As Filed with the Securities and Exchange
Commission on February ??, 2000
1933 Act File No. 33-3677
1940 Act File No. 811-4603
==========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 24 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 26 [X]
(Check appropriate box or boxes.)
LB SERIES FUND, INC.
--------------------
(Exact Name of Registrant)
625 Fourth Avenue South, Minneapolis, Minnesota 55415
-----------------------------------------------------
(Address of Principal Executive Offices)
(612) 340-7215
-------------------------------
(Registrant's Telephone Number)
Otis F. Hilbert, Secretary
LB Series Fund, Inc.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
--------------------------------------------------
(Name and Address of Agent for Service of Process)
Approximate date of proposed public offering:
It is proposed that this filing will become effective under Rule 485 (check
appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[X] On May 1, 2000 pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On (date) pursuant to paragraph (a)(2).
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
LB SERIES FUND, INC.
PROSPECTUS MAY 1, 2000
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
The Portfolios
Investment Objectives, Principal Strategies and Risks,
Volatility and Performance
Opportunity Growth Portfolio
Mid Cap Growth Portfolio
World Growth Portfolio
Growth Portfolio
High Yield Portfolio
Income Portfolio
Money Market Portfolio
Management
The Separate Accounts and the Contracts
Net Asset Value
Distributions and Taxes
Other Securities and Investment Practices
Financial Highlights
<PAGE>
OPPORTUNITY GROWTH PORTFOLIO
INVESTMENT OBJECTIVE. The investment objective of the Opportunity
Growth Portfolio is to achieve long-term growth of capital by investing
primarily in a professionally managed diversified portfolio of smaller
capitalization common stocks.
PRINCIPAL STRATEGIES. The principal strategy for achieving this
objective is to invest in common stocks of companies with small market
capitalizations. Under normal market conditions, the Opportunity Growth
Portfolio invests at least 65% of its assets in companies that fall within
the range of companies included in the Russell 2000 Index at the time of the
Portfolio's investment. As of January 31, 2000, the Russell 2000 Index
included companies with capitalizations between $25.5 million and $10.1
billion. Lutheran Brotherhood, the Portfolio's investment adviser, uses
both fundamental and technical investment research techniques to determine
what stocks to buy and sell. (Fundamental investment analysis generally
involves assessing a company's or security's value based on factors such as
sales, assets, markets, management, products and services, earnings, and
financial structure. Technical analysis generally involves studying trends
and movements in a security's price, trading volume, and other market-
related factors in an attempt to discern patterns.) Lutheran Brotherhood
focuses on companies that have a strong record of earnings growth or show
good prospects for growth in sales and earnings and also considers the
trends in the market as a whole.
PRINCIPAL RISKS. The Opportunity Growth Portfolio's principal risks
are the risks generally of stock investing. They include the risk of sudden
and unpredictable drops in the value of the market as a whole and periods of
lackluster performance.
In addition, the Opportunity Growth Portfolio will be invested in
smaller companies with shorter histories and less seasoned operations.
Smaller, less seasoned companies often have greater price volatility, lower
trading volume, and less liquidity than larger, more established companies.
These companies tend to be more dependent on the success of limited product
lines and have less experienced management and financial resources. Growth
stocks can have greater price volatility than other stocks in a declining
market or when a company's earnings are less than expected.
For these and other reasons, the Opportunity Growth Portfolio may
underperform other stock Portfolios (such as large company stock Portfolios)
when stocks of small or growth companies are out of favor.
The success of the Opportunity Growth Portfolio's investment strategy
depends significantly on Lutheran Brotherhood's skill in assessing the
potential of the securities in which the Portfolio invests. Shares of the
Opportunity Growth Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Opportunity
Growth Portfolio cannot be certain that it will achieve its objective.
VOLATILITY AND PERFORMANCE
The bar chart and table shown below provide an indication of the risks
of investing in the Opportunity Growth Portfolio by showing changes in the
Portfolio's performance from year to year and by showing how the Portfolio's
average annual returns for a one-year period and since inception compared to
a broad-based securities market index. The bar chart and table include the
effects of Portfolio expenses, but not charges or deductions against your
variable contract, and assume that you sold your investment at the end of
the period. Because shares of the Portfolio may be purchased only through
variable life insurance and variable annuity contracts, you should carefully
review the variable contract prospectus for information on applicable
charges and expenses. If the charges and deductions against your variable
contract were included, returns would be lower than those shown. How a
Portfolio has performed in the past is not necessarily an indication of how
it will perform in the future.
[GRAPHIC BAR CHART OMITTED: YEAR-BY-YEAR TOTAL RETURN]
Annual
Year Return
1997 0.93%
1998 -2.99%
1999 27.55%
Best Quarter: Q4 '99 +26.38%
Worst Quarter: Q3 '98 -22.05%
Average Annual Total Returns
(periods ending
December 31, 1999)
-----------------------------
Since
Inception
1-Year (1/18/96)
Opportunity Growth Portfolio 27.55% 10.57%
Russell 2000 21.35% 14.32%
The Russell 2000 is an unmanaged index which measures the performance
of the 2,000 smallest companies in the Russell 3000 Index (an index of the
3,000 largest companies based on market capitalization).
MID CAP GROWTH PORTFOLIO
INVESTMENT OBJECTIVE. The investment objective of the Mid Cap Growth
Portfolio is to achieve long-term growth of capital by investing primarily
in a professionally managed diversified portfolio of common stocks of
companies with medium market capitalizations.
PRINCIPAL STRATEGIES. The Mid Cap Growth Portfolio tries to increase
the long-term value of your investment by investing in common stocks of
companies with medium market capitalizations. Under normal market
conditions, the Mid Cap Growth Portfolio invests at least 65% of its assets
in companies that fall within the range of companies included in the
Standard & Poor's MidCap 400 Index at the time of the Portfolio's
investment. As of January 1, 2000, the S&P MidCap 400 included companies
with capitalizations between approximately $137 million and $37.8 billion.
Lutheran Brotherhood, the Portfolio's investment adviser, uses both
fundamental and technical investment research techniques to determine what
stocks to buy and sell. (Fundamental investment analysis and technical
investment analysis are defined on Page _.)) Lutheran Brotherhood focuses on
companies that have a strong record of earnings growth or show good
prospects for growth in sales and earnings and also considers the trends in
the market as a whole.
PRINCIPAL RISKS. The Mid Cap Growth Portfolio's principal risks are
the risks generally of stock investing. They include the risk of sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster performance.
In addition, medium-sized companies often have greater price
volatility, lower trading volume, and less liquidity than larger, more-
established companies. These companies tend to have smaller revenues,
narrower product lines, less management depth and experience, smaller shares
of their product or service markets, fewer financial resources, and less
competitive strength than larger companies. For these and other reasons,
the Mid Cap Growth Portfolio may underperform other stock Portfolios (such
as large company stock Portfolios) when stocks of medium-sized companies are
out of favor.
The success of the Portfolio's investment strategy depends
significantly on Lutheran Brotherhood's skill in assessing the potential of
the securities in which the Portfolio invests. Shares of the Mid Cap Growth
Portfolio will rise and fall in value and there is a risk that you could
lose money by investing in the Portfolio. The Mid Cap Growth Portfolio
cannot be certain that it will achieve its objective.
VOLATILITY AND PERFORMANCE
The bar chart and table shown below provide an indication of the risks
of investing in the Mid Cap Growth Portfolio by showing changes in the
Portfolio's performance during its first complete calendar year and by
showing how the Portfolio's average annual returns for a one-year period and
since inception compared to a broad-based securities market index. The bar
chart and table include the effects of Portfolio expenses, but not charges
or deductions against your variable contract, and assume that you sold your
investment at the end of the period. Because shares of the Portfolio may be
purchased only through variable life insurance and variable annuity
contracts, you should carefully review the variable contract prospectus for
information on applicable charges and expenses. If the charges and
deductions against your variable contract were included, returns would be
lower than those shown. How a Portfolio has performed in the past is not
necessarily an indication of how it will perform in the future.
[GRAPHIC BAR CHART OMITTED: YEAR-BY-YEAR TOTAL RETURN]
Annual
Year Return
1999 49.64%
Best Quarter: Q4 '99 +34.13%
Worst Quarter: Q3 '98 -19.15%
Average Annual Total Returns
(periods ending
December 31, 1999)
-----------------------------
Since
Inception
1-Year (1/30/98)
Mid Cap Growth Portfolio 49.64% 30.67%
S&P MidCap 400 Index 14.70% 19.04%
The S&P MidCap 400 Index is an unmanaged index which measures the
performance of 400 widely-held common stocks of mid-cap companies.
WORLD GROWTH PORTFOLIO
INVESTMENT OJBECTIVE. The investment objective of the World Growth
Portfolio is to achieve long-term growth of capital by investing primarily
in a professionally managed diversified portfolio of common stocks of
established, non-U.S. companies.
PRINCIPAL STRATEGIES. The World Growth Portfolio seeks to achieve its
objective by investing primarily (at least 65%) in common stocks of
established non-U.S. companies. The Portfolio may invest in companies
located anywhere in the world (including the United States) and expects to
diversify broadly among developed and emerging countries.
Stock selection reflects a growth style. While stocks may be purchased
without regard to a company's market capitalization, the focus typically
will be on large and, to a lesser extent, medium-sized, companies. In
determining the appropriate distribution of investments among various
countries and geographic regions, Rowe Price-Fleming International, Inc.
("Price-Fleming"), the Portfolio's sub-adviser, employs in-depth fundamental
research in an effort to identify companies capable of achieving and
sustaining above-average, long-term earnings growth. (Fundamental
investment analysis is defined on Page _.) Price-Fleming seeks to purchase
such stocks at reasonable prices in relation to present or anticipated
earnings, cash flow, or book value, and valuation factors often influence
its allocations among large-, mid-, or small-cap shares.
While Price-Fleming invests with an awareness of the global economic
backdrop and its outlook for individual countries, bottom-up stock selection
is the focus of its decision-making. Country allocation is driven largely
by stock selection, though the sub-adviser may limit investments in markets
that appear to have poor overall prospects.
In selecting stocks, Price-Fleming generally favors companies with one
or more of the following characteristics:
o Leading market position
o Attractive business niche
o Strong franchise or natural monopoly
o Technological leadership or proprietary advantages
o Seasoned management
o Earnings growth and cash flow sufficient to support growing
dividends
o Healthy balance sheet with relatively low debt.
PRINCIPAL RISKS. The World Growth Portfolio's principal risks are the
general risks of stock investing. They include the risk of sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster performance.
Stocks of non-U.S. companies in which the World Growth Portfolio
invests generally carry more risk than stocks of U.S. companies. One of the
most important is currency risk. This refers to a decline in the value of a
foreign currency versus the U.S. dollar, which reduces the dollar value of
securities denominated in that currency. The overall impact on the World
Growth Portfolio's holdings can be significant and long-lasting, depending
on the currencies represented in the portfolio, how each one appreciates or
depreciates in relation to the U.S. dollar, and whether currency positions
are hedged. Under normal conditions, the Portfolio does not engage in
extensive foreign currency hedging programs. Further, exchange rate
movements are unpredictable and it is not possible to effectively hedge the
currency risks of many developing countries. The introduction of the
European common currency on January 1, 1999, may cause unanticipated adverse
effects. Other risks result from the varying stages of economic and
political development of foreign countries, the differing regulatory
environments and accounting standards of non-U.S. markets, and higher
transaction costs. The World Growth Portfolio's investment in any country
could be subject to actions such as capital or currency controls,
nationalizing a company or industry, expropriating assets, or imposing
punitive taxes which would have a severe effect on security prices and
impair the World Growth Portfolio's ability to repatriate capital or income.
These risks are usually greater in emerging markets. To the extent the
Portfolio invests in emerging markets, it is subject to the abrupt and
severe price declines these holdings can experience. The economic and
political structure of developing nations, in most cases, do not compare
favorably with the U.S. or other developed countries in terms of wealth and
stability, and their financial markets often lack liquidity. The Portfolio
performance will likely be negatively affected by its exposure to nations
suffering severe inflation or currency devaluations. For these and other
reasons, the World Growth Portfolio may underperform other stock funds (such
as U.S. stock funds) when international stocks are out of favor.
To the extent the Portfolio uses futures and options, it is exposed to
additional volatility and potential losses.
The success of the Portfolio's investment strategy depends
significantly on Price-Fleming's skill in assessing the potential of the
securities in which the Portfolio invests. Shares of the World Growth
Portfolio will rise and fall in value and there is a risk that you could
lose money by investing in the Portfolio. The World Growth Portfolio
cannot be certain that it will achieve its objective.
VOLATILITY AND PERFORMANCE
The bar chart and table shown below provide an indication of the risks
of investing in the World Growth Portfolio by showing changes in the
Portfolio's performance from year to year and by showing how the Portfolio's
average annual returns for a one-year period and since inception compared to
a broad-based securities market index. The bar chart and table include the
effects of Portfolio expenses, but not charges or deductions against your
variable contract, and assume that you sold your investment at the end of
the period. Because shares of the Portfolio may be purchased only through
variable life insurance and variable annuity contracts, you should carefully
review the variable contract prospectus for information on applicable
charges and expenses. If the charges and deductions against your variable
contract were included, returns would be lower than those shown. How a
Portfolio has performed in the past is not necessarily an indication of how
it will perform in the future.
[GRAPHIC BAR CHART OMITTED: YEAR-BY-YEAR TOTAL RETURN]
Annual
Year Return
1997 2.81%
1998 16.75%
1999 34.13%
Best Quarter: Q4 '99 +24.47%
Worst Quarter: Q3 '98 -13.14%
Average Annual Total Returns
(periods ending
December 31, 1999)
-----------------------------
Since
Inception
1-Year (1/18/96)
World Growth Portfolio 34.13% 15.65%
Morgan Stanley EAFE Index 27.30% 13.73%
The Morgan Stanley EAFE (Europe and Australia, Far East Equity) is an
unmanaged index which measures the performance of international companies
screened for liquidity, cross-ownership, and industry representation.
GROWTH PORTFOLIO
INVESTMENT OBJECTIVE. The investment objective of the Growth Portfolio
is to achieve long-term growth of capital through investment primarily in
common stocks of established corporations that appear to offer attractive
prospects of a high total return from dividends and capital appreciation.
PRINCIPAL STRATEGIES. The Growth Portfolio's principal strategy for
achieving its objective is to invest in leading U.S. domestic and multi-
national companies. Lutheran Brotherhood, the Portfolio's investment
adviser, uses fundamental and technical investment research techniques to
identify stocks of companies that it believes have a leading position and
successful business strategy within their industry. (Fundamental investment
analysis and technical investment analysis are defined on Page .)The
Portfolio invests primarily (at least 65%) in stocks of large and, to a
lesser extent, medium-sized, companies, which Lutheran Brotherhood believes
have balance sheet strength and profitability. Lutheran Brotherhood defines
large- and medium-sized companies according to the market capitalization
classifications published by Lipper, Inc. Based on Lipper's guidelines as
of, ___________,2000, large-sized companies are those with market
capitalizations of at least $__ billion and medium-sized companies are those
with market capitalizations less than $__ billion. Lutheran Brotherhood
seeks to invest in companies with a strong management team that will develop
business strategies which lead to sales and earnings growth and improving
relative stock value.
PRINCIPAL RISKS. The Growth Portfolio's principal risks are the risks
generally of stock investing. They include the risk of sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster performance.
In addition, the prices of larger company stocks may not rise as
quickly or as significantly as prices of stocks of well-managed smaller
companies. For these and other reasons, the Growth Portfolio may
underperform other stock Portfolios (such as small company or medium company
stock Portfolios) when larger company stocks are out of favor.
The success of the Growth Portfolio's investment strategy depends
significantly on Lutheran Brotherhood's skill in assessing the potential of
the securities in which the Portfolio invests. Shares of the Growth
Portfolio will rise and fall in value and there is a risk that you could
lose money by investing in the Portfolio. The Growth Portfolio cannot be
certain that it will achieve its objective.
VOLATILITY AND PERFORMANCE
The bar chart and table shown below provide an indication of the risks
of investing in the Growth Portfolio by showing changes in the Portfolio's
performance from year to year and by showing how the Portfolio's average
annual returns for one, five, and ten years compared to a broad-based
securities market index. The bar chart and table include the effects of
Portfolio expenses, but not charges or deductions against your variable
contract, and assume that you sold your investment at the end of the period.
Because shares of the Portfolio may be purchased only through variable life
insurance and variable annuity contracts, you should carefully review the
variable contract prospectus for information on applicable charges and
expenses. If the charges and deductions against your variable contract were
included, returns would be lower than those shown. How a Portfolio has
performed in the past is not necessarily an indication of how it will
perform in the future. The Growth Portfolio commenced operations on January
9, 1987.
[GRAPHIC BAR CHART OMITTED: YEAR-BY-YEAR TOTAL RETURN]
Annual
Year Return
1990 -1.97%
1991 41.35%
1992 8.13%
1993 10.10%
1994 -4.66%
1995 37.25%
1996 22.44%
1997 30.18%
1998 28.38%
1999 43.61%
Best Quarter: Q4 '99 +25.53%
Worst Quarter: Q3 '90 -15.81%
Average Annual Total Returns
(periods ending
December 31, 1999)
-----------------------------
1-Year 5-Years 10-Years
Growth Portfolio 43.61% 32.15% 20.28%
S&P 500 21.04% 28.54% 18.19%
The S&P 500 is an unmanaged index which measures the performance of 500
widely held common stocks of large-cap companies.
HIGH YIELD PORTFOLIO
INVESTMENT OBJECTIVE. The investment objective of the High Yield
Portfolio is to achieve a higher level of income through investment in a
diversified portfolio of high yield securities ("junk bonds") which involve
greater risks than higher quality investments. The Portfolio will also
consider growth of capital as a secondary objective.
PRINCIPAL STRATEGIES. Under normal market conditions, the High Yield
Portfolio invests at least 65% of its total assets in high-yield, high risk
bonds, notes, debentures and other debt obligations or preferred stocks.
These securities are commonly known as "junk bonds." At the time of
purchase these securities are rated within or below the BB major rating
category by Standard & Poor's Corporation or the Ba major rating category by
Moody's Investor Services, Inc. or are unrated but considered to be of
comparable quality by Lutheran Brotherhood, the Portfolio's investment
adviser. Lutheran Brotherhood uses fundamental investment research
techniques to determine what securities to buy and sell. (Fundamental
investment analysis is defined on Page _.) Lutheran Brotherhood focuses on
companies which it believes have or are expected to achieve adequate cash
flows or access to capital markets for the payment of principal and interest
obligations. Lutheran Brotherhood generally purchases bonds with a 10-year
maturity, although it may purchase bonds with a shorter or longer maturity.
PRINCIPAL RISKS. The principal risks of the High Yield Portfolio
include the tendency of high-yield bond prices to fall when the economy is
sluggish or overall corporate earnings are weak. During those times, it may
become difficult for issuers of high-yield bonds to generate sufficient cash
flow or to obtain adequate access to capital markets to pay principal or
interest. For all bonds, there is a risk that an issuer will default.
High-yield bonds, however, are more susceptible to the risk of default and
their prices usually fall if a number of issuers, or a high profile issuer,
default or go bankrupt or if the market anticipates either of those events.
The price of the High Yield Portfolio shares also may be affected by
weak equity markets, when issuers of high-yield bonds generally find it
difficult to improve their financial condition by replacing debt with
equity. In addition, many high yield securities are traded only among
institutional investors, and it may be difficult for Lutheran Brotherhood
to sell the Portfolio's investments at fair prices when high-yield bonds
fall out of favor with those investors.
Generally, when interest rates rise, bond prices fall, which may cause
the price of shares of the High Yield Portfolio to fall as well. Bonds with
longer durations and maturities tend to be more sensitive to changes in
interest rates than bonds with shorter durations or maturities. (Duration
is a measure of the effective, as opposed to the actual, maturity of a
fixed-income security. Duration considers the bond's cash flows and the
time value of money.) In general, the prices at which lower quality bonds
are traded before they mature may be more affected by the financial health
of the issuer and the economy and less by changes in interest rates.
The success of the High Yield Portfolio's investment strategy depends
significantly on Lutheran Brotherhood's skill in assessing the potential of
the securities in which the Portfolio invests. Shares of the High Yield
Portfolio will rise and fall in value and there is a risk that you could
lose money by investing in the Portfolio. The High Yield Portfolio cannot
be certain that it will achieve its objective.
VOLATILITY AND PERFORMANCE
The bar chart and table shown below provide an indication of the risks
of investing in the High Yield Portfolio by showing changes in the
Portfolio's performance from year to year and by showing how the Portfolio's
average annual returns for one, five, and ten years compared to a broad-
based securities market index. The bar chart and table include the effects
of Portfolio expenses, but not charges or deductions against your variable
contract, and assume that you sold your investment at the end of the period.
Because shares of the Portfolio may be purchased only through variable life
insurance and variable annuity contracts, you should carefully review the
variable contract prospectus for information on applicable charges and
expenses. If the charges and deductions against your variable contract were
included, returns would be lower than those shown. How a Portfolio has
performed in the past is not necessarily an indication of how it will
perform in the future. The High Yield Portfolio commenced operations on
November 2, 1987.
[GRAPHIC BAR CHART OMITTED: YEAR-BY-YEAR TOTAL RETURN]
Annual
Year Return
1990 -3.72%
1991 35.32%
1992 20.08%
1993 22.91%
1994 -4.38%
1995 19.62%
1996 11.55%
1997 14.10%
1998 -1.50%
1999 10.52%
Best Quarter: Q1 '91 +12.39%
Worst Quarter: Q3 '98 - 8.86%
Average Annual Total Returns
(periods ending
December 31, 1999)
-----------------------------
1-Year 5-Years 10-Years
High Yield Portfolio 10.52% 10.62% 11.78%
Lehman High Yield Index 2.39% 9.30% 10.71%
The Lehman High Yield Index is an unmanaged index which measures the
performance of fixed-rate non-investment grade bonds.
INCOME PORTFOLIO
INVESTMENT OBJECTIVE. The investment objective of the Income Portfolio
is to achieve a high level of income over the longer term while providing
reasonable safety of capital through investment primarily in readily
marketable intermediate and long-term fixed income securities.
PRINCIPAL STRATEGIES. The Income Portfolio invests primarily in
investment-grade corporate bonds, government bonds, and mortgage-backed
securities. Under normal conditions, at least 65% of the Portfolio's assets
will be invested in debt securities or preferred stock at least in the "Baa"
major rating category by Moody's or at least in the "BBB" major rating
category by S&P or unrated securities considered to be of comparable quality
by Lutheran Brotherhood, the Portfolio's investment adviser. The Portfolio
may also invest in high-yield, high risk bonds, notes, debentures and other
debt obligations or preferred stock commonly known as "junk bonds." At the
time of purchase these securities are rated within or below the BB major
rating category by S&P or the Ba major rating category by Moody's or are
unrated but considered to be of comparable quality by Lutheran Brotherhood.
Lutheran Brotherhood uses fundamental investment research techniques to
determine what debt obligations to buy and sell. (Fundamental investment
analysis is defined on Page _.) Lutheran Brotherhood focuses on companies
which it believes are financially sound and have strong cash flow, asset
values, and interest or dividend earnings.
PRINCIPAL RISKS. The Income Portfolio's principal risks are those of
debt investing, including increases in interest rates and loss of principal.
Generally, when interest rates rise, bond prices fall, which may cause the
price of shares of the Income Portfolio to fall as well. Bond prices fall
because bonds issued after rates rise will offer higher yields, making older
bonds with lower rates less attractive. To raise the effective yield on
older bonds, holders of the older bonds must discount their prices.
(Effective yield on a bond is determined by the purchase price, the stated
rate of interest on the bond, the time between interest payments, and the
time until maturity.) Bonds with longer durations and maturities tend to be
more sensitive to changes in interest rates than bonds with shorter
durations or maturities.
In addition, mortgage-backed securities are sensitive to changes in the
redemption patterns of the underlying securities. If the principal payment
on the underlying asset is repaid faster or slower than the holder of the
mortgage-backed security anticipates, the price of the security may fall,
especially if the holder must reinvest the repaid principal at lower rates
or must continue to hold the securities when interest rates rise.
For all bonds there is a risk that an issuer will default. High-yield
bonds generally are more susceptible to risk of default than higher rated
bonds, and to the Income Portfolio, this risk increases as Lutheran
Brotherhood increases the percentage of the Portfolio's investments in high-
yield bonds.
The success of the Income Portfolio's investment strategy depends
significantly on Lutheran Brotherhood's skill in assessing the potential of
the securities in which the Portfolio invests. Shares of the Income
Portfolio will rise and fall in value and there is a risk that you could
lose money by investing in the Portfolio. The Income Portfolio cannot be
certain that it will achieve its goal.
VOLATILITY AND PERFORMANCE
The bar chart and table shown below provide an indication of the risks
of investing in the Income Portfolio by showing changes in the Portfolio's
performance from year to year and by showing how the Portfolio's average
annual returns for one, five, and ten years compared to a broad-based
securities market index. The bar chart and table include the effects of
Portfolio expenses, but not charges or deductions against your variable
contract, and assume that you sold your investment at the end of the period.
Because shares of the Portfolio may be purchased only through variable life
insurance and variable annuity contracts, you should carefully review the
variable contract prospectus for information on applicable charges and
expenses. If the charges and deductions against your variable contract were
included, returns would be lower than those shown. How a Portfolio has
performed in the past is not necessarily an indication of how it will
perform in the future. The Income Portfolio commenced operations on January
9, 1987.
[GRAPHIC BAR CHART OMITTED: YEAR-BY-YEAR TOTAL RETURN]
Annual
Year Return
1990 6.91%
1991 19.76%
1992 9.23%
1993 11.66%
1994 -4.68%
1995 19.36%
1996 3.21%
1997 8.75%
1998 9.37%
1999 -2.01%
Best Quarter: Q2 '95 +6.99%
Worst Quarter: Q1 '94 -3.99%
Average Annual Total Returns
(periods ending
December 31, 1999)
-----------------------------
1-Year 5-Years 10-Years
Income Portfolio -2.01% 7.50% 7.89%
Lehman Aggregate Bond Index -0.82% 7.73% 7.69%
The Lehman Aggregate Bond Index is an unmanaged index which measures
the performance of U.S. investment grade bonds.
MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE. The investment objective of the Money Market
Portfolio is to achieve the maximum current income that is consistent with
stability of capital and maintenance of liquidity through investment in
high-quality, short-term debt obligations.
PRINCIPAL STRATEGIES. The Money Market Portfolio seeks to achieve its
objective by investing in high quality, short-term money market instruments
that mature in 397 days or less, including U.S. dollar-denominated
commercial paper, bank instruments such as certificates of deposit, U.S.
government discount notes, and U.S. Treasury Bills. Lutheran Brotherhood,
the Portfolio's investment adviser, uses fundamental investment research
techniques to determine what money market instruments to buy and sell.
(Fundamental investment analysis is defined on Page _.) Under normal market
conditions, the Portfolio invests primarily in prime commercial paper.
Lutheran Brotherhood looks for prime commercial paper issued by corporations
which it believes are financially sound, have strong cash flows, and solid
capital levels, are leaders in their industry and have experienced
management.
Lutheran Brotherhood manages the Money Market Portfolio subject to
strict rules established by the Securities and Exchange Commission that are
designed so that the Money Market Portfolio may maintain a stable $1.00
share price. Those guidelines generally require the Money Market Portfolio
to, among other things, invest only in high quality securities that
generally are diversified with respect to issuers, are denominated in U.S.
dollars and have short remaining maturities. In addition, the guidelines
require the Money Market Portfolio to maintain a dollar-weighted average
portfolio maturity of not more than 90 days.
Under the guidelines, at least 95% of the Money Market Portfolio's
total assets must be invested in "first tier" securities. First-tier
securities must be rated by at least two rating agencies in their highest
short-term major rating categories (or one, if only one rating agency has
rated the security, or if they have not received a short-term rating,
determined by Lutheran Brotherhood to be of comparable quality). First-tier
securities generally include U.S. Government securities, such as U.S.
Treasury bills and securities issued or sponsored by U.S. government
agencies. They also may include corporate debt securities, finance company
commercial paper and certain obligations of U.S. and foreign banks.
The remainder of the Money Market Portfolio's assets will be invested
in securities rated within the two highest rating categories by any two
rating agencies (or one, if only one rating agency has rated the security
or, if unrated, determined by Lutheran Brotherhood to be of comparable
quality), or kept in cash.
PRINCIPAL RISKS. The Money Market Portfolio's principal risks are
those that could affect the yield of its shares. They include those factors
that could cause short-term interest rates to decline, such as a weak
economy, strong equity markets and changes by the Federal Reserve in its
monetary policies. The success of the Portfolio's investment strategy
depends significantly on Lutheran Brotherhood's skill in assessing the
potential of the securities in which the Portfolio invests.
An investment in the Money Market Portfolio is not a bank deposit and
is not insured or guaranteed by the Federal Deposit Insurance Corporation 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.
VOLATILITY AND PERFORMANCE
The bar chart and table shown below provide an indication of the risks
of investing in the Money Market Portfolio by showing changes in the
Portfolio's performance from year to year and by showing the Portfolio's
average annual returns for one, five, and ten years. The bar chart and table
include the effects of Portfolio expenses, but not charges or deductions
against your variable contract, and assume that you sold your investment at
the end of the period. Because shares of the Portfolio may be purchased only
through variable life insurance and variable annuity contracts, you should
carefully review the variable contract prospectus for information on
applicable charges and expenses. If the charges and deductions against your
variable contract were included, returns would be lower than those shown.
How a Portfolio has performed in the past is not necessarily an indication
of how it will perform in the future. The Money Market Portfolio commenced
operations on January 9, 1987.
[GRAPHIC BAR CHART OMITTED: YEAR-BY-YEAR TOTAL RETURN]
Annual
Year Return
1990 8.00%
1991 5.89%
1992 3.53%
1993 2.87%
1994 4.00%
1995 5.71%
1996 5.20%
1997 5.43%
1998 5.32%
1999 4.94%
Best Quarter: Q2 '90 +2.01%
Worst Quarter: Q2 '93 +0.69%
Average Annual Total Returns
(periods ending
December 31, 1999)
-----------------------------
1-Year 5-Years 10-Years
Money Market Portfolio 4.94% 5.32% 5.08%%
MANAGEMENT
Lutheran Brotherhood, 625 Fourth Avenue South, Minneapolis, Minnesota
55415, serves as investment adviser for each of the Portfolios. Lutheran
Brotherhood and its wholly-owned subsidiary, Lutheran Brotherhood Research
Corp., have been in the investment advisory business since 1970 and managed
over $22.9 billion in assets as of December 31, 1999, including $14.1
billion in mutual fund assets. Lutheran Brotherhood provides investment
research and supervision of the Portfolios' investments. The following
individuals are responsible for the day-to-day management of the Portfolios.
OPPORTUNITY GROWTH PORTFOLIO
Brian L. Thorkelson, Portfolio Manager of Lutheran Brotherhood, has
been the portfolio manager of the Opportunity Growth Portfolio since March
1, 2000. Mr. Thorkelson also serves as portfolio manager of the Mid Cap
Growth Portfolio, a position he has held since 1998. Mr. Thorkelson has
been with Lutheran Brotherhood since 1987, and has served as an equities
analyst from 1992 until 1997 and a portfolio manager since 1997.
MID CAP GROWTH PORTFOLIO
Brian L. Thorkelson, Portfolio Manager of Lutheran Brotherhood, has
been the portfolio manager of the Mid Cap Growth Portfolio since its
inception in 1998. Mr. Thorkelson has been with Lutheran Brotherhood since
1987, and has served as an equities analyst from 1992 until 1997 and a
portfolio manager since 1997.
GROWTH PORTFOLIO
Scott A. Vergin, Portfolio Manager of Lutheran Brotherhood, has been
the portfolio manager of the Growth Portfolio since 1994. Mr. Vergin has
been with Lutheran Brotherhood since 1984.
HIGH YIELD PORTFOLIO
Thomas N. Haag, Assistant Vice President of Lutheran Brotherhood, has
been the portfolio manager of the High Yield Portfolio since 1992. Mr. Haag
has been with Lutheran Brotherhood since 1986.
INCOME PORTFOLIO
Mark L. Simenstad, Vice President of Lutheran Brotherhood, has been the
portfolio manager of the Income Portfolio since 1999. Mr. Simenstad served
as a portfolio manager with Investment Advisors, Inc. from 1993 to 1996, and
chief investment officer for fixed-income investing at Voyageur Asset
Management from 1996 until 1999.
MONEY MARKET PORTFOLIO
Gail R. Onan, Portfolio Manager of Lutheran Brotherhood, has been the
portfolio manager of the Money Market Portfolio since 1994. Ms. Onan
has been with Lutheran Brotherhood since 1986.
WORLD GROWTH PORTFOLIO
Lutheran Brotherhood has engaged Price-Fleming, 100 East Pratt Street,
Baltimore, Maryland 21202, as investment sub-adviser for the World Growth
Portfolio. Price-Fleming is one of the world's largest international mutual
fund asset managers with the U.S. equivalent of over $42 billion under
management as of December 31, 1999 in its offices in Baltimore, London,
Tokyo, Singapore, Paris, Hong Kong, and Buenos Aires. Price-Fleming has an
investment advisory group that has day-to-day responsibility for managing
the Portfolio and developing and executing the Portfolio's investment
program.
Lutheran Brotherhood and Price-Fleming personnel may invest in
securities for their own account pursuant to a code of ethics that
establishes procedures for personal investing and restricts certain
transactions.
During the fiscal year ended December 31, 1999, Lutheran Brotherhood
received the following advisory fees, expressed as a percentage of the
Portfolio's net assets:
Opportunity Growth Portfolio 0.40%
Mid Cap Growth Portfolio 0.40%
World Growth Portfolio 0.85%
Growth Portfolio 0.40%
High Yield Portfolio 0.40%
Income Portfolio 0.40%
Money Market Portfolio 0.40%
THE SEPARATE ACCOUNTS AND THE CONTRACTS
Shares in the LB Series Fund, Inc. ("the Fund") are currently sold,
without sales charges, only to separate accounts of Lutheran Brotherhood and
Lutheran Brotherhood Variable Insurance Products Company ("LBVIP"). These
separate accounts fund benefits of variable life insurance and variable
annuity contracts. A Prospectus for your variable contract accompanies this
Prospectus and describes how you may allocate the premiums and the assets
relating to your variable contract among one or more of the seven
subaccounts which correspond to the Portfolios of the Fund.
The separate accounts of Lutheran Brotherhood and LBVIP place a single
order to buy or sell shares of each Portfolio each business day. The
separate accounts calculate the amount of the order based on the aggregate
instructions from owners of the variable annuity contracts and variable life
insurance contracts. Instructions received from contract owners before the
close of the New York Stock Exchange ("NYSE")on a given day result in share
purchases and redemptions at the net asset value ("NAV") calculated as of
the close of the NYSE that day.
NET ASSET VALUE
Each Portfolio determines its NAV by adding the value of Portfolio
assets, subtracting the Portfolio's liabilities, and dividing the result by
the number of outstanding shares. The Money Market Portfolio seeks to
maintain a stable $1.00 NAV pursuant to procedures established by the Board
of Directors for the Fund in connection with the amortized cost method of
portfolio valuation. The NAV for the other Portfolios varies with the value
of their investments. The other Portfolios value their securities using
market quotations, other than short-term debt securities maturing in less
than 60 days, which are valued using amortized costs, and securities for
which market quotations are not readily available, which are valued at fair
value.
The Portfolios determine their NAV on each day the NYSE is open for
business, or any other day as required under the rules of the Securities and
Exchange Commission. The NYSE is currently closed on New Year's Day, Martin
Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
calculation is made as of the close of regular trading of the NYSE
(currently 4:00 p.m. Eastern time) after the Portfolio has declared any
applicable dividends. Because foreign securities markets are open on
different days from U.S. markets, there may be instances when the value of a
Portfolio's investment in foreign securities changes on days when you are
not able to change the allocation in your variable contract.
DISTRIBUTIONS AND TAXES
Dividends and capital gains distributions of each Portfolio will be
reinvested in additional full and fractional shares of that Portfolio.
Dividends. Dividends are declared and paid as follows:
- declared daily and paid monthly Money Market Portfolio
High Yield Portfolio
Income Portfolio
- declared and paid quarterly Growth Portfolio
- declared and paid annually Opportunity Growth Portfolio
Mid Cap Growth Portfolio
World Growth Portfolio
Income dividends are derived from investment income, including
dividends, interest, and certain foreign currency gains received by a
Portfolio.
Capital Gains. Capital gains distributions, if any, usually will be
declared in February.
Contract owners should review the documents pertaining to their
variable annuity and variable life insurance contracts for information
regarding the personal tax consequences purchasing such a contract.
Under existing tax law, dividends or capital gains distributions from a
Portfolio are not currently taxable to holders of variable annuity and
variable life insurance contracts when left to accumulate within a variable
contract. Depending on the variable contract, withdrawals from the contract
may be subject to ordinary income tax and, in addition, to a 10% penalty tax
on withdrawals before age 59.
OTHER SECURITIES AND INVESTMENT PRACTICES
The principal investment strategies and risk factors of each Portfolio
are outlined beginning on page . The Portfolios may also invest in other
securities and engage in other practices. Below are brief discussions of
some of these securities, other practices in which certain of the Portfolios
may engage, and their associated risks.
REPURCHASE AGREEMENTS. Each of the Portfolios may buy securities with
the understanding that the seller will buy them back with interest at a
later date. If the seller is unable to honor its commitment to repurchase
the securities, the Portfolio could lose money.
WHEN-ISSUED SECURITIES. Each Portfolio may invest in securities prior
to their date of issue. These securities could fall in value by the time
they are actually issued, which may be any time from a few days to over a
year. In addition, no income will be earned on these securities until they
are actually delivered.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. The High Yield Portfolio,
Income Portfolio, and Money Market Portfolio may invest in mortgage-backed
and asset-backed securities. Mortgage-backed securities are securities that
are backed by pools of mortgages and which pay income based on the payments
of principal and income they receive from the underlying mortgages. Asset-
backed securities are similar but are backed by other assets, such as pools
of consumer loans. Both are sensitive to interest rate changes as well as
to changes in the redemption patterns of the underlying securities. If the
principal payment on the underlying asset is repaid faster or slower than
the holder of the mortgage-backed or asset-backed security anticipates, the
price of the security may fall, especially if the holder must reinvest the
repaid principal at lower rates or must continue to hold the securities when
interest rates rise.
ZERO COUPONS. Each of the Portfolios may invest in zero coupon
securities. A zero coupon security is a debt security that is purchased and
traded at discount to its face value because it pays no interest for some or
all of its life. Interest, however, is reported as income to the Portfolio
that has purchased the security and the Portfolio is required to distribute
to shareholders an amount equal to the amount reported.
FOREIGN SECURITIES. Each of the Portfolios may invest in foreign
securities. Foreign securities are generally more volatile than their
domestic counterparts, in part because of higher political and economic
risks, lack of reliable information and fluctuations in currency exchange
rates. These risks are usually higher in less developed countries. Each of
these Portfolios except the Money Market Portfolio may use foreign
currencies and related instruments to hedge its foreign investments.
In addition, foreign securities may be more difficult to resell than
comparable U.S. securities because the markets for foreign securities are
less efficient. Even where a foreign security increases in price in its
local currency, the appreciation may be diluted by the negative effect of
exchange rates when the security's value is converted to U.S. dollars.
Foreign withholding taxes also may apply and errors and delays may occur in
the settlement process for foreign securities.
RESTRICTED AND ILLIQUID SECURITIES. Each of the Portfolios may invest
to a limited extent in restricted or illiquid securities. Any securities
that are thinly traded or whose resale is restricted can be difficult to
sell at a desired time and price. Some of these securities are new and
complex, and trade only among institutions. The markets for these
securities are still developing and may not function as efficiently as
established markets. Owning a large percentage of restricted or illiquid
securities could hamper a Portfolio's ability to raise cash to meet
redemptions. Also, because there may not be an established market price for
these securities, the Portfolio may have to estimate their value, which
means that their valuation (and, to a much smaller extent, the valuation of
the Portfolio) may have a subjective element.
SECURIITES LENDING. Each of the Portfolios except the Money Market
Portfolio may seek additional income by lending securities to qualified
institutions. By reinvesting any cash collateral it receives in these
transactions, a Portfolio could realize additional gains or losses. If the
borrower fails to return the securities and the invested collateral has
declined in value, the Portfolio could lose money.
DERIVATIVES. Each of the Portfolios except the Money Market Portfolio
may invest in derivatives. Derivatives, a category that includes options
and futures, are financial instruments whose value derives from another
security, an index or a currency. Each Portfolio may use derivatives for
hedging (attempting to offset a potential loss in one position by
establishing an interest in an opposite position). This includes the use of
currency-based derivatives for hedging its positions in foreign securities.
Each Portfolio may also use derivatives for speculation (investing for
potential income or capital gain).
While hedging can guard against potential risks, it adds to the
Portfolio's expenses and can eliminate some opportunities for gains. There
is also a risk that a derivative intended as a hedge may not perform as
expected.
The main risk with derivatives is that some types can amplify a gain or
loss, potentially earning or losing substantially more money than the actual
cost of the derivative.
With some derivatives, whether used for hedging or speculation, there
is also the risk that the counterpart may fail to honor its contract terms,
causing a loss for the Portfolio. In addition, suitable derivative
investments for hedging or speculative purposes may not be available.
HIGH-YIELD BONDS. The Opportunity Growth Portfolio, Mid Cap Growth
Portfolio, World Growth Portfolio, Growth Portfolio, High Yield Portfolio
and Income Portfolio may invest in high-yield bonds. High-yield bonds are
debt securities rated below BBB by S&P or Baa by Moody's. To the extent
that a Portfolio invests in high-yield bonds, it takes on certain risks:
o The risk of a bond's issuer defaulting on principal or interest
payments is greater than on higher quality bonds.
o Issuers of high-yield bonds are less secure financially and are more
likely to be hurt by interest rate increases and declines in the
health of the issuer or the economy.
SHORT-TERM TRADING. The investment strategy for the Opportunity Growth
Portfolio, Mid Cap Growth Portfolio, World Growth Portfolio, Growth
Portfolio, High Yield Portfolio, and Income Portfolio at times may include
short-term trading. While a Portfolio ordinarily does not trade securities
for short-term profits, it will sell any security at any time it believes
best, which may result in short-term trading. Short-term trading can
increase a Portfolio's transaction costs.
INTERNATIONAL EXPOSURE. Many U.S. companies in which the Opportunity
Growth Portfolio, Mid Cap Growth Portfolio, World Growth Portfolio, Growth
Portfolio, High Yield Portfolio, and Income Portfolio may invest generate
significant revenues and earnings from abroad. As a result, these companies
and the prices of their securities may be affected by weaknesses in global
and regional economies and the relative value of foreign currencies to the
U.S. dollar. These factors, taken as a whole, could adversely affect the
price of Portfolio shares.
BONDS. The value of any bonds held by a Portfolio is likely to decline
when interest rates rise; this risk is greater for bonds with longer
maturities. A less significant risk is that a bond issuer could default on
principal or interest payments, possibly causing a loss for the Portfolio.
COMPUTER RISKS. Lutheran Brotherhood does not currently anticipate
that computer problems related to the year 2000 or to the conversion of
various European currencies into a single currency, the Euro, will have a
material effect on any Portfolio. However, there can be no assurances in
this area, including the possibility that year 2000 computer problems could
negatively affect communications systems, the investment markets or the
economy in general.
SECURITIES RATINGS. When fixed-income securities are rated by one or
more independent rating agencies, a Portfolio uses these ratings to
determine bond quality. Investment grade bonds are those that are rated
within or above the BBB major rating category by S&P or the Baa major rating
category by Moody's, or unrated but considered of equivalent quality by the
Portfolio's adviser. High-yield bonds are below investment grade bonds in
terms of quality.
In cases where a bond is rated in conflicting categories by different
rating agencies, a Portfolio (other than the Money Market Portfolio) may
choose to follow the higher rating. If a bond is unrated, the Portfolio may
assign it to a given category based on its own credit research. If a rating
agency downgrades a security, the Portfolio will determine whether to hold
or sell the security, depending on all of the facts and circumstances at
that time.
DEFENSIVE INVESTING. During unusual market conditions, each Portfolio
(other than the Money Market Portfolio) may place up to 100% of its total
assets in cash or quality short-term debt securities. To the extent that
the Portfolio does this, it is not pursuing its investment objective.
FINANCIAL HIGHLIGHTS
The financial highlights tables for each of the Portfolios are intended
to help you understand the Portfolios' financial performance for the past 5
years or, if shorter, the period of the Portfolios' operations. The total
returns in the tables represent the rate that an investor would have earned
or lost on an investment in a Portfolio (assuming reinvestment of all
dividends and distributions). The returns do not reflect any charges that
would normally occur at the separate account level. This information has
been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report, along with the Portfolios' financial statements, are included in the
Annual Report for Variable Products for the fiscal year ended December 31,
1999, which is available upon request.
<PAGE>
<TABLE>
<CAPTION>
Opportunity Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------
For the period from
Year Ended Year Ended Year Ended 1/18/96 (effective
12/31/99 12/31/98 12/31/97 date) to 12/31/96
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $11.06 $11.55 $11.50 $10.00
------ ------ ------ ------
Investment Operations -
Net investment income (0.01) 0.03 0.06 0.02
Net realized and unrealized gain
on investments (a) 3.05 (0.37) 0.05 1.90
------ ------ ------ ------
Total from investment operations 3.04 (0.34) 0.11 1.92
------ ------ ------ ------
Less Distributions from:
Net investment income 0.00 (0.03) (0.06) (0.02)
Net realized gain on investments 0.00 (0.12) -- (0.40)
------ ------ ------ ------
Total Distributions 0.00 (0.15) (0.06) (0.42)
------ ------ ------ ------
Net asset value, end of period $14.10 $11.06 $11.55 $11.50
====== ====== ====== ======
Total investment return at
net asset value (%) 27.55% (2.99%) 0.93% 19.17%
Net assets, end of period (in millions) $436.9 $372.2 $391.5 $246.6
Ratio of expenses to average
net assets (%) 0.40% 0.40% 0.40% 0.40%(b)
Ratio of net investment income to
average net assets (%) (0.09%) 0.30% 0.65% 0.27%(b)
Portfolio turnover rate (%) 60% 134% 147% 155%
- ----------------------------------
(a) The amount shown is a balancing figure and may not agree with the change in aggregate gains and losses of
portfolio securities as a result of the timing of sales and redemption of fund shares.
(b) Computed on an annualized basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Mid Cap Growth Portfolio
- ----------------------------------------------------------------------------------------
For the period from
January 30, 1998
Year Ended (effective date) to
12/31/99 December 31, 1998
--------------------------------------
<S> <C> <C>
Net asset value, beginning of period $11.13 $10.00
------ ------
Investment Operations -
Net investment income 0.02 0.04
Net realized and unrealized gain
on investments (a) 5.49 1.13
------ ------
Total from investment operations 5.51 1.17
------ ------
Less Distribution from:
Dividends from net investment income (0.02) (0.04)
------ ------
Net asset value, end of period $16.62 $11.13
====== ======
Total investment return at
net asset value 49.64% 11.62%
Net assets, end of period (in millions) $271.7 $95.7
Ratio of expenses to average
net assets 0.40% 0.40%(b)
Ratio of net investment income to
average net assets 0.26% 0.64%(b)
Portfolio turnover rate 148% 125%
- ----------------------------------
(a) The amount shown is a balancing figure and may not agree with the change in aggregate gains and losses of
portfolio securities as a result of the timing of sales and redemption of fund shares.
(b) Computed on an annualized basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
World Growth Portfolio
- -------------------------------------------------------------------------------------------------------------------
For the period from
Year Ended Year Ended Year Ended 1/18/96 (effective
12/31/99 12/31/98 12/31/97 date) to 12/31/96
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.67 $11.12 $10.95 $10.00
------ ------ ------ ------
Investment Operations -
Net investment income 0.11 0.12 0.10 0.08
Net realized and unrealized gain
on investments (a) 4.21 1.74 0.21 0.96
------ ------ ------ ------
Total from investment operations 4.32 1.86 0.31 1.04
------ ------ ------ ------
Less Distributions from:
Net investment income (0.06) (0.21) (0.13) (0.09)
Net realized gain on investments 0.00 (0.10) (0.01) --
------ ------ ------ ------
Total Distributions (0.06) (0.31) (0.14) (0.09)
------ ------ ------ ------
Net asset value, end of period 16.93 12.67 $11.12 $10.95
====== ====== ====== ======
Total investment return at
net asset value (%) 34.13% 16.75% 2.81% 10.41%
Net assets, end of period (in millions) $550.1 $369.7 $287.2 $174.1
Ratio of expenses to average
net assets (%) 0.85% 0.85% 0.85% 0.85%(b)
Ratio of net investment income to
average net assets (%) 0.89% 1.04$ 1.08% 1.34%(b)
Portfolio turnover rate (%) 23% 19% 19% 9%
- ----------------------------------
(a) The amount shown is a balancing figure and may not agree with the change in aggregate gains and losses of
portfolio securities as a result of the timing of sales and redemption of fund shares.
(b) Computed on an annualized basis.
</TABLE>
<PAGE>
<TABLE>
<CAPTION
Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.51 $21.58 $19.32 $18.27 $13.51
------ ------ ------ ------ ------
Investment Operations -
Net investment income 0.11 0.19 0.21 0.24 0.24
Net realized and unrealized gain
on investments (a) 9.14 5.28 4.97 3.43 4.76
------ ------ ------ ----- -----
Total from investment operations 9.25 5.47 5.18 3.67 5.00
------ ------ ------ ----- -----
Less Distributions from:
Net investment income (0.11) (0.19) (0.21) (0.24) (0.24)
Net realized gain on investments (2.41) (3.35) (2.71) (2.38) --
------ ------ ------ ----- -----
Total Distributions (2.52) (3.54) (2.92) (2.62) (0.24)
------ ------ ------ ----- -----
Net asset value, end of period $30.24 $23.51 $21.58 $19.32 $18.27
====== ====== ====== ====== ======
Total investment return at
net asset value (%) 43.61% 28.38% 30.18% 22.44% 37.25%
Net assets, end of period (in millions) $4,913.3 $3,320.0 $2,426.1 $1,658.6 $1,173.1
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 (%) 0.45% 0.94% 1.11% 1.41% 1.53%
Portfolio turnover rate (%) 124% 152% 193% 223% 184%
- ----------------------------------
(a) The amount shown is a balancing figure and may not agree with the change in aggregate gains and losses of
portfolio securities as a result of the timing of sales and redemption of fund shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
High Yield Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.16 $10.44 $10.06 $ 9.94 $ 9.18
------ ------ ------ ------ ------
Investment Operations -
Net investment income 0.99 0.99 0.98 0.98 0.96
Net realized and unrealized gain
on investments (a) (0.07) (1.12) 0.37 0.12 0.76
------ ------ ------ ----- -----
Total from investment operations 0.92 (0.13) 1.35 1.10 1.72
------ ------ ------ ----- -----
Less Distributions from:
Net investment income (0.99) (1.00) (0.97) (0.98) (0.96)
Net realized gain on investments 0.00 (0.15) -- -- --
------ ------ ------ ----- -----
Total Distributions (0.99) (1.15) (0.97) (0.98) (0.96)
------ ------ ------ ----- -----
Net asset value, end of period $ 9.09 $9.16 $10.44 $10.06 $ 9.94
====== ====== ====== ====== ======
Total investment return at
net asset value (%) 10.52% (1.50%) 14.10% 11.55% 19.62%
Net assets, end of period (in millions) $1,525.7 $1,427.3 $1,344.6 $1,026.7 $792.5
Ratio of expenses to average
net assets (%) 0.40% 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to
average net assets (%) 10.71% 10.04% 9.58% 9.83% 9.94%
Portfolio turnover rate (%) 59% 71% 105% 107% 67%
- ----------------------------------
(a) The amount shown is a balancing figure and may not agree with the change in aggregate gains and losses of
portfolio securities as a result of the timing of sales and redemption of fund shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Income Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.21 $ 9.92 $ 9.75 $10.08 $ 9.04
------ ------ ------ ------ ------
Investment Operations -
Net investment income 0.59 0.61 0.65 0.63 0.65
Net realized and unrealized gain
on investments (a) (0.80) 0.29 0.17 (0.33) 1.04
------ ------ ------ ----- -----
Total from investment operations (0.21) 0.90 0.82 0.30 1.69
------ ------ ------ ----- -----
Less Distributions from:
Net investment income (0.59) (0.61) (0.65) (0.63) (0.65)
Net realized gain on investments -- -- -- --
------ ------ ------ ----- -----
Total Distributions (0.59) (0.61) (0.65) (0.63) (0.65)
------ ------ ------ ----- -----
Net asset value, end of period $ 9.41 $10.21 $ 9.92 $ 9.75 $10.08
====== ====== ====== ====== ======
Total investment return at
net asset value (%) (2.01%) 9.37% 8.75% 3.21% 19.36%
Net assets, end of period (in millions) $1,066.0 $1,074.3 $880.4 $801.2 $762.1
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 (%) 6.09% 6.06% 6.68% 6.54% 6.81%
Portfolio turnover rate (%) 91% 86% 117% 150% 132%
- ----------------------------------
(a) The amount shown is a balancing figure and may not agree with the change in aggregate gains and losses of
portfolio securities as a result of the timing of sales and redemption of fund shares.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Money Market Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
Investment Operations -
Net investment income 0.05 0.05 0.05 0.05 0.06
------ ------ ------ ----- -----
Less Distributions from:
Net investment income (0.05) (0.05) (0.05) (0.05) (0.06)
------ ------ ------ ----- -----
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
Total investment return at
net asset value (%) 4.94% 5.32% 5.43% 5.20% 5.71%
Net assets, end of period (in millions) $294.9 $193.8 $121.2 $103.9 $66.1
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 (%) 4.86% 5.16% 5.27% 5.07% 5.55%
- ----------------------------------------
(a) The amount shown is a balancing figure and may not agree with the change in aggregate gains and losses of
portfolio securities as a result of the timing of sales and redemption of fund shares.
</TABLE>
<PAGE>
[Back cover page]
The Statement of Additional Information which is incorporated by
reference into this Prospectus contains additional information about the
Fund and its Portfolios. Additional information about the Portfolios'
investments is available in the Fund's annual and semi-annual reports for
variable products. In the Fund's annual report, you will find a discussion
of the market conditions and investment strategies that significantly
affected the performance of each of the Portfolios during their last fiscal
year. You may request a free copy of the Statement of Additional
Information, the annual report, or the semi-annual report, or you may make
additional requests or inquiries by calling 1-800-990-6290. You also may
review and copy information about the Portfolios (including the Statement of
Additional Information) at the Public Reference Room of the Securities and
Exchange Commission in Washington, DC. You may get more information about
the Public Reference Room by calling 1-202-942-8090. You also may get
information about the Portfolios on the EDGAR database at the SEC Web site
(www.sec.gov) and copies of the information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, DC 20549-6009, or by sending an e-mail to: [email protected].
1940 Act File No. 811-4603
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
LB SERIES FUND, INC.
May 1, 2000
This Statement of Additional Information is not a Prospectus, but
should be read in conjunction with the Prospectus for LB Series Fund, Inc.
(the "Fund") dated May 1, 2000. The Report of Independent Accountants and
financial statements included in the Annual Report to Shareholders for the
fiscal year ended December 31, 1999 of the Fund are a separate report
furnished with this Statement of Additional Information and are incorporated
herein by reference. To receive a copy of the Prospectus or the Annual
Report for the Fund, write to LB Series Fund, Inc., 625 Fourth Avenue South,
Minneapolis, Minnesota 55415 or call toll-free (800) 328-4552 for the
Automated Service Line or (800) 990-6290 to speak with a customer service
associate.
TABLE OF CONTENTS
PAGE
History of the Fund...................................................
Investment Policies and Restrictions..................................
Fund Management.......................................................
Investment Advisory Services..........................................
Brokerage Transactions................................................
Code of Ethics........................................................
Capital Stock.........................................................
Net Asset Value.......................................................
Tax Status............................................................
Calculation of Performance Data.......................................
Description of Debt Ratings...........................................
Report of Independent Public Accountants and Financial Statements.....
<PAGE>
HISTORY OF THE FUND
The Fund is a diversified open-end management investment company, a
Minnesota corporation organized on February 24, 1986. Prior to January 31,
1994, the Fund was known as LBVIP Series Fund, Inc. The Fund is made up of
seven separate Portfolios: the Opportunity Growth Portfolio, the Mid Cap
Growth Portfolio, the World Growth Portfolio, the Growth Portfolio, the High
Yield Portfolio, the Income Portfolio, and the Money Market Portfolio. Each
Portfolio is in effect a separate investment fund, and a separate class of
capital stock is issued with respect to each Portfolio.
INVESTMENT POLICIES AND RESTRICTIONS
ADDITIONAL INVESTMENT PRACTICES
In addition to those practices stated in the Prospectus, various of the
Portfolios may purchase the following securities or may engage in the
following transactions.
OTHER SECURITIES
The Opportunity Growth Portfolio, the Mid Cap Growth Portfolio, the
World Growth Portfolio, and the Growth Portfolio may each invest in other
types of securities, including bonds, preferred stocks, convertible bonds,
convertible preferred stocks, warrants, American Depository Receipts
(ADR's), and other debt or equity securities. In addition, each of these
Portfolios may invest in U.S. Government securities or cash, and the World
Growth Portfolio may also invest in European Depository Receipts (EDR's) and
the securities of foreign investment trusts and or trusts.
The Opportunity Growth Portfolio, the Mid Cap Growth Portfolio, the
World Growth Portfolio, and the Growth Portfolio will not use any minimum
level of credit quality. Debt obligations may be rated less than investment
grade, which is defined as having a quality rating below "Baa", as rated by
Moody's Investors Service, Inc. ("Moody's"), or below "BBB", as rated by
Standard & Poor's Corporation ("S&P"). For a description of Moody's and
S&P's ratings, see "Description of Debt Ratings". Securities rated below
investment grade (sometimes referred to as "high yield" or "junk bonds") are
considered to be speculative and involve certain risks, including a higher
risk of default and greater sensitivity to interest rate and economic
changes.
The High Yield Portfolio and the Income Portfolio may also invest in
common stocks, warrants to purchase stocks, bonds or preferred stocks
convertible into common stock, and other equity securities.
BANK INSTRUMENTS
The Money Market Portfolio may invest in bank instruments including,
but not limited to, certificates of deposit, bankers' acceptances and time
deposits. Certificates of deposit are generally short-term (i.e., less than
one year), interest-bearing negotiable certificates issued by commercial
banks or savings and loan associations against funds deposited in the
issuing institution. A banker's acceptance is a time draft drawn on a
commercial bank by a borrower, usually in connection with an international
commercial transaction (to finance the import, export, transfer or storage
of goods). A banker's acceptance may be obtained from a domestic or foreign
bank including a U.S. branch or agency of a foreign bank. The borrower is
liable for payment as well as the bank, which unconditionally guarantees to
pay the draft at its face amount on the maturity date. Most acceptances
have maturities of six months or less and are traded in secondary markets
prior to maturity. Time deposits are non-negotiable deposits for a fixed
period of time at a stated interest rate.
U.S. branches of foreign banks are offices of foreign banks and are not
separately incorporated entities. They are chartered and regulated either
federally or under state law. U.S. federal branches of foreign banks are
chartered and regulated by the Comptroller of the Currency, while state
branches and agencies are chartered and regulated by authorities of the
respective state or the District of Columbia. U.S. branches of foreign
banks may accept deposits and thus are eligible for FDIC insurance; however,
not all such branches elect FDIC insurance. U.S. branches of foreign banks
can maintain credit balances, which are funds received by the office
incidental to or arising out of the exercise of their banking powers and can
exercise other commercial functions, such as lending activities.
Investing in foreign branches of U.S. banks and U.S. branches of
foreign banks may involve risks. These risks may include future unfavorable
political and economic developments, possible withholding or confiscatory
taxes, seizure of foreign deposits, currency controls, interest limitations
and other governmental restrictions that might affect payment of principal
or interest, and possible difficulties pursuing or enforcing claims against
banks located outside the U.S. Additionally, foreign issuers are not
generally subject to uniform accounting, auditing and financial reporting
standards or other regulatory requirements and practices comparable to U.S.
issuers, and there may be less public information available about foreign
banks and their branches and agencies.
REPURCHASE AGREEMENTS
Each of the Portfolios may engage in repurchase agreement transactions
in pursuit of its investment objective. A repurchase agreement consists of a
purchase and a simultaneous agreement to resell an investment for later
delivery at an agreed upon price and rate of interest. The Portfolio or its
custodian will take possession of the obligations subject to a repurchase
agreement. If the original seller of a security subject to a repurchase
agreement fails to repurchase the security at the agreed upon time, the
Portfolio could incur a loss due to a drop in the market value of the
security during the time it takes the Portfolio to either sell the security
or take action to enforce the original seller's agreement to repurchase the
security. Also, if a defaulting original seller filed for bankruptcy or
became insolvent, disposition of such security might be delayed by pending
court action. The Portfolio may only enter into repurchase agreements with
banks and other recognized financial institutions such as broker/dealers
which are found by Lutheran Brotherhood (or a sub-adviser) to be
creditworthy.
RESTRICTED SECURITIES
The Portfolios may buy or sell restricted securities, including
securities that meet the requirements of Rule 144A under the Securities Act
of 1933 ("Rule 144A Securities"). Securities may be resold pursuant to Rule
144A under certain circumstances only to qualified institutional buyers as
defined in the rule, and the markets and trading practices for such
securities are relatively new and still developing; depending on the
development of such markets, such Rule 144A Securities may be deemed to be
liquid as determined by or in accordance with methods adopted by the
Directors. Under such methods the following factors are considered, among
others: the frequency of trades and quotes for the security, the number of
dealers and potential purchasers in the market, market making activity, and
the nature of the security and marketplace trades. Investments in Rule 144A
Securities could have the effect of increasing the level of a Portfolio's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing such securities. Also, a Portfolio may be
adversely impacted by the subjective valuation of such securities in the
absence of an active market for them. Restricted securities that are not
resalable under Rule 144A may be subject to risks of illiquidity and
subjective valuations to a greater degree than Rule 144A securities.
REVERSE REPURCHASE AGREEMENTS
Each of the Portfolios also may enter into reverse repurchase
agreements, which are similar to borrowing cash. A reverse repurchase
agreement is a transaction in which the Portfolio transfers possession of a
portfolio instrument to another person, such as a financial institution,
broker or dealer, in return for a percentage of the instrument's market
value in cash, with an agreement that at a stipulated date in the future the
Portfolio will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Portfolio to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
the ability to enter into reverse repurchase agreements does not assure that
the Portfolio will be able to avoid selling portfolio instruments at a
disadvantageous time. The Portfolio will engage in reverse repurchase
agreements which are not in excess of 60 days to maturity and will do so to
avoid borrowing cash and not for the purpose of investment leverage or to
speculate on interest rate changes. When effecting reverse repurchase
agreements, assets of the Portfolio in a dollar amount sufficient to make
payment of the obligations to be purchased are segregated on the Portfolio's
records at the trade date and maintained until the transaction is settled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each of the Portfolios may purchase securities on a when-issued and
delayed delivery basis. When-issued and delayed delivery transactions arise
when U.S. Government obligations and other types of securities are bought by
the Portfolio with payment and delivery taking place in the future. The
settlement dates of these transactions, which may be a month or more after
entering into the transaction, are determined by mutual agreement of the
parties. There are no fees or other expenses associated with these types of
transactions other than normal transaction costs. To the extent a Portfolio
engages in when-issued and delayed delivery transactions, it will do so for
the purpose of acquiring portfolio instruments consistent with its
investment objective and policies and not for the purpose of investment
leverage or to speculate on interest rate changes. On the settlement date,
the value of such instruments may be less than the cost thereof. When
effecting when-issued and delayed delivery transactions, a Portfolio will
maintain liquid securities, cash, or cash equivalents of a dollar amount
sufficient to make payment for the obligations to be purchased until the
transaction has been settled.
LENDING SECURITIES (ALL PORTFOLIOS EXCEPT THE MONEY MARKET PORTFOLIO)
Consistent with applicable regulatory requirements, each of the
Portfolios may from time to time lend the securities it holds to broker-
dealers, provided that such loans are made pursuant to written agreements
and are continuously secured by collateral in the form of cash, U.S.
Government securities, irrevocable standby letters of credit or other liquid
securities in an amount at all times equal to at least the market value of
the loaned securities plus the accrued interest and dividends. In electing
to engage in securities lending for a Portfolio, the Adviser will take into
account the investment objective and principal strategies of the Portfolio.
For the period during which the securities are on loan, the lending
Portfolio will be entitled to receive the interest and dividends, or amounts
equivalent thereto, on the loaned securities and a fee from the borrower or
interest on the investment of the cash collateral. The right to terminate
the loan will be given to either party subject to appropriate notice. Upon
termination of the loan, the borrower will return to the Portfolio
securities identical to the loaned securities.
The primary risk in lending securities is that the borrower may become
insolvent on a day on which the loaned security is rapidly increasing in
value. In such event, if the borrower fails to return the loaned security,
the existing collateral might be insufficient to purchase back the full
amount of the security loaned, and the borrower would be unable to furnish
additional collateral. The borrower would be liable for any shortage, but
the lending Portfolio would be an unsecured creditor with respect to such
shortage and might not be able to recover all or any thereof. However, this
risk may be minimized by a careful selection of borrowers and securities to
be lent and by monitoring collateral.
No Portfolio will lend securities to broker-dealers affiliated with
Lutheran Brotherhood or a sub-adviser. Lutheran Brotherhood believes that
this will not affect the Portfolio's ability to maximize its securities
lending opportunities. No Portfolio may lend any security or make any other
loan if, as a result, more than one-third of its total assets would be lent
to other parties.
PUT AND CALL OPTIONS (ALL PORTFOLIOS EXCEPT THE MONEY MARKET PORTFOLIO)
Selling ("Writing") Covered Call Options: The Portfolios may from time
to time sell ("write") covered call options on any portion of their
investments as a hedge to provide partial protection against adverse
movements in prices of securities in those Portfolios and, subject to the
limitations described below, for the non-hedging purpose of attempting to
create additional income. A call option gives the buyer of the option, upon
payment of a premium, the right to call upon the writer to deliver a
specified amount of a security on or before a fixed date at a predetermined
("strike") price. As the writer of a call option, a Portfolio assumes the
obligation to deliver the underlying security to the holder of the option on
demand at the strike price. This obligation is held by the Portfolio until
either the option expires or a closing transaction is made.
If the price of a security hedged by a call option falls below or
remains below the strike price of the option, a Portfolio will generally not
be called upon to deliver the security. A Portfolio will, however, retain
the premium received for the option as additional income, offsetting all or
part of any decline in the value of the security. If the price of a hedged
security rises above or remains above the strike price of the option, the
Portfolio will generally be called upon to deliver the security. In this
event, a Portfolio limits its potential gain by limiting the value it can
receive from the security to the strike price of the option plus the option
premium.
Buying Call Options: The Portfolios may also from time to time purchase
call options on securities in which those Portfolios may invest. As the
holder of a call option, a Portfolio has the right (but not the obligation)
to purchase the underlying security or currency at the exercise price at any
time during the option period (American style) or at the expiration of the
option (European style). A Portfolio generally will purchase such options as
a hedge to provide protection against adverse movements in the prices of
securities which the Portfolio intends to purchase. In purchasing a call
option, a Portfolio would realize a gain if, during the option period, the
price of the underlying security increased by more than the amount of the
premium paid. A Portfolio would realize a loss equal to all or a portion of
the premium paid if the price of the underlying security decreased, remained
the same, or did not increase by more than the premium paid.
Selling Put Options: The Portfolios may from time to time sell
("write") covered put options if the put option is part of a combined
position (see "Combined Position Option" below). As the writer of a put
option, the Portfolio assumes the obligation to pay a predetermined
("strike") price for the option's underlying security if the holder of the
option chooses to exercise it. Until the option expires or a closing
transaction is made, the Portfolio must continue to be prepared to pay the
strike price, regardless of price movements in the underlying security.
If the price of the underlying security remains the same or rises above
the strike price, the Portfolio generally will not be called upon to
purchase the security. The Portfolio will, however, retain the premium
received for the option as additional income. If the price of the
underlying security falls below the strike price, the Portfolio may be
called upon to purchase the security at the strike price.
Buying Put Options: The Portfolios may from time to time purchase put
options on any portion of their investments. A put option gives the buyer of
the option, upon payment of a premium, the right (but not the obligation) to
deliver a specified amount of a security to the writer of the option on or
before a fixed date at a predetermined ("strike") price. A Portfolio
generally will purchase such options as a hedge to provide protection
against adverse movements in the prices of securities in the Portfolio. In
purchasing a put option, a Portfolio would realize a gain if, during the
option period, the price of the security declined by an amount in excess of
the premium paid. A Portfolio would realize a loss equal to all or a portion
of the premium paid if the price of the security increased, remained the
same, or did not decrease by more than the premium paid.
Options on Foreign Currencies: The Portfolios may also write covered
call options and purchase put and call options on foreign currencies as a
hedge against changes in prevailing levels of currency exchange rates.
Index Options: As part of its options transactions, the Portfolios may
also purchase and sell call options and put options on stock and bond
indices. Options on securities indices are similar to options on a security
except that, upon the exercise of an option on a securities index,
settlement is made in cash rather than in specific securities.
Combined Position Options. The Portfolios may purchase and sell
options in combination with each other or in combination with futures or
forward contracts, to adjust the risk and return characteristics of the
overall position. For example, the Portfolios may engage in "straddle"
and "spread" transactions. A straddle is established by buying both a call
and a put option on the same underlying security, each with the same
exercise price and expiration date. A spread is a combination of two or more
call options or put options on the same security with differing exercise
prices or times to maturity. The particular strategies employed by a
Portfolio will depend on Lutheran Brotherhood's or the Sub-adviser's
perception of anticipated market movements.
Negotiated Transactions: The Portfolios will generally purchase and
sell options traded on a national securities or options exchange. Where
options are not readily available on such exchanges, a Portfolio may
purchase and sell options in negotiated transactions. A Portfolio effects
negotiated transactions only with investment dealers and other financial
institutions deemed creditworthy by its investment adviser. Despite the
investment adviser's or sub-adviser's best efforts to enter into negotiated
options transactions with only creditworthy parties, there is always a risk
that the opposite party to the transaction may default in its obligation to
either purchase or sell the underlying security at the agreed upon time and
price, resulting in a possible loss by the Portfolio. This risk is described
more completely in the section of this Statement of Additional Information
entitled, "Risks of Transactions in Options and Futures". Options written or
purchased by a Portfolio in negotiated transactions are illiquid and there
is no assurance that a Portfolio will be able to effect a closing purchase
or closing sale transaction at a time when its investment adviser or sub-
adviser believes it would be advantageous to do so. In the event the
Portfolio is unable to effect a closing transaction with the holder of a
call option written by the Portfolio, the Portfolio may not sell the
security underlying the option until the call written by the Portfolio
expires or is exercised.
Closing Transactions: The Portfolios may dispose of options which they
have written by entering into "closing purchase transactions". Those
Portfolios may dispose of options which they have purchased by entering into
"closing sale transactions". A closing transaction terminates the rights of
a holder, or the obligation of a writer, of an option and does not result in
the ownership of an option.
A Portfolio realizes a profit from a closing purchase transaction if
the premium paid to close the option is less than the premium received by
the Fund from writing the option. The Portfolio realizes a loss if the
premium paid is more than the premium received. The Portfolio may not enter
into a closing purchase transaction with respect to an option it has written
after it has been notified of the exercise of such option.
A Portfolio realizes a profit from a closing sale transaction if the
premium received to close out the option is more than the premium paid for
the option. A Portfolio realizes a loss if the premium received is less than
the premium paid.
FINANCIAL FUTURES AND OPTIONS ON FUTURES (ALL PORTFOLIOS EXCEPT THE MONEY
MARKET PORTFOLIO)
Selling Futures Contracts: The Portfolios may sell financial futures
contracts ("futures contracts") as a hedge against adverse movements in the
prices of securities in those Portfolios. Such contracts may involve futures
on items such as U.S. Government Treasury bonds, notes and bills, government
mortgage-backed securities; corporate and municipal bond indices; and stock
indices. A futures contract sale creates an obligation for the Portfolio, as
seller, to deliver the specific type of instrument called for in the
contract at a specified future time for a specified price. In selling a
futures contract, the Portfolio would realize a gain on the contract if,
during the contract period, the price of the securities underlying the
futures contract decreased. Such a gain would be expected to approximately
offset the decrease in value of the same or similar securities in the
Portfolio. The Portfolio would realize a loss if the price of the securities
underlying the contract increased. Such a loss would be expected to
approximately offset the increase in value of the same or similar securities
in the Portfolio.
Futures contracts have been designed by and are traded on boards of
trade which have been designated "contract markets" by the Commodity Futures
Trading Commission ("CFTC"). These boards of trade, through their clearing
corporations, guarantee performance of the contracts. Although the terms of
some financial futures contracts specify actual delivery or receipt of
securities, in most instances these contracts are closed out before the
settlement due date without the making or taking of delivery of the
securities. Other financial futures contracts, such as futures contracts on
a securities index, by their terms call for cash settlements. The closing
out of a futures contract is effected by entering into an offsetting
purchase or sale transaction.
When a Portfolio sells a futures contract, or a call option on a
futures contract, it is required to make payments to the commodities broker
which are called "margin" by commodities exchanges and brokers.
The payment of "margin" in these transactions is different than
purchasing securities "on margin". In purchasing securities "on margin" an
investor pays part of the purchase price in cash and receives an extension
of credit from the broker, in the form of a loan secured by the securities,
for the unpaid balance. There are two categories of "margin" involved in
these transactions: initial margin and variation margin. Initial margin does
not represent a loan between a Portfolio and its broker, but rather is a
"good faith deposit" by a Portfolio to secure its obligations under a
futures contract or an option. Each day during the term of certain futures
transactions, a Portfolio will receive or pay "variation margin" equal to
the daily change in the value of the position held by the Portfolio.
Buying Futures Contracts: The Portfolios may purchase financial futures
contracts as a hedge against adverse movements in the prices of securities
which they intend to purchase. The Portfolios may buy and sell futures
contracts for a number of reasons, including to manage their exposure to
changes in securities prices and foreign currencies as an efficient means of
adjusting their overall exposure to certain markets in an effort to enhance
income; and to protect the value of portfolio securities. A futures
contract purchase creates an obligation by a Portfolio, as buyer, to take
delivery of the specific type of instrument called for in the contract at a
specified future time for a specified price. In purchasing a futures
contract, a Portfolio would realize a gain if, during the contract period,
the price of the securities underlying the futures contract increased. Such
a gain would approximately offset the increase in cost of the same or
similar securities which a Portfolio intends to purchase. A Portfolio would
realize a loss if the price of the securities underlying the contract
decreased. Such a loss would approximately offset the decrease in cost of
the same or similar securities which a Portfolio intends to purchase.
Options on Futures Contracts: The Portfolios may also sell ("write")
and purchase covered call and put options on futures contracts in connection
with the above strategies. An option on a futures contract gives the buyer
of the option, in return for the premium paid for the option, the right to
assume a position in the underlying futures contract (a long position if the
option is a call and a short position if the option is a put). The writing
of a call option on a futures contract constitutes a partial hedge against
declining prices of securities underlying the futures contract to the extent
of the premium received for the option. The purchase of a put option on a
futures contract constitutes a hedge against price declines below the
exercise price of the option and net of the premium paid for the option. The
purchase of a call option constitutes a hedge, net of the premium, against
an increase in cost of securities which a Portfolio intends to purchase.
Currency Futures Contracts and Options: The Portfolios may also sell
and purchase currency futures contracts (or options thereon) as a hedge
against changes in prevailing levels of currency exchange rates. Such
contracts may be traded on U.S. or foreign exchanges. The Portfolio will not
use such contracts or options for leveraging purposes.
Limitations: The Portfolios may engage in futures transactions, and
transactions involving options on futures, only on regulated commodity
exchanges or boards of trade. A Portfolio will not enter into a futures
contract or purchase or sell related options if immediately thereafter the
sum of the amount of initial margin deposits on the Portfolio's existing
futures and related options positions and premiums paid for options with
respect to futures and options used for non-hedging purposes would exceed 5%
of the market value of the Portfolio's total assets. In addition, in
instances involving the purchase of futures contracts or call options
thereon, a Portfolio will maintain liquid securities, cash, or cash
equivalents in an amount equal to the market value of such contracts.
HYBRID INVESTMENTS (ALL PORTFOLIOS EXCEPT THE MONEY MARKET PORTFOLIO)
As part of their investment program and to maintain greater
flexibility, the Portfolios may invest in hybrid instruments (a potentially
high risk derivative) which have the characteristics of futures, options and
securities. Such instruments may take a variety of forms, such as debt
instruments with interest or principal payments determined by reference to
the value of a currency, security index or commodity at a future point in
time. The risks of such investments would reflect both the risks of
investing in futures, options, currencies and securities, including
volatility and illiquidity. Under certain conditions, the redemption value
of a hybrid instrument could be zero. In addition, because the purchase and
sale of hybrid instruments could take place in an over-the-counter market or
in a private transaction between a Portfolio and the seller of the hybrid
instrument, the creditworthiness of the counter party to the transaction
would be a risk factor which the Portfolio would have to consider. Hybrid
instruments also may not be subject to regulation of the Commodities Futures
Trading Commission ("CFTC"), which generally regulates the trading of
commodity futures by U.S. persons, the SEC, which regulates the offer and
sale of securities by and to U.S. persons, or any other governmental
regulatory authority. None of the Portfolios expect to hold more than 5% of
its total assets in hybrid instruments.
RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES
There are certain risks involved in the use of futures contracts,
options on securities and securities index options, and options on futures
contracts, as hedging devices. There is a risk that the movement in the
prices of the index or instrument underlying an option or futures contract
may not correlate perfectly with the movement in the prices of the assets
being hedged. The lack of correlation could render a Portfolio's hedging
strategy unsuccessful and could result in losses. The loss from investing in
futures transactions is potentially unlimited.
There is a risk that Lutheran Brotherhood or a sub-adviser could be
incorrect in their expectations about the direction or extent of market
factors such as interest rate movements. In such a case a Portfolio would
have been better off without the hedge. In addition, while the principal
purpose of hedging is to limit the effects of adverse market movements, the
attendant expense may cause a Portfolio's return to be less than if hedging
had not taken place. The overall effectiveness of hedging therefore depends
on the expense of hedging and Lutheran Brotherhood's or a Portfolio's sub-
adviser's accuracy in predicting the future changes in interest rate levels
and securities price movements.
A Portfolio will generally purchase and sell options traded on a
national securities or options exchange. Where options are not readily
available on such exchanges a Portfolio may purchase and sell options in
negotiated transactions. When a Portfolio uses negotiated options
transactions it will seek to enter into such transactions involving only
those options and futures contracts for which there appears to be an active
secondary market. There is nonetheless no assurance that a liquid secondary
market such as an exchange or board of trade will exist for any particular
option or futures contract at any particular time. If a futures market were
to become unavailable, in the event of an adverse movement, a Portfolio
would be required to continue to make daily cash payments of maintenance
margin if it could not close a futures position. If an options market were
to become unavailable and a closing transaction could not be entered into,
an option holder would be able to realize profits or limit losses only by
exercising an option, and an option writer would remain obligated until
exercise or expiration. In addition, exchanges may establish daily price
fluctuation limits for options and futures contracts, and may halt trading
if a contract's price moves upward or downward more than the limit in a
given day. On volatile trading days when the price fluctuation limit is
reached or a trading halt is imposed, it may be impossible for a Portfolio
to enter into new positions or close out existing positions. If the
secondary market for a contract is not liquid because of price fluctuation
limits or otherwise, it could prevent prompt liquidation of unfavorable
positions, and potentially could require a Portfolio to continue to hold a
position until delivery or expiration regardless of changes in its value. As
a result, a Portfolio's access to other assets held to cover its options or
futures positions could also be impaired.
When conducting negotiated options transactions there is a risk that
the opposite party to the transaction may default in its obligation to
either purchase or sell the underlying security at the agreed upon time and
price. In the event of such a default, a Portfolio could lose all or part of
the benefit it would otherwise have realized from the transaction, including
the ability to sell securities it holds at a price above the current market
price or to purchase a security from another party at a price below the
current market price.
Finally, if a broker or clearing member of an options or futures
clearing corporation were to become insolvent, a Portfolio could experience
delays and might not be able to trade or exercise options or futures
purchased through that broker or clearing member. In addition, a Portfolio
could have some or all of its positions closed out without its consent. If
substantial and widespread, these insolvencies could ultimately impair the
ability of the clearing corporations themselves.
FOREIGN FUTURES AND OPTIONS
Participation in foreign futures and foreign options transactions
involves the execution and clearing of trades on or subject to the rules of
a foreign board of trade. Neither the National Futures Association nor any
domestic exchange regulates activities of any foreign boards of trade,
including the execution, delivery and clearing of transactions, or has the
power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign law. This is true even if the exchange is formally linked
to a domestic market so that a position taken on the market may be
liquidated by a transaction on another market. Moreover, such laws or
regulations will vary depending on the foreign country in which the foreign
futures or foreign options transaction occurs. For these reasons, customers
who trade foreign futures or foreign options contracts may not be afforded
certain of the protective measures provided by the Commodity Exchange Act,
the CFTC's regulations and the rules of the National Futures Association and
any domestic exchange, including the right to use reparations proceedings
before the Commission and arbitration proceedings provided by the National
Futures Association or any domestic futures exchange. In particular, funds
received from customers for foreign futures or foreign options transactions
may not be provided the same protections as funds received in respect of
transactions on United States futures exchanges. In addition, the price of
any foreign futures or foreign options contract and, therefore, the
potential profit and loss thereon may be affected by any variance in the
foreign exchange rate between the time an order is placed and the time it is
liquidated, offset or exercised.
SHORT SALES AGAINST THE BOX
The Portfolios may effect short sales, but only if such transactions
are short sale transactions known as short sales "against the box". A short
sale is a transaction in which a Portfolio sells a security it does not own
by borrowing it from a broker, and consequently becomes obligated to replace
that security. A short sale against the box is a short sale where a
Portfolio owns the security sold short or has an immediate and unconditional
right to acquire that security without additional cash consideration upon
conversion, exercise or exchange of options with respect to securities held
in its portfolio. The effect of selling a security short against the box is
to insulate that security against any future gain or loss.
FOREIGN CURRENCY EXCHANGE-RELATED SECURITIES
Foreign Currency Warrants. Foreign currency warrants are warrants which
entitle the holder to receive from their issuer an amount of cash
(generally, for warrants issued in the United States, in U.S. dollars) which
is calculated pursuant to a predetermined formula and based on the exchange
rate between a specified foreign currency and the U.S. dollar as of the
exercise date of the warrant. Foreign currency warrants generally are
exercisable upon their issuance and expire as of a specified date and time.
Foreign currency warrants have been issued in connection with U.S. dollar-
denominated debt offerings by major corporate issuers in an attempt to
reduce the foreign currency exchange risk which, from the point of view of
prospective purchasers of the securities, is inherent in the international
fixed-income marketplace. Foreign currency warrants may attempt to reduce
the foreign exchange risk assumed by purchasers of a security by, for
example, providing for a supplemental payment in the event that the U.S.
dollar depreciates against the value of a major foreign currency such as the
Japanese Yen or German Deutschmark. The formula used to determine the amount
payable upon exercise of a foreign currency warrant may make the warrant
worthless unless the applicable foreign currency exchange rate moves in a
particular direction (e.g., unless the U.S. dollar appreciates or
depreciates against the particular foreign currency to which the warrant is
linked or indexed). Foreign currency warrants are severable from the debt
obligations with which they may be offered, and may be listed on exchanges.
Foreign currency warrants may be exercisable only in certain minimum
amounts, and an investor wishing to exercise warrants who possesses less
than the minimum number required for exercise may be required either to sell
the warrants or to purchase additional warrants, thereby incurring
additional transaction costs. In the case of any exercise of warrants, there
may be a time delay between the time a holder of warrants gives instructions
to exercise and the time the exchange rate relating to exercise is
determined, during which time the exchange rate could change significantly,
thereby affecting both the market and cash settlement values of the warrants
being exercised. The expiration date of the warrants may be accelerated if
the warrants should be delisted from an exchange or if their trading should
be suspended permanently, which would result in the loss of any remaining
"time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case the
warrants were "out-of-the-money," in a total loss of the purchase price of
the warrants. Warrants are generally unsecured obligations of their issuers
and are not standardized foreign currency options issued by the Options
Clearing Corporation ("OCC"). Unlike foreign currency options issued by OCC,
the terms of foreign exchange warrants generally will not be amended in the
event of governmental or regulatory actions affecting exchange rates or in
the event of the imposition of other regulatory controls affecting the
international currency markets. The initial public offering price of foreign
currency warrants is generally considerably in excess of the price that a
commercial user of foreign currencies might pay in the interbank market for
a comparable option involving significantly larger amounts of foreign
currencies. Foreign currency warrants are subject to significant foreign
exchange risk, including risks arising from complex political or economic
factors.
Principal Exchange Rate Linked Securities. Principal exchange rate
linked securities are debt obligations the principal on which is payable at
maturity in an amount that may vary based on the exchange rate between the
U.S. dollar and a particular foreign currency at or about that time. The
return on "standard" principal exchange rate linked securities is enhanced
if the foreign currency to which the security is linked appreciates against
the U.S. dollar, and is adversely affected by increases in the foreign
exchange value of the U.S. dollar; "reverse" principal exchange rate linked
securities are like the "standard" securities, except that their return is
enhanced by increases in the value of the U.S. dollar and adversely impacted
by increases in the value of foreign currency. Interest payments on the
securities are generally made in U.S. dollars at rates that reflect the
degree of foreign currency risk assumed or given up by the purchaser of the
notes (i.e., at relatively higher interest rates if the purchaser has
assumed some of the foreign exchange risk, or relatively lower interest
rates if the issuer has assumed some of the foreign exchange risk, based on
the expectations of the current market). Principal exchange rate linked
securities may in limited cases be subject to acceleration of maturity
(generally, not without the consent of the holders of the securities), which
may have an adverse impact on the value of the principal payment to be made
at maturity.
Performance Indexed Paper. Performance indexed paper is U.S. dollar-
denominated commercial paper the yield of which is linked to certain foreign
exchange rate movements. The yield to the investor on performance indexed
paper is established at maturity as a function of spot exchange rates
between the U.S. dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is
below, and a potential maximum rate of return that is above, market yields
on U.S. dollar-denominated commercial paper, with both the minimum and
maximum rates of return on the investment corresponding to the minimum and
maximum values of the spot exchange rate two business days prior to
maturity.
TEMPORARY DEFENSIVE INVESTMENTS
The Portfolios may hold up to 100% of their assets in cash or short-
term debt securities for temporary defensive position when, in the opinion
of Lutheran Brotherhood or a Portfolio's sub-adviser such a position is more
likely to provide protection against unfavorable market conditions than
adherence to the Portfolios' other investment policies. The types of short-
term instruments in which the Portfolios may invest for such purposes
include short-term money market securities such as repurchase agreements and
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, certificates of deposit, Eurodollar certificates of
deposit, commercial paper and banker's acceptances issued by domestic and
foreign corporations and banks. When investing in short-term money market
obligations for temporary defensive purposes, a Portfolio will invest only
in securities rated at the time of purchase Prime-1 or Prime-2 by Moody's,
A-1 or A-2 by S&P, F-1 or F-2 by Fitch Investors Service, Inc., or unrated
instruments that are determined by Lutheran Brotherhood or the Sub-adviser
to be of a comparable level of quality. When a Portfolio adopts a temporary
defensive position its investment objective may not be achieved.
PORTFOLIO TURNOVER RATE
The rate of portfolio turnover in the Portfolios will not be a limiting
factor when Lutheran Brotherhood or the Sub-adviser deems changes in a
Portfolio's assets appropriate in view of its investment objectives. As a
result, while a Portfolio will not purchase or sell securities solely to
achieve short term trading profits, a Portfolio may sell securities without
regard to the length of time held if consistent with the Portfolio's
investment objective. A higher degree of equity trading activity will
increase brokerage costs to a Portfolio. The portfolio turnover rate is
computed by dividing the dollar amount of securities purchased or sold
(whichever is smaller) by the average value of securities owned during the
year. Short-term investments such as commercial paper and short-term U.S.
Government securities are not considered when computing the turnover rate.
For the last three fiscal years, the portfolio turnover rates of the
Opportunity Growth Portfolio, Mid Cap Growth Portfolio, World Growth
Portfolio, Growth Portfolio, High Yield Portfolio, and Income Portfolio were
as follows:
12/31/99 12/31/98 12/31/97
Opportunity Growth Portfolio 60% 134% 147%
Mid Cap Growth Portfolio 148% 125% --
World Growth Portfolio 23% 19% 19%
Growth Portfolio 124% 152% 193%
High Yield Portfolio 59% 71% 105%
Income Portfolio 91% 86% 117%
COMPUTER RELATED RISKS
Many mutual funds and other companies that issue securities, as well as
government entities upon whom those mutual funds and companies depend, may
be adversely affected by computer systems (whether their own systems or
systems of their service providers) that do not properly process dates
beginning with January 1, 2000 and information related to those dates.
The Investment Manager currently is in the process of reviewing its
internal computer systems as they relate to the Portfolios, as well as the
computer systems of those service providers upon which the Portfolios rely,
in order to obtain reasonable assurances that the Portfolios will not
experience a material adverse impact related to this problem. The
Portfolios do not currently anticipate that this problem will have a
material adverse impact on their portfolio investments, taken as a whole.
There can be no assurances in this area, however, including the possibility
that this problems could negatively affect the investment markets or the
economy generally.
INVESTMENT LIMITATIONS
The fundamental investment restrictions for the Portfolios are set
forth below. These fundamental investment restrictions may not be changed by
a Portfolio except by the affirmative vote of a majority of the outstanding
voting securities of that Portfolio as defined in the Investment Company Act
of 1940. (Under the Investment Company Act of 1940, a "vote of the majority
of the outstanding voting securities" means the vote, at a meeting of
security holders duly called, (i) of 67% or more of the voting securities
present at a meeting if the holders of more than 50% of the outstanding
voting securities are present or represented by proxy or (ii) of more than
50% of the outstanding voting securities, whichever is less (a "1940 Act
Majority Vote").) Under these restrictions:
1. None of the Portfolios may borrow money, except that a Portfolio may
borrow money (through the issuance of debt securities or otherwise) in
an amount not exceeding one-third of the Portfolio's total assets
immediately after the time of such borrowing.
2. None of the Portfolios may issue senior securities, except as permitted
under the Investment Company Act of 1940 or any exemptive order or rule
issued by the Securities and Exchange Commission.
3. None of the Portfolios will make an investment unless, when considering
all its other investments, 75% of the value of a Portfolio's assets
would consist of cash, cash items, obligations of the U.S. Government,
its agencies or instrumentalities, and securities other securities. For
purposes of this restriction, "other securities" are limited for each
issuer to not more than 5% of the value of a Portfolio's assets and to
not more than 10% of the issuer's outstanding voting held by the Fund as
a whole.
4. None of the Portfolios will buy or sell real estate, commodities or
commodity contracts, although the Portfolios may buy and sell securities
or other instruments which are secured by real estate and securities of
real estate investment trusts and of other issuers that engage in real
estate operations and except that the Portfolios may enter into
financial futures contracts, may purchase put options on financial
futures contracts and may purchase and sell call options on financial
futures contracts.
5. None of the Portfolios may lend any of its assets except portfolio
securities. The purchase of corporate or U.S. or foreign governmental
bonds, debentures, notes, certificates of indebtedness, repurchase
agreements or other debt securities of an issuer permitted by a
Portfolio's investment objective and policies will not be considered a
loan for purposes of this limitation.
6. None of the Portfolios will underwrite the securities of other issuers,
except where the Fund may be deemed to be an underwriter for purposes of
certain federal securities laws in connection with the disposition of
portfolio securities and with loans that a Portfolio may make pursuant
to paragraph 5 above.
7. None of the Portfolios will purchase securities of a company in any
industry if as a result of the purchase a Portfolio's holdings of
securities issued by companies in that industry would exceed 25% of the
value of the Portfolio, except that this restriction does not apply to
purchases of obligations issued or guaranteed by the U.S. Government,
its agencies and instrumentalities, or issued by domestic banks. For
purposes of this restriction, neither finance companies as a group nor
utility companies as a group are considered to be a single industry and
will be grouped instead according to their services; for example, gas,
electric, and telephone utilities will each be considered a separate
industry.
The following nonfundamental investment restriction may be changed
without shareholder approval. Under this restriction:
1. None of the Portfolios will purchase any security while borrowings,
including reverse repurchase agreements, representing more than 5% of
the Portfolio's total assets are outstanding.
Section 18(g) of the 1940 Act defines a "senior security" as any bond,
debenture, note, or similar obligation constituting a security and
evidencing indebtedness. Section 18(F)(1) of the 1940 Act prohibits an
open-end investment company from issuing senior securities but permits
borrowings from a bank if immediately after the borrowing there is asset
coverage of at least 300%. The SEC staff has taken the position that a fund
may engage in certain leveraged transactions, such as short sales and
financial futures contracts, without violating Section 18(F)(1) if it
segregates fund assets.
FUND MANAGEMENT
The Board of Directors of the Fund is responsible for the management
and supervision of the Fund's business affairs and for exercising all powers
except those reserved to the shareholders.
The officers and Directors of the Fund and their addresses, positions
with the Fund, and principal occupations are set forth below.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH THE TRUST PRINCIPAL OCCUPATION DURING THE
PAST 5 YEARS
<S> <C> <C>
Rolf F. Bjelland* Chairman, Director and Executive Vice President, Lutheran
625 Fourth Avenue South President Brotherhood; Director, Lutheran
Minneapolis, MN Brotherhood Research Corp.; Director
Age 61 and Executive Vice President, Lutheran
Brotherhood Financial Corp.; Director,
Lutheran Brotherhood Securities Corp.;
Director and Vice President, Lutheran
Brotherhood Variable Insurance Products
Company; Director, Lutheran Brotherhood
Real Estate Products Company; Trustee,
Chairman and President of Lutheran
Brotherhood Family of Funds
Herbert F. Eggerding, Jr. Director Management consultant to several privately
12587 Glencroft Drive owned companies; formerly Executive Vice
St. Louis, MO President and Chief Financial Officer,
Age 62 Petrolite Corporation; Director, Lutheran
Charities Foundation of St. Louis, MO;
Trustee, Lutheran Brotherhood Family of Funds
Noel K. Estenson Director President and Chief Executive Officer,
CENEX, Inc. CENEX, Inc.; Vice Chairman, CF
P.O. Box 64089 Industries; Board member, National
St. Paul, MN Cooperative Refinery Association;
Age 61 Board member, Farm Credit Leasing;
Board member, National Council of
Farmer Cooperatives; Trustee, Lutheran
Brotherhood Family of Funds
Jodi L. Harpstead Director Vice President, U.S. Cardiac Rhythm
Medtronic Management for Medtronic, Inc.; Previously,
7000 Central Avenue NE Manager and Vice President, U.S. Pacing
Minneapolis, MN Marketing, Medtronic, Inc.; Board member
Age 43 of Delta Dental Plan of Minnesota;
Trustee, Lutheran Brotherhood Family of
Funds
Richard A. Hauser Director Partner, Baker & Hostetler, LLP; Previously,
1050 Connecticut Avenue NW Chairman of the Pennsylvania Avenue
Suite 1100 Development Corporation, Washington, DC;
Washington, DC Director, The Luther Institute; Trustee,
Age 57 Lutheran Brotherhood Family of Funds
Connie M. Levi Director Retired President of the Greater
P.O. Box 675325 Minneapolis Chamber of Commerce;
Rancho Santa Fe, CA served in the Minnesota House of
Age 60 Representatives from 1978 to 1986,
including in the capacity as majority
leader; former Director or member of
numerous governmental, public service
and non-profit boards and organizations;
Director, Norstan, Inc.; Trustee, Lutheran
Brotherhood Family of Funds
Bruce J. Nicholson* Director President and Chief Operating Officer,
625 Fourth Avenue South Lutheran Brotherhood; Chairman, President
Minneapolis, MN and Chief Executive Officer, Lutheran
Age 53 Brotherhood Financial Corporation; Chairman,
President and Chief Executive Officer,
Lutheran Brotherhood Variable Insurance
Products Company; Chairman, Lutheran
Brotherhood Research Corp.; Chairman,
Lutheran Brotherhood Securities Corp.;
Chairman, Lutheran Brotherhood Real Estate
Products Company; Trustee, Lutheran
Brotherhood Family of Funds
Randall L. Boushek Vice President Senior Vice President and Chief Investment
625 Fourth Avenue South Officer, Lutheran Brotherhood; Director
Minneapolis, MN and President, Lutheran Brotherhood
Age 43 Research Corp.; Director, Vice President and
Chief Investment Officer, Lutheran Brotherhood
Variable Insurance Products Company; Director,
Lutheran Brotherhood Securities Corp.; Vice
President, Lutheran Brotherhood Real Estate
Products Company; Vice President, Lutheran
Brotherhood Family of Funds
Otis F. Hilbert Secretary and Vice President Vice President, Lutheran Brotherhood;
625 Fourth Avenue South Vice President and Secretary,
Minneapolis, MN Lutheran Brotherhood Securities Corp.;
Age 62 Secretary of Lutheran Brotherhood
Research Corp.; Vice President and
Secretary, Lutheran Brotherhood
Real Estate Products Company; Vice
President and Assistant Secretary,
Lutheran Brotherhood Variable
Insurance Products Company; Secretary and
Vice President, Lutheran Brotherhood
Family of Funds
Frederick P. Johnson Vice President Assistant Vice President, Lutheran
625 Fourth Avenue South Brotherhood; Assistant Vice President,
Minneapolis, MN Lutheran Brotherhood Variable Insurance
Age 37 Products Company; Assistant Vice
President, Lutheran Brotherhood
Securities Corp.; Assistant Vice
President, Lutheran Brotherhood Research
Corp.; Vice President, Lutheran Brotherhood
Family of Funds
James R. Olson Vice President Senior Vice President, Lutheran
625 Fourth Avenue South Brotherhood; Director and Vice President,
Minneapolis, MN Lutheran Brotherhood Variable Insurance
Age 57 Products Company; Director and Vice President,
Lutheran Brotherhood Research Corp.;
Director and Vice President, Lutheran
Brotherhood Securities Corp.; Vice
President, Lutheran Brotherhood Real
Estate Products Company; Vice President,
Lutheran Brotherhood Family of Funds
Brenda J. Pederson Vice President Assistant Vice President, Lutheran
625 Fourth Avenue South Brotherhood; Assistant Vice President,
Minneapolis, MN Lutheran Brotherhood Securities Corp.;
Age 38 Vice President, Lutheran Brotherhood
Family of Funds
Richard B. Ruckdashel Vice President Vice President, Lutheran Brotherhood;
625 Fourth Avenue South Vice President, Lutheran Brotherhood
Minneapolis, MN Variable Insurance Products Company; Vice
Age 44 President, Lutheran Brotherhood
Securities Corp.; Vice President,
Lutheran Brotherhood Family of Funds
Wade M. Voigt Treasurer Assistant Vice President, Mutual Fund
625 Fourth Avenue South Accounting, Lutheran Brotherhood;
Minneapolis, MN Treasurer of LB Series Fund, Inc.
Age 43
- -----------------------
(*) "Interested person" of the Fund as defined in the Investment Company
Act of 1940 by virtue of his positions with affiliated entities
referred to elsewhere herein.
Executive Committee
The present members of the Executive Committee of the Fund are Directors Bjelland (Chairman), Eggerding, and
Nicholson. The Executive Committee assists the Board of Directors in fulfilling its duties with respect to the
scheduling of Board meetings and their agendas. The Executive Committee serves as a direct line of communication
between the Board of Directors and management of the Fund and the investment adviser. The Executive Committee meets as
necessary, and generally meets at least once prior to each meeting of the Board of Directors.
</TABLE>
COMPENSATION OF DIRECTORS AND OFFICERS
The Fund makes no payments to any of its officers for services
performed for the Fund. Directors of the Fund who are not interested persons
of the Fund are paid an annual retainer fee of $28,500 and an annual fee of
$10,000 per year to attend meetings of Board of Directors of the Fund
complex.
Directors who are not interested persons of the Fund are reimbursed by
the Fund for any expenses they may incur by reason of attending Board
meetings or in connection with other services they may perform in connection
with their duties as Directors of the Fund. The Directors receive no pension
or retirement benefits in connection with their service to the Fund.
For the fiscal year ended December 31, 1999, the Directors of the Fund
received the following amounts of compensation either directly or in the
form of payments into a deferred compensation plan:
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL TOTAL COMPENSATION
NAME AND POSITION COMPENSATION AS PART OF FUND BENEFITS UPON PAID BY FUND
OF PERSON FROM FUND EXPENSES RETIREMENT AND FUND COMPLEX (1)
<S> <C> <C> <C> <C>
Rolf F. Bjelland(2) $ 0 $ 0 $ 0 $ 0
Chairman and Director
Herbert F. Eggerding, Jr. 17,292 0 0 38,875
Director
Noel K. Estenson 16,222 0 0 36,375
Director
Jodi L. Harpstead 16,222 0 0 36,375
Director
Richard K. Hauser 16,222 0 0 36,375
Director
Connie M. Levi 16,757 0 0 37,625
Director
Bruce J. Nicholson(2) 0 0 0 0
Director
- -------------------------
(1) The "Fund Complex" includes eleven series of The Lutheran Brotherhood Family of Funds and the seven portfolios
of LB Series Fund, Inc.
(2) "Interested person" of the Fund as defined in the Investment Company Act of 1940.
</TABLE>
CONTROL PERSONS AND PURCHASES OF SECURITIES
Shares in the Fund are sold only to separate accounts (the "Accounts")
of Lutheran Brotherhood and Lutheran Brotherhood Variable Insurance Products
Company ("LBVIP"), to fund benefits under various variable life insurance
and annuity contracts issued by Lutheran Brotherhood and LBVIP (the
"Contracts").
The voting rights of Contract owners, and limitations on those rights,
are explained in separate prospectuses relating to such Contracts. Lutheran
Brotherhood and LBVIP, as the owners of the assets in the Accounts, are
entitled to vote all of the shares of the Fund held to fund the benefits
under the Contracts, but they will generally do so in accordance with the
instructions of Contract owners. Any shares of a Portfolio attributable to a
Contract for which no timely voting instructions are received, and any
shares of that Portfolio held by Lutheran Brotherhood, LBVIP or any of their
affiliates for their own account, will be voted by Lutheran Brotherhood and
LBVIP in proportion to the voting instructions that are received with
respect to all Contracts participating in that Portfolio. Under certain
circumstances described in the separate prospectus relating to the
Contracts, however, Lutheran Brotherhood and LBVIP may disregard voting
instructions received from Contract owners.
INVESTMENT ADVISORY SERVICES
Lutheran Brotherhood (the "Adviser") is the investment adviser of the
Fund. The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940. Lutheran Brotherhood, founded in 1917 under
the laws of Minnesota, is a fraternal benefit society owned by and operated
for its members. It is subject to regulation by the Insurance Division of
the State of Minnesota as well as by the insurance departments of all the
other states and jurisdictions in which it does business. LBVIP is an
indirect subsidiary of Lutheran Brotherhood.
Certain directors and officers of the Fund are also affiliates of
Lutheran Brotherhood and/or LBVIP. See "Fund Management".
Investment decisions for each of the Portfolios, except the World
Growth Portfolio, are made by Lutheran Brotherhood, subject to the overall
direction of the Board of Directors. Lutheran Brotherhood provides overall
investment supervision of the World Growth Portfolio's investments, with
investment decisions for the World Growth Portfolio being made by an
investment sub-adviser. Except for the World Growth Portfolio, Lutheran
Brotherhood provides investment research and supervision of each Portfolio's
investments and conducts a continuous program of investment evaluation and
appropriate disposition and reinvestment of each Portfolio's assets.
Investment decisions for the World Growth Portfolio are made by Rowe
Price-Fleming International, Inc. ("Price-Fleming"), which Lutheran
Brotherhood has engaged as the sub-adviser for that Portfolio. Price-Fleming
manages that Portfolio on a daily basis, subject to the overall direction of
Lutheran Brotherhood and the Board of Directors.
Price-Fleming was founded in 1979 as a joint venture between T. Rowe
Price Associates, Inc. and Robert Fleming Holdings Limited. Price-Fleming
is one of the world's largest international mutual fund asset managers with
the U.S. equivalent of over $42 billion under management as of December 31,
1999 in its offices in Baltimore, London, Tokyo, Singapore, Paris, Hong
Kong, and Buenos Aires.
The Advisory Contract provides that it shall continue in effect with
respect to each Portfolio from year to year as long as it is approved at
least annually both (i) by a vote of a majority of the outstanding voting
securities of such Portfolio (as defined in the 1940 Act) or by the
Directors of the Fund, and (ii) in either event by a vote of a majority of
the Directors who are not parties to the Advisory Contract or "interested
persons" of any party thereto, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory Contract may be terminated
on 60 days' written notice by either party and will terminate automatically
in the event of its assignment, as defined under the 1940 Act and
regulations thereunder. Such regulations provide that a transaction which
does not result in a change of actual control or management of an adviser is
not deemed an assignment.
The Investment Sub-advisory Contract between Lutheran Brotherhood, the
Fund and Price-Fleming (the "Price-Fleming Sub-advisory Contract") provides
that it shall continue in effect with respect to the World Growth Portfolio
from year to year as long as it is approved at least annually both (i) by a
vote of a majority of the outstanding voting securities of such Portfolio
(as defined in the 1940 Act) or by the Directors of the Fund, and (ii) in
either event by a vote of a majority of the Directors who are not parties to
the Price-Fleming Sub-advisory Contract or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of voting on
such approval. The Price-Fleming Sub-advisory Contract may be terminated on
60 days' written notice by either party and will terminate automatically in
the event of its assignment, as defined under the 1940 Act and regulations
thereunder. Such regulations provide that a transaction which does not
result in a change of actual control or management of an adviser is not
deemed an assignment.
The Adviser receives an investment advisory fee as compensation for its
services to the Fund. The fee is a daily charge equal to an annual rate of
.40% of the aggregate average daily net assets of the Money Market, Income,
High Yield, Growth, Opportunity Growth, and Mid Cap Growth Portfolios. The
fee is a daily charge equal to an annual rate of .85% of the aggregate
average daily net assets of the World Growth Portfolio. Each daily charge
for the fee is divided among the Portfolios in proportion to their net
assets on that day. During the fiscal periods ended December 31, 1999, 1998,
and 1997, the Adviser earned $32,324,023, $25,936,473, and $20,167,422,
respectively, as gross advisory fees.
Lutheran Brotherhood pays Price-Fleming an annual sub-advisory fee for
the performance of sub-advisory services. The fee payable is equal to a
percentage of that Portfolio's average daily net assets. The percentage
decreases as the Portfolio's assets increase. For purposes of determining
the percentage level of the sub-advisory fee for the Portfolio, the assets
of the Portfolio are combined with the assets of the Lutheran Brotherhood
World Growth Fund, another fund with investment objectives and policies that
are similar to the World Growth Portfolio and for which the Sub-adviser also
provides sub-advisory services. The sub-advisory fee Lutheran Brotherhood
pays the Sub-adviser is equal to the World Growth Portfolio's pro rata share
of the combined assets of the Portfolio and the Lutheran Brotherhood World
Growth Fund and is equal to .75% of combined average daily net assets up to
$20 million, .60% of combined average daily net assets over $20 million but
not over $50 million, and .50% of combined average daily net assets over $50
million. When the combined assets of the World Growth Portfolio and the
Lutheran Brotherhood World Growth Fund exceed $200 million, the sub-advisory
fee for the World Growth Portfolio is equal to .50% of all of the
Portfolio's average daily net assets. Price-Fleming has agreed to waive its
fees so that when the combined assets of the World Growth Portfolio and
World Growth Fund exceed $500 million, the sub-advisory fee for the World
Growth Portfolio is equal to .45% of all the Portfolio's average daily net
assets. As of December 31, 1999, the combined assets of the World Growth
Portfolio and the World Growth Fund totaled $683.6 million.
The Investment Advisory Agreement provides that the Fund will pay, or
provide for the payment of, the compensation of the directors who are not
affiliated with the Adviser, Lutheran Brotherhood or LBVIP and all other
expenses of the Fund (other than those assumed by the Adviser), including
governmental fees, interest charges, taxes, membership dues in the
Investment Company Institute allocable to the Fund, fees and expenses of the
independent auditors, of legal counsel and of any transfer agent, registrar
and dividend disbursing agent of the Fund, expenses of preparing, printing
and mailing prospectuses, shareholders' reports, notices, proxy statements
and reports to governmental officers and commissions, expenses connected
with the execution, recording and settlement of portfolio security
transactions, insurance premiums, fees and expenses of the Fund's custodian
for all services to the Fund, expenses of calculating the net asset value of
the shares of the Portfolio of the Fund, expenses of shareholders' meetings
and expenses relating to the issuance, registration and qualification of
shares of the Fund. Lutheran Brotherhood and LBVIP have agreed with the Fund
to pay, or to reimburse the Fund for the payment of, all of the foregoing
expenses.
The Adviser also furnishes at its own expense all necessary
administrative services, office space, equipment and clerical personnel for
servicing the investments of the Fund and maintaining its organization, and
investment advisory facilities and executive and supervisory personnel for
managing the investments and effecting the portfolio transactions of the
Fund.
The Adviser, through the indirect ownership of Lutheran Brotherhood
Research Corp., also serves as the investment adviser to several other
investment companies. When investment opportunities arise that may be
appropriate for one of the Portfolios and one or more of such other
companies, the Adviser will not favor one over another and may allocate
investments among them in an impartial manner believed to be equitable to
each entity involved. The allocations will be based on the investment
objectives and current cash and investment position of each. Because the
various entities for which the Adviser acts as investment adviser have
different investment objectives and positions, the Adviser may from time to
time buy a particular security for one or more such entities while at the
same time it sells such securities for another.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the custodian of the securities held by the
Portfolios and is authorized to use various securities depository
facilities, such as the Depository Trust Company and the facilities of the
book-entry system of the Federal Reserve Bank. State Street Bank and Trust
Company is also the transfer agent and dividend disbursing agent for the
Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 650 Third Avenue South, Park Building,
Suite 1300, Minneapolis, Minnesota 55402, serves as the Fund's independent
accountants, providing professional services including audits of the Fund's
annual financial statements, assistance and consultation in connection with
Securities and Exchange Commission filings, and review of the annual income
tax returns filed on behalf of the Fund.
BROKERAGE TRANSACTIONS
PORTFOLIO TRANSACTIONS
In connection with the management of the investment and reinvestment of
the assets of the Portfolios, the Advisory Contract authorizes Lutheran
Brotherhood, acting by its own officers, directors or employees or by a duly
authorized subcontractor, including Price-Fleming (a "sub-adviser"), to
select the brokers or dealers that will execute purchase and sale
transactions for the Portfolios. In executing portfolio transactions and
selecting brokers or dealers, if any, Lutheran Brotherhood and the sub-
adviser will use reasonable efforts to seek on behalf of the Portfolios the
best overall terms available. In assessing the best overall terms available
for any transaction, Lutheran Brotherhood and the sub-adviser will consider
all factors it deems relevant, including the breadth of the market in and
the price of the security, the financial condition and execution capability
of the broker or dealer, and the reasonableness of the commission, if any
(for the specific transaction and on a continuing basis). In evaluating the
best overall terms available, and in selecting the broker or dealer, if any,
to execute a particular transaction, Lutheran Brotherhood and the sub-
adviser may also consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to any other accounts over which Lutheran Brotherhood or the sub-
adviser or an affiliate of Lutheran Brotherhood or the sub-adviser exercises
investment discretion. Lutheran Brotherhood and the sub-adviser may pay to a
broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction which is in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction if, but only if, Lutheran Brotherhood or the sub-
adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided.
To the extent that the receipt of the above-described services may
supplant services for which Lutheran Brotherhood or the sub-adviser might
otherwise have paid, it would, of course, tend to reduce the expenses of
Lutheran Brotherhood or the sub-adviser.
The investment decisions for a Portfolio are and will continue to be
made independently from those of other investment companies and accounts
managed by Lutheran Brotherhood, a sub-adviser, or their affiliates. Such
other investment companies and accounts may also invest in the same
securities as a Portfolio. When purchases and sales of the same security are
made at substantially the same time on behalf of such other investment
companies and accounts, transactions may be averaged as to the price and
available investments allocated as to the amount in a manner which Lutheran
Brotherhood and its affiliates believe to be equitable to each investment
company or account, including the Portfolio. In some instances, this
investment procedure may affect the price paid or received by a Portfolio or
the size of the position obtainable or sold by a Portfolio.
AFFILIATED TRANSACTIONS OF THE SUB-ADVISER
Subject to applicable SEC rules, as well as other regulatory
requirements, the sub-adviser of the World Growth Portfolio may allocate
orders to brokers or dealers affiliated with the sub-adviser. Such
allocation shall be in such amounts and proportions as the sub-adviser shall
determine and the Portfolio's sub-adviser will report such allocations
either to Lutheran Brotherhood, which will report such allocations to the
Board of Directors, or, if requested, directly to the Board of Directors.
BROKERAGE COMMISSIONS
During the last three fiscal years, the Portfolios paid the following
brokerage fees:
12/31/99 12/31/98 12/31/97
Opportunity Growth
Portfolio $ 280,517 $ 857,916 $ 789,032
Mid Cap Growth Portfolio 404,051 203,262 --
World Growth Portfolio* 308,563 285,236 492,771
Growth Portfolio 8,772,124 8,234,385 6,961,631
High Yield Portfolio 12,179 9,706 8,418
Income Portfolio 80,789 82,478 135,832
Money Market Portfolio -- -- --
- ---------------------
* Amount paid to affiliated broker-dealer is $7,586 for the fiscal year
ended December 31, 1999, $10,640 for the fiscal year ended December 31,
1998, and $11,272 for the fiscal year ended December 31, 1997.
Of the brokerage fee amounts stated above and underwriting concessions
of dealers from whom the Portfolio purchased newly issued debt securities,
the following percentages were paid to firms which provided research,
statistical, or other services to Lutheran Brotherhood or the sub-adviser in
connection with the management of the Portfolios:
12/31/99 12/31/98 12/31/97
Opportunity Growth
Portfolio -- 6.70% 5.52%
Mid Cap Growth Portfolio 17.27% 45.80% --
World Growth Portfolio 3.38% 3.77% 1.90%
Growth Portfolio 16.88% 17.15% 18.19%
High Yield Portfolio 0.07% -- --
Income Portfolio 3.32% 3.15% 3.29%
Money Market Portfolio -- -- --
CODE OF ETHICS
The Fund has adopted a code of ethics that imposes certain limitations
and restrictions on personal securities transactions by persons having
access to Fund investment information, including portfolio managers. Such
access persons may not purchase any security being offered under an initial
public offering, any security for which one of the Portfolios has a purchase
or sale order pending, or any security currently under active consideration
for purchase or sale by a Portfolio. Additionally, portfolio managers may
not purchase or sell any security within seven days before or after any
transaction in such security by the Portfolio that he or she manages. In
order for the Fund to monitor the personal investment transactions, all
access persons must obtain the approval of an officer of the Fund designated
by the Directors before they may purchase or sell any security and they must
have all such transactions reported to such officer by the broker-dealer
through which the transaction was accomplished.
CAPITAL STOCK
The total number of shares of capital stock which the Fund has
authority to issue is 2,000,000,000 shares of the par value of $.01 per
share. All shares are divided into the following classes of capital stock,
each class comprising the number of shares and having the designations
indicated, subject, however, to the authority to increase and decrease the
number of shares of any class granted to the Board of Directors:
Class Number of Shares
Money Market Portfolio Capital Stock 400,000,000
Income Portfolio Capital Stock 400,000,000
High Yield Portfolio Capital Stock 200,000,000
Growth Portfolio Capital Stock 400,000,000
Opportunity Growth Portfolio Capital Stock 200,000,000
Mid Cap Growth Portfolio Capital Stock 200,000,000
World Growth Portfolio Capital Stock 200,000,000
Subject to any then applicable statutory requirements, the balance of
any unassigned shares of the authorized capital stock may be issued in such
classes, or in any new class or classes having such designations, such
powers, preferences and rights as may be fixed and determined by the Board
of Directors. In addition, and subject to any applicable statutory
requirements, the Board of Directors has the authority to increase or
decrease the number of shares of any class, but the number of shares of any
class will not be decreased below the number of shares thereof then
outstanding.
The holder of each share of stock of the Fund shall be entitled to one
vote for each full share and a fractional vote for each fractional share of
stock, irrespective of the class, then standing in such holder's name on the
books of the Fund. On any matter submitted to a vote of shareholders, all
shares of the Fund will be voted in the aggregate and not by class except
that (a) when otherwise expressly required by statutes or the Investment
Company Act of 1940 shares will be voted by individual class, (b) only
shares of a particular Portfolio are entitled to vote on matters concerning
only that Portfolio, and (c) fundamental objectives and restrictions may be
changed, with respect to any Portfolio, if such change is approved by the
holders of a majority (as defined under the Investment Company Act of 1940)
of the outstanding shares of such Portfolio. No shareholder will have any
cumulative voting rights.
The shares of each class, when issued, will be fully paid and
nonassessable, have no preference, preemptive, conversion, exchange or
similar rights and will be freely transferable. The consideration received
by the Fund for the sale of shares shall become part of the assets of the
Portfolio to which the shares of the class relates. Each share will have a
pro rata interest in the assets of the Portfolio to which the share relates
and will have no interest in the assets of any other Portfolio.
The Board of Directors may from time to time declare and pay dividends
or distributions, in stock or in cash, on any or all classes of stock, the
amount of such dividends and distributions and the payment of them being
wholly in the discretion of the Board. Dividends or distributions on shares
of any class of stock shall be paid only out of undistributed earnings or
other lawfully available funds belonging to such class.
Inasmuch as one goal of the Fund is to qualify as a Regulated
Investment Company under the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder, and inasmuch as the computation of
net income and gains for Federal income tax purposes may vary from the
computation thereof on the books of the Fund, the Board of Directors has the
power in its discretion to distribute in any fiscal year as dividends,
including dividends designated in whole or in part as capital gains
distributions, amounts sufficient in the opinion of the Board to enable the
Fund and each portfolio to qualify as a Regulated Investment Company and to
avoid liability for Federal income tax in respect of that year.
The assets belonging to any class of stock will be charged with the
liabilities in respect to such class, and will also be charged with their
share of the general liabilities of the Fund in proportion to the asset
values of the respective classes.
NET ASSET VALUE
OPPORTUNITY GROWTH PORTFOLIO, MID CAP GROWTH PORTFOLIO, WORLD GROWTH
PORTFOLIO, GROWTH PORTFOLIO, HIGH YIELD PORTFOLIO, AND INCOME PORTFOLIO
The net asset value per share is determined at the close of each day
the New York Stock Exchange (the "NYSE") is open, or any other day as
provided by Rule 22c-1 under the Investment Company Act of 1940.
Determination of net asset value may be suspended when the Exchange is
closed or if certain emergencies have been determined to exist by the
Securities and Exchange Commission, as allowed by the Investment Company Act
of 1940.
Net asset value is determined by adding the market or appraised value
of all securities and other assets; subtracting liabilities; and dividing
the result by the number of shares outstanding.
The market value of each Portfolio's securities is determined at the
close of regular trading of the NYSE on each day the NYSE is open. The value
of portfolio securities is determined in the following manner:
- - Equity securities traded on the NYSE or any other national
securities exchange are valued at the last sale price. If there has
been no sale on that day or if the security is unlisted, it is
valued at prices within the range of the current bid and asked
prices considered best to represent value in the circumstances.
- - Equity securities not traded on a national securities exchange are
valued at prices within the range of the current bid and asked
prices considered best to represent the value in the circumstances,
except that securities for which quotations are furnished through
the nationwide automated quotation system approved by the NASDAQ
will be valued at their last sales prices so furnished on the date
of valuation, if such quotations are available for sales occurring
on that day.
- - Bonds and other income securities traded on a national securities
exchange will be valued at the last sale price on such national
securities exchange that day. Lutheran Brotherhood may value such
securities on the basis of prices provided by an independent
pricing service or within the range of the current bid and asked
prices considered best to represent the value in the circumstances,
if those prices are believed to better reflect the fair market
value of such exchange listed securities.
- - Bonds and other income securities not traded on a national
securities exchange will be valued within the range of the current
bid and asked prices considered best to represent the value in the
circumstances. Such securities may also be valued on the basis of
prices provided by an independent pricing service if those prices
are believed to reflect the fair market value of such securities.
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.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may consider institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data
employed in determining valuation for such securities.
All other securities and assets will be appraised at fair value as
determined by the Board of Director.
Generally, trading in foreign securities, as well as U.S. Government
securities, money market instruments and repurchase agreements, is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in computing the net asset value of
shares of a Portfolio are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the NYSE.
Occasionally, events affecting the value of such securities and exchange
rates may occur between the times at which they are determined and the close
of the NYSE, which will not be reflected in the computation of net asset
values. If during such periods events occur which materially affect the
value of such securities, the securities will be valued at their fair market
value as determined in good faith by the Directors of the Fund.
For purposes of determining the net asset value of shares of a
Portfolio all assets and liabilities initially expressed in foreign
currencies will be converted into U.S. dollars quoted by a major bank that
is a regular participant in the foreign exchange market or on the basis of a
pricing service that takes into account the quotes provided by a number of
such major banks.
MONEY MARKET PORTFOLIO
Securities held by the Money Market Portfolio are valued on the basis
of amortized cost, which involves a constant amortization of premium or
accretion of discount to maturity regardless of the impact of fluctuating
interest rates on the market value of the security. While this method
provides certainty in valuation, it may result in periods in which the value
as determined by amortized cost is higher or lower than the price the Money
Market Portfolio would receive if it sold the security.
The Money Market Portfolio anticipates that under ordinary and usual
circumstances it will be able to maintain a constant net asset value of
$1.00 per share and the Money Market Portfolio will use its best efforts to
do so. However, such maintenance at $1.00 might not be possible if (1)
there are changes in short-term interest rates or other factors such as
unfavorable changes in the credit of issuers affecting the values of the
securities held by the Money Market Portfolio and the Money Market Portfolio
is compelled to sell such securities at a time when the prices which it is
able to realize vary significantly from the values determined on the
amortized cost basis or (2) the Money Market Portfolio should have negative
net income. It is expected that the Money Market Portfolio will have
positive net income at the time of each determination thereof.
The utilization of the amortized cost method of valuation requires
compliance with the requirements of Rule 2a-7 under the 1940 Act. Such
compliance requires, among other things, the following:
(1) The Directors must adopt procedures whereby the extent of
deviation, if any, of the current net asset value per share
calculated using available market quotations (or an appropriate
substitute which reflects current market conditions) from the
Money Market Portfolio's net asset value per share under the
amortized cost valuation method will be determined at such
intervals as the Directors deem appropriate and reasonable in
light of current market conditions, and the Directors must review
periodically the amount of the deviation as well as the methods
used to calculate the deviation;
(2) In the event such deviation from the Money Market Portfolio's net
asset value under the amortized cost valuation method exceeds
1/2 of 1%, the Directors must promptly consider what action should
be initiated by them, and when the Directors believe the extent of
any deviation from the Money Market Portfolio's net asset value
per share under the amortized cost valuation method may result in
material dilution or any other unfair results to investors or
existing shareholders, they must take such action as they deem
appropriate to eliminate or reduce to the extent reasonably
practicable such dilution or unfair results (shareholders will be
notified in the event any such corrective action is taken by the
Directors);
(3) The Money Market Portfolio may not purchase any instrument with a
remaining maturity greater than 397 calendar days or maintain a
dollar-weighted average portfolio maturity which exceeds 90 days;
(4) The Money Market Portfolio must limit its portfolio investments,
including repurchase agreements, to those United States dollar-
denominated instruments which the Directors determine present
minimal credit risks and which are "eligible securities" as
defined in Rule 2a-7; and
(5) The Money Market Portfolio must record, maintain and preserve
certain records and observe certain reporting obligations in
accordance with Rule 2a-7.
Securities in which the Money Market Portfolio invests must be U.S.
dollar-denominated Eligible Securities (as defined in Rule 2a-7 under the
1940 Act) that are determined to present minimal credit risks. In general,
the term "Eligible Security" is limited to any security that:
(i) (a) either (1) has received a short-term rating from a nationally
recognized statistical rating organization (NRSRO") or has been
issued by an issuer that has received a short-term rating from an
NRSRO with respect to a class of debt obligations (or any debt
obligation within that class) that is comparable in priority and
security with the security or (2) is subject to a guarantee that
has received a short-term rating from an NRSRO, or a guarantee
issued by a guarantor that has received a short-term rating from
an NRSRO with respect to a class of debt obligations (or any debt
obligation within that class) that is comparable in priority and
security with the guarantee, (b) has a remaining maturity of 397
calendar days or less and (c) has received a rating from the
requisite number of NRSROs (i.e.. two, if two organizations have
issued ratings and one if only one has issued a rating) in one of
the two highest short-term major rating categories; or
(ii) is unrated but is of comparable quality to a rated security as
described in (i), above, and which at the time of issuance (a)
had a remaining maturity of more than 397 calendar days and now
has a remaining maturity of 397 calendar days or less, and (b)
has not received a long-term rating from an NRSRO in any NRSRO
major rating category outside of the NRSRO's three highest major
rating categories, unless the security has received a long-term
rating from the requisite number of NRSROs (i.e., two, if two
organizations have issued ratings and one if only one has issued
a rating) in one of the three highest long-term major rating
categories.
As indicated in the Prospectus, at least 95% of the Money Market
Portfolio's total assets will consist of government securities and "first
tier" eligible securities as defined in Rule 2a-7 under the 1940 Act, with
the balance of the Money Market Portfolio's assets invested in "second tier"
eligible securities as defined in Rule 2a-7. For this purpose, "second
tier" eligible securities generally are those which have been (i) rated by
at least two nationally recognized statistical rating organizations in one
of the two highest rating categories for short-term obligations (or so rated
by one such organization if it alone has rated the security), (ii) issued by
an issuer with comparable short-term obligations that are rated in one of
the two highest rating categories, or (iii) if unrated, determined to be
comparable to such securities. The Money Market Portfolio may not invest
more than the greater of 1% of its total assets or $1 million in "second
tier" eligible securities of any single issuer.
TAX STATUS
The Portfolios expect to pay no federal income tax because they intend
to meet requirements of Subchapter M of the Internal Revenue Code applicable
to regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Portfolio
must, among other requirements:
- derive at least 90% of its gross income from dividends,
interest, gains from the sale of securities, and certain
other investments;
- invest in securities within certain statutory limits; and
- distribute at least 90% of its ordinary income to
shareholders.
It is each Portfolio's policy to distribute substantially all of its
income on a timely basis, including any net realized gains on investments
each year.
To avoid payment of a 4% excise tax, each Portfolio is also generally
required to distribute to shareholders at least 98% of its ordinary income
earned during the calendar year and 98% of its net capital gains realized
during the 12-month period ending December 31.
CAPITAL GAINS
While the Portfolios do not intend to engage in short-term trading,
they may dispose of securities held for only a short time if Lutheran
Brotherhood believes it to be advisable. Such changes may result in the
realization of capital gains. Each Portfolio distributes its realized gains
in accordance with federal tax regulations. Distributions from any net
realized capital gains will usually be declared in February.
CALCULATION OF PERFORMANCE DATA
The total return and yield of each of the Portfolios will be calculated
as set forth below. Calculations of performance data for the Portfolios
includes the effect of the investment advisory fee charged to the Fund but
does not reflect the expenses charged to the variable contracts at the
separate account level.
TOTAL RETURN
Average annual total return is computed by determining the average
annual compounded rates of return over the designated periods that, if
applied to the initial amount invested would produce the ending redeemable
value, according to the following formula:
P(1+T)(n) = ERV
[In the above formula "n" is an exponent.]
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
designated period assuming a hypothetical
$1,000 payment made at the beginning of the
designated period
The calculation is based on the further assumptions that all dividends
and distributions by the Portfolio are reinvested at net asset value on the
reinvestment dates during the periods. The investment advisory fee charged
to the Fund is also taken into account as described later herein.
YIELD
Yield is computed by dividing the net investment income per share
earned during a recent month or other specified 30-day period by the
applicable maximum offering price per share on the last day of the period
and annualizing the result, according to the following formula:
[A formula is expressed here that is as follows:
Yield is equal to 2 times the difference between the sixth power of a
number and 1, where that number is equal to the sum of the quotient of a
divided by b and 1.]
Where:
a = dividends and interest earned during the period
minus the investment advisory fee accrued for the
period
b = the average daily number of shares outstanding
during the period that were entitled to receive
dividends multiplied by the maximum offering
price per share on the last day of the period
To calculate interest earned (for the purpose of "a" above) on debt
obligations, a Portfolio computes the yield to maturity of each obligation
held by a Portfolio based on the market value of the obligation (including
actual accrued interest) at the close of the last business day of the
preceding period, or, with respect to obligations purchased during the
period, the purchase price (plus actual accrued interest). The yield to
maturity is then divided by 360 and the quotient is multiplied by the market
value of the obligation (including actual accrued interest) to determine the
interest income on the obligation for each day of the period that the
obligation is in the portfolio. Dividend income is recognized daily based on
published rates.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to
monthly payments of principal and interest ("paydowns"), a Portfolio
accounts for gain or loss attributable to actual monthly paydowns as a
realized capital gain or loss during the period. Each Portfolio has elected
not to amortize discount or premium on such securities.
Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the
end of the base period, has not been declared as a dividend, but is
reasonably expected to be declared as a dividend shortly thereafter.
Yield information is useful in reviewing a Portfolio's performance, but
because yields fluctuate, such information cannot necessarily be used to
compare an investment in a Portfolio's shares with bank deposits, savings
accounts and similar investment alternatives which are insured and/or often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that yield is a function of the kind and
quality of the instruments in the portfolio, portfolio maturity and
operating expenses and market conditions.
The tables below present the average annual returns for all Portfolios
except the Money Market Portfolio and the yields for the High Yield
Portfolio, and the Income Portfolio for the indicated periods ended December
31, 1999.
<TABLE>
<CAPTION>
Current
SEC Average Annual Total Returns as of 12/31/99 Date
Yield --------------------------------------------- of
Portfolio 12/31/99 1-Year 5-Years 10-Years Inception Inception
- -------------------------- -------- ------ ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Opportunity Growth Portfolio n/a 27.55% n/a n/a 10.57% 01/18/96
Mid Cap Growth Portfolio n/a 49.64% n/a n/a 30.67% 01/30/98
World Growth Portfolio n/a 34.13% n/a n/a 15.65% 01/18/96
Growth Portfolio n/a 43.61% 32.15% 20.28% n/a --
High Yield Portfolio 11.11% 10.52% 10.62% 11.78% n/a --
Income Portfolio 6.98% -2.01% 7.50% 7.89% n/a --
Money Market Portfolio n/a 4.94% 5.32% 5.08% n/a --
</TABLE>
YIELD - MONEY MARKET PORTFOLIO
When the Money Market Portfolio quotes a "current annualized" yield, it
is based on a specified recent seven calendar-day period. It is computed by
(1) determining the net change, exclusive of capital changes, in the value
of a hypothetical preexisting account having a balance of one share at the
beginning of the period, (2) dividing the net change in account value by the
value of the account at the beginning of the base period to obtain the base
return, then (3) multiplying the base period by 52.14 (365 divided by 7).
The resulting yield figure is carried to the nearest hundredth of one
percent.
The calculation includes (1) the value of additional shares purchased
with dividends on the original share, and dividends declared on both the
original share and any such additional shares, and (2) all fees charge to
all shareholder accounts, in proportion to the length of the base period.
The capital changes excluded from the calculation are realized capital
gains and losses from the sale of securities and unrealized appreciation and
depreciation. The Portfolio's effective (compounded) yield will be computed
by dividing the seven-day annualized yield as defined above by 365, adding 1
to the quotient, raising the sum to the 365th power, and subtracting 1 from
the result.
Current and effective yields fluctuate daily and will vary with factors
such as interest rates and the quality, length of maturities, and type of
investments in the portfolio.
Money Market
Portfolio
----------
Annualized Current Yield For 7-day Period Ended 12/31/99 5.51%
Effective Yield For 7-day Period Ended 12/31/99 5.66%
NONSTANDARDIZED TOTAL RETURN
A Portfolio may provide the above described average annual total return
results for periods which end no earlier than the most recent calendar
quarter end and which begin one, five and ten years before such quarter end
and at the commencement of such Portfolio's operations. In addition, a
Portfolio may provide nonstandardized total return results for differing
periods, such as for the most recent six months, and/or without taking sales
charges into account. Such nonstandardized total return is computed as
otherwise described under "Total Return" except that the result may or may
not be annualized, and as noted any applicable sales charge may not be taken
into account and therefore not deducted from the hypothetical initial
payment of $1,000.
DESCRIPTION OF DEBT RATINGS
Moody's Investors Service, Inc. describes grades of corporate debt
securities and "Prime-1" and "Prime-2" commercial paper as follows:
BONDS:
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
COMMERCIAL PAPER:
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of senior short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well-established industries.
o High rates of return of funds employed.
o Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of senior short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above
but to a lesser degree. Earning trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
Standard & Poor's Corporation describes grades of corporate debt
securities and "A" commercial paper as follows:
BONDS:
AAA Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher rated categories. However, the obligor's capacity to meet
its financial commitments on the obligation is still strong.
BBB Debt rated BBB exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitments on the obligation in this category than in higher rated
categories.
BB Debt rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity of the obligor to meet its
financial commitments on the obligation. The BB rating category is
also used for debt subordinated to senior debt that is assigned an
actual or implied BBB-rating.
B Debt rated B is more vulnerable to nonpayment but currently has the
capacity to meet its financial commitments on the obligation.
Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial
commitments on the obligation.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC Debt rated CCC is vulnerable to nonpayment, and is dependent upon
favorable business, financial, and economic conditions for the
obligor to meet its financial commitments on the obligation. In the
event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitments on the obligation.
The CCC rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied B or B- rating.
CC The rating CC typically is currently highly vulnerable to
nonpayment.
C The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken but payments on the
obligation are being continued.
D Debt rated D is in payment default. The D rating category is used
when payments are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or the taking
of similar action if payments on the obligation are jeopardized.
Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on
the likelihood of, or the risk of default upon failure of, such completion.
The investor should exercise judgment with respect to such likelihood and
risk.
Commercial Paper: Commercial paper rated A by Standard & Poor's
Corporation has the following characteristics: liquidity ratios are better
than the industry average; long-term senior debt rating is "A" or better
(however, in some cases a "BBB" long-term rating may be acceptable); the
issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowances made for unusual
circumstances. Also, the issuer's industry typically is well established,
the issuer has a strong position within its industry and the reliability and
quality of management is unquestioned. Issuers rated A are further referred
to by use of numbers 1, 2 and 3 to denote relative strength within this
classification.
REPORT OF INDEPENDENT ACCOUNTANTS
AND FINANCIAL STATEMENTS
The Report of Independent Accountants and financial statements included
in the Annual Report to Shareholders for the fiscal year ended December 31,
1999 of the Fund are a separate report furnished with this Statement of
Additional Information and are incorporated herein by reference.
<PAGE>
LB SERIES FUND, INC.
PART C
OTHER INFORMATION
-----------------
Item 23. Exhibits
(a) Articles of Incorporation of the Registrant (4)
(b)(1) Bylaws of the Registrant (3)(4)(5)
(b)(2) First Amended and Restated Bylaws of the Registrant (6)
(c) Not applicable
(d)(1) Investment Advisory Contract between the Registrant
and Lutheran Brotherhood Research Corp. (4)
(d)(2) Investment Advisory Contract between the Registrant
and Lutheran Brotherhood. (4)
(d)(3) Form of Sub-Advisory Agreement between Lutheran Brotherhood,
the Registrant and Rowe Price-Fleming International, Inc. (1)
(e) Not Applicable
(f) Not applicable
(g)(1) Custodian Contract between the Registrant and State
Street Bank and Trust Company (4)
(g)(2) Transfer Agency Agreement between the Registrant and
State Street Bank and Trust Company (4)
(g)(3) Amendment to Custodian Contract dated February 1, 1989 (1)
(g)(4) Amendment to Custodian Contract dated January 11, 1990 (1)
(g)(5) Amendment to Custodian Contract dated March 15, 1995 (1)
(g)(6) Letter Agreement between the Registrant and State Street
Bank and Trust Company regarding the Opportunity Growth Portfolio
and the World Growth Portfolio (2)
(g)(7) Form of Letter Agreement between the Registrant and State Street
Bank and Trust Company regarding the Mid Cap Growth Portfolio (3)
(h)(1) Reimbursement Agreement between the Registrant, Lutheran
Brotherhood, and Lutheran Brotherhood Variable Insurance Products
Company (5)
(h)(2) Form of Letter Agreement for Line of Credit (6)
(i) Opinion and consent of counsel (6)
(j) Consent of independent accountants (6)
(k) Not applicable
(l)(1) Letter from Lutheran Brotherhood Variable Insurance Products
Company ("LBVIP")with respect to providing initial capital. (4)
(l)(2) Letter from Lutheran Brotherhood with respect to providing
initial capital to the Opportunity Growth Portfolio (2)
(l)(3) Letter from Lutheran Brotherhood with respect to providing
initial capital to the World Growth Portfolio (2)
(l)(4) Letter from Lutheran Brotherhood Variable Insurance Products
Company with respect to providing initial capital to the
Opportunity Growth Portfolio (2)
(l)(5) Letter from Lutheran Brotherhood Variable Insurance Products
Company with respect to providing initial capital to the World
Growth Portfolio (2)
(l)(6) Letter from Lutheran Brotherhood with respect to providing
initial capital to the Mid Cap Growth Portfolio (3)
(l)(7) Letter from Lutheran Brotherhood Variable Insurance Products
Company with respect to providing initial capital Letter
with respect to the Mid Cap Growth Portfolio (3)
(m) Not applicable
(n) Not applicable
(o) Powers of Attorney for 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, and Wade M.
Voigt. (5)
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
Footnote
Reference Securities Act of 1933 Amendment Date Filed
--------- -------------------------------- ----------
(1) Post-effective Amendment No. 14 November 1, 1995
(2) Post-effective Amendment No. 15 January 17, 1996
(3) Post-effective Amendment No. 18 November 12, 1997
(4) Post-effective Amendment No. 22 April 27, 1998
(5) Post-effective Amendment No. 23 February 25, 1999
(6) Filed herewith.
Item 24. Persons Controlled by or under Common Control with Registrant
- ----------------------------------------------------------------------
None.
Item 25. Indemnification
- ------------------------
Filed as part of the initial Registration Statement filed on March 3, 1986,
and incorporated herein by reference.
Item 26. Business and Other Connections of Investment Adviser
- -------------------------------------------------------------
The Adviser has been engaged in the management of its own investment
portfolio since 1917, and has been a registered investment adviser since
1989. The Adviser's own assets were approximately $17.41 billion on
December 31, 1999. The Adviser also has owned a subsidiary investment
advisory company since 1970 that acts as investment adviser to eleven mutual
funds which are each a series of a registered investment company with
combined net assets of approximately $5.06 billion on December 31, 1999.
The directors and officers of the Adviser are listed below, together
with their principal occupations during the past two years. (Their titles
may have varied during that period.)
Directors:
Robert P. Gandrud Chairman of the Board of
Lutheran Brotherhood Directors, Chief Executive
625 Fourth Avenue South Officer
Minneapolis, Minnesota
Robert O. Blomquist Director
16060 Kelly Cove Drive
Fort Myers, Florida
Dr. Addie J. Butler Director
Assistant Dean
Community College of Philadelphia
1700 Spring Garden Street
Philadelphia, Pennsylvania
Richard W. Duesenberg Director
Retired, formerly Senior Vice President
General Counsel and Secretary
Monsanto Company
One Indian Creek Lane
St. Louis, Missouri
Bobby I. Griffin Director
Executive Vice President
Medtronic, Inc.
7000 Central Avenue Northeast
Minneapolis, Minnesota
James M. Hushagen Director
Partner, Eisenhower & Carlson
1201 Pacific Avenue, Suite 1200
Tacoma, Washington
Richard C. Kessler Director
President
The Kessler Enterprise, Inc.
7380 Sand Lake Road, Suite 120
Orlando, Florida
Dr. Luther S. Luedtke Director
California Lutheran University
60 West Olsen Road
Thousand Oaks, California
Richard C. Lundell Director
Lutheran Brotherhood
10000 W. Highway 55, Suite 300
Plymouth, Minnesota
John P. McDaniel Director
President
MedStar Health
5565 Sterett Place
Columbia, Maryland
Bruce J. Nicholson President, Chief Operating
Lutheran Brotherhood Officer and Director
625 Fourth Avenue South
Minneapolis, Minnesota
Dr. Mary Ellen H. Schmider Director
Retired, formerly Dean of Graduate Studies
Coordinator of Grants
Moorhead State University
7701 180th Street
Chippewa Falls, Wisconsin
Dr. Kurt M. Senske Director
President and CEO
Lutheran Social Services
408 West 45th Street
Austin, Texas
Dr. Albert K. Siu Director
Vice President
AT&T
19 SchoolHouse Road, Room A107
Somerset, New Jersey
Officers:
Bruce J. Nicholson President and Chief Operating
Officer
Robert P. Gandrud Chairman and Chief Executive Officer
David W. Angstadt Executive Vice President and Chief
Marketing Officer
Rolf F. Bjelland Executive Vice President -
Subsidiary Management
J. Keith Both Senior Vice President - Marketing
Randall L. Boushek Senior Vice President and Chief
Investment Officer
David J. Larson Senior Vice President, Secretary
and General Counsel
Dr. Edward A. Lindell Senior Vice President - External
Affairs
Michael E. Loken Senior Vice President - Information
Technology Resources
Jennifer H. Martin Senior Vice President - Human
Resources
James R. Olson Senior Vice President - Member
Services
Jerald E. Sourdiff Senior Vice President and Chief
Financial Officer
Daniel G. Walseth Senior Vice President - Law
Mary M. Abbey Vice President - Client Systems
Galen R. Becklin Vice President - MIS Data Center
Larry A. Borlaug Regional Vice President
Colleen Both Vice President and Chief Compliance
Officer
Michael R. Braun Vice President - Management
Information Services
David J. Christianson Vice President - Member Operations
Pamela H. Desnick Vice President - Communications
Nathan A. Dungan Vice President - Marketing
Mitchell F. Felchle Vice President - Institutional
Relations Group
Craig L. Halverson Vice President - Field Force
Development
Charles E. Heeren Vice President - Mutual Fund
Equities
Wayne A. Hellbusch Regional Vice President
Otis F. Hilbert Vice President - Law
Roger W. Howe Vice President - Tech Competencies
Gary J. Kallsen Vice President - Mortgages and Real
Estate
Fred O. Konrath Vice President - Marketing
Douglas B. Miller Regional Vice President - Marketing
C. Theodore Molen Vice President - Marketing
Susan Oberman Smith Vice President - Product Development
Kay J. Owen Vice President - Corporate Planning
Dennis K. Peterson Vice President - Corporate Scorecard
Bruce M. Piltingsrud Vice President - Market Development
Richard B. Ruckdashel Vice President - Product Marketing
Rolf H. Running Vice President - Financial
Management
Mark L. Simenstad Vice President - Mutual Fund Bond
Investments
Lynette J.C. Stertz Vice President - Controller's
David K. Stewart Vice President and Treasurer
John O. Swanson, M.D. Vice President and Medical Director
Mark O. Swenson Vice President - General Accounting
Bond Investments
Louise K. Thoresen Vice President - External Programs
and Charitable Contributions
James M. Walline Vice President - Equities/Mutual
Funds Investment
Anita J.T. Young Vice President - Assistant to
President
Except where noted otherwise, the business address of each of the above
directors and officers employed by Lutheran Brotherhood is 625 Fourth Avenue
South, Minneapolis, Minnesota 55415.
The business and other connections of the officers and directors of T. Rowe
Price Associates, Inc. ("Sub-advisor for Opportunity Growth Portfolio") are
set forth in the Form ADV of Sub-advisor currently on file with the
Securities and Exchange Commission (File No.801-856).
The business and other connections of the officers and directors of Rowe
Price-Fleming International, Inc. ("Sub-advisor for World Growth Portfolio")
are set forth in the Form ADV of Sub-advisor currently on file with the
Securities and Exchange Commission (File No. 801-14713)
Item 27. Principal Underwriters
- -------------------------------
Not Applicable
Item 28. Location of Accounts and Records
- -----------------------------------------
The Registrant maintains the records required to be maintained by it
under Rules 31a-1(a), 31a-1(b), and 31a-2(a) under the Investment Company
Act of 1940 at its principal executive offices at 625 Fourth Avenue South,
Minneapolis, Minnesota 55415. Certain records, including records relating to
Registrant's shareholders and the physical possession of its securities, may
be maintained pursuant to Rule 31a-3 under the Investment Company Act of
1940 by the Registrant's transfer agent or custodian at the following
locations:
Name Address
---- -------
Lutheran Brotherhood Securities Corp. 625 Fourth Avenue South
Minneapolis, Minnesota 55415
Norwest Bank Minnesota, N.A. Sixth and Marquette Avenue
Minneapolis, Minnesota 55402
State Street Bank and Trust Company 225 Franklin Street
Boston, Massachusetts 02110
Item 29. Management Services
- ----------------------------
Not Applicable.
Item 30. Undertakings
- ---------------------
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant certifies that it meets all of
the requirements for effectiveness of this Amendment to its Registration
Statement pursuant to Rule 485(a) under the Securities Act of 1933 and has
duly caused this amendment to its Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of
Minneapolis and State of Minnesota, on the 24th day of February, 2000.
LB SERIES FUND, INC.
By: /s/ John C. Bjork
-------------------------------
John C. Bjork,
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to this registration statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
* Director and President February 24, 2000
- ------------------------ (Principal Executive Officer)
Rolf F. Bjelland
* Treasurer February 24, 2000
- ------------------------ (Principal Financial and
Wade M. Voigt Accounting Officer)
* Director February 24, 2000
- -------------------------
Herbert F. Eggerding, Jr.
* Director February 24, 2000
- -------------------------
Noel K. Estenson
* Director February 24, 2000
- -------------------------
Jodi L. Harpstead
* Director February 24, 2000
- -------------------------
Richard A. Hauser
* Director February 24, 2000
- ------------------------
Connie M. Levi
* Director February 24, 2000
- ------------------------
Bruce J. Nicholson
By: /s/ John C. Bjork
----------------------------
John C. Bjork,
Attorney-in-Fact Under Powers
of Attorney filed with Post-
Effective Amendment No. 23
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Item
- ----------- -----------------------------------------------------
(b)(2) First Amended and Restated Bylaws of the Registrant
(h)(2) Form of Letter Agreement for Line of Credit
(i) Opinion and Consent of Counsel
(j) Consent of Independent Accountants
- - 48 -
<PAGE>
LB Series Fund, Inc. Exhibit (i)
625 Fourth Avenue South
Minneapolis, Minnesota 55415
February 24, 2000
LB Series Fund, Inc.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Gentlemen:
As counsel to LB Series Fund, Inc., a corporation organized under the laws
of the State of Minnesota (the "Fund"), I have been asked to render an
opinion in connection with Post-Effective Amendment No. 24 under the
Securities Act of 1933 to the Registration Statement on Form N-1A
(Securities Act File No. 33-3677) to be filed by the Fund with the
Securities and Exchange Commission (as amended, the "Registration
Statement").
I wish to advise you that I have examined such documents and questions of
law as I have deemed necessary for purposes of this opinion. Based upon the
foregoing, I am of the opinion that:
1. The Fund has been duly organized and is validly existing pursuant to the
laws of the State of Minnesota;
2. In its pre-effective registration statement, the Fund elected to
register an indefinite number of shares pursuant to the provision of Rule
24f-2; and
3. The shares of capital stock of the Fund which are described in the
foregoing Registration Statement will, when sold in accordance with the
terms of the Prospectus and Statement of Additional Information in effect at
the time of the sale, be legally issued, fully paid and non-assessable by
the Fund.
I consent to this opinion being filed as an exhibit to the foregoing
Registration Statement.
Sincerely,
/s/ John C. Bjork
John C. Bjork
Counsel
#27702
<PAGE>
EXHIBIT (j)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-
Effective Amendment No. 24 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated February 9, 2000, relating to
the financial statements and financial highlights appearing in the the
December 31, 1999 Annual Report of the LB Series Fund, Inc., which is also
incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Financial Highlights" in the
Prospectus and under the heading "Independent Accountants" in the Statement
of Additional Information.
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
February 24, 2000
<PAGE>
FIRST AMENDED AND RESTATED BYLAWS
OF
LB SERIES FUND, INC.
Effective December 1, 1999
SHAREHOLDERS
Section 1.01. PLACE OF MEETINGS. Each meeting of the shareholders
shall be held at the principal executive office of the Corporation or at
such other place as may be designated by the Board of Directors or the Chief
Executive Officer; provided, however, that any meeting called by or at the
demand of a shareholder or shareholders shall be held in the county where
the principal executive office of the Corporation is located.
SECTION 1.02. REGULAR MEETINGS. Regular meetings of the shareholders
may be held on an annual or other less frequent basis as determined by the
Board of Directors; provided, however, that if a regular meeting has not
been held during the immediately preceding fifteen months, a shareholder or
shareholders holding 3% or more of the voting power of all shares entitled
to vote may demand a regular meeting of shareholders by written demand given
to the Chief Executive Officer or Chief Financial Officer of the
Corporation. At each regular meeting the shareholders shall elect qualified
successors for directors who serve for an indefinite term or whose terms
have expired or are due to expire within six months after the date of the
meeting and may transact any other business, provided, however, that no
business with respect to which special notice is required by law shall be
transacted unless such notice shall have been given.
Section 1.03. SPECIAL MEETINGS. A special meeting of the shareholders
may be called for any purpose or purposes at any time by the Chief Executive
Officer; by the Chief Financial Officer; by the Board of Directors or any
two or more members thereof; or by one or more shareholders holding not less
than 10% of the voting power of all shares of the Corporation entitled to
vote, who shall demand such special meeting by written notice given to the
Chief Executive Officer or the Chief Financial Officer of the Corporation
specifying the purposes of such meeting.
Section 1.04. MEETINGS HELD UPON SHAREHOLDER DEMAND. Within thirty
days of receipt of a demand by the Chief Executive Officer or the Chief
Financial Officer from any shareholder or shareholders entitled to call a
meeting of the shareholders, it shall be the duty of the Board of Directors
of the Corporation to cause a special or regular meeting of shareholders, as
the case may be, to be duly called and held on notice no later than ninety
days after receipt of such demand. If the Board of Directors fails to cause
such a meeting to be called and held as required by this Section, the
shareholder or shareholders making the demand may call the meeting by giving
notice as provided in Section 1.06 hereof at the expense of the Corporation.
Section 1.05. ADJOURNMENTS. Any meeting of the shareholders may be
adjourned from time to time to another date, time and place. If any meeting
of the shareholders is so adjourned, no notice as to such adjourned meeting
need be given if the date, time and place at which the meeting will be
reconvened are announced at the time of adjournment.
Section 1.06. NOTICE OF MEETINGS. Except as otherwise specified in
Section 1.05 or required by law, written notice of each meeting of the
shareholders, stating the date, time and place and, in the case of a special
meeting, the purpose or purposes, shall be given at least ten days and not
more than sixty days prior to the meeting to every holder of shares entitled
to vote at such meeting. The business transacted at a special meeting of
shareholders is limited to the purposes stated in the notice of the meeting.
Section 1.07. WAIVER OF NOTICE. A shareholder may waive notice of the
date, time, place and purpose or purposes of a meeting of shareholders. A
waiver of notice by a shareholder entitled to notice is effective whether
given before, at or after the meeting, and whether given in writing, orally
or by attendance. Attendance by a shareholder at a meeting is a waiver of
notice of that meeting, unless the shareholder objects at the beginning of
the meeting to the transaction of business because the meeting is not
lawfully called or convened, or objects before a vote on an item of business
because the item may not lawfully be considered at that meeting and does not
participate in the consideration of the item at that meeting.
Section 1.08. QUORUM; ACTS OF SHAREHOLDERS. Subdivision 1. Except as
otherwise required by law, the Articles of Incorporation of the Corporation
or these Bylaws, the holders of a majority of the voting power of the shares
entitled to vote at a shareholders meeting are a quorum for the transaction
of business. If a quorum is present when a duly called or held meeting is
convened, the shareholders present may continue to transact business until
adjournment, even though the withdrawal of a number of the shareholders
originally present leaves less than the proportion or number otherwise
required for a quorum. Except as otherwise required by law or specified in
the Articles of Incorporation of the Corporation, the shareholders shall
take action by the affirmative vote of the holders of a majority of the
voting power of the shares present and entitled to vote at a duly held
meeting of shareholders.
Subdivision 2. The absence from any meeting, in person or by proxy, of
holders of the number of shares in excess of a majority thereof which may be
required by the laws of the State of Minnesota, the Investment Company Act
of 1940 or other applicable statute, the Articles of Incorporation of the
Corporation or these Bylaws for action upon any given matter shall not
prevent action at such meeting upon any other matter or matters which may
properly come before the meeting if there shall be present thereat, in
person or by proxy, holders of the number of shares of stock of the
Corporation required for action in respect of such matter or matters.
Section 1.09. VOTING RIGHTS. Subdivision 1. A shareholder shall have
the voting rights set forth in the Articles of Incorporation of the
Corporation. Except as otherwise required by law, a holder of shares
entitled to vote may vote any portion of the shares in any way the
shareholder chooses. If a shareholder votes without designating the
proportion or number of shares voted in a particular way, the shareholder is
deemed to have voted all of the shares in that way.
Subdivision 2. The Board may fix a date not more than sixty days
before the date of a meeting of shareholders as the date for the
determination of the holders of shares entitled to notice of and entitled to
vote at the meeting. When a date is so fixed, only shareholders on that date
are entitled to notice of and permitted to vote at that meeting of
shareholders.
Section 1.10. PROXIES. A shareholder may cast or authorize the
casting of a vote by filing a written appointment of a proxy with an officer
of the Corporation at or before the meeting at which the appointment is to
be effective.
Section 1.11. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken at a meeting of the shareholders of the Corporation
may be taken without a meeting by written action signed by all of the
shareholders entitled to vote on that action. The written action is
effective when it has been signed by all of those shareholders, unless a
different effective time is provided in the written action.
DIRECTORS
Section 2.01. NUMBER; QUALIFICATIONS. Except as authorized by the
shareholders pursuant to a shareholder control agreement or unanimous
affirmative vote, the business and affairs of the Corporation shall be
managed by or under the direction of a Board of one or more directors.
Directors shall be natural persons. The shareholders at each regular
meeting shall determine the number of directors to constitute the Board,
provided that thereafter the authorized number of directors may be increased
by the shareholders or the Board and decreased by the shareholders.
Directors need not be shareholders.
Section 2.02. TERM. Each director shall serve for an indefinite term
that expires at the next regular meeting of the shareholders. A director
shall hold office until a successor is elected and has qualified or until
the earlier death, resignation, removal or disqualification of the director.
No person shall serve as a Director beyond the earlier of the end of the
month in which he or she attains the age of 70 years, or the end of the
month in which he or she completes 15 continuous years of service as a
Director, except that the limitation on 15 continuous years of service shall
not apply to any person who is an interested person of the LB Series Fund,
Inc., as defined in Section 2(a) (19) of the Investment Company Act of 1940.
A vacancy on the Board may be declared by a majority of the Board upon
the happening of any of the following events: (1) death, (2) resignation,
or (3) disability of a Director. Disability may involve either physical or
mental disability which seriously affects the ability of a Director to
participate in the meetings of the Board. Such physical or mental
disability shall be certified to after examination by one or more physicians
selected by majority vote of the remaining directors. A Director shall be
deemed to be disabled if he or she is unable to attend three (3) consecutive
regular meetings of the Board of Directors because of such disability.
Section 2.03. VACANCIES. Vacancies on the Board of Directors
resulting from the death, resignation, removal or disqualification of a
director may be filled by the affirmative vote of a majority of the
remaining members of the Board, though less than a quorum. Vacancies on the
Board resulting from newly created directorships may be filled by the
affirmative vote of a majority of the directors serving at the time such
directorships are created. Each person elected to fill a vacancy shall hold
office until a qualified successor is elected by the shareholders at the
next regular meeting or at any special meeting duly called for that purpose.
Section 2.04. PLACE OF MEETINGS. Each meeting of the Board of
Directors shall be held at the principal executive office of the Corporation
or at such other place as may be designated from time to time by a majority
of the members of the Board.
Section 2.05. REGULAR MEETINGS. Regular meetings of the Board of
Directors for the election of officers and the transaction of any other
business shall be held without notice at the place of and immediately after
each regular meeting of the shareholders.
Section 2.06. SPECIAL MEETINGS. A special meeting of the Board of
Directors may be called for any purpose or purposes at any time by any
member of the Board by giving not less than two nor more than ten days'
notice to all directors of the date, time and place of the meeting. The
notice need not state the purpose of the meeting.
Section 2.07. WAIVER OF NOTICE; PREVIOUSLY SCHEDULED MEETINGS.
Subdivision 1. A director of the Corporation may waive notice of the date,
time and place of a meeting of the Board. A waiver of notice by a director
entitled to notice is effective whether given before, at or after the
meeting, and whether given in writing, orally or by attendance. Attendance
by a director at a meeting is a waiver of notice of that meeting, unless the
director objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened and
thereafter does not participate in the meeting.
Subdivision 2. If the day or date, time and place of a Board meeting
have been provided herein or announced at a previous meeting of the Board,
no action is required. Notice of an adjourned meeting need not be given
other than by announcement at the meeting at which adjournment is taken of
the date, time and place at which the meeting will be reconvened.
Section 2.08. QUORUM; ACTS OF BOARD. The presence in person of a
majority of the directors currently holding office shall be necessary to
constitute a quorum for the transaction of business. In the absence of a
quorum, a majority of the directors present may adjourn a meeting from time
to time without further notice until a quorum is present. If a quorum is
present when a duly held meeting is convened, the directors present may
continue to transact business until adjournment, even though the withdrawal
of a number of the directors originally present leaves less than the
proportion or number otherwise required for a quorum. Except as otherwise
required by law, the Articles of Incorporation of the Corporation or these
Bylaws, the Board shall take action by the affirmative vote of a majority of
the directors present at a duly held meeting; provided, however, that the
approval of any contract with an investment adviser or principal
underwriter, as such terms are defined in the Investment Company Act of 1940
or any renewal or amendment thereof, the approval of the fidelity bond
required by the Investment Company Act of 1940, and the selection of the
Corporation's independent public accountants shall each require the
affirmative vote of a majority of the directors who are not parties to such
contract or interested persons of such party.
Section 2.09. ELECTRONIC COMMUNICATIONS. A conference among directors
by any means of communication through which the directors may simultaneously
hear each other during the conference constitutes a Board meeting, if the
same notice is given of the conference as would be required for a meeting,
and if the number of directors participating in the conference would be
sufficient to constitute a quorum at a meeting. A director may participate
in a Board meeting not described in the immediately preceding sentence by
any means of communication through which the director, other directors so
participating and all directors physically present at the meeting may
simultaneously hear each other during the meeting. Participation in a
meeting by any means referred to in this Section 2.09 constitutes a presence
in person at the meeting.
Section 2.10. ABSENT DIRECTORS. A director of the Corporation may
give advance written consent or opposition to a proposal to be acted on at a
Board meeting. If the director is not present at the meeting, consent or
opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered
in the minutes or other record of action at the meeting, if the proposal
acted on at the meeting is substantially the same or has substantially the
same effect as the proposal to which the director has consented or objected.
Section 2.11. ACTION WITHOUT A MEETING. An action required or
permitted to be taken at a Board meeting may be taken without a meeting by
written action signed by all of the directors. Any action, other than an
action requiring shareholder approval, if the Articles of Incorporation so
provide, may be taken by written action signed by the number of directors
that would be required to take the same action at a meeting of the Board at
which all directors were present. The written action is effective when
signed by the required number of directors, unless a different effective
time is provided in the written action. When written action is permitted to
be taken by less than all directors, all directors shall be notified
immediately of its text and effective date.
Section 2.12. COMMITTEES. Subdivision 1. A resolution approved by
the affirmative vote of a majority of the Board may establish committees
having the authority of the Board in the management of the business of the
Corporation only to the extent provided in the resolution. Committees shall
be subject at all times to the direction and control of the Board, except as
provided in Section 2.13.
Subdivision 2. A committee shall consist of one or more natural
persons, who need not be directors, appointed by affirmative vote of a
majority of the directors present at a duly held Board meeting.
Subdivision 3. Section 2.04 and Sections 2.06 to 2.11 hereof shall
apply to committees and members of committees to the same extent as those
sections apply to the Board and directors.
Subdivision 4. Minutes, if any, of committee meetings shall be made
available upon request to members of the committee and to any director.
Section 2.13. COMMITTEE OF DISINTERESTED PERSONS. Pursuant to the
procedure set forth in Section 2.12, the Board may establish a committee
composed of two or more disinterested directors or other disinterested
persons to determine whether it is in the best interests of the Corporation
to pursue a particular legal right or remedy of the Corporation and whether
to cause the dismissal or discontinuance of a particular proceeding that
seeks to assert a right or remedy on behalf of the Corporation. The
committee, once established, is not subject to the direction or control of,
or termination by, the Board. A vacancy on the committee may be filled by a
majority vote of the remaining committee members. The good faith
determinations of the committee are binding upon the Corporation and its
directors, officers and shareholders. The committee terminates when it
issues a written report of its determinations to the Board.
Section 2.14. COMPENSATION. The Board may fix the compensation, if
any, of directors.
OFFICERS
Section 3.01. NUMBER AND DESIGNATION. The Corporation shall have one
or more natural persons exercising the functions of the offices of Chief
Executive Officer and Chief Financial Officer. The Board of Directors may
elect or appoint such other officers or agents as it deems necessary for the
operation and management of the Corporation, with such powers, rights,
duties and responsibilities as may be determined by the Board, including,
without limitation, a Chairman of the Board, a President, one or more Vice
Presidents, a Secretary and a Treasurer, each of whom shall have the powers,
rights, duties and responsibilities set forth in these Bylaws unless
otherwise determined by the Board. Any of the offices or functions of those
offices may be held by the same person.
Section 3.02. CHAIRMAN OF THE BOARD. Unless otherwise determined by
the Board of Directors, the Chairman of the Board shall be the Chief
Executive Officer of the Corporation. The Chairman of the Board shall
perform such executive and other duties as the Board of Directors may, from
time to time, prescribe.
Section 3.03. CHIEF EXECUTIVE OFFICER. Unless provided otherwise by a
resolution adopted by the Board of Directors, the Chief Executive officer
(a) shall have general active management of the business of the Corporation;
(b) shall, when present, preside at all meetings of the shareholders and
Board of Directors; (c) shall see that all orders and resolutions of the
Board are carried into effect; (d) may maintain records of and certify
proceedings of the Board and shareholders; and (e) shall perform such other
duties as may from time to time be assigned by the Board.
Section 3.04. CHIEF FINANCIAL OFFICER. Unless provided otherwise by a
resolution adopted by the Board of Directors, the Chief Financial officer
(a) shall keep accurate financial records for the Corporation; (b) shall
deposit all monies, drafts and checks in the name of and to the credit of
the Corporation in such banks and depositories as the Board of Directors
shall designate from time to time; (c) shall endorse for deposit all notes,
checks and drafts received by the Corporation as ordered by the Board,
making proper vouchers therefor; (d) shall disburse corporate funds and
issue checks and drafts in the name of the Corporation, as ordered by the
Board; (e) shall render to the Chief Executive Officer and the Board of
Directors, whenever requested, an account of all of his transactions as
Chief Financial Officer and of the financial condition of the Corporation;
and (f) shall perform such other duties as may be prescribed by the Board of
Directors or the Chief Executive Officer from time to time.
Section 3.05. PRESIDENT. The President shall perform such duties as
may from time to time be assigned by the Board of Directors.
Section 3.06. VICE PRESIDENTS. Any one or more Vice Presidents, if
any, may be designated by the Board of Directors as Executive Vice
Presidents or Senior Vice Presidents. During the absence or disability of
the President, it shall be the duty of the highest ranking Executive Vice
President, and, in the absence of any such Vice President, it shall be the
duty of the highest ranking Senior Vice President or other Vice President,
who shall be present at the time and able to act, to perform the duties of
the President. The determination of who is the highest ranking of two or
more persons holding the same office shall, in the absence of specific
designation of order of rank by the Board of Directors, be made on the basis
of the earliest date of appointment or election, or, in the event of
simultaneous appointment or election, on the basis of the longest continuous
employment by the Corporation.
Section 3.07. SECRETARY. The Secretary, unless otherwise determined
by the Board, shall attend all meetings of the shareholders and all meetings
of the Board of Directors, shall record or cause to be recorded all
proceedings thereof in a book to be kept for that purpose, and may certify
such proceedings. Except as otherwise required or permitted by law or by
these Bylaws, the Secretary shall give or cause to be given notice of all
meetings of the shareholders and all meetings of the Board of Directors.
Section 3.08. TREASURER. Unless otherwise determined by the Board,
the Treasurer shall be the Chief Financial Officer of the Corporation. If
an officer other than the Treasurer is designated Chief Financial Officer,
the Treasurer shall perform such duties as may from time to time be assigned
to him by the Board.
Section 3.09. AUTHORITY AND DUTIES. In addition to the foregoing
authority and duties, all officers of the Corporation shall respectively
have such authority and perform such duties in the management of the
business of the Corporation as may be designated from time to time by the
Board of Directors. Unless prohibited by a resolution approved by the
affirmative vote of a majority of the directors present, an officer elected
or appointed by the Board may, without the approval of the Board, delegate
some or all of the duties and powers of an office to other persons.
Section 3.10. TERM. Subdivision 1. All officers of the Corporation
shall hold office until their respective successors are chosen and have
qualified or until their earlier death, resignation or removal.
Subdivision 2. An officer may resign at any time by giving written
notice to the Corporation. The resignation is effective without acceptance
when the notice is given to the Corporation, unless a later effective date
is specified in the notice.
Subdivision 3. An officer may be removed at any time, with or without
cause, by a resolution approved by the affirmative vote of a majority of the
directors present at a duly held Board meeting.
Subdivision 4. A vacancy in an office because of death, resignation,
removal, disqualification or other cause may, or in the case of a vacancy in
the office of Chief Executive Officer or Chief Financial Officer shall, be
filled for the unexpired portion of the term by the Board.
Section 3.11. SALARIES. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors or by the Chief
Executive Officer if authorized by the Board.
INDEMNIFICATION
Section 4.01. INDEMNIFICATION. The Corporation shall indemnify such
persons, for such expenses and liabilities, in such manner, under such
circumstances, and to such extent, as required or permitted by Minnesota
Statutes, Section 302A.521, as amended from time to time, or as required or
permitted by other provisions of law.
Section 4.02. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person in such person's official capacity against
any liability asserted against and incurred by such person in or arising
from that capacity, whether or not the Corporation would otherwise be
required to indemnify the person against the liability.
SHARES
Section 5.01. CERTIFICATED AND UNCERTIFICATED SHARES. Subdivision 1.
The shares of the Corporation shall be either certificated shares or
uncertificated shares. Each holder of duly issued certificated shares is
entitled to a certificate of shares.
Subdivision 2. Each certificate of shares of the Corporation shall
bear the corporate seal, if any, and shall be signed by the Chief Executive
Officer, or the President or any Vice President, and the Chief Financial
Officer, or the Secretary or any Assistant Secretary, but when a certificate
is signed by a transfer agent or a registrar, the signature of any such
officer and the corporate seal upon such certificate may be facsimiles,
engraved or printed. If a person signs or has a facsimile signature placed
upon a certificate while an officer, transfer agent or registrar of the
Corporation, the certificate may be issued by the Corporation, even if the
person has ceased to serve in that capacity before the certificate is
issued, with the same effect as if the person had that capacity at the date
of its issue.
Subdivision 3. A certificate representing shares issued by the
Corporation shall, if the Corporation is authorized to issue shares of more
than one class or series, set forth upon the face or back of the
certificate, or shall state that the Corporation will furnish to any
shareholder upon request and without charge, a full statement of the
designations, preferences, limitations and relative rights of the shares of
each class or series authorized to be issued, so far as they have been
determined, and the authority of the Board to determine the relative rights
and preferences of subsequent classes or series.
Subdivision 4. A resolution approved by the affirmative vote of a
majority of the directors present at a duly held meeting of the Board may
provide that some or all of any or all classes and series of the shares of
the Corporation will be uncertificated shares. Any such resolution shall
not apply to shares represented by a certificate until the certificate is
surrendered to the Corporation.
Section 5.02. DECLARATION OF DIVIDENDS AND OTHER DISTRIBUTIONS. The
Board of Directors shall have the authority to declare dividends and other
distributions upon the shares of the Corporation to the extent permitted by
the Articles of Incorporation of the Corporation and by law.
Section 5.03. TRANSFER OF SHARES. Shares of the Corporation may be
transferred only on the books of the Corporation by the holder thereof, in
person or by his attorney. In the case of certificated shares, shares shall
be transferred only upon surrender and cancellation of certificates for a
like number of shares. The Board of Directors, however, may appoint one or
more transfer agents and registrars to maintain the share records of the
Corporation and to effect transfers of shares.
Section 5.04. RECORD DATE. The Board of Directors may fix a time, not
exceeding sixty days preceding the date fixed for the payment of any
dividend or other distribution, as a record date for the determination of
the shareholders entitled to receive payment of such dividend or other
distribution, and in such case only shareholders of record on the date so
fixed shall be entitled to receive payment of such dividend or other
distribution, notwithstanding any transfer of any shares on the books of the
Corporation after any record date so fixed.
MISCELLANEOUS(8)
Section 6.01. EXECUTION OF INSTRUMENTS. Subdivision 1. All deeds,
mortgages, bonds, checks, contracts and other instruments pertaining to the
business and affairs of the Corporation shall be signed on behalf of the
Corporation by the Chief Executive Officer, the President or any Vice
President, or by such other person or persons as may be designated from time
to time by the Board of Directors.
Subdivision 2. If a document must be executed by persons holding
different offices or functions and one person holds such offices or
exercises such functions, that person may execute the document in more than
one capacity if the document indicates each such capacity.
Section 6.02. ADVANCES. The Corporation may, without a vote of the
directors, advance money to its directors, officers or employees to cover
expenses that can reasonably be anticipated to be incurred by them in the
performance of their duties and for which they would be entitled to
reimbursement in the absence of an advance.
Section 6.03. CORPORATE SEAL. The seal of the Corporation, if any,
shall be a circular embossed seal having inscribed thereon the name of the
Corporation and the following words:
"Corporate Seal Minnesota".
Section 6.04. FISCAL YEAR. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 6.05. AMENDMENTS. The Board of Directors shall have the power
to adopt, amend or repeal the Bylaws of the Corporation, subject to the
power of the shareholders to change or repeal the same, provided, however,
that the Board shall not adopt, amend or repeal any Bylaw fixing a quorum
for meetings of shareholders, prescribing procedures for removing directors
or filling vacancies in the Board, or fixing the number of directors or
their classifications, qualifications or terms of office, but may adopt or
amend a Bylaw that increases the number of directors.
<PAGE>
As of September 18, 1999
Lutheran Brotherhood Family of Funds
LB Series Fund, Inc.
625 Fourth Avenue South
Minneapolis, MN 55415
RE: LOAN FACILITY
Ladies and Gentlemen:
State Street Bank and Trust Company (the "Bank") is pleased to make
available a $50,000,000 unsecured committed revolving line of credit (the
"Committed Line") to the Lutheran Brotherhood Family of Funds a Delaware
business trust (the "Trust"), on behalf of its fund series as described on
Appendix I hereto (each such series, a "Brotherhood Fund") and to LB Series
Fund, Inc., a Minnesota corporation (the "Corporation"), on behalf of its
fund series as described on Appendix I hereto (each such series, an "LB
Fund"; each Brotherhood Fund and LB Fund, a "Fund"; and each of the Trust
and the Corporation, a "Borrower") on the following terms and conditions:
I. COMMITTED LINE
1. TERM. The Committed Line shall commence on the date hereof and
expire June 30, 2000 (the "Expiration Date"), unless extended in the
discretion of the Bank or terminated by the Borrowers as provided herein.
The Borrowers may terminate the Committed Line upon five days prior written
notice and payment of all outstanding principal, interest, fees, costs and
expenses on the effective date of termination.
2. NOTICE AND MANNER OF BORROWINGS. Subject to the terms and
conditions hereof the Bank will make revolving loans to a Borrower on behalf
of one or more of its Funds under the Committed Line (each such loan, a
"Loan") not to exceed in the aggregate outstanding hereunder at any time the
lesser of (i) 15% of the value of the total assets of the Fund for which a
Loan is extended (after giving effect to the requested Loan) based upon the
current market value of such Fund's assets determined with reference to
daily prices provided by independent pricing sources at the time the Loan is
to be made or (ii) the maximum amount which the Borrower or Fund for which a
Loan is made is permitted to borrow at any time or in the aggregate pursuant
to the Prospectus, the Investment Company Act or any registration made
thereunder, any vote of the shareholders of the Borrower or such Fund, any
agreement of the Borrower or any Fund with any foreign, federal, state or
local securities division to which the Borrower is subject, any other
applicable agreement or document to which the Borrower or such Fund is a
party or any law, rule or regulation applicable to the Borrower or such Fund
(the lesser of (i) and (ii), the "Maximum Amount"); provided that the
aggregate amount of all outstanding Loans hereunder shall not exceed
$50,000,000 (the "Maximum Facility Amount") at any time. Each request for a
Loan hereunder, shall be made in writing by a Borrower by delivering a
completed loan request in the form of Exhibit B attached hereto and such
other information or documentation as the Bank may reasonably request. Each
such Loan request shall be made by the Borrower and received by the Bank not
later than 4:00 p.m. Boston time on the business day on which such Loan is
to be made. Each Loan request hereunder shall be deemed to be a confirmation
by the Borrower that no Default has occurred and is continuing hereunder
with respect to such Borrower, that the representations and warranties of
the Borrower and the Fund for which a Loan is made described below remain
true and correct and that no borrowing limitations applicable to the
Borrower or such Fund will be exceeded after giving effect to the requested
Loan, each of which shall be a precondition to the making of any Loan
hereunder.
3. EVIDENCE OF INDEBTEDNESS. All Loans will be evidenced by a
promissory note in the form attached hereto as Exhibit A (as amended, the
"Note"). Each Borrower hereby authorizes the Bank to record each Loan and
the corresponding information on the schedule forming part of the Note, and,
absent manifest error, this record shall govern and control. The failure by
the Bank to record, or any error in so recording, any such amount on the
Bank's books and records, such schedule, or any other record maintained by
the Bank, shall not limit or otherwise affect the obligation of the
Borrowers to make payments of principal of and interest on each Loan as
provided herein and in the Note.
4. INTEREST RATE. Principal on each outstanding Loan shall bear
interest at a variable rate per annum equal to the Bank's overnight federal
funds rate as determined by the Bank as of 11:00 a.m. Boston time plus 0.50%
per annum which rate shall change when such federal funds rate changes.
Interest on each Loan shall be calculated on the basis of a 360-day year for
the actual number of days elapsed. Following the occurrence of a Default
hereunder, unpaid principal on any Loan, and to the extent permitted by
applicable law, unpaid interest on any Loan, shall thereafter bear interest,
compounded monthly and be payable on demand, until paid in full (after as
well as before judgment) at a rate per annum equal to two percent (2%) above
the rate otherwise applicable to such Loan hereunder.
5. PAYMENTS AND PREPAYMENT/RECOURSE. Each Loan, together with
accrued and unpaid interest thereon, shall be due and payable upon the
earliest of (a) 60 days following the date on which such Loan is made, (b)
the date on which such Loan becomes due pursuant to Section II, Paragraph 4
below following the occurrence of a Default or (c) the Expiration Date,
provided that a Borrower may not have Loans outstanding hereunder with
respect to any Fund for a period in excess of 60 consecutive calendar days.
Interest on all Loans shall be payable monthly in arrears on the fifteenth
day of each month with all accrued and unpaid interest due and payable on
the same day when principal is due and payable. Each Borrower covenants and
agrees to immediately repay any amount by which the then outstanding
aggregate principal amount of the Loans exceeds the Maximum Facility Amount
upon the earlier to occur of the Borrower first becoming aware of such
excess or demand by the Bank (except that no Borrower shall be required to
make any such repayment if such repayment is required solely because the
Maximum Amount applicable to any other Borrower or any Fund of such other
Borrower has been exceeded). Loans may be prepaid without penalty and any
amounts prepaid may be reborrowed subject to the terms hereof. All payments
of principal and interest with respect to any Loan shall be made not later
than 2:00 p.m. Boston time on the date due without set off or deduction in
immediately available United States dollars at the Bank's office at 225
Franklin Street, Boston, Massachusetts or as otherwise directed in writing
by the Bank.
The Bank and each Borrower acknowledge and agree that all persons
dealing with such Borrower shall look solely to the trust or corporate (as
appropriate) property of such Borrower for the enforcement of any claim
against such Borrower. None of the directors, trustees, officers, agents or
shareholders of a Borrower assumes any personal liability for the
obligations entered into on behalf of the Borrower or Fund with respect to
the Committed Line. In addition, the principal amount of the Loans and
accrued interest thereon, any fees or additional amounts payable in
connection with or relating to such Loans pursuant to this Agreement, and
all other obligations of a Borrower, shall be paid or repaid solely from the
assets of the Fund, constituting a series of such Borrower, for which a Loan
is made and the Bank shall have no right of recourse or offset against the
assets of any other series of either Borrower or any other Borrower or Fund.
The Trust agrees that if Lutheran Brotherhood Research Corp. ceases to
be the investment adviser to any Brotherhood Fund without the consent of the
Bank (such consent not to be unreasonably withheld), then, at the Bank's
option, the Agreement shall terminate and any Loans with respect to such
Brotherhood Funds, together with any accrued interest and other Obligations
with respect to such Brotherhood Funds, shall immediately be due and
payable. The Corporation agrees that if Lutheran Brotherhood ceases to be
the investment adviser to any LB Fund without the consent of the Bank (such
consent not to be unreasonably withheld), then, at the Bank's option, the
Agreement shall terminate and any Loans with respect to such LB Funds,
together with any accrued interest and other Obligations with respect to
such LB Funds, shall immediately be due and payable.
6. FEES. The Borrowers agree to pay to the Bank a commitment fee
equal to 0.08% per annum on the daily unused portion of the Committed Line
Amount which shall be payable quarterly in arrears on or before the 15th day
following the end of each March, June, September and December of each year
and on the Expiration Date or, if earlier, on the date when the commitment
hereunder is terminated, provided that the Borrowers may consult among
themselves and determine, in their sole discretion, how such commitment fee
shall be allocated among the Borrowers, provided further that
contemporaneous with the payment of such fee to the Bank, the Borrowers
shall provide the details of such allocation to the Bank in writing. The
commitment fee described herein shall be calculated on the basis of a 360-
day year for the actual number of days elapsed.
7. USE OF FUNDS. Proceeds of Loans may be used only (i) to
temporarily finance the purchase or sale of securities for prompt delivery
if the Loan is to be repaid promptly in the ordinary course of business upon
completion of such purchase or sale transaction or (ii) to finance the
redemption of the shares of an investor of the Fund for which a Loan is
made. No portion of any proceeds of any Loan shall be used directly or
indirectly in violation of any provision of any statute, regulation, order
or restriction applicable to the Borrower or in violation of Federal
Reserve Regulation U.
8. SECURITY. All obligations of the Borrowers with respect to the
Committed Line shall remain unsecured, however State Street Bank and Trust
Company will remain as custodian of the assets of each Borrower.
II. GENERAL LOAN TERMS
1. Covenants. Until all obligations of the Borrowers with respect to
the Committed Line have been paid in full and the Committed Line has been
terminated, unless otherwise consented to in writing by the Bank, each
Borrower, severally and not jointly, covenants and agrees as follows both as
to itself and as to each of its Funds:
a) not to issue any preferred stock or create, incur, assume or
guarantee any Indebtedness other than, to the extent permitted by the
Prospectus (i) Indebtedness to the Bank, and Indebtedness to any custodian
of assets of the Borrower incurred in connection with such custody
relationship, other than Indebtedness for borrowed money, (ii) Indebtedness
and guarantees existing as of the date of this letter agreement and
disclosed on Exhibit C, (iii) reverse repurchase agreements aggregating not
in excess of 5% of the Fund's total assets, (iv) preferred stock or other
Indebtedness and guarantees with the prior consent of the Bank and (v) other
Indebtedness incurred in the course of the Borrower's business as described
in the then current Prospectus and Statement of Additional Information,
other than Indebtedness for borrowed money;
b) not to create, incur, assume or suffer to exist any mortgage,
pledge, security interest, lien or other charge or encumbrance upon any of
its assets or properties, or enter into any agreement preventing it from
encumbering any such assets or properties other than, to the extent
permitted by the Prospectus (i) those in favor of the Bank or its affiliates
or subsidiaries, (ii) those shown on Exhibit D, (iii) those in favor of any
custodian of assets of the Borrower, (iv) those for which the Bank has given
its prior written approval, and (v) liens for taxes, fees, assessments and
other governmental charges not yet due and payable.
c) to (i) duly observe and comply in all material respects with
all applicable laws, including, without limitation, the Investment Company
Act and any asset coverage and borrowing restrictions and restrictions on
indebtedness and extensions of credit contained therein and applicable to
the Borrower or any Fund and applicable securities laws and regulations, and
pay all taxes and governmental charges prior to the time they become
delinquent, (ii) maintain in full force and effect all licenses and permits
necessary in any material respect for the proper conduct of its business,
(iii) maintain its status as an open-end diversified management investment
company registered under the Investment Company Act and the status of each
of its Funds as a regulated investment company under Subchapter M of the
Internal Revenue Code, (iv) operate in compliance with its organizational
documents, the Prospectus and any other applicable investment policies and
restrictions and agreements relating thereto, (v) make no change in the
investment objectives or fundamental investment restrictions of any Fund
without the Bank's prior consent, not to be unreasonably withheld, (vi) not
merge or consolidate with or into any entity or purchase all or
substantially all of the assets or stock of any entity or sell or otherwise
transfer all or any substantial portion of the Borrower's or any Fund's
assets, (vii) not permit there to occur a change in the custodian of the
Borrower's assets from the Custodian or in the investment objectives of the
Borrower or in the investment restrictions as described in the Prospectus,
without the prior written consent of the Bank in each instance not to be
unreasonably withheld, (viii) comply with all terms and provisions of all
documents evidencing or securing any Indebtedness to the Bank and to or with
any party other than the Bank ("Other Indebtedness"), (ix) immediately
notify the Bank of any default or event of default with respect to Other
Indebtedness and of any default under or termination of any agreement with
the Custodian or with the Investment Adviser and to provide to the Bank a
copy of any notice received by the Borrower or any Fund relating thereto and
any notice or claim of any such default or termination and (x) immediately
notify the Bank of any Default hereunder and of any litigation or
governmental proceeding inspection or investigation commenced or threatened
in writing against the Borrower;
d) to permit the Bank or its representatives and agents to visit
and inspect the properties of the Borrower and make copies or abstracts from
the Borrower's and each Fund's books and records at all such reasonable
times and as often as may be reasonably desired;
e) to pay all reasonable fees, costs and expenses incurred or
paid by the Bank, including the Bank's attorney's fees and expenses, in
connection with the administration, enforcement, amendment or termination of
the Loan Documents;
f) to submit to the Bank: (i) within 65 days after the end of
each semi-annual period in each fiscal year, the Borrower's and each Fund's
semi-annual or annual, as the case may be, financial statements including a
statement of assets, liabilities and investments as of the end of each such
period in the form received by shareholders and, in the case of annual
statements, audited by a certified public accountant, (ii) all proxy
materials, reports to shareholders and other information delivered to
shareholders of the Borrower and each Fund or to the United States
Securities and Exchange Commission including, in any event, copies of any
material change to the Prospectus or registration statement, and (iii) such
other financial statements and information as to the Borrower, any Fund or
Investment Adviser as the Bank may reasonably request from time to time.
All financial statements required hereunder shall be prepared in accordance
with generally accepted accounting principles consistently applied; and
g) execute and deliver such additional instruments and take such
further action as the Bank may reasonably request solely to effect the
purpose of the Loan Documents and the Loans.
2. REPRESENTATIONS AND WARRANTIES. Each Borrower severally
represents and warrants to the Bank both as to itself and as to each of its
Funds (but not as to the other Borrower or any of its Funds) that:
a) it is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization, and it is registered as
an open-end management investment company under the Investment Company Act,
and each of its Funds is qualified as a regulated investment company within
the meaning of the United States Internal Revenue Code of 1986, has all
requisite power and authority to own its property and conduct its business
as is now conducted, is duly authorized to do business in each jurisdiction
where the nature of its properties or business requires such qualification
and is in compliance with its organizational documents and applicable law,
including, without limitation, the Investment Company Act and Federal
Reserve Regulations U and X. The Borrower has filed all income tax returns
and paid all taxes due pursuant to such returns and the charges, accruals
and reserves on the books and records of the Borrower with respect to such
taxes and charges are, in the opinion the Borrower, adequate;
b) the execution, delivery and performance of each of the Loan
Documents and the making of any Loan by the Bank to the Borrower and any
Fund hereunder (i) are, and will be, within the Borrower's and such Fund's
power and authority, (ii) have been authorized by all necessary proceedings,
(iii) do not, and will not, require the consent of any shareholders of the
Borrower or any Fund or approvals of any governmental authority other than
those which have been received, (iv) will not contravene any provision of,
or exceed any limitation contained in, the declaration of trust or by-laws
or other organizational documents of the Borrower or any Fund or the
Prospectus or any law, rule or regulation applicable to the Borrower or any
Fund, including, without limitation, the Investment Company Act, and the
same will be in compliance with Federal Reserve Regulations T, U and X, upon
the execution of a Federal Reserve Form U-1, and the Investment Company Act,
(v) does not constitute a default under any other agreement, order or
undertaking binding on the Borrower or any Fund, and (vi) does not require
the consent or approval of any obligee or holder of any instrument relating
to the Other Indebtedness or any other party other than for those consents
and approvals which have been received;
c) each of the Loan Documents constitutes the legal, valid,
binding and enforceable obligation of the Borrower, except as the same may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors' rights generally and by general
equitable principles;
d) all financial statements previously furnished to the Bank by
the Borrower were prepared in accordance with generally accepted accounting
principles and present fairly and completely the financial position of the
Borrower and the Funds. Since the date of such statements, there has been
no material adverse change in the assets, liabilities, financial condition
or business of the Borrower or any Fund other than in the ordinary course of
business. The Borrower has disclosed to the Bank in writing any and all
facts which, to the best of the Borrower's knowledge after due inquiry,
materially and adversely affect or may affect the business, operations or
financial condition of the Borrower or any Fund or the ability of the
Borrower to perform its obligations under the Loan Documents;
e) the Borrower and each Fund has good and marketable title to
all its material properties, assets and rights of every name and nature
purportedly owned by it, except for encumbrances shown on Exhibit D;
f) there is no litigation, arbitration, proceeding or
investigation pending, or to the best of the Borrower's knowledge
threatened, against the Borrower, any Fund or the Investment Adviser except
those previously disclosed by the Borrower to the Bank in writing and except
as described on Exhibit E attached hereto;
g) the shares of the Borrower and each Fund have been registered
under the Securities Act of 1933 and are eligible for sale under applicable
state and federal securities laws and regulations;
h) with regard to the Employee Retirement Income Security Act of
1974, and the rules and regulations thereunder, collectively, as amended and
in effect from time to time ("ERISA") neither the Borrower nor any Fund is
treated as a single employer with any other person under ERISA, and each has
no liability with respect to any benefit arrangement, plan or multi-employer
plan subject to ERISA;
i) to the best of the Borrower's knowledge, the Borrower and each
Fund is not an "Affiliated Person", as defined in the Investment Company
Act, with the Bank;
j) the Investment Adviser serves as investment adviser to the
Borrower and the Custodian serves as custodian for assets of the Borrower;
and
k) the Borrower and each Fund has complied with, and is in
compliance in all material respects with, the investment policies and
restrictions set forth in the Prospectus.
The making of each Loan hereunder shall be deemed to be a
reaffirmation by the Borrower as to the representations and warranties
contained in this paragraph and confirmation that no Default has occurred
hereunder or will occur after giving effect to the making of such Loan.
3. DEFAULT. It will be a Default hereunder with respect to a Fund if
any of the following events occurs, as appropriate, with respect to such
Fund or to the Borrower of which such Fund is a series:
a) the Borrower fails to pay within five days when due any amount
of principal of any Loan, or any amount of interest thereon or any fees or
expenses payable hereunder or under the Note; or
b) the Borrower fails to perform any term, covenant or agreement
contained in any of the Loan Documents or a default or event of default
occurs thereunder; or
c) any material representation or warranty of the Borrower made
in any of the Loan Documents or as an inducement for the Bank to make any
Loan shall prove to have been false in any material respect upon the date
when made or deemed to have been made; or
d) the Borrower fails to pay or perform any Obligation whether
now existing or hereafter arising, except as otherwise provided in this
Section II, Paragraph 3, when due or the Borrower or such Fund fails to pay
at maturity, or within any applicable period of grace, any obligations for
Other Indebtedness, or for the use of real or personal property, or fails to
observe or perform any term, covenant or agreement evidencing or securing
such Other Indebtedness or relating to such use of real or personal
property; or
e) the Borrower, such Fund or the Investment Adviser (i) applies
for or consents to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar official of itself or of
all or a substantial part of its property, (ii) is generally not paying its
debts as such debts become due, (iii) makes a general assignment for the
benefit of its creditors, (iv) commences any case or proceeding relating to
the business affairs of the Borrower or such Fund under any law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, or any other law providing for the relief of debtors,
(v) fails to contest in a timely or appropriate manner, or acquiesces in
writing to, any petition filed against it in an involuntary case under the
Federal Bankruptcy Code or other law, (vi) takes any action under the laws
of its jurisdiction of incorporation or organization similar to any of the
foregoing or (vii) discontinues its business; or
f) a proceeding or case shall be commenced against the Borrower,
such Fund or the Investment Adviser without the application or consent of
such party, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, dissolution, winding-up, or composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of
its assets, or (iii) similar relief in respect of it, under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts or any other law providing for the relief of debtors,
and such proceeding or case shall continue undismissed, or unstayed and in
effect, for a period of 60 days; or an order for relief shall be entered in
an involuntary case under the Federal Bankruptcy Code, against the Borrower,
such Fund or the Investment Adviser or action under the laws of the
jurisdiction of incorporation or organization of the Borrower, such Fund or
the Investment Adviser similar to any of the foregoing shall be taken with
respect to the Borrower, such Fund or the Investment Adviser and shall
continue unstayed and in effect for any period of 60 days; or
g) a final judgment or final order for the payment of money is
entered against the Borrower or such Fund by any court, or an execution or
similar process is issued or levied against property of the Borrower or such
Fund, that in the aggregate exceeds $500,000 in value and such judgment,
order, warrant or process is not within 45 days after entry thereof
discharged or stayed pending appeal or is not discharged within 45 days
after the expiration of such stay; or
h) there occurs a material adverse change in the business,
assets, financial condition or prospects of the Borrower or such Fund (which
shall not include a decline in the net assets of the Borrower resulting from
redemptions by shareholders of the Borrower or a decline in market value of
securities held by the Borrower); or
i) the Custodian ceases to serve as the custodian for the
Borrower's assets without the prior written consent of the Bank, which
consent shall not be unreasonably withheld; or
j) the Borrower or such Fund shall violate, or take any action
that would result in a material violation of, any of its fundamental
investment policies or fundamental restrictions applicable to the Borrower
or such Fund as in effect from time to time, including those as set forth in
the Prospectus.
Notwithstanding any provision of this Agreement to the contrary, if
there occurs any Default solely with respect to a particular Fund that is a
series of a Borrower, such Default shall not constitute a Default with
respect to any other Fund of such Borrower, or any other Borrower or Fund of
such other Borrower and shall not permit the Bank to terminate the Committed
Line or exercise any of its other remedies as to such other Fund or other
Borrower.
4. REMEDIES. Upon the occurrence of a Default described in
subsections 3 (e) and (f) to the extent the same relates to such Fund or to
the Borrower of which such Fund is a series, immediately and automatically,
and upon the occurrence of any other Default, at any time thereafter while
such Default is continuing, at the Bank's option and upon the Bank's
declaration:
(a) the Committed Line established hereunder shall terminate with
respect to the subject Fund;
(b) the unpaid principal amount of the Loans to the Borrower on
behalf of such Fund, together with accrued interest and all other
Obligations with respect to such Fund, shall become immediately due and
payable without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived; and
(c) the Bank may exercise any and all rights it has under any of
the Loan Documents and proceed to protect and enforce the Bank's rights by
any action at law, in equity or other appropriate proceeding as it relates
to such Fund.
Each Borrower and each Fund authorizes the Bank and the Custodian to
charge and setoff against any deposit account or other account maintained
with either the Bank or the Custodian on behalf of such Fund and apply the
proceeds thereof against repayment of any unpaid Obligations of such
Borrower with respect to such Fund, as appropriate. In addition, the
Custodian is hereby directed by each Borrower to dispose of the applicable
Fund's assets as selected by the Borrower's investment adviser to the extent
necessary to repay all amounts due to the Bank from the Borrower with
respect to such Fund to the extent that the Obligations of the Borrower with
respect to such Fund have not been paid when due or if a default has
occurred with respect to the Fund. If the Borrower's investment adviser
does not select a sufficient amount of assets of the Fund to repay all
amounts due to the Bank from the Borrower with respect to such Fund within a
reasonable time, the Custodian is hereby directed by the Borrower, upon one
day's prior written notice to the Borrower and its investment adviser, to
dispose of the Fund's assets to the extent necessary to repay all amounts
due to the Bank from the Borrower with respect to such Fund. The foregoing
shall be deemed to be continuing and irrevocable "proper instructions" to
the Custodian for all purposes under the custody agreement between the
Borrower and the Custodian. The foregoing shall be in addition to any other
rights or remedies the Bank and the Custodian may have against a Borrower
following the occurrence of a default hereunder.
No right of the Bank shall be exclusive of any other right of the Bank
now or hereafter available under the Loan Documents, at law, in equity or
otherwise, and no course of dealing or delay by the Bank in exercising any
right shall operate as a waiver thereof or otherwise affect any rights or
remedies of the Bank.
5. NOTICES. All notices hereunder shall be in writing and shall be
deemed to have been given one business day after delivery to overnight
courier or when delivered by hand to the address given below and in each
case such delivery is confirmed to have been made. Notices to the Bank
shall be given to State Street Bank and Trust Company, Lafayette Corporate
Center, 2 Avenue de Lafayette - 2nd Floor, Boston, Massachusetts 02111 Attn:
F. Omar Hazoury, Vice President, or Mutual Fund Lending Department Head
Executive and notices to a Borrower shall be deemed to have been given if
given at the address stated at the beginning of this letter agreement,
Attention: Wade M. Voigt, Treasurer.
6. MISCELLANEOUS. No waivers shall be effective unless in writing.
All amendments hereto must be in writing signed by all parties hereto.
Regardless of the adequacy of any collateral, any amounts owing from the
Bank to a Borrower, including deposits, may be set off and applied against
obligations of such Borrower to the Bank. The Borrowers may not assign or
transfer or participate any of its rights under any of the Loan Documents
without the prior written consent of the Bank. The Bank may assign or
transfer its rights hereunder to any Federal Reserve Bank. With the prior
written consent of each Borrower (not to be unreasonably withheld) the Bank
may assign or transfer its rights hereunder to any other entity. The Bank
may participate its rights hereunder to any entity provided however that no
such entity, without the consent of the Borrower, shall have any rights with
respect to any participation other than for the right to vote on changes in
interest, fees, commitment amount and principal payments.
7. WAIVER OF JURY TRIAL. Except as prohibited by law, neither of the
Borrowers nor the Bank, nor any assignee or successor of a Borrower or the
Bank, shall seek a jury trial in any lawsuit, proceeding, counterclaim or
any other litigation procedure based upon or arising out of any of the Loan
Documents. Neither of the Borrowers nor the Bank will seek to consolidate
any such action, in which a jury trial has been waived, with any other
action in which a jury trial has not been waived. THE PROVISIONS OF THIS
SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THE PROVISIONS
HEREOF SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HERETO HAS IN ANY WAY
AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF THIS
SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
8. JURISDICTION. EACH OF THE LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW).
EACH BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF ANY OF THE LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS
OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED ABOVE. EACH
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN
AN INCONVENIENT COURT.
9. DEFINITIONS. Except as otherwise defined herein, all financial
terms shall be defined in accordance with generally accepted accounting
principles. The following defined terms as used herein shall have the
following meanings:
"Custodian" shall mean State Street Bank and Trust Company.
"Indebtedness" of a Borrower shall mean all obligations for
borrowed money and other extensions of credit to the Borrower and all
amounts payable in connection therewith as permitted to be incurred by a
registered open-end management investment company pursuant to the Investment
Company Act.
"Investment Adviser" means as to the Trust and its Funds, Lutheran
Brotherhood Research Corp., and as to the Corporation and its Funds,
Lutheran Brotherhood.
"Investment Company Act" means the Investment Company Act of 1940,
as amended, together with all related rules and regulations promulgated by
the United States Securities and Exchange Commission relating thereto.
"Loan Documents" means this letter agreement, the Note and any
other documents executed in connection herewith, as the same may be amended,
superseded or replaced.
"Maximum Amount" is defined in Part I, Paragraph 2.
"Obligations" of a Borrower means any and all obligations of the
Borrower to the Bank of every kind and description, direct or indirect,
absolute or contingent, primary or secondary, due or to become due, now
existing or hereafter arising, regardless of how they arise or by what
agreement or instrument, if any, and including obligations to perform acts
and refrain from taking action as well as obligations to pay money.
"Prospectus" means the currently effective Prospectus and
Statement of Additional Information delivered to purchasers of shares of a
Fund.
If the foregoing satisfactorily sets forth the terms and conditions of
the Committed Line, please execute and return to the undersigned each of the
Loan Documents and such other documents and agreements as the Bank may
request. We are pleased to provide the Committed Line to the Borrowers and
look forward to the ongoing development of our relationship.
Sincerely,
STATE STREET BANK AND
TRUST COMPANY, as Bank
By: /s/ F. Omar Hazoury
------------------------
Title: Vice President
Acknowledged and accepted:
LUTHERAN BROTHERHOOD FAMILY OF FUNDS, on behalf of its fund series as
described on Appendix I
By: /s/ Rolf F. Bjelland
-----------------------------
Title: President
LB SERIES FUND, INC., on behalf of its fund series as described on Appendix
I
By: /s/ Rolf F. Bjelland
-----------------------------
Title: President
STATE STREET BANK AND TRUST COMPANY
as Custodian
By: /s/ William M. Marvin
-----------------------------
Title: Vice President
<PAGE>
EXHIBIT A
---------------------
NOTE
$____________ As of September 18, 1999
Boston, Massachusetts
For value received, the undersigned, on behalf of the fund series as
described on Appendix I, hereby promises to pay to State Street Bank and
Trust Company (the "Bank"), or order, at the head office of the Bank at 225
Franklin Street, Boston, Massachusetts 02110 in immediately available United
States dollars, the principal amount of FIFTY MILLION DOLLARS ($50,000,000),
or such lesser amount as shall not have been prepaid as provided herein.
Each Loan shall be payable upon the earliest to occur of 60 days after the
date on which such Loan is made, the date on which the Loan becomes due
whether following the occurrence of a Default or otherwise as described in
the Agreement, as hereinafter defined, or the Expiration Date as defined in
the Agreement. Interest on the unpaid principal amount outstanding
hereunder shall be payable at the variable rate per annum equal to the
Bank's overnight federal funds rate as determined by the Bank as of 11 a.m.
Boston time plus 0.50% per annum. Interest on principal outstanding
hereunder shall be payable monthly in arrears on the first business day of
each month beginning on the first such date following the date hereof, with
all accrued and unpaid interest due and payable upon the Expiration Date or
when principal outstanding hereunder is otherwise due and payable. Each
change in such interest rate shall take effect simultaneously with the
corresponding change in such federal funds rate. Interest shall be computed
on the basis of a 360-day year for the actual number of days elapsed,
including holidays or other days on which the Bank is not open for the
conduct of banking business.
All loans hereunder and all payments on account of principal and
interest hereof shall be recorded by the Bank. The entries on the records
of the Bank (including any appearing on this Note), absent manifest error,
shall govern and control as to amounts outstanding hereunder. The Bank shall
provide the undersigned with written confirmation of any advance or
repayment hereunder, provided however that the failure by the Bank to
provide any such written confirmation or make any entry on the records of
the Bank as described above, shall not affect the obligation of the
undersigned to make payments of principal and interest on all Loans as
provided herein and in the Letter Agreement.
Overdue principal, and, to the extent permitted by law, overdue
interest, shall bear interest, compounded monthly and payable on demand in
immediately available funds, at a rate per annum equal to two percent (2%)
above the rate otherwise applicable to such principal.
This Note is issued pursuant to, and entitled to the benefits of, and
is subject to, the provisions of a certain letter agreement dated as of
September 18, 1999 by and between the undersigned and the Bank (herein, as
the same may from time to time be amended or extended, referred to as the
"Agreement"), but neither this reference to the Agreement nor any provision
thereof shall affect or impair the absolute and unconditional obligation of
the undersigned maker of this Note to pay the principal of and interest on
this Note as herein provided. All terms not otherwise defined herein shall
be used as defined in the Agreement.
The undersigned may at its option prepay all or any part of the
principal of this Note without penalty. Amounts prepaid may be reborrowed
subject to the terms of the Agreement.
Any deposits or other sums at any time credited by or due from the Bank
to the undersigned and any securities or other property of the undersigned
at any time in the possession of the Bank may at all times be held and
treated as collateral for the payment of this Note.
The undersigned maker and every endorser and guarantor hereof hereby
waives presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance, default or
enforcement hereof and consents that this Note may be extended from time to
time and that no such extension or other indulgence, and no substitution,
release or surrender of collateral and no discharge or release of any other
party primarily or secondarily liable hereon, shall discharge or otherwise
affect the liability of the undersigned, endorser or guarantor. No delay or
omission on the part of the Bank in exercising any right hereunder shall
operate as a waiver of such right or of any other right hereunder, and a
waiver of any such right on any one occasion shall not be construed as a bar
to or waiver of any such right on any future occasion.
The Bank and the undersigned acknowledge and agree that all persons
dealing with the undersigned shall look solely to the trust or corporate (as
appropriate) property of such Borrower constituting assets of the Funds for
the enforcement of any claim against such Borrower. None of the directors,
trustees, officers, agents or shareholders of a Borrower assumes any
personal liability for the obligations entered into on behalf of the
Borrower or Fund with respect to this Note. In addition, the principal
amount of the Note and accrued interest thereon, any fees or additional
amounts payable in connection with or relating to such Note and all other
obligations of the undersigned shall be paid or repaid solely from the
assets of the Fund constituting a series of the undersigned for which a Loan
is made and the Bank shall have no right of recourse or offset against the
assets of any other series of the undersigned or any other Borrower or Fund.
This instrument shall have the effect of an instrument executed under
seal and shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts (without giving effect to any conflicts of
laws provisions contained therein).
WITNESS: LUTHERAN BROTHERHOOD FAMILY OF FUNDS,
on behalf of its fund series as
described on Appendix I
________________________________
By: _____________________
Title: __________________
LB SERIES FUND, INC., on behalf of its
fund series as described on Appendix I
_______________________________
By: _____________________
Title: __________________
<PAGE>
SCHEDULE I TO NOTE DATED AS OF SEPTEMBER 18, 1999
FROM LUTHERAN BROTHERHOOD FAMILY OF FUNDS, on behalf of its fund series as
described on Appendix I;
LB SERIES FUND, INC., on behalf of its fund series as
described on Appendix I
TO THE BANK
Date of Loan Amount of Amount of Outstanding Notation
Principal Principal Paid Balance Made By
<PAGE>
EXHIBIT B
ADVANCE/PAYDOWN
REQUEST FORM
DATE: --------------------------------------------------------------
TO: STATE STREET BANK AND TRUST COMPANY
--------------------------------------------------------------
ATTN: --------------------------------------------------------------
FROM: --------------------------------------------------------------
Borrower
SUBJECT: ("Fund")
In connection with the letter agreement and related documents currently
in effect with State Street Bank and Trust Company (collectively, the
"Agreement"), please increase or reduce the outstanding balance on behalf of
the above-indicated Fund as indicated below. The Loan should be recorded on
the books of the Borrower with the Bank and interest payable to the Bank
should be recorded at the agreed upon rate.
Increase/ Cumulative
(Decrease) Balance
Date the Loan by Outstanding Total Assets
- ---- ----------- ----------- ------------
- ------------ $----------- $------------- $-----------
Further, the Borrower hereby represents and warrants that:
1. the proceeds of the Advance shall be used in conformance with the usage
specified in the Agreement,
2. the Borrower is in compliance with all the terms and conditions in the
Agreement and will remain in compliance therewith after giving effect to
the making of the requested Loan; and
3. the undersigned is a duly authorized officer of the Borrower with
authority to execute and deliver this document to the Bank and request
the Loan described herein on behalf of the Borrower.
By: -----------------------------
Name: -----------------------------
Title: -----------------------------
Date: -----------------------------
<PAGE>
EXHIBIT C
INDEBTEDNESS
NONE
<PAGE>
EXHIBIT D
ENCUMBRANCES
NONE
<PAGE>
EXHIBIT E
LITIGATION
To be submitted by the Borrower
<PAGE>
APPENDIX I
I. Lutheran Brotherhood Family of Funds on behalf of its Fund Series:
1. Lutheran Brotherhood Opportunity Growth Fund;
2. Lutheran Brotherhood Mid Cap Growth Fund;
3. Lutheran Brotherhood World Growth Fund;
4. Lutheran Brotherhood Fund;
5. Lutheran Brotherhood High Yield Fund;
6. Lutheran Brotherhood Income Fund;
7. Lutheran Brotherhood Municipal Bond Fund; and
8. Lutheran Brotherhood Money Market Fund.
II. LB Series Fund, Inc. on behalf of its Fund Series:
1. Opportunity Growth Portfolio;
2. Mid Cap Growth Portfolio;
3. World Growth Portfolio;
4. Growth Portfolio;
5. High Yield Portfolio;
6. Income Portfolio; and
7. Money Market Portfolio.
