecessary given
that reverse repurchase agreements, as a form of borrowing, would be subject to
the Portfolio's general borrowing restrictions.
PROPOSAL 2E
TO ELIMINATE THE FUNDAMENTAL INVESTMENT RESTRICTION
ON THE PLEDGE OF ASSETS
Under the Portfolio's current investment restrictions:
"None of the Portfolios will pledge or mortgage assets, except that
not more than 10% of the value of any Portfolio may be pledged (taken at
the time the pledge is made) to secure borrowings made in accordance with
paragraph 1 above, and the Portfolio may enter into reverse repurchase
agreements in accordance with paragraph 2 above. Margin deposits for the
purchase and sale of financial futures contracts and related options are
not deemed to be a pledge."
The 1940 Act does not impose any percentage limitations on the pledge of
assets. The Board of Directors believes that elimination of the investment
restriction on pledging of assets is in the best interest of the shareholders of
each Portfolio. Elimination of the restriction will provide Lutheran Brotherhood
with added flexibility to enter into secured borrowing arrangements on behalf of
a Portfolio consistent with the Portfolio's investment restriction on borrowing.
PROPOSAL 2F
TO ELIMINATE THE FUNDAMENTAL INVESTMENT RESTRICTION
ON RESTRICTED SECURITIES, ILLIQUID SECURITIES AND UNSEASONED ISSUERS
Under the current restriction, a Portfolio's aggregate investments in
restricted securities, securities for which no readily available market exists
and securities of issuers which have a record of less than three years'
continuous operation (typically referred to as "unseasoned issuers") may not
exceed 10% of the Portfolio's total assets. Specifically,
"None of the Portfolios will invest in securities (including
repurchase agreements maturing in more than seven days) that are subject to
legal or contractual restrictions on resale or for which no readily
available market exists, or in the securities of issuers (other than U.S.
Government agencies or instrumentalities) having a record, together with
predecessors, of less than three years' continuous operation, if, regarding
all such securities, more than 10% of the Portfolio's total assets would be
invested in them."
The proposal would eliminate the current percentage limitation on a
Portfolio's ability to invest in securities "for which no readily available
market exists. . ." Under current SEC policy, a Portfolio may not invest more
than 15% of its net assets in illiquid securities (10% in the case of the Money
Market Portfolio). Illiquid securities are generally regarded as securities
which may not be sold or disposed of within seven days in the ordinary course of
business at approximately the price at which a fund has valued them. Series of
open-end investment companies such as the Portfolios must stand ready to redeem
their shares on a continuous basis. Thus, they are limited in the amount of
illiquid securities they may hold because illiquid securities may not be easily
sold to raise cash necessary to meet the redemptions under certain circumstances
and because illiquid securities can present valuation problems. The proposal
would also permit a Portfolio to invest in restricted series under certain
circumstances. Although the SEC staff takes the position that restricted
securities should generally be presumed to be illiquid, the SEC staff does not
impose a specific percentage
13
<PAGE> 18
limitation on a fund's investment in restricted securities. The SEC staff has
permitted an open-end investment company's board of directors to determine that
certain types of restricted securities are liquid.
In 1990, the SEC adopted Rule 144A under the 1933 Act, which has resulted
in a form of restricted security which can be traded among qualified
institutional buyers without registration under the 1933 Act ("Rule 144A
securities"). In the release adopting Rule 144A, the SEC stated that the board
of directors of a fund has the authority to make the determination that a Rule
144A security is liquid, despite its restricted nature. More recently, the SEC
has taken the position that the board of directors of a fund may determine that
certain commercial paper issued in reliance on Section 4(2) of the 1933 Act
("Section 4(2) paper") is liquid. Section 4(2) paper is commercial paper issued
in reliance on Section 4(2) of the 1933 Act, which exempts from registration
"transactions not involving a public offering." The Directors believe that
elimination of the restriction will provide the Portfolio with additional
flexibility to address market, regulatory or other developments regarding
illiquid securities as they occur in the future.
Proposal 2F would also eliminate the restriction on investments in issuers
that have been in continuous operations for less than three years, commonly
referred to as "unseasoned issuers". The 1940 Act does not contain any
restrictions on investments in unseasoned issues. The Board of Directors
believes that elimination of the policy will increase the flexibility of
Lutheran Brotherhood by permitting investments by a Portfolio in unseasoned
issuers that otherwise meet the investment objectives and policies of the
Portfolio. Securities of unseasoned issuers may be subject to greater risk than
securities of more established companies because these issuers have only a brief
operating history and may have more limited markets and financial resources.
However, the Board of Directors believe that the increasing prevalence of
unseasoned issuers, the investment opportunities offered by such issuers, and
the fact that any such investments will be made in accordance with the
investment objective and policies of the Portfolio, warrants the elimination of
the current policy.
PROPOSAL 2G
TO ELIMINATE THE FUNDAMENTAL INVESTMENT RESTRICTIONS
ON CONTROL SECURITIES
Under each Portfolio's current investment restriction:
"None of the Portfolios will acquire securities for the purpose of
exercising control or management of any company except in connection with a
merger, consolidation, acquisition or reorganization."
The 1940 Act does not impose restrictions on the acquisition of securities
for the purpose of exercising control or management of a company. The Board of
Directors has concluded that the elimination of this investment restriction will
enhance the ability of a Portfolio, in its capacity as a shareholder, to
communicate with other shareholders, exercise voting rights and take other
corporate actions.
PROPOSAL 2H
TO ELIMINATE THE FUNDAMENTAL INVESTMENT
RESTRICTION ON SHORT SALES
Under each Portfolio's current investment restriction:
"None of the Portfolios will make short sales."
If Proposal 2H is adopted, a Portfolio would have the authority to effect
short sales. A short sale is a transaction in which a fund sells a security it
does not own by borrowing it from a broker, and consequently becomes obligated
to replace that security. A short sale against the box is a short sale where the
fund owns the
14
<PAGE> 19
security sold short or has an immediate and unconditional right to acquire that
security without additional cash consideration upon conversion, exercise or
exchange of options with respect to securities held in its portfolio. The effect
of selling a security short against the box is to insulate that security against
any future gain or loss. The Portfolios intend to restrict any short sales
transactions to short sales against the box, unless modified by the Board of
Directors.
PROPOSAL 2I
TO ELIMINATE THE FUNDAMENTAL INVESTMENT
RESTRICTION ON INVESTMENTS
IN OTHER INVESTMENT COMPANIES
Under each Portfolio's current investment restriction:
"None of the Portfolios will buy or sell the securities of other
investment companies, except by purchases in the open market involving only
customary brokerage commissions, or except as part of a merger,
consolidation or other acquisition".
The Board of Directors proposes to eliminate this fundamental investment
restriction. If Proposal 2I is adopted, each Portfolio would be able to invest
in the securities of other investment companies subject to the limitations of
the 1940 Act. Under the 1940 Act, a fund may generally not purchase a security
issued by another investment company, if, immediately after such purchase the
fund would own, in the aggregate, (i) more than 3% of the total outstanding
voting securities of such other investment company; (ii) securities issued by
such other investment company having an aggregate value in excess of 5% of the
value of the fund's total assets; or (iii) securities issued by such other
investment company and all other investment companies having an aggregate value
in excess of 10% of the value of the fund's total assets. These percentage
limitations do not apply to investments in affiliated funds that are part of the
same group of investment companies if certain conditions are satisfied. The
Board of Directors believes that the adoption of Proposal 2I will enhance
Lutheran Brotherhood's ability to consider potential investments in other
investment companies, consistent with a Portfolio's investment objective and
strategy.
PROPOSAL 2J
TO ELIMINATE THE FUNDAMENTAL INVESTMENT
RESTRICTION ON INVESTMENTS IN OIL AND GAS INTERESTS,
COMMON STOCK AND OTHER EQUITY SECURITIES
(MONEY MARKET PORTFOLIO ONLY)
Under the Money Market Portfolio's current investment restriction:
"The Money Market Portfolio will not invest in oil and gas interests,
common stock, preferred stock, warrants or other equity securities".
The Board of Directors proposes to eliminate this fundamental investment
restriction. The Board of Directors believes that the current investment
restriction could affect the Money Market Portfolio's ability to invest in other
money market funds if such investments were characterized as "equity
securities." If Proposal 2J is adopted, the Money Market Portfolio intends to
continue to operate so as to satisfy the requirements of Rule 2a-7 under the
1940 Act, the rule governing the operation of money market funds that use the
amortized cost method to value their assets. Rule 2a-7 imposes limitations on
the credit quality and portfolio maturity of the Portfolio's investments.
15
<PAGE> 20
PROPOSAL 2K
TO ELIMINATE THE FUNDAMENTAL INVESTMENT
RESTRICTION ON PORTFOLIO MATURITY
(MONEY MARKET PORTFOLIO ONLY)
Under the Money Market Portfolio's current investment restrictions:
The Money Market Portfolio will not invest in any security with a
remaining maturity in excess of one year, except that securities held
pursuant to repurchase agreements may have a remaining maturity of more
than one year".
The Board of Directors proposes to eliminate this fundamental investment
restriction, which is not required under the 1940 Act. The Money Market
Portfolio would continue to be governed by the provisions of Rule 2a-7. Rule
2a-7 generally prohibits a money market fund from acquiring securities with
remaining maturities that exceed 397 days. For purposes of the portfolio
maturity calculation under Rule 2a-7, a fund may rely on certain maturity
shortening features, such as demand features and puts. The Board of Directors
believes that the adoption of Proposal 2K will provide the Money Market
Portfolio with the maximum flexibility permitted under Rule 2a-7, including any
changes to Rule 2a-7 that may occur in the future.
REQUIRED VOTE
To be approved with respect to any Portfolio, each of Proposals 2A through
2K must receive the affirmative vote of a "majority of the outstanding voting
securities" of the Portfolio entitled to vote on the Proposal, as defined in the
1940 Act. Under the 1940 Act, a vote of a majority of the outstanding voting
securities of a Portfolio means the lesser of (1) the vote of 67% or more of the
shares of the Portfolio present at the Special Meeting if the holders of more
than 50% of the outstanding Portfolio shares are present or represented by
proxy, or (2) the vote of the holders of more than 50% of the outstanding shares
of the Portfolio.
RECOMMENDED SHAREHOLDER ACTION
The Board of Directors unanimously recommends that shareholders vote FOR
approval of proposals 2A through 2K. If a proposal with respect to a particular
investment restriction is not approved by shareholders of a Portfolio, the
present investment restriction will remain in effect.
16
<PAGE> 21
PROPOSAL 3
TO RATIFY THE SELECTION OF PRICEWATERHOUSECOOPERS LLP
AS THE FUND'S INDEPENDENT ACCOUNTANTS
At a meeting held on December 4, 1997, the Board of Directors of the Fund
selected the firm of Price Waterhouse LLP, which subsequently merged with
Coopers and Lybrand LLP to become PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), as the independent accountants for the Fund for its
fiscal year ending December 31, 1998. Shareholders of each Fund are being asked
to ratify the selection of PricewaterhouseCoopers to serve as the independent
accountants to the Fund for this period. PricewaterhouseCoopers has served as
independent accountants to the Fund since 1988, providing customary professional
services in connection with the audit of the Fund. Their fees for such services
include fees for work leading to the expression of opinions on the financial
statements included in reports to shareholders, opinions on financial statements
and other data included in the Fund's annual report to the Securities and
Exchange Commission, and opinions on financial statements included in amendments
to the Fund's Registration Statement. For the fiscal year ended December 31,
1997, fees paid to the accountants for the Fund represented fees for audit
services described above. In approving such fees, the Audit Committee of the
Board of Directors considered the possible effect thereof in the independence of
the accountants. Representatives of PricewaterhouseCoopers are not expected to
attend the Special Meeting, but will be available by telephone to answer any
questions that may arise during the Special Meeting.
REQUIRED VOTE
Approval of proposal 3 requires the affirmative vote of a majority of the
shares of the Fund voted at the Special Meeting, provided a quorum is present.
Shareholders of all Portfolios will vote together as a single class on proposal
3.
RECOMMENDED SHAREHOLDER ACTION
The Board of Directors, including those Directors who are not interested
person of the Fund, unanimously recommends that shareholders vote FOR approval
of proposal 3.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
The Board of Directors does not know of any other matters to be considered
at the Special Meeting other than those referred to above. If any other matters
are properly brought before the Special Meeting, it is the intention of proxy
holders to vote such proxies on such matters in accordance with their best
judgment.
NO ANNUAL MEETINGS OF SHAREHOLDERS
There will be no annual or further special meetings of shareholders of the
Fund unless required by applicable law or called by the Board of Directors in
their discretion. The next meeting of the shareholders of the Fund will be held
at such time as the Board of Directors may determine or at such time as may be
legally required. Contract owners wishing to submit proposals for inclusion in a
proxy statement for a subsequent shareholder meeting should send their written
proposals to the Secretary of the Fund, 625 Fourth Avenue South, Minneapolis,
Minnesota 55415. Contract owner proposals should be received in a reasonable
time before the solicitation is made.
WHETHER OR NOT YOU PLAN TO ATTEND THIS SPECIAL MEETING, PLEASE FILL IN, DATE AND
SIGN THE ENCLOSED VOTING INSTRUCTION FORM AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS NECESSARY IF IT IS MAILED IN THE UNITED STATES.
October 13, 1998
Date of Proxy Statement
17
<PAGE> 22
1933 Act File No. 33-3677
LB SERIES FUND, INC.
625 FOURTH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55415-1625
VOTING INSTRUCTION CARD FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 1, 1998
A Special Meeting of the shareholders of LB Series Fund, Inc. (the
"Fund") will be held at the Lutheran Brotherhood Building, 625 Fourth Avenue
South, Minneapolis, Minnesota 55415, on December 1, 1998, at 8:30 a.m. local
time. For all of the full and fractional shares of the Fund for which I am
permitted to give you the voting directions, Lutheran Brotherhood Variable
Insurance Products Company and/or Lutheran Brotherhood, as holder of such
shares, is hereby instructed to vote as indicated below and return to the Fund
the proxy solicited by the Board of Directors of the Fund for the meeting, and
any adjournment(s) thereof. Receipt of the Notice of the Proxy Statement for
said Special Meeting is acknowledged.
Discretionary authority is hereby conferred as to all other matters as
may properly come before the meeting.
Note: Please sign exactly as your name
appears hereon. If shares are held
jointly, either holder may sign.
Corporate proxies should be signed by
an authorized officer.
---------------------------------------
Shareholder Signature Date
---------------------------------------
Co-owner Signature Date
BE SURE TO VOTE FOR EACH PORTFOLIO OF
THE LB SERIES FUND, INC. ON THE REVERSE
SIDE
[REVERSE SIDE]
THIS VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE LB SERIES FUND INC. YOU MUST MARK THE BOX "ABSTAIN" IF YOU WISH TO ABSTAIN
ON A PARTICULAR PROPOSAL. IF NO CHOICE IS INDICATED AS TO ANY ITEM, THIS PROXY
WILL BE VOTED AFFIRMATIVELY ON THESE MATTERS.
PLEASE MARK VOTES AS IN THIS EXAMPLE: [ ]
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS. To withhold authority to vote for any FOR all Vote withheld FOR all nominees
individual nominee, strike a line through the nominee's name nominees for all (except as marked
in the list below. to the contrary)
01. Rolf F. Bjelland 04. Herbert F. Eggerding, Jr. 07. Noel K. Estenson [ ] [ ] [ ]
02. Jody L. Harpstead 05. Richard A. Hauser 08. Connie M. Levi
03. Bruce J. Nicholson 06. Ruth E. Randall
2. Amendment or Elimination of certain fundamental investment restrictions.(2A. Borrowing and senior securities. 2B. Lending. 2C.
Real estate and commodities. 2D. Reverse repurchase agreements. 2E. Pledge of assets. 2F. Restricted securities. Illiquid
securities and unseasoned issuers. 2G. Control securities. 2H. Short Sales. 2I. Investments in other investment companies. 2J.
Investments in oil and gas interests, common stock and other equity securities. 2K. Portfolio Maturity.) To vote against the
proposed amendment or elimination of one or more of the specific fundamental investment restrictions, but to approve the others,
fill in the "FOR ALL EXCEPT" box AND indicate the number(s)(as set forth in the proxy statement) of the investment restriction(s)
you do not want to change on the line provided.
FOR AGAINST ABSTAIN FOR ALL EXCEPT
[OPPORTUNITY GROWTH PORTFOLIO] [ ] [ ] [ ] [ ] ________________
[MID CAP PORTFOLIO] [ ] [ ] [ ] [ ] ________________
[WORLD GROWTH PORTFOLIO] [ ] [ ] [ ] [ ] ________________
[HIGH YIELD PORTFOLIO] [ ] [ ] [ ] [ ] ________________
[INCOME PORTFOLIO] [ ] [ ] [ ] [ ] ________________
[MUNICIPAL BOND PORTFOLIO] [ ] [ ] [ ] [ ] ________________
[MONEY MARKET PORTFOLIO] [ ] [ ] [ ] [ ] ________________
3. To ratify the selection of PricewaterhouseCoopers LLP
as the Trust's independent accountants. [ ] [ ] [ ]
</TABLE>
Please sign and date the front of this card
WHEN THIS VOTING INSTRUCTION FORM IS PROPERLY EXECUTED, THE SHARES
REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES MADE ON THIS
FORM. IF NO CHOICE IS INDICATED ON THIS FORM, THE VOTING INSTRUCTION WILL BE
DEEMED TO BE AFFIRMATIVE ON THESE MATTERS. IF THE FORM IS NOT SIGNED AND
RECEIVED BY LUTHERAN BROTHERHOOD VARIABLE INSURANCE PRODUCTS COMPANY OR LUTHERAN
BROTHERHOOD AS APPROPRIATE BY NOVEMBER 27, 1998, THE SHARES REPRESENTED BY THIS
VOTING INSTRUCTION WILL BE CAST IN THE SAME PROPORTION OF INSTRUCTIONS "FOR,"
"AGAINST," AND "WITHHELD" OR "ABSTAIN" ON EACH ISSUE AS ARE CAST WITH RESPECT TO
ALL OTHER SHARES VOTED BY CONTRACT OWNERS AT THE MEETING.
