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LB SERIES FUND, INC.
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Curved copy within art reads:
CHOICE [BULLET] PROTECTION [BULLET] ACCUMULATION
December 31, 1998
Annual Report for Variable Products
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Our Message To You
February 1999
[PHOTO OF MR. BJELLAND OMITTED]
Dear Contract Owner:
Enclosed is the LB Series Fund, Inc. Annual Report covering the 12-month
period ending December 31, 1998. LB Series Fund, Inc. 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.
On the following pages we review the major economic issues that
influenced the investment markets in 1998, as well as the strategies our
portfolio managers used to navigate the volatile markets of the past
year. We also provide you with each portfolio's performance history and
top 10 holdings. And, on pages 18-20, you'll find summaries of the two
LB Series Fund shareholder meetings that were held during 1998.
Year 1998 put many long-term investment strategies to the test. Last
summer's sharp downturn in stock prices prompted some investors to sell
corporate securities in hopes of avoiding losses by timing the markets.
Unfortunately, these tactics often had a reverse effect, with many
market participants selling their holdings during market downdrafts,
only to re-enter the market when prices had already risen. Those with
the discipline to endure the markets' ups and downs, however, were amply
rewarded for their patience. By the end of the year, stock prices
rebounded impressively from their October lows and liquidity in the
corporate bond markets improved steadily, as well.
Strong U.S. economic growth, combined with low levels of inflation and
interest rates, should provide fertile ground for future gains in the
broad market. At the same time, however, there are also signs of
overvaluation in some sectors of the equities markets, particularly in
the area of technology growth stocks. This could signal further market
corrections on the horizon in order for companies' earnings to "catch
up" with their stock valuations.
The normal cyclical nature of the financial markets necessitates
occasional market corrections. If the prospect of potential market
turbulence puts you ill at ease, contact your LBSC registered
representative for a review of your investment strategy. Using Lutheran
Brotherhood's AssetMatchSM program, your LBSC registered representative
can make sure that your asset allocation strategy is in line with your
risk temperament and time horizon.
Programs like AssetMatch are a result of Lutheran Brotherhood's
commitment to continually add value to the products and services we
provide our members. In the past year we also added the Mid Cap Growth
Portfolio to the LB Series Fund, Inc. The Mid Cap Growth Portfolio
invests primarily in common stocks of medium-sized companies, which
often have greater potential for growth than larger firms. Lutheran
Brotherhood members have reacted enthusiastically to this addition,
helping the Mid Cap Growth Portfolio grow to over $95 million in net
assets as of December 31, 1998.
We are also in the process of redrafting our LB Series Fund, Inc. and
variable products prospectuses with clear, concise "plain English"
language, increased use of charts and graphs, and other features to
better communicate the essential information that investors need to
know. You will receive these updated prospectuses in the mail in early
May 1999.
As always, we remain committed to providing Lutheran Brotherhood members
with high-quality products and customer service, as well as accurate and
timely investment information. If you would like information on variable
annuity unit values, call 1-800-328-4552, option 3. For customer service
support, call our new toll-free number, 1-800-990-6290.
Thank you for investing with us. We're pleased to include you among the
growing ranks of investors who put their trust in Lutheran Brotherhood.
Sincerely,
[/s/Rolf F. Bjelland]
Rolf F. Bjelland
President and Chairman
LB Series Fund, Inc.
Economic and Market Overview December 31, 1998
Following a late-summer meltdown, the financial markets staged a
remarkable recovery in the latter part of the 12-month fiscal period
ending December 31, 1998. After delivering strong returns early in 1998,
stock prices began a downward slide in July, fueled by international
financial turmoil. By mid-October, demand for corporate bonds was
lagging and equity valuations had dropped significantly, briefly
interrupting the record bull market that began in 1990. Amid fears of a
looming U.S. recession, many investors shifted assets from riskier
corporate securities into safe U.S. Treasury bonds and cash management
accounts.
In an effort to ease investor fears, the U.S. Federal Reserve enacted
three separate interest rate cuts in September, October and November.
With the extra cash these rate cuts infused into the U.S. economy, the
stock markets responded quite positively, posting impressive gains in
the last quarter. By year-end, the major equity indexes had surged past
their all-time highs, including the large-company Standard & Poor's 500
Index, which gained over 20% for the fourth straight year. High-quality
corporate bond prices also rebounded strongly, though demand for high-
yield corporate issues remained sluggish by comparison.
Economy
The U.S. economic machine continued its impressive momentum in the face
of recessionary conditions in East Asia, currency problems in Russia,
and slowing growth elsewhere around the world. As of December, the
economic expansion which began in April 1991 became the second-longest
in U.S. economic history. In the fourth quarter of 1998, the U.S. gross
domestic product grew at an estimated 4.10% from the previous year,
according to statistics released by the U.S. Department of Commerce on
January 29, 1999. Strong levels of consumer spending and residential
construction were largely responsible for these gains.
Despite robust economic conditions, both inflation and interest rates
remained at historically low levels. Consumer prices never rose more
than 2% from the previous year throughout all of 1998, and yields on the
benchmark 30-year U.S. Treasury bond dipped below 5% for the first time
ever. However, the United States was not completely isolated from dire
economic conditions elsewhere in the world. Weak export markets
contributed to falling farm incomes, low commodity prices, and an
increasing trade gap.
1998 also provided further evidence of a rapidly concentrating
industrial structure. Rising cost pressures and excess global industrial
capacity spawned a wave of corporate consolidations around the globe as,
one by one, industry titans once considered too large to merge announced
deals to join hands. In the U.S. alone, the total value of mergers and
acquisitions rose 78% in 1998. While these deals frequently provided
rewards to equity shareholders in the form of higher share prices, they
also led to wide-scale corporate downsizing and job losses. Fortunately,
a low national unemployment rate of just over four percent took some of
the sting out of job layoffs.
Sector Performance
Throughout most of the year, equity market gains were disproportionately
in the hands of large, growth-company stockholders, as investors
continued to place a premium on the name recognition, liquidity, and
reliable earnings histories of larger companies. The strong performance
of health care and retailing stocks, coupled with frenetic bidding for
Internet and technology stocks, helped push the large-company S&P 500 to
a 28.59% total return in 1998, outpacing by over 10% the Dow Jones
Industrial Average, which returned 18.12% for the 12-month period.
Total return for the Russell 2000 Index of small-capitalization stocks
was -2.55% for the year, though the performance of small-cap issues
improved markedly following the Federal Reserve Board's lowering of
short-term interest rates. Meanwhile, a strong fourth quarter rally in
the performance of mid-cap stocks helped boost the S&P 400 Midcap Index
to an 18.25% total return for the year. Strong gains in Europe accounted
for much of the 20.33% gain in the Morgan Stanley EAFE Index, while
growth in most areas of East Asia and Latin America remained stagnant.
The investment-grade sector of the bond market performed well in 1998,
spurred on by strong investor demand for U.S. Treasury bonds and high-
quality corporate issues. However, economic uncertainties abroad
resulted in weakening demand for high-yield corporate issues, pulling
down market prices, but resulting in higher current yields for new
investors. For the 12-month period, the Lehman Brothers Aggregate Bond
Index returned 8.69%, while the Lehman Brothers High Yield Index lagged
at 1.87%.
Challenges in the Year Ahead
In the coming year, attention to Year 2000 ("Y2K") computer fixes will
reach a fever pitch as corporations and units of government prepare for
the new millenium. This issue centers around the ability of computers
and other date-sensitive components to accurately distinguish dates in
their program codes for the year 2000 and beyond. While no organization
can promise to be totally Y2K compliant, Lutheran Brotherhood has
allocated significant resources to update and test our critical computer
systems. Additionally, we have incorporated the Y2K issue into
investment research, reviewing the Y2K compliance efforts of securities
issuers and weighing the risks of non-compliance with the other risks of
investing. Though no investment manager can insure against securities
price declines relating to Y2K, we are committed to taking steps to
minimize its impact on Lutheran Brotherhood's investment portfolios.
Currency issues could also have an effect on European markets over the
coming year. The nations of the European Economic and Monetary Union
(EMU) are adapting to the introduction of a common European currency,
the Euro, introduced in January 1999. Circulation of existing currencies
in these countries will gradually be reduced until the Euro becomes the
sole currency among EMU member nations on January 1, 2002. Though
advancement of the EMU is generally considered a positive influence for
European investments, conversion to the Euro presents both challenges
and opportunities for European companies, and the ultimate effect of
this transition on global financial markets remains unclear.
Outlook
There are a few concerns surrounding the U.S. equities markets,
including extremely high valuations in the technology sector and
disproportionate sector returns. In 1998, approximately 40 percent of
the stocks included in the S&P 500 finished the year with negative
returns, while five stocks alone accounted for one-fourth of the Index's
total return. Consequently, the direction of the equities markets in the
coming year could depend, in part, on whether or not technology and
large, growth companies can produce earnings commensurate with their
soaring stock valuations.
Many parts of the world are expected to experience slow economic growth
in the coming year, particularly Russia and the economies of Southeast
Asia. Additionally, there are fears that Brazil's recently devalued
currency could drag Latin America into recession. Fortunately, the U.S.
remains economically vibrant, consumer confidence is high and, with the
Federal Reserve's easing of monetary policy, prospects for future
economic growth are good.
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Curved copy within art reads:
CHOICE [BULLET] PROTECTION [BULLET] ACCUMULATION
Opportunity Growth Portfolio Review
[GRAPHIC OMITTED: PHOTO OF Richard T. Whitney]
Richard T. Whitney is portfolio manager of the Opportunity Growth
Portfolio and a managing director of T. Rowe Price Associates, the
investment subadvisor for the Portfolio. Rich has been with T. Rowe
Price since 1985 and heads the firm's investment advisory committee.
Rich is a Chartered Financial Analyst.
Stocks of small companies significantly underperformed shares of larger
firms in the 12 months ended December 31, 1998, as investors sought
issues with stronger liquidity and reliable earnings. Among the hardest
hit were stocks with the smallest market capitalizations (which are
calculated by multiplying the number of stock shares outstanding by the
price for those shares). By moving into stocks at the larger end of the
small-company spectrum, and by emphasizing the better-performing small-
cap growth sector over small-cap value shares, we helped the Opportunity
Growth Portfolio maintain a competitive position in this difficult
market environment.
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Top 10 Holdings % of Portfolio
Citrix Systems, Inc. 0.8%
Concord EFS, Inc. 0.8%
Symbol Technologies, Inc. 0.8%
NOVA Corp. 0.8%
Sanmina Corp. 0.7%
E*TRADE Group, Inc. 0.7%
Insight Enterprise, Inc. 0.7%
Orbital Sciences Corp. 0.7%
HBO & Co. 0.7%
NCO Group, Inc. 0.6%
Footnote reads:
These holdings represent 7.3% of the Portfolio's total investments.
During the reporting period, the Portfolio had a total return (based on
NAV) of -2.99%. Over the same time, the Portfolio's market benchmark,
the Russell 2000 Index, had a return of -2.55%.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Common Stocks 97.1%
Short-Term Securities 2.9%
Adding Stability in a Volatile Market
When the year began, the Opportunity Growth Portfolio was overweighted
in stocks with market capitalizations under $250 million as compared to
the Russell 2000 Index. As investors continued to move away from these
issues, we added investments in small-cap stocks with greater
capitalizations and sold stocks with capitalizations of $200 million or
less. This strategy helped to stabilize the Portfolio's returns as the
small-company market fell nearly 40% between April and October of 1998.
To give the Portfolio added stability, we increased positions in
consumer growth stocks, which benefited from the highest level of
consumer confidence in several decades. We also boosted positions in
stocks of media and telecommunications firms, which we expect to enjoy
strong growth over time, as well as positions in stocks of financial
firms. These changes were especially beneficial to the Portfolio's
performance when small-cap stocks rebounded in the fourth quarter of
1998.
With investors uncertain where the economy was headed, we reduced the
Portfolio's exposure to economically sensitive sectors, including shares
of capital goods, energy, and basic materials firms. By the end of
December these and other changes increased the median five-year
projected earnings growth rate for stocks in the Portfolio to 23.6%.
That compares to a median rate of 17.5% for stocks in the Russell 2000
Index.
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Top 10 Sectors
Computer Software 17.4%
Business Services 9.3%
Retail 8.6%
Bank & Finance 6.8%
Media & Communications 5.7%
Hospital Supplies & Management 5.6%
Electronic Components 5.1%
Pharmaceuticals 2.9%
Telecommunications Equipment 2.8%
Distribution Services 2.6%
Footnote reads:
These sectors represent 66.8% of the Portfolio's total investments.
LB Series Fund, Inc.
Opportunity Growth Portfolio seeks long-term growth of capital by
investing primarily in common stocks of small companies.
Portfolio Facts
Inception Date: 1/18/96
Total Net Assets
(in millions): $372.2
Attractive Opportunities
Despite a 16.31% gain in the Russell 2000 Index in 1998's final quarter
- -- one of the Index's best quarterly returns since it was created in
1986 -- relative valuations for small-cap stocks remain near 40-year
lows. Meanwhile, the earnings of small-cap firms have been mostly
sheltered from the foreign economic problems that have hurt the earnings
of large, multinational firms. Historically, valuations like these have
signaled attractive opportunities for investing in small-cap growth
companies.
Nonetheless, small-cap stocks sometimes remain cheap for extended
periods, especially when investors expect economic growth to weaken.
Thus, the small-cap sector could continue to underperform until
investors are confident that growth will strengthen. Once economic
expectations improve, and stocks enjoy a broader, sustained rally,
small-cap shares could emerge as the new market leaders.
[GRAPHIC WORM CHART OMITTED: Growth of $10,000 Invested Since 1/31/96]
Performance Through December 31, 1998
Growth of $10,000 Invested Since 1/31/96
Opportunity Russell Consumer
Growth 2000 Price
Date Portfolio Index Index
- ---- ----------- ------- --------
1996 10,000 10,000 10,000
1996 10,416 10,312 10,030
1996 10,722 10,525 10,080
1996 11,944 11,089 10,120
1996 12,716 11,525 10,140
1996 11,871 11,052 10,150
1996 10,855 10,087 10,170
1996 11,499 10,673 10,190
1996 12,342 11,090 10,220
1996 11,364 10,920 10,250
1996 10,954 11,369 10,270
1996 11,302 11,667 10,270
1997 11,528 11,901 10,300
1997 10,533 11,613 10,340
1997 9,415 11,065 10,360
1997 9,009 11,095 10,380
1997 10,338 12,329 10,370
1997 10,887 12,858 10,380
1997 11,454 13,456 10,400
1997 11,721 13,764 10,410
1997 13,018 14,772 10,440
1997 12,246 14,123 10,470
1997 11,776 14,032 10,460
1997 11,407 14,277 10,450
1998 11,063 14,052 10,470
1998 11,739 15,090 10,490
1998 12,175 15,712 10,510
1998 12,216 15,798 10,520
1998 11,219 14,947 10,540
1998 11,305 14,978 10,560
1998 10,451 13,765 10,570
1998 8,200 11,094 10,580
1998 8,812 11,963 10,600
1998 9,345 12,451 10,620
1998 9,990 13,104 10,620
1998 $11,066 $13,915 $10,610
*See accompanying notes to Portfolio Management Reviews.
[INSET BOX ON CHART READS:]
Opportunity Growth
Portfolio
Annualized Total Returns*
- -------------------------
Since Inception
1/18/96 5.36%
1 Year -2.99%
Mid Cap Growth Portfolio Review
[GRAPHIC OMITTED: PHOTO OF Brian L. Thorkelson]
Brian L. Thorkelson is portfolio manager for the Mid Cap Growth
Portfolio. He joined Lutheran Brotherhood in 1987, working for five
years as a bond trader and another five years as an equity analyst for
several Lutheran Brotherhood portfolios.
In a climate where economic uncertainty caused investors to favor stocks
with strong liquidity and reliable earnings, stocks of mid-sized
companies outperformed stocks with smaller market capitalizations but
significantly underperformed large-capitalization issues during 1998.
(Market capitalization is calculated by multiplying the number of stock
shares outstanding by the price of those shares.) During the reporting
period, the Mid Cap Growth Portfolio benefited from emphasizing stocks
of quality mid-cap companies, whose prices were reasonable in light of
their strong potential for long-term growth.
Although the Portfolio earned a solid return for the period, it
underperformed its market benchmark, the Standard & Poor's 400 MidCap
Index. This is, in part, attributable to the portion of the Portfolio's
assets that were held in cash reserves early in the period as we waited
to make attractive investments that were appropriate to the young
Portfolio's size. Of course, the Index, as a pure measure of market
values, reflects no such holdings in cash reserves. In addition, one-
third of the S&P 400's 1998 return came from just one of its 400 stocks.
That stock represented more than 7% of the value of the Index -- a level
that diversified mutual funds (which must not exceed 5% of holdings in
any single issuer) are prohibited from matching.
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Top 10 Holdings % of Portfolio
America Online, Inc. 1.5%
Staples, Inc. 0.9%
Office Depot, Inc. 0.8%
Clear Channel Communications, Inc. 0.8%
Watson Pharmaceuticals, Inc. 0.7%
TJX Companies, Inc. 0.7%
Fiserv, Inc. 0.7%
Outdoor Systems, Inc. 0.6%
Compuware Corp. 0.6%
Ascend Communications, Inc. 0.6%
Footnote reads:
These holdings represent 7.9% of the Portfolio's total investments.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Common Stocks 95.6%
Short-Term Securities 4.4%
Between the Portfolio's inception on January 30, 1998, and the end of
the reporting period on December 31, 1998, the Portfolio had a total
return (based on NAV) of 11.62%. Over the same 11-month period, the S&P
400 MidCap Index had a return of 21.42%.
Technology Stocks Strong Performers
With investors concerned about economies here and abroad, we tilted the
Portfolio's investments toward companies that focus on domestic sales,
giving extra attention to stocks of technology, consumer growth, and
financial firms. Technology stocks, particularly those of computer
software and semiconductor firms, significantly improved the Portfolio's
returns, along with shares of retail firms. These performances helped
offset disappointing returns from basic materials and energy shares.
During the summer of 1998, when economic problems overseas threatened
financial firms around the world, we trimmed the Portfolio's holdings in
the financial sector. As stock prices corrected late in the summer, we
found many attractive opportunities to put the Portfolio's cash to work.
These investments included financial, technology and consumer growth
shares, which continued to perform well when stocks rebounded. At the
end of December, the Portfolio was overweighted in technology,
biotechnology, healthcare and energy stocks versus its market benchmark
and underweighted in shares of basic materials firms.
LB Series Fund, Inc.
Mid Cap Growth Portfolio seeks long-term growth of capital by investing
primarily in common stocks of medium-sized companies.
Portfolio Facts
Inception Date: 1/30/98
Total Net Assets
(in millions): $95.7
Continued Focus on Growth
Even though the mid-cap sector has rallied strongly in recent months, it
remains attractively priced in comparison to large-cap shares. In
addition, mid-cap companies are generally experiencing better earnings
growth rates than large-cap firms. Mid-cap shares may continue to lag
the broader market while investors remain uncertain about near-term
economic growth. However, like small-cap stocks, the mid-cap sector
could outperform once investor confidence finds a solid footing.
In this environment, we plan to maintain our focus on companies with
strong growth prospects. This should mean a continued overweighting in
shares of technology and consumer growth firms, with special attention
to biotechnology and health care issues.
[GRAPHIC OMITTED: Top 10 Sectors]
Top 10 Sectors
Computer Software 10.7%
Retail 10.0%
Bank & Finance 8.8%
Computers & Office Equipment 7.9%
Drugs & Health Care 7.6%
Services 7.1%
Electronics 6.9%
Healthcare Management 3.9%
Telephone & Telecommunications 3.7%
Broadcasting 3.4%
Footnote reads:
These sectors represent 70.0% of the Portfolio's total investments.
Mid Cap Growth
Portfolio
Total Return*
Period Ending 12/31/98
- ----------------------
Since Inception
1/30/98 11.62%
*See accompanying notes to Portfolio Management Reviews.
The Mid Cap Growth Portfolio was introduced on January 30, 1998.
Given its brief performance history, the growth of a
$10,000 investment in the Portfolio is not illustrated in this report.
World Growth Portfolio Review
[GRAPHIC OMITTED: PHOTO OF Martin G. Wade]
Martin G. Wade is chief executive officer and vice chairman of Rowe
Price-Fleming International, the investment subadvisor for the World
Growth Portfolio. He heads the Portfolio's investment management team
and has done so since the Portfolio's inception in January 1996. Martin
has been working in research and investment management since 1968 and
has been with Rowe Price-Fleming since 1979.
The Asian financial crisis that started in the summer of 1997 deepened
during 1998, as Japan entered an economic recession. Economies in the
emerging markets of Russia and Latin America also weakened over this
time. While European economies continued to grow, stocks in the region
were restrained for most of the year by concerns about a worldwide
recession. Although foreign stocks retraced most of their gains during a
third quarter correction, a strong fourth quarter rebound led by shares
in Asian companies helped the Morgan Stanley Capital International
Europe, Australasia, Far East (EAFE) Index earn a total return of 20.33%
for the 12 months ended December 31, 1998.
[GRAPHIC OMITTED: Top 10 Countries]
Top 10 Countries
United Kingdom 18.8%
Japan 16.8%
Netherlands 11.0%
France 10.7%
Switzerland 7.4%
Germany 7.2%
Italy 5.9%
Sweden 3.5%
Spain 3.1%
Australia 2.0%
Footnote reads:
These countries represent 86.4% of the Portfolio's total investments.
During the reporting period, we invested a smaller portion of the World
Growth Portfolio in Asian companies than that represented in the EAFE
Index, while simultaneously overweighting the Portfolio in European
investments compared to the Index. However, an underweighting in the
strongly performing markets of Finland and Germany, and an overweighting
in the lagging markets of Latin America, caused the Portfolio to
underperform its benchmark with a total return (based on NAV) of 16.75%.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Common Stocks & Warrants 95.9%
Short-Term Securities 3.4%
Preferred Stocks 0.7%
A Further Shift from Asia to Europe
When 1998 began, Asian stocks accounted for about 22% of Portfolio
assets, versus 33% of the EAFE Index. As economic conditions in the
region deteriorated, we continued to trim that part of the Portfolio.
These cuts, plus a decline in market value, reduced Asian stocks to 19%
of the Portfolio at the end of the year, versus 27% of the Index.
For the most part, we used the proceeds from sales of Asian stocks to
increase investments in Europe. During the first half of the year, we
added stocks of French, Italian, and German banks, as well as shares of
Royal Philips Electronics, a major Dutch electronics firm. In the third
quarter, we trimmed investments in several Japanese blue-chip companies.
This let us take advantage of weaker prices in European stocks to
further increase Portfolio positions in that region. As stocks rebounded
in the fourth quarter, we traded certain European holdings for shares of
other European firms that we felt had better promise. We also bought
stocks of two telecommunications firms in Asia.
[GRAPHIC OMITTED: Top 10 Holdings]
% of
Top 10 Holdings Country Portfolio
National Westminster Bank U.K. 2.9%
SmithKline Beecham plc U.K. 2.5%
Wolters Kluwer Netherlands 2.2%
Nestle Switzerland 2.0%
Glaxo Wellcome U.K. 1.8%
Kingfisher U.K. 1.7%
Eaux Cie Generale France 1.7%
Shell Transport & Trading U.K. 1.7%
ING Groep NV Netherlands 1.6%
Novartis AG Switzerland 1.5%
Footnote reads:
These holdings represent 19.6% of the Portfolio's total investments.
LB Series Fund, Inc.
World Growth Portfolio seeks long-term capital growth by investing
primarily in common stocks issued by established companies outside
of the United States.**
Portfolio Facts
Inception Date: 1/18/96
Total Net Assets
(in millions): $369.7
Focusing on Europe
With 70% of its investments in Europe, and 19% in Asia, we believe the
Portfolio is properly positioned for the months ahead. While Europe
faces the near-term uncertainties of the European Monetary Union and
deregulation of industry and trade, the region should benefit over time
from the corporate mergers and restructuring that are now taking place.
We continue to find stocks in that region that are reasonably priced
versus their companies' long-term potential for growth.
While we are encouraged by recent actions taken by the Japanese
government to stimulate its economy, we believe few companies are taking
the tough actions needed to reverse the recession there. Though other
Asian economies may be near bottom, we think stock prices in those
markets remain high relative to their prospects for growth in corporate
earnings. In Latin America, we remain convinced that there are many
attractive investment opportunities that can perform strongly once
economies in that region stabilize.
[GRAPHIC WORM CHART OMITTED: Growth of $10,000 Invested Since 1/31/96]
Performance Through December 31, 1998
Growth of $10,000 Invested Since 1/31/96
World Growth MSCI EAFE Consumer
Date Portfolio Index Price Index
- ---- ------------ --------- -----------
1996 10,000 10,000 10,000
1996 9,974 10,036 10,030
1996 10,098 10,252 10,080
1996 10,355 10,552 10,120
1996 10,336 10,360 10,140
1996 10,468 10,421 10,150
1996 10,137 10,119 10,170
1996 10,290 10,143 10,190
1996 10,534 10,415 10,220
1996 10,481 10,311 10,250
1996 10,965 10,723 10,270
1996 11,025 10,588 10,270
1997 10,871 10,220 10,300
1997 10,983 10,389 10,340
1997 10,967 10,430 10,360
1997 11,035 10,487 10,380
1997 11,738 11,172 10,370
1997 12,239 11,791 10,380
1997 12,568 11,985 10,400
1997 11,433 11,092 10,410
1997 12,195 11,715 10,440
1997 11,306 10,816 10,470
1997 11,276 10,708 10,460
1997 11,335 10,805 10,450
1998 11,737 11,302 10,470
1998 12,423 12,030 10,490
1998 12,851 12,402 10,510
1998 12,952 12,503 10,520
1998 12,928 12,445 10,540
1998 12,924 12,542 10,560
1998 13,082 12,673 10,570
1998 11,483 11,105 10,580
1998 11,226 10,768 10,600
1998 12,223 11,893 10,620
1998 12,781 12,505 10,620
1998 $13,233 $13,002 $10,610
*See accompanying notes to Portfolio Management Reviews.
[INSET BOX ON CHART READS:]
World
Growth Portfolio
Annualized Total Returns*
- -------------------------
Since inception
1/18/96 9.99%
1 Year 16.75%
Growth Portfolio Review
[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.
Investors' preference for stocks of large, high-quality companies in
1998 benefited the Growth Portfolio, which focuses on such issues.
During the year, the Portfolio also gained from emphasizing such
strongly performing sectors as technology, finance, and consumer growth
and from de-emphasizing companies that trade heavily with the troubled
economies of Asia. These factors, plus strong gains from many individual
investments, helped the Portfolio earn strong returns that were
comparable to those of its market benchmark.
For the 12 months ended December 31, 1998, the Portfolio earned a total
return (based on NAV) of 28.38%. Over the same period, the Standard &
Poor's 500 Index returned 28.59%.
[GRAPHIC OMITTED: Top 10 Holdings]
Top 10 Holdings % of Portfolio
Microsoft Corp. 2.2%
Cisco Systems, Inc. 2.2%
Intel Corp. 2.1%
MCI Worldcom, Inc. 1.7%
General Electric Co. 1.7%
Pfizer, Inc. 1.5%
International Business Machines Corp. 1.3%
AT&T Corp. 1.3%
Wal-Mart Stores, Inc. 1.2%
Citigroup, Inc. 1.2%
Footnote reads:
These holdings represent 16.4% of the Portfolio's total investments.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Common Stocks & Warrants 94.5%
Short-Term Securities 5.5%
Adding Investments in Growth Sectors
During the year we increased the Portfolio's allocation in technology
stocks, with the addition of companies like America Online, Inc. and
Ascend Communications, Inc. and an increase in shares of Compaq Computer
Corp. We made some of these purchases at attractive prices when the
stock market corrected in the third quarter. Such opportunities, plus an
overweighting in technology shares versus the Portfolio's benchmark
index, proved especially beneficial when technology stocks led the
market rebound in the fourth quarter.
We also used periods of price weakness to add positions in retail
companies like Lowe's Companies Inc., Home Depot, Inc., and Circuit City
Stores, Inc. The Portfolio's weighting in telecommunication issues rose
in 1998 as well, with the introduction of service firms like ALLTEL
Corp. and Sprint Corp (PCS Group) and additions to its position in AT&T
Corp.
As investor uncertainty grew early in the year, we trimmed the
Portfolio's allocation in stocks that are particularly sensitive to
economic changes -- especially shares of capital goods, basic materials
and energy firms. This proved a prudent strategy, as basic materials and
energy shares lagged significantly during the year.
[GRAPHIC OMITTED: Top 10 Sectors]
Top 10 Sectors
Bank & Finance 14.9%
Drugs & Health Care 12.6%
Computers & Office Equipment 8.9%
Retail 8.0%
Telephone & Telecommunications 6.6%
Computer Software 5.9%
Electronics 4.4%
Oil & Oil Service 3.8%
Telecommunications Equipment 3.3%
Food & Beverage 3.1%
Footnote reads:
These sectors represent 71.5% of the Portfolio's total investments.
LB Series Fund, Inc.
Growth Portfolio seeks long-term growth of capital by investing
primarily in common stocks of established companies.
Portfolio Facts
Inception Date: 1/9/87
Total Net Assets
(in millions): $3,320.0
Growth Shares Should Continue to Lead
We expect that continued uncertainty about the economy should further
benefit the stocks of larger firms. We also believe that investors will
maintain their preference for companies with strong growth prospects.
This could help most of 1998's top-performing industry sectors
outperform once again in 1999. With its strong emphasis on technology
and consumer growth shares, the Portfolio is well positioned to make
the most of these trends.
As before, we will look for top-quality companies in industry sectors
that have the best potential for earnings improvements. For now, we also
plan to limit our exposure to economies abroad. Should it appear that
the U.S. economy is poised for a sustained period of growth, we may look
for opportunities in economically sensitive sectors, such as basic
materials or capital goods.
[GRAPHIC WORM CHART OMITTED: Growth of $10,000 Invested Since 12/31/88]
Performance Through December 31, 1998
Growth of $10,000 Invested Since 12/31/88
Growth S & P 500 Consumer
Date Portfolio Index Price Index
- ---- --------- --------- -----------
1988 10,000 10,000 10,000
1989 10,636 10,742 10,050
1989 10,435 10,458 10,090
1989 10,701 10,707 10,150
1989 11,234 11,277 10,220
1989 11,671 11,710 10,270
1989 11,471 11,653 10,300
1989 12,445 12,716 10,320
1989 12,938 12,952 10,340
1989 13,007 12,900 10,370
1989 12,350 12,611 10,420
1989 12,619 12,856 10,450
1989 12,657 13,165 10,460
1990 11,673 12,294 10,570
1990 11,943 12,430 10,620
1990 12,336 12,767 10,680
1990 12,154 12,461 10,700
1990 13,448 13,650 10,720
1990 13,547 13,569 10,780
1990 13,273 13,535 10,820
1990 12,176 12,299 10,920
1990 11,405 11,703 11,010
1990 11,382 11,666 11,080
1990 12,084 12,405 11,100
1990 12,408 12,751 11,100
1991 13,207 13,320 11,170
1991 14,179 14,249 11,190
1991 14,553 14,600 11,200
1991 14,553 14,648 11,220
1991 15,332 15,258 11,250
1991 14,555 14,567 11,290
1991 15,350 15,263 11,300
1991 15,900 15,607 11,340
1991 15,761 15,347 11,390
1991 16,114 15,573 11,400
1991 15,573 14,926 11,440
1991 17,538 16,634 11,440
1992 17,503 16,343 11,460
1992 17,670 16,534 11,500
1992 17,234 16,213 11,560
1992 17,300 16,709 11,580
1992 17,444 16,766 11,590
1992 17,055 16,520 11,630
1992 17,623 17,216 11,660
1992 17,253 16,846 11,690
1992 17,491 17,042 11,730
1992 17,942 17,122 11,770
1992 18,844 17,680 11,780
1992 18,965 17,901 11,780
1993 19,292 18,067 11,830
1993 19,241 18,293 11,880
1993 19,776 18,680 11,920
1993 19,414 18,250 11,950
1993 19,915 18,708 11,970
1993 19,933 18,770 11,980
1993 19,877 18,714 11,980
1993 20,608 19,406 12,020
1993 20,797 19,256 12,040
1993 20,981 19,674 12,090
1993 20,417 19,466 12,100
1993 20,880 19,709 12,100
1994 21,536 20,393 12,130
1994 20,954 19,820 12,170
1994 19,937 18,960 12,220
1994 19,911 19,219 12,230
1994 19,936 19,502 12,240
1994 19,256 19,024 12,280
1994 19,715 19,669 12,320
1994 20,612 20,462 12,370
1994 20,278 19,958 12,400
1994 20,564 20,423 12,410
1994 19,756 19,666 12,420
1994 19,907 19,955 12,420
1995 20,345 20,488 12,470
1995 21,146 21,270 12,520
1995 21,748 21,906 12,560
1995 22,379 22,561 12,610
1995 23,070 23,430 12,630
1995 24,079 23,976 12,660
1995 25,370 24,788 12,660
1995 25,448 24,838 12,690
1995 26,243 25,884 12,710
1995 26,316 25,809 12,760
1995 27,280 26,921 12,750
1995 27,326 27,441 12,740
1996 27,988 28,393 12,810
1996 28,572 28,637 12,850
1996 28,672 28,918 12,920
1996 29,697 29,357 12,970
1996 30,351 30,082 13,000
1996 29,955 30,200 13,000
1996 28,666 28,877 13,030
1996 29,792 29,477 13,050
1996 31,604 31,131 13,100
1996 32,144 32,009 13,140
1996 34,188 34,416 13,160
1996 33,450 33,735 13,160
1997 35,662 35,863 13,200
1997 35,212 36,125 13,240
1997 33,555 34,637 13,280
1997 35,115 36,718 13,290
1997 37,604 38,925 13,290
1997 39,204 40,673 13,300
1997 42,675 43,910 13,320
1997 40,978 41,443 13,340
1997 43,247 43,726 13,380
1997 41,808 42,283 13,410
1997 42,939 44,224 13,400
1997 43,545 44,985 13,390
1998 43,849 45,502 13,410
1998 46,942 48,765 13,440
1998 49,310 51,266 13,460
1998 50,158 51,789 13,490
1998 48,944 50,867 13,510
1998 50,819 52,937 13,530
1998 50,264 52,387 13,540
1998 41,769 44,807 13,560
1998 44,932 47,665 13,580
1998 48,442 51,569 13,610
1998 51,596 54,684 13,610
1998 $55,901 $57,839 $13,600
*See accompanying notes to Portfolio Management Reviews.
[INSET BOX ON CHART READS:]
Growth Portfolio
Annualized Total Returns*
- -------------------------
10 Years 18.77%
5 Years 21.76%
1 Year 28.38%
High Yield Portfolio Review
[GRAPHIC OMITTED: PHOTO OF Thomas N. Haag]
Thomas N. Haag is a Chartered Financial Analyst and portfolio manager
for the High Yield Portfolio. He is an assistant vice president of
Lutheran Brotherhood and has managed the Portfolio since January 1992.
Tom has been with Lutheran Brotherhood since 1986.
Prices for corporate bonds, like those for stocks, were more volatile in
1998 due to greater uncertainty over company earnings and world economic
stability. After performing strongly in the first quarter of the year,
when earnings outlooks were most positive, corporate bond prices
weakened as fears of slower growth prompted a "flight to quality." The
corporate bond sector also suffered as falling interest rates increased
supplies of new issues. Prices for high-yield corporates were
particularly vulnerable to these changes. Most high-yield issues
continued to produce strong income streams throughout the year, however,
which helped shore-up their declining returns.
During the year we used three primary strategies to give the High Yield
Portfolio greater price stability. First, we gave greater attention to
issues with higher credit quality. Second, we emphasized debt from
"defensive" industries (such as utilities and broadcasting) that are
generally less sensitive to changing economic conditions. Finally, we
increased holdings in investments with shorter maturities, which tend to
be less volatile than longer maturities during changing interest rate
environments. However, with large investments in bonds of
telecommunications firms, whose prices were volatile, the Portfolio
lagged its market benchmark index slightly for the reporting period.
[GRAPHIC OMITTED: Top 10 Holdings by Issuers]
Top 10 Holdings by Issuers % of Portfolio
Orion Network Systems, Inc. 1.3%
Intermedia Capital Partners 1.2%
MCI Worldcom, Inc. 1.2%
CSC Holdings, Inc. 1.0%
Nextel Communications, Inc. 1.0%
ICG Holdings, Inc. 0.9%
Jitney-Jungle Stores of America 0.9%
Primedia, Inc. 0.9%
Grupo Televisa S.A. 0.8%
Intermedia Communications, Inc. 0.8%
Footnote reads:
These holdings represent 10.0% of the Portfolio's total investments.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Corporate Bonds 85.2%
Short-Term Securities 2.0%
Non-Convertible Preferred Stocks 7.7%
Common Stocks & Stock Warrants 3.1%
Convertible Preferred Stocks 2.0%
During the 12 months ending December 31, 1998, the High Yield Portfolio
had a total return (based on NAV) of -1.50%. That compares with a return
of 1.87% for the Lehman Brothers High Yield Index.
Stabilizing Returns
We continued to invest heavily in telecommunications firms during the
year, because we believe the sector will benefit over time from trends
such as industry deregulation. As in prior periods, we sold selected
issues from this sector when their prices were strong and bought issues
when prices weakened. This strategy proved particularly helpful in the
second half of the year, when issues we'd bought during a market slump
in the third quarter rebounded strongly in the fourth quarter. At the
end of the year, the Portfolio had a somewhat larger weighting in the
sector than it did when the year began.
[GRAPHIC OMITTED: Top 10 Sectors]
Top 10 Sectors
Telecommunications 23.4%
Broadcasting 12.5%
Bank & Finance 6.3%
Leisure & Entertainment 3.4%
Oil & Gas 3.2%
Electric Utilities 2.8%
Food & Beverage 2.7%
Hospital Management 2.7%
Retail -- Food 2.1%
Machinery & Equipment 2.0%
Footnote reads:
These sectors represent 61.1% of the Portfolio's total investments.
High Yield Portfolio seeks high current income and, secondarily, growth
of capital by investing primarily in high-yielding ("junk") corporate
bonds.***
Portfolio Facts
Inception Date: 11/2/87
Total Net Assets
(in millions): $1,427.3
[GRAPHIC HORIZONTAL BAR CHART OMITTED: MOODY'S BOND QUALITY
RATING DISTRIBUTION]
Moody's Bond Quality Rating Distribution
A 0.4%
Baa 1.2%
Ba 25.9%
B 49.5%
Caa 13.8%
Ca 1.2%
D 0.0%
Not Rated 8.0%
We offset the added fluctuations from telecommunications issues by
increasing the Portfolio's weighting in bonds with a Moody's quality
rating of "Ba" or better from 15% to 28% of assets. We also reduced the
Portfolio's average maturity of investments from 8.23 years to 7.85
years. We further increased stability by avoiding sectors that tend to
be more sensitive to economic uncertainty. During the year we trimmed
holdings in energy and financial firms.
Looking Ahead
Recent economic indicators show that growth remains strong. While growth
could slow later in 1999, we expect prices for corporate bonds to be
less volatile than they were in 1998. As a result, we have stopped
adding shorter-term issues to the Portfolio and have begun to focus new
investments on bonds with credit ratings in the middle of the high-yield
spectrum. Because the economic outlook remains uncertain at home and
abroad, we expect to remain relatively defensive and limit the
Portfolio's exposure to "cyclical" sectors, such as financial, chemical
and paper companies.
If lower-quality issues rally significantly, we might lock in price
gains in that sector and shift back into higher-quality debt.
Conversely, if lower-quality issues weaken, we may take advantage of
attractive opportunities as they arise, further increasing investments
in that sector. Regardless, we anticipate keeping the Portfolio
overweighted in bonds rated "Ba" by Moody's -- the highest of the junk
bond rating categories.
[GRAPHIC WORM CHART OMITTED: Growth of $10,000 Invested Since 12/31/88]
Performance Through December 31, 1998
Growth of $10,000 Invested Since 12/31/88
Lehman
High Yield High Yield Consumer
Date Portfolio Index Price Index
- ---- ---------- ---------- -----------
1988 10,000 10,000 10,000
1989 10,234 10,176 10,050
1989 10,303 10,198 10,090
1989 10,234 10,119 10,150
1989 10,182 10,161 10,220
1989 10,456 10,358 10,270
1989 10,736 10,487 10,300
1989 10,715 10,473 10,320
1989 10,811 10,509 10,340
1989 10,618 10,332 10,370
1989 10,333 10,087 10,420
1989 10,363 10,067 10,450
1989 10,313 10,083 10,460
1990 10,115 9,867 10,570
1990 9,931 9,663 10,620
1990 10,013 9,917 10,680
1990 10,022 9,900 10,700
1990 10,337 10,091 10,720
1990 10,488 10,335 10,780
1990 10,669 10,613 10,820
1990 10,331 10,009 10,920
1990 9,924 9,278 11,010
1990 9,618 8,791 11,080
1990 9,782 9,066 11,100
1990 9,930 9,116 11,100
1991 10,032 9,367 11,170
1991 10,694 10,392 11,190
1991 11,161 11,004 11,200
1991 11,540 11,455 11,220
1991 11,668 11,476 11,250
1991 11,982 11,815 11,290
1991 12,300 12,193 11,300
1991 12,498 12,474 11,340
1991 12,705 12,647 11,390
1991 13,158 13,070 11,400
1991 13,358 13,138 11,440
1991 13,437 13,327 11,440
1992 13,990 13,796 11,460
1992 14,381 14,137 11,500
1992 14,632 14,312 11,560
1992 14,764 14,366 11,580
1992 15,015 14,569 11,590
1992 15,103 14,706 11,630
1992 15,411 14,928 11,660
1992 15,636 15,123 11,690
1992 15,819 15,278 11,730
1992 15,508 15,062 11,770
1992 15,795 15,252 11,780
1992 16,136 15,426 11,780
1993 16,785 15,875 11,830
1993 17,058 16,154 11,880
1993 17,427 16,363 11,920
1993 17,532 16,505 11,950
1993 17,843 16,701 11,970
1993 18,448 17,052 11,980
1993 18,631 17,218 11,980
1993 18,781 17,362 12,020
1993 18,780 17,407 12,040
1993 19,419 17,759 12,090
1993 19,498 17,844 12,100
1993 19,832 18,065 12,100
1994 20,445 18,458 12,130
1994 20,372 18,410 12,170
1994 19,598 17,714 12,220
1994 19,346 17,593 12,230
1994 19,444 17,602 12,240
1994 19,527 17,657 12,280
1994 19,384 17,807 12,320
1994 19,535 17,933 12,370
1994 19,434 17,935 12,400
1994 19,490 17,978 12,410
1994 19,073 17,751 12,420
1994 18,961 17,883 12,420
1995 19,022 18,126 12,470
1995 19,765 18,748 12,520
1995 19,962 18,950 12,560
1995 20,452 19,431 12,610
1995 20,889 19,976 12,630
1995 20,990 20,109 12,660
1995 21,656 20,363 12,660
1995 21,748 20,426 12,690
1995 21,954 20,677 12,710
1995 22,057 20,805 12,760
1995 22,314 20,988 12,750
1995 22,677 21,318 12,740
1996 23,205 21,693 12,810
1996 23,791 21,710 12,850
1996 23,566 21,695 12,920
1996 23,725 21,743 12,970
1996 23,991 21,873 13,000
1996 23,798 22,055 13,000
1996 23,629 22,156 13,030
1996 24,009 22,396 13,050
1996 24,830 22,936 13,100
1996 24,761 23,112 13,140
1996 25,019 23,567 13,160
1996 25,296 23,737 13,160
1997 25,599 23,970 13,200
1997 25,973 24,346 13,240
1997 25,145 23,983 13,280
1997 25,149 24,235 13,290
1997 26,113 24,754 13,290
1997 26,862 25,098 13,300
1997 27,785 25,788 13,320
1997 27,877 25,729 13,340
1997 28,743 26,238 13,380
1997 28,489 26,262 13,410
1997 28,580 26,514 13,400
1997 28,862 26,747 13,390
1998 29,471 27,229 13,410
1998 29,882 27,389 13,440
1998 30,275 27,647 13,460
1998 30,158 27,755 13,490
1998 30,053 27,852 13,510
1998 30,200 27,952 13,530
1998 30,385 28,111 13,540
1998 27,933 26,560 13,560
1998 27,519 26,679 13,580
1998 26,942 26,132 13,610
1998 28,279 27,217 13,610
1998 $28,428 $27,247 $13,600
*See accompanying notes to Portfolio Management Reviews.
[INSET BOX ON CHART READS:]
High Yield Portfolio
Annualized Total Returns*
- -------------------------
10 Years 11.01%
5 Years 7.47%
1 Year -1.50%
Income Portfolio Review
[GRAPHIC OMITTED: PHOTO OF Charles E. Heeren]
Charles E. Heeren is a Chartered Financial Analyst and portfolio manager
for the Income Portfolio. He is a vice president of Lutheran Brotherhood
and has managed the Portfolio since its inception in January 1987. Chuck
has been with Lutheran Brotherhood since 1976.
For the first five months of 1998, prices for high-quality bonds traded
in a narrow range. Then, as economic growth began to slow and interest
rates fell, investors became concerned about credit risk and liquidity.
Prices for high-quality bonds rallied strongly in this environment. By
increasing investments in U.S. government issues, and focusing on high-
quality corporate bonds representing good value, we helped the Income
Portfolio outperform its market benchmark for the 12 months ended
December 31, 1998. During the reporting period the Income Portfolio
earned a total return (based on NAV) of 9.37%, while the Lehman Brothers
Aggregate Bond Index returned 8.69%.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Corporate Bonds 52.9%
Foreign Government Bonds 3.0%
Asset-Backed Securities 10.9%
Mortgage-Backed Securities 6.2%
U.S. Government Agency 4.0%
U.S. Government 20.3%
Common Stocks 0.1%
Preferred Stocks 1.1%
Short-Term Securities 1.5%
[GRAPHIC OMITTED: Top 10 Holdings]
% of
Top 10 Holdings Coupon Maturity Portfolio
U.S. Treasury Bond 7.625% 11/15/2022 8.6%
U.S. Treasury Note 7.875% 11/15/2004 5.0%
U.S. Treasury Note 7.0% 7/15/2006 3.4%
Government National
Mortgage Association 6.5% 2/15/2027 2.4%
Federal National
Mortgage Association 5.75% 2/15/2008 2.3%
Federal Home Loan Mortgage Corp. 6.0% 7/1/2013 2.1%
World Omni Auto Lease Trust 6.9% 6/25/2003 1.7%
U.S. Treasury Note 6.25% 2/15/2003 1.6%
U.S. Treasury Bond 7.5% 11/15/2016 1.6%
Equitable Life Assurance
Society of the United States,
Surplus Notes 6.95% 12/1/2005 1.5%
Footnote reads:
These holdings represent 30.2% of the Portfolio's total investments.
A Move to Higher Quality
In the final months of 1997, before the period began, we found
attractive opportunities in higher-yielding corporate bonds that we
believed had been oversold. In the first months of 1998, as an improving
economy strengthened the credit ratings of the issuers of these bonds,
they enjoyed healthy price gains. These issues also added income as
interest rates fell. In addition, the Portfolio benefited as holdings in
dollar-denominated "Yankee" bonds issued in the United States by foreign
companies and governments rose in response to greater stability in Asian
economies. Holdings in convertible bonds (which can be traded for the
common stocks of their issuers) further enhanced the Portfolio's
returns.
In the second and third quarters of 1998, as foreign economies
deteriorated, we trimmed positions in Yankee bonds and lower-rated,
higher-yielding corporates. With lower interest rates causing more
homeowners to prepay their loans, we also reduced investments in
mortgage-backed securities. We used the proceeds from these sales to buy
U.S. Treasury securities and higher-rated corporate bonds. These issues
performed well as the "flight to quality" intensified in August
and September.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: MOODY'S BOND QUALITY
RATING DISTRIBUTION]
Moody's Bond Quality Rating Distribution
U.S. Government-/
Aaa Equivalent 47.1%
Aa 6.8%
A 18.4%
Baa 15.6%
Ba 10.5%
B 1.0%
LB Series Fund, Inc.
Income Portfolio seeks 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 Net Assets
(in millions): $1,074.3
As a result of these strategies, we increased investments in U.S.
government issues during the year from 22% to 31% of assets and
decreased holdings in bonds with a Moody's quality rating of "Ba" or "B"
from 18% to 12% of assets.
Less Near-Term Volatility
At the end of the year, when prices for corporates had become quite
attractive, we began to trim Treasury holdings for investments in high-
quality corporate bonds and issues of U.S. government agencies. Many of
the corporates we bought were attractively-priced issues of financial
firms hit hard when foreign economic problems broadened. We also added
to positions in economically "defensive" firms in the food, drug and
retail sectors, as well as telecommunications and electric utility
companies.
While we believe growth could slow in the second half of 1999, economic
conditions are now stable enough to keep bonds in a relatively narrow
range for the next few months. If this is the case, we may further
increase investments in corporates as new opportunities arise. With
further cuts in interest rates unlikely in the near term, we have also
started to buy mortgage-backed securities again.
[GRAPHIC WORM CHART OMITTED: Growth of $10,000 Invested Since 12/31/88]
Performance Through December 31, 1998
Growth of $10,000 Invested Since 12/31/88
Lehman Brothers
Income Aggregate Consumer
Date Portfolio Bond Index Price Index
- ---- --------- --------------- -----------
1988 10,000 10,000 10,000
1989 10,151 10,144 10,050
1989 10,006 10,071 10,090
1989 10,064 10,114 10,150
1989 10,260 10,326 10,220
1989 10,482 10,597 10,270
1989 10,813 10,919 10,300
1989 11,000 11,152 10,320
1989 10,900 10,987 10,340
1989 10,912 11,043 10,370
1989 11,073 11,315 10,420
1989 11,194 11,422 10,450
1989 11,223 11,453 10,460
1990 11,106 11,317 10,570
1990 11,143 11,353 10,620
1990 11,180 11,361 10,680
1990 11,035 11,256 10,700
1990 11,373 11,589 10,720
1990 11,548 11,776 10,780
1990 11,689 11,939 10,820
1990 11,499 11,779 10,920
1990 11,427 11,876 11,010
1990 11,535 12,027 11,080
1990 11,805 12,286 11,100
1990 11,999 12,477 11,100
1991 12,157 12,632 11,170
1991 12,432 12,740 11,190
1991 12,583 12,827 11,200
1991 12,763 12,966 11,220
1991 12,911 13,041 11,250
1991 12,930 13,035 11,290
1991 13,100 13,216 11,300
1991 13,401 13,501 11,340
1991 13,692 13,775 11,390
1991 13,840 13,928 11,400
1991 13,936 14,056 11,440
1991 14,369 14,474 11,440
1992 14,316 14,277 11,460
1992 14,411 14,370 11,500
1992 14,420 14,289 11,560
1992 14,469 14,392 11,580
1992 14,747 14,664 11,590
1992 14,951 14,867 11,630
1992 15,299 15,170 11,660
1992 15,450 15,323 11,690
1992 15,634 15,505 11,730
1992 15,382 15,299 11,770
1992 15,441 15,302 11,780
1992 15,695 15,546 11,780
1993 16,021 15,844 11,830
1993 16,357 16,121 11,880
1993 16,454 16,189 11,920
1993 16,576 16,302 11,950
1993 16,605 16,324 11,970
1993 16,948 16,619 11,980
1993 17,099 16,714 11,980
1993 17,407 17,006 12,020
1993 17,460 17,052 12,040
1993 17,616 17,115 12,090
1993 17,427 16,970 12,100
1993 17,526 17,061 12,100
1994 17,784 17,292 12,130
1994 17,399 16,991 12,170
1994 16,827 16,571 12,220
1994 16,647 16,439 12,230
1994 16,678 16,437 12,240
1994 16,555 16,401 12,280
1994 16,913 16,727 12,320
1994 16,956 16,747 12,370
1994 16,658 16,501 12,400
1994 16,596 16,486 12,410
1994 16,601 16,450 12,420
1994 16,705 16,563 12,420
1995 17,007 16,891 12,470
1995 17,397 17,293 12,520
1995 17,495 17,399 12,560
1995 17,795 17,643 12,610
1995 18,566 18,325 12,630
1995 18,718 18,459 12,660
1995 18,610 18,418 12,660
1995 18,844 18,641 12,690
1995 19,025 18,822 12,710
1995 19,319 19,067 12,760
1995 19,619 19,353 12,750
1995 19,938 19,624 12,740
1996 20,052 19,753 12,810
1996 19,630 19,410 12,850
1996 19,436 19,274 12,920
1996 19,316 19,166 12,970
1996 19,304 19,127 13,000
1996 19,544 19,384 13,000
1996 19,584 19,436 13,030
1996 19,512 19,403 13,050
1996 19,892 19,741 13,100
1996 20,354 20,179 13,140
1996 20,774 20,524 13,160
1996 20,584 20,333 13,160
1997 20,649 20,396 13,200
1997 20,746 20,447 13,240
1997 20,442 20,220 13,280
1997 20,681 20,523 13,290
1997 20,898 20,718 13,290
1997 21,200 20,965 13,300
1997 21,827 21,531 13,320
1997 21,596 21,348 13,340
1997 21,943 21,664 13,380
1997 22,119 21,978 13,410
1997 22,218 22,079 13,400
1997 22,385 22,302 13,390
1998 22,687 22,588 13,410
1998 22,724 22,570 13,440
1998 22,855 22,646 13,460
1998 22,982 22,764 13,490
1998 23,182 22,980 13,510
1998 23,400 23,176 13,530
1998 23,437 23,224 13,540
1998 23,596 23,603 13,560
1998 24,255 24,155 13,580
1998 24,114 24,027 13,610
1998 24,398 24,164 13,610
1998 $24,486 $24,237 $13,600
*See accompanying notes to Portfolio Management Reviews.
[INSET BOX ON CHART READS:]
Income Portfolio
Annualized Total Returns*
- -------------------------
10 Years 9.36%
5 Years 6.92%
1 Year 9.37%
Money Market Portfolio Review
[GRAPHIC OMITTED: PHOTO OF Gail R. Onan]
Gail R. Onan is portfolio manager for the Money Market Portfolio. She
has managed the Portfolio since January 1994 and has been with Lutheran
Brotherhood since 1969.
Money market yields fell by roughly 0.60% during 1998 as economic growth
slowed somewhat and the Federal Reserve cut short-term interest rates by
0.75%. Starting the year at 5.12%, the average yield for money market
instruments in the IBC Donoghue's All-Taxable Index fell to 4.53% as the
year closed. During that time there were many fluctuations in money
market yields that offered attractive investment opportunities in
individual instruments. By taking advantage of these opportunities, and
adjusting the maturity structure of the Money Market Portfolio to make
the most of changing yields, we helped the Portfolio earn a total return
of 5.32% for the 12 months ended December 31, 1998.
[GRAPHIC PIE CHART OMITTED: Portfolio Composition (% of Portfolio)]
Portfolio Composition
(% of Portfolio)
Commercial Paper 90.0%
Variable Rate Notes 5.8%
U.S. Government Agency 1.6%
Banker's Acceptances 0.5%
Bank Notes 2.1%
Adapting to Lower Yields
When the year started, investments in the Portfolio had a weighted
average maturity of 47 days, versus 54 days for the Donoghue Index.
In the spring and summer, when economic problems worsened abroad, and it
looked like the Federal Reserve might cut interest rates, the yields for
investments with maturities of 18 months to 2 years fell below those for
investments dated 1- to 6-months. In this "inverted" short-term yield
environment, we gave greater attention to investments with shorter
maturities. This let us move more quickly into higher-yielding
securities as we identified them in the marketplace. After the Fed began
to cut interest rates in the fall, the yield curve moved from an
inverted to a flat position. Because longer-term issues remained
relatively unattractive, we stayed focused on shorter maturities. At the
end of the year, as technical market factors pushed yields higher, we
added some investments in longer-term issues. This left the Portfolio
with an average weighted maturity of 52 days on December 31, 1998,
versus 54 days for the Donoghue Index.
[GRAPHIC OMITTED: Top 10 Holdings]
% of
Top 10 Holdings Industry Portfolio
Chevron Corp. Industrial 4.3%
Ford Motor Credit Co. Finance-Automotive 4.3%
Duke University Education 4.1%
Amoco Oil Co. Petroleum 4.1%
Block Financial Corp. Services 4.0%
Petrofina S.A. Energy 3.8%
Harvard University Education 3.8%
Yale University Education 3.8%
General Electric Capital Corp. Finance-Commercial 3.8%
Associates Corp. of North America Finance-Consumer 3.7%
Footnote reads:
These holdings represent 39.7% of the Portfolio's total investments.
LB Series Fund, Inc.
Money Market Portfolio seeks current income with stability of principal
by investing in high-quality, short-term debt securities.****
Portfolio Facts
Inception Date: 1/9/87
Total Net Assets
(in millions): $193.8
As in past years, we remained heavily invested in commercial paper,
while improving the Portfolio's yield with other instruments. These
instruments included taxable municipal paper issued by state and local
governments. Typically, such securities finance commercial projects and
have credit enhancements from major corporations and banks. During the
first part of the year we also kept a small portion of the Portfolio in
U.S. dollar-denominated securities issued by top-quality banks and
businesses in Europe. However, given the foreign economic upheaval that
developed later in the year, we were very conservative when replacing
maturing issues.
Further Rate Cuts Unlikely
Recent economic strength suggests that the Fed will not cut interest
rates further in months to come. With inflation apparently under
control, a near-term increase in rates also seems unlikely. We expect,
therefore, that short-term yields will remain in a relatively narrow
range during the first part of 1999. Given that scenario, we plan to
maintain the Portfolio's current maturity structure while remaining
watchful for new opportunities to add yield. In the meantime, we'll
continue to strengthen yield through individual instruments such as
taxable municipal issues.
Money Market Portfolio
Annualized Total Returns*
Period Ending 12/31/98
- -------------------------
10 Years 5.48%
5 Years 5.13%
1 Year 5.32%
Seven-Day Yields
as of 12/31/98+
- -------------------------
Current 4.84%
Effective 4.95%
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. (The Mid Cap
Growth Portfolio's total return is cumulative.) 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
LBSC registered 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.
****An investment in the Money Market Portfolio is not insured or
guaranteed by the FDIC or any other government agency. Although the
Portfolio seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Portfolio.
+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.
Results of Special Shareholder Meetings (unaudited)
April 29, 1998 Meeting
A special meeting of the shareholders of the LB Series Fund, Inc.
Opportunity Growth Portfolio was held on April 29, 1998, to consider the
proposed appointment of T. Rowe Price Associates, Inc. of Baltimore,
Maryland, to serve as investment subadviser for the Portfolio. The
shares cast for, against and abstaining were as follows:
For Against Abstaining
31,709,608 423,052 2,213,543
December 1, 1998 Meeting
A special meeting of the shareholders of each of the LB Series Fund,
Inc. portfolios (Opportunity Growth Portfolio, Mid Cap Growth Portfolio,
World Growth Portfolio, Growth Portfolio, High Yield Portfolio, Income
Portfolio and Money Market Portfolio) was held on December 1, 1998. The
matters voted upon at the meeting and the shares cast for, against, and
abstaining can be found on the following pages.
<TABLE>
<CAPTION>
Results of Special Shareholder Meeting -- 12/1/98 (unaudited)
Opportunity Mid Cap World Money
Growth Growth Growth Growth High Yield Income Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Election of Directors of LB Series Fund, Inc.
Rolf F. Bjelland For 33,323,862 7,554,478 28,065,639 139,938,143 151,192,403 99,283,081 160,161,314
Withhold 556,907 75,943 397,706 1,693,874 1,626,391 914,482 1,496,333
Abstain 0 0 0 0 0 0 0
Herbert F. Eggerding, Jr. For 33,349,047 7,560,592 28,092,390 140,009,800 151,244,304 99,342,865 160,558,964
Withhold 531,721 69,829 370,955 1,622,217 1,574,490 854,698 1,098,683
Abstain 0 0 0 0 0 0 0
Noel K. Estenson For 33,353,348 7,560,789 28,085,117 139,912,048 151,159,094 99,285,610 160,190,930
Withhold 527,421 69,633 378,228 1,719,969 1,659,700 911,954 1,466,717
Abstain 0 0 0 0 0 0 0
Jodi L. Harpstead For 33,327,705 7,553,956 28,066,150 139,953,796 151,166,966 99,260,341 160,297,929
Withhold 553,064 76,466 397,195 1,678,221 1,651,828 937,222 1,359,718
Abstain 0 0 0 0 0 0 0
Richard A. Hauser For 33,344,170 7,554,844 28,076,573 139,961,127 151,183,145 99,311,477 160,485,492
Withhold 536,599 75,578 386,772 1,670,890 1,635,650 886,086 1,172,155
Abstain 0 0 0 0 0 0 0
Connie M. Levi For 33,320,768 7,552,724 28,064,149 139,798,413 151,096,976 99,260,605 160,351,716
Withhold 560,001 77,697 399,196 1,833,605 1,721,818 936,958 1,305,931
Abstain 0 0 0 0 0 0 0
Bruce J. Nicholson For 33,349,983 7,546,004 28,060,907 140,013,370 151,210,053 99,253,432 160,595,884
Withhold 530,785 84,418 402,438 1,618,647 1,608,742 944,132 1,061,763
Abstain 0 0 0 0 0 0 0
Ruth E. Randall For 33,328,040 7,556,222 28,077,113 139,918,475 151,178,668 99,274,741 160,354,663
Withhold 552,729 74,200 386,232 1,713,542 1,640,126 922,823 1,302,984
Abstain 0 0 0 0 0 0 0
Amending or Eliminating Certain Investment Restrictions
Borrowing and Issuance
of Senior Securities For 32,339,421 7,359,305 27,173,417 135,227,192 146,352,617 96,061,971 154,977,497
Against 410,140 75,475 340,399 1,633,409 1,300,455 698,656 1,647,270
Abstain 1,131,207 195,642 949,529 4,771,416 5,165,722 3,436,937 5,032,879
Lending For 32,346,293 7,362,404 27,183,459 135,329,015 146,402,821 96,098,024 155,027,225
Against 403,268 72,376 330,357 1,532,712 1,250,251 663,568 1,597,542
Abstain 1,131,207 195,642 949,529 4,770,291 5,165,722 3,435,971 5,032,879
Real Estate Companies
and Commodities For 32,344,692 7,362,365 27,178,378 135,318,196 146,410,663 96,076,010 155,058,186
Against 404,869 72,415 335,437 1,542,405 1,242,409 685,582 1,566,581
Abstain 1,131,207 195,642 949,529 4,771,416 5,165,722 3,435,971 5,032,879
Results of Special Shareholder Meeting -- 12/1/98 (continued) (unaudited)
Opportunity Mid Cap World Money
Growth Growth Growth Growth High Yield Income Market
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amending or Eliminating Certain Investment Restrictions
Reverse Purchase Agreements For 32,350,035 7,362,000 27,182,143 135,295,991 146,398,379 96,075,341 155,072,750
Against 399,526 72,780 331,672 1,565,736 1,254,693 686,251 1,552,017
Abstain 1,131,207 195,642 949,529 4,770,291 5,165,722 3,435,971 5,032,879
Pledge of Assets For 32,346,921 7,359,563 27,179,666 135,296,513 146,381,486 96,094,194 155,062,651
Against 402,640 75,217 334,150 1,564,088 1,271,586 667,398 1,562,116
Abstain 1,131,207 195,642 949,529 4,771,416 5,165,722 3,435,971 5,032,879
Restricted Securities,
Illiquid Securities, and
Unseasoned Issuers For 32,329,957 7,359,505 27,173,730 135,266,775 146,288,719 96,018,283 155,068,666
Against 419,604 75,275 340,085 1,593,826 1,364,353 743,309 1,556,102
Abstain 1,131,207 195,642 949,529 4,771,416 5,165,722 3,435,971 5,032,879
Control Securities For 32,356,049 7,362,498 27,186,723 135,334,491 146,405,756 96,099,913 155,093,482
Against 393,512 72,282 327,093 1,526,110 1,247,316 661,679 1,531,286
Abstain 1,131,207 195,642 949,529 4,771,416 5,165,722 3,435,971 5,032,879
Short Sales For 32,282,438 7,323,746 27,112,904 135,186,710 146,262,514 95,986,526 155,069,403
Against 467,123 111,034 400,912 1,675,016 1,390,558 775,066 1,555,364
Abstain 1,131,207 195,642 949,529 4,770,291 5,165,722 3,435,971 5,032,879
Investments in other
Investment Companies For 32,339,822 7,356,369 27,171,009 135,253,024 146,341,069 96,097,415 155,085,418
Against 409,739 78,411 342,807 1,608,702 1,312,003 664,177 1,539,350
Abstain 1,131,207 195,642 949,529 4,770,291 5,165,722 3,435,971 5,032,879
Investments in Oil and Gas
Interests, Common Stock &
Other Equity Securities For N/A N/A N/A N/A N/A N/A 155,105,022
Against N/A N/A N/A N/A N/A N/A 1,519,746
Abstain N/A N/A N/A N/A N/A N/A 5,032,879
Portfolio Maturity For N/A N/A N/A N/A N/A N/A 155,102,138
Against N/A N/A N/A N/A N/A N/A 1,522,629
Abstain N/A N/A N/A N/A N/A N/A 5,032,879
Ratification of PricewaterhouseCoopers LLP as Independent Auditors
For 33,109,904 7,498,364 27,835,808 138,756,884 149,679,180 98,329,168 157,952,309
Against 155,952 18,832 106,264 528,115 393,471 205,520 190,072
Abstain 614,912 113,226 521,273 2,347,018 2,746,144 1,662,876 3,515,266
</TABLE>
Pricewaterhouse Coopers LLP
650 Third Avenue South
Park Building
Suite 1300
Minneapolis MN 55402-4333
Telephone (612) 370 9300
Facsimile (612) 373 7178
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, Mid Cap 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, 1998, the results of each of their operations for the year or
period 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 an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion
expressed above.
/s/ Price Waterhouse LLP
February 10, 1999
LB SERIES FUND, INC.
Opportunity Growth Portfolio
Portfolio of Investments
December 31, 1998
Shares Value
- -------------- -------------
[S] [C]
COMMON STOCKS - 97.1% (a)
Aerospace & Defense - 2.1%
71,800 Aar Corp. $ 1,714,194
43,800 Avondale Industries, Inc. 1,270,200(b)
56,400 Orbital Sciences Corp. 2,495,700(b)
26,600 Precision Castparts Corp. 1,177,050(c)
33,000 Triumph Group, Inc. 1,056,000(b)
-------------
7,713,144
-------------
Airlines - 1.0%
22,400 Alaska Air Group, Inc. 991,200(b)
50,900 COMAIR Holdings, Inc. 1,717,875
55,500 Mesaba Holdings, Inc. 1,144,688(b)
-------------
3,853,763
-------------
Automotive - 1.9%
15,900 Central Parking Corp. 515,756
95,200 Gentex Corp. 1,904,000(b)
38,900 Group 1 Automotive, Inc. 1,011,400(b)
45,900 O'Reilly Automotive, Inc. 2,168,775(b)
65,600 Tower Automotive, Inc. 1,635,900(b)
-------------
7,235,831
-------------
Bank & Finance - 6.8%
28,500 Affiliated Managers Group, Inc. 851,438(b)
110,400 Americredit Corp. 1,524,900(b)
52,800 Amerin Corp. 1,247,400(b)
45,300 City National Corp. 1,885,613
25,300 CMAC Investment Corp. 1,162,219
31,500 Commerce Bankcorp, Inc. 1,653,750
60,100 Community First Bankshares, Inc. 1,265,856
22,700 Executive Risk, Inc. 1,247,081
27,500 E.W. Blanch Holdings, Inc. 1,304,531
60,000 Fremont General Corp. 1,485,000
29,800 HealthCare Financial Partners, Inc. 1,188,275(b)
40,700 Imperial Credit Commercial Mortgage
Investment Corp. 381,563
44,630 Imperial Credit Industries 373,776(b)
52,200 Legg Mason, Inc. 1,647,563
67,000 North Fork Bancorporation, Inc. 1,603,813
46,400 Protective Life Corp. 1,847,300
75,000 Silicon Valley Bancshares 1,277,344(b)
54,200 Waddell & Reed Financial, Inc.,
Class A 1,283,863
33,700 Webster Financial Corp. 924,644
18,300 Zions Bancorporation 1,141,463
-------------
25,297,392
-------------
Biotechnology - 1.8%
52,400 Covance, Inc. 1,526,150(b)
54,100 Cytyc Corp. 1,393,075(b)
44,000 Medco Research, Inc. 1,144,000(b)
122,700 NBTY, Inc. 874,238(b)
58,320 Serologicals Corp. 1,749,600(b)
-------------
6,687,063
-------------
Building &
Construction - 1.6%
81,600 American Homestar Corp. 1,224,000(b)
21,600 Dycom Industries, Inc. 1,233,900(b)
42,204 Fairfield Communities, Inc. 466,882(b)
43,300 Global Industries, Ltd. 265,213(b)
43,000 Insituform Technologies, Inc. 623,500(b)
50,000 NCI Building Systems, Inc. 1,406,250(b)
20,200 Simpson Manufacturing Co., Inc. 756,238(b)
-------------
5,975,983
-------------
Business Services - 9.3%
34,700 ABR Information Services, Inc. 680,988(b)
1,600 Billing Concepts Corp. 17,600(b)
34,400 Carriage Services, Inc. 978,250(b)
70,050 Concord EFS, Inc. 2,968,369(b)
21,100 Consolidated Graphics, Inc. 1,425,569(b)
27,400 Cort Business Services Corp. 664,450(b)
14,400 Fastenal Co. 633,600
21,200 G & K Services, Inc. 1,128,900
15,600 IMR Global Corp. 459,225(b)
46,400 Innovative Valve Technologies, Inc. 118,900(b)
34,500 Knoll, Inc. 1,022,063(b)
9,300 Lason, Inc. 541,144(b)
47,100 Merrill Corp. 909,619
66,900 META Group, Inc. 1,990,275(b)
67,600 Metamor Worldwide, Inc. 1,690,000(b)
8,500 Metzler Group, Inc. 413,844(b)
113,100 Modis Professional Services, Inc. 1,639,950(b)
44,330 National Computer Systems, Inc. 1,640,210
53,000 NCO Group, Inc. 2,385,000(b)
80,938 NOVA Corp. 2,807,537(b)
86,200 Paging Network, Inc. 404,063(b)
23,600 Pre-Paid Legal Services, Inc. 778,800(b)
111,300 Professional Staff plc ADR 876,488(b)
65,300 Rent-Way, Inc. 1,587,606(b)
76,600 Romac International, Inc. 1,704,350(b)
37,800 Service Experts, Inc. 1,105,650(b)
30,900 StaffMark, Inc. 691,388(b)
21,500 Strayer Education, Inc. 757,875
47,500 Superior Services, Inc. 952,969(b)
60,875 Tetra Tech, Inc. 1,647,430(b)
-------------
34,622,112
-------------
Chemicals - 0.5%
67,200 Sybon Corp . 1,827,000(b)
-------------
Computer Equipment - 1.8%
6,700 Lexmark International Group, Inc. 673,350(b)
30,600 Pinnacle Systems, Inc. 1,093,950(b)
78,600 Security Dynamics Technologies, Inc. 1,807,800(b)
44,300 Symbol Technologies, Inc. 2,832,431
36,300 Technology Solutions Co. 389,091(b)
-------------
6,796,622
-------------
Computer Software - 17.4%
33,600 Affiliated Computer Services, Inc.,
Class A 1,512,000(b)
34,700 Analysts International Corp. 667,975
64,200 AXENT Technologies, Inc. 1,962,113(b)
26,800 Bisys (The) Group, Inc. 1,383,550(b)
51,800 Cadence Design Systems, Inc. 1,541,050(b)
26,000 Cambridge Technology Partners, Inc. 575,250(b)
57,800 CIBER, Inc. 1,614,788(b)
31,200 Citrix Systems, Inc. 3,028,350(b)
43,400 Cognos, Inc. 1,085,000(b)
65,000 Computer Management Sciences, Inc. 1,129,375(b)
53,500 Cotelligent Group, Inc. 1,140,219(b)
59,200 Datastream Systems, Inc. 680,800(b)
29,100 Documentum, Inc. 1,555,031(b)
28,900 DST Systems, Inc. 1,649,106(b)
31,500 Electronic Arts, Inc. 1,767,938(b)
25,000 Engineering Animation, Inc. 1,350,000(b)
53,800 E*TRADE Group, Inc. 2,516,831(b)
85,155 HBO & Co. 2,442,884
52,155 Hyperion Solutions Corp. 938,790(b)
45,100 IDX Systems Corp. 1,984,400(b)
25,100 International Network Services Co. 1,669,150(b)
18,900 Intuit, Inc. 1,370,250(b)
33,900 Keane, Inc. 1,353,881(b)
24,200 Legato Systems, Inc. 1,595,688(b)
30,000 MAPICS, Inc. 495,000(b)
47,600 Mastech Corp. 1,362,550(b)
8,200 Mercury Interactive Corp. 518,650(b)
41,000 National Data Corp. 1,996,188
45,000 National Instruments Corp. 1,535,625(b)
27,750 Network Associates, Inc. 1,838,438(b)
32,600 Platinum Technology, Inc. 623,475(b)
36,500 QRS Corp. 1,752,000(b)
59,300 Saville Systems Ireland plc ADR 1,126,700(b)
26,633 Sterling Commerce, Inc. 1,198,485(b)
142,700 Summit Design, Inc. 1,328,894(b)
43,800 SunGard Data Systems, Inc. 1,738,313(b)
54,200 Sykes Enterprises, Inc. 1,653,100(b)
40,500 Symantec Corp. 880,875(b)
32,600 Synopsys, Inc. 1,768,550(b)
32,500 Transaction Systems Architects, Inc. 1,625,000(b)
87,450 USWeb Corp. 2,306,494(b)
27,000 Veritas Software Corp. 1,618,313(b)
37,000 Visio Corp. 1,352,813(b)
46,170 Zebra Technologies Corp. 1,327,388(b)
-------------
64,561,270
-------------
Distribution Services - 2.6%
23,100 AmeriSource Health Corp. 1,501,500(b)
12,200 Aviation Sales Co. 495,625(b)
6,270 Cardinal Health, Inc. 475,736
48,610 Central Garden & Pet Co. 698,769(b)
58,800 MSC Industrial Direct Co., Inc., Class A 1,330,350(b)
47,400 Richfood Holdings, Inc. 983,550
30,000 Tech Data Corp. 1,207,500(b)
34,100 U.S. Foodservice Co. 1,670,900(b)
76,100 Watsco, Inc. 1,274,675
-------------
9,638,605
-------------
Education - 1.3%
45,715 Apollo Group, Inc., Class A 1,548,596(b)
37,400 ITT Educational Services, Inc. 1,271,600(b)
45,300 Learning Tree International, Inc. 410,531(b)
52,850 Sylvan Learning Systems, Inc. 1,611,925(b)
-------------
4,842,652
-------------
Electronic Components - 5.1%
53,550 Burr-Brown Corp. 1,255,078(b)
45,000 Cybex Computer Products Corp. 1,321,875(b)
37,700 Dallas Semiconductor Corp. 1,536,275
35,200 Etec Systems, Inc. 1,408,000(b)
36,700 Lattice Semiconductor Corp. 1,684,759(b)
22,600 Maxim Integrated Products, Inc. 987,338(b)
27,600 Micrel, Inc. 1,518,000(b)
38,900 Microchip Technology, Inc. 1,439,300(b)
32,800 Plexus Corp. 1,111,100(b)
10,300 PMC-Sierra, Inc. 650,188(b)
17,900 QLogic Corp. 2,342,663(b)
42,400 Sanmina Corp. 2,650,000(b)
23,500 Vitesse Semiconductor Corp. 1,072,188(b)
-------------
18,976,764
-------------
Electronic Systems - 2.0%
25,500 Black Box Corp. 965,813(b)
27,300 Novellus Systems, Inc. 1,351,350(b)
69,100 Sawtek, Inc. 1,209,250(b)
27,500 Teradyne, Inc. 1,165,313(b,c)
48,500 Tollgrade Communications, Inc. 933,625(b)
25,400 Uniphase Corp. 1,762,125(b)
-------------
7,387,476
-------------
Energy Services - 0.8%
45,800 BJ Services Co. 715,625(b)
12,200 Gulf Island Fabrication, Inc. 94,550(b)
56,000 Oceaneering International, Inc. 840,000(b)
38,900 R&B Falcon Corp. 296,613(b)
19,900 Smith International, Inc. 501,231(b)
18,500 Weatherford International, Inc. 358,438(b)
-------------
2,806,457
-------------
Entertainment & Leisure - 2.5%
38,200 Brinker International, Inc. 1,103,025(b)
56,200 Imax Corp. 1,777,325(b)
49,600 J & J Snack Foods Corp. 1,109,800(b)
26,050 Promus Hotel Corp. 843,369(b)
26,200 SFX Entertainment, Inc. 1,437,725(b)
19,100 Sonic Corp. 475,113(b)
43,000 Steinway Musical Instruments, Inc. 1,118,000(b)
84,800 Sunterra Corp. 1,272,000(b)
-------------
9,136,357
-------------
Exploration & Production - 0.3%
39,400 Noble Affliliates, Inc. 970,225
-------------
Food Processing - 0.8%
32,700 Earthgrains Co. 1,011,656
44,370 Smithfield Foods, Inc. 1,503,034(b)
45,800 Twinlab Corp. 601,125(b)
-------------
3,115,815
-------------
Healthcare Services - 2.5%
59,300 Concentra Managed Care, Inc. 633,769(b)
2,900 Healthcare Recoveries, Inc. 49,300(b)
29,800 Henry Schein, Inc. 1,333,550(b)
50,000 Inhale Therapeutic Systems, Inc. 1,650,000(b)
43,700 Novoste Corp. 1,239,988(b)
57,100 Orthodontic Centers of America, Inc. 1,109,881(b)
8,900 PacifiCare Health Systems, Inc. 707,550(b)
23,900 Roberts Pharmaceutical Corp. 519,825(b)
72,000 Total Renal Care Holdings, Inc. 2,128,500(b)
-------------
9,372,363
-------------
Hospital Supplies & Management - 5.6%
76,100 ADAC Labs, Inc. 1,519,622(b)
46,600 American Oncology Resources, Inc. 678,613(b)
34,300 DENTSPLY International, Inc. 883,225
41,800 First Health Group Corp. 692,313(b)
51,800 Lincare Holdings, Inc. 2,101,138(b)
21,800 MedQuist Inc. 861,100(b)
80,000 Mentor Corp. 1,875,000
32,000 Omnicare, Inc. 1,112,000
14,700 Patterson Dental Co. 639,450(b)
32,400 Pediatrix Medical Group, Inc. 1,941,975(b)
83,400 PSS World Medical, Inc. 1,918,200(b)
26,800 Quorum Health Group, Inc. 346,725(b)
49,100 Renal Care Group, Inc. 1,414,694(b)
51,300 STERIS Corp. 1,458,844(b)
30,000 Universal Health Services, Inc. 1,556,250(b)
20,600 Veterinary Centers of America, Inc. 410,713(b)
15,500 VISX, Inc. 1,355,281(b)
-------------
20,765,143
-------------
Information Processing - 1.4%
21,400 Catalina Marketing Corp. 1,463,225(b)
41,400 Data Processing Resources Corp. 1,210,950(b)
43,000 Paymentech, Inc. 795,500(b)
28,100 SCI Systems, Inc. 1,622,775(b)
-------------
5,092,450
-------------
Machinery - 0.5%
81,500 JLG Industries, Inc. 1,273,438
19,800 Terex Corp. 565,538(b)
-------------
1,838,976
-------------
Media & Communications - 5.7%
43,800 ACNielsen Corp. 1,237,350(b)
1,000 American Tower Corp. 29,563(b)
52,200 Century Communications Corp., Class A 1,655,719(b)
41,800 Chancellor Media Corp. 2,001,175(b)
13,600 Cox Radio, Inc., Class A 574,600(b)
38,900 Emmis Communications Corp., Class A 1,687,288(b)
35,900 Harte-Hanks, Inc. 1,023,150
20,000 Heftel Broadcasting Corp., Class A 985,000(b)
29,700 Jacor Communications, Inc. 1,911,938(b)
49,700 Level One Communications, Inc. 1,764,350(b)
14,200 Media General, Inc. 752,600
58,805 Outdoor Systems, Inc. 1,764,150(b)
39,800 TCA Cable TV, Inc. 1,420,363
40,800 United Video Satellite
Group, Inc., Class A 963,900(b)
22,400 Univision Communications, Inc., Class A 810,600(b)
20,200 Valassis Communications, Inc. 1,042,825(b)
22,200 World Color Press, Inc. 675,713(b)
25,200 Young Broadcasting Inc., Class A 1,055,250(b)
-------------
21,355,534
-------------
Mining & Metals - 0.1%
30,500 RTI International Metals, Inc. 427,000(b)
-------------
Miscellaneous Consumer
Products - 2.6%
48,600 Blyth Industries, Inc. 1,518,750(b)
33,290 Equity Corporation International 884,266(b)
32,700 Fossil, Inc. 940,125(b)
42,500 HA LO Industries, Inc. 1,599,063(b)
50,800 Jones Apparel Group, Inc. 1,120,775(b)
67,400 Nautica Enterprises, Inc. 1,011,000(b)
19,700 North Face (The), Inc. 256,100(b)
19,500 Pillowtex Corp. 521,625
28,600 Quiksilver, Inc. 858,000(b)
5,400 Tefron, Ltd. 35,438(b)
30,800 Wesley Jessen VisionCare, Inc. 854,700(b)
-------------
9,599,842
-------------
Pharmaceuticals - 2.9%
26,800 Barr Laboratories, Inc. 1,286,400(b)
11,900 Biogen, Inc. 987,700(b)
28,200 Express Scripts, Inc., Class A 1,892,925(b)
15,500 IDEXX Laboratories, Inc. 417,047(b)
900 K-V Pharmaceutical Co., Class A 18,619(b)
45,000 PAREXEL International Corp. 1,125,000(b)
15,800 Sofamor Danek Group, Inc. 1,923,650(b)
92,340 Theragenics Corp. 1,552,466(b)
28,000 Watson Pharmaceuticals, Inc. 1,760,500(b)
-------------
10,964,307
-------------
Pollution Control - 0.4%
70,700 Allied Waste Industries, Inc. 1,670,288(b)
-------------
Real Estate Investment Trust - 0.4%
38,700 Apartment Investment & Management 1,439,156
-------------
Restaurants - 1.3%
39,700 Applebee's International, Inc. 818,813
43,780 CKE Restaurants, Inc. 1,288,774
50,700 Dave & Busters, Inc. 1,169,269(b)
9,000 Logan's Roadhouse, Inc. 211,500(b)
37,400 Outback Steakhouse, Inc. 1,491,325(b)
-------------
4,979,681
-------------
Retail - 8.6%
33,000 Barnes and Noble, Inc. 1,402,500(b)
44,200 Bed, Bath & Beyond, Inc. 1,508,325(b)
49,200 Borders Group, Inc. 1,226,925(b)
31,600 Buckle (The), Inc. 758,400(b)
20,600 CDW Computer Centers, Inc. 1,976,313(b)
34,600 Day Runner, Inc. 501,700(b)
39,600 Dollar Tree Stores, Inc. 1,730,025(b)
42,800 Family Dollar Stores, Inc. 941,600
27,370 Fred Meyer, Inc. 1,649,043(b)
42,300 General Nutrition Companies 687,375(b)
36,600 Guitar Center, Inc. 901,275(b)
49,350 Insight Enterprise, Inc. 2,510,681(b)
24,800 Kenneth Cole Productions, Inc.,
Class A 465,000(b)
32,000 Lands' End, Inc. 862,000(b)
27,800 Linens 'N Things, Inc. 1,101,575(b)
42,000 Men's (The) Wearhouse, Inc. 1,333,500(b)
48,500 Neiman Marcus Group, Inc. 1,209,469(b)
49,500 Office Depot, Inc. 1,828,406(b)
36,150 Pacific Sunwear of California 591,956(b)
39,700 Polo Ralph Lauren Corp. 761,744(b)
54,800 Renters Choice, Inc. 1,739,900(b)
33,000 Ross Stores, Inc. 1,299,375
48,900 SLI, Inc. 1,356,975(b)
72,400 Stein Mart, Inc. 504,538(b)
22,800 Whole Foods Market, Inc. 1,102,950(b)
49,900 Williams-Sonoma, Inc. 2,011,594(b)
-------------
31,963,144
-------------
Telecommunications Equipment - 2.8%
40,600 Dialogic Corp. 798,044(b)
40,300 Gilat Satellite Networks, Ltd. 2,221,538(b)
30,400 Inter-Tel, Inc. 710,600
24,200 Omnipoint Corp. 225,363(b)
21,700 Pacific Gateway Exchange, Inc. 1,042,956(b)
42,900 Premisys Communications, Inc. 394,144(b)
70,300 Proxim, Inc. 1,876,131(b)
52,200 Tekelec Co. 864,563(b)
39,300 Transaction Network Services, Inc. 788,456(b)
39,600 USA Networks, Inc. 1,311,750(b)
-------------
10,233,545
-------------
Telephone Services - 0.7%
20,200 Comverse Technology, Inc. 1,434,200(b)
31,000 InterVoice, Inc. 1,069,500(b)
-------------
2,503,700
-------------
Transportation Services - 2.0%
64,800 BE Aerospace, Inc. 1,360,800(b)
44,200 Coach USA, Inc. 1,533,188(b)
32,880 Expeditors International of
Washington, Inc. 1,380,960
69,800 Swift Transportation Co., Inc. 1,956,581(b)
41,700 USFreightways Corp. 1,214,513
-------------
7,446,042
-------------
Total Common Stocks
(cost $332,721,477) 361,095,702
-------------
Principal
Amount
- ------------
SHORT-TERM SECURITIES - 2.9% (a)
Commercial Paper
$10,600,000 New Center Asset Trust, 5.23%,
Due 1/4/1999
(at amortized cost) 10,595,380
-------------
Total Investments
(cost $344,316,857) 371,691,082(d)
=============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total
investments of the Opportunity Growth Portfolio.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock and
had no separate value at December 31, 1998.
(d) At December 31, 1998, the aggregate cost of securities for federal
income tax purposes was $344,446,308 and the net unrealized
appreciation of investments based on that cost was $27,244,774 which
is comprised of $64,215,748 aggregate gross unrealized appreciation
and $36,970,974 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
LB SERIES FUND, INC.
Mid Cap Growth Portfolio
Portfolio of Investments
December 31, 1998
Shares Value
- -------------- -------------
COMMON STOCKS - 95.6% (a)
Aerospace - 0.4%
7,550 BE Aerospace, Inc. 158,524(b)
4,950 Sunstrand Corp. 256,781
-------------
415,305
-------------
Airlines - 1.3%
5,700 ASA Holdings, Inc. 173,850
11,440 Comair Holdings, Inc. 386,100
4,300 Delta Air Lines, Inc. 223,600
6,460 Expeditors International of
Washington, Inc. 271,320
9,575 Southwest Airlines Co. 214,839
-------------
1,269,709
-------------
Appliances & Furnishings - 0.2%
3,400 Maytag Corp. 211,650
-------------
Automotive - 1.7%
13,190 AutoZone, Inc. 434,446(b)
7,000 Borg-Warner Automotive, Inc. 390,688
7,400 Dana Corp. 302,475
1,400 SPX Corp. 93,800(b)
14,370 Tower Automotive, Inc. 358,352(b)
-------------
1,579,761
-------------
Bank & Finance - 8.8%
7,600 Associates First Capital Corp. 322,050
4,200 Bear Stearns Cos., Inc. 156,975
1,500 Capital One Financial Corp. 172,500
5,990 Charter One Financial, Inc. 166,223
3,200 Chase Manhattan Corp. 217,800
6,010 Citigroup, Inc. 297,495
9,230 City National Corp. 384,199
3,330 Crestar Financial Corp. 239,760
2,920 Donaldson, Lufkin & Jenrette, Inc. 119,720
4,740 EVEREN Capital Corp. 107,835
9,660 Finova Group, Inc. 521,036
1,900 First American Corp. 84,313
5,340 First Union Corp. 324,739
2,200 Firstar Corp. 205,150
4,300 Franklin Resources, Inc. 137,600
2,200 Lehman Brothers Holdings, Inc. 96,938
2,400 Merrill Lynch & Co., Inc. 160,200
2,200 Morgan Stanley Dean Witter & Co. 156,200
7,550 Mutual Risk Management, Ltd. 295,394
4,910 Northern Trust Corp. 428,704
3,250 PaineWebber Group, Inc. 125,531
2,290 PMI Group 113,069
7,300 Profit Recovery Group
International, Inc. 273,294(b)
11,930 Provident Companies, Inc. 495,095
5,100 Providian Financial Corp. 382,500
1,300 Standard & Poor's Depositary
Receipts Trust 159,900
5,890 State Street Corp. 409,723
8,760 Summit Bancorp 382,703
5,770 SunAmerica, Inc. 468,091
9,970 TCF Financial Corp. 241,149
10,500 T. Rowe Price Associates, Inc. 359,625
7,300 Zions Bancorp 455,338
-------------
8,460,849
-------------
Broadcasting - 3.4%
11,650 Chancellor Media Corp. 557,744(b)
13,260 Clear Channel Communications, Inc. 722,670(b)
9,200 Comcast Corp., Class A 539,925
9,100 Fox Entertainment Group, Inc. 229,206(b)
6,000 Infinity Broadcasting Corp. 164,250(b)
8,010 Jacor Communications, Inc. 515,644(b)
12,700 Sinclair Broadcast Group, Inc. 248,444(b)
5,800 Tele-Communications, Inc.,
TCI Group, Series A 320,813(b)
-------------
3,298,696
-------------
Building Products & Materials - 0.3%
2,765 Fastenal Co. 121,660
8,480 Leggett & Platt, Inc. 186,560
-------------
308,220
-------------
Chemicals - 0.2%
10,050 Crompton & Knowles Corp. 207,909
-------------
Computer Software - 10.7%
8,400 Acclaim Entertainment, Inc. 102,900(b)
9,260 America Online, Inc. 1,481,600
5,780 American Power Conversion Corp. 279,969(b)
12,000 Arrow Electronics, Inc. 320,250(b)
5,030 Autodesk, Inc. 214,718
9,900 AXENT Technologies, Inc. 302,569(b)
8,880 BMC Software, Inc. 395,715(b)
15,100 Cadence Design Systems, Inc. 449,224(b)
5,030 Citrix Systems, Inc. 488,224(b)
7,880 Compuware Corp. 615,625(b)
6,390 Documentum, Inc. 341,466(b)
10,390 HBO & Co. 298,063
8,010 HNC Software, Inc. 323,904(b)
7,690 Keane, Inc. 307,119(b)
3,700 Macromedia, Inc. 124,644(b)
2,380 Microsoft Corp. 330,076(b)
3,800 Network Associates, Inc. 251,750(b)
8,600 Oracle Corp. 370,875(b)
9,200 Parametric Technology Corp. 150,650(b)
18,480 Platinum Technology, Inc. 353,430(b)
8,600 Project Software &
Development, Inc. 288,100(b)
13,700 Rational Software Corp. 363,050(b)
9,160 Saville Systems Ireland plc ADR (USD) 174,040(b)
5,440 Shared Medical Systems Corp. 271,320
5,700 Siebel Systems, Inc. 193,444(b)
4,280 Sterling Commerce, Inc. 192,600(b)
15,210 SunGard Data Systems, Inc. 603,647(b)
7,340 Synopsys, Inc. 398,195(b)
5,200 Veritas Software Corp. 311,675(b)
-------------
10,298,842
-------------
Computers & Office Equipment - 7.9%
9,710 3Com Corp. 435,129(b)
11,000 Apple Computer 450,313(b)
6,300 At Home Corp., Series A 467,775(b,d)
4,600 Cisco Systems, Inc. 426,938(b)
5,800 CNet, Inc. 317,913(b)
7,420 Compaq Computer Corp. 311,176
3,200 Comverse Technology, Inc. 227,200(b)
5,700 EMC Corp. 484,500(b)
5,000 Excite, Inc. 210,313(b,d)
3,400 Gateway 2000, Inc. 174,038(b)
4,700 GeoCities Corp. 158,038(b)
6,760 Herman Miller, Inc. 181,675
7,280 Hon Industries, Inc. 174,265
2,600 Intuit, Inc. 188,500(b)
3,200 Legato Systems, Inc. 211,000(b)
2,080 Lexmark International
Group, Inc., Class A 209,040(b)
3,600 Lycos, Inc. 200,025(b)
5,780 Network Appliance, Inc. 260,100(b)
15,300 Novell, Inc. 277,313(b)
12,000 PRI Automation, Inc. 312,000(b)
13,500 Quantum Corp. 286,875(b)
4,600 RealNetworks, Inc. 165,025(b)
10,150 Seagate Technology, Inc. 307,038(b)
2,380 Sun Microsystems, Inc. 203,788(b)
3,920 Systems & Computer Technology Corp. 53,900(b)
3,380 Tech Data Corp. 136,045(b)
7,100 Teradyne, Inc. 300,863(b,c)
11,500 Verio, Inc. 257,313(b)
9,900 Western Digital Corp. 149,119(b,c)
-------------
7,537,217
-------------
Conglomerates - 0.6%
8,700 ITT Industries, Inc. 345,825
3,480 Tyco International, Ltd. 262,523
-------------
608,348
-------------
Construction & Home Building - 0.4%
8,760 Centex Corp. 394,748
-------------
Containers & Packaging - 0.3%
9,220 Owens-Illinois, Inc. 282,363(b)
-------------
Drugs & Health Care - 7.6%
5,040 Alza Corp. 263,340(b)
3,200 Amgen, Inc. 334,600
8,100 Arterial Vascular Engineering 425,250(b)
11,900 Biochem Pharma, Inc. 340,638(b)
3,260 Biogen, Inc. 270,580(b)
6,330 Biomet, Inc. 254,783
2,490 Cardinal Health, Inc. 188,929
6,580 Centocor, Inc. 296,923(b)
5,930 Elan Corp. plc, ADR (USD) 412,506(b)
3,100 Eli Lilly & Co. 275,513
5,840 Forest Laboratories, Inc. 310,615(b)
4,740 Genzyme Corp. 235,815(b)
7,680 Gilead Sciences, Inc. 315,360(b)
1,890 Guidant Corporation 208,373
4,500 Haemonetics Corp. 102,375(b)
8,900 HCR Manor Care, Inc. 261,438(b)
13,280 Luxottica Group S.P.A. ADR (USD) 159,360
4,460 McKesson Corp. 352,619
2,000 MedImmune, Inc. 198,875(b)
8,020 Mylan Laboratories, Inc. 252,630
9,320 Rite Aid Corp. 461,923
3,640 Sofamor Danek Group, Inc. 443,170(b)
6,060 STERIS Corp. 172,331(b)
11,350 Watson Pharmaceuticals, Inc. 713,631(b)
-------------
7,251,577
-------------
Electric Utilities - 0.2%
4,680 AES (The) Corp. 221,715(b)
-------------
Electrical Equipment - 1.2%
6,290 Applied Materials, Inc. 268,504(b)
7,470 KLA Instruments Corp. 324,011(b)
5,790 Novellus Systems, Inc. 286,605(b)
4,300 Symbol Technologies, Inc. 274,931
-------------
1,154,051
-------------
Electronics - 6.9%
8,420 Altera Corp. 512,568(b)
6,300 AMP, Inc. 327,994
9,300 Analog Devices, Inc. 291,788(b)
5,400 Avnet, Inc. 326,700
2,000 Jabil Circuit, Inc. 149,250(b)
5,380 Linear Technology Corp. 481,846
10,920 Maxim Integrated Products, Inc. 477,068(b)
11,900 Mettler-Toledo International Inc. 333,944(b)
4,100 Micrel, Inc. 225,500(b)
7,360 Microchip Technology, Inc. 272,320(b)
11,800 Oak Industries, Inc. 413,000(b)
3,260 PMC-Sierra, Inc. 205,788(b)
1,700 SCI Systems, Inc. 98,175(b)
15,000 Smart Modular Technologies, Inc. 416,250(b)
3,340 Solectron Corp. 310,411(b)
8,070 Uniphase Corp. 559,856(b)
10,170 Vitesse Semiconductor Corp. 464,006(b)
3,860 Waters Corp. 336,785(b)
6,730 Xilinx, Inc. 438,291(b)
-------------
6,641,540
-------------
Food & Beverage - 1.1%
4,900 Coca-Cola Enterprises, Inc. 175,175
17,030 Flowers Industries, Inc. 407,656
6,500 Nabisco Holdings, Inc. 269,750
3,680 U.S. Foodservice 180,320(b)
-------------
1,032,901
-------------
Healthcare Management - 3.9%
7,300 Allegiance Corp. 340,363
3,700 Express Scripts, Inc., Class A 248,363(b)
24,870 HEALTHSOUTH Corp. 383,931(b)
3,770 Henry Schein, Inc. 168,708(b)
7,500 Humana, Inc. 133,594(b)
5,000 Lincare Holdings, Inc. 202,813(b)
14,670 Omnicare, Inc. 509,783
10,730 Orthodontic Centers of
America, Inc. 208,564(b)
7,180 Quintiles Transnational Corp. 383,233(b)
17,710 Total Renal Care Holdings, Inc. 523,552(b)
13,770 Trigon Healthcare, Inc. 513,793(b)
1,990 Wellpoint Health Networks Inc. 173,130(b)
-------------
3,789,827
-------------
Hospital Management - 0.7%
25,875 Health Management Associates,
Inc., Class A 559,547(b)
3,140 Tenet Healthcare Corporation 82,425(b)
-------------
641,972
-------------
Household Products - 0.5%
15,330 Dial Corp. 442,654
-------------
Insurance - 1.6%
10,800 AFLAC, Inc. 475,200
6,350 Allmerica Financial Corp. 367,506
9,350 Nationwide Financial Services,
Class A 483,278
8,825 Old Republic International Corp. 198,563
-------------
1,524,547
-------------
Leisure & Entertainment - 1.0%
4,300 Carnival Corp., Inc. 206,400
3,960 Harley Davidson, Inc. 187,605(c)
5,400 Royal Caribbean Cruises, Ltd. 199,800
6,660 Time Warner, Inc. 413,336
-------------
1,007,141
-------------
Machinery & Equipment - 1.5%
9,500 Applied Power, Inc. 358,625
7,860 Black & Decker Corp. 440,651
7,545 Crane Co. 227,765
3,500 Danaher Corp. 190,094
11,470 MSC Industrial Direct Co., Inc.,
Class A 259,509(b)
-------------
1,476,644
-------------
Media - 1.5%
4,000 Cox Communications, Inc., Class A 276,500(b)
20,730 Outdoor Systems, Inc. 621,900(b)
10,990 Tele-Communications, Inc.,
Liberty Media Group, Series A 506,227(b)
-------------
1,404,627
-------------
Natural Gas - 0.6%
10,000 Consolidated Natural Gas Co. 540,000
-------------
Oil & Oil Service - 3.0%
6,730 Apache Corp. 170,353
8,380 BJ Services Co. 130,938(b)
8,340 Cooper Cameron Corp. 204,330(b)
5,640 Devon Energy Corp. 173,078
10,100 Diamond Offshore Drilling, Inc. 239,244
11,320 ENSCO International, Inc. 120,983
13,720 Global Marine, Inc. 126,053(b)
15,960 Noble Drilling Corp. 206,483(b)
12,640 R&B Falcon Corp. 96,380(b)
3,050 Schlumberger, Ltd. 140,681
8,590 Smith International, Inc. 216,361(b)
8,880 Sunoco, Inc. 320,235
6,250 Tosco Corp. 161,719
6,160 Transocean Offshore, Inc. 165,165
10,490 USX-Marathon Group 316,011
4,840 Weatherford International, Inc. 93,775(b)
-------------
2,881,789
-------------
Paper & Forest Products - 0.3%
6,600 Bowater, Inc. 273,488
-------------
Pollution Control - 1.1%
10,900 Allied Waste Industries, Inc. 257,513(b)
18,400 Catalyca, Inc. 331,200(b)
10,070 Waste Management, Inc. 469,514
-------------
1,058,227
-------------
Publishing & Printing - 0.3%
10,580 World Color Press, Inc. 322,029(b)
-------------
Railroads - 0.2%
4,930 CSX Corp. 204,595
-------------
Restaurants - 1.3%
18,800 Darden Restaurants, Inc. 338,400
5,600 Outback Steakhouse, Inc. 223,300(b)
6,750 Papa John's International, Inc. 297,844(b)
6,500 Starbucks Corp. 364,813(b)
-------------
1,224,357
-------------
Retail - 10.0%
5,800 Abercrombie & Fitch Co., Class A 410,350(b)
8,400 Albertson's, Inc. 534,975
15,300 Bed, Bath & Beyond, Inc. 522,113(b)
7,340 Circuit City Stores, Inc. 366,541
5,100 Costco Companies, Inc. 368,156(b)
6,300 CVS Corp. 346,500
4,300 Dayton Hudson Corp. 233,275
9,900 Dollar Tree Stores, Inc. 432,506(b)
6,770 Eagle Hardware & Garden, Inc. 220,025(b)
4,290 Ethan Allen Interiors, Inc. 175,890
8,490 Fred Meyer, Inc. 511,523(b)
9,920 Kohl's Corp. 609,460(b)
17,600 Limited, Inc. 512,600
5,300 Lowe's Companies 271,294
10,735 Men's (The) Wearhouse, Inc. 340,836(b)
20,900 Office Depot, Inc. 771,994(b)
6,500 Ross Stores, Inc. 255,938
8,060 Safeway, Inc. 491,156(b)
9,050 Saks, Inc. 285,641(b)
20,330 Staples, Inc. 888,167(b)
23,920 TJX Companies, Inc. 693,680
8,500 Williams-Sonoma, Inc. 342,656(b)
-------------
9,585,276
-------------
Services - 7.1%
13,000 Acxiom Corp. 403,000(b)
2,430 Apollo Group, Inc., Class A 82,316(b)
8,850 Cambridge Technology
Partners, Inc. 195,806(b)
2,900 Cintas Corp. 204,269
6,300 Computer Sciences Corp. 405,956
8,200 Concord EFS, Inc. 347,475(b)
4,800 Covance, Inc. 139,800(b)
3,200 DST Systems, Inc. 182,600(b)
8,200 Electronic Data Systems Corp. 412,050
6,580 Equifax, Inc. 224,954
9,100 First Data Corp. 288,356
13,140 Fiserv, Inc. 675,889(b)
10,430 Getty Images, Inc. 179,266(b)
11,500 IDEXX Laboratories, Inc. 309,422(b)
2,000 Interpublic Group of Cos., Inc. 159,500
9,330 ITT Educational Services, Inc. 317,220(b)
9,690 Modis Professional Services, Inc. 140,505(b)
6,760 Omnicom Group, Inc. 392,080
7,120 Paychex, Inc. 366,235
8,900 Renters Choice, Inc. 282,575(b)
5,420 Robert Half International, Inc. 242,206(b)
4,210 Service Corp. International 160,243
6,960 Stewart Enterprises, Inc.,
Class A 154,860
10,800 Sylvan Learning Systems, Inc. 329,400(b)
6,600 Young & Rubicam, Inc. 213,675(b)
-------------
6,809,658
-------------
Telecommunications Equipment - 3.0%
5,700 ADC Telecommunications, Inc. 198,075(b)
9,300 Ascend Communications, Inc. 611,475(b)
3,000 Bisys (The) Group, Inc. 154,875(b)
7,100 Global TeleSystems Group, Inc. 395,825(b)
6,800 Level One Communications, Inc. 241,400(b)
2,900 Lucent Technologies, Inc. 319,000
4,300 Motorola, Inc. 262,569
1,900 Nokia Corp. ADR (USD) 228,831
2,560 Tellabs, Inc. 175,520(b)
7,100 Terayon Communication Systems, Inc. 262,700(b)
-------------
2,850,270
-------------
Telephone & Telecommunications - 3.7%
4,560 Century Telephone Enterprises 307,800
9,110 Cincinnati Bell, Inc. 344,472
4,700 Level 3 Communications
Holdings Corp. 218,844(b)
7,400 MCI Worldcom, Inc. 530,950(b)
9,600 Newbridge Networks Corp. 291,600(b)
8,670 Pacific Gateway Exchange, Inc. 416,702(b)
10,500 Qwest Communications
International, Inc. 525,000(b)
9,300 RSL Communications, Ltd. 274,350(b)
13,100 Tel-Save Holdings, Inc 219,425(b)
17,270 Western Wireless Corp., Class A 379,940(b)
-------------
3,509,083
-------------
Textiles & Apparel - 0.7%
10,500 Jones Apparel Group, Inc. 231,656(b)
3,850 Tommy Hilfiger Corp. 231,000(b)
8,320 Stewart Enterprises, Inc., Class A 210,080
-------------
672,736
-------------
Trucking - 0.4%
3,100 Airborne Freight Corp. 111,794
10,360 USFreightways Corp. 301,736
-------------
413,530
-------------
Total Common Stocks
(cost $81,892,562) 91,807,851
-------------
Principal
Amount
- ------------
SHORT-TERM
SECURITIES - 4.4% (a)
U.S. Government Agency
$4,210,000 Federal Home Loan Bank
Discount Notes, 4.2%,
due 1/4/1999
(at amortized cost) 4,208,527
-------------
Total Investments
(cost $86,101,089) $96,016,378(e)
=============
NOTES TO PORTFOLIO OF INVESTMENTS:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total
investments of the Mid Cap 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, 1998.
(d) At December 31, 1998, common stocks valued at $440,488 were held
in escrow to cover call options written as follows:
Number of Exercise Expiration
Type Contracts Price Date Value
- ------ ------------ ---------- ------------ -------
At Home Corp. 31 $80 1/15/1999 $ 9,300
Excite, Inc. 50 45 1/15/1999 17,500
-- -------
81 $26,800
== =======
(e) At December 31, 1998, the aggregate cost of securities for
federal income tax purposes was $87,116,796 and the net unrealized
appreciation of investments based on that cost was
$8,899,581 which is comprised of
$13,713,646 aggregate gross unrealized appreciation and $4,814,065
aggregate gross unrealized depreciation.
(f) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
The accompanying notes are an integral part of the financial statements.
LB Series Fund, Inc.
World Growth Portfolio
Portfolio of Investments
December 31, 1998
Shares Value
- -------------- -------------
ARGENTINA - 0.7% (a)
COMMON STOCKS
13,592 Banco de Galicia Buenos
Aires 'B' ADR (USD) $ 239,559
10,799 Banco Frances del Rio de la
Plata ADR (USD) 224,079
22,830 Telefonica de Argentina ADR (USD) 637,813
47,286 YPF Sociedad Anonima ADR (USD) 1,321,053
-------------
Total Argentina 2,422,504
-------------
AUSTRALIA - 2.0% (a)
COMMON STOCKS
70,109 Australia Gas & Light 504,970
25,000 Brambles Industries, Ltd. 608,953
213,030 Colonial, Ltd. 731,030
59,887 Commonwealth Bank of Australia 850,029
333,000 Goodman, Fielder, Wattie, Ltd. 336,693
35,000 John Fairfax Holdings, Ltd. 71,849
33,558 Lend Lease Corp. 452,403
718 National Australia Bank, Ltd. 10,823
106,401 News Corp., Ltd. 702,863
113,000 Publishing & Broadcasting, Ltd. 493,713
240,398 Telstra Corporation 1,123,988
145,544 Westpac Banking Corp. 973,920
-------------
6,861,234
-------------
PREFERRED STOCKS
90,402 News Corp., Ltd. 550,090
-------------
Total Australia 7,411,324
-------------
BELGIUM - 1.9% (a)
COMMON STOCKS
2,693 Credit Communal Holding/Dexia 447,925
5,551 Fortis AG 1,999,131
51,230 Kredietbank 4,030,824
104 UCB 637,778
-------------
Total Belgium 7,115,658
-------------
BRAZIL - 1.2% (a)
COMMON STOCKS
1,030 Brazil Fund (USD) 11,201
10,360 Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar GDR (USD) 160,580
391 Companhia Energetica Brasilia
ADR (USD) 7,429
25,513 Companhia Energetica Minas
Gerais ADR (USD) 484,747
47,819 Telecomunicacues Brasilieras
SA ADR (USD) 3,475,844
15,000 Unibanco - Uniao de Bancos
Brasileiros SA GDR 216,563
-------------
Total Brazil 4,356,364
-------------
CANADA - 0.2% (a)
COMMON STOCKS
16,090 Alcan Aluminum 436,856
5,900 Royal Bank of Canada 295,482
-------------
Total Canada 732,338
-------------
CHILE - 0.1% (a)
COMMON STOCKS
8,522 Chilectra ADR (USD) 183,223
-------------
CHINA - 0.2% (a)
COMMON STOCKS
41,360 Huaneng Power International
'N' ADR (USD) 599,720(c)
-------------
CZECH REPUBLIC (b)
COMMON STOCKS
7,000 SPT Telecom a.s. 106,815
-------------
DENMARK - 0.4% (a)
COMMON STOCKS
5,244 Den Danske Bank 704,495
2,287 Tele Danmark 'B' 308,680
4,510 Unidanmark 'A' 407,468
-------------
Total Denmark 1,420,643
-------------
FINLAND - 0.7% (a)
COMMON STOCKS
21,670 Nokia Oyj 'A' 2,634,909
-------------
FRANCE - 10.7% (a)
COMMON STOCKS
12,259 Alcatel Alsthom 1,499,760
20,860 AXA 3,022,107
2,581 Carrefour 1,947,637
10,250 Cie de St. Gobain 1,446,476
12,414 Credit Commercial de France 1,152,364
1,539 Credit Local de France 237,002
2,513 Credit Local de France -
Dexia France 386,996
24,437 Eaux Cie Generale 6,337,623
4,890 Groupe Danone 1,399,392
2,820 GTM Entrepose 292,542
4,983 Lafarge Coppee 473,256
5,500 Lapeyre 392,506
2,319 Legrand 614,280
1,094 L'Oreal 790,513
1,877 Pathe SA 523,720
21,925 Pinault-Printemps-Redoute SA 4,188,142
587 Primagaz 55,645
16,059 Sanofi 2,642,511
32,880 Schneider SA 1,993,618
7,823 Societe Generale 1,266,288
10,605 Societe Nationale Elf Aquitaine 1,225,332
14,838 Sodexho 3,317,385
7,370 Television Francaise 1,311,599
29,959 Total 'B' 3,032,873
-------------
Total France 39,549,567
-------------
GERMANY - 7.2% (a)
COMMON STOCKS
5,830 Allianz AG 2,137,363
32,372 Bayer AG 1,350,938
39,216 Bayerische Vereinsbank AG 3,070,736
400 Buderas AG 145,686
27,131 Deutsche Bank AG 1,596,181
48,558 Deutsche Telekom AG 1,596,651
39,217 Dresdner Bank AG 1,647,180
17,778 Dresdner Bank AG Warrants
Expiring 4/30/2002 304,016(c)
46,007 Gehe AG 3,174,610
9,000 Hoechst AG 373,155
520 Hornbach Baumarkt AG 18,721
27,770 Mannesmann AG 3,182,569
4,716 Rhoen Klinikum AG 468,318
4,810 SAP AG 2,078,003
12,653 Siemens AG 816,151
34,915 Veba AG 2,088,699
6,490 Volkswagon AG 517,923
-------------
24,566,900
-------------
PREFERRED STOCKS
1,200 Fielmann AG 57,602
1,450 Fresenius AG 305,382
4,590 Hornbach Holdings AG 272,657
2,684 SAP AG 1,280,641
-------------
1,916,282
-------------
Total Germany 26,483,182
-------------
HONG KONG - 1.4% (a)
COMMON STOCKS
35,000 Cheung Kong Holdings, Ltd. 251,852
176,000 China Telecom, Ltd. 300,996
39,000 Hang Seng Bank, Ltd. 348,592
135,000 Henderson Land Development, Ltd. 698,733
22,400 Hong Kong Shanghai Bank Holdings 558,005
282,000 Hong Kong Telecommunications, Ltd. 493,198
301,000 Hutchison Whampoa 2,127,078
34,000 Sun Hung Kai Properties, Ltd. 247,948
-------------
Total Hong Kong 5,026,402
-------------
INDIA - 0.1% (a)
COMMON STOCKS
27,000 Mahanager Telephone Nigam, Ltd. GDR 334,125
-------------
IRELAND - 0.1% (a)
COMMON STOCKS
28,507 CBT Group plc 424,042(c)
-------------
ITALY - 5.9% (a)
COMMON STOCKS
42,560 Assicurazioni Generali 1,776,068
87,000 Banca Commerciale Italiana 599,837
672,000 Banca di Roma 1,137,984(c)
383,177 Credito Italiano 2,269,932
361,491 Ente Nazionale Idrocarburi 2,361,186
9,074 Industrie Natuzzi SpA ADR (USD) 225,716
123,477 Instituto Bancario San Paolo
di Torino 2,180,609
482,000 Istituto Nazionale
Delle Assicurazioni 1,272,449
71,600 Italgas 387,349
178,645 Mediolanum SpA 1,323,536
17,600 Rinascente 180,902
449,400 Telecom Italia Mobile 3,315,903
548,903 Telecom Italia SpA 4,680,838
-------------
Total Italy 21,712,309
-------------
JAPAN - 16.8% (a)
COMMON STOCKS
5,340 Advantest Corp. 338,208
31,000 Alps Electric 568,996
73,000 Amada 353,215
141,000 Canon 3,012,074
45,000 Citizen Watch Co. 270,677
71,000 Dai Nippon Screen
Manufacturing Co., Ltd. 177,107
77,000 Daiichi Pharmaceutical 1,300,248
98,000 Daiwa House 1,042,848
207 DDI Corp. 769,040
186 East Japan Railway 1,038,178
15,900 Fanuc 544,299
30,000 Fujitsu, Ltd. 399,381
170,000 Hitachi 1,052,632
8,000 Honda Motor Co. 262,539
28,000 Ito-Yokado 1,956,656
79,000 Kao Corp. 1,781,955
44,000 Kokuyo 591,986
76,000 Komatsu 398,655
43,000 Komori 905,263
106,000 Kuraray 1,169,235
34,000 Kyocera 1,795,489
56,000 Makita 623,653
104,000 Marui 2,000,885
157,000 Matsushita Electric Industrial 2,776,143
92,000 Mitsubishi 528,969
446,000 Mitsubishi Heavy Industries 1,735,869
246,000 Mitsui Fudosan 1,860,504
51,000 Murata Manufacturing 2,115,789
269,000 NEC 2,474,657
163,000 Nippon Denso 3,013,445
203 Nippon Telegraph & Telecom 1,565,820
154,000 Nomura Securities 1,341,796
10 NTT Mobile Communication
Network, Inc. 411,322
26,000 Pioneer Electronic 435,825
4,000 Sangetsu Co., Ltd. 59,797
116,000 Sankyo Co. 2,534,454
147,000 Sekisui Chemical 988,235
90,000 Sekisui House 951,349
11,000 Seven-Eleven Japan 885,449
85,300 Shin-Etsu Chemical 2,052,331
49,000 Shiseido Co., Ltd. 629,350
38,700 Sony 2,817,346
199,000 Sumitomo 968,156
246,000 Sumitomo Electric 2,765,732
36,000 Sumitomo Forestry 257,939
35,000 TDK 3,198,142
32,000 Tokio Marine & Fire Insurance 382,132
16,900 Tokyo Electronics 641,318
31,800 Tokyo Steel Manufacturing 159,211
87,000 Toppan Printing 1,062,008
47,000 Uny Co. 858,514
-------------
Total Japan 61,824,821
-------------
LUXEMBOURG - 0.1% (a)
COMMON STOCKS
1,800 Societe Europeenne des Satellites 287,209(c)
-------------
MEXICO - 1.1% (a)
COMMON STOCKS
75,000 Cementos de Mexico ADR (USD) 332,813
47,850 Cemex 'B' 118,092
1,435 Cemex SA de C.V. 3,092
74,660 Gruma 'B' 188,402(c)
20,695 Gruma SA ADR 205,657
240,062 Grupo Industrial Maseca 'B' 193,852
17,500 Grupo Televisa GDR (USD) 432,031(c)
110,408 Kimberly-Clark Mexico 'A' 351,050
22,020 Panamerican Beverages 'A' ADR (USD) 480,311
35,435 Telefonos de Mexico 'L' ADR (USD) 1,725,242
20,700 TV Azteca SA ADR (USD) 138,431
-------------
Total Mexico 4,168,973
-------------
NETHERLANDS - 11.0% (a)
COMMON STOCKS
75,136 ABN Amro Holdings NV 1,579,748
9,160 Akzo Nobel NV 416,873
37,210 ASM Lithography Holdings NV 1,136,879(c)
111,000 CLP Holdings, Ltd. 553,023
33,699 CSM 1,944,415
185,199 Elsevier 2,592,609
35,885 Fortis Amev NV 2,972,112
10,231 Gucci Group NV ADR (USD) 497,482
99,082 ING Groep NV 6,038,691
75,314 Koninklijke Ahold NV 2,782,132
29,310 Koninklijke Numico NV 1,396,309
8,490 KPN NV 424,794
65,778 Royal Dutch Petroleum 3,273,670
26,070 Royal Phillips Electronics NV 1,748,454
10,200 ST Microelectronics 802,719
8,490 TNT Post Group NV 273,404
49,520 Unilever NV 4,230,564
38,057 Wolters Kluwer 8,139,300
-------------
Total Netherlands 40,803,178
-------------
NEW ZEALAND - 0.2% (a)
COMMON STOCKS
77,000 Telecom Corporation of New
Zealand, Ltd. 168,149(c)
132,000 Telecom Corp. of New Zealand 573,037
-------------
Total New Zealand 741,186
-------------
NORWAY - 1.1% (a)
COMMON STOCKS
5,570 Bergesen 'A' 66,707
56,354 Norsk Hydro 1,906,031
148,190 Orkla ASA 2,213,538
6,910 Saga Petroleum ASA 63,203
-------------
Total Norway 4,249,479
-------------
PORTUGAL - 0.5% (a)
COMMON STOCKS
35,545 Jeronimo Martins 1,945,389
-------------
RUSSIA - (b)
COMMON STOCKS
13,070 Gazprom ADS (USD) 110,768
1,880 Lukoil holding AB ADR 30,550
-------------
Total Russia 141,318
-------------
SINGAPORE - 0.1% (a)
COMMON STOCKS
35,416 Singapore Press Holdings, Ltd. 386,122
-------------
SOUTH KOREA - 0.1% (a)
COMMON STOCKS
53,991 Korea Equity Fund (USD) 499,417
-------------
SPAIN - 3.1% (a)
COMMON STOCKS
36,780 Banco Bilboa Vizcaya SA 575,820(c)
87,091 Banco Santander SA 1,728,093
40,178 Corporacion Bancaria de Espana SA 1,038,940
57,564 Endesa SA 1,522,943
11,276 Gas Natural SDG SA 1,225,825
59,060 Iberdrola 1,103,323
13,325 Repsol SA 709,754
77,344 Telefonica de Espana 3,434,004
77,344 Telefonica SA 6,857
-------------
Total Spain 11,345,559
-------------
SWEDEN - 3.5% (a)
COMMON STOCKS
57,930 ABB AB 616,747
175,540 Astra AB 3,564,900
40,060 Atlas Copco 'B' 867,783
107,225 Electrolux AB 1,841,016
7,770 Esselte 'B' 127,192
6,582 Granges AB 94,783
37,250 Hennes & Mauritz AB 3,035,091
325,121 Nordbanken Holding AB 2,080,826
4,860 Sandvik 'A' 84,342
29,620 Sandvik 'B' 510,388
-------------
Total Sweden 12,823,068
-------------
SWITZERLAND - 7.4% (a)
COMMON STOCKS
1,320 ABB AG 1,547,063
5,447 Adecco SA 2,486,183
9,750 Credit Suisse Group 1,525,988
3,355 Nestle 7,302,504
2,818 Novartis AG 5,538,764
344 Roche Holdings 4,197,015
1,542 Swisscom AG 645,447(c)
13,738 UBS AG 4,220,307
-------------
Total Switzerland 27,463,271
-------------
UNITED KINGDOM - 18.8% (a)
COMMON STOCKS
120,000 Abbey National 2,553,913
421,000 Asda Group 1,129,615
132,764 BG plc 853,625
111,000 British Petroleum 1,652,368
245,000 Cable & Wireless 2,995,846
179,225 Cadbury Schweppes 3,066,984
257,800 Caradon plc 441,160
62,000 Centrica plc 127,214(c)
190,000 Compass Group plc 2,168,633
114,000 David S. Smith 200,764
79,000 Electrocomponents 521,067
26,000 GKN plc 345,572
191,500 Glaxo Wellcome 6,592,258
11,000 Heywood Williams Group 39,475
58,000 John Laing 'A' 240,904
593,000 Kingfisher 6,423,592
555,000 National Westminster Bank 10,742,233
90,000 Rank Group plc 344,001
496,000 Reed International plc 3,938,993
84,000 Rolls Royce 348,895
122,000 RTZ 1,418,840
240,000 Safeway plc 1,204,187
992,000 Shell Transport & Trading 6,098,023
674,400 SmithKline Beecham plc 9,346,698
573,000 Tesco 1,665,974
515,700 Tomkins 2,450,410
71,000 Unilever plc 798,588
186,000 United News & Media 1,616,175
-------------
Total United Kingdom 69,326,007
-------------
Principal
Amount
- ------------
SHORT-TERM
SECURITIES - 3.4% (a)
Commercial Paper
$12,400,000 New Center Asset Trust,
5.23%, Due 1/4/1999
(at amortized cost) 12,394,596
-------------
Total Investments $368,912,718(e)
=============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the World Growth Portfolio.
(b) The market value of the denoted categories of investments
represents less than 0.1% of the total investments of the
World Growth Portfolio.
(c) Currently non-income producing.
(d) Security Classification:
% of
Cost Value Portfolio
------------- ------------- ---------
Common Stocks
& Warrants $ 296,280,555 $ 354,051,750 95.9%
Preferred Stocks 2,284,109 2,466,372 0.7%
Short-Term 12,394,596 12,394,596 3.4%
------------- ------------- ---------
Total Investments $ 310,959,260 $ 368,912,718 100.0%
============= ============= =========
(e) At December 31, 1998, the aggregate cost of securities for
federal income tax purposes was $314,495,907 and the net unrealized
appreciation of investments based on that cost was
$54,416,811 which is comprised of
$78,975,916 aggregate gross unrealized appreciation and $24,559,105
aggregate gross unrealized depreciation.
(f) Miscellaneous Footnotes:
(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.
LB SERIES FUND, INC.
World Growth Portfolio
Portfolio of Investments
December 31, 1998
Shares Value
- -------------- -------------
COMMON STOCKS - 94.5% (a)
Airlines - 0.9%
196,100 Airborne Freight Corp. $ 7,071,856
100,000 Continental Airlines
Holding, Inc., Class B 3,350,000(b)
53,800 Delta Air Lines, Inc. 2,797,600
268,700 Northwest Airlines Corp., Class A 6,868,613(b)
467,850 Southwest Airlines Co. 10,497,384
-------------
30,585,453
-------------
Appliances &
Furnishings - (c)
142,300 Sunbeam Corp. 996,100
-------------
Automotive - 1.9%
100,000 DaimlerChrysler AG 9,606,250(b)
250,000 Ford Motor Co. 14,671,875
215,700 General Motors Corp., Class H 8,560,594(b)
201,600 General Motors Corp. 14,427,000
80,000 Magna International, Inc. 4,960,000
350,000 Tower Automotive, Inc. 8,728,125(b)
38,000 Volvo Aktiebolaget ADR (USD) 885,875
-------------
61,839,719
-------------
Bank & Finance - 14.9%
142,500 Ace, Ltd. 4,907,344
263,100 American Express Co. 26,901,975
341,900 American International Group, Inc. 33,036,088
646,200 Associates First Capital Corp. 27,382,725
603,800 Bank of New York Co., Inc. 24,302,950
255,632 Bank One Corp. 13,053,209
105,900 Bank United Corp. 4,156,575
549,999 BankAmerica Corp. 33,068,690
153,100 BankBoston Corp. 5,961,331
407,800 Chase Manhattan Corp. 27,755,888
773,100 Citigroup, Inc. 38,268,450
91,200 Compass Bancshares, Inc. 3,471,300
107,000 Crestar Financial Corp. 7,704,000
115,500 Donaldson, Lufkin & Jenrette, Inc. 4,735,500
395,000 Federal Home Loan Mortgage Corp. 25,452,813
470,000 Federal National Mortgage Association 34,780,000
133,900 Finova Group, Inc. 7,222,231
54,200 First American Corp. 2,405,125
173,900 First Union Corp. 10,575,294
451,500 Fleet Financial Group, Inc. 20,176,406
129,800 Greenpoint Financial Corp. 4,559,225
375,000 Hibernia Corp., Class A 6,515,625
324,100 Keycorp 10,371,200
215,000 Lehman Brothers Holdings, Inc. 9,473,438
570,000 MBNA Corp. 14,214,375
237,700 Mellon Bank Corp. 16,341,875
185,000 Merrill Lynch & Co., Inc. 12,348,750
193,100 PaineWebber Group, Inc. 7,458,488
30,000 Progressive Corp. 5,081,250
121,660 Provident Bankshares Corporation 3,026,293
85,000 Standard & Poor's Depositary
Receipts Trust 10,455,000
236,900 Summit Bancorp 10,349,569
106,200 SunAmerica, Inc. 8,615,475
138,400 TCF Financial Corp. 3,347,550
453,900 U.S. Bancorp 16,113,450
-------------
493,589,457
-------------
Broadcasting - 1.9%
359,200 CBS Corp. 11,763,800
200,000 Chancellor Media Corp. 9,575,000(b)
220,000 Clear Channel Communications, Inc. 11,990,000(b)
181,500 Cumulus Media, Inc., Class A 3,017,438(b)
38,000 Echostar Communications Corp. 1,838,250(b)
193,400 Fox Entertainment Group, Inc. 4,871,263(b)
350,000 Tele-Communications, Inc.,
Liberty Media Group, Series A 16,121,875(b)
106,200 TV Azteca, S.A. de C.V. ADR 710,213
100,000 USA Networks, Inc. 3,312,500(b)
-------------
63,200,339
-------------
Building Materials - 0.3%
350,000 Masco Corp. 10,062,500
-------------
Chemicals - 1.1%
246,200 Air Products & Chemicals, Inc. 9,848,000
115,700 Avery Dennison Corp. 5,213,731
178,800 E.I. du Pont de Nemours and Co. 9,487,575
252,900 Monsanto Co. 12,012,750
-------------
36,562,056
-------------
Computer Software - 5.9%
200,000 America Online, Inc. 32,000,000
170,000 BMC Software, Inc. 7,575,625(b)
120,300 Cadence Design Systems, Inc. 3,578,925(b)
200,200 Compuware Corp. 15,640,625(b)
200,000 Electronic Arts, Inc. 11,225,000(b)
136,200 Excite, Inc. 5,728,913(b,c)
123,300 HBO & Co. 3,537,169
525,000 Microsoft Corp. 72,810,938(b)
130,000 Network Associates, Inc. 8,612,500(b)
195,900 Novell, Inc. 3,550,688(b)
350,000 Oracle Corp. 15,093,750(b)
219,600 Parametric Technology Corp. 3,595,950(b)
272,000 Platinum Technology, Inc. 5,202,000(b)
150,400 Security Dynamics Technologies, Inc. 3,459,200(b)
120,900 Verio, Inc. 2,705,138(b)
304,000 Viasoft, Inc. 2,128,000(b)
-------------
196,444,421
-------------
Computers & Office Equipment - 8.9%
330,800 3Com Corp. 14,823,975(b)
162,000 Apple Computer, Inc. 6,631,875(b)
771,100 Cisco Systems, Inc. 71,567,719(b)
778,800 Compaq Computer Corp. 32,660,925
300,000 Dell Computer Corp. 21,956,250(b)
235,000 FORE Systems, Inc. 4,303,438(b)
110,000 Gateway 2000, Inc. 5,630,625(b)
315,000 Hewlett Packard Co. 21,518,438
235,000 International Business
Machines Corp. 43,416,250
85,000 Lexmark International Group, Inc. 8,542,500(b)
175,000 Pitney Bowes, Inc. 11,560,938
184,300 Quantum Corp. 3,916,375(b)
423,100 Seagate Technology, Inc. 12,798,775(b)
293,200 Sun Microsystems, Inc. 25,105,250(b)
100,000 Xerox Corp. 11,800,000
-------------
296,233,333
-------------
Conglomerates - 1.8%
390,200 AlliedSignal, Inc. 17,290,738
28,200 Minnesota Mining & Manufacturing Co. 2,005,725
446,000 Tyco International, Ltd. 33,645,125
300,000 U.S. Industries, Inc. 5,587,500
-------------
58,529,088
-------------
Construction & Home Building - 0.3%
250,000 Kaufman & Broad Home Corp. 7,187,500
123,100 Pulte Corp. 3,423,719
-------------
10,611,219
-------------
Drugs & Health Care - 12.6%
424,900 Abbott Laboratories 20,820,100
325,000 American Home Products Corp. 18,301,563
150,000 Amgen, Inc. 15,684,375
150,000 Arterial Vascular Engineering, Inc. 7,875,000(b)
276,000 Baxter International, Inc. 17,750,250
115,200 Beckman Coulter, Inc. 6,249,600
594,900 Becton, Dickinson & Co. 25,394,794
255,000 Bristol-Myers Squibb Co. 34,122,188
109,100 Cardinal Health, Inc. 8,277,963
244,100 Centocor, Inc. 11,015,013(b)
103,900 Elan Corp. plc, ADR (USD) 7,227,544(b)
250,000 Eli Lilly & Co. 22,218,750
160,000 Genzyme Corp. 7,960,000(b)
39,000 Guidant Corporation 4,299,750
360,000 Johnson & Johnson 30,195,000
230,000 Mallinckrodt, Inc. 7,086,875
140,000 McKesson Corp. 11,068,750
175,000 Medtronic, Inc. 12,993,750
216,900 Merck & Co., Inc. 32,033,419
62,500 Miravant Medical Technologies 804,688(b)
400,000 Pfizer, Inc. 50,175,000
593,000 Schering-Plough Corp. 32,763,250
155,000 Smithkline Beecham plc., ADR (USD) 10,772,500
300,000 Warner-Lambert Co. 22,556,250
-------------
417,646,372
-------------
Electrical Equipment - 1.9%
553,700 General Electric Co. 56,512,006
103,900 Honeywell, Inc. 7,824,969
-------------
64,336,975
-------------
Electronics - 4.4%
125,000 Advanced Micro Devices, Inc. 3,617,188(b)
232,700 Altera Corp. 14,165,613(b)
146,100 Analog Devices, Inc. 4,583,888(b)
223,000 Applied Materials, Inc. 9,519,313(b)
580,000 Intel Corp. 68,766,250
100,000 Novellus Systems, Inc. 4,950,000(b)
120,000 Philips Electronics N.V. 8,122,500
225,000 Texas Instruments, Inc. 19,251,563
175,000 Xilinx, Inc. 11,396,875(b)
-------------
144,373,190
-------------
Food & Beverage - 3.1%
175,400 American Italian Pasta Co. 4,626,175(b)
300,000 Coca-Cola Co. 20,062,500
138,300 Heinz (H.J.) Co. 7,831,238
130,000 IBP, Inc. 3,786,250
371,400 International Home Foods, Inc. 6,267,375(b)
200,000 Nabisco Holdings, Inc. 8,300,000
633,800 PepsiCo, Inc. 25,946,188
710,000 Sara Lee Corp. 20,013,125
124,500 Suiza Foods Corp. 6,341,719(b)
-------------
103,174,570
-------------
Healthcare Management - 1.0%
115,000 Aetna, Inc. 9,041,875
220,200 Capital Senior Living Corp. 3,069,038(b)
250,000 Columbia/HCA Healthcare Corp. 6,187,500
338,200 Oxford Health Plans, Inc. 5,030,725(b)
333,600 Total Renal Care Holdings, Inc. 9,862,050(b)
-------------
33,191,188
-------------
Household Products - 2.3%
80,000 Clorox Co. 9,345,000
200,000 Colgate Palmolive Co. 18,575,000
300,000 Dial Corp. 8,662,500
373,200 Gillette Co. 18,030,225
230,000 Procter & Gamble Co. 21,001,875
-------------
75,614,600
-------------
Insurance - 0.3%
78,500 CMAC Investment Corp. 3,606,094
69,700 Lincoln National Corp. 5,702,331
-------------
9,308,425
-------------
Leisure &
Entertainment - 1.6%
40,000 Adams Golf, Inc. 163,750(b)
165,600 American Skiing Co. 1,273,050(b)
160,500 Carnival Corp., Inc. 7,704,000
268,800 Disney (Walt) Co. 8,064,000
106,050 Sunterra Corp. 1,590,750(b)
553,600 Time Warner, Inc. 34,357,800
-------------
53,153,350
-------------
Machinery & Equipment - 0.6%
393,800 AGCO Corp. 3,101,175
270,000 Black & Decker Corp. 15,136,875
-------------
18,238,050
-------------
Media - 1.4%
103,000 Cablevision Systems Corp., Class A 5,169,313(b)
42,000 Lamar Advertising Co. 1,564,500(b)
247,700 MediaOne Group, Inc. 11,641,900(b)
227,100 MediaOne Group, Inc.
(Airtouch Communications,
Premium Income
Exchangeable Security) 15,102,150
235,000 News Corp., Ltd. ADR 5,801,563
154,600 Outdoor Systems, Inc. 4,638,000(b)
68,600 Times (The) Mirror Co. 3,841,600
-------------
47,759,026
-------------
Mining & Metals - 0.6%
170,000 Aluminum Co. of America 12,675,625
429,400 Homestake Mining Co. 3,945,113
152,100 USX-U.S. Steel Group, Inc. 3,498,300
-------------
20,119,038
-------------
Oil & Oil Service - 3.8%
123,600 Apache Corp. 3,128,625
106,000 Atlantic Richfield Co. 6,916,500
68,600 British Petroleum Co. plc ADR 5,706,663
257,600 Chevron Corp. 21,364,700
596,100 Halliburton Co. 17,659,463
283,200 Mobil Corp. 24,673,800
289,600 R&B Falcon Corp. 2,208,200(b)
162,500 Smith International, Inc. 4,092,969(b)
197,500 Sunoco, Inc. 7,122,344
156,800 Texaco, Inc. 8,290,800
120,400 Total SA ADR 5,989,900
225,000 Transocean Offshore, Inc. 6,032,813
342,500 USX-Marathon Group 10,317,813
200,000 Weatherford International, Inc. 3,875,000(b)
-------------
127,379,590
-------------
Paper & Forest Products - 0.4%
187,800 Louisiana Pacific Corp. 3,439,088
45,700 Mead Corp. 1,339,581
92,300 Temple Inland, Inc. 5,474,544
110,100 Willamette Industries, Inc. 3,688,350
-------------
13,941,563
-------------
Pollution Control - 0.6%
400,000 Republic Services, Inc., Class A 7,375,000(b)
139,000 U.S. Filter Corp. 3,179,625(b)
165,200 Waste Management, Inc. 7,702,450
-------------
18,257,075
-------------
Real Estate Investment
Trust - 0.5%
127,000 Crescent Real Estate Equities 2,921,000
252,523 Equity Office Properties Trust 6,060,552
157,000 Glimcher Realty Trust 2,462,938
220,000 Simon Property Group, Inc. 6,270,000
-------------
17,714,490
-------------
Restaurants - 0.9%
500,000 Landry's Seafood Restaurant, Inc. 3,750,000(b)
303,500 McDonald's Corp. 23,255,688
67,000 PR Chang's China Bistro, Inc. 1,524,250(b)
-------------
28,529,938
-------------
Retail - 8.0%
200,900 Borders Group, Inc. 5,009,944(b)
200,000 Circuit City Stores, Inc. 9,987,500
112,600 Computer Literacy, Inc. 1,513,063(b)
528,100 CVS Corp. 29,045,500
338,000 Dayton Hudson Corp. 18,336,500
205,100 Eagle Hardware & Garden, Inc. 6,665,750(b)
88,400 Federated Department Stores 3,850,925(b)
109,500 Fred Meyer, Inc. 6,597,375(b)
75,000 Gucci Group NV ADR (USD) 3,576,563
550,000 Home Depot, Inc. 33,653,125
190,500 Intimate Brands, Inc. 5,691,188
385,100 Kmart Corp. 5,896,844(b)
268,100 Kroger Co. 16,220,050(b)
96,100 Lowe's Companies 4,919,119
100,000 Office Depot, Inc. 3,693,750(b)
455,500 OfficeMax, Inc. 5,579,875(b)
200,000 PETCO Animal Supplies, Inc. 2,012,500(b)
294,300 Rite Aid Corp. 14,586,244
475,000 Safeway, Inc. 28,945,313(b)
348,300 Saks, Inc. 10,993,219(b)
272,000 TJX Companies, Inc. 7,888,000
138,600 Venator Group, Inc. 892,238(b)
475,000 Wal-Mart Stores, Inc. 38,682,813
55,200 Zale Corp. 1,780,200(b)
-------------
266,017,598
-------------
Services - 2.1%
92,500 Block (H & R), Inc. 4,162,500
100,000 Budget Group, Inc. 1,587,500(b)
500,000 Cendant Corp. 9,531,250(b)
96,800 Ceridian Corp. 6,757,850(b)
175,300 Computer Sciences Corp. 11,295,894
184,600 Electronic Data Systems Corp. 9,276,150
25,000 Entrust Technologies, Inc. 596,875(b)
78,800 Interpublic Group of Companies., Inc. 6,284,300
389,400 Modis Professional Services, Inc. 5,646,300(b)
126,300 Stewart Enterprises, Inc. 2,810,175
341,300 Young & Rubicam, Inc. 11,049,588(b)
-------------
68,998,382
-------------
Telecommunications Equipment - 3.3%
189,200 Ascend Communications, Inc. 12,439,900(b)
185,900 General Instrument Corp. 6,308,981(b)
315,000 Lucent Technologies, Inc. 34,650,000
311,000 Motorola, Inc. 18,990,438
103,500 Newbridge Networks Corp. 3,143,813(b)
115,000 Nokia Corp. ADR (USD) 13,850,313
280,000 Tellabs, Inc. 19,197,500(b)
-------------
108,580,945
-------------
Telephone & Telecommunications - 6.6%
50,000 AirTouch Communications, Inc. 3,606,250(b)
126,900 ALLTEL Corp. 7,590,206
423,200 Ameritech Corp. 26,820,300
551,239 AT&T Corp. 41,480,735
325,100 Bell Atlantic Corp. 17,230,300
800,000 MCI Worldcom, Inc. 57,400,000(b)
327,500 MobileMedia Corp., Class A 164(b)
291,100 Premiere Technologies, Inc. 2,146,863(b)
130,700 Qwest Communications
International, Inc. 6,535,000(b)
407,700 SBC Communications, Inc. 21,862,913
160,000 Sprint Corp. (FON Group) 13,460,000
311,100 Sprint Corp. (PCS Group) 7,194,188(b)
254,300 Tele-Communications, Inc. 5,991,944(b)
120,000 Telecomunicacoes Brasileiras
S.A. ADR (USD) 8,722,500(b)
-------------
220,041,363
-------------
Textiles & Apparel - 0.6%
76,900 NIKE, Inc., Class B 3,119,256
88,800 Reebok International, Ltd. 1,320,900(b)
60,000 Timberland Co., Class A 2,733,750(b)
168,000 Tommy Hilfiger Corp. 10,080,000(b)
115,500 Wolverine World Wide, Inc. 1,530,375
-------------
18,784,281
-------------
Total Common Stocks
(cost $2,510,943,656) 3,133,813,694
-------------
CORPORATE BONDS - (c)
$ 3,250,000 Broadband Technologies, Inc.,
Convertible Subordinated
Notes 5.0%,
Due 5/15/2001 $ 1,202,500
-------------
Total Corporate Bonds
(cost $3,256,364) 1,202,500
-------------
SHORT-TERM SECURITIES - 5.5% (a)
Commercial Paper - 3.7%
48,100,000 American General Corp.,
5.0%, Due 1/4/1999 48,079,958
10,000,000 Centerior Fuel Corp.,
5.05%, Due 1/8/1999 9,990,181
4,815,000 Enterprise Funding Corp. ,
5.25%, Due 1/7/1999 4,810,787
5,000,000 Enterprise Funding Corp. ,
5.25%, Due 1/8/1999 4,994,896
22,100,000 Gillette Co., 5.12%,
Due 1/4/1999 22,090,571
4,026,000 Met-Life Funding, Inc.,
5.4%, Due 1/27/1999 4,010,299
18,000,000 Northern Illinois Gas Co .,
5.25%, Due 1/4/1999 17,992,125
10,000,000 President & Fellows
Harvard Co., 6.1%,
Due 1/5/1999 9,993,222
-------------
121,962,039
-------------
U.S. Government
Agency - 1.8%
20,000,000 Federal Home Loan Bank
Discount Notes, 5.13%,
Due 1/20/1999 19,945,850
20,000,000 Federal Home Loan
Mortgage Corp.
Discount Notes, 5.09%,
Due 1/8/1999 19,980,206
18,900,000 Federal National Mortgage
Association Discount Notes,
5.14%, Due 1/7/1999 18,883,809
--------------
58,809,865
--------------
Total Short-Term Investments
(at amortized cost) 180,771,904
--------------
Total Investments
(cost $2,694,971,924) $3,315,788,098(e)
==============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Growth Portfolio.
(b) Currently non-income producing.
(c) The market value of the denoted categories of investments
represents less than 0.1% of the total investments of the
Growth Portfolio.
(d) At December 31, 1998, Common Stocks valued at $1,400,598 were held
in escrow to cover call options written as follows:
Number of Exercise Expiration
Type Contracts Price Date Value
- ------ ------------ ---------- ------------ -------
Excite, Inc. 333 $45 1/15/99 $97,819
(e) At December 31, 1998, the aggregate cost of securities for federal
income tax purposes was $2,719,209,040 and the net unrealized
appreciation of investments based on that cost was $596,579,058 which
is comprised of $692,634,989 aggregate gross unrealized appreciation
and $96,055,931 aggregate gross unrealized depreciation.
(f) Miscellaneous Footnotes:
(ADS) - American Depository Shares
(ADR) - American Depository Receipts
(USD) - Denominated in U. S. Dollars
The accompanying notes are an integral part of the financial statements.
LB SERIES FUND, INC.
High Yield Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
Principal Maturity
Amount Rate Date Value
- -------------- --------- ------------- --------------
<S> <C> <C> <C>
CORPORATE BONDS - 85.2% (a)
Aerospace - 0.8%
$ 3,000,000 BE Aerospace, Inc., Sr. Subordinated Notes, Series B 8.0% 3/1/2008 $ 2,985,000
3,600,000 Sabreliner Corp., Sr. Notes 11.0% 6/15/2008 3,186,000
3,600,000 Sequa Corp., Sr. Subordinated Notes 9.375% 12/15/2003 3,712,500
1,200,000 Transdigm, Inc., Sr. Subordinated Notes 10.375% 12/1/2008 1,212,000
----------------
11,095,500
----------------
Airlines - 1.6%
8,750,000 Continental Airlines, Inc., Sr. Notes 9.5% 12/15/2001 9,187,500
4,000,000 Northwest Airlines, Corp., Notes 8.375% 3/15/2004 4,075,100
4,500,000 Northwest Airlines, Corp., Sr. Notes 7.625% 3/15/2005 4,252,500
3,000,000 U.S. Air, Inc., Sr. Secured Equipment Trust,
Series 1993-A-3 10.375% 3/1/2013 3,403,005
----------------
20,918,105
----------------
Automotive - 0.3%
4,000,000 Safelite Glass Corp., Sr. Subordinated Notes 9.875% 12/15/2006 3,710,000
----------------
Bank & Finance - 6.3%
3,550,000 Chevy Chase Savings Bank, Subordinated Debentures 9.25% 12/1/2005 3,550,000
6,000,000 Dollar Financial Group, Inc., Sr. Notes, Series A 10.875% 11/15/2006 6,090,000
5,800,000 Emergent Group, Inc., Sr. Notes, Series B 10.75% 9/15/2004 2,929,000
4,200,000 FC CBO II, Ltd., Subordinated Debentures,
Series 1A, Class C 11.05% 9/9/2010 4,189,500
10,800,000 GS Escrow Corp., Sr. Notes 7.125% 5/1/2005 10,665,184
3,896,000 HomeSide, Inc., Sr. Notes, Series B 11.25% 5/15/2003 4,577,800
8,400,000 Mego Mortgage Corp., Sr. Subordinated Notes 12.5% 12/1/2001 6,174,000
4,250,000 Metris Companies, Inc., Sr. Notes 10.0% 11/1/2004 4,228,750
4,800,000 Riggs Capital Trust II, Trust Preferred Securities 8.875% 3/15/2027 5,065,277
9,000,000 SIG Capital Trust I, Bond 9.5% 8/15/2027 7,470,000
8,530,000 Trizec Finance, Ltd., Sr. Notes 10.875% 10/15/2005 9,105,775
10,060,000 United Companies Financial Corp., Subordinated Notes 8.375% 7/1/2005 5,565,071
3,000,000 Veritas Capital Trust, Trust Preferred Securities 10.0% 1/1/2028 2,700,000
5,070,000 Veritas Holdings GMBH, Sr. Notes 9.625% 12/15/2003 5,070,000
7,500,000 Williams Scotsman, Inc., Sr. Notes 9.875% 6/1/2007 7,743,750
6,500,000 Wilshire Financial Services Group, Inc., Notes 13.0% 1/1/2004 1,950,000(d)
3,500,000 Wilshire Financial Services Group, Notes, Series B 13.0% 8/15/2004 1,050,000(d)
----------------
88,124,107
----------------
Broadcasting - 12.5%
1,200,000 Ackerley Group Inc., Sr. Sub Notes 9.0% 1/15/2009 1,224,000
6,300,000 Adelphia Communications Corp., Sr. Debentures 11.875% 9/15/2004 6,804,000
1,772,380 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 6/15/2004 274,719
2,542,728 American Telecasting, Inc., Sr. Discount Notes, Series B Zero Coupon 8/15/2005 292,414
3,600,000 Australis Holdings Pty., Ltd., Sr. Discount Notes Zero Coupon 11/1/2002 189,000
24,594,230 Australis Media, Ltd., Sr. Discount Notes, Payment-In-Kind Zero Coupon 5/15/2003 368,913
12,400,000 Avalon Cable Holdings, LLP, Sr. Discount Notes Zero Coupon 12/1/2008 6,959,500
1,800,000 Avalon Cable of Michigan, Sr. Sub Notes 9.375% 12/1/2009 1,849,500
2,700,000 Chancellor Media Corp., Sr. Notes 8.0% 11/1/2008 2,774,250
3,600,000 Chancellor Media Corp., Sr. Subordinated Notes 8.125% 12/15/2007 3,609,000
2,400,000 Chancellor Media Corp., Sr. Subordinated Notes 9.0% 10/1/2008 2,544,000
1,200,000 Citadel Broadcasting, Co., Sr. Subordinated Notes 9.25% 11/15/2008 1,257,000
2,600,000 Classic Cable, Inc., Sr. Subordinated Notes 9.875% 8/1/2008 2,717,000
4,800,000 Classic Communications, Inc., Units Zero Coupon 8/1/2009 2,928,000
6,000,000 CS Wireless Systems, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2006 1,110,000
3,000,000 CSC Holdings, Inc., Sr. Notes 7.875% 12/15/2007 3,124,800
3,000,000 Cumulus Media, Inc., Sr. Subordinated Notes 10.375% 7/1/2008 3,195,000
1,850,000 Diamond Cable Communications plc, Sr. Discount Notes Zero Coupon 9/30/2004 1,831,500
6,000,000 Diamond Cable Communications plc, Sr. Discount Notes Zero Coupon 12/15/2005 4,995,000
12,000,000 DIVA Systems Corp. Zero Coupon 3/1/2008 4,530,000
1,200,000 EchoStar Communications Corp., Sr. Discount Notes Zero Coupon 6/1/2004 1,236,000
2,400,000 EchoStar DBS Corp., Sr. Secured Notes 12.5% 7/1/2002 2,772,000
4,800,000 EchoStar Satellite Broadcasting Corp., Sr. Secured
Discount Notes Zero Coupon 3/15/2004 4,812,000
6,450,000 Falcon Holding Group, L.P., Series B Debentures Zero Coupon 4/15/2010 4,450,500
1,500,000 Frontiervision Holdings, Sr. Discount Notes Zero Coupon 9/15/2007 1,261,875
8,400,000 Grupo Televisa S.A., Sr. Notes 11.875% 5/15/2006 8,400,000
3,000,000 Grupo Televisa S.A., Sr. Notes, Series A 11.375% 5/15/2003 2,970,000
15,105,000 Intermedia Capital Partners, Sr. Notes 11.25% 8/1/2006 17,068,650
6,900,000 International CableTel, Inc., Sr. Notes, Series A Zero Coupon 4/15/2005 6,279,000
7,300,000 Jacor Communications, Inc., Convertible Preferred Zero Coupon 2/9/2018 3,531,375
3,240,000 Jones Intercable, Inc., Sr. Notes 9.625% 3/15/2002 3,499,200
3,600,000 Marcus Cable Operating Co., Sr. Subordinated Guaranteed
Discount Notes Zero Coupon 8/1/2004 3,645,000
4,200,000 NTL, Inc., Sr. Notes, Series B 10.0% 2/15/2007 4,326,000
4,000,000 NTL, Inc., Convertible Subordinated Notes 7.0% 12/15/2008 4,330,000
6,000,000 Olympus Communications, L.P., Sr. Notes 10.625% 11/15/2006 6,630,000
7,050,000 Rogers Cablesystems, Ltd., Sr. Secured Second Priority Notes 9.625% 8/1/2002 7,649,250
3,000,000 Rogers Cantel, Inc., Debentures 9.375% 6/1/2008 3,180,000
886,310 Scott Cable Communications, Inc., Jr. Subordinated Notes,
Payment-In-Kind 16.0% 7/18/2002 358,956
5,525,000 SFX Broadcasting, Inc., Sr. Subordinated Notes, Series B 10.75% 5/15/2006 6,077,500
6,000,000 Sinclair Broadcast Group, Inc., Sr. Subordinated Notes 9.0% 7/15/2007 6,150,000
8,000,000 Supercanal Holding S.A.., Sr. Notes 11.5% 5/15/2005 4,840,000
4,600,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series B Zero Coupon 5/15/2006 2,415,000
1,800,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series D Zero Coupon 5/15/2006 945,000
10,800,000 United International Holdings, Inc., Sr. Notes, Series B Zero Coupon 2/15/2008 5,886,000
4,900,000 Wireless One, Inc., Sr. Notes 13.0% 10/15/2003 759,500
7,850,000 Young Broadcasting Inc., Sr. Subordinated Notes 11.75% 11/15/2004 8,458,375
----------------
174,508,777
----------------
Building Products & Materials - 1.3%
4,200,000 American Standard Companies, Inc., Notes 7.375% 4/15/2005 4,252,907
6,600,000 American Standard Companies, Inc., Sr. Notes 7.375% 2/1/2008 6,633,000
6,000,000 CEMEX S.A. de C.V., Notes 12.75% 7/15/2006 6,660,000
----------------
17,545,907
----------------
Chemicals - 0.5%
6,450,000 Huntsman Polymers Corp., Sr. Notes 11.75% 12/1/2004 7,030,500
----------------
Computers & Office Equipment - 1.6%
5,500,000 Dictaphone Corp., Sr. Subordinated Notes 11.75% 8/1/2005 4,152,500
4,200,000 MCMS, Inc., Subordinated Notes, Series B (Variable rate) Zero Coupon 3/1/2008 3,549,000
2,600,000 Samsung Electronics America, Notes 9.75% 5/1/2003 2,509,000
1,000,000 Samsung Electronics Co., Notes 7.45% 10/1/2002 884,440
3,600,000 Unisys Corp., Sr. Notes 12.0% 4/15/2003 4,050,000
6,000,000 Unisys Corp., Sr. Notes 11.75% 10/15/2004 6,990,000
----------------
22,134,940
----------------
Conglomerates - 0.3%
4,250,000 Eagle-Picher, Inc., Sr. Subordinated Notes 9.375% 3/1/2008 4,016,250
----------------
Construction & Home Building - 1.8%
6,000,000 M.D.C. Holdings, Inc., Sr. Notes 8.375% 2/1/2008 5,910,000
4,000,000 Mastec, Inc., Sr. Subordinated Notes, Series B 7.75% 2/1/2008 3,880,000
9,600,000 Peters (J.M.) Co., Inc., Sr. Notes 12.75% 5/1/2002 9,648,000
5,400,000 The Fortress Group, Inc., Sr. Notes 13.75% 5/15/2003 5,697,000
----------------
25,135,000
----------------
Containers & Packaging - 1.9%
6,000,000 Dimac Corp., Sr. Sub Notes 12.5% 10/1/2008 6,030,000
2,000,000 Fonda Group, Inc., Sr. Subordinated Notes, Series B 9.5% 3/1/2007 1,670,000
3,600,000 Graham Packaging Co.,Sr. Subordinated Notes (Variable rate) Zero Coupon 1/15/2008 3,546,000
4,750,000 Radnor Holdings Corp., Sr. Notes 10.0% 12/1/2003 4,797,500
6,250,000 SF Holdings Group, Inc., Sr. Discount Notes, Series B Zero Coupon 3/15/2008 2,218,750
2,866,000 Silgan Holdings, Inc., Subordinated Debentures,
Payment-In-Kind 13.25% 7/15/2006 3,224,250
5,900,000 Vicap, S.A. de C.V., Guaranteed Sr. Notes ADR 11.375% 5/15/2007 5,221,500
----------------
26,708,000
----------------
Cosmetics & Toiletries - 0.4%
4,000,000 Revlon Consumer Products Corp., Sr. Subordinated Notes 8.625% 2/1/2008 3,660,000
1,800,000 Revlon Consumer Products Corp., Sr. Notes 8.125% 2/1/2006 1,737,000
----------------
5,397,000
----------------
Drugs & Health Care - 1.7%
1,800,000 Biovail Corp. International, Sr. Notes 10.875% 11/15/2005 1,818,000
8,400,000 Dade International, Inc., Sr. Subordinated Notes, Series B 11.125% 5/1/2006 9,366,000
5,500,000 Global Health Sciences, Inc., Sr. Notes 11.0% 5/1/2008 3,657,500
4,800,000 ICN Pharmaceuticals, Inc., Sr. Notes 8.75% 11/15/2008 4,872,000
4,200,000 Total Renal Care Holdings, Inc., Convertible
Subordinated Notes 7.0% 5/15/2009 4,541,250
----------------
24,254,750
----------------
Electric Utilities - 2.8%
2,400,000 AES Corp., Sr. Subordinated Notes 8.5% 11/1/2007 2,442,000
3,000,000 CMS Energy Corp., Sr. Notes 7.625% 11/15/2004 3,048,897
6,000,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 6,156,738
4,200,000 CMS Energy Corp., Sr. Unsecured Notes 7.0% 1/15/2005 4,058,288
3,600,000 El Paso Electric Co., First Mortgage Bonds, Series D 8.9% 2/1/2006 4,113,000
4,800,000 ESI Tractebel Acquisition Corp., Bonds 7.99% 12/30/2011 4,739,098
3,550,000 Midland Cogen Venture Fund II, Secured Lease Obligation
Bonds, Series A 11.75% 7/23/2005 4,182,436
4,450,000 Midland Cogen Venture Fund II, Subordinated Secured
Lease Obligation Bonds 13.25% 7/23/2006 5,552,772
2,400,000 Niagara Mohawk Power Corp., Sr. E Notes 7.375% 7/1/2003 2,469,310
3,600,000 Niagara Mohawk Power Corp., Sr. H Discount Notes Zero Coupon 7/1/2010 2,805,797
----------------
39,568,336
----------------
Electrical Equipment - 1.1%
5,000,000 Fisher Scientific International, Inc.,
Sr. Subordinated Notes 9.0% 2/1/2008 5,025,000
3,000,000 Jordan Telecommunication Products, Sr. Notes, Series B 9.875% 8/1/2007 2,985,000
4,200,000 Protection One Alarm Monitoring, Inc., Convertible
Sr. Subordinated Notes 6.75% 9/15/2003 4,310,250
3,120,000 Protection One Alarm Monitoring, Inc., Sr. Subordinated
Discount Notes 13.625% 6/30/2005 3,572,400
----------------
15,892,650
----------------
Food & Beverage - 2.7%
4,800,000 Ameriserve Food Distribution, Inc., Sr. Notes 8.875% 10/15/2006 4,464,000
4,200,000 Cott Corp., Sr. Notes 8.5% 5/1/2007 3,759,000
10,000,000 Grupo Azucarero Mexico S.A. DE C, Sr. Notes ADR 11.5% 1/15/2005 3,525,000
7,300,000 Imperial Holly Corp., Sr. Subordinated Notes 9.75% 12/15/2007 7,263,500
4,800,000 Packaged Ice, Inc., Sr. Notes, Series B 9.75% 2/1/2005 4,824,000
6,000,000 Smithfield Foods, Inc., Sr. Subordinated Notes 7.625% 2/15/2008 6,060,000
3,000,000 Southern Foods Group, L.P., Sr. Subordinated Notes 9.875% 9/1/2007 3,150,000
5,000,000 Sun World International, First Mortgage Notes, Series B 11.25% 4/15/2004 5,325,000
----------------
38,370,500
----------------
Hospital Management - 2.7%
6,500,000 Health Insurance Plan, Bonds, Series C 11.25% 7/1/2010 6,953,557
5,100,000 Healthsouth Rehab Corp., Sr. Subordinated Notes 9.5% 4/1/2001 5,233,875
3,500,000 Integrated Health Services, Inc., Convertible Sr.
Subordinated Debentures 5.75% 1/1/2001 3,115,000
3,000,000 Integrated Health Svcs, Inc., Sr. Subordinated Notes,
Series A 9.25% 1/15/2008 2,820,000
8,000,000 MedPartners, Inc., Sr. Notes 7.375% 10/1/2006 6,440,000
4,500,000 MedPartners, Inc., Sr. Subordinated Notes 6.875% 9/1/2000 3,982,500
4,200,000 PhyMatrix Corp., Convertible Subordinated Debentures 6.75% 6/15/2003 1,979,250
3,000,000 Tenet Healthcare Corp., Sr. Notes 7.625% 6/1/2008 3,131,826
4,000,000 Tenet Healthcare Corp., Sr. Subordinated Notes 8.125% 12/1/2008 4,120,000
----------------
37,776,008
----------------
Household Products - 0.9%
3,000,000 AM Holdings, Inc., Sr. Discount Notes Zero Coupon 7/1/2009 1,365,000
7,800,000 BPC Holding Corp., Sr. Secured Notes, Series B 12.5% 6/15/2006 8,151,000
3,000,000 Moll Industries, Inc., Sr. Subordinated Notes 10.5% 7/1/2008 2,955,000
----------------
12,471,000
----------------
Leisure & Entertainment - 3.4%
7,471,000 AMF Bowling Worldwide, Inc., Sr. Subordinated
Discount Notes, Series B Zero Coupon 3/15/2006 4,295,825
9,000,000 CapStar Hotel Company, Convertible Subordinated Notes 4.75% 10/15/2004 6,536,250
7,500,000 Discovery Zone, Inc., Sr. Notes 13.5% 8/1/2002 1,912,500
1,875,000 Discovery Zone, Inc., Units 13.5% 5/1/2005 1,884,375
2,200,000 HMH Properties, Inc., Sr. Notes, Series A 7.875% 8/1/2005 2,156,000
2,400,000 HMH Properties, Inc., Sr. Notes, Series B 7.875% 8/1/2008 2,328,000
4,000,000 HMH Properties, Inc., Sr. Notes, Series C 8.45% 12/1/2008 4,020,000
1,200,000 Imax Corp., Sr. Notes 7.875% 12/1/2005 1,218,000
5,400,000 Lodgenet Entertainment Corp., Sr. Notes 10.25% 12/15/2006 5,373,000
8,000,000 Premier Cruise Ltd., Sr. Notes 11.0% 3/15/2008 4,040,000
6,000,000 Production Resource Group LLC, Sr. Subordinated Notes 11.5% 1/15/2008 5,910,000
3,600,000 SFX Entertainment, Inc., Sr. Subordinated Notes 9.125% 12/1/2008 3,622,500
1,800,000 Signature Resorts, Inc., Sr. Subordinated Notes 9.75% 10/1/2007 1,539,000
3,000,000 Silverleaf Resorts, Inc., Sr. Subordinated Notes 10.5% 4/1/2008 2,587,500
----------------
47,422,950
----------------
Machinery & Equipment - 2.0%
6,000,000 Anthony Crane Rentals, L.P., Sr. Discount Notes Zero Coupon 8/1/2009 2,670,000
2,400,000 Motors & Gears, Inc., Sr. Notes, Series D 10.75% 11/15/2006 2,454,000
7,200,000 Navistar Financial Corp., Sr. Subordinated Notes, Series B 9.0% 6/1/2002 7,506,000
5,400,000 Navistar International Corp., Sr. Notes, Series B 7.0% 2/1/2003 5,454,000
3,000,000 Scotsman Group, Inc., Sr. Subordinated Notes 8.625% 12/15/2007 3,090,000
6,000,000 United Rentals, Inc., Sr. Subordinated Notes 9.25% 1/15/2009 6,045,000
----------------
27,219,000
----------------
Mining & Metals - 1.1%
6,500,000 AK Steel Corp., Sr. Notes 10.75% 4/1/2004 6,792,500
4,850,000 Altos Hornos de Mexico, Bonds, Series B 11.875% 4/30/2004 2,825,125
6,000,000 UCAR Global Enterprises, Inc., Sr. Subordinated Notes,
Series B 12.0% 1/15/2005 6,330,000
----------------
15,947,625
----------------
Oil & Gas - 3.2%
4,800,000 Abraxas Petroleum Corp., Sr. Notes, Series B 11.5% 11/1/2004 3,648,000
6,200,000 Belden & Blake Corp., Sr. Subordinated Notes, Series B 9.875% 6/15/2007 5,053,000
4,500,000 Conproca S.A. de C.V., Sr. Secured Bonds 12.0% 6/16/2010 4,196,250
4,050,000 Dailey International Inc., Sr. Notes, Series B 9.5% 2/15/2008 1,802,250
7,165,000 Gulf Canada Resources Ltd., Sr. Subordinated Debentures 9.625% 7/1/2005 7,182,913
9,000,000 National Energy Group, Inc., Sr. Notes, Series D 10.75% 11/1/2006 3,375,000(d)
5,500,000 Northern Offshore ASA, Sr. Notes 10.0% 5/15/2005 2,887,500
5,100,000 Pride Petroleum Services, Inc., Sr. Notes 9.375% 5/1/2007 4,768,500
4,500,000 RAM Energy, Inc., Sr. Notes 11.5% 2/15/2008 3,172,500
3,600,000 Snyder Oil Corp., Sr. Subordinated Notes 8.75% 6/15/2007 3,510,000
6,150,000 Trico Marine Services, Inc., Sr. Unsecured Notes, Series G 8.5% 8/1/2005 5,319,750
----------------
44,915,663
----------------
Paper & Forest Products - 1.5%
3,600,000 APP Finance (II) Mauritius Ltd., Guaranteed Preferred
Securities, Series B 12.0% 2/15/2004 2,061,000
3,000,000 FSW International Finance Co. B.V., Guaranteed Secured Notes 12.5% 11/1/2006 577,500(d)
1,800,000 Indah Kiat Finance Mauritius, Guaranteed Sr. Notes 10.0% 7/1/2007 976,500
7,800,000 Malette, Inc., Sr. Secured Notes 12.25% 7/15/2004 8,463,000
3,600,000 Pindo Deli Finance Mauritius, Sr. Notes 10.25% 10/1/2002 2,025,000
6,600,000 S.D. Warren Co. Sr. Subordinated Notes 12.0% 12/15/2004 7,218,750
----------------
21,321,750
----------------
Pollution Control - 0.9%
7,000,000 Allied Waste, North America, Sr. Notes 7.625% 1/1/2006 7,070,000
5,500,000 Norcal Waste Systems, Inc., Sr. Notes, Series B 13.5% 11/15/2005 6,077,500
----------------
13,147,500
----------------
Publishing & Printing - 1.3%
4,500,000 K-III Communications Corp., Sr. Notes 10.25% 6/1/2004 4,747,500
7,500,000 MDC Communications Corp., Sr. Subordinated Notes 10.5% 12/1/2006 7,687,500
5,850,000 Sullivan Graphics, Inc., Sr. Subordinated Notes 12.75% 8/1/2005 6,054,750
----------------
18,489,750
----------------
Retail - 1.2%
3,000,000 County Seat Stores, Inc., Units 12.75% 11/1/2004 2,100,000(d)
2,750,000 F & M Distributors, Inc., Sr. Subordinated Notes 11.5% 4/15/2003 34,375(d)
5,400,000 Hollywood Entertainment Corp., Sr. Subordinated Notes,
Series B 10.625% 8/15/2004 5,481,000
6,000,000 Lifestyle Furnishings International Ltd.,
Sr. Subordinated Notes 10.875% 8/1/2006 6,660,000
3,000,000 TravelCenters of America, Inc., Sr. Subordinated Notes 10.25% 4/1/2007 2,985,000
----------------
17,260,375
----------------
Retail - Food - 2.1%
6,210,000 Carr Gottstein Foods Co., Sr. Subordinated Notes 12.0% 11/15/05 7,157,025
5,100,000 Fleming Companies, Inc., Sr. Subordinated Notes, Series B 10.625% 7/31/2007 4,781,250
8,500,000 Jitney-Jungle Stores of America, Sr. Notes 12.0% 3/1/2006 9,520,000
7,600,000 Smith's Food & Drug Centers, Pass Through Certificates 8.64% 7/2/2012 8,017,962
----------------
29,476,237
----------------
Services - 0.6%
8,000,000 KinderCare Learning Centers, Inc., Sr. Subordinated Notes 9.5% 2/15/2009 8,000,000
----------------
Telecommunications - 23.4%
5,000,000 Advanced Radio Telecom, Sr. Notes 14.0% 2/15/2007 4,025,000
10,200,000 Allegiance Telecom, Inc., Sr. Discount Notes, Series B Zero Coupon 2/15/2008 4,947,000
6,500,000 American Mobile Satellite Corp., Sr. Notes, Series B 12.25% 4/1/2008 4,062,500
3,000,000 Birch Telecom, Inc., Units 14.0% 6/15/2008 2,782,500
3,300,000 Call-Net Enterprises, Inc., Sr. Discount Notes Zero Coupon 12/1/2004 3,217,500
4,900,000 CenCall Communications Corp., Sr. Redeemable Discount Notes Zero Coupon 1/15/2004 4,826,500
6,000,000 Centennial Cellular Operating Co., Sr. Subordinated Notes 10.75% 12/15/2008 6,000,000
6,000,000 Clearnet Communications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 5,160,000
5,400,000 Comcast Cellular Holdings, Inc., Sr. Notes 9.5% 5/1/2007 5,751,000
7,500,000 Covad Communications Group, Inc., Sr. Discount Notes,
Series B Zero Coupon 3/15/2008 4,162,500
7,500,000 Dobson Wireline Co., Sr. Notes 12.25% 6/15/2008 6,975,000
3,000,000 Dobson/Sygnet Communications Corp., Sr. Notes 12.25% 12/15/2008 3,067,500
3,500,000 Dolphin Telecom plc, Sr. Discount Notes Zero Coupon 6/1/2008 1,417,500
5,000,000 DTI Holdings, Inc., Discount Notes, Series B Zero Coupon 3/1/2008 1,325,000
4,800,000 Esprit Telecom Group, plc, Sr. Notes 11.5% 12/15/2007 4,968,000
4,350,000 Exodus Communications, Inc., Sr. Notes 11.25% 7/1/2008 4,371,750
4,800,000 E.Spire Communications, Sr. Notes 13.75% 7/15/2007 4,500,000
6,700,000 GST Equipment Funding, Inc., Sr. Secured Notes 13.25% 5/1/2007 7,001,500
10,000,000 GST Telecommunications, Inc., Sr. Discount Notes Zero Coupon 5/1/2008 4,350,000
5,445,000 GST Telecommunications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 4,321,969
1,000,000 GST USA, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 722,500
4,250,000 Hermes Europe Railtel B.V., Sr. Notes 11.5% 8/15/2007 4,526,250
4,000,000 HighwayMaster Communications, Inc., Sr. Notes, Series B 13.75% 9/15/2005 1,300,000
1,800,000 Hyperion Telecommunications, Inc., Sr. Notes, Series B 12.25% 9/1/2004 1,836,000
5,600,000 Hyperion Telecommunications, Inc., Sr. Discount Notes,
Series B Zero Coupon 4/15/2003 4,032,000
5,500,000 ICG Holdings, Inc., Sr. Discount Notes Zero Coupon 5/1/2006 4,125,000
4,200,000 ICO Global Communications, Units 15.0% 5/1/2005 3,150,000
3,700,000 IDT Corp., Sr. Notes 8.75% 2/15/2006 3,533,500
4,900,000 Intermedia Communications Inc., Sr. Notes, Series B 8.5% 1/15/2008 4,679,500
1,800,000 Intermedia Communications, Inc., Sr. Notes 8.6% 6/1/2008 1,719,000
4,200,000 Ionica plc, Sr. Notes 13.5% 8/15/2006 1,533,000
4,200,000 Iridium LLC/Capital Corp., Sr. Notes, Series A 13.0% 7/15/2005 3,864,000
4,850,000 Iridium LLC/Capital Corp., Sr. Notes, Series B 14.0% 7/15/2005 4,631,750
1,200,000 Iridium LLC/Capital Corp., Sr. Notes, Series C 11.25% 7/15/2005 1,038,000
13,200,000 Level 3 Communications, Inc., Sr. Discount Notes Zero Coupon 12/1/2008 7,755,000
10,100,000 McCaw International Ltd., Sr. Discount Notes Zero Coupon 4/15/2007 5,529,750
3,500,000 Metrocall, Inc. Sr. Subordinated Notes 11.0% 9/15/2008 3,535,000
4,200,000 Metromedia Fiber Network, Inc., Sr. Notes 10.0% 11/15/2008 4,336,500
1,200,000 MetroNet Communications Corp., Sr. Notes 10.625% 11/1/2008 1,278,000
3,000,000 MetroNet Communications Corp.,Sr. Discount Notes Zero Coupon 6/15/2008 1,852,500
7,000,000 MGC Communications, Inc., Sr. Notes, Series B 13.0% 10/1/2004 4,690,000
7,800,000 Microcell Telecommunications, Inc., Sr. Discount Notes Zero Coupon 6/1/2006 5,830,500
13,500,000 Millicom International Cellular, Sr. Discount Notes Zero Coupon 6/1/2006 9,618,750
6,000,000 MJD Communications, Inc., Notes, Series B 9.16% 5/1/2008 5,850,000
6,000,000 Mobile Telecommunications Technology, Sr. Notes 13.5% 2/15/2002 6,825,000
5,000,000 Netia Holdings B.V., Sr. Discount B Notes Zero Coupon 11/1/2007 2,862,500
3,000,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 10/31/2007 1,830,000
2,450,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 2/15/2008 1,463,875
4,900,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 9/15/2007 3,148,250
3,000,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 8/15/2004 2,925,000
4,800,000 NEXTLINK Communications LLC, Sr. Discount Notes 12.5% 4/15/2006 5,208,000
1,200,000 NEXTLINK Communications, Inc., Sr. Notes 9.625% 10/1/2007 1,152,000
1,200,000 NEXTLINK Communications, Inc., Sr. Notes 10.75% 11/15/2008 1,227,000
2,400,000 Northeast Optic Network, Inc., Sr. Notes 12.75% 8/15/2008 2,364,000
6,000,000 OnePoint Communications Corp., Sr. Notes 14.5% 6/1/2008 3,210,000
9,000,000 Orion Network Systems, Inc., Sr. Discount Notes Zero Coupon 1/15/2007 5,670,000
13,000,000 Orion Network Systems, Inc., Sr. Notes 11.25% 1/15/2007 12,805,000
8,200,000 PageMart Nationwide, Inc., Sr. Discount Exchange Notes Zero Coupon 2/1/2005 7,298,000
7,200,000 Pagemart Wireless, Inc., Sr. Discount Notes Zero Coupon 2/1/2008 3,348,000
4,200,000 Pathnet, Inc., Sr. Notes 12.25% 4/15/2000 2,961,000
4,200,000 Phonetel Technologies, Inc., Sr. Notes 12.0% 12/15/2006 1,554,000(d)
5,000,000 Poland Telecom Finance BV, Sr. B Notes 14.0% 12/1/2007 4,575,000
1,800,000 Price Communication Cellular, Sr. Notes (Payment-In-Kind) 11.25% 8/15/2008 1,710,000
3,050,000 Price Communications Wireless, Sr. Subordinated Notes 11.75% 7/15/2007 3,233,000
5,400,000 Primus Telecommunications Group, Inc., Sr. Notes 11.75% 8/1/2004 5,643,000
6,755,000 RSL Communications plc, Units 12.25% 11/15/2006 7,194,075
1,800,000 RSL Communications plc, Bonds 12.0% 11/1/2008 1,863,000
4,200,000 Splitrock Services, Inc., Notes, Series B 11.75% 7/15/2008 3,654,000
3,000,000 Startec Global Communications, Inc., Sr. Notes 12.0% 5/15/2008 2,595,000
2,100,000 Telegroup, Inc., Sr. Discount Notes Zero Coupon 11/1/2004 976,500
7,000,000 Teligent, Inc., Sr. Notes, Series B 14.0% 8/1/2007 3,990,000
4,800,000 Teligent, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2008 2,400,000
4,800,000 Teligent, Inc., Sr. Notes 11.5% 12/1/2007 4,512,000
9,000,000 UNIFI Communications, Inc., Sr. Notes 14.0% 3/1/2004 675,000
4,900,000 USA Mobile Communications, Inc., Sr. Notes 14.0% 11/1/2004 5,071,500
10,527,000 USN Communications, Inc., Sr. Discount Notes, Series B Zero Coupon 8/15/2004 684,255
7,000,000 Verio, Inc., Sr. Notes 11.25% 12/1/2008 7,070,000
4,200,000 VersaTel Telecom B.V., Units 13.25% 5/15/2008 4,284,000
5,500,000 VIALOG Corp., Sr. Notes 12.75% 11/15/2001 3,492,500
5,000,000 Viatel, Inc., Sr. Discount Notes Zero Coupon 4/15/2008 2,975,000
7,000,000 Wam!Net, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2005 3,850,000
3,300,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/2005 2,359,500
2,000,000 WinStar Communications, Inc., Sr. Subordinated Notes 15.0% 3/1/2007 1,870,000
3,000,000 WinStar Communications, Inc., Sr. Unsecured Notes Zero Coupon 10/15/2005 3,345,000
4,000,000 Worldwide Fiber, Inc., Sr. Notes 12.5% 12/15/2005 4,060,000
----------------
326,133,174
----------------
Textiles & Apparel - 1.5%
4,500,000 Brazos Sportswear, Inc., Sr. Notes 10.5% 7/1/2007 607,500(d)
6,050,000 CMI Industries, Inc., Sr. Subordinated Notes 9.5% 10/1/2003 5,989,500
8,700,000 Dan River, Inc., Sr. Subordinated Notes 10.125% 12/15/2003 9,156,750
1,800,000 Norton McNaughton, Inc., Sr. Notes 12.5% 6/1/2005 1,539,000
4,000,000 WestPoint Stevens, Inc., Sr. Notes 7.875% 6/15/2008 4,085,000
----------------
21,377,750
----------------
Transportation - 1.8%
7,300,000 Allied Holdings, Inc., Sr. Notes, Series B 8.625% 10/1/2007 7,446,000
6,000,000 Alpha Shipping, PLC, Sr. Notes, Series A 9.5% 2/15/2008 1,740,000
3,000,000 Cenargo International plc, First Mortgage 9.75% 6/15/2008 2,891,250
5,400,000 Equimar Shipholdings Ltd., First Priority Mtg 9.875% 7/1/2007 4,293,000
4,200,000 PanOceanic Bulk Carriers, Ltd., 1st Preferred
Ship Mortgage Notes 12.0% 12/15/2007 3,171,000
7,200,000 Windsor Petroleum, Notes 7.84% 1/15/2021 5,400,000
----------------
24,941,250
----------------
Total Corporate Bonds (cost $1,318,516,274) $1,190,310,354
----------------
</TABLE>
<TABLE>
<CAPTION>
Shares Value
- -------------- ----------------
<S> <C>
PREFERRED STOCKS - 9.7% (a)
Convertible - 2.0%
60,000 CalEnergy Capital Trust III, Convertible Preferred Stock $ 2,910,000
69,000 Chesapeake Energy Corp., Convertible Preferred Stock 707,250
60,000 Echostar Communications Corp., Preferred Stock, Series C 5,910,000
140,000 Granite Broadcasting Corp., Convertible Preferred Stock 4,760,000
90,000 Host Marriott Financial Trust, Convertible Preferred Stock 3,645,000
50,000 Intermedia Communication, Convertible Preferred Stock 912,500
60,000 Owens - Illinois, Inc., Convertible Preferred Stock 2,550,000
45,500 Sinclair Broadcast Group, Inc., Convertible Preferred Stock 2,269,313
54,000 TIMET Capital Trust I, Convertible Preferred Stock 1,437,750
83,800 Treev, Inc., Convertible Preferred Stock, Series A 618,025
90,000 USX Corp. (Marathon Group), Convertible Preferred Stock 1,271,250
2,642 Viatel, Inc., Payment-In-Kind Convertible Preferred Stock 291,281
----------------
27,282,369
----------------
Non-Convertible - 7.7%
25,528 Century Maintenance Supply, Inc., Payment-In-Kind, Preferred Stock 2,629,384
105,000 Chevy Chase Capital Corp., Noncumulative Exchangeable Preferred Stock, Series A 5,505,938
30,000 Cluett American Corp., Preferred Stock 2,677,500
53,150 Communications & Power Industries, Inc., Preferred Stock, Series B 5,740,200
62,832 CSC Holdings, Inc., Payment-In-Kind, Preferred Stock 7,241,388
31,711 CSC Holdings, Inc., Preferred Stock 3,543,704
1,283 Cumulus Media Inc., Preferred Stock, Series A 1,385,640
2,434 EchoStar Communications Corp., Payment-in-Kind, Series B Preferred Stock 2,814,313
60,000 Global Crossing Holdings, Ltd., Payment-In-Kind, Preferred Stock 5,895,000
396,146 Harvard Industries, Inc., Exchangeable Payment-In-Kind Preferred Stock 396,146(d)
8,652 ICG Holdings, Inc., Preferred Stock 8,825,040
3,700 Intermedia Communications, Inc., Preferred Stock 3,741,625
4,694 IXC Communications, Inc., Preferred Stock 4,740,940
1,800 J Crew Group, Preferred Stock 1,260,000
24,000 Jitney-Jungle Stores of America, Sr. Exchangeable Preferred Stock, Class A 3,216,000
136,164 Nebco Evans Holdings Co., Payment-In-Kind, Preferred Stock 6,842,241
4,945 Nextel Communications, Inc., Payment-In-Kind Preferred Stock, Series E 4,409,704
118,231 NEXTLINK Communications, Inc., Payment-In-Kind Preferred Stock 6,295,801
6,556 Paxson Communications Corp., Payment-In-Kind Preferred Stock 5,933,180
20,240 Petroleum Heat & Power Co., Inc., Jr. Preferred Stock 30,360
240,000 Petroleum Heat & Power, Inc., Preferred Stock, Series C 5,100,000
42,500 Primedia, Inc., Exchangeable Preferred Stock, Series H 4,101,250
33,000 Primedia, Inc., Preferred Stock, Series F 3,250,500
46,000 Primedia, Inc., Preferred Stock, Series D 4,807,000
147,500 River Bank Asset, Inc., Preferred Stock, Series A 2,599,688(c)
25,232 SFX Broadcasting, Inc., Payment-In-Kind Preferred Stock, Series E 3,053,072
1,700 WinStar Communications, Inc., Payment-In-Kind Preferred Stock, Series C 1,224,000
----------------
107,259,614
----------------
Total Preferred Stocks (cost $153,893,686) 134,541,983
----------------
COMMON STOCKS & STOCK WARRANTS - 3.1% (a, c)
10,200 Allegiance Telecom, Inc., Stock Warrants 52,275
6,500 American Mobile Satellite Corp., Stock Warrants 21,314
3,600 American Telecasting, Inc., Stock Warrants 36
34,000 American Telecasting, Inc., Stock Warrants 340
175,000 Arch Communications Group, Inc., Common Stock 251,563
3,600 Australis Holdings Pty., Ltd., Stock Warrants 36(e)
17,150 Australis Media Ltd., Stock Warrants 172(e)
100,000 Bell & Howell Co., Common Stock 3,781,250
35,475 Clearnet Communications, Inc., Stock Warrants 84,221
2,310 Communications & Power Industries, Inc., Common Stock 347,655(e)
10,989 Consolidated Hydro, Inc., Stock Warrants, Class B 2,747(e)
7,133 Consolidated Hydro, Inc., Stock Warrants, Class C 3,567(e)
7,500 Covad Communications Group, Inc., Stock Warrants 375,000
3,267 CS Wireless Systems, Inc., Common Stock 441(e)
7,500 Discovery Zone, Inc., Stock Warrants 8(e)
36,000 DIVA Systems Corp., Common Stock 576,000
25,000 DTI Holdings, Inc., Stock Warrants 4,375
16,800 E.Spire Communications, Stock Warrants 405,485
101,377 Gaylord Container Corp., Common Stock, Class A 620,934
127,902 Gaylord Container Corp., Stock Warrants 775,406
4,000 HighwayMaster Communications, Inc., Stock Warrants 1,740
13,800 Hyperion Telecommunications, Inc., Stock Warrants 848,079
140,000 IntelCom Group Communications, Inc., Common Stock 3,010,000
68,300 IntelCom Group (U.S.A.), Inc., Stock Warrants 936,092
5,900 Intermedia Communications of Florida, Stock Warrants 252,166
3,679 Intermedia Communications, Inc., Common Stock 63,463
14,800 Ionica plc, Stock Warrants 148
3,000 Iridium World Communications, Stock Warrants 375,375
95,000 Magellan Health Services, Inc., Common Stock 795,625
10,900 McCaw International Ltd., Stock Warrants 55,863
235,000 MCI Worldcom, Inc., Common Stock 16,861,250
4,850 MGC Communications, Inc., Stock Warrants 149,574
40,800 Microcell Telecommunications, Inc., Stock Warrants 739,500
3,750 NEXTEL Communications, Inc., Stock Warrants 0
6,000 OnePoint Communications Corp., Stock Warrants 60,000
33,250 PageMart Nationwide, Inc., Common Stock 149,625
168,000 PageMart Wireless, Inc., Common Stock, Class A 934,500
4,200 Pathnet, Inc., Stock Warrants 42,525
5,000 Poland Telecom Finance BV, Stock Warrants 280,000
120,000 Powertel, Inc., Common Stock 1,627,500
4,800 Primus Telecommunications Group, Inc., Stock Warrants 60,600
23,840 Protection One Alarm Monitoring, Stock Warrants 235,420
9,000 RSL Communications, Ltd., Stock Warrants 991,125
12,500 SF Holdings Group, Inc., Common Stock 25,000
4,200 Splitrock Services, Inc., Stock Warrants 46,200
3,000 Startec Global Communications, Inc., Stock Warrants 30,000
7,000 Teletrac Holdings, Inc., Stock Warrants 0
4,469 TREEV, Inc., Common Stock 7,402
7,400 UIH Australia/Pacific, Inc., Stock Warrants 8,325
9,000 UNIFI Communications, Inc., Stock Warrants 1,215(e)
118,000 United International Holdings, Inc., Common Stock, Class A 2,271,500
27,000 United International Holdings, Inc., Stock Warrants 408,375
66,000 USN Communications, Inc., Stock Warrants 37,950(e)
3,400 Vialog Corp., Stock Warrants 17,000
175,000 Viatel, Inc., Common Stock 4,003,125
22,200 Wam!Net, Inc., Stock Warrants 177,600
36,654 Wherehouse Entertainment, Inc., Stock Warrants, Class A 261,160
6,363 Wherehouse Entertainment, Inc., Stock Warrants, Class B 23,066
6,363 Wherehouse Entertainment, Inc., Stock Warrants, Class C 7,158
19,200 Wireless One, Inc., Stock Warrants 192
----------------
Total Common Stock & Stock Warrants (cost $30,005,154) 43,098,263
----------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Rate Date Value
- -------------- ------ ------------ ----------------
<S> <C> <C> <C>
SHORT-TERM SECURITIES - 2.0% (a)
Commercial Paper
$ 10,000,000 Associates Corp. of North America 5.08% 1/4/1999 $ 9,995,767
14,900,000 General Electric Capital Corp. 5.0% 1/4/1999 14,893,792
3,000,000 Harvard University 6.1% 1/5/1999 2,997,967
----------------
Total Short-Term Securities (at amortized cost) 27,887,526
----------------
Total Investments (cost $1,530,302,640) $1,395,838,126(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) Denominated in U.S. dollars.
(c) Currently non-income producing.
(d) Currently non-income producing and in default.
(e) Denotes restricted securities. These securities have been valued
from the date of acquisition through December 31, 1998, 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, 1998.
</TABLE>
<TABLE>
<CAPTION>
Acquisition
Security Date Cost
-------------------------------------------------------------------- ------------ ------------------
<S> <C> <C>
Australis Holdings Pty Ltd., Stock Warrants 10/29/1996 $ 0
Australis Media Ltd., Stock Warrants 1/2/1997 0
Communications & Power Industries, Inc., Common Stock 12/22/1995 211,287
Consolidated Hydro, Inc., Stock Warrants, Class B 11/18/1997 1,370,006
Consolidated Hydro, Inc., Stock Warrants, Class C 11/18/1997 691,659
CS Wireless Systems, Inc., Common Stock 12/11/1996 22,110
Discovery Zone, Inc., Stock Warrants 3/12/1998 838,524
UNIFI Communications, Inc., Stock Warrants 8/13/1997 123,449
USN Communications, Inc., Stock Warrants 12/12/1997 560
(f) At December 31, 1998, the aggregate cost of securities for federal tax
purposes was $1,534,781,925 and the net unrealized depreciation of
investments based on that cost was $138,943,799 which is comprised
of $54,858,453 aggregate gross unrealized appreciation and
$193,802,252 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
LB SERIES FUND, INC.
Income Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
Principal Maturity
Amount Rate Date Value
- -------------- --------- ------------- --------------
<S> <C> <C> <C>
CORPORATE BONDS - 52.9% (a)
Aerospace - 1.4%
$ 6,000,000 Lockheed Martin Corp., Notes 7.45% 6/15/2004 $ 6,498,084
3,500,000 Raytheon Co., Notes 6.45% 8/15/2002 3,604,493
4,000,000 Raytheon Co., Notes 6.75% 8/15/2007 4,256,788
1,500,000 United Defense Industries, Inc., Sr. Subordinated Notes 8.75% 11/15/2007 1,526,250
----------------
15,885,615
----------------
Airlines - 0.6%
6,000,000 US Airways, Inc., P-T Certificates, Series 98-1A 6.85% 1/30/2018 6,081,810
----------------
Automotive - 2.2%
6,000,000 Ford Motor Credit Co., Notes 6.13% 4/28/2003 6,105,696
5,000,000 Ford Motor Credit Co., Notes 6.375% 10/6/2000 5,083,180
9,000,000 Toyota Motor Credit Corp., Notes 5.625% 11/13/2003 9,052,947
3,000,000 Toyota Motor Credit Corp., Notes 5.5% 9/17/2001 2,999,949
----------------
23,241,772
----------------
Bank & Finance - 11.8%
3,000,000 Associates Corp. of North America, Sr. Notes 6.5% 8/15/2002 3,100,233
5,000,000 Associates Corp. of North America, Sr. Notes 9.125% 4/1/2000 5,219,640
5,500,000 Banc One Corp., Subordinated Debentures 8.0% 4/29/2027 6,604,923
2,000,000 Chase Manhattan Corp., Subordinated Notes 10.375% 3/15/1999 2,018,038
6,000,000 Chase Manhattan Corp., Subordinated Notes 9.375% 7/1/2001 6,542,196
5,000,000 Chemical New York Corp., Debentures 9.75% 6/15/1999 5,085,860
15,000,000 Equitable Life Assurance Society of the United States,
Surplus Notes 6.95% 12/1/2005 15,887,505
4,500,000 First Union Corp., Subordinated Notes 6.875% 9/15/2005 4,784,508
7,000,000 General Electric Capital Corp., Debentures 8.75% 5/21/2007 8,512,854
6,500,000 General Electric Capital Corp., Debentures 8.85% 4/1/2005 7,659,724
1,500,000 GS Escrow Corp., Sr. Notes 6.75% 8/1/2001 1,479,297
6,000,000 Mellon Capital II, Capital Securities, Series B 7.995% 1/15/2027 6,688,686
8,000,000 Metropolitan Life Insurance Co., Surplus Notes 7.7% 11/1/2015 8,884,864
4,000,000 NationsBank Corp., Sr. Notes 6.125% 7/15/2004 4,105,036
8,000,000 New York Life Insurance Co., Surplus Notes 6.4% 12/15/2003 8,245,928
9,000,000 Prudential Insurance Co. of America, Capital Notes 6.875% 4/15/2003 9,326,223
3,500,000 Prudential Insurance Co., Surplus Notes 8.3% 7/1/2025 4,265,419
4,000,000 Societe Generale Real Estate Investment Trust,
LIBOR Bonds, Series A 7.64% 12/29/2049 3,713,572
6,000,000 Wachovia Corp., Subordinated Notes 5.625% 12/15/2008 5,975,328
6,000,000 Wells Fargo Capital, Capital Trust Preferred Securities 7.73% 12/1/2026 6,572,682
----------------
124,672,516
----------------
Broadcasting - 2.0%
300,000 Clear Channel Communications, Convertible Sr. Notes 2.625% 4/1/2003 321,375
3,000,000 Clear Channel Communications, Sr. Notes 6.625% 6/15/2008 3,045,828
3,000,000 CSC Holdings, Inc., Sr. Notes 7.25% 7/15/2008 3,012,900
6,000,000 Rogers Cablesystems, Ltd., Sr. Secured
Second Priority Notes 9.625% 8/1/2002 6,510,000
3,000,000 TKR Cable I, Inc., Sr. Debentures 10.5% 10/30/2007 3,266,388
5,000,000 Westinghouse Electric Corp., Notes 8.875% 6/1/2001 5,281,700
----------------
21,438,191
----------------
Chemicals - 0.6%
6,000,000 Monsanto Company, Bonds 6.5% 12/1/2018 5,990,268
----------------
Computers & Office Equipment - 0.2%
2,000,000 International Business Machines, Inc., Debentures 6.5% 1/15/2028 2,117,340
850,000 Xerox Corp., Convertible Subordinated Notes 0.57% 4/21/2018 520,625
----------------
2,637,965
----------------
Conglomerates - 1.0%
5,500,000 Dover Corp., Debentures 6.65% 6/1/2028 5,741,208
5,000,000 TYCO International Group, SA, Notes 5.875% 11/1/2004 4,976,435
----------------
10,717,643
----------------
Construction & Home Building - 0.3%
3,000,000 American Standard Co., Inc., Notes 7.375% 4/15/2005 3,037,791
----------------
Containers & Packaging - 0.4%
4,000,000 Owens-Illinois, Inc., Sr. Notes 7.85% 5/15/2004 4,186,636
----------------
Drugs & Health Care - 2.9%
5,000,000 Allegiance Corp., Debentures 7.8% 10/15/2016 5,463,060
700,000 Athena Neurosciences, Inc., Convertible Bonds 4.75% 11/15/2004 824,250
900,000 Athena Neurosciences, Inc., Convertible Notes 4.75% 11/15/2004 1,059,750
5,000,000 Becton, Dickinson, & Co., Debentures 6.7% 8/1/2028 5,284,455
5,750,000 Bristol Myers Squibb Co., Debentures 7.15% 6/15/2023 6,638,789
5,000,000 McKesson Corp., Notes 6.3% 3/1/2005 5,087,130
5,000,000 Merck & Co., Inc., Debentures 6.3% 1/1/2026 5,276,020
1,250,000 Roche Holdings, Inc., Convertible Notes Zero Coupon 4/20/2010 811,725
600,000 Swiss Life Finance, Ltd., Convertible Notes
(Convertible to Glaxo Wellcome plc) 2.0% 5/20/2003 679,500
----------------
31,124,679
----------------
Electric Utilities - 7.1%
2,000,000 AES Corp., Sr. Subordinated Notes 10.25% 7/15/2006 2,170,000
1,500,000 Calpine Corp., Sr. Notes 7.875% 4/1/2008 1,515,000
6,000,000 Cleveland Electric Illumination Co., First Mortgage Bonds 7.625% 8/1/2002 6,260,322
7,000,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 7,182,861
6,500,000 Commonwealth Edison Co., Notes 7.625% 1/15/2007 7,208,091
7,000,000 Connecticut Light & Power Co., First Refunding
Mortgage Bonds, Series 97C 7.75% 6/1/2002 7,230,790
5,000,000 Consolidated Edison Co. NY, Inc., Debentures 6.45% 12/1/2007 5,381,195
4,000,000 El Paso Electric Co., First Mortgage Bonds, Series D 8.9% 2/1/2006 4,570,000
6,500,000 Empresa Electrica Pehuienche S.A., Notes 7.3% 5/1/2003 6,077,526
6,000,000 National Rural Utilities, Medium Term Notes 5.75% 12/1/2008 6,017,268
7,000,000 Niagara Mohawk Power Corp., Sr. Notes, Series C 7.125% 7/1/2001 7,143,759
5,000,000 NRG Energy, Inc., Sr. Notes 7.5% 6/15/2007 5,275,540
9,000,000 Texas Utilities Electric Co., Debentures 7.17% 8/1/2007 9,762,966
----------------
75,795,318
----------------
Food & Beverage - 1.5%
5,500,000 Archer Daniels Midland Co., Bonds 6.75% 12/15/2027 5,916,845
5,500,000 ConAgra, Inc., Sr. Notes 5.5% 10/15/2002 5,481,124
4,000,000 Safeway, Inc., Notes 5.875% 11/15/2001 4,013,948
----------------
15,411,917
----------------
Hospital Management - 0.3%
2,500,000 Tenet Healthcare Corp., Sr. Notes 8.625% 12/1/2003 2,640,503
1,000,000 Tenet Healthcare Corp., Sr. Notes 7.875% 1/15/2003 1,012,500
----------------
3,653,003
----------------
Household Products - 1.0%
3,500,000 Playtex Products Inc., Unsecured Sr. Notes, Series B 8.875% 7/15/2004 3,683,750
5,000,000 Procter & Gamble, Guaranteed ESOP Debentures 9.36% 1/1/2021 6,647,430
----------------
10,331,180
----------------
Leisure & Entertainment - 0.7%
6,000,000 Time Warner, Inc., Debentures 9.125% 1/15/2013 7,613,646
----------------
Media - 0.3%
3,000,000 Chancellor Media Corp., Sr. Notes 8.0% 11/1/2008 3,082,500
----------------
Oil Service - 0.1%
450,000 Diamond Offshore Drilling, Inc., Convertible Subordinated 3.75% 2/15/2007 419,063
650,000 Swiss Life Finance, Ltd., Convertible Bonds (Convertible to
Notes Royal Dutch Petroleum Co.) 2.0% 5/20/2005 628,875
----------------
1,047,938
----------------
Oil & Gas - 2.4%
2,000,000 Flores & Rucks, Inc., Sr. Subordinated Notes 9.75% 10/1/2006 2,050,000
3,500,000 Gulf Canada Resources, Ltd., Sr. Subordinated Debentures 9.625% 7/1/2005 3,508,750
1,500,000 Gulf Canada Resources, Ltd., Sr. Notes 8.375% 11/15/2005 1,485,000
2,914,796 Mobil Oil Corp., ESOP Sinking Fund Debentures 9.17% 2/29/2000 2,982,976
3,000,000 Newfield Exploration Co., Sr. Notes, Series B 7.45% 10/15/2007 2,950,146
1,500,000 Ocean Energy, Inc., Sr. Subordinated Notes, Series B 8.375% 7/1/2008 1,402,500
4,000,000 Oryx Energy Co., Notes 8.375% 7/15/2004 4,306,972
2,000,000 Oryx Energy Co., Notes 8.125% 10/15/2005 2,149,900
5,000,000 Triton Energy, Ltd., Sr. Notes 8.75% 4/15/2002 4,475,000
----------------
25,311,244
----------------
Paper & Forest Products - 0.3%
3,500,000 Willamette Industries, Inc., Notes 6.45% 2/1/2005 3,567,897
----------------
Pollution Control - 1.2%
2,500,000 Allied Waste, North America, Sr. Notes 7.625% 1/1/2006 2,525,000
5,000,000 USA Waste Services, Inc., Notes 6.5% 12/15/2002 5,106,285
3,000,000 USA Waste Services, Inc., Sr. Notes 7.0% 10/1/2004 3,140,649
1,300,000 Waste Management, Inc., Convertible Subordinated Notes 4.0% 2/1/2002 1,558,375
----------------
12,330,309
----------------
Publishing & Printing - 0.2%
1,500,000 KIII Communications Corp., Sr. Notes 10.25% 6/1/2004 1,582,500
1,000,000 PRIMEDIA Inc., Sr. Notes 7.625% 4/1/2008 985,000
----------------
2,567,500
----------------
Railroads - 1.7%
5,500,000 Norfolk Southern Corp., Notes 6.875% 5/1/2001 5,674,202
5,000,000 Norfolk Southern Corp., Notes 6.95% 5/1/2002 5,209,195
7,000,000 Union Pacific Corp., Medium Term Notes, Series E 6.79% 11/9/2007 7,252,931
----------------
18,136,328
----------------
Retail - 4.9%
700,000 Costco Companies, Inc., Convertible Subordinated Notes Zero Coupon 8/19/2017 582,750
800,000 Costco Companies, Inc., Subordinated Notes Zero Coupon 8/19/2017 666,000
9,000,000 Dayton Hudson Corp., Notes 6.4% 2/15/2003 9,282,258
7,000,000 Dillards, Inc., Notes 6.43% 8/1/2004 7,079,233
5,000,000 Federated Department Stores, Sr. Notes 8.5% 6/15/2003 5,526,275
200,000 Home Depot, Inc., Convertible Subordinated Notes 3.25% 10/1/2001 528,000
3,500,000 Nordstrom, Inc. 6.95% 3/15/2028 3,701,446
8,000,000 Penney (J.C.) Co., Inc., Notes 6.95% 4/1/2000 8,119,152
1,200,000 Rite Aid Corp., Convertible Subordinated Notes 5.25% 9/15/2002 1,731,000
4,000,000 Rite Aid Corp., Notes 6.125% 12/15/2008 4,044,020
10,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes,
Series II 6.86% 7/3/2001 10,283,900
----------------
51,544,034
----------------
Retail - Food - 0.7%
2,500,000 Fred Meyer, Inc., Notes 7.375% 3/1/2005 2,650,520
4,000,000 Kroger Co. (The), Sr. Notes 8.15% 7/15/2006 4,525,788
----------------
7,176,308
----------------
Services - 1.3%
2,000,000 ARAMARK Services, Inc., Notes 7.0% 7/15/2006 2,028,966
500,000 Credit Suisse First Boston - NY, Convertible Medium
Term Notes (General Electric) 2.25% 5/5/2003 534,375
1,000,000 CUC International, Inc., Convertible Subordinated Notes 3.0% 2/15/2002 941,250
6,000,000 Electronic Data Systems Corp., Notes 6.85% 5/15/2000 6,125,124
4,000,000 Service Corp. International, Notes 6.0% 12/15/2005 3,993,160
----------------
13,622,875
----------------
Telephone & Telecommunications - 4.5%
1,000,000 Bell Atlantic Financial Services Corp., Sr. Exchange Notes 5.75% 4/1/2003 1,035,000
10,000,000 Bell South Telecommunications, Bonds 6.375% 6/1/2028 10,510,490
4,000,000 Cable & Wireless Communications Corp., Notes 6.625% 3/6/2005 4,043,212
5,000,000 GTE Corp., Debentures 6.36% 4/15/2006 5,265,100
3,500,000 LCI International, Inc., Sr. Notes 7.25% 6/15/2007 3,599,516
4,500,000 Qwest Communications International, Inc., Sr. Notes 7.5% 11/1/2008 4,668,750
6,000,000 U.S. West Capital Funding, Inc., Notes 6.25% 7/15/2005 6,266,736
5,000,000 WorldCom, Inc., Sr. Notes 6.4% 8/15/2005 5,189,195
6,000,000 WorldCom, Inc., Sr. Notes 7.75% 4/1/2007 6,779,010
----------------
47,357,009
----------------
Textiles & Apparel - 0.8%
9,000,000 Levi Strauss & Co., Notes 6.8% 11/1/2003 8,889,669
----------------
Transportation - 0.5%
5,000,000 Federal Express Corp., Series 1998-1-A, Class B 6.72% 1/15/2022 5,241,925
----------------
Total Corporate Bonds (cost $543,355,269) 561,695,486
----------------
FOREIGN GOVERNMENT BONDS - 3.0% (a,b)
3,000,000 British Columbia (Providence of), Unsubordinated Notes 5.375% 10/29/2008 2,991,210
4,500,000 Korea Development Bank, Bonds 7.375% 9/17/2004 4,107,780
5,000,000 Korea Development Bank, Unsecured Bonds 6.625% 11/21/2003 4,395,440
4,000,000 Korea (Republic of), Bonds 8.875% 4/15/2008 4,114,660
7,000,000 Ontario (Province of) Canada, Sr. Bonds 7.375% 1/27/2003 7,596,603
6,000,000 Ontario (Province of) Canada, Sr. Notes 5.5% 10/1/2008 6,043,200
2,500,000 Philippines (Republic of), Bonds 8.875% 4/15/2008 2,509,375
----------------
Total Foreign Government Bonds (cost $29,911,348) 31,758,268
----------------
ASSET-BACKED SECURITIES - 10.9% (a)
12,000,000 AESOP Funding II, L.L.C., Rental Car Notes, Series 1997-1,
Class A-2 6.4% 10/20/2003 12,295,260
11,000,000 Chase Manhattan Credit Card, Series 1996-4, Class A 6.73% 2/15/2002 11,071,665
4,040,493 Chase Manhattan Grantor Trust, Series 1996-B-A 6.61% 9/15/2002 4,092,797
6,000,000 Com-Ed Transitional Funding Trust, Series 1998-1-A6 5.63% 6/25/2009 6,041,970
5,000,000 CS First Boston Mortgage Security Corp., 1996-2 Class A4 6.62% 9/25/2009 5,029,225
5,000,000 CS First Boston Mortgage Security Corp., Series 1997-1-A3 6.91% 5/25/2007 5,005,625
10,000,000 Discover Card Master Trust I, Series 1996-3A 6.05% 8/18/2008 10,243,950
5,000,000 Discover Card Master Trust I, Series 1998-7A 5.6% 5/15/2006 5,010,725
10,000,000 Proffitt's Credit Card Master Trust 6.5% 12/15/2005 10,326,195
12,000,000 Standard Credit Master Trust 1, Credit Card Participation
Certificates, Series 1995-9-A 6.55% 10/7/2007 12,589,621
15,000,000 World Financial Network Credit Card Master Trust,
Series 1996-B 6.95% 4/15/2006 15,845,060
17,922,749 World Omni Auto Lease Trust 6.9% 6/25/2003 18,230,213
----------------
Total Asset-Backed Securities (cost $112,764,118) 115,782,306
----------------
MORTGAGE-BACKED SECURITIES - 6.2% (a)
22,066,587 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 7/1/2013 22,183,981
11,278,831 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 4/1/2011 11,345,827
5,940,193 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 3/1/2011 5,975,477
25,676,931 Government National Mortgage Association, Modified Pass
Through Certificates 6.5% 2/15/2027 25,969,905
----------------
Total Mortgage-Backed Securities (cost $63,170,861) 65,475,190
----------------
U.S. GOVERNMENT AGENCY - 4.0% (a)
7,000,000 Federal Home Loan Mortgage Corp., Notes 5.125% 10/15/2008 6,877,766
10,000,000 Federal National Mortgage Association, Notes 5.75% 4/15/2003 10,281,220
24,000,000 Federal National Mortgage Association, Notes 5.75% 2/15/2008 24,911,832
----------------
Total U.S. Government Agency (cost $41,115,971) 42,070,818
----------------
U.S. GOVERNMENT - 20.3% (a)
14,000,000 U.S. Treasury Bonds 7.5% 11/15/2016 17,412,500
70,000,000 U.S. Treasury Bonds 7.625% 11/15/2022 90,890,660
32,000,000 U.S. Treasury Notes 7.0% 7/15/2006 36,450,016
45,500,000 U.S. Treasury Notes 7.875% 11/15/2004 52,723,125(c)
16,500,000 U.S. Treasury Notes 6.25% 2/15/2003 17,443,602
----------------
Total U.S. Government (cost $213,721,152) 214,919,903
----------------
Shares
- --------------
COMMON STOCKS - 0.1% (a)
5,000 Federal National Mortgage Association, Common Stock 370,000
5,000 Simon Property Group, Inc., Common Stock 142,500
5,000 Spieker Properties, Inc., Common Stock 173,125
----------------
Total Common Stocks (cost $617,879) 685,625
----------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
PREFERRED STOCKS - 1.1% (a)
10,000 CVS Corp., Convertible Preferred Stock 1,001,875
13,500 El Paso Energy Capital Trust I, Convertible Preferred Stock 646,313
16,000 Estee Lauder Company, Convertible Preferred Stock 1,240,000
12,000 Houston Industries, Inc., Convertible Preferred Stock 1,276,500
30,000 Lincoln National Corp., Convertible Preferred Stock 706,875
11,000 McKesson Financing Trust, Convertible Preferred Stock 1,178,375
16,000 MediaOne Group, Inc., Convertible Premium Income Exchange Security 1,064,000
20,000 Monsanto Company, Convertible Preferred Stock 980,000
11,000 National Australia Banks, Convertible Preferred Stock 306,625
27,000 Newell Financial Trust I., Convertible Preferred Stock 1,424,250
3,000 Newell Financial Trust I., Convertible Preferred Stock 158,250
70,000 Philadelphia Consolidated Holding, Convertible Preferred Stock 700,000
12,500 Prologis Trust, Series B, Convertible Preferred Stock 329,688
5,000 Unocal Capital Trust, Convertible Preferred Stock 244,369
----------------
Total Preferred Stocks (cost $9,551,534) 11,257,120
----------------
OPTIONS ON U.S. TREASURY BOND FUTURES - (d)
U.S. Treasury Bond Futures, 100 call option contracts,
exercise price of $132, expires February, 1999 (cost $90,123) 57,813
----------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Rate Date
- -------------- ------ ------------
<S> <C> <C> <C>
SHORT-TERM SECURITIES - 1.5% (a)
Commerical Paper
16,400,000 Koch Industries, Inc. (at amortized cost) 5.25% 1/4/1999 16,392,825
----------------
Total Investments (cost $1,030,691,080) $1,060,095,354(e)
================
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Income Portfolio.
(b) Denominated in U.S. dollars.
(c) At December 31, 1998, U.S. Treasury Notes valued at $2,027,813
were held in escrow or pledged as initial margin deposit to cover
open financial futures contracts and call options written as follows:
</TABLE>
<TABLE>
<CAPTION>
Notional
Number of Market Principal Unrealized
Financial Futures Contracts Contracts Expiration Position Value Amount Loss
- --------------------------- --------- ---------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Bond Futures 120 March 1999 Long $15,333,750 $15,500,156 $166,406
Standard & Poors 500 11 March 1999 Short 3,425,125 3,309,230 115,895
<CAPTION>
Number of
Call Options Contracts Price Date Value
- --------------------------- --------- ----- --------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury Bond Futures 400 $136 2/19/1999 $62,500
(d) The market value of the denoted categories of investments represents
less than 0.1% of the total investments of the Income Portfolio.
(e) At December 31, 1998, the aggregate cost of securities for federal
income tax purposes was $1,031,007,559 and the net unrealized
appreciation of investments based on that cost was $29,087,795
which is comprised of $32,042,854 aggregate gross unrealized
appreciation and $2,955,059 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
LB SERIES FUND, INC.
Money Market Portfolio
Portfolio of Investments
December 31, 1998
<TABLE>
<CAPTION>
Principal Yield to Maturity
Amount Maturity Date Value
- -------------- -------- ----------- ------------
<S> <C> <C> <C>
BANKER'S ACCEPTANCES - 0.5% (a)
$ 220,000 Citibank, N. A. 5.12% 3/25/1999 $ 217,439
129,276 Citibank, N. A. 5.71% 1/15/1999 128,994
210,975 Citibank, N. A. 5.09% 4/30/1999 207,488
500,000 Wachovia Bank, N.A. 4.96% 4/14/1999 493,033
------------
Total Banker's Acceptances 1,046,954
------------
BANK NOTES - 2.1% (a)
4,000,000 Wachovia Bank, N.A. 4.86% 4/26/1999 4,000,000
------------
COMMERCIAL PAPER - 90.0% (a)
Banking-Foreign - 1.0%
2,000,000 Glencore Finance (Bermuda), Ltd. (ABN AMRO, Direct Pay
Letter of Credit) 5.68% 1/29/1999 1,991,211
------------
Education - 15.1%
1,000,000 Duke University 4.97% 6/21/1999 977,008
2,000,000 Duke University 5.25% 1/27/1999 1,992,489
5,000,000 Duke University 5.27% 2/4/1999 4,975,256
2,400,000 Harvard University 5.25% 1/4/1999 2,398,950
5,000,000 Harvard University 6.01% 1/6/1999 4,995,833
2,000,000 Leland H. Stanford Junior University 5.18% 2/22/1999 1,985,209
2,500,000 Leland H. Stanford Junior University 5.07% 4/12/1999 2,465,351
1,000,000 Leland H. Stanford Junior University 5.33% 1/28/1999 996,175
1,000,000 Leland H. Stanford Junior University 4.97% 6/4/1999 979,253
3,000,000 Yale University 5.19% 4/9/1999 2,958,350
1,500,000 Yale University 5.13% 4/1/1999 1,481,063
3,000,000 Yale University 5.02% 5/7/1999 2,948,340
------------
29,153,277
------------
Electronics - 2.3%
2,500,000 Seibe plc 5.23% 2/16/1999 2,483,581
2,000,000 Seibe plc 5.03% 3/1/1999 1,983,808
------------
4,467,389
------------
Energy - 11.3%
2,000,000 American Petrofina Holding Co. (Guaranteed Petrofina S.A.) 5.32% 3/18/1999 1,977,960
1,000,000 American Petrofina Holding Co. (Guaranteed Petrofina S.A.) 5.17% 3/22/1999 988,756
3,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.00% 3/22/1999 2,967,333
1,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.04% 5/19/1999 981,063
1,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.11% 3/2/1999 991,600
2,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.34% 2/19/1999 1,985,790
1,500,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.02% 5/25/1999 1,470,600
5,600,000 Koch Industries, Inc. 5.25% 1/4/1999 5,597,550
401,000 Mobil Australia Finance Co., Inc. (Guaranteed Mobil
Oil Corp.) 5.71% 1/5/1999 400,746
2,000,000 Petrofina (Delaware), Inc. (Guaranteed Petrofina S.A.) 5.49% 1/13/1999 1,996,353
100,000 Petrofina (Delaware), Inc. (Guaranteed Petrofina S.A.) 5.87% 1/7/1999 99,903
2,000,000 Petrofina (Delaware), Inc. (Guaranteed Petrofina S.A.) 5.29% 3/12/1999 1,979,933
400,000 Petrofina (Delaware), Inc. (Guaranteed Petrofina S.A.) 5.86% 1/5/1999 399,740
------------
21,837,327
------------
Finance-Automotive - 5.0%
1,000,000 Ford Motor Credit Co. of Puerto Rico, Inc.
(Guaranteed Ford Motor Credit Co.) 5.72% 1/8/1999 998,929
1,000,000 Ford Motor Credit Co. of Puerto Rico, Inc.
(Guaranteed Ford Motor Credit Co.) 5.18% 1/15/1999 998,017
850,000 Ford Motor Credit Co. 5.53% 1/8/1999 849,058
2,000,000 Ford Motor Credit Co. 5.14% 1/27/1999 1,992,677
1,000,000 Ford Motor Credit Co. 5.42% 1/11/1999 998,503
500,000 Ford Motor Credit Co. 5.10% 5/3/1999 491,528
2,000,000 Ford Motor Credit Co. 5.23% 1/21/1999 1,994,289
1,250,000 General Motors Acceptance Corp. 5.16% 4/23/1999 1,255,191
------------
9,578,192
------------
Finance-Commercial - 9.9%
2,500,000 CIT Group, Inc. 5.09% 3/1/1999 2,479,514
1,500,000 CIT Group, Inc. 5.10% 4/6/1999 1,480,129
2,000,000 CIT Group, Inc. 5.09% 3/24/1999 1,977,177
400,000 General Electric Capital Corp. 5.35% 3/12/1999 395,940
2,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.62% 1/20/1999 1,994,205
1,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.35% 2/17/1999 993,172
2,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.16% 2/22/1999 1,985,411
2,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.48% 1/26/1999 1,992,542
2,000,000 Norwest Financial, Inc. 5.21% 3/5/1999 1,982,150
2,000,000 Norwest Financial, Inc. 5.16% 3/19/1999 1,978,183
2,000,000 Norwest Financial, Inc. 4.97% 3/17/1999 1,979,708
------------
19,238,131
------------
Finance-Consumer - 11.4%
2,000,000 American General Finance Corp. 5.12% 3/3/1999 1,982,818
1,500,000 Associates Corp. of North America 5.00% 3/19/1999 1,484,279
1,000,000 Associates Corp. of North America 5.08% 2/12/1999 994,167
2,000,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 5.16% 3/22/1999 1,977,378
750,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 5.19% 3/9/1999 742,853
2,000,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 5.18% 3/29/1999 1,975,302
2,500,000 Commercial Credit Co. 5.22% 1/26/1999 2,491,024
2,000,000 Commercial Credit Co. 5.23% 2/9/1999 1,988,798
2,000,000 Household Finance Corp. 6.11% 1/8/1999 1,997,628
4,000,000 Household Finance Corp. 6.01% 1/7/1999 3,996,000
2,500,000 Transamerica Finance Corp. 5.08% 4/14/1999 2,464,308
------------
22,094,555
------------
Finance-Structured - 11.1%
2,500,000 Corporate Asset Funding Co. 5.33% 2/1/1999 2,488,676
2,500,000 CXC, Inc. 5.45% 2/8/1999 2,485,816
3,000,000 CXC, Inc. 5.36% 2/8/1999 2,983,217
1,134,000 Delaware Funding Corp. 5.27% 3/2/1999 1,124,172
3,039,000 Delaware Funding Corp. 5.68% 1/22/1999 3,028,984
2,000,000 Edison Asset Securitization, L.L.C. 5.66% 1/22/1999 1,993,572
1,000,000 Edison Asset Securitization, L.L.C. 5.29% 5/10/1999 981,510
2,500,000 Edison Asset Securitization, L.L.C. 5.37% 3/16/1999 2,472,918
384,000 Triple-A One Funding Corp. 5.44% 2/19/1999 381,183
617,000 Triple-A One Funding Corp. 5.52% 1/21/1999 615,118
1,020,000 Triple-A One Funding Corp. 5.57% 1/11/1999 1,018,430
2,000,000 Triple-A One Funding Corp. 5.59% 1/19/1999 1,994,440
------------
21,568,036
------------
Financial Services - 1.3%
2,000,000 American Express Credit Corp. 6.11% 1/8/1999 1,997,628
500,000 American Express Credit Corp. 5.03% 5/24/1999 490,228
------------
2,487,856
------------
Food & Beverage - 1.2%
2,400,000 Cargill, Inc. 5.01% 5/20/1999 2,354,686
------------
Insurance - 6.6%
3,840,000 A.I. Credit Corp. 5.25% 1/4/1999 3,838,320
2,000,000 Prudential Funding Corp. 4.95% 2/25/1999 1,985,150
3,000,000 USAA Capital Corp. 4.89% 3/23/1999 2,967,668
2,000,000 USAA Capital Corp. 5.07% 3/31/1999 1,975,278
2,000,000 USAA Capital Corp. 5.21% 2/26/1999 1,984,040
------------
12,750,456
------------
Services - 4.0%
1,500,000 Block Financial Corp. 5.27% 2/26/1999 1,487,867
1,000,000 Block Financial Corp. 5.38% 1/8/1999 998,969
191,000 Block Financial Corp. 5.47% 2/12/1999 189,790
1,500,000 Block Financial Corp. 5.35% 2/19/1999 1,489,220
2,500,000 Block Financial Corp. 5.40% 1/22/1999 2,492,213
1,000,000 Block Financial Corp. 5.33% 1/28/1999 996,040
------------
7,654,099
------------
Telecommunications - 1.3%
2,500,000 Motorola Credit Corp. (Guaranteed Motorola, Inc.) 5.10% 3/8/1999 2,476,946
100,000 Motorola, Inc. 5.20% 2/25/1999 99,213
------------
2,576,159
------------
Transportation - 0.4%
682,000 United Parcel Service of America, Inc. 5.23% 1/15/1999 680,634
------------
U.S. Municipal - 8.1%
2,500,000 California Pollution Control Finance Authority; Environmental
Improvement Revenue Bonds; Series 1996 (Guaranteed
Shell Oil Co.) 5.35% 1/29/1999 2,500,000
3,100,000 City of New York GO Bonds, Fiscal 1995, Series B
(Guaranteed FGIC, SPI) 5.32% 2/19/1999 3,100,000
1,000,000 City of Whiting, Indiana; Industrial Sewage & Solid Waste
Disposal; Series 1995 (Guaranteed Amoco Oil Co.) 5.20% 1/12/1999 1,000,000
1,900,000 City of Whiting, Indiana; Industrial Sewage & Solid Waste
Disposal; Series 1995 (Guaranteed Amoco Oil Co.) 5.15% 3/10/1999 1,900,000
4,020,000 Gulf Coast Waste Disposal Authority; Pollution Control Revenue
Bonds; Series 1995 (Guaranteed Amoco Oil Co.) 5.25% 3/10/1999 4,020,000
1,000,000 Gulf Coast Waste Disposal Authority; Pollution Control Revenue
Bonds; Series 1995 (Guaranteed Amoco Oil Co.) 5.50% 1/14/1999 1,000,000
2,200,000 Metrocrest Hospital Authority, Series 1989 (Bank of New York,
Direct Pay Letter of Credit) 5.36% 2/2/1999 2,189,666
------------
15,709,666
------------
Total Commercial Paper 174,141,674
------------
VARIABLE RATE NOTES - 5.8% (a,b)
3,000,000 Abbey National Treasury Service plc 5.07% 1/20/1999 2,998,694
2,000,000 Beneficial Corp. 5.23% 2/1/1999 2,000,000
2,000,000 Deutsche Bank, New York 5.32% 1/16/1999 1,999,142
300,000 Illinois Student Assistance Commission (Bank of America,
Illinois Direct Pay Letter of Credit) 5.52% 1/7/1999 300,000
2,000,000 Illinois Student Assistance Commission (Bank of America,
Illinois Direct Pay Letter of Credit) 5.52% 1/7/1999 2,000,000
2,000,000 Wachovia Bank, N.A. 5.50% 1/4/1999 1,999,915
------------
Total Variable Rate Notes 11,297,751
------------
U.S. GOVERNMENT AGENCY - 1.6% (a)
300,000 Federal Farm Credit Bank 5.38% 2/8/1999 298,353
2,000,000 Federal Home Loan Bank 5.09% 4/13/1999 2,008,047
363,000 Federal Home Loan Bank 5.11% 4/16/1999 357,780
414,000 Federal Home Loan Bank 5.16% 4/23/1999 407,663
------------
Total U.S. Government Agency 3,071,843
------------
Total Investments (at amortized cost) $193,558,222(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.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
OPPORTUNITY GROWTH PORTFOLIO
Financial Statements
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $344,316,857) $371,691,082
Cash 76,526
Receivable for investment securities sold 648,122
Dividend and interest receivable 77,521
------------
Total assets 372,493,251
------------
LIABILITIES:
Payable for investment securities purchased 297,818
------------
NET ASSETS $372,195,433
============
NET ASSETS CONSIST OF:
Paid-in capital (33,659,283 shares of capital
stock outstanding) $392,838,107
Accumulated net realized loss from sale
of investments (48,016,899)
Unrealized net appreciation of investments 27,374,225
------------
NET ASSETS $372,195,433
============
Net asset value and public offering price per share
($372,195,433 divided by 33,659,283 shares of
capital stock outstanding) $11.06
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 1,009,336
Interest income 1,539,209
------------
Total income 2,548,545
------------
Expenses --
Investment advisory fee 1,453,614
------------
Net investment income 1,094,931
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investment transactions (45,123,705)
Net change in unrealized appreciation of investments 30,584,366
------------
Net loss on investments (14,539,339)
------------
Net change in net assets resulting
from operations $(13,444,408)
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years ended December 31, 1998 and 1997
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 1,094,931 $ 2,117,275
Net realized gain (loss) on investments (45,123,705) 4,835,884
Net change in unrealized appreciation or depreciation
of investments 30,584,366 1,130,770
------------ ------------
Net change in net assets resulting from operations (13,444,408) 8,083,929
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS--
Net investment income (1,020,790) (2,117,275)
Net realized gain on investments (4,105,350) --
------------ ------------
Total distributions (5,126,140) (2,117,275)
------------ ------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 29,992,364 144,261,099
Reinvested dividend distributions 5,126,140 2,117,275
Cost of shares redeemed (35,816,306) (7,432,544)
------------ ------------
Net change in net assets from capital stock transactions (697,802) 138,945,830
------------ ------------
Net change in net assets (19,268,350) 144,912,484
NET ASSETS:
Beginning of period 391,463,783 246,551,299
------------ ------------
End of period $372,195,433 $391,463,783
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
MID CAP GROWTH PORTFOLIO
Financial Statements
Statement of Assets and Liabilities
December 31, 1998
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $86,101,089) $ 96,016,378
Cash 7,092
Receivable for investment securities sold 1,035,531
Dividend and interest receivable 37,969
------------
Total assets 97,096,970
------------
LIABILITIES:
Open options written, at value
(premium received $24,658) 26,800
Payable for investment securities purchased 1,400,194
------------
Total liabilities 1,426,994
------------
NET ASSETS $ 95,669,976
============
NET ASSETS CONSIST OF:
Paid-in capital (8,596,982 shares of capital
stock outstanding) $ 91,073,414
Accumulated net realized loss from sale
of investments (5,316,585)
Unrealized net appreciation of investments 9,913,147
------------
NET ASSETS $ 95,669,976
============
Net asset value and public offering price per share
($95,669,976 divided by 8,596,982 shares of
capital stock outstanding) $11.13
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the period from January 30, 1998 (effective date)
to December 31, 1998
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 270,002
Interest income 242,711
------------
Total income 512,713
------------
Expenses --
Investment advisory fee 196,436
------------
Net investment income 316,277
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investment transactions (5,316,585)
Net change in unrealized appreciation of investments 9,913,147
------------
Net gain on investments 4,596,562
------------
Net increase in net assets resulting
from operations $ 4,912,839
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the period from
January 30, 1998
(effective date) to
December 31, 1998
-------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 316,277
Net realized loss on investments (5,316,585)
Net change in unrealized appreciation of investments 9,913,147
------------
Net increase in net assets resulting from operations 4,912,839
------------
DISTRIBUTIONS PAID TO SHAREHOLDERS--
Net investment income (316,277)
------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 95,921,660
Reinvested dividend distributions 316,277
Cost of shares redeemed (5,164,523)
------------
Net increase in net assets from capital stock transactions 91,073,414
------------
Net increase in net assets 95,669,976
NET ASSETS:
Beginning of period --
------------
End of period $ 95,669,976
============
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, 1998
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $310,959,260) $368,912,718
Cash (including foreign currency holdings
of $256,692) 295,051
Dividend and interest receivable 552,471
------------
Total assets 369,760,240
------------
LIABILITIES:
Payable for investment securities purchased 15,910
------------
NET ASSETS $369,744,330
============
NET ASSETS CONSIST OF:
Paid-in capital (29,187,004 shares of capital
stock outstanding) $319,059,583
Accumulated net realized loss from sale of
investments and foreign currency transactions (7,286,890)
Unrealized net appreciation of investments and
on translation of assets and liabilities in
foreign currencies 57,971,637
------------
NET ASSETS $369,744,330
============
Net asset value and public offering price per share
($369,744,330 divided by 29,187,004 shares of
capital stock outstanding) $12.67
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $705,238) $ 5,442,048
Interest income 829,467
------------
Total income 6,271,515
------------
Expenses --
Investment advisory fee 2,820,070
------------
Net investment income 3,451,445
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on investment transactions (2,217,176)
Net realized gain on foreign currency transactions 166,038
------------
Net realized loss on investments and foreign
currency transactions (2,051,138)
------------
Net change in unrealized appreciation of investments 47,600,258
Net change in unrealized appreciation on translation
of assets and liabilities in foreign currencies (18,039)
------------
Net change in unrealized appreciation of investments
and on translation of assets and liabilities in
foreign currencies 47,582,219
------------
Net gain on investments and foreign currency 45,531,081
------------
Net increase in net assets resulting
from operations $ 48,982,526
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years ended December 31, 1998 and 1997
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 3,451,445 $ 2,644,523
Net realized gain (loss) on investments
and foreign currency transactions (2,051,138) 766,226
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and liabilities
in foreign currencies 47,582,219 47,641
------------ ------------
Net increase in net assets resulting from operations 48,982,526 3,458,390
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS--
Net investment income (6,100,889) (3,251,752)
Net realized gain on investments (2,480,808) (161,102)
------------ ------------
Total distributions (8,581,697) (3,412,854)
------------ ------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 48,521,478 112,489,907
Reinvested dividend distributions 8,581,697 3,412,854
Cost of shares redeemed (14,963,421) (2,837,098)
------------ ------------
Net increase in net assets from capital stock transactions 42,139,754 113,065,663
------------ ------------
Net increase in net assets 82,540,583 113,111,199
NET ASSETS:
Beginning of period 287,203,747 174,092,548
------------ ------------
End of period $369,744,330 $287,203,747
============ ============
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, 1998
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $2,694,971,924) $3,315,788,098
Cash 83,914
Receivable for investment securities sold 52,446,484
Dividend and interest receivable 1,998,749
--------------
Total assets 3,370,317,245
--------------
LIABILITIES:
Open options written, at value (premium
received $134,098) 97,819
Payable for investment securities purchased 50,207,453
--------------
Total liabilities 50,305,272
--------------
NET ASSETS $3,320,011,973
==============
NET ASSETS CONSIST OF:
Paid-in capital (141,237,909 shares of capital
stock outstanding) $2,382,025,846
Accumulated net realized gain from sale
of investments 317,133,674
Unrealized net appreciation of investments 620,852,453
--------------
NET ASSETS $3,320,011,973
==============
Net asset value and public offering price per share
($3,320,011,973 divided by 141,237,909 shares
of capital stock interest outstanding) $23.51
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 28,044,194
Interest income 9,722,191
------------
Total income 37,766,385
------------
Expenses --
Investment advisory fee 11,282,299
------------
Net investment income 26,484,086
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 324,341,135
Net realized gain on closed or expired option
contracts written 983,678
------------
Net realized gain on investments 325,324,813
Net change in unrealized appreciation of investments 361,224,415
------------
Net gain on investments 686,549,228
------------
Net increase in net assets resulting
from operations $713,033,314
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years ended December 31, 1998 and 1997
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 26,484,086 $ 22,970,797
Net realized gain on investments 325,324,813 389,813,407
Net change in unrealized appreciation or depreciation
of investments 361,224,415 118,290,444
-------------- --------------
Net increase in net assets resulting from operations 713,033,314 531,074,648
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
Net investment income (26,297,317) (22,970,797)
Net realized gain on investments (382,615,151) (239,942,399)
-------------- --------------
Total distributions (408,912,468) (262,913,196)
-------------- --------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 271,027,313 268,095,815
Reinvested dividend distributions 408,912,468 262,913,195
Cost of shares redeemed (90,186,334) (31,613,719)
-------------- --------------
Net increase in net assets from capital stock transactions 589,753,447 499,395,291
-------------- --------------
Net increase in net assets 893,874,293 767,556,743
NET ASSETS:
Beginning of period 2,426,137,680 1,658,580,937
-------------- --------------
End of period $3,320,011,973 $2,426,137,680
============== ==============
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, 1998
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $1,530,302,640) $1,395,838,126
Cash 3,746,673
Receivable for investment securities sold 2,294,299
Interest and dividends receivable 29,120,796
--------------
Total assets 1,430,999,894
--------------
LIABILITIES:
Payable for investment securities purchased 3,683,292
------------
NET ASSETS $1,427,316,602
==============
NET ASSETS CONSIST OF:
Paid-in capital (155,872,541 shares of capital
stock outstanding) $1,571,726,626
Accumulated net realized loss from sale
of investments (9,945,509)
Unrealized net depreciation of investments (134,464,515)
--------------
NET ASSETS $1,427,316,602
==============
Net asset value and public offering price per share
($1,427,316,602 divided by 155,872,541 shares of
capital stock outstanding) $9.16
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $137,404,266
Dividend income 12,645,845
------------
Total income 150,050,111
------------
Expenses --
Investment advisory fee 5,747,550
------------
Net investment income 144,302,561
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investment transactions (9,085,193)
Net change in unrealized depreciation of investments (162,813,026)
------------
Net loss on investments (171,898,219)
------------
Net change in net assets resulting
from operations $(27,595,658)
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years ended December 31, 1998 and 1997
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 144,302,561 $ 113,336,033
Net realized gain (loss) on investment transactions (9,085,193) 26,147,702
Net change in unrealized appreciation or depreciation
of investments (162,813,026) 18,136,291
-------------- --------------
Net change in net assets resulting from operations (27,595,658) 157,620,026
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
Net investment income (145,155,458) (112,483,136)
Net realized gain on investments (19,837,525) --
-------------- --------------
Total distributions (164,992,983) (112,483,136)
-------------- --------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 161,947,132 180,112,872
Reinvested dividend distributions 164,992,983 112,483,136
Cost of shares redeemed (51,597,568) (19,906,718)
-------------- --------------
Net increase in net assets from capital stock transactions 275,342,547 272,689,290
-------------- --------------
Net increase in net assets 82,753,906 317,826,180
NET ASSETS:
Beginning of period 1,344,562,696 1,026,736,516
-------------- --------------
End of period (including undistributed net investment
income of $0 and $852,897 respectively) $1,427,316,602 $1,344,562,696
============== ==============
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, 1998
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $1,030,691,080) $1,060,095,354
Cash 36,666
Interest and dividends receivable 14,275,443
--------------
Total assets 1,074,407,463
--------------
LIABILITIES:
Open options written, at value (premium
received $245,760) 62,500
Payable for variation margin on open
futures contracts 24,350
--------------
Total liabilities 86,850
--------------
NET ASSETS $1,074,320,613
==============
NET ASSETS CONSIST OF:
Paid-in capital (105,218,103 shares of capital
stock outstanding) $1,050,122,368
Accumulated net realized loss from sale
of investments (5,106,988)
Unrealized net appreciation of investments 29,305,233
--------------
NET ASSETS $1,074,320,613
==============
Net asset value and public offering price per share
($1,074,320,613 divided by 105,218,103 shares of
capital stock outstanding) $10.21
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 61,733,720
Dividend income 665,673
------------
Total income 62,399,393
------------
Expenses --
Investment advisory fee 3,861,771
------------
Net investment income 58,537,622
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 13,555,086
Net realized gain on closed or expired option
contracts written 342,770
Net realized loss on closed futures contracts (524,904)
------------
Net realized gain on investments 13,372,952
Net change in unrealized appreciation of investments 14,894,893
------------
Net gain on investments 28,267,845
------------
Net increase in net assets resulting
from operations $ 86,805,467
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years ended December 31, 1998 and 1997
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 58,537,622 $ 55,084,746
Net realized gain on investment transactions 13,372,952 7,344,236
Net change in unrealized appreciation or depreciation
of investments 14,894,893 7,183,565
-------------- ------------
Net increase in net assets resulting from operations 86,805,467 69,612,547
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
Net investment income (58,495,759) (55,084,746)
-------------- ------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 134,532,247 65,602,599
Reinvested dividend distributions 58,495,759 55,084,746
Cost of shares redeemed (27,456,669) (55,935,562)
-------------- ------------
Net increase in net assets from capital stock transactions 165,571,337 64,751,783
-------------- ------------
Net increase in net assets 193,881,045 79,279,584
NET ASSETS:
Beginning of period 880,439,568 801,159,984
-------------- ------------
End of period $1,074,320,613 $880,439,568
============== ============
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, 1998
<S> <C>
ASSETS:
Investments in securities, at amortized cost
and value $193,558,222
Cash 8,863
Interest receivable 241,620
------------
Total assets 193,808,705
------------
NET ASSETS $193,808,705
============
NET ASSETS CONSIST OF:
Paid-in capital (193,808,705 shares of capital
stock outstanding) $193,808,705
============
Net asset value and public offering price per share
($193,808,705 divided by 193,808,705 shares of
capital stock outstanding) $1.00
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended December 31, 1998
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 7,991,172
------------
Expenses --
Investment advisory fee 574,733
------------
Net investment income $ 7,416,439
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years ended December 31, 1998 and 1997
1998 1997
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 7,416,439 $ 5,959,136
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS--
Net investment income (7,416,439) (5,959,136)
------------ ------------
CAPITAL STOCK TRANSACTIONS--
Proceeds from sale of shares 130,085,700 76,690,617
Reinvested dividend distributions 7,416,439 5,959,136
Cost of shares redeemed (64,860,589) (65,403,224)
------------ ------------
Net increase in net assets from capital stock transactions 72,641,550 17,246,529
------------ ------------
Net increase in net assets 72,641,550 17,246,529
NET ASSETS:
Beginning of period 121,167,155 103,920,626
------------ ------------
End of period $193,808,705 $121,167,155
============ ============
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 1998 1997 December 31, 1996
-------- -------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.55 $11.50 $10.00
-------- -------- --------
Income From Investment Operations --
Net investment income 0.03 0.06 0.02
Net realized and unrealized gain
(loss) on investments (b) (0.37) 0.05 1.90
-------- -------- --------
Total from investment operations (0.34) 0.11 1.92
-------- -------- --------
Less Distributions --
Dividends from net investment income (0.03) (0.06) (0.02)
Distributions from net realized
gain on investments (0.12) -- (0.40)
-------- -------- --------
Total distributions (0.15) (0.06) (0.42)
-------- -------- --------
Net asset value, end of period $11.06 $11.55 $11.50
======== ======== ========
Total investment return at net asset value (c) (2.99%) 0.93% 19.17%
Net assets, end of period ($ millions) $372.2 $391.5 $246.6
Ratio of expenses to average net assets 0.40% 0.40% 0.40%(d)
Ratio of net investment income to
average net assets 0.30% 0.65% 0.27%(d)
Portfolio turnover rate 134% 147% 155%
</TABLE>
<TABLE>
<CAPTION>
For the period from
January 18, 1996
(effective date) to
MID CAP GROWTH PORTFOLIO December 31, 1996
--------------------
<S> <C>
Net asset value, beginning of period $10.00
--------
Income From Investment Operations --
Net investment income 0.04
Net realized and unrealized gain
on investments (b) 1.13
--------
Total from investment operations 1.17
--------
Less Distributions --
Dividends from net investment income (0.04)
--------
Net asset value, end of period $11.13
========
Total investment return at net asset value (c) 11.62%
Net assets, end of period ($ millions) $95.7
Ratio of expenses to average net assets 0.40%(d)
Ratio of net investment income to
average net assets 0.64%(d)
Portfolio turnover rate 125%
See accompanying notes to the Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
Financial Highlights (continued)
For the period from
January 18, 1996
(effective date) to
WORLD GROWTH PORTFOLIO 1998 1997 December 31, 1996
-------- -------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period $11.12 $10.95 $10.00
-------- -------- --------
Income From Investment Operations --
Net investment income 0.12 0.10 0.08
Net realized and unrealized gain
on investments (b) 1.74 0.21 0.96
-------- -------- --------
Total from investment operations 1.86 0.31 1.04
-------- -------- --------
Less Distributions --
Dividends from net investment income (0.21) (0.13) (0.09)
Distributions from net realized
gain on investments (0.10) (0.01) --
-------- -------- --------
Total distributions (0.31) (0.14) (0.09)
-------- -------- --------
Net asset value, end of period $12.67 $11.12 $10.95
======== ======== ========
Total investment return at net asset value (c) 16.75% 2.81% 10.41%
Net assets, end of period ($ millions) $369.7 $287.2 $174.1
Ratio of expenses to average net assets 0.85% 0.85% 0.85%(d)
Ratio of net investment income to
average net assets 1.04% 1.08% 1.34%(d)
Portfolio turnover rate 19% 19% 9%
</TABLE>
<TABLE>
<CAPTION>
GROWTH PORTFOLIO 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C >
Net asset value, beginning of period $21.58 $19.32 $18.27 $13.51 $14.76
-------- -------- -------- -------- --------
Income From Investment Operations --
Net investment income 0.19 0.21 0.24 0.24 0.20
Net realized and unrealized gain
(loss) on investments (b) 5.28 4.97 3.43 4.76 (0.87)
-------- -------- -------- -------- --------
Total from investment operations 5.47 5.18 3.67 5.00 (0.67)
-------- -------- -------- -------- --------
Less Distributions --
Dividends from net investment income (0.19) (0.21) (0.24) (0.24) (0.20)
Distributions from net realized
gain on investments (3.35) (2.71) (2.38) -- (0.38)
-------- -------- -------- -------- --------
Total distributions (3.54) (2.92) (2.62) (0.24) (0.58)
-------- -------- -------- -------- --------
Net asset value, end of period $23.51 $21.58 $19.32 $18.27 $13.51
======== ======== ======== ======== ========
Total investment return at net asset value (c) 28.38% 30.18% 22.44% 37.25% (4.66%)
Net assets, end of period ($ millions) $3,320.0 $2,426.1 $1,658.6 $1,173.1 $721.8
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 0.94% 1.11% 1.41% 1.53% 1.52%
Portfolio turnover rate 152% 193% 223% 184% 135%
See accompanying notes to the Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
Financial Highlights (continued)
HIGH YIELD PORTFOLIO 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C >
Net asset value, beginning of period $10.44 $10.06 $ 9.94 $ 9.18 $10.76
-------- -------- -------- -------- --------
Income From Investment Operations --
Net investment income 0.99 0.98 0.98 0.96 0.97
Net realized and unrealized gain
(loss) on investments (b) (1.12) 0.37 0.12 0.76 (1.40)
-------- -------- -------- -------- --------
Total from investment operations (0.13) 1.35 1.10 1.72 (0.43)
-------- -------- -------- -------- --------
Less Distributions --
Dividends from net investment income (1.00) (0.97) (0.98) (0.96) (0.97)
Distributions from net realized
gain on investments (0.15) -- -- -- (0.18)
-------- -------- -------- -------- --------
Total distributions (1.15) (0.97) (0.98) (0.96) (1.15)
-------- -------- -------- -------- --------
Net asset value, end of period $ 9.16 $10.44 $10.06 $ 9.94 $ 9.18
======== ======== ======== ======== ========
Total investment return at net asset value (c) (1.50%) 14.10% 11.55% 19.62% (4.38%)
Net assets, end of period ($ millions) $1,427.3 $1,344.6 $1,026.7 $792.5 $595.6
Ratio of expenses to average net assets 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to
average net assets 10.04% 9.58% 9.83% 9.94% 9.75%
Portfolio turnover rate 71% 105% 107% 67% 44%
</TABLE>
<TABLE>
<CAPTION>
INCOME PORTFOLIO 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C >
Net asset value, beginning of period $ 9.92 $ 9.75 $10.08 $ 9.04 $10.36
-------- -------- -------- -------- --------
Income From Investment Operations --
Net investment income 0.61 0.65 0.63 0.65 0.64
Net realized and unrealized gain
(loss) on investments (b) 0.29 0.17 (0.33) 1.04 (1.11)
-------- -------- -------- -------- --------
Total from investment operations 0.90 0.82 0.30 1.69 (0.47)
-------- -------- -------- -------- --------
Less Distributions --
Dividends from net investment income (0.61) (0.65) (0.63) (0.65) (0.64)
Distributions from net realized
gain on investments -- -- -- -- (0.21)
-------- -------- -------- -------- --------
Total distributions (0.61) (0.65) (0.63) (0.65) (0.85)
-------- -------- -------- -------- --------
Net asset value, end of period $10.21 $ 9.92 $ 9.75 $10.08 $ 9.04
======== ======== ======== ======== ========
Total investment return at net asset value (c) 9.37% 8.75% 3.21% 19.36% (4.68%)
Net assets, end of period ($ millions) $1,074.3 $880.4 $801.2 $762.1 $608.2
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 6.06% 6.68% 6.54% 6.81% 6.78%
Portfolio turnover rate 86% 117% 150% 132% 139%
See accompanying notes to the Financial Highlights.
</TABLE>
<TABLE>
<CAPTION>
LB SERIES FUND, INC.
Financial Highlights (continued)
MONEY MARKET PORTFOLIO 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<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 0.05 0.06 0.04
Less: Dividends from net investment income (0.05) (0.05) (0.05) (0.06) (0.04)
-------- -------- -------- -------- --------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return (c) 5.32% 5.43% 5.20% 5.71% 4.00%
Net assets, end of period ($ millions) $193.8 $121.2 $103.9 $66.1 $41.9
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 5.16% 5.27% 5.07% 5.55% 4.03%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in aggregate gains and losses of
portfolio securities due to the timing of sales and redemption of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
</TABLE>
LB SERIES FUND, INC.
Notes to Financial Statements
December 31, 1998
(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 seven separate series (the
"Portfolio(s)"), each with its own investment objective and policies.
The seven Portfolios of the Fund are: Opportunity Growth Portfolio, Mid
Cap Growth Portfolio, World Growth Portfolio, Growth Portfolio, High
Yield Portfolio, Income Portfolio and Money Market Portfolio. The Mid
Cap Growth Portfolio's registration was declared effective by the
Securities and Exchange Commission and the Portfolio began operations
as a series of the LB Series Fund, Inc. on January 30, 1998. 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.
(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. Over-the-counter securities 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 approved by the Board
of Directors. 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. Securities which cannot be valued by the
approved pricing service are valued using valuations obtained from
dealers that make markets in the securities. 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 Fund does not separately report the effect of changes in
foreign exchange rates from changes in market prices on securities
held. Such changes are included in net realized and unrealized gain or
loss from investments.
Federal Income Taxes
No provision has been made for income taxes because the Fund's policy
is to qualify as a regulated investment company under the Internal
Revenue Code and to distribute substantially all of its taxable income
on a timely basis. It is also the intention of the Funds to distribute
an amount sufficient to avoid imposition of any federal excise tax.
Each Fund is treated as a separate taxable entity for federal income
tax purposes.
Securities Transactions and Investment Income
Securities transactions are accounted for on trade date. Realized gains
and losses on investments and unrealized appreciation and depreciation
are determined on an identified cost basis, which is the same basis
used for federal income tax purposes.
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.
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, Mid Cap 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) may 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 capital accounts on the
statements of assets and liabilities. As a result of permanent book-to-
tax differences for the year ended December 31, 1998, accumulated net
realized gain or loss from the sale of investments was increased
(decreased) by $74,141, ($2,649,444), $186,769, and $41,863,
respectively, for the Opportunity Growth,World Growth, Growth, and
Income Portfolios; undistributed net investment income was increased
(decreased) by ($74,141) $2,649,444, ($186,769), and ($41,863),
respectively, for the Opportunity Growth, World Growth, Growth, and
Income Portfolios. 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.
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.
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 $251,680 from such fees for the year ended December 31, 1998.
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.
Accounting Estimates
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 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, Mid Cap 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 an annual sub-advisory fee equal to
0.50% of all the World Growth Portfolio's annual average daily net
assets.
Effective April 30, 1998, Lutheran Brotherhood entered into a sub-
advisory agreement with T. Rowe Price Associates, Inc. for the
performance of various sub-advisory services for the Opportunity Growth
Portfolio. For these services, Lutheran Brotherhood pays an annual sub-
advisory fee equal to 0.30% of all the Opportunity Growth Portfolio's
annual average daily net assets.
Other Expenses
All other expenses associated with operating the Fund are absorbed 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) DISTRIBUTIONS FROM CAPITAL GAINS
During year ended December 31, 1998, distributions from net realized
capital gains of $4,105,350, $2,480,808, $382,615,151 and $19,837,525
were paid by the Opportunity Growth, World Growth, Growth and High
Yield Portfolios, respectively. These distributions relate to net
capital gains realized during the year ended December 31, 1997.
(5) CAPITAL LOSS CARRYOVER
At December 31, 1998, the Opportunity Growth, Mid Cap Growth, World
Growth, High Yield, and Income Portfolios had accumulated net realized
capital loss carryovers expiring as follows:
Expiration Opportunity Mid Cap World
Year Growth Growth Growth
---------- ----------- ---------- ----------
2006 $38,177,716 $4,231,061 $3,750,242
----------- ---------- ----------
$38,177,716 $4,231,061 $3,750,242
=========== ========== ==========
Expiration High Yield Income
Year Portfolio Portfolio
---------- ---------- ----------
2002 -- $1,019,053
2004 -- 3,667,020
2006 $4,536,501 --
---------- ----------
$4,536,501 $4,686,073
========== ==========
To the extent these Portfolios realize future net capital gains,
taxable distributions will be reduced by any unused capital loss
carryovers. Temporary timing differences of $9,839,182, $1,085,524,
$3,536,647, $24,769,321, $5,409,008, and $420,914 existed between
accumulated net realized capital gains or losses for financial
statement and tax purposes as of December 31, 1998 for the Opportunity
Growth, Mid Cap Growth, World Growth, Growth, High Yield, and Income
Portfolios, respectively. These differences are due primarily to
deferral of capital losses for tax purposes.
(6) INVESTMENT TRANSACTIONS
Purchases and Sales of Investment Securities
For the year ended December 31, 1998, 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 $ 460,325 $ 453,484
Mid Cap Growth 154,381 67,171
World Growth 94,157 58,722
Growth 4,176,107 3,998,513
High Yield 1,227,574 976,039
Income 487,142 408,171
Purchases and sales of U.S. Government securities were:
In thousands
Portfolio Purchases Sales
- ------------------- ---------- ----------
Growth $ 17,844 $ 15,420
Income 541,119 399,710
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 $393,790 at December 31, 1998, which
represented 0.03% 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, 1998 were as
follows:
<TABLE>
<CAPTION>
Mid Cap 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, 1997 -- $ -- -- $ -- -- $ --
Opened 81 24,658 26,844 5,425,900 4,775 1,873,366
Closed -- (12,815) (3,329,049) (3,595) (1,344,873)
Expired -- -- (5,991) (484,454) (780) (282,733)
Exercised -- -- (7,705) (1,478,299) -- --
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 81 $24,658 333 $ 134,098 400 $ 245,760
============ ============ ============ ============ ============ ============
</TABLE>
(7) CAPITAL STOCK
Authorized capital stock consists of two billion shares as follows:
Shares Par
Portfolio Authorized Value
- ------------------- ----------- ----------
Opportunity Growth 200,000,000 $ 0.01
Mid Cap Growth 200,000,000 $ 0.01
World Growth 200,000,000 $ 0.01
Growth 400,000,000 $ 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 Mid Cap World High Money
Growth Growth Growth Growth Yield Income Market
------------ ---------- ---------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
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
Shares sold 2,767,211 9,154,232 3,959,733 12,852,681 15,926,615 13,351,834 130,085,700
Shares issued on
reinvestment of dividends
and distributions 441,302 28,428 686,747 20,455,417 16,628,892 5,817,896 7,416,439
Shares redeemed (3,446,650) (585,678) (1,286,464) (4,476,400) (5,514,257) (2,734,184) (64,860,589)
------------ ---------- ---------- ----------- ----------- ----------- -------------
Shares outstanding at
December 31, 1998 33,659,283 8,596,982 29,187,004 141,237,909 155,872,541 105,218,103 193,808,705
============ ========= ========== =========== =========== =========== =============
</TABLE>
LB SERIES FUND, INC.
OPPORTUNITY GROWTH PORTFOLIO
MID CAP GROWTH PORTFOLIO
WORLD GROWTH PORTFOLIO
GROWTH PORTFOLIO
HIGH YIELD PORTFOLIO
INCOME PORTFOLIO
MONEY MARKET PORTFOLIO
DIRECTORS
Rolf F. Bjelland
Herbert F. Eggerding, Jr.
Noel K. Estenson
Jodi L. Harpstead
Richard A. Hauser
Connie M. Levi
Bruce J. Nicholson
Ruth E. Randall
OFFICERS
Rolf F. Bjelland Brenda J. Pederson
Chairman and President Vice President
Wade M. Voigt Richard B. Ruckdashel
Treasurer Vice President
Otis F. Hilbert John C. Bjork
Secretary and Vice President Assistant Secretary
Randall L. Boushek James M. Odland
Vice President Assistant Secretary
Frederick P. Johnson Rand E. Mattsson
Vice President Assistant Treasurer
James R. Olson
Vice President
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the
current prospectuses.
Back Cover:
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PAID
Minneapolis, MN
Permit No. 1202
VP 54 (12/98)
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