<PAGE> 1
As filed with the Securities and Exchange Commission on November 18, 1994
Securities Act File No. 33-62312
Investment Company Act File No. 811-7706
===============================================================================
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. 4 /X/
and/or -
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 6 - /X/
------ -
Lehman Brothers Funds, Inc.
---------------------------
(Exact Name of Registrant as Specified in Charter)
3 World Financial Center
New York, N.Y. 10285
--------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 640-0600
Andrew D. Gordon
Lehman Brothers Funds, Inc.
3 World Financial Center , New York, New York 10285
(Name and Address of Agent for Service)
Copies to:
Patricia L. Bickimer, Esq. Gary S. Schpero, Esq.
The Shareholder Services Group, Inc. Simpson Thacher & Bartlett
Exchange Place 425 Lexington Avenue
Boston, Massachusetts 02109 New York, New York 10017
(Name and Address of Agent for Service)
*Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of the Registration Statement.
It is proposed that this filing will become effective
(check appropriate box):
X immediately upon filing pursuant to paragraph (b), or
--------
__ on _________ pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a), or
_____ on _________ pursuant to paragraph (a) of Rule 485
- ----------------------------------------------------------------------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite number of shares of Common Stock,
$0.001 par value per share, of all series and classes of the Registrant, then
existing or thereafter created, and has filed a Rule 24f-2 Notice, for the
fiscal year ended July 31, 1994, on September 22, 1994.
<PAGE> 2
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 495(a)
under the Securities Act of 1933
<CAPTION>
Form N-1A Location
Item in
No. Prospectus
--- ----------
<S> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis Background and Expense
Information
Item 3. Condensed Financial
Information Not Applicable
Item 4. General Description of
Registrant Investment
Objective and Policies;
Additional Information
Item 5. Management of the Fund Management of the Fund;
Additional Information
Item 5A. Management's Discussion
of Fund Performance Not Applicable
Item 6. Capital Stock and Other
Securities Dividends; Taxes;
Additional Information
Item 7. Purchase of Securities Valuation of Shares;
Being Offered Purchase of Shares;
Exchange Privilege
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Legal Proceedings Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-1A Statement of Additional
Item Information
No. -----------------------
-----
<S> <C>
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12.General Information and
History Not Applicable
Item 13. Investment Objectives and
Policies Investment Objectives and
Policies
Item 14. Management of the Fund Management of the Funds
Item 15. Control Persons and Principal
Holders of Securities Management of the Funds
Item 16. Investment Advisory and
Other Services Management of the Funds; Auditors
Item 17. Brokerage Allocation Investment Objectives and
and Other Practices Policies; Additional Purchase
and Redemption Information
Item 18. Capital Stock and Other
Securities Investment Objectives and
Policies
Item 19. Purchase, Redemption and
Pricing of Securities Additional Purchase and
Redemption Information
Item 20. Tax Status Additional Information
Concerning Taxes
Item 21. Underwriters Additional Purchase and
Redemption Information
Item 22. Calculation of Performance Data Performance Data
Item 23. Financial Statements Performance Data
</TABLE>
Part C
------
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration
Statement.
<PAGE> 4
PART A
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS
LEHMAN BROTHERS DAILY INCOME FUND
LEHMAN BROTHERS MUNICIPAL INCOME FUND
Incorporated by reference to Registrant's filing of definitive copies under Rule
497(e) of the Securities Act of 1933, as amended (the "Securities Act"), on
March 23, 1994, and not affected by this filing.
<PAGE> 5
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS
LEHMAN SELECTED GROWTH STOCK PORTFOLIO
Incorporated by reference to Registrant's filing of definitive copies under
Rule 497(e) of the Securities Act on April 28, 1994, as supplemented by
Registrant's filing of definitive copies under Rule 497(e) of the
Securities Act on May 2, 1994. Financial Highlights are filed herewith.
<PAGE> 6
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
SUPPLEMENT DATED NOVEMBER 16, 1994 TO
PROSPECTUS DATED MARCH 21, 1994
<TABLE>
FINANCIAL HIGHLIGHTS
The table of "Financial Highlights for a share outstanding throughout each
period" below supplements the Fund's Financial Statements contained in the
Statement of Additional Information and sets forth certain information regarding
the investment operations of the Fund for the periods presented. The financial
highlights for the period ended July 31, 1994 are derived from the Fund's
Financial Statements audited by Ernst & Young LLP, independent auditors, whose
report thereon appears in the Lehman Brothers Funds Inc.'s Annual Report dated
July 31, 1994. This information should be read in conjunction with the
financial statements and notes thereto that also appear in the Lehman Brothers
Fund Inc.'s Annual Report.
<CAPTION>
Period Period
Ended Ended
09/30/94 7/31/94*
(unaudited) (audited)
----------- ---------
<S> <C> <C>
Net asset value, beginning of period $ 9.73 $ 10.00
-------- -------
Income from investment operations:
Net investment income +++ 0.00 # 0.01
Net realized and unrealized gain/(loss) on investments 0.54 (0.28)
-------- -------
Total from investment operations 0.54 (0.27)
-------- -------
Net asset value, end of period $ 10.27 $ 9.73
======== =======
Total return++ 5.56% (2.70)%
======== =======
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 30,480 $26,341
Ratio of net investment income to average net assets 0.09%** 1.06%**
Ratio of operating expenses to average net assets+ 2.17%** 2.04%**
Portfolio turnover rate 28% 33%
<FN>
- -------------------
* The Fund commenced operations on May 20, 1994.
** Annualized.
+ Annualized operating expenses ratios before waiver of fees and/or expenses reimbursed by investment adviser and
administrator for the periods ended September 30, 1994 and July 31, 1994 were 3.02% and 3.42%, respectively.
++ Total return represents aggregate total return for the periods indicated and does not reflect any applicable
contingent deferred sales charge.
+++ Net investment income before waiver of fees and/or expenses reimbursed by investment adviser and administrator
for the periods ended September 30, 1994 and July 31, 1994 rounded to less than $0.00.
# Amount represents less than $0.01 per share.
</TABLE>
<PAGE> 7
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS
LEHMAN MEXICAN GROWTH AND INCOME PORTFOLIO
Incorporated by reference to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form N1-A, filed on January 14, 1994,
and not affected by this filing.
<PAGE> 8
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS
LEHMAN LATIN AMERICA DOLLAR INCOME PORTFOLIO
Incorporated by reference to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form N1-A, filed on January 14, 1994,
and not affected by this filing.
<PAGE> 9
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS FOR CLASS A, B, C and W SHARES, PROSPECTUS FOR PREMIER SHARES, AND
PROSPECTUS FOR SELECT SHARES
LEHMAN BROTHERS INTERNATIONAL BOND FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N-1A, filed on September 8, 1994,
and not affected by this filing.
<PAGE> 10
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS FOR CLASS A, B, C and W SHARES, PROSPECTUS FOR PREMIER SHARES, AND
PROSPECTUS FOR SELECT SHARES
LEHMAN BROTHERS GLOBAL EMERGING MARKETS EQUITY FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N-1A, filed on September 8, 1994,
and not affected by this filing.
<PAGE> 11
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS FOR CLASS A, B, C and W SHARES, PROSPECTUS FOR PREMIER SHARES, AND
PROSPECTUS FOR SELECT SHARES
LEHMAN BROTHERS GLOBAL EMERGING MARKETS BOND FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N-1A, filed on September 8, 1994,
and not affected by this filing.
<PAGE> 12
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS FOR CLASS A, B, C and W SHARES, PROSPECTUS FOR PREMIER SHARES, AND
PROSPECTUS FOR SELECT SHARES
LEHMAN BROTHERS LARGE CAPITALIZATION U.S. EQUITY FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N-1A, filed on September 8, 1994,
and not affected by this filing.
<PAGE> 13
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS FOR CLASS A, B, C and W SHARES, PROSPECTUS FOR PREMIER SHARES, AND
PROSPECTUS FOR SELECT SHARES
LEHMAN BROTHERS INTERNATIONAL EQUITY FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N-1A, filed on September 8, 1994,
and not affected by this filing.
<PAGE> 14
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS FOR CLASS A, B, C and W SHARES, PROSPECTUS FOR PREMIER SHARES, AND
PROSPECTUS FOR SELECT SHARES
LEHMAN BROTHERS MUNICIPAL BOND FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N-1A, filed on September 8, 1994,
and not affected by this filing.
<PAGE> 15
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS FOR CLASS A, B, C and W SHARES, PROSPECTUS FOR PREMIER SHARES, AND
PROSPECTUS FOR SELECT SHARES
LEHMAN BROTHERS NEW YORK MUNICIPAL BOND FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N-1A, filed on September 8, 1994,
and not affected by this filing.
<PAGE> 16
LEHMAN BROTHERS FUNDS, INC.
PROSPECTUS FOR CLASS A, B, C and W SHARES, PROSPECTUS FOR PREMIER SHARES, AND
PROSPECTUS FOR SELECT SHARES
LEHMAN BROTHERS HIGH-GRADE FIXED INCOME FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N-1A, filed on September 8, 1994,
and not affected by this filing.
<PAGE> 17
PART B
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS DAILY INCOME FUND
LEHMAN BROTHERS MUNICIPAL INCOME FUND
Incorporated by reference to Registrant's filing of definitive copies under
Rule 497(e) of the Securities Act on March 23, 1994, and not
affected by this filing.
<PAGE> 18
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN SELECTED GROWTH STOCK PORTFOLIO
Incorporated by reference to Registrant's filing of definitive copies under
Rule 497(e) of the Securities Act on April 28, 1994, as supplemented by
Registrant's filing of definitive copies under Rule 497(e) of the
Securities Act on May 2, 1994 (except the financial statements
contained therein). Financial Statements are filed herewith.
<PAGE> 19
This Supplement to the Statement of Additional Information is not a
prospectus and is only authorized for distribution when preceded or accompanied
by a Prospectus for Lehman Selected Growth Stock Portfolio (the "Fund") dated
March 21, 1994, as amended or supplemented from time to time. The following
supplements the information contained in the Fund's Statement of Additional
Information dated March 21, 1994.
<TABLE>
LEHMAN BROTHERS FUNDS, INC. JULY 31, 1994
Selected Growth Stock Portfolio
Portfolio of Investments
FINANCIAL STATEMENTS
<CAPTION>
VALUE
(NOTE 1)
SHARES
- ----------------------------------------------------------------------------
COMMON STOCKS - 39.2%
<S> <C> <C>
HEALTHCARE - 3.5%
10,000 Community Health Systems, Inc.** $215,000
10,000 Genzyme Corporation ** 288,750
7,500 Homedco, Inc.** 206,500
5,000 Manor Care, Inc. 125,625
5,000 Multicare Companies, Inc.** 81,250
--------
917,125
--------
MANUFACTURING - 3.5%
7,000 Electroglas, Inc.** 246,750
10,000 Fusion Systems Corporation** 200,000
5,000 Scott Paper Company 288,750
10,000 Union Switch & Signal Corporation** 175,000
--------
910,500
--------
RETAIL - 3.3%
8,000 Heilig-Meyers Company 212,000
10,000 Home Shopping Network, Inc.** 118,750
8,000 Sports & Recreation, Inc.** 264,000
10,700 Stop & Shop Companies** 272,850
--------
867,600
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 20
<TABLE>
LEHMAN BROTHERS FUNDS, INC. JULY 31, 1994
Selected Growth Stock Portfolio
Portfolio of Investments
<CAPTION>
VALUE
(NOTE 1)
SHARES
- ----------------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
<S> <C> <C>
BANKING - 3.2%
10,000 Ahmanson (H.F.) & Company $198,750
10,000 Bank of Boston Corporation 263,750
5,000 First Interstate Bancorp 375,625
--------
838,125
--------
INSURANCE - 2.6%
8,000 CMAC Investment Corporation 209,000
5,000 MBIA, Inc. 290,000
7,000 MGIC Investment Corporation 196,875
--------
695,875
--------
PUBLISHING - 2.5%
5,000 McGraw-Hill, Inc. 347,500
5,000 Scholastic Corporation** 220,625
10,000 Westcott Comunications, Inc.** 103,125
--------
671,250
--------
COMPUTER & COMPUTER SERVICES - 2.4%
13,000 BISYS Group, Inc.** 251,875
5,000 Computer Sciences Corporation** 208,750
10,000 Orbital Sciences Corporation** 172,500
--------
633,125
--------
ADMINISTRATIVE SERVICES - 2.4%
10,000 Medaphis Corporation** 293,750
10,000 Paychex, Inc. 335,000
--------
628,750
--------
ELECTRIC - 2.1%
5,000 American Power Conversion Corporation** 82,500
20,000 Dallas Semiconductor Corporation** 300,000
5,000 Varian Associates, Inc. 180,625
--------
563,125
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 21
<TABLE>
LEHMAN BROTHERS FUNDS, INC. JULY 31, 1994
Selected Growth Stock Portfolio
Portfolio of Investments
<CAPTION>
VALUE
(NOTE 1)
SHARES
- --------------------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
<S> <C> <C>
BROADCASTING - 1.5%
5,000 Clear Channel Communications** $231,250
12,000 Emmis Broadcasting Corporation, Class A 171,000
--------
402,250
--------
AEROSPACE - 1.5%
20,000 GTECH Holdings Corporation** 380,000
--------
TELECOMMUNICATIONS - 1.4%
10,000 Centennial Cellular Corporation, Class A 155,000
5,000 Southwestern Bell Corporation 210,000
--------
365,000
--------
CABLE & TELEVISION 1.4%
10,000 TCA Cable Television, Inc. 222,500
10,000 United International Holdings, Inc., Class A** 133,750
--------
356,250
--------
FINANCIAL SERVICES - 1.3%
6,000 Equifax Inc. 174,750
10,000 SEI Corporation 172,656
--------
347,406
--------
MEDICAL & DENTAL EQUIPMENT - 1.2%
5,000 DENTSPLY International, Inc.** 172,500
15,000 Orthofix Interntaional, Inc.** 150,000
--------
322,500
--------
OIL & GAS - 0.9%
5,000 Anadarko Petroleum Company 239,375
--------
WASTE MANAGEMENT - 0.9%
8,000 WMX Technologies, Inc. 233,000
--------
BUILDING EQUIPMENT - 0.9%
12,000 Ply Gem Industries, Inc. 229,500
--------
AUTOMOTIVE PARTS & ACCESSORIES - 0.8%
12,000 Lear Seating Corporation** 217,500
--------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 22
<TABLE>
LEHMAN BROTHERS FUNDS, INC. JULY 31, 1994
Selected Growth Stock Portfolio
Portfolio of Investments
<CAPTION>
VALUE
(NOTE 1)
SHARES
- --------------------------------------------------------------------------------
COMMON STOCKS - (CONTINUED)
<S> <C> <C>
CONSUMER SERVICES - 0.8%
7,000 CUC International, Inc.** $ 210,875
-----------
MARKETING SERVICES - 0.7%
20,000 Pharmaceutical Marketing Services, Inc.** 187,500
-----------
METALS- 0.4%
10,000 WCI Steel, Inc.** 100,000
-----------
TOTAL COMMON STOCKS (Cost $10,429,155) 10,316,631
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS
- --------------------------------------------------------------------------------
PUT OPTION PURCHASED - 0.2% (COST $92,750)
<S> <C> <C>
50 Nasdaq 100 Index Put Option, December 1994, at $360.00 60,625
------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FACE
VALUE
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 22.8%
$1,000,000 American Telephone and Telegraph Company,
4.350% due 08/24/1994 997,221
1,000,000 CIT Group Holdings Inc.,
4.260% due 08/10/1994 1,000,000
1,000,000 Ford Motor Credit Company,
4.200% due 08/01/1994 1,000,000
1,000,000 General Electric Capital Corporation,
4.203% due 08/01/1994 1,000,000
1,000,000 Household Finance Corporation,
4.386% due 08/25/1994 1,000,000
1,000,000 Xerox Corporation,
4.380% due on 08/22/1994 997,445
-----------
TOTAL COMMERCIAL PAPER (COST $5,994,666) 5,994,666
-----------
TOTAL COMMON STOCKS, PUT OPTION PURCHASED AND
COMMERCIAL PAPER (COST $16,516,571) 16,371,922
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 23
<TABLE>
LEHMAN BROTHERS FUNDS, INC. JULY 31, 1994
Selected Growth Stock Portfolio
Portfolio of Investments
<CAPTION>
VALUE
FACE (NOTE 1)
VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS - 45.0%
$5,935,000 Agreement with Chase Securities, Inc.
4.250% dated 07/29/1994
to be repurchased at $5,937,102 on
8/01/1994 collateralized by U.S.
Treasury Notes, 7.250% due 08/31/1996 $ 5,935,000
5,936,000 Agreement with Morgan Stanley & Co.,
4.250% dated 07/29/1994
to be repurchased at $5,938,102 on
08/01/1994 collateralized by Federal
Home Loan Mortgage Corporation,
4.922% due on 04/01/2017 5,936,000
-----------
TOTAL REPURCHASE AGREEMENTS (COST $11,871,000) 11,871,000
-----------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $28,387,571*) 107.2% 28,242,922
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS
- -----------------------------------------------------------------------------------------
<S> <C> <C>
PUT OPTION WRITTEN (0.1)% (PREMIUM RECEIVED $34,749)
50 Nasdaq 100 Index Put Option, December 1994, at $320.00 (0.1)% (19,375)
- -----------------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (Net) (7.1)% (1,882,353)
- -----------------------------------------------------------------------------------------
NET ASSETS 100.00% $26,341,194
- -----------------------------------------------------------------------------------------
</TABLE>
* Aggregate cost for Federal tax purposes is $28,431,621.
** Non income producing securities.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 24
<TABLE>
Financial Statements
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (UNAUDITED)
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 82.9%
COMPUTER & COMPUTER SERVICES - 12.5%
10,000 American Management Systems Inc.** $ 235,000
18,000 BISYS Group, Inc.** 382,500
15,000 Caere Corporation 140,625
10,000 Ceridian Corporation** 246,250
5,000 Computer Sciences Corporation** 217,500
17,000 EMC Corporation** 342,125
10,000 IMRS Inc.** 375,000
10,000 Informix Corporation** 277,500
5,000 Intel Corporation 307,500
15,000 Orbital Sciences Corporation** 247,500
7,000 Parametric Technology** 232,750
10,000 Policy Management Systems Corporation** 398,750
10,000 Sun Microsystems Inc.** 293,750
10,000 Unisys Corporation** 107,500
----------
3,804,250
----------
HEALTHCARE - 9.8%
5,000 Columbia/HCA Healthcare Corporation 217,500
10,000 Community Health Systems, Inc.** 260,000
10,000 Drypers Corporation 120,000
10,000 Genzyme Corporation ** 342,500
12,000 Homedco Group Inc.** 420,000
10,000 Manor Care, Inc. 266,250
15,000 Multicare Companies, Inc.** 300,937
10,000 National Medical Enterprises Inc.** 171,250
10,000 Quantum Health Resources Inc.** 421,875
8,000 Scherer (R.P.) Corporation** 333,000
5,000 Target Therapeutics Inc.** 146,250
----------
2,999,562
----------
CONSUMER SERVICES - 5.7%
5,000 Albertson's, Inc. 145,625
5,000 Capital Cities/ABC Inc. 410,000
7,000 CUC International, Inc.** 231,000
5,000 Dell Webb Corporation 76,875
20,000 DIMAC Corporation** 245,000
10,000 Loewen Group Inc. 242,500
10,000 Showboat, Inc. 136,250
5,000 SPS Transaction Services Inc.** 260,000
----------
1,747,250
----------
ELECTRIC - 5.0%
25,000 Dallas Semiconductor Corporation** 387,500
20,000 General Instrument Corporation** 570,000
1,800 Kent Electronics Corporation** 63,900
8,000 Lam Research Corporation** 322,000
5,000 Varian Associates, Inc. 182,500
----------
1,525,900
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 25
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (UNAUDITED)
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
TELECOMMUNICATIONS - 4.8%
10,000 A Plus Communications Inc.** $ 130,625
20,000 Centennial Cellular Corporation, Class A 345,000
10,000 Paging Network Inc.** 288,750
10,000 Rogers Cantel Mobil Communications, Class B** 290,000
5,000 Southwestern Bell Corporation 212,500
5,000 Sprint Corporation 190,625
----------
1,457,500
----------
RETAIL - 4.5%
15,000 Heilig-Meyers Company 390,000
20,000 Home Shopping Network, Inc.** 215,000
10,000 Lillian Vernon Corporation 185,000
12,000 Sports & Recreation Inc.** 312,000
10,700 Stop & Shop Companies** 268,838
----------
1,370,838
----------
MANUFACTURING - 4.3%
10,000 Fusion Systems Corporation** 324,375
20,000 Group Technologies Corporation** 180,000
5,000 Scott Paper Company 305,625
15,000 Union Switch & Signal Corporation** 262,500
10,000 Watts Industries Inc., Class A 242,500
----------
1,315,000
----------
ENTERTAINMENT - 3.7%
10,000 Argosy Gaming Company** 175,000
25,000 GTECH Holding Corporation** 503,125
10,000 Mirage Resort Inc.** 215,000
10,000 Players International Inc.** 242,500
----------
1,135,625
----------
INSURANCE - 3.6%
8,000 CMAC Investment Corporation 211,000
10,000 MBIA Inc. 596,250
10,000 MGIC Investment Corporation 301,250
----------
1,108,500
----------
BROADCASTING - 3.0%
20,000 Emmis Broadcasting Corporation, Class A** 325,000
10,000 Infinity Broadcasting Corporation, Class A** 305,000
15,000 Turner Broadcasting Systems Inc., Class A 294,375
----------
924,375
----------
MEDICAL & DENTAL EQUIPMENT - 2.9%
7,500 Charter Medical Corporation** 207,187
10,000 IDEXX Laboratories Inc.** 295,000
15,000 Orthofix International, Inc.** 172,500
5,000 SciMed Life Systems Inc.** 218,750
----------
893,437
----------
FINANCIAL SERVICES - 2.9%
10,000 Equifax Inc. 296,250
10,000 Roosevelt Financial Group Inc. 166,875
20,000 SEI Corporation 430,000
----------
893,125
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 26
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (UNAUDITED)
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - (CONTINUED)
BANKING - 2.9%
10,000 Ahmanson (H. F.) & Company $ 208,750
10,000 Bank of Boston Corporation 266,250
5,000 First Interstate Bancorp 405,625
---------
880,625
---------
CABLE & TELEVISION - 2.6%
10,000 TCA Cable Television, Inc. 243,750
10,000 United International Holdings Inc., Class A** 151,875
10,000 Viacom Inc., Class B, Non-voting** 397,500
---------
793,125
---------
PHARMACEUTICALS - 2.3%
30,000 Perrigo Company** 405,000
10,000 Teva Pharmaceuticals Industries, ADR 283,750
---------
688,750
---------
BUILDING & EQUIPMENT - 1.6%
10,000 Clayton Homes Inc.** 190,000
13,000 Ply Gem Industries, Inc. 300,625
---------
490,625
---------
PUBLISHING - 1.6%
5,000 Houghton Mifflin Company 206,250
20,000 Westcott Communications, Inc.** 273,750
---------
480,000
---------
AUTOMOTIVE PARTS & ACCESSORIES - 1.5%
5,000 Eaton Corporation 237,500
12,000 Lear Seating Corporation** 220,500
---------
458,000
---------
ADMINISTRATIVE SERVICES - 1.3%
10,000 Paychex, Inc. 377,500
---------
CHEMICALS - 1.1%
5,000 Borden Chemicals/Plastics Ltd. 123,750
10,000 IVAX Corporation 196,250
---------
320,000
---------
PAPER PRODUCTS - 1.0%
10,000 Times Mirror Company 307,500
---------
TRANSPORTATION - 0.9%
15,000 Celadon Group Inc.** 277,500
---------
METALS - 0.8%
10,000 WCI Steel, Inc.** 121,250
5,000 Wolverine Tube Inc.** 128,750
---------
250,000
---------
INDUSTRIAL - 0.8%
5,000 Thermo Electron Corporation** 229,375
---------
MINING - NON-METALS - 0.7%
5,000 Cleveland-Cliffs 193,750
---------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 27
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1994 (UNAUDITED)
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS - (CONTINUED)
BASIC INDUSTRIES - 0.6%
10,000 Pall Corporation $ 172,500
-----------
OIL & GAS - 0.3%
5,000 Petroleum Geo-Services, ADR** 96,875
-----------
PACKAGING - 0.2%
2,500 AptarGroup Inc. 67,187
-----------
TOTAL COMMON STOCKS (Cost $24,049,159) 25,258,674
-----------
NUMBER OF
CONTRACTS
- ----------------------------------------------------------------------------------------------------------------------------
PUT OPTION PURCHASED - 0.1% (COST $92,750)
50 Nasdaq 100 Index Put Option, December 1994, at $360.00 22,500
-----------
TOTAL COMMON STOCKS AND PUT OPTION PURCHASED
(Cost $24,141,909) 25,281,174
-----------
FACE
VALUE
- ----------------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 22.3% (Cost $6,804,000)
$6,804,000 Agreement with Chase Manhattan Corporation, 5.150% dated
09/30/1994 to be repurchased at $6,806,920 on 10/03/1994
collateralized by $7,695,000 U.S. Government Securities with
various maturities and coupon rates (Value $6,946,470) 6,804,000
-----------
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $30,945,909*) 105.3 % 32,085,174
NUMBER OF
CONTRACTS
- ----------------------------------------------------------------------------------------------------------------------------
PUT OPTION WRITTEN (0.0)% (PREMIUM RECEIVED $34,749)
50 Nasdaq 100 Index Put Option, December 1994, at $320.00 (0.0) (5,938)
-----------
OTHER ASSETS AND LIABILITIES (Net) (5.3) (1,599,247)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS 100.0 % $30,479,989
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
* Aggregate cost for Federal tax purposes.
** Non income producing securities.
ABBREVIATION:
ADR - American Depositary Receipt
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 28
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
<S> <C> <C>
ASSETS:
Investments, at value (Cost $28,387,571) (Note 1)
See accompanying schedule:
Securities............................................................... $ 16,371,922
Repurchase Agreements.................................................... 11,871,000 $ 28,242,922
----------------
Cash........................................................................ 100,571
Receivable for investment securities sold................................... 167,500
Receivable for Fund shares sold............................................. 161,607
Unamortized organization costs (Note 6)..................................... 121,267
Receivable from investment adviser.......................................... 11,440
Dividends and interest receivable........................................... 8,325
Receivable from administrator............................................... 3,051
----------------
TOTAL ASSETS................................................................ 28,816,683
LIABILITIES:
Payable for investment securities purchased................................. 2,292,450
Organization costs payable.................................................. 102,568
Option written, at value (Premium received $34,749) (Note 1)
See accompanying schedule................................................ 19,375
Distribution fee payable (Note 3)........................................... 13,960
Accrued Directors' fees and expenses (Note 2)............................... 5,500
Service fee payable (Note 3)................................................ 4,653
Custodian fees payable (Note 2)............................................. 2,400
Transfer agent fees payable (Note 2)........................................ 1,138
Accrued expenses and other payables......................................... 33,445
----------------
TOTAL LIABILITIES........................................................... 2,475,489
----------------
NET ASSETS...................................................................... $ 26,341,194
================
NET ASSETS consist of:
Undistributed net investment income......................................... $ 38,112
Accumulated net realized loss on securities sold............................ (219,954)
Unrealized depreciation of securities....................................... (129,275)
Par value................................................................... 2,706
Paid-in capital in excess of par value...................................... 26,649,605
----------------
TOTAL NET ASSETS............................................................ $ 26,341,194
================
NET ASSET VALUE and offering price per share +
($26,341,194 / 2,706,412 shares outstanding) $ 9.73
================
- ---------------------------
<FN>
+ Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 29
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994 (UNAUDITED)
<S> <C> <C>
ASSETS:
Investments, at value (Cost $30,945,909) (Note 1)
See accompanying schedule:
Securities......................................................................... $25,281,174
Repurchase Agreements.............................................................. 6,804,000 $32,085,174
Cash.................................................................................. ----------- 300
Receivable for investment securities sold............................................. 575,000
Unamortized organization costs (Note 6)............................................... 117,042
Receivable for Fund shares sold....................................................... 25,812
Dividends and interest receivable..................................................... 8,258
Other assets.......................................................................... 2,000
-----------
TOTAL ASSETS.......................................................................... 32,813,586
LIABILITIES:
Payable for investment securities purchased........................................... 2,230,228
Distribution fee payable (Note 3)..................................................... 18,775
Organization costs payable............................................................ 16,671
Accrued Directors' fees and expenses (Note 2)......................................... 9,167
Service fee payable (Note 3).......................................................... 6,258
Option written, at value (Premium received $34,749) (Note 1)
See accompanying schedule.......................................................... 5,938
Custodian fees payable (Note 2)....................................................... 5,400
Investment advisory fee payable (Note 2).............................................. 3,821
Transfer agent fees payable (Note 2).................................................. 1,150
Administration fee payable (Note 2)................................................... 1,019
Accrued expenses and other payables................................................... 35,170
-----------
TOTAL LIABILITIES..................................................................... 2,333,597
-----------
NET ASSETS................................................................................. $30,479,989
===========
NET ASSETS CONSIST OF:
Undistributed net investmentincome......................................................... $ 42,712
Accumulated net realized loss on securities sold...................................... (8,570)
Unrealized appreciation of securities................................................. 1,168,076
Par value............................................................................. 2,966
Paid-in capital in excess of par value................................................ 29,274,805
-----------
TOTAL NET ASSETS...................................................................... $30,479,989
===========
NET ASSET VALUE and offering price per share +
($30,479,989 / 2,966,398 shares outstanding) $ 10.27
===========
<FN>
___________________
+ Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 30
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JULY 31, 1994
<S> <C> <C>
INVESTMENT INCOME:
Interest.................................................................... $ 102,880
Dividends................................................................... 2,455
----------------
TOTAL INVESTMENT INCOME.......................................................... 105,335
EXPENSES:
Investment advisory fee (Note 2)............................................ $ 25,460
Distribution fee (Note 3)................................................... 25,460
Legal and audit fees........................................................ 20,795
Shareholder reports expense................................................. 10,000
Service fee (Note 3)........................................................ 8,487
Administration fee (Note 2)................................................. 6,790
Directors' fees and expenses (Note 2)....................................... 5,500
Amortization of organization costs (Note 6)................................. 5,125
Transfer agent fees (Note 2)................................................ 3,217
Custodian fees (Note 2)..................................................... 2,495
Other....................................................................... 2,650
Fees waived and expenses reimbursed by investment
adviser and administrator (Note 2)....................................... (46,741)
----------------
TOTAL EXPENSES.............................................................. 69,238
----------------
NET INVESTMENT INCOME............................................................ 36,097
----------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
(Notes 1 and 4):
Net realized loss on securities sold during the period...................... (219,954)
----------------
Net change in unrealized appreciation/(depreciation) of:
Securities............................................................... (144,649)
Written options.......................................................... 15,374
----------------
Net unrealized depreciation of investments during
the period............................................................... (129,275)
----------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS.................................. (349,229)
----------------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................................................... $ (313,132)
================
SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
<PAGE> 31
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1994 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
Interest.............................................................................. $ 82,944
Dividends............................................................................. 26,713
----------
TOTAL INVESTMENT INCOME.................................................................... 109,657
EXPENSES:
Investment advisory fee (Note 2)...................................................... $ 47,808
Distribution fee (Note 3)............................................................. 36,368
Registration and filing fees.......................................................... 14,190
Administration fee (Note 2)........................................................... 12,749
Service fee (Note 3).................................................................. 12,122
Legal and audit fees.................................................................. 6,363
Amortization of organization costs (Note 6)........................................... 4,225
Directors' fees and expenses (Note 2)................................................. 3,667
Custodian fees (Note 2)............................................................... 3,000
Transfer agent fees (Note 2).......................................................... 2,336
Other................................................................................. 3,454
Fees waived by investment adviser and administrator
(Note 2)........................................................................... (41,225)
---------
TOTAL EXPENSES........................................................................ 105,057
----------
NET INVESTMENT INCOME...................................................................... 4,600
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
(Notes 1 and 4):
Net realized gain on securities sold during the period................................ 211,384
----------
Net change in unrealized appreciation of:
Securities......................................................................... 1,283,914
Written options.................................................................... 13,437
----------
Net unrealized appreciation of investments during
the period......................................................................... 1,297,351
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............................................ 1,508,735
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................................................................... $1,513,335
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 32
<TABLE>
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
Period
Ended Period
09/30/1994 Ended
(unaudited) 07/31/94*
----------- -----------
<S> <C> <C>
Net investment income...................................................................... $ 4,600 $ 36,097
Net realized gain/(loss) on securities and written options
during the period....................................................................... 211,384 (219,954)
Net unrealized appreciation/(depreciation) of securities and
written options during the period..................................................... 1,297,351 (129,275)
----------- -----------
Net increase/(decrease) in net assets resulting from operations............................ 1,513,335 (313,132)
Net increase in net assets from Fund share
transactions (Note 5)................................................................. 2,625,460 26,654,326
----------- -----------
Net increase in net assets................................................................. 4,138,795 26,341,194
NET ASSETS:
Beginning of period........................................................................ 26,341,194 0
----------- -----------
End of period (including undistributed net investment
income of $42,712 and $38,112, respectively).......................................... $30,479,989 $26,341,194
=========== ===========
<FN>
____________________
* The Fund commenced operations on May 20, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 33
Lehman Brothers Funds, Inc.
Selected Growth Stock Portfolio
NOTES TO JULY 31, 1994 FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Lehman Brothers Funds, Inc. (the "Company") was incorporated under the
laws of the State of Maryland on May 5, 1993. It is an open-end management
investment company, which currently offers three funds. Information presented
in these financial statements pertains only to the Lehman Brothers Selected
Growth Stock Portfolio ("Selected Growth Stock Portfolio") (the "Fund"). The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
Portfolio valuation: Portfolio securities held by the Fund which are
traded on a recognized stock exchange are valued at the last sale price on the
securities exchange on which such securities are primarily traded or at the
last sale price on the national securities market or in the absence of sales in
such market, at the mean between the closing bid and asked prices. Securities
traded only on over-the-counter markets are valued on the basis of the closing
over-the-counter bid prices or if no sale occurred on such day at the mean of
the current bid and ask prices. Certain securities may be valued by one or
more principal market makers. Restricted securities, securities for which
market quotations are not readily available, and other assets are valued at
fair value under the supervision of the Board of Directors. Short-term
investments that mature in 60 days or less are valued at amortized cost.
Repurchase agreements: The Fund may engage in repurchase agreement
transactions. The Fund values repurchase agreements at cost and accrues
interest into interest receivable. Under the terms of a typical repurchase
agreement, the Fund takes possession of an underlying debt obligation subject
to an obligation of the seller to repurchase, and the Fund to resell, the
obligation at an agreed-upon price and time, thereby determining the yield
during the Fund's holding period. There is potential loss to the Fund in the
event of default by the seller, including the risk of adverse market action or
delay in connection with the disposition of the underlying obligations. The
Fund reviews the creditworthiness of those banks and dealers with which the
Fund enters into repurchase agreements to evaluate potential risks.
Option contracts: The Fund may engage in option contracts. Upon the
purchase of a put option or a call option by the Fund, the premium paid is
recorded as an investment, the value of which is marked-to-market daily. When
a purchased option expires, the Fund will realize a loss in the amount of the
cost of the option. When the Fund enters into a closing sale transaction, the
Fund will realize a gain or loss depending on whether the sales proceeds from
the closing sale transaction are greater or less than the cost of the option.
When the Fund exercises a put option, it will realize a gain or loss from the
sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When the Fund exercises a call
option, the cost of the security which the Fund purchases upon exercise will be
increased by the premium originally paid.
When a Fund writes a call option or a put option, an amount equal to
the premium received by the Fund is recorded as a liability, the value of which
is marked-to-market daily. When a written option expires, the Fund realizes a
gain equal to the amount of the premium received. When the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss if the cost of
the closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is eliminated. When a call
option is exercised, the
<PAGE> 34
Lehman Brothers Funds, Inc.
Selected Growth Stock Portfolio
NOTES TO JULY 31, 1994 FINANCIAL STATEMENTS (CONTINUED)
Fund realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received.
When a put option is exercised, the amount of the premium originally received
will reduce the cost of the security which the Fund purchased upon exercise.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is the Fund may forego the
opportunity of profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the underlying security decreases and
the option is exercised.
Securities transactions and investment income: Securities transactions
are recorded as of the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Realized gains
and losses on investments sold are recorded on the basis of identified cost.
Federal income taxes: The Fund intends to qualify as a regulated
investment company by complying with the requirements of the Internal Revenue
Code of 1986, as amended and applicable to regulated investment companies and
by distributing substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
Dividends and distributions to shareholders: It is the policy of the
Fund to declare and pay dividends from net investment income annually. Capital
gains, unless offset by any available capital loss carryforward, are
distributed to shareholders annually after the close of the fiscal year in
which earned. In order to avoid the application of a 4% non-deductible excise
tax on certain undistributed amounts of ordinary income and capital gains, the
Fund may make additional distributions of any undistributed ordinary income or
capital gains before each December 31, and expects to make any other
distributions as are necessary to avoid the application of this tax.
For the period ended July 31, 1994, permanent differences resulting
from book and tax accounting for organizational costs were reclassified to
paid-in capital at period end.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS
Lehman Brothers Global Asset Management Inc. ("LBGAM") serves as the
Fund's investment adviser pursuant to an investment advisory agreement. LBGAM
is a wholly owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings").
Under the investment advisory agreement, the Fund pays a monthly fee at an
annual rate of 0.75% of the value of the Fund's average daily net assets.
LBGAM may voluntarily waive fees and reimburse expenses. For the period ended
July 31, 1994, LBGAM voluntarily waived fees and reimbursed expenses of $25,460
and $11,440.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned
subsidiary of First Data Corporation, serves as the Fund's administrator
pursuant to an administration agreement. Under the administration agreement
the Fund pays a monthly fee at the annual rate of 0.20% of the value of its
average daily net assets. TSSG may voluntarily waive fees and reimburse
expenses. For the period ended July 31, 1994, TSSG voluntarily waived fees and
reimbursed expenses of $6,790 and $3,051.
<PAGE> 35
Lehman Brothers Funds, Inc.
Selected Growth Stock Portfolio
NOTES TO JULY 31, 1994 FINANCIAL STATEMENTS (CONTINUED)
For the period ended July 31, 1994, the Fund incurred total brokerage
commissions of $21,670, of which $14,392 was paid to Lehman Brothers Inc.
("Lehman Brothers").
A contingent deferred sales charge ("CDSC") may be imposed upon the
redemption of Fund Shares within two years after the date of purchase. The
amount of the CDSC will depend on the number of years since the shareholder
made the purchase payment from which the amount is being redeemed. During the
period ended July 31, 1994, Lehman Brothers received $908 in CDSC Fees on the
redemption of Fund Shares.
No employee of Lehman Brothers, LBGAM or TSSG receives any compensation
from the Company for serving as an officer or Director of the Company. The
Company pays each Director who is not a director, an officer or employee of
Lehman Brothers, LBGAM or TSSG or their affiliates a fee of $20,000 per annum,
plus $500 per meeting attended, and reimburses each of them for travel and
out-of-pocket expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned
subsidiary of Mellon Bank Corporation, serves as the Fund's custodian. TSSG
serves as the Fund's transfer agent.
3. SERVICE AGREEMENTS
Lehman Brothers acts as the distributor of Fund shares.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Company has adopted a services and distribution plan (The "Plan") with respect
to the Fund. Under the Plan, the Fund has agreed to pay Lehman Brothers a
service fee, accrued daily and paid monthly, at an annual rate of 0.25% of the
value of the Fund's average daily net assets, and a distribution fee, accrued
daily and paid monthly, at an annual rate of 0.75% of the value of the Fund's
average daily net assets. The service fee is used by Lehman Brothers to pay
Investment Representatives or Introducing Brokers for servicing shareholder
accounts. The distribution fee is paid to Lehman Brothers for advertising,
marketing and distributing Fund shares. For the period ended July 31, 1994,
the Fund incurred distribution fees and service fees of $25,460 and $8,487,
respectively.
4. PURCHASE AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding
short-term investments, aggregated $12,041,922 and $1,392,813, respectively,
for the period ended July 31, 1994. At July 31, 1994, aggregate gross
unrealized appreciation for all securities in which there is an excess of value
over tax cost was $339,133 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over value was $527,832.
Net unrealized depreciation was $188,699 at July 31, 1994.
<PAGE> 36
Lehman Brothers Funds, Inc.
Selected Growth Stock Portfolio
NOTES TO JULY 31, 1994 FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
Written option activity for the Fund for the period ended July 31, 1994
was as follows:
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
<S> <C> <C>
Options outstanding at May 20, 1994 0 $ 0
Options written 50 34,749
-- --------
Options outstanding at July 31, 1994 50 $ 34,749
== ========
</TABLE>
5. SHARES OF CAPITAL STOCK
At July 31, 1994, the Board of Directors have authority to issue
10,000,000,000 shares of capital stock ($0.001 par value) for the Lehman
Brothers Funds, Inc. Changes in common stock outstanding were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
07/31/94*
SHARES AMOUNT
---------------------------
<S> <C> <C>
Sold 2,712,257 $26,711,937
Redeemed (5,845) (57,611)
--------- -----------
Net increase 2,706,412 $26,654,326
========= ===========
- ------------------
<FN>
*The Fund commenced operations on May 20, 1994.
</TABLE>
6. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization including
fees and expenses of registering and qualifying its shares for distribution
under Federal and state securities regulations. All such costs are being
amortized on the straight-line method over a period of five years from the
commencement of operations. In the event that any of the initial shares of the
Fund are redeemed during such amortization period, the Fund will be reimbursed
for any unamortized organization costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
<PAGE> 37
Lehman Brothers Funds, Inc.
Selected Growth Stock Portfolio
NOTES TO SEPTEMBER 30, 1994 FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Lehman Brothers Funds, Inc. (the "Company") was incorporated under the
laws of the State of Maryland on May 5, 1993. It is an open-end management
investment company, which currently offers three funds. Information presented in
these financial statements pertains only to the Lehman Brothers Selected Growth
Stock Portfolio ("Selected Growth Stock Portfolio") (the "Fund"). The following
is a summary of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements.
Portfolio valuation: Portfolio securities held by the Fund which are
traded on a recognized stock exchange are valued at the last sale price on the
securities exchange on which such securities are primarily traded or at the last
sale price on the national securities market or in the absence of sales in such
market, at the mean between the closing bid and asked prices. Securities traded
only on over-the-counter markets are valued on the basis of the closing
over-the-counter bid prices or if no sale occurred on such day at the mean of
the current bid and ask prices. Certain securities may be valued by one or more
principal market makers. Restricted securities, securities for which market
quotations are not readily available, and other assets are valued at fair value
under the supervision of the Board of Directors. Short-term investments that
mature in 60 days or less are valued at amortized cost.
Repurchase agreements: The Fund may engage in repurchase agreement
transactions. The Fund values repurchase agreements at cost and accrues
interest into interest receivable. Under the terms of a typical repurchase
agreement, the Fund takes possession of an underlying debt obligation subject to
an obligation of the seller to repurchase, and the Fund to resell, the
obligation at an agreed-upon price and time, thereby determining the yield
during the Fund's holding period. There is potential loss to the Fund in the
event of default by the seller, including the risk of adverse market action or
delay in connection with the disposition of the underlying obligations. The
Fund reviews the creditworthiness of those banks and dealers with which the Fund
enters into repurchase agreements to evaluate potential risks.
Option contracts: The Fund may engage in option contracts. Upon the
purchase of a put option or a call option by the Fund, the premium paid is
recorded as an investment, the value of which is marked-to-market daily. When a
purchased option expires, the Fund will realize a loss in the amount of the cost
of the option. When the Fund enters into a closing sale transaction, the Fund
will realize a gain or loss depending on whether the sales proceeds from the
closing sale transaction are greater or less than the cost of the option. When
the Fund exercises a put option, it will realize a gain or loss from the sale of
the underlying security and the proceeds from such sale will be decreased by the
premium originally paid. When the Fund exercises a call option, the cost of the
security which the Fund purchases upon exercise will be increased by the premium
originally paid.
When a Fund writes a call option or a put option, an amount equal to the
premium received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received. When the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or loss if the cost of
the closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the
<PAGE> 38
LEHMAN BROTHERS FUNDS, INC.
SELECTED GROWTH STOCK PORTFOLIO
NOTES TO SEPTEMBER 30, 1994 FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
underlying security, and the liability related to such option is eliminated.
When a call option is exercised, the Fund realizes a gain or loss from the sale
of the underlying security and the proceeds from such sale are increased by
the premium originally received. When a put option is exercised, the amount of
the premium originally received will reduce the cost of the security which the
Fund purchased upon exercise.
The risk associated with purchasing options is limited to the premium
originally paid. The risk in writing a call option is the Fund may forego the
opportunity of profit if the market price of the underlying security increases
and the option is exercised. The risk in writing a put option is that the Fund
may incur a loss if the market price of the underlying security decreases and
the option is exercised.
Securities transactions and investment income: Securities transactions
are recorded as of the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex- dividend date. Realized gains
and losses on investments sold are recorded on the basis of identified cost.
Federal income taxes: The Fund intends to qualify as a regulated
investment company by complying with the requirements of the Internal Revenue
Code of 1986, as amended and applicable to regulated investment companies and by
distributing substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
Dividends and distributions to shareholders: It is the policy of the
Fund to declare and pay dividends from net investment income annually. Capital
gains, unless offset by any available capital loss carryforward, are distributed
to shareholders annually after the close of the fiscal year in which earned. In
order to avoid the application of a 4% non-deductible excise tax on certain
undistributed amounts of ordinary income and capital gains, the Fund may make
additional distributions of any undistributed ordinary income or capital gains
before each December 31, and expects to make any other distributions as are
necessary to avoid the application of this tax.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS
Lehman Brothers Global Asset Management Inc. ("LBGAM") serves as the
Fund's investment adviser pursuant to an investment advisory agreement. LBGAM is
a wholly owned subsidiary of Lehman Brothers Holdings Inc. ("Holdings"). Under
the investment advisory agreement, the Fund pays a monthly fee at an annual rate
of 0.75% of the value of the Fund's average daily net assets. LBGAM may
voluntarily waive fees. For the period ended September 30, 1994, LBGAM
voluntarily waived fees of $32,546.
The Shareholder Services Group, Inc. ("TSSG"), a wholly owned subsidiary
of First Data Corporation, serves as the Fund's administrator pursuant to an
administration agreement. Under the administration agreement the Fund pays a
monthly fee at the annual rate of 0.20% of the value of its average daily net
assets. TSSG may voluntarily waive fees. For the period ended September 30,
1994, TSSG voluntarily waived fees of $8,679.
<PAGE> 39
Lehman Brothers Funds, Inc.
Selected Growth Stock Portfolio
NOTES TO SEPTEMBER 30, 1994 FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
For the period ended September 30, 1994, the Fund incurred total
brokerage commissions of $29,948, of which none was paid to Lehman Brothers Inc.
("Lehman Brothers").
A contingent deferred sales charge ("CDSC") may be imposed upon the
redemption of Fund Shares within two years after the date of purchase. The
amount of the CDSC will depend on the number of years since the shareholder made
the purchase payment from which the amount is being redeemed. During the period
ended September 30, 1994, Lehman Brothers received $3,498 in CDSC Fees on the
redemption of Fund Shares.
No employee of Lehman Brothers, LBGAM or TSSG receives any compensation
from the Company for serving as an officer or Director of the Company. The
Company pays each Director who is not a director, an officer or employee of
Lehman Brothers, LBGAM or TSSG or their affiliates a fee of $20,000 per annum,
plus $500 per meeting attended, and reimburses each of them for travel and
out-of-pocket expenses.
Boston Safe Deposit and Trust Company, an indirect wholly owned
subsidiary of Mellon Bank Corporation, serves as the Fund's custodian. TSSG
serves as the Fund's transfer agent.
3. SERVICE AGREEMENTS
Lehman Brothers acts as the distributor of Fund shares.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Company has adopted a services and distribution plan (The "Plan") with respect
to the Fund. Under the Plan, the Fund has agreed to pay Lehman Brothers a
service fee, accrued daily and paid monthly, at an annual rate of 0.25% of the
value of the Fund's average daily net assets, and a distribution fee, accrued
daily and paid monthly, at an annual rate of 0.75% of the value of the Fund's
average daily net assets. The service fee is used by Lehman Brothers to pay
Investment Representatives or Introducing Brokers for servicing shareholder
accounts. The distribution fee is paid to Lehman Brothers for advertising,
marketing and distributing Fund shares. For the period ended September 30,
1994, the Fund incurred distribution fees and service fees of $36,368 and
$12,122, respectively.
4. PURCHASE AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of securities, excluding
short-term investments, aggregated $18,783,824 and $5,375,203, respectively, for
the period ended September 30, 1994. At September 30, 1994, aggregate gross
unrealized appreciation for all securities in which there is an excess of value
over tax cost was $1,591,599 and aggregate gross unrealized depreciation for all
securities in which there is an excess of tax cost over value was $452,334. Net
unrealized appreciation was $1,139,265 at September 30, 1994.
<PAGE> 40
Lehman Brothers Funds, Inc.
Selected Growth Stock Portfolio
NOTES TO SEPTEMBER 30, 1994 FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
<TABLE>
Written option activity for the Fund for the period ended September 30,
1994 was as follows:
<CAPTION>
NUMBER OF
CONTRACTS PREMIUMS
<S> <C> <C>
Options outstanding at July 31, 1994........ 50 $34,749
-- -------
Options outstanding at September 30, 1994 .. 50 $34,749
== =======
</TABLE>
<TABLE>
5. SHARES OF CAPITAL STOCK
At September 30, 1994, the Board of Directors have authority to issue
10,000,000,000 shares of capital stock ($0.001 par value) for the Lehman
Brothers Funds, Inc. Changes in common stock outstanding were as follows:
<CAPTION>
Period Ended Period Ended
09/30/94 07/31/94***
Shares Amount Shares Amount
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Sold .................. 291,722 $ 2,949,169 2,712,257 $26,711,937
Dividend Reinvestment.. - - - -
Redeemed............... (31,736) (323,709) (5,845) (57,611)
------- ----------- --------- -----------
Net increase........... 259,986 $ 2,625,460 2,706,412 $26,654,326
======= =========== ========= ===========
________________
<FN>
*** The Fund commenced operations on May 20, 1994.
</TABLE>
6. ORGANIZATION COSTS
The Fund bears all costs in connection with its organization including
fees and expenses of registering and qualifying its shares for distribution
under Federal and state securities regulations. All such costs are being
amortized on the straight-line method over a period of five years from the
commencement of operations. In the event that any of the initial shares of the
Fund are redeemed during such amortization period, the Fund will be reimbursed
for any unamortized organization costs in the same proportion as the number of
shares redeemed bears to the number of initial shares held at the time of
redemption.
<PAGE> 41
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN MEXICAN GROWTH AND INCOME PORTFOLIO
Incorporated by reference to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form N1-A, filed on January 14, 1994, and not
affected by this filing.
<PAGE> 42
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN LATIN AMERICA DOLLAR INCOME PORTFOLIO
Incorporated by reference to Post-Effective Amendment No. 2 to the Company's
Registration Statement on Form N1-A, filed on January 14, 1994, and not
affected by this filing.
<PAGE> 43
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS INTERNATIONAL BOND FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N1-A, filed on September 8, 1994, and not
affected by this filing.
<PAGE> 44
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS GLOBAL EMERGING MARKETS EQUITY FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N1-A, filed on September 8, 1994, and not
affected by this filing.
<PAGE> 45
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS GLOBAL EMERGING MARKETS BOND FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N1-A, filed on September 8, 1994, and not
affected by this filing.
<PAGE> 46
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS LARGE CAPITALIZATION U.S. EQUITY FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N1-A, filed on September 8, 1994, and not
affected by this filing.
<PAGE> 47
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS INTERNATIONAL EQUITY FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N1-A, filed on September 8, 1994, and not
affected by this filing.
<PAGE> 48
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS MUNICIPAL BOND FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N1-A, filed on September 8, 1994, and not
affected by this filing.
<PAGE> 49
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS NEW YORK MUNICIPAL BOND FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N1-A, filed on September 8, 1994, and not
affected by this filing.
<PAGE> 50
LEHMAN BROTHERS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
LEHMAN BROTHERS HIGH-GRADE FIXED INCOME FUND
Incorporated by reference to Post-Effective Amendment No. 3 to the Company's
Registration Statement on Form N1-A, filed on September 8, 1994, and not
affected by this filing.
<PAGE> 51
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
Included in Part A
------------------
Financial Highlights
Included in Part B
------------------
Portfolio of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Included in Part C
------------------
Consent and Opinion of Independent Auditors is filed herewith.
<TABLE>
(b) Exhibits:
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C> <C> <C>
1(a) -- Registrant's Amended Articles of Incorporation and Certificate of
Correction of Amended Articles of Incorporation are incorporated by reference
to Exhibit 1(a) to Post-Effective Amendment No. 2, filed January 14, 1994
("Post-Effective Amendment No. 2") to the Registrant's Registration Statement
on Form N-1A, filed May 6, 1993, Registration Nos. 33-62312 and 811-7706 (the
"Registration Statement").
1(b) -- Articles Supplementary to Registrant's Articles of Incorporation
dated March 15, 1994 is incorporated by reference to Exhibit 1(b) to
Post-Effective Amendment No. 3, filed September 8, 1994 ("Post-Effective
Amendment No. 3").
1(c) -- Articles Supplementary to Registrant's Articles of Incorporation,
dated July 27, 1994, is incorporated by reference to Exhibit 1(c) to
Post-Effective Amendment No. 3.
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C>
1(d) -- Form of Articles Supplementary to Registrant's Articles of
Incorporation with respect to Lehman Brothers International Bond Fund, Lehman Brothers Global
Emerging Markets Equity Fund, Lehman Brothers Global Emerging Markets Bond Fund, Lehman
Brothers Large Capitalization U.S. Equity Fund, Lehman Brothers International Equity Fund,
Lehman Brothers Municipal Bond Fund, Lehman Brothers New York Municipal Bond
Fund and Lehman Brothers High-Grade Fixed Income Fund is incorporated by
reference to Exhibit 1(d) to Post-Effective Amendment No. 3.
2 -- Registrant's By-Laws are incorporated by reference to Exhibit 2 to
Pre-Effective Amendment No. 1, filed July 22, 1993 ("Pre-Effective Amendment
No. 1") to the Registration Statement.
3 -- Not Applicable.
4 -- Form of Stock Certificate for shares of Registrant's Capital Stock is
incorporated by reference to Exhibit 4 to Pre-Effective Amendment No. 1.
5(a) -- Form of Investment Advisory Agreements between Registrant and Lehman
Brothers Global Asset Management Inc.("LBGAM Inc.") relating to Lehman
Brothers Daily Income Fund and Lehman Brothers Municipal Income Fund are
incorporated by reference to Exhibit 5 to Pre-Effective Amendment No. 1.
5(b) -- Form of Investment Advisory Agreement between Registrant and LBGAM Inc.
relating to Lehman Selected Growth Stock Portfolio is incorporated by
reference to Exhibit 5(b) to Post-Effective Amendment No. 2.
5(c) -- Form of Investment Advisory Agreements between Registrant and Lehman
Brothers Global Asset Management Limited ("LBGAM Ltd.") relating to Lehman
Mexican Growth and Income Portfolio and Lehman Latin America Dollar Income
Portfolio is incorporated by reference to Exhibit 5(c) to Post-Effective
Amendment No 2.
5(d) -- Form of Research Service Agreements between Lehman Brothers Inc. and
LBGAM Ltd. is incorporated by reference to Exhibit 10 to Post-Effective
Amendment No. 2.
5(e) -- Form of Investment Advisory Agreements between Registrant and LBGAM
Ltd. relating to Lehman Brothers International Bond Fund, Lehman Brothers
Global Emerging Markets Equity Fund, Lehman Brothers Global Emerging Markets
Bond Fund, Lehman Brothers Large Capitalization U.S. Equity Fund and
Lehman Brothers International Equity Fund are incorporated by
reference to Exhibit 5(e) to Post-Effective Amendment No. 3.
</TABLE>
<PAGE> 53
<TABLE>
<S> <C> <C>
5(f) -- Form of Investment Advisory Agreements between Registrant and LBGAM Inc.
relating to Lehman Brothers Municipal Bond Fund, Lehman Brothers New York
Municipal Bond Fund and Lehman Brothers High-Grade Fixed Income Fund are
incorporated by reference to Exhibit 5(f) to Post-Effective Amendment No. 3.
6 -- Form of Distribution Agreement between Registrant and Lehman Brothers Inc. is
incorporated by reference to Exhibit 6 to Pre-Effective Amendment No. 1.
7 -- Not Applicable.
8(a) -- Form of Custodian Agreement between Registrant and Boston Safe Deposit and
Trust Company is incorporated by reference to Exhibit 8(a) to Pre-Effective
Amendment No. 1.
8(b) -- Form of Administration Agreement between Registrant and The Boston Company
Advisors, Inc. is incorporated by reference to Exhibit 8(b) to Pre-Effective
Amendment No. 1.
9(a) -- Form of Transfer Agency Agreement between Registrant and The Shareholder
Services Group, Inc. is incorporated by reference to Exhibit 9 to
Pre-Effective Amendment No. 1.
9(b) -- Form of Amendment to the Transfer Agency Agreement between Registrant and
The Shareholder Services Group, Inc. is incorporated by reference to Exhibit
9(b) to Post-Effective Amendment No. 3.
10 -- Opinion and Consent of Piper & Marbury is incorporated by reference to
Exhibit 10 to Post-Effective Amendment No. 3.
11(a) -- Consent of independent auditors is filed herewith.
11(b) -- Opinion of independent auditors is filed herewith.
12 -- Not Applicable.
13(a) -- Form of Share Purchase Agreement between Registrant and Lehman Brothers
Inc. relating to Lehman Brothers Daily Income Fund and Lehman Brothers
Municipal Income Fund is incorporated by reference to Exhibit 13 to
Pre-Effective Amendment No. 1.
13(b) -- Form of Share Purchase Agreement between Registrant and Lehman Brothers
Inc. relating to the addition of Selected Growth Stock Portfolio, Lehman Latin
America Dollar Income Portfolio and Lehman Mexican Growth and Income Portfolio
is incorporated by reference to Exhibit 13(b) to Post-Effective Amendment No. 2.
</TABLE>
<PAGE> 54
<TABLE>
<S> <C> <C>
13(c) -- Form of Share Purchase Agreement between Registrant and Lehman
Brothers Inc. relating to Global Clearing Shares, dated July 21, 1994, is
incorporated by reference to Exhibit 13(c) to Post-Effective Amendment No.
3.
13(d) -- Form of Share Purchase Agreement between Registrant and Lehman
Brothers Inc. relating to Lehman Brothers International Bond Fund, Lehman
Brothers Global Emerging Markets Equity Fund, Lehman Brothers Global Emerging
Markets Bond Fund, Lehman Brothers Large Capitalization U.S. Equity Fund,
Lehman Brothers International Equity Fund, Lehman Brothers Municipal Bond
Fund, Lehman Brothers New York Municipal Bond Fund and Lehman Brothers
High-Grade Fixed Income Fund is incorporated by reference to Exhibit 13(d) to
Post-Effective Amendment No. 3.
14 -- Not Applicable.
15(a) -- Form of Plan of Distribution relating to Lehman Brothers Daily Income
Fund and Lehman Brothers Municipal Income Fund is incorporated by reference to
Exhibit 15 to Pre-Effective Amendment No. 1.
15(b) -- Form of Amended and Restated Services and Distribution Plan is
incorporated by reference to Exhibit 15(b) to Post-Effective Amendment No. 3.
15(c) -- Form of Amended and Restated Distribution Plan (the "Restated Plan")
dated January 27, 1994 relating to Lehman Brothers Daily Income Fund and
Lehman Brothers Municipal Income Fund is incorporated by reference to Exhibit
15(c) to Post-Effective Amendment No. 3.
15(d) -- Amendment to the Restated Plan dated July 21, 1994 is incorporated
by reference to Exhibit 15(d) to Post-Effective Amendment No. 3.
15(e) -- Form of Shareholder Servicing Agreement between Registrant and
Service Organizations relating to the Select Shares of Lehman Brothers
International Bond Fund, Lehman Brothers Global Emerging Markets Equity Fund,
Lehman Brothers Global Emerging Markets Bond Fund, Lehman Brothers Large
Capitalization U.S. Equity Fund, Lehman Brothers International Equity Fund,
Lehman Brothers Municipal Bond Fund, Lehman Brothers New York Municipal Bond
Fund and Lehman Brothers High-Grade Fixed Income Fund is incorporated by
reference to Exhibit 15(e) to Post-Effective Amendment No. 3.
16 -- Not Applicable.
17 -- Not Applicable.
</TABLE>
<PAGE> 55
<TABLE>
<S> <C> <C>
18 -- Powers of Attorney of Mr. Dorsett, Mr. Hatsopoulos and Ms. Holmes dated
November 2, 1994 are filed herewith.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None.
Item 26. Number of Holders of Securities
-------------------------------
<TABLE>
<CAPTION>
Title of Class
--------------
Common Stock, par value
$.001 per share
---
Holders as of November 9, 1994
------------------------------
FUND
----
<S> <C>
Lehman Brothers Daily Income Fund
629,725,408.86
(Class A)
Lehman Brothers Municipal Income Fund 209,403,104.85
(Class B)
Lehman Brothers Selected Growth Stock Portfolio 31,212,938.69
(Class C)
</TABLE>
Item 27. Indemnification.
---------------
Reference is made to Articles VII and VIII of Registrant's Amended
Articles of Incorporation filed as Exhibit 1(a) to Post-Effective Amendment No.
2 to the Registration Statement, Article V of Registrant's By-Laws filed as
Exhibit 2 to Pre-Effective Amendment No. 1, and paragraph 4 of the Distribution
Agreement filed as Exhibit 6 to Pre-Effective Amendment No. 1.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Securities of Act") may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant understands that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser.
----------------------------------------------------
Lehman Brothers Global Asset Management Inc. ("LBGAM Inc."), which
serves as investment adviser to Lehman Brothers Daily Income Fund, Lehman
Brothers Municipal Income Fund and Lehman Selected Growth Stock Portfolio, and
will serve as investment adviser to Lehman Brothers Municipal Bond Fund, Lehman
Brothers New York Municipal Bond Fund and Lehman Brothers High-Grade Fixed
Income Fund, is a wholly owned subsidiary of Lehman Brothers Holdings Inc.
("Holdings"). LBGAM Inc. is an investment adviser registered under the
Investment Advisers Act of 1940 (the "Advisers Act") and serves as investment
counsel for individuals with substantial capital, executors, trustees and
institutions. It also serves as investment adviser or sub-investment adviser to
several investment companies.
<PAGE> 56
The list required by this Item 28 of officers and directors of LBGAM
Inc., together with information as to any other business profession, vocation or
employment of a substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by LBGAM Inc. pursuant to the Advisers Act (SEC File No.
801-42006).
Lehman Brothers Global Asset Management Limited ("LBGAM Ltd."), which
will serve as investment adviser to Lehman Mexican Growth and Income Portfolio,
Lehman Latin America Dollar Income Portfolio, Lehman Brothers International Bond
Fund, Lehman Brothers Global Emerging Markets Equity Fund, Lehman Brothers
Global Emerging Markets Bond Fund, Lehman Brothers Large Capitalization U.S.
Equity Fund, and Lehman Brothers International Equity Fund, is an affiliate of
Lehman Brothers and is an indirect, wholly owned subsidiary of Holdings. LBGAM
Ltd., is an investment adviser registered under the Advisers Act and serves as
investment adviser or sub-investment adviser to several U.S. registered and
offshore investment funds.
The list required by this Item 28 of officers and directors of LBGAM
Ltd., together with information as to any other business profession, vocation or
employment of a substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by LBGAM Ltd. pursuant to the Advisers Act (SEC File No.
801-21068).
Item 29. Principal Underwriters.
----------------------
(a) In addition to acting as distributor for the shares of the
Registrant's funds, Lehman Brothers Inc.("Lehman Brothers") acts as distributor
for Lehman Brothers Institutional Funds Group Trust, The USA High Yield Fund
N.V., The Latin American Bond Fund N.V., Mexican Short-Term Investment Portfolio
N.V., Garzarelli Sector Analysis Portfolio N.V., The Mexican Appreciation Fund
N.V., The Mexico Premium Income Portfolio N.V., ECU Fixed-Income Fund N.V.,
European Equity Investments N.V., Pacific Equity Investments N.V., Global Bond
Investments N.V., U.S. Money Market Investments N.V., U.S. Appreciation Fund
N.V., U.S. Government Securities Investments N.V., The Asian Dragon Portfolio
N.V., Offshore Diversified Strategic Income Fund N.V., Lehman Brothers Series I
Mortgage-Related Securities Portfolio N.V., TBC Enhanced Tactical Asset
Allocation Portfolio N.V., U.S. Tactical Asset Allocation Portfolio N.V.,
Short-Term World Income Portfolio (Cayman), The Global Advisors Portfolio N.V.,
The Global Advisors Portfolio II N.V., Short Duration U.S. Government Fund N.V.,
The Global Natural Resources Fund N.V. and various series of unit investment
trusts.
(b) Lehman Brothers is a wholly-owned subsidiary of Holdings. The
information required by this Item 29 with respect to each director, officer and
partner of Lehman Brothers is incorporated by reference to Schedule A of Form BD
filed by Lehman Brothers pursuant to the Securities Exchange Act of 1934 (SEC
File No. 8-12324).
(c) Not Applicable.
Item 30. Location of Accounts and Records.
--------------------------------
(1) Lehman Brothers Funds, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
(2) Lehman Brothers Global Asset Management Inc.
3 World Financial Center
New York, New York 10285
<PAGE> 57
(3) Lehman Brothers Global Asset Management Limited
Two Broadgate
London EC2M 7HA
England
(4) Boston Safe Deposit and Trust Company
One Boston Place
Boston, Massachusetts 02108
(5) The Shareholder Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Item 31. Management Services.
-------------------
Not Applicable
Item 32. Undertakings.
------------
The undersigned Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be certified, within four
to six months from the date the Registrant commences selling shares of each of
Lehman Mexican Growth and Income Portfolio, Lehman Latin America Dollar Income
Portfolio, Lehman Brothers International Bond Fund, Lehman Brothers Global
Emerging Markets Equity Fund, Lehman Brothers Global Emerging Markets Bond Fund,
Lehman Brothers Large Capitalization U.S. Equity Fund, Lehman Brothers
International Equity Fund, Lehman Brothers Municipal Bond Fund, Lehman Brothers
New York Municipal Bond Fund and Lehman Brothers High-Grade Fixed Income Fund.
<PAGE> 58
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectivemess of this Post-Effective Amendment
to the Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933, as amended, and Registrant has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York and State of New York, on November 2,
1994.
LEHMAN BROTHERS FUNDS, INC.
Registrant
By:/s/ Andrew D. Gordon
---------------------------
Andrew D. Gordon, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Kirk Hartman Chairman of the Board and Director November 2 ,1994
- -------------------
Kirk Hartman
/s/ Michael Kardok Treasurer and Chief Financial Officer November 2, 1994
- ------------------ (principal financial and accounting officer)
Michael Kardok
/s/Burt N. Dorsett Director November 2, 1994
- ------------------
Burt N. Dorsett
/s/John Hatsopoulos Director November 2, 1994
- -------------------
John Hatsopoulos
/s/Kathleen C. Holmes Director November 2, 1994
- ---------------------
Kathleen C. Holmes
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT No. DESCRIPTION OF EXHIBIT
<S> <C>
11(a) Consent of independent auditors dated November 17, 1994.
11(b) Opinion of independent auditors dated August 31, 1994.
18 Powers of Attorney for Messrs. Dorsett and Hatsopoulos
and Ms. Holmes dated November 2, 1994.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
Exhibit 11(a)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references made to our firm under the captions "Financial
Highlights" in the Prospectus Supplement and "Auditors" in the Statement
of Additional Information, which is incorporated by reference, and to the
inclusion in this Post-Effective Amendment No. 4 to Registration Statement
Number 33-62312 on Form N-1A of our report dated August 31, 1994, on the
financial statements and financial highlights of the Lehman Selected Growth
Stock Portfolio (a portfolio of Lehman Brothers Funds, Inc.).
ERNST & YOUNG LLP
Boston, Massachusetts
November 17, 1994
<PAGE> 1
Exhibit 11(b)
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholders and Directors
Lehman Brothers Funds, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Lehman Selected Growth Stock Portfolio (one of
the portfolios constituting Lehman Brothers Funds, Inc.) (the "Fund") as of
July 31, 1994, and the related statements of operations and changes in net
assets, and the financial highlights for the period from May 20, 1994
(commencement of operations) to July 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of July 31, 1994, by correspondence with the custodian and brokers or
other appropriate auditing procedures where replies from brokers were not
received. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Lehman Selected Growth Stock Portfolio at July 31, 1994, the results of its
operations and changes in its net assets and financial highlights for the period
from May 20, 1994 (commencement of operations) to July 31, 1994, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
August 31, 1994
<PAGE> 1
Exhibit 18
POWER OF ATTORNEY
-----------------
KNOWN TO ALL MEN BY THESE PRESENTS, that the undersigned, being an
officer or director, or both, of LEHMAN BROTHERS FUNDS, INC., a Maryland
corporation (the "Company"), does hereby make, constitute and appoint each of
Andrew Gordon and Kirk Hartman as attorney-in-fact and agent of the
undersigned, each acting singly and having full power and authority of
substitution and resubstitution, in any and all capacities, to execute for and
on behalf of the undersigned the Registration Statement on Form N-1A relating
to the common stock of the Company, and any and all amendments (including
post-effective amendments) to the foregoing Registration Statement and any
other documents and instruments incidental thereto, and to deliver and file the
same, with all exhibits thereto, and all documents and instruments in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, full power and authority to do and
perform each and every act and thing that either said attorney-in-fact and
agent deems advisable or necessary to enable the Company to effectuate the
intents and purposes hereof, and the undersigned hereby fully ratifies and
confirms all that said attorneys-in-fact and agents, or their respective
substitutes, shall do or cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has subscribed his or her name, this
2nd day of November, 1994.
/s/Burt N. Dorsett
------------------
Name: Burt N. Dorsett
<PAGE> 2
POWER OF ATTORNEY
-----------------
KNOWN TO ALL MEN BY THESE PRESENTS, that the undersigned, being an
officer or director, or both, of LEHMAN BROTHERS FUNDS, INC., a Maryland
corporation (the "Company"), does hereby make, constitute and appoint each of
Andrew Gordon and Kirk Hartman as attorney-in-fact and agent of the
undersigned, each acting singly and having full power and authority of
substitution and resubstitution, in any and all capacities, to execute for and
on behalf of the undersigned the Registration Statement on Form N-1A relating
to the common stock of the Company, and any and all amendments (including
post-effective amendments) to the foregoing Registration Statement and any
other documents and instruments incidental thereto, and to deliver and file the
same, with all exhibits thereto, and all documents and instruments in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, full power and authority to do and
perform each and every act and thing that either said attorney-in-fact and
agent deems advisable or necessary to enable the Company to effectuate the
intents and purposes hereof, and the undersigned hereby fully ratifies and
confirms all that said attorneys-in-fact and agents, or their respective
substitutes, shall do or cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has subscribed his or her name, this
2nd day of November, 1994.
/s/John Hatsopoulos
-------------------
Name: John Hatsopoulos
<PAGE> 3
POWER OF ATTORNEY
-----------------
KNOWN TO ALL MEN BY THESE PRESENTS, that the undersigned, being an
officer or director, or both, of LEHMAN BROTHERS FUNDS, INC., a Maryland
corporation (the "Company"), does hereby make, constitute and appoint each of
Andrew Gordon and Kirk Hartman as attorney-in-fact and agent of the
undersigned, each acting singly and having full power and authority of
substitution and resubstitution, in any and all capacities, to execute for and
on behalf of the undersigned the Registration Statement on Form N-1A relating
to the common stock of the Company, and any and all amendments (including
post-effective amendments) to the foregoing Registration Statement and any
other documents and instruments incidental thereto, and to deliver and file the
same, with all exhibits thereto, and all documents and instruments in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, full power and authority to do and
perform each and every act and thing that either said attorney-in-fact and
agent deems advisable or necessary to enable the Company to effectuate the
intents and purposes hereof, and the undersigned hereby fully ratifies and
confirms all that said attorneys-in-fact and agents, or their respective
substitutes, shall do or cause to be done by virtue hereof.
IN WITNESS HEREOF, the undersigned has subscribed his or her name, this
2nd day of November, 1994.
/s/Kathleen Holmes
------------------
Name: Kathleen Holmes
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS REPORT IS FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF LEHMAN
BROTHERS FUNDS, INC. ITS USE IN CONNECTION WITH ANY OFFERING OF THE FUND'S
SHARES IS AUTHORIZED ONLY, IF ACCOMPANIED OR PRECEDED BY THE FUND'S CURRENT
PROSPECTUS.
</LEGEND>
<CIK> 0000904411
<NAME> LEH BROS FNDS, INC., SELECTED GR STOCK FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 30,945,909
<INVESTMENTS-AT-VALUE> 32,085,174
<RECEIVABLES> 609,070
<ASSETS-OTHER> 117,342
<OTHER-ITEMS-ASSETS> 2,000
<TOTAL-ASSETS> 32,813,586
<PAYABLE-FOR-SECURITIES> 2,230,228
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 103,369
<TOTAL-LIABILITIES> 2,333,597
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,277,771
<SHARES-COMMON-STOCK> 2,966,398
<SHARES-COMMON-PRIOR> 2,706,412
<ACCUMULATED-NII-CURRENT> 42,712
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,570)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,168,076
<NET-ASSETS> 30,479,989
<DIVIDEND-INCOME> 26,713
<INTEREST-INCOME> 82,944
<OTHER-INCOME> 0
<EXPENSES-NET> 105,057
<NET-INVESTMENT-INCOME> 4,600
<REALIZED-GAINS-CURRENT> 211,384
<APPREC-INCREASE-CURRENT> 1,297,351
<NET-CHANGE-FROM-OPS> 1,513,335
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 291,722
<NUMBER-OF-SHARES-REDEEMED> (31,736)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,138,795
<ACCUMULATED-NII-PRIOR> 38,112
<ACCUMULATED-GAINS-PRIOR> (219,954)
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 47,808
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 146,282
<AVERAGE-NET-ASSETS> 29,014,610
<PER-SHARE-NAV-BEGIN> 9.73
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.54
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<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> 2.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
