LUTHERAN BROTHERHOOD WORLD GROWTH FUND
SERIES OF
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
PROSPECTUS September 5, 1995
LUTHERAN BROTHERHOOD WORLD GROWTH FUND ("LB World Growth Fund" or the "Fund")
seeks high total return from long-term growth of capital by investing
primarily in a professionally managed diversified portfolio of common stocks
of established, non-U.S. companies. See page 4.
Lutheran Brotherhood Research Corp. ("LB Research"), an indirect wholly-
owned subsidiary of Lutheran Brotherhood, serves as investment adviser for
the Fund. Lutheran Brotherhood and LB Research personnel have developed
skills in the investment advisory business over the past 25 years, and
Lutheran Brotherhood personnel have extensive skill in managing over $10.1
billion of Lutheran Brotherhood assets and had over $5.4 billion in mutual
fund assets under management as of May 31, 1995. Lutheran Brotherhood
Securities Corp. ("LB Securities") serves as distributor for the LB Family of
Funds. LB Research currently engages Rowe Price-Fleming International, Inc.
("Price-Fleming" or "Sub-advisor") as investment sub-advisor for LB World
Growth Fund.
This Prospectus sets forth concisely the information a prospective investor
ought to know about the Fund before investing. It should be retained for
future reference. A Statement of Additional Information about the Fund dated
September 5, 1995 has been filed with the Securities and Exchange Commission
and is incorporated by reference in this Prospectus. It is available, at no
charge, upon request by writing LB Securities or by calling toll free (800)
328-4552 or (612) 339-8091.
The LB World Growth Fund is a diversified series of The Lutheran Brotherhood
Family of Funds (the "Trust"), an open-end management investment company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
SC 544
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TABLE OF CONTENTS
PAGE
Summary of Fund Expenses 3
Investment Objectives and Policies 4
Investment Limitations 10
Investment Risks 10
Buying Shares of The Lutheran Brotherhood Family of Funds 12
Net Asset Value of Your Shares 13
Sales Charges 13
Receiving Your Order 15
Certificates and Statements 15
Redeeming Shares 15
Dividends and Capital Gains 16
Taxes 17
IRAs and Other Tax-Deferred Plans 17
Fund Performance 17
The Fund and Its Shares 18
Fund Management 18
Fund Administration 19
Description of Debt Ratings 20
How to Invest 23
Addresses 23
<PAGE>
SUMMARY OF FUND EXPENSES
LB World Growth Fund
--------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 5%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Maximum Deferred Sales Charge
(as a percentage of original purchase price
or redemption proceeds, as applicable) None
Redemption Fees (as a percentage
of amount redeemed, if applicable) None
Exchange Fees None
Sales charges vary from 1/2% to 5% of the public offering price, depending
upon the amount of your investment. For a complete description of sales
charges, see "Sales Charges".
LB
World
Growth
Fund
------
ANNUAL FUND OPERATING EXPENSES*
(as a percentage of average net assets)
Net Management Fees 0.81%**
12b-1 Fees None
Other Expenses 1.14%
-----
Total Fund Operating Expenses 1.95%**
=====
_____________________
*Estimated for the fiscal year ending October 31, 1995.
**After waiver of management fees, as described below.
EXAMPLE:
You would pay the following expenses
on a $1,000 investment assuming
(1)5% annual return and
(2)redemption at the end
of each time period:
1 Year 3 Years
------ -------
LB World Growth Fund $69 $108
THE EXAMPLE SHOULD NOT BE CONSIDERED AS A REPRESENTATION OF PAST OR FUTURE
RETURN OR EXPENSES. ACTUAL RETURN OR EXPENSES MAY BE GREATER OR LESS THAN
SHOWN.
The purpose of the table above is to assist the investor in understanding the
various costs and expenses that an investor will bear directly or indirectly.
Actual expense levels for the current and future years may vary from the
amounts shown. The table does not reflect charges for optional services
elected by certain shareholders. For more complete information and
descriptions of various costs and expenses, see "Sales Charges" and "Fund
Administration".
LB Research has undertaken to limit the LB World Growth Fund's operating
expenses to 1.95% of its average net assets by means of a voluntary waiver of
advisory fees. Estimated Management Fees and Total Fund Operating Expenses
for LB World Growth Fund for the fiscal year ending October 31, 1995 would be
1.25% and 2.39%, respectively, of average net assets of the Fund without the
partial waiver of advisory fees, which is estimated to amount to 0.44% of
average net assets of the Fund. This waiver of fees are voluntary and may be
discontinued at any time after the conclusion of the Fund's first full fiscal
year.
INVESTMENT OBJECTIVES AND POLICIES
Each of the Funds in The Lutheran Brotherhood Family of Funds has a separate
investment objective and investment policies for the pursuit of that
objective. The investment objective of the LB World Growth Fund is
fundamental and may not be changed without the approval of shareholders of
that Fund. Except as otherwise indicated in this Prospectus, the investment
policies of the Fund may be changed from time to time by the Board of
Trustees of the Trust. There is no assurance that the Fund will achieve its
investment objective, but it will strive to do so by following the policies
set forth below.
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
The investment objective of the LB World Growth Fund is to seek total return
from long-term growth of capital. The Fund will pursue its objective
principally through investments in common stocks of established, non-U.S.
companies. Total return consists of capital appreciation or depreciation,
dividend income, and currency gains or losses.
The Fund intends to diversify investments broadly among countries and to
normally have at least three different countries represented in the Fund.
The Fund may invest in countries of the Far East and Western Europe as well
as South Africa, Australia, Canada and other areas (including developing
countries). As a temporary defensive measure, the Fund may invest
substantially all of its assets in one or two countries.
In seeking its objective, the Fund will invest primarily in common stocks of
established foreign companies which have the potential for growth of capital.
In order to increase total return, the Fund may also invest in bonds and
preferred stocks, convertible bonds, convertible preferred stocks, warrants,
American Depository Receipts (ADR's) and other debt or equity securities. In
addition, the Fund may invest in U.S. Government securities or cash. The Fund
will not use any minimum level of credit quality. At no time will the Fund
invest more than 5% of its net assets in debt obligations or other securities
that may be converted to debt obligations. Debt obligations may be rated less
than investment grade, which is defined as having a quality rating below
"Baa", as rated by Moody's Investors Service, Inc. ("Moody's"), or below
"BBB", as rated by Standard & Poor's Corporation ("S&P"). Debt obligations
rated "Baa" or "BBB" are considered to have speculative characteristics. For a
description of Moody's and S&P's ratings, see "Description of Debt Ratings".
Securities rated below investment grade are considered to be speculative and
involve certain risks, including a higher risk of default and greater
sensitivity to interest rate and economic changes.
In determining the appropriate distribution of investments among various
countries and geographic regions, the Sub-advisor considers the following
factors: prospects for relative economic growth between foreign countries;
expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of
individual investment opportunities available to international investors.
In analyzing companies for investment, the Sub-advisor looks for one or more
of the following characteristics: an above-average earnings growth per share;
high return on invested capital; healthy balance sheet; sound financial and
accounting policies and overall financial strength; strong competitive
advantages; effective research and product development and marketing;
efficient service; pricing flexibility; strength of management; and general
operating characteristics which will enable the companies to compete
successfully in their market place. While current dividend income is not a
prerequisite in the selection of portfolio companies, the companies in which
the Fund invests normally will have a record of paying dividends, and will
generally be expected to increase the amounts of such dividends in future
years as earnings increase.
The Fund's investments also may include, but are not limited to, European
Depository Receipts ("EDRs"), other debt and equity securities of foreign
issuers, and the securities of foreign investment funds or trusts (including
passive foreign investment companies). For a discussion of the risks involved
in foreign investing see the section of this Prospectus entitled "Foreign
Issuers".
The Fund may engage in certain forms of options and futures transactions that
are commonly known as derivative securities transactions. These derivative
securities transactions are identified and described in the sections of this
Prospectus entitled "Put and Call Options" and "Financial Futures and Options
on Futures."
The Fund may use foreign currency exchange-related securities including
foreign currency warrants, principal exchange rate linked securities, and
performance indexed paper. The Fund does not expect to hold more than 5% of
its total assets in foreign currency exchange-related securities.
The Fund will normally conduct its foreign currency exchange transactions
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward contracts to
purchase or sell foreign currencies. The Fund will generally not enter into a
forward contract with a term of greater than one year.
The Fund will generally enter into forward foreign currency exchange
contracts only under two circumstances. First, when the Fund enters
into a contract for the purchase or sale of a security denominated in a
foreign currency, it may desire to "lock in" the U.S. dollar price of
the security. Second, when Sub-advisor believes that the currency of a
particular foreign country may suffer or enjoy a substantial movement
against another currency, it may enter into a forward contract to sell
or buy the former foreign currency (or another currency which acts as a
proxy for that currency) approximating the value of some or all of the
Fund's securities denominated in such foreign currency. Under certain
circumstances, the Fund may commit a substantial portion of the entire
value of its portfolio to the consummation of these contracts. Sub-advisor
will consider the effect such a commitment of its portfolio to forward
contracts would have on the investment program of the Fund and the
flexibility of the Fund to purchase additional securities. Although
forward contracts will be used primarily to protect the Fund from
adverse currency movements, they also involve the risk that anticipated
currency movements will not be accurately predicted and the Fund's total
return could be adversely affected as a result.
For a discussion of foreign currency contracts and the risks involved
therein, see the section of this Prospectus entitled, "Investment Risks."
The Fund will not generally trade in securities for short-term profits,
but, when circumstances warrant, securities may be purchased and sold
without regard to the length of time held. The annual portfolio
turnover rate of the Fund is expected to be no more than 50%.
For more information on other investment policies of the Fund, see
"Additional Investment Practices" below.
ADDITIONAL INVESTMENT PRACTICES
The Fund may purchase the following securities or may engage
in the following transactions.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions in pursuit of its
investment objective. A repurchase agreement consists of a purchase and a
simultaneous agreement to resell for later delivery at an agreed upon price
and rate of interest U.S. Government obligations. The Fund or its custodian
will take possession of the obligations subject to a repurchase agreement. If
the original seller of a security subject to a repurchase agreement fails to
repurchase the security at the agreed upon time, the Fund could incur a loss
due to a drop in the market value of the security during the time it takes the
Fund to either sell the security or take action to enforce the original
seller's agreement to repurchase the security. Also, if a defaulting original
seller filed for bankruptcy or became insolvent, disposition of such security
might be delayed by pending court action. The Fund may only enter into
repurchase agreements with banks and other recognized financial institutions
such as broker/dealers which are found by LB Research (or the Sub-advisor) to
be creditworthy.
REVERSE REPURCHASE AGREEMENTS
The Fund also may enter into reverse repurchase agreements, which are similar
to borrowing cash. A reverse repurchase agreement is a transaction in which
the Fund transfers possession of a portfolio instrument to another person,
such as a financial institution, broker or dealer, in return for a percentage
of the instrument's market value in cash, with an agreement that at a
stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase
agreements does not assure that the Fund will be able to avoid selling
portfolio instruments at a disadvantageous time. The Fund will engage in
reverse repurchase agreements which are not in excess of 60 days to
maturity and will do so to avoid borrowing cash and not for the purpose of
investment leverage or to speculate on interest rate changes.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase securities on a when-issued and delayed delivery basis.
When-issued and delayed delivery transactions arise when U.S. Government
obligations and other types of securities are bought by the Fund with payment
and delivery taking place in the future. The settlement dates of these
transactions, which may be a month or more after entering into the
transaction, are determined by mutual agreement of the parties. There are
no fees or other expenses associated with these types of transactions other
than normal transaction costs. To the extent a Fund engages in when-issued and
delayed delivery transactions, it will do so for the purpose of acquiring
portfolio instruments consistent with its investment objective and policies
and not for the purpose of investment leverage or to speculate on interest
rate changes. On the settlement date, the value of such instruments may be
less than the cost thereof. When effecting when-issued and delayed delivery
transactions, cash, cash equivalents or high grade debt obligations of a
dollar amount sufficient to make payment for the obligations to be purchased
will be segregated at the trade date and maintained until the transaction has
been settled.
LENDING SECURITIES
The Fund may from time to time lend the securities it holds to broker-
dealers, provided that such loans are made pursuant to written agreements and
are continuously secured by collateral in the form of cash, U.S. Government
securities, or irrevocable standby letters of credit in an amount at all times
equal to at least the market value of the loaned securities plus the accrued
interest and dividends. For the period during which the securities are on
loan, the lending Fund will be entitled to receive the interest and dividends,
or amounts equivalent thereto, on the loaned securities and a fee from the
borrower or interest on the investment of the cash collateral. The right to
terminate the loan will be given to either party subject to appropriate
notice. Upon termination of the loan, the borrower will return to the Fund
securities identical to the loaned securities.
The primary risk in lending securities is that the borrower may become
insolvent on a day on which the loaned security is rapidly increasing in
value. In such event, if the borrower fails to return the loaned security,
the existing collateral might be insufficient to purchase back the full
amount of the security loaned, and the borrower would be unable to furnish
additional collateral. The borrower would be liable for any shortage, but
the lending Fund would be an unsecured creditor with respect to such
shortage and might not be able to recover all or any thereof. However, this
risk may be minimized by a careful selection of borrowers and securities to
be lent and by monitoring collateral.
The Fund will not lend securities to broker-dealers affiliated with LB
Research or the Sub-advisor. This will not affect the Fund's ability to
maximize its securities lending opportunities. The Fund may not lend any
security or make any other loan if, as a result, more than one-third of its
total assets would be lent to other parties.
PUT AND CALL OPTIONS
SELLING ("WRITING") COVERED CALL OPTIONS: The Fund may from time to time sell
("WRITE") covered call options on any portion of its portfolio as a hedge to
provide partial protection against adverse movements in prices of securities
in the Fund and, subject to the limitations described below, for the non-
hedging purpose of attempting to create additional income. A call option
gives the buyer of the option, upon payment of a premium, the right to call
upon the writer to deliver a specified amount of a security on or before a
fixed date at a predetermined ("strike") price. As the writer of a call
option, a Fund assumes the obligation to deliver the underlying security to
the holder of the option on demand at the strike price.
If the price of a security hedged by a call option falls below or remains
below the strike price of the option, the Fund will generally not be called
upon to deliver the security. The Fund will, however, retain the premium
received for the option as additional income, offsetting all or part of any
decline in the value of the security. If the price of a hedged security rises
above or remains above the strike price of the option, the Fund will generally
be called upon to deliver the security. In this event, the Fund limits its
potential gain by limiting the value it can receive from the security to the
strike price of the option plus the option premium.
BUYING CALL OPTIONS: The Fund may also from time to time purchase call options
on securities in which the Fund may invest. As the holder of a call option,
the Fund has the right to purchase the underlying security or currency at the
exercise price at any time during the option period (American style) or at the
expiration of the option (European style). The Fund generally will purchase
such options as a hedge to provide protection against adverse movements in the
prices of securities which the Fund intends to purchase. In purchasing a call
option, the Fund would realize a gain if, during the option period, the price
of the underlying security increased by more than the amount of the premium
paid. The Fund would realize a loss equal to all or a portion of the premium
paid if the price of the underlying security decreased, remained the same, or
did not increase by more than the premium paid.
BUYING PUT OPTIONS: The Fund may from time to time purchase put options on any
portion of its portfolio. A put option gives the buyer of the option, upon
payment of a premium, the right to deliver a specified amount of a security to
the writer of the option on or before a fixed date at a predetermined
("strike") price. The Fund generally will purchase such options as a hedge to
provide protection against adverse movements in the prices of securities in
the Fund. In purchasing a put option, the Fund would realize a gain if, during
the option period, the price of the security declined by an amount in excess
of the premium paid. The Fund would realize a loss equal to all or a portion
of the premium paid if the price of the security increased, remained the same,
or did not decrease by more than the premium paid.
OPTIONS ON FOREIGN CURRENCIES: The Fund may also write covered call options
and purchase put and call options on foreign currencies as a hedge against
changes in prevailing levels of currency exchange rates.
SELLING PUT OPTIONS: The Fund may not sell put options, except in the case of
a closing purchase transaction (see Closing Transactions).
INDEX OPTIONS: As part of its options transactions, the Fund may also purchase
and sell call options and purchase put options on stock and bond indices.
Options on securities indices are similar to options on a security except
that, upon the exercise of an option on a securities index, settlement is
made in cash rather than in specific securities.
CLOSING TRANSACTIONS: The Fund may dispose of options which they have written
by entering into "closing purchase transactions". The Fund may dispose of
options which they have purchased by entering into "closing sale
transactions". A closing transaction terminates the rights of a holder, or the
obligation of a writer, of an option and does not result in the ownership of
an option.
The Fund realizes a profit from a closing purchase transaction if the
premium paid to close the option is less than the premium received by the
Fund from writing the option. The Fund realizes a loss if the premium paid is
more than the premium received. The Fund may not enter into a closing
purchase transaction with respect to an option it has written after it has
been notified of the exercise of such option.
The Fund realizes a profit from a closing sale transaction if the premium
received to close out the option is more than the premium paid for the
option. The Fund realizes a loss if the premium received is less than the
premium paid.
SPREADS AND STRADDLES: The Fund may also engage in "straddle" and "spread"
transactions in order to enhance return, which is a speculative, non-hedging
purpose. A straddle is established by buying both a call and a put option on
the same underlying security, each with the same exercise price and expiration
date. A spread is a combination of two or more call options or put options on
the same security with differing exercise prices or times to maturity. The
particular strategies employed by a Fund will depend on LB Research's
perception of anticipated market movements.
NEGOTIATED TRANSACTIONS: The Fund will generally purchase and sell options
traded on a national securities or options exchange. Where options are not
readily available on such exchanges, the Fund may purchase and sell options
in negotiated transactions. A Fund effects negotiated transactions only with
investment dealers and other financial institutions deemed creditworthy by
its investment adviser. Despite the investment adviser's or sub-advisor's
best efforts to enter into negotiated options transactions with only
creditworthy parties, there is always a risk that the opposite party to the
transaction may default in its obligation to either purchase or sell the
underlying security at the agreed upon time and price, resulting in a
possible loss by the Fund. This risk is described more completely in the
section of this Prospectus entitled, "Risks of Transactions in Options and
Futures". Options written or purchased by a Fund in negotiated transactions
are illiquid and there is no assurance that a Fund will be able to effect a
closing purchase or closing sale transaction at a time when its Investment
Adviser believes it would be advantageous to do so. In the event the Fund is
unable to effect a closing transaction with the holder of a call option
written by the Fund, the Fund may not sell the security underlying the
option until the call written by the Fund expires or is exercised. The
underlying securities on such transactions will also be considered illiquid
and are subject to the Fund's 15% illiquid securities limitations.
LIMITATIONS: The Fund will not purchase any option if, immediately
thereafter, the aggregate cost of all outstanding options purchased and
held by the Fund would exceed 5% of the market value of the Fund's total
assets. The Fund will not write any option if, immediately thereafter, the
aggregate value of the Fund's securities subject to outstanding options
would exceed 30% of the market value of the Fund's total assets.
FINANCIAL FUTURES AND OPTIONS ON FUTURES
SELLING FUTURES CONTRACTS: The Fund may sell financial futures contracts
("futures contracts") as a hedge against adverse movements in the prices of
securities in those Funds. Such contracts may involve futures on items such
as U.S. Government Treasury bonds, notes and bills, government mortgage-
backed securities; corporate and municipal bond indices; and stock indices.
A futures contract sale creates an obligation for the Fund, as seller, to
deliver the specific type of instrument called for in the contract at a
specified future time for a specified price. In selling a futures contract,
the Fund would realize a gain on the contract if, during the contract period,
the price of the securities underlying the futures contract decreased. Such a
gain would be expected to approximately offset the decrease in value of the
same or similar securities in the Fund. The Fund would realize a loss if the
price of the securities underlying the contract increased. Such a loss would
be expected to approximately offset the increase in value of the same or
similar securities in the Fund.
Futures contracts have been designed by and are traded on boards of
trade which have been designated "contract markets" by the Commodity
Futures Trading Commission ("CFTC"). These boards of trade, through their
clearing corporations, guarantee performance of the contracts. Although the
terms of some financial futures contracts specify actual delivery or
receipt of securities, in most instances these contracts are closed out
before the settlement due date without the making or taking of delivery of
the securities. Other financial futures contracts, such as futures contracts
on a securities index, by their terms call for cash settlements. The closing
out of a futures contract is effected by entering into an offsetting purchase
or sale transaction.
When the Fund sells a futures contract, or a call option on a futures
contract, it is required to make payments to the commodities broker which
are called "margin" by commodities exchanges and brokers.
The payment of "margin" in these transactions is different than purchasing
securities "on margin". In purchasing securities "on margin" an investor pays
part of the purchase price in cash and receives an extension of credit from
the broker, in the form of a loan secured by the securities, for the unpaid
balance. There are two categories of "margin" involved in these transactions:
initial margin and variation margin. Initial margin does not represent a loan
between the Fund and its broker, but rather is a "good faith deposit" by the
Fund to secure its obligations under a futures contract or an option. Each
day during the term of certain futures transactions, the Fund will receive or
pay "variation margin" equal to the daily change in the value of the position
held by the Fund.
BUYING FUTURES CONTRACTS: The Fund may also purchase financial futures
contracts as a hedge against adverse movements in the prices of securities
which they intend to purchase. A futures contract purchase creates an
obligation by the Fund, as buyer, to take delivery of the specific type of
instrument called for in the contract at a specified future time for a
specified price. In purchasing a futures contract, the Fund would realize a
gain if, during the contract period, the price of the securities underlying
the futures contract increased. Such a gain would approximately offset the
increase in cost of the same or similar securities which the Fund intends to
purchase. the Fund would realize a loss if the price of the securities
underlying the contract decreased. Such a loss would approximately offset the
decrease in cost of the same or similar securities which the Fund intends to
purchase.
OPTIONS ON FUTURES CONTRACTS: The Fund may also sell ("write") covered call
options on futures contracts and purchase put and call options on futures
contracts in connection with hedging strategies. The Fund may not sell put
options on futures contracts. An option on a futures contract gives the
buyer of the option, in return for the premium paid for the option, the right
to assume a position in the underlying futures contract (a long position if
the option is a call and a short position if the option is a put). The writing
of a call option on a futures contract constitutes a partial hedge against
declining prices of securities underlying the futures contract to the extent
of the premium received for the option. The purchase of a put option on a
futures contract constitutes a hedge against price declines below the exercise
price of the option and net of the premium paid for the option. The purchase
of a call option constitutes a hedge, net of the premium, against an increase
in cost of securities which the Fund intends to purchase.
CURRENCY FUTURES CONTRACTS AND OPTIONS: The Fund may also sell and purchase
currency futures contracts (or options thereon) as a hedge against changes in
prevailing levels of currency exchange rates. Such contracts may be traded on
U.S. or foreign exchanges. The Fund will not use such contracts or options for
leveraging purposes.
LIMITATIONS: The Fund may engage in futures transactions, and transactions
involving options on futures, only on regulated commodity exchanges or boards
of trade. The Fund will not enter into a futures contract or purchase or sell
related options if immediately thereafter (a) the sum of the amount of
initial margin deposits on the Fund's existing futures and related options
positions and premiums paid for options with respect to futures and options
used for non-hedging purposes would exceed 5% of the market value of the
Fund's total assets or (b) the sum of the then aggregate value of open
futures contracts sales, the aggregate purchase prices under open futures
contract purchases, and the aggregate value of futures contracts subject to
outstanding options would exceed 30% of the market value of the Fund's total
assets. In addition, in instances involving the purchase of futures contracts
or call options thereon, the Fund will maintain cash or cash equivalents, less
any related margin deposits, in an amount equal to the market value of such
contracts. "Cash and cash equivalents" may include cash, government
securities, or liquid high quality debt obligations.
HYBRID INVESTMENTS
As part of its investment program and to maintain greater flexibility,
the Fund may invest in hybrid instruments (a potentially high risk derivative)
which have the characteristics of futures, options and securities. Such
instruments may take a variety of forms, such as debt instruments with
interest or principal payments determined by reference to the value of a
currency, security index or commodity at a future point in time. The risks of
such investments would reflect both the risks of investing in futures,
options, currencies and securities, including volatility and illiquidity.
Under certain conditions, the redemption value of a hybrid instrument could be
zero. The Fund does not expect to hold more than 5% of its total assets in
hybrid instruments. For a discussion of hybrid investments and the risks
involved therein, see the Trust's Statement of Additional Information under
"Additional Information Concerning Certain Investment Techniques".
RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES
There are certain risks involved in the use of futures contracts, options on
securities and securities index options, and options on futures contracts, as
hedging devices. There is a risk that the movement in the prices of the index
or instrument underlying an option or futures contract may not correlate
perfectly with the movement in the prices of the assets being hedged. The lack
of correlation could render the Fund's hedging strategy unsuccessful and could
result in losses. The loss from investing in futures transactions is
potentially unlimited.
There is a risk that LB Research or the Sub-advisor could be incorrect in
their expectations about the direction or extent of market factors such as
interest rate movements. In such a case the Fund would have been better off
without the hedge. In addition, while the principal purpose of hedging is to
limit the effects of adverse market movements, the attendant expense may cause
the Fund's return to be less than if hedging had not taken place. The overall
effectiveness of hedging therefore depends on the expense of hedging and LB
Research's or the Sub-advisor's accuracy in predicting the future changes in
interest rate levels and securities price movements.
The Fund will generally purchase and sell options traded on a national
securities or options exchange. Where options are not readily available on
such exchanges the Fund may purchase and sell options in negotiated
transactions. When the Fund uses negotiated options transactions it will seek
to enter into such transactions involving only those options and futures
contracts for which there appears to be an active secondary market. There is
nonetheless no assurance that a liquid secondary market such as an exchange or
board of trade will exist for any particular option or futures contract at any
particular time. If a futures market were to become unavailable, in the event
of an adverse movement, the Fund would be required to continue to make daily
cash payments of maintenance margin if it could not close a futures position.
If an options market were to become unavailable and a closing transaction
could not be entered into, an option holder would be able to realize profits
or limit losses only by exercising an option, and an option writer would
remain obligated until exercise or expiration. In addition, exchanges may
establish daily price fluctuation limits for options and futures contracts,
and may halt trading if a contract's price moves upward or downward more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a Fund
to enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
potentially could require the Fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Fund's access to other assets held to cover its options or futures positions
could also be impaired.
When conducting negotiated options transactions there is a risk that the
opposite party to the transaction may default in its obligation to either
purchase or sell the underlying security at the agreed upon time and price.
In the event of such a default, the Fund could lose all or part of benefit it
would otherwise have realized from the transaction, including the ability
to sell securities it holds at a price above the current market price or to
purchase a security from another party at a price below the current market
price.
The Fund intends to continue to meet the requirements of federal law to be
treated as a regulated investment company. One of these requirements is that
the Fund realize less than 30% of its annual gross income from the sale of
securities held for less than three months. Accordingly, the extent to which
the Fund may engage in futures contracts and related options may be materially
limited by this 30% test. Options activities of the Fund may increase the
amount of gains from the sale of securities held for less than three months,
because gains from the expiration of, or from closing transactions with
respect to, call options written by the Fund will be treated as short-term
gains and because the exercise of call options written by the Fund would cause
it to sell the underlying securities before it otherwise might.
Finally, if a broker or clearing member of an options or futures clearing
corporation were to become insolvent, the Fund could experience delays and
might not be able to trade or exercise options or futures purchased through
that broker or clearing member. In addition, the Fund could have some or all
of its positions closed out without its consent. If substantial and
widespread, these insolvencies could ultimately impair the ability of the
clearing corporations themselves.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may hold up to 100% of its assets in cash or short-term debt
securities for temporary defensive position when, in the opinion of LB
Research or the Sub-advisor such a position is more likely to provide
protection against unfavorable market conditions than adherence to the Fund's
other investment policies. The types of short-term instruments in which the
Fund may invest for such purposes include short-term money market securities
such as repurchase agreements and securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, certificates of deposit,
Eurodollar certificates of deposit, commercial paper and banker's acceptances
issued by domestic and foreign corporations and banks. When investing in
short-term money market obligations for temporary defensive purposes, the Fund
will invest only in securities rated at the time of purchase Prime-1 or Prime-
2 by Moody's, A-1 or A-2 by S&P, F-1 or F-2 by Fitch Investors Service, Inc.,
or unrated instruments that are determined by LB Research or the Sub-advisor
to be of a comparable level of quality. When the Fund adopts a temporary
defensive position its investment objective may not be achieved.
INVESTMENT LIMITATIONS
In seeking to lessen investment risk, each Fund operates under certain
investment restrictions. The restrictions in the following paragraphs may
not be changed with respect to any Fund except by a vote of a majority of
the outstanding voting securities of that Fund.
The Fund may not, with respect to 75% of its total assets, purchase the
securities of any issuer (except Government Securities, as such term is
defined in the Investment Company Act of 1940) if, as a result, the Fund
would own more than 10% of the outstanding voting securities of such issuer
or the Fund would have more than 5% of its total assets invested in the
securities of such issuer. The Fund may not invest in a security if the
transaction would result in 25% or more of the Fund's total assets being
invested in any one industry.
The Fund may borrow (through reverse repurchase agreements or otherwise) up to
one-third of its total assets. If the Fund borrows money its share price will
be subject to greater fluctuation until the borrowing is paid off. If the Fund
makes additional investments while borrowings are outstanding, this may be
considered a form of leverage. If borrowings, including reverse repurchase
agreements, exceed 5% of the Fund's total assets, the Fund will not purchase
portfolio securities.
For further information on these and other investment restrictions, including
nonfundamental investment restrictions which may be changed without a
shareholder vote, see the Statement of Additional Information.
INVESTMENT RISKS
Special risks are associated with investments in the Fund, beyond the standard
level of risks. These risks are described below. An investor should take into
account his or her investment objectives and ability to absorb a loss or
decline in his or her investment when considering an investment in the Fund.
Investors in the Fund assume an above average risk of loss, and should not
consider an investment the Fund to be a complete investment program.
The Fund, may invest in stocks of foreign issuers and in "ADRs" "EDRs" of
foreign stocks. When investing in foreign stocks, ADRs and EDRs, the Fund
assumes certain additional risks that are not present with investments in
stocks of domestic companies. These risks include political and economic
developments such as possible expropriation or confiscatory taxation that
might adversely affect the market value of such stocks, ADRs and EDRs. In
addition, there may be less publicly available information about such foreign
issuers than about domestic issuers, and such foreign issuers may not be
subject to the same accounting, auditing and financial standards and
requirements as domestic issuers.
OTHER RISKS OF FOREIGN INVESTING INCLUDE:
Foreign Securities. Investments in securities of foreign issuers may involve
risks that are not present with domestic investments. While investments in
foreign securities are intended to reduce risk by providing further
diversification, such investments involve sovereign risk in addition to credit
and market risks. Sovereign risk includes local political or economic
developments, potential nationalization, withholding taxes on dividend or
interest payments, and currency blockage (which would prevent cash from being
brought back to the United States). Compared to United States issuers, there
is generally less publicly available information about foreign issuers and
there may be less governmental regulation and supervision of foreign stock
exchanges, brokers and listed companies. Fixed brokerage commissions on
foreign securities exchanges are generally higher than in the United States.
Foreign issuers are not generally subject to uniform accounting and auditing
and financial reporting standards, practices and requirements comparable to
those applicable to domestic issuers. Securities of some foreign issuers are
less liquid and their prices are more volatile than securities of comparable
domestic issuers. In some countries, there may also be the possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets, difficulty in enforcing contractual and other obligations,
political or social instability or revolution, or diplomatic developments
which could affect investments in those countries. Settlement of transactions
in some foreign markets may be delayed or less frequent than in the United
States, which could affect the liquidity of investments. For example,
securities which are listed on foreign exchanges or traded in foreign markets
may trade on days (such as Saturday) when the Fund does not compute its price
or accept orders for the purchase, redemption or exchange of its shares. As a
result, the net asset value of the Fund may be significantly affected by
trading on days when shareholders cannot make transactions. Further, it may be
more difficult for the Trust's agents to keep currently informed about
corporate actions which may affect the price of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable
than within the U.S., increasing the risk of delayed settlements or loss of
certificates for portfolio securities.
Investments by the Fund in foreign companies may require the Fund to hold
securities and funds denominated in a foreign currency. Foreign investments
may be affected favorably or unfavorably by changes in currency rates and
exchange control regulations. Thus, the Fund's net asset value per share will
be affected by changes in currency exchange rates. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned,
gains and losses realized on the sale of securities and net investment income
and gains, if any, to be distributed to shareholders of the Fund. They
generally are determined by the forces of supply and demand in foreign
exchange markets and the relative merits of investment in different countries,
actual or perceived changes in interest rates or other complex factors, as
seen from an international perspective. Currency exchange rates also can be
affected unpredictably by intervention by U.S. or foreign governments or
central banks or the failure to intervene, or by currency controls or
political developments in the U.S. or abroad. In addition, the Fund may incur
costs in connection with conversions between various currencies. Investors
should understand and consider carefully the special risks involved in foreign
investing. These risks are often heightened for investments in emerging or
developing countries.
Developing Countries. Investing in developing countries involves certain risks
not typically associated with investing in U.S. securities, and imposes risks
greater than, or in addition to, risks of investing in foreign, developed
countries. These risks include: the risk of nationalization or expropriation
of assets or confiscatory taxation; currency devaluations and other currency
exchange rate fluctuations; social, economic and political uncertainty and
instability (including the risk of war); more substantial government
involvement in the economy; higher rates of inflation; less government
supervision and regulation of the securities markets and participants in those
markets; controls on foreign investment and limitations on repatriation of
invested capital and on the Fund's ability to exchange local currencies for
U.S. dollars; unavailability of currency hedging techniques in certain
developing countries; the fact that companies in developing countries may be
smaller, less seasoned and newly organized companies; the difference in, or
lack of, auditing and financial reporting standards, which may result in
unavailability of material information about issuers; the risk that it may be
more difficult to obtain and/or enforce a judgment in a court outside the
United States; and greater price volatility, substantially less liquidity and
significantly smaller market capitalization of securities markets.
American Depository Receipts (ADRs) and European Depository Receipts (EDRs):
ADRs are dollar-denominated receipts generally issued by a domestic bank that
represents the deposit of a security of a foreign issuer. ADRs may be
publicly traded on exchanges or over-the-counter in the United States. EDRs
are receipts similar to ADRs and are issued and traded in Europe. ADRs and
EDRs may be issued as sponsored or unsponsored programs. In sponsored
programs, the issuer makes arrangements to have its securities traded in the
form of ADRs or EDRs. In unsponsored programs, the issuer may not be directly
involved in the creation of the program. Although regulatory requirements
with respect to sponsored and unsponsored programs are generally similar, the
issuers of unsponsored ADRs or EDRs are not obligated to disclose material
information in the United States and, therefore, the import of such
information may not be reflected in the market value of such securities.
CURRENCY FLUCTUATIONS. Investment in securities denominated in foreign
currencies involves certain risks. A change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S.
dollar value of a Fund's assets denominated in that currency. Such changes
will also affect a Fund's income. Generally, when a given currency appreciates
against the dollar (the dollar weakens) the value of a Fund's securities
denominated in that currency will rise. When a given currency depreciates
against the dollar (the dollar strengthens) the value of a Fund's securities
denominated in that currency would be expected to decline.
BUYING SHARES OF THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
INITIAL PURCHASES
The Fund is a series of a family of mutual funds offering investment
opportunities to members of Lutheran Brotherhood and to Lutheran church
organizations, trusts, and employee benefit plans. Lutheran Brotherhood
membership is open to any person who is (1) baptized in the Christian faith
or affiliated with a Lutheran church organization and (2) professes to be a
Lutheran, or to any non-Lutheran who is a spouse, dependent child, or
grandchild of a member or qualified proposed member.
To make your first purchase of shares of the Fund:
* complete and sign an application for the Fund;
* enclose a check made payable to Lutheran Brotherhood World
Growth Fund; and
* mail your application and check to Lutheran Brotherhood
Securities, 625 Fourth Avenue S., Minneapolis, MN 55415.
SUBSEQUENT PURCHASES
To purchase additional shares of the Fund, send a check payable to the Fund
to LB Securities together with a completed To Invest By Mail form. You may
also buy additional Fund shares through:
* your LB Securities representative;
* the Systematic Investment Plan (SIP), under which you authorize
automatic monthly payments to the Fund from your checking account;
* the automatic Payroll Deduction Plan;
* Invest-by-Phone; or
* Federal Reserve or bank wire.
INVEST-BY-PHONE
The Fund's Invest-by-Phone service allows you to telephone LB Securities
to request the purchase of Fund shares. You must first complete an Account
Privileges Application permitting LB Securities to accept your telephoned
requests. When LB Securities receives your telephoned request, it will draw
funds directly from your preauthorized bank account at a commercial or
savings bank or credit union. The bank or credit union must be a member of
the Automated Clearing House system. To use this service, you may call
800-328-4552 or (612) 339-8091 before 4:00 p.m. (Eastern time). Funds will
be withdrawn from your bank or credit union account and shares will be
purchased for you at the price next calculated by the Fund after receipt of
funds from your bank. This service may also be used to redeem shares. See
"Redeeming Shares."
FEDERAL RESERVE OR BANK WIRE
You may purchase shares by Federal Reserve or bank wire directly to Norwest
Bank Minnesota, N.A. This method will result in a more rapid investment in
Fund shares. To wire Funds:
Notify LBSC of a pending wire, call: (800) 328-4552, or (612) 339-8091
(local)
Wire to: Norwest Bank of Minneapolis, NA
Norwest Bank
6th Street and Marquette Avenue
Minneapolis, MN 55479
ABA Routing #: 091000019
Account #: 00-003-156
Account Name: Lutheran Brotherhood Securities Corp.
Use text message to indicate:
Transfer for - shareholder name(s), fund and account number, LB
Representative name and number.
Your LB Securities representative can explain any of these investment
plans.
MINIMUM INVESTMENTS REQUIRED
Minimum investments required for the Fund are $500 for an initial purchase
and $50 for additional purchases. An initial purchase of $50 is permitted for
tax-deferred retirement plans, and Systematic Investment plans, and payroll
plans.
EXCHANGING SHARES BETWEEN FUNDS
You may exchange at relative net asset value shares of the Fund for any of the
other funds in the Lutheran Brotherhood Family of Funds, including Lutheran
Brotherhood Opportunity Growth Fund, LB Fund, LB High Yield Fund, Lutheran
Brotherhood Income Fund, and Lutheran Brotherhood Municipal Bond Fund.
Shares of the Lutheran Brotherhood Money Market Fund ("LB Money Market Fund")
acquired in such exchanges, including shares of that Fund acquired by
reinvestment of dividends and held in the LB Money Market Fund may be
re-exchanged at relative net asset value for shares of the Fund and the other
Lutheran Brotherhood Funds. Shares of the LB Money Market Fund not acquired
in such an exchange may be exchanged at relative net asset value plus the
applicable sales load for shares of the Fund. Each exchange constitutes a
sale of shares requiring the calculation of a capital gain or loss for tax
reporting purposes. To obtain an exchange form or to receive more information
about making exchanges between funds, contact your LB Securities
representative. This exchange offer may be modified or terminated in the
future. If the exchange offer is materially modified or terminated, you will
receive at least 60 days prior notice.
TELEPHONE EXCHANGES
You may make the type of exchanges between Funds described above by
telephone unless otherwise indicated on the account application. You may
make an unlimited number of telephone exchanges. Telephone exchanges must
be for a minimum amount of $500. Telephone exchanges may be made only into
existing Fund or LB Money Market Fund accounts, and all accounts involved
in telephone exchanges must have the same ownership registration. To
request a telephone exchange, call toll-free (800) 328-4552; or (612)
339-8091.
The Funds reserve the right to refuse a wire or telephone redemption or
exchange if it is reasonably believed to be unauthorized. Procedures for
redeeming or exchanging Fund shares by wire or telephone may be modified or
terminated at any time by the Funds. When requesting a redemption or
exchange by telephone, shareholders should have available the correct
account registration and account number or tax identification number. All
telephone redemptions and exchanges are recorded and written confirmations
are subsequently mailed to an address of record. Neither the Funds nor LB
Securities will be liable for following redemption or exchange instructions
received by telephone, which are reasonably believed to be genuine, and the
shareholder will bear the risk of loss in the event of unauthorized or
fraudulent telephone instructions. The Funds and LB Securities will employ
reasonable procedures to confirm that instructions communicated by
telephone are genuine. The Funds and/or LB Securities may be liable for any
losses due to unauthorized or fraudulent instructions in the absence of
following these procedures.
WHAT YOUR SHARES WILL COST
The offering price of the Fund is the next determined net asset value (which
will fluctuate) plus any applicable sales charge.
NET ASSET VALUE OF YOUR SHARES
The net asset value for the Fund varies with the value of its investments. The
Fund determines its net asset value by adding the value of its portfolio
securities to all other Fund assets, subtracting the Fund's liabilities,
and dividing the result by the number of shares outstanding.
The Fund determines its net asset value on each day the New York Stock
Exchange is open for business, except the day after
Thanksgiving. The calculation is made as of the close of regular trading of
the New York Stock Exchange (currently 4:00 p.m. Eastern time) after the
Fund has declared any applicable dividends.
SALES CHARGES
Sales charges apply to purchase the Fund. The sales charge varies from 1/2 of
1% to 5% of the offering price, depending upon the amount purchased, including
the value of existing investments. The larger your purchase, the smaller the
sales charge. Offering prices in this table apply to purchases by an
individual or by an individual together with spouse and children under the age
of 21.
SALES CHARGE SALES CHARGE
AS A AS A
PERCENTAGE OF PERCENTAGE OF
AMOUNT INVESTED OFFERING PRICE AMOUNT INVESTED
-------------------------------------------------------------------------
$500,000 or more 0.5% 0.5%
$250,000 and above but less than $500,000 1% 1%
$100,000 and above but less than $250,000 2% 2%
$50,000 and above but less than $100,000 3% 3.1%
$25,000 and above but less than $50,000 4% 4.2%
$15,000 and above but less than $25,000 4.5% 4.7%
Less than $15,000 5% 5.3%
EXCHANGING SHARES
If you already paid a sales charge on your shares, you may exchange
shares between Funds without paying additional sales charges.
REDUCTION IN SALES CHARGES
Ways to reduce the sales charge include:
CUMULATIVE DISCOUNT: All current holdings of shares of the Fund will be
aggregated to permit you to enjoy any sales charge reduction allowed for
larger sales. The Fund will combine purchases, including the value of
existing investments, made by you, your spouse and your children under age 21
when it calculates your sales charge. In addition, reduced sales charges are
available for purchases made at one time by a trustee or fiduciary for a
single trust estate or a single fiduciary account. You must inform LB
Securities that you qualify for this discount.
REINVESTMENT OF DIVIDENDS: Shares purchased by automatic reinvestment of
dividends will not be subject to any sales charges.
THIRTEEN-MONTH LETTER OF INTENT: If you intend to accumulate $15,000 or
more, including the value of existing investments, in one or more of the
Funds within the next 13 months, you may sign a letter of intent and
receive a reduced sales charge on your share purchases.
REINVESTMENT UPON REDEMPTION: If you redeem any or all of your Fund shares
or received cash dividends from the Fund, you may reinvest the amount in any
of the Lutheran Brotherhood Funds (except the LB Money Market Fund) without
paying a sales charge. You must make your reinvestment within 30 days after
redeeming your shares.
FUNDS FROM LUTHERAN BROTHERHOOD AND OTHER LIFE INSURANCE AND ANNUITIES: If
Fund shares are purchased with lump sum proceeds (does not apply to period
payments) that are payable in the form of death benefits from any life
insurance or annuity contract, insured endowment benefits, or matured annuity
benefits issued by Lutheran Brotherhood, and are purchased within 90 days of
the issuance of such benefits, the sales charge for such shares will be
reduced to one-half of the usual charge for such a purchase. If additional
shares are also purchased with benefits payable under similar contracts or
policies of other insurance companies, and such benefits have become
payable as a result of the same occurrence for which the Lutheran
Brotherhood benefits became payable, the sales charge for such additional
purchase will also be reduced to one-half of the usual charge for such a
purchase. To qualify for the reduction in sales charge, either such
purchase must be made within 90 days of the date that such benefits were
issued.
PURCHASES BY TAX-EXEMPT ORGANIZATIONS: Fund shares are available at
one-half of the regular sales charge if purchased by organizations
qualifying for tax-exemption under Sections 501(c)(3) and 501(c)(13) of the
Internal Revenue Code. Section 501(c)(3) generally would include
organizations such as community chests, churches, universities and
colleges, libraries and other foundations or organizations operated
exclusively for charitable purposes. Section 501(c)(13) would generally
include companies such as cemetery companies and other companies owned and
operated exclusively for the benefit of their members and also includes
not-for-profit companies.
RECEIVING YOUR ORDER
Shares of the Funds are issued on days on which the New York Stock Exchange
is open, except the day after Thanksgiving. The net asset value of the shares
you are buying will be determined at the close of the regular trading session
of the New York Stock Exchange after your order is received.
Your order will be considered received when your check or other payment is
received by the home office of LB Securities. The Funds reserve the right
to reject any purchase request.
CERTIFICATES AND STATEMENTS
As transfer agent for the Fund, LB Securities will maintain a share account
for you. Share certificates will not be issued. Systematic Investment Plan,
Systematic Withdrawal Plan and Systematic Exchange Plan transactions, as well
as dividend transactions (including dividends reinvested to other funds) will
be confirmed on the quarterly consolidated statement. All transactions will
be reported as they occur.
REDEEMING SHARES
One of the advantages of owning shares in The Lutheran Brotherhood Family of
Funds is the rapid access you have to your investment. Once your request for
redemption has been received at the home office of LB Securities, your shares
will be redeemed at the next computed net asset value on any day on which the
New York Stock Exchange is open for business, except the day after
Thanksgiving, or any other day as provided under the rules of the Securities
and Exchange Commission. That net asset value may be more or less than the
net asset value at the time you bought the shares.
You may redeem your shares at any time you choose. The redemption method
you choose will determine exactly when you will receive your funds.
The Fund allows you to redeem your shares:
* in writing;
* through Redeem-by-Phone; or
* through the Fund's systematic withdrawal plan.
WRITTEN REQUESTS
To redeem all or some of your shares, send a written request to:
Lutheran Brotherhood Securities Corp.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
YOUR SIGNATURE: Your signature on the redemption request must be
guaranteed by:
* a trust company or commercial bank;
* a savings association;
* a credit union; or
* a securities broker, dealer, exchange, association, or clearing
agency.
The Fund will not accept signatures that are notarized by a notary
public.
RECEIVING YOUR CHECK: Normally, the Fund will mail you a check within
one business day after it receives a proper redemption request, but in no
event more than three days, unless the Fund has not received payment for
the shares to be redeemed. (See "Redemption before Purchase Instruments
Clear.")
REDEEM BY PHONE
If you have completed an Account Privileges Application, you may redeem
shares with a net asset value of at least $1,000 and have them transmitted
electronically to your commercial bank by the second business day after
your redemption request. This feature is NOT available on IRA or other Tax
Deferred Plans.
SYSTEMATIC WITHDRAWAL
Shareholders owning or buying shares with a net asset value of at least
$5,000 may order automatic monthly, quarterly, semiannual or annual
redemptions in any amount. The proceeds will be sent to the shareholder or
other designated payee, or may be deposited in the shareholder's commercial
bank, savings bank or credit union.
Income dividends and capital gains distributions will continue to be
reinvested in additional Fund shares. Shares will be redeemed as necessary
to make automatic payments to the shareholder.
You may, at any time, elect to have Federal income taxes withheld from
your IRA or TSCA distributions, or change the amount currently being
withheld. To make the election, please complete and return a Redemption
form, or the Systematic Withdrawal section or the IRA/TSCA Distributions
section of the Account Features Application which includes the IRS required
Substitute W4P.
Shareholders who are making automatic withdrawals ordinarily should not
purchase Fund shares, but rather should terminate withdrawals in order to
avoid sales charges.
DIVIDENDS ON REDEMPTION
If you redeem all your shares, the redemption proceeds will include all
dividends to which you have become entitled since they were last paid.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
If you redeem shares purchased by check before State Street Bank has
collected your payment for such shares, State Street Bank reserves the right
to hold payment on such redemption until it is reasonably satisfied that the
investment has been collected (which could take up to 15 days from the
purchase date).
UNDELIVERABLE MAIL
If mail from LB Securities to a shareholder is returned as undeliverable
on two or more consecutive occasions, LB Securities will not send any
future mail to the shareholder unless it receives notification of a correct
mailing address for the shareholder. Any dividends that would be payable by
check to such shareholders will be held in escrow by LB Securities until LB
Securities receives notification of the shareholder's correct mailing
address or until it becomes escheatable under the applicable state law.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account if the net asset value of shares in the account
falls below a certain minimum. The required minimum net asset value for share
accounts is $500 for the Fund.
Before shares are redeemed to close an account, the shareholder is notified
in writing and allowed 60 days to purchase additional shares. Shares will not
be redeemed if the account's value drops below the minimum only because of
market fluctuations.
BACKUP WITHHOLDING
When you sign your account application you will be asked to certify that
your social security or taxpayer identification number is correct and that
you are not subject to 31% backup withholding for failure to report income
to the IRS. If you violate IRS regulations, the IRS can generally require
the Funds to withhold 31% of your taxable distributions and redemptions.
FOR MORE INFORMATION
For more information about the Fund or your shares, see your LB
Securities representative or call toll-free:
* (800) 328-4552 or
* (612) 339-8091 local.
DIVIDENDS AND CAPITAL GAINS
DIVIDENDS
The Fund declares and pays dividends from net income at regular intervals.
The Fund declares and pays dividends annually.
Unless you ask to receive your dividends in cash, they will automatically be
reinvested in shares of the Fund. You may also choose to have your dividends
reinvested into an existing account in another Fund within The Lutheran
Brotherhood Family of Funds. On the dividend payable date, your dividend will
be invested in the designated Fund account at net asset value. In order to
receive your dividends in cash, you must notify LB Securities in writing or
indicate this choice in the appropriate place on your account application.
Your request to receive dividends and other distributions in cash must be
received by LB Securities at least ten days before the record date of the
dividend or other distribution.
STATEMENTS
You will receive quarterly statements of dividends and capital gains paid the
previous quarter.
CAPITAL GAINS
The Fund distributes its realized gains in accordance with federal tax
regulations. Distributions from any net realized capital gains will usually
be declared in December.
TAXES
FUNDS' TAX STATUS
The Fund expects to pay no federal income tax because it intends to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
SHAREHOLDERS' TAX POSITION
You will be required to pay federal income tax on any dividends and other
distribution that you receive. This applies whether you receive dividends or
distributions in cash or as additional shares. To the extent the Fund earns
interest from U.S. Government obligations, a number of states may allow
pass-through treatment and permit a shareholder to exclude a portion of their
dividends from state income tax. For corporate shareholders, dividends paid to
shareholders may qualify for the 70% dividends received deduction to the
extent the Fund earns dividend income from domestic corporations. The Fund
will mail annually to each shareholder advice as to the tax status of each
year's dividends and distributions.
Dividends and certain interest income earned by the Fund from foreign
securities may be subject to foreign withholding taxes or other income
taxes. The Fund may elect, for U.S. income tax purposes, to treat certain
foreign taxes paid by it as paid by its shareholders. Should the Fund make
that election, a pro rata portion of such foreign taxes paid by the Fund will
constitute income to you (in addition to taxable dividends actually received
by you), and you may be entitled to claim an offsetting tax credit or itemized
deduction for that amount of foreign taxes.
Under current tax law, distributions by the Fund representing short-term and
long-term capital gains are included in shareholders' gross income for tax
purposes. Distributions representing net long-term capital gains realized by
the Fund will be taxable to a shareholder as long-term capital gains no matter
how long the shareholder may have held the shares.
IRAs AND OTHER TAX-DEFERRED PLANS
Shares of the Fund may be selected as investments for Individual
Retirement Accounts, the qualified Lutheran Brotherhood prototype plans for
the self-employed, qualified pension and profit-sharing plans and
tax-sheltered custodial accounts (403(b) plans). There are additional fees
and procedural requirements for such plans. See your LB Securities
registered representative for more details.
FUND PERFORMANCE
From time to time, quotations of the Fund's performance in terms of total
return may be included in advertisements, sales literature, or shareholder
reports. All performance figures are based on historical results and are not
intended to indicate future performance. "Total returns" are based on the
change in value of an investment in the Fund for a specified period. "Average
annual total return" is the average annual compounded rate of return of an
investment in the Fund at the maximum public offering price, if applicable,
assuming the investment has been held for one year, five years and ten years
as of a stated ending date. (If the Fund has not been in operation for at
least ten years, the life of the Fund will be used where applicable.) Average
annual return quotations assume a constant rate of growth. Actual performance
fluctuates and will vary from the quoted results for periods of time within
the quoted periods. "Cumulative total return" represents the cumulative change
in value of an investment in the Fund over a stated period. Average annual
total return may be accompanied with nonstandard total return information
computed in the same manner, but for differing periods and with or without
annualizing the total return or taking sales charges into account. These
calculations assume that all dividends and capital gains distributions during
the period were reinvested in shares of the Fund.
The average annual total return results take sales charges
into account, if applicable, but do not take into account recurring and
nonrecurring charges for optional services which only certain shareholders
elect and which involve nominal fees. Where sale charges are not
applicable and therefore not taken into account in the calculation of
average annual total return, the results will be increased. Any
voluntary waiver of fees or assumption of expenses will also increase
performance results.
The Fund's performance reported from time to time in advertisements and
sales literature may be compared to generally accepted indices or analyses
such as those provided by Lipper Analytical Service, Inc., Standard &
Poor's and Dow Jones. Performance ratings reported periodically in
financial publications such as MONEY MAGAZINE, FORBES, BUSINESS WEEK,
FORTUNE, FINANCIAL PLANNING and the WALL STREET JOURNAL will be used.
THE FUND AND ITS SHARES
All the Funds in the Lutheran Brotherhood Family of Funds, except the LB
World Growth Fund, were organized in 1993 as series of The Lutheran
Brotherhood Family of Funds, a Delaware business trust. Each of those Funds is
the successor to a fund of the same name that previously operated as a
separate corporation or trust pursuant to a reorganization that was
effective as of November 1, 1993. The LB World Growth Fund began operating as
a series of the LB Family of Funds on September 5, 1995. The fiscal year end
of the Trust and each Fund is October 31.
The rights of holders of shares may be modified by the Trustees at any
time, so long as such modifications do not have a material, adverse effect
on the rights of any shareholder. On any matter submitted to the
shareholders, the holder of each Fund share is entitled to one vote per
share (with proportionate voting for fractional shares) regardless of the
relative net asset value thereof.
Shares of the Fund have equal dividend, redemption and liquidation rights
and when issued are fully paid and nonassessable by the Trust. Each share
has one vote (with proportionate voting for fractional shares) irrespective
of net asset value.
Under the Trust's Master Trust Agreement, no annual or regular meeting
of shareholders is required. Thus, there will ordinarily be no shareholder
meetings unless required by the Investment Company Act of 1940. The
Trustees may fill vacancies on the Board or appoint new Trustees provided
that immediately after such action at least two-thirds of the Trustees have
been elected by shareholders. Under the Master Trust Agreement, any Trustee
may be removed by vote of two-thirds of the outstanding Trust shares or by
three-fourths of the Trustees; holders of 10% or more of the outstanding
shares of the Trust can require that the Trustees call a meeting of
shareholders for purposes of voting on the removal of one or more Trustees.
In connection with such meetings called by shareholders, the relevant Fund
or Funds will assist shareholders in shareholder communications.
FUND MANAGEMENT
BOARD OF TRUSTEES
The Board of Trustees of the Trust is responsible for the management and
supervision of the Funds' business affairs and for exercising all powers
except those reserved to the shareholders.
INVESTMENT ADVISER
Investment decisions for the Fund are made by LB Research, subject
to the overall direction of the Board of Trustees. LB Research provides
investment research and supervision of the Fund's investments and conducts a
continuous program of investment evaluation and appropriate disposition and
reinvestment of the Fund's assets. LB Research assumes the expense of
providing the personnel to perform its advisory functions. Lutheran
Brotherhood, the indirect parent company of LB Research, also serves as
the investment adviser for each of the other Funds in The Lutheran
Brotherhood Family of Funds and for LB Series Fund, Inc.
LB Research has engaged Rowe Price-Fleming International, Inc. ("Price-
Fleming") as investment sub-advisor for Lutheran Brotherhood World Growth
Fund. Price-Fleming was founded in 1979 as a joint venture between T. Rowe
Price Associates, Inc. and Robert Fleming Holdings Limited. Price-Fleming is
one of the world's largest international mutual fund asset managers with
approximately $17 billion under management as of December 31, 1994 in its
offices in Baltimore, London, Tokyo and Hong Kong. Price-Fleming has an
investment advisory group that has day-to-day responsibility for managing the
Fund and developing and executing the Fund's investment program. The members
of the advisory group are listed below.
Martin G. Wade, Christopher Alderson, Peter Askew, David Boardman, Richard J.
Bruce, Mark T.J. Edwards, John R. Forde, Robert C. Howe, James B.M. Seddon,
Benedict R.F. Thomas, and David J.L. Warren.
Martin Wade joined Price-Fleming in 1979 and has 26 years of experience with
Fleming Group (Fleming Group includes Robert Fleming Holdings Ltd. and/or
Jardine Fleming International Holdings Ltd.) in research, client service and
investment management, including assignments in the Far East and the United
States.
Peter Askew joined Price-Fleming in 1988 and has 20 years of experience
managing multicurrency fixed income portfolios. Christopher Alderson joined
Price-Fleming in 1988, and has eight years of experience with the Fleming
Group in research and portfolio management, including an assignment in Hong
Kong. David Boardman joined Price-Fleming in 1988 and has 20 years experience
in managing multicurrency fixed income portfolios. Richard J. Bruce joined
Price-Fleming in 1991 and has six years of experience in investment
management with the Fleming Group in Tokyo. Mark J.T. Edwards joined Price-
Fleming in 1986 and has 14 years of experience in financial analysis,
including three years in Fleming European research. John R. Ford joined Price-
Fleming in 1982 and has 15 years of experience with Fleming Group in research
and portfolio management, including assignments in the Far East and the
United States. Robert C. Howe joined Price-Fleming in 1986 and has 15 years
of experience in economic research in Japan. James B.M. Seddon joined Price-
Fleming in 1987 and has eight years of experience in investment management.
Benedict R.F. Thomas joined Price-Fleming in 1988 and has six years of
portfolio management experience, including assignments in London and
Baltimore. David J.L. Warren joined Price-Fleming in 1984 and has 15 years
experience in equity research, fixed income research and portfolio
management, including an assignment in Japan.
LB Research receives an annual investment advisory fee from the Fund.
LB Research is compensated by the Fund with an advisory fee paid by the Fund
equal to 1.25% of average daily net assets up to $20 million, 1.10% of average
daily net assets over $20 million but not over $50 million, and 1.00% of
average daily net assets over $50 million.
LB Research pays the sub-advisor for the Fund, Rowe Price-Fleming
International, Inc., an annual sub-advisory fee for the performance of sub-
advisory services. The fee payable is equal to .75% of average daily net
assets up to $20 million, .60% of average daily net assets over $20 million
but not over $50 million, and .50% of average daily net assets over $50
million.
LB Research has voluntarily agreed to waive a portion of the advisory fees
payable by the Fund so that total expenses for the Fund do not exceed 1.95% of
the Fund's average daily net assets. This voluntary partial waiver of advisor
fees may be discontinued at any time.
FUND ADMINISTRATION
ADMINISTRATIVE SERVICES
LB Securities, the Fund's distributor, provides administrative personnel
and services necessary to operate the Fund on a daily basis at for a fee equal
to 0.025 percent of the Fund's average daily net assets.
CUSTODIAN
State Street Bank and Trust Company ("State Street Bank") is custodian
of the Fund's cash and securities.
TRANSFER AGENT
LB Securities serves as transfer agent for the Fund, with the assistance of
Norwest Bank Minnesota, N.A., respecting cash transactions.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP is the independent accountants for the Fund.
DESCRIPTION OF DEBT RATINGS
Moody's Investors Service, Inc. describes grades of corporate debt
securities and "Prime-1" and "Prime-2" commercial paper as follows:
BONDS:
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.
Ca Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
COMMERCIAL PAPER:
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
* Leading market positions in well-established industries.
* High rates of return of funds employed.
* Conservative capitalization structures with moderate reliance on
debt and ample asset protection.
* Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
* Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earning trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Standard & Poor's Corporation describes grades of corporate debt
securities and "A" commercial paper as follows:
BONDS:
AAA Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher rated categories.
BB Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and
principal payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied
BBB- rating.
B Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal.
The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and
economic conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied B or B- rating.
CC The rating CC typically is applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.
C The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed but debt service payments are continued.
CI The rating CI is reserved for income bonds on which no interest is
being paid.
D Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the
date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such
grace period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes no
comment on the likelihood of, or the risk of default upon failure of, such
completion. The investor should exercise judgment with respect to such
likelihood and risk.
COMMERCIAL PAPER: Commercial paper rated A by Standard & Poor's
Corporation has the following characteristics: liquidity ratios are better
than the industry average; long-term senior debt rating is "A" or better
(however, in some cases a "BBB" long-term rating may be acceptable); the
issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowances made for
unusual circumstances. Also, the issuer's industry typically is well
established, the issuer has a strong position within its industry and the
reliability and quality of management is unquestioned. Issuers rated A are
further referred to by use of numbers 1, 2 and 3 to denote relative
strength within this classification.
HOW TO INVEST
* Complete and sign the General Application
* Enclose a check made payable to Lutheran Brotherhood World Growth Fund
* Mail your application and check to:
Lutheran Brotherhood Securities Corp.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
ADDRESSES
Lutheran Brotherhood
Lutheran Brotherhood Research Corp.
Lutheran Brotherhood Securities Corp.
The Lutheran Brotherhood Family of Funds
625 Fourth Avenue South
Minneapolis, Minnesota 55415
State Street Bank and Trust Company
P.O. Box 1591
Boston, Massachusetts 02104
Norwest Bank Minnesota, N.A.
Sixth & Marquette Avenue
Minneapolis, Minnesota 55402
Price Waterhouse LLP
3100 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402
<PAGE>
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
SERIES OF
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 5, 1995
__________________________
TABLE OF CONTENTS
PAGE
Investment Policies and Restrictions 2
Additional Information Concerning Certain Investment Techniques 3
Fund Management 9
Investment Advisory Services 11
Administrative Services 12
Distributor 13
Brokerage Transactions 13
Purchasing Shares 14
Sales Charges 14
Net Asset Value 15
Redeeming Shares 16
Tax Status 16
General Information 16
Calculation of Performance Data 17
This Statement of Additional Information should be read in conjunction
with the prospectus dated September 5, 1995 of the Lutheran Brotherhood
World Growth Fund ("LB World Growth Fund") series of The Lutheran Brotherhood
Family of Funds (the "Trust"). This Statement is not a prospectus itself. To
receive a copy of the prospectus, write to Lutheran Brotherhood Securities
Corp., 625 Fourth Avenue South, Minneapolis, Minnesota 55415 or call
toll-free (800) 328-4552 or (612) 339-8091.
___________________________
FOR MORE INFORMATION, CALL TOLL-FREE
(800) 328-4552
or (612) 339-8091
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As set forth in part under "Investment Limitations" in the Fund's
Prospectus, the Fund has adopted certain fundamental and nonfundamental
investment policies.
The fundamental investment restrictions for the Fund are set forth
below. These fundamental investment restrictions may not be changed by a
Fund except by the affirmative vote of a majority of the outstanding voting
securities of that Fund as defined in the Investment Company Act of 1940.
(Under the Investment Company Act of 1940, a "vote of the majority of the
outstanding voting securities" means the vote, at a meeting of security
holders duly called, (i) of 67% or more of the voting securities present at
a meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy or (ii) of more than 50% of
the outstanding voting securities, whichever is less.) Under these
restrictions:
(1) The Fund may not borrow money, except that the Fund may borrow
money (through the issuance of debt securities or otherwise) in an amount not
exceeding one-third of the Fund's total assets immediately after the time of
such borrowing.
(2) The Fund may not purchase or sell commodities or commodity
contracts, except that the Fund may invest in financial futures
contracts, options thereon and similar instruments.
(3) The Fund may not purchase or sell real estate unless acquired
as a result of ownership of securities or other instruments, except that the
Fund may invest in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business or that invest or
deal in real estate.
(4) The Fund may not engage in underwriting or agency distribution
of securities issued by others; provided, however, that this restriction shall
not be construed to prevent or limit in any manner the power of the Fund to
purchase and resell restricted securities or securities for investment.
(5) The Fund may not lend any of its assets except portfolio
securities. The purchase of corporate or U.S. or foreign governmental bonds,
debentures, notes, certificates of indebtedness, repurchase agreements or
other debt securities of an issuer permitted by the Fund's investment
objective and policies will not be considered a loan for purposes of this
limitation.
(6) The Fund may not with respect to 75% of its total assets, purchase
the securities of any issuer (except Government Securities, as such term is
defined in the Investment Company Act of 1940) if, as a result, the Fund would
own more than 10% of the outstanding voting securities of such issuer or the
Fund would have more than 5% of its total assets invested in the securities of
such issuer.
(7) The Fund may not issue senior securities, except as permitted
under the Investment Company Act of 1940 or any exemptive order or rule
issued by the Securities and Exchange Commission.
(8) The Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same fundamental
investment objectives, policies, and limitations as the Fund.
(9) The Fund may not invest in a security if the transaction would
result in 25% or more of the Fund's total assets being invested in any one
industry.
The following nonfundamental investment restrictions may be changed without
shareholder approval. Under these restrictions, with respect to the Fund:
(1) The Fund may not purchase securities on margin or sell securities
short, except that the Fund may obtain short-term credits necessary for the
clearance of securities transactions and make short sales against the box.
The deposit or repayment of initial or variation margin in connection with
financial futures contracts or related options will not be deemed to be a
purchase of securities on margin.
(2) The Fund may not purchase or sell interests in oil, gas and other
mineral exploration or development programs or leases, although it may invest
in securities of companies that do.
(3) The Fund may not purchase the securities of any issuer (other than
securities issued or guaranteed by domestic or foreign governments or
political subdivisions thereof) if, as a result, more than 5% of the value of
its total assets would be invested in the securities of business enterprises
(which does not include issuers of asset-backed securities) that, including
predecessors, have a record of less than three years of continuous operations.
(4) The Fund may not purchase or retain the securities of any issuer if
the officers and Trustees of the Fund or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own more
than 5% of the issuer's securities.
(5) The Fund may not invest in securities of other investment companies,
except to the extent permitted under the Investment Company Act of 1940 or
except by purchases in the open market involving only customary brokers'
commissions, or securities acquired as dividends or distributions or in
connection with a merger, consolidation or similar transaction or other
exchange.
(6) The Fund may not invest in warrants, if at the time of such
investment (a) more than 5% of the value of the Fund's total assets would
be invested in warrants or (b) more than 2% of the value of the Fund's total
assets would be invested in warrants that are not listed on the New York
Stock Exchange or the American Stock Exchange (and for this purpose, warrants
attached to securities will be deemed to have no value).
(7) The Fund may not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements maturing in more than seven days.
(8) The Fund will not purchase any security while borrowings, including
reverse repurchase agreements, representing more than 5% of the Fund's total
assets are outstanding.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
Some of the investment instruments, techniques and methods which may be used
by the LB World Growth Fund to aid in achieving its investment objective, and
the risks attendant thereto, are described below. Other risk factors and
investment methods may be described in the "Investment Objectives and
Policies" and "Investment Risks" sections of the Fund's Prospectus.
SHORT SALES AGAINST THE BOX
The Fund may effect short sales, but only if such transactions are short
sale transactions known as short sales "against the box". A short sale is a
transaction in which the Fund sells a security it does not own by borrowing it
from a broker, and consequently becomes obligated to replace that security. A
short sale against the box is a short sale where the Fund owns the security
sold short or has an immediate and unconditional right to acquire that
security without additional cash consideration upon conversion, exercise or
exchange of options with respect to securities held in its portfolio. The
effect of selling a security short against the box is to insulate that
security against any future gain or loss.
RESTRICTED SECURITIES
Subject to the limitations on illiquid securities noted above, the
Fund may buy or sell restricted securities in accordance with Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities"). Securities may be
resold pursuant to Rule 144A under certain circumstances only to qualified
institutional buyers as defined in the rule, and the markets and trading
practices for such securities are relatively new and still developing;
depending on the development of such markets, such Rule 144A Securities may
be deemed to be liquid as determined by or in accordance with methods
adopted by the Trustees. Under such methods the following factors are
considered, among others: the frequency of trades and quotes for the
security, the number of dealers and potential purchasers in the market,
marketmaking activity, and the nature of the security and marketplace
trades. Investments in Rule 144A Securities could have the effect of
increasing the level of the Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing such
securities. Also, the Fund may be adversely impacted by the subjective
valuation of such securities in the absence of an active market for them. The
Fund does not expect to hold more than 10% of its total assets in restricted
securities.
FOREIGN FUTURES AND OPTIONS
Participation in foreign futures and foreign options transactions involves the
execution and clearing of trades on or subject to the rules of a foreign board
of trade. Neither the National Futures Association nor any domestic exchange
regulates activities of any foreign boards of trade, including the execution,
delivery and clearing of transactions, or has the power to compel enforcement
of the rules of a foreign board of trade or any applicable foreign law. This
is true even if the exchange is formally linked to a domestic market so that a
position taken on the market may be liquidated by a transaction on another
market. Moreover, such laws or regulations will vary depending on the foreign
country in which the foreign futures or foreign options transaction occurs.
For these reasons, customers who trade foreign futures or foreign options
contracts may not be afforded certain of the protective measures provided by
the Commodity Exchange Act, the CFTC's regulations and the rules of the
National Futures Association and any domestic exchange, including the right to
use reparations proceedings before the Commission and arbitration proceedings
provided by the National Futures Association or any domestic futures exchange.
In particular, funds received from customers for foreign futures or foreign
options transactions may not be provided the same protections as funds
received in respect of transactions on United States futures exchanges. In
addition, the price of any foreign futures or foreign options contract and,
therefore, the potential profit and loss thereon may be affected by any
variance in the foreign exchange rate between the time your order is placed
and the time it is liquidated, offset or exercised.
FOREIGN CURRENCY EXCHANGE-RELATED SECURITIES
FOREIGN CURRENCY WARRANTS. Foreign currency warrants are warrants which
entitle the holder to receive from their issuer an amount of cash (generally,
for warrants issued in the United States, in U.S. dollars) which is calculated
pursuant to a predetermined formula and based on the exchange rate between a
specified foreign currency and the U.S. dollar as of the exercise date of the
warrant. Foreign currency warrants generally are exercisable upon their
issuance and expire as of a specified date and time. Foreign currency
warrants have been issued in connection with U.S. dollar-denominated debt
offerings by major corporate issuers in an attempt to reduce the foreign
currency exchange risk which, from the point of view of prospective purchasers
of the securities, is inherent in the international fixed-income marketplace.
Foreign currency warrants may attempt to reduce the foreign exchange risk
assumed by purchasers of a security by, for example, providing for a
supplemental payment in the event that the U.S. dollar depreciates against the
value of a major foreign currency such as the Japanese Yen or German
Deutschmark. The formula used to determine the amount payable upon exercise
of a foreign currency warrant may make the warrant worthless unless the
applicable foreign currency exchange rate moves in a particular direction
(e.g., unless the U.S. dollar appreciates or depreciates against the
particular foreign currency to which the warrant is linked or indexed).
Foreign currency warrants are severable from the debt obligations with which
they may be offered, and may be listed on exchanges. Foreign currency
warrants may be exercisable only in certain minimum amounts, and an investor
wishing to exercise warrants who possesses less than the minimum number
required for exercise may be required either to sell the warrants or to
purchase additional warrants, thereby incurring additional transaction costs.
In the case of any exercise of warrants, there may be a time delay between the
time a holder of warrants gives instructions to exercise and the time the
exchange rate relating to exercise is determined, during which time the
exchange rate could change significantly, thereby affecting both the market
and cash settlement values of the warrants being exercised. The expiration
date of the warrants may be accelerated if the warrants should be delisted
from an exchange or if their trading should be suspended permanently, which
would result in the loss of any remaining "time value" of the warrants (i.e.,
the difference between the current market value and the exercise value of the
warrants), and, in the case the warrants were "out-of-the-money," in a total
loss of the purchase price of the warrants. Warrants are generally unsecured
obligations of their issuers and are not standardized foreign currency options
issued by the Options Clearing Corporation ("OCC"). Unlike foreign currency
options issued by OCC, the terms of foreign exchange warrants generally will
not be amended in the event of governmental or regulatory actions affecting
exchange rates or in the event of the imposition of other regulatory controls
affecting the international currency markets. The initial public offering
price of foreign currency warrants is generally considerably in excess of the
price that a commercial user of foreign currencies might pay in the interbank
market for a comparable option involving significantly larger amounts of
foreign currencies. Foreign currency warrants are subject to significant
foreign exchange risk, including risks arising from complex political or
economic factors.
PRINCIPAL EXCHANGE RATE LINKED SECURITIES. Principal exchange rate linked
securities are debt obligations the principal on which is payable at maturity
in an amount that may vary based on the exchange rate between the U.S. dollar
and a particular foreign currency at or about that time. The return on
"standard" principal exchange rate linked securities is enhanced if the
foreign currency to which the security is linked appreciates against the U.S.
dollar, and is adversely affected by increases in the foreign exchange value
of the U.S. dollar; "reverse" principal exchange rate linked securities are
like the "standard" securities, except that their return is enhanced by
increases in the value of the U.S. dollar and adversely impacted by increases
in the value of foreign currency. Interest payments on the securities are
generally made in U.S. dollars at rates that reflect the degree of foreign
currency risk assumed or given up by the purchaser of the notes (i.e., at
relatively higher interest rates if the purchaser has assumed some of the
foreign exchange risk, or relatively lower interest rates if the issuer has
assumed some of the foreign exchange risk, based on the expectations of the
current market). Principal exchange rate linked securities may in limited
cases be subject to acceleration of maturity (generally, not without the
consent of the holders of the securities), which may have an adverse impact on
the value of the principal payment to be made at maturity.
PERFORMANCE INDEXED PAPER. Performance indexed paper is U.S. dollar-
denominated commercial paper the yield of which is linked to certain foreign
exchange rate movements. The yield to the investor on performance indexed
paper is established at maturity as a function of spot exchange rates between
the U.S. dollar and a designated currency as of or about that time (generally,
the index maturity two days prior to maturity). The yield to the investor
will be within a range stipulated at the time of purchase of the obligation,
generally with a guaranteed minimum rate of return that is below, and a
potential maximum rate of return that is above, market yields on U.S. dollar-
denominated commercial paper, with both the minimum and maximum rates of
return on the investment corresponding to the minimum and maximum values of
the spot exchange rate two business days prior to maturity.
HYBRID INSTRUMENTS.
Hybrid Instruments (a type of potentially high risk derivative) have recently
been developed and combine the elements of futures contracts or options with
those of debt, preferred equity or a depository instrument (hereinafter
"Hybrid Instruments"). Often these Hybrid Instruments are indexed to the
price of a commodity, particular currency, or a domestic foreign debt or
equity securities index. Hybrid Instruments may take a variety of forms,
including, but not limited to, debt instruments with interest or principal
payments or redemption terms determined by reference to the value of a
currency or commodity or securities index at a future point in time, preferred
stock with dividend rates determined by reference to the value of a currency,
or convertible securities with the conversion terms related to a particular
commodity.
The risks of investing in Hybrid Instruments reflect a combination of the
risks from investing in securities, options, futures and currencies, including
volatility and lack of liquidity. Reference is made to the discussion of
futures, options, and forward contracts herein for a discussion of these
risks. Further, the prices of the Hybrid Instrument and the related commodity
or currency may not move in the same direction or at the same time. Hybrid
Instruments may bear interest or pay preferred dividends at below market (or
even relatively nominal) rates. Alternatively, Hybrid Instruments may bear
interest at above market rates but bear an increased risk of principal loss
(or gain). In addition, because the purchase and sale of Hybrid Instruments
could take place in an over-the-counter market or in a private transaction
between the Fund and the seller of the Hybrid Instrument, the creditworthiness
of the contra party to the transaction would be a risk factor which the Fund
would have to consider. Hybrid Instruments also may not be subject to
regulation of the Commodities Futures Trading Commission ("CFTC"), which
generally regulates the trading of commodity futures by U.S. persons, the SEC,
which regulates the offer and sale of securities by and to U.S. persons, or
any other governmental regulatory authority.
INVESTMENT RISKS
There are special risks in investing in the LB World Growth Fund, as discussed
in the Prospectus. Certain of these risks are inherent in any international
mutual fund while others relate more to the countries in which the Fund will
invest ("Portfolio Companies"). Many of the risks are more pronounced for
investments in developing or emerging countries. Although there is no
universally accepted definition, a developing country is generally
considered to be a country which is in the initial stages of its
industrialization cycle with a per capita gross national product of less than
$5,000.
Investors should understand that all investments have a risk factor. There
can be no guarantee against loss resulting from an investment in the Fund, and
there can be no assurance that the Fund's investment policies will be
successful, or that its investment objective will be attained. The Fund is
designed for individual and institutional investors seeking to diversify
beyond the United States in an actively researched and managed portfolio, and
is intended for long-term investors who can accept the risks entailed in
investment in foreign securities. In addition to the general risks of foreign
investing described in the Trust's Prospectus, other risks include:
INVESTMENT AND REPATRIATION RESTRICTIONS. Foreign investment in the
securities markets of certain foreign countries is restricted or controlled in
varying degrees. These restrictions may at times limit or preclude investment
in certain of such countries and may increase the cost and expenses of a Fund.
Investments by foreign investors are subject to a variety of restrictions in
many developing countries. These restrictions may take the form of prior
governmental approval, limits on the amount or type of securities held by
foreigners, and limits on the types of companies in which foreigners may
invest. Additional or different restrictions may be imposed at any time by
these or other countries in which a Fund invests. In addition, the
repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including in
some cases the need for certain government consents. Although these
restrictions may in the future make it undesirable to invest in these
countries, the Advisor and Sub-advisor do not believe that any current
repatriation restrictions would affect its decision to invest in these
countries.
MARKET CHARACTERISTICS. Foreign securities may be purchased in over-the-
counter markets or on stock exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign stock markets are
generally not as developed or efficient as, and may be more volatile than,
those in the United States. While growing in volume, they usually have
substantially less volume than U.S. markets and a Fund's portfolio securities
may be less liquid and more volatile than securities of comparable U.S.
companies. Equity securities may trade at price/earnings multiples higher
than comparable United States securities and such levels may not be
sustainable. Fixed commissions on foreign stock exchanges are generally
higher than negotiated commissions on United States exchanges, although a Fund
will endeavor to achieve the most favorable net results on its portfolio
transactions. There is generally less government supervision and regulation
of foreign stock exchanges, brokers and listed companies than in the United
States. Moreover, settlement practices for transactions in foreign markets
may differ from those in United States markets, and may include delays beyond
periods customary in the United States.
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States' economy
in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. The internal politics of certain foreign countries are not as
stable as in the United States. For example, the Philippines' National
Assembly was dissolved in 1986 following a period of intense political unrest
and the removal of President Marcos. During the 1960's, the high level of
communist insurgency in Malaysia paralyzed economic activity, but by the
1970's these communist forces were suppressed and normal economic activity
resumed. In 1991, the existing government in Thailand was overthrown in a
military coup. In addition, significant external political risks currently
affect some foreign countries. Both Taiwan and China still claim sovereignty
of one another and there is a demilitarized border between North and South
Korea.
Governments in certain foreign countries continue to participate to a
significant degree, through ownership interest or regulation, in their
respective economics. Action by these governments could have a significant
effect on market prices of securities and payment of dividends. The economies
of many foreign countries are heavily dependent upon international trade and
are accordingly affected by protective trade barriers and economic conditions
of their trading partners. The enactment by these trading partners of
protectionist trade legislation could have a significant adverse effect upon
the securities markets of such countries.
INFORMATION AND SUPERVISION. There is generally less publicly available
information about foreign companies comparable to reports and ratings that are
published about companies in the United States. Foreign companies are also
generally not subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to United
States companies.
TAXES. The dividends and interest payable on certain of a Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Fund's
shareholders. A shareholder otherwise subject to United States federal income
taxes may, subject to certain limitations, be entitled to claim a credit or
deduction for U.S. federal income tax purposes for his or her proportionate
share of such foreign taxes paid by the Fund.
COSTS. Investors should understand that the expense ratio of the Fund can be
expected to be higher than investment companies investing in domestic
securities since the cost of maintaining the custody of foreign securities and
the rate of advisory fees paid by the Fund are higher.
OTHER. With respect to certain foreign countries, especially developing and
emerging ones, there is the possibility of adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of the Fund, political or
social instability, or diplomatic developments which could affect investments
by U.S. persons in those countries.
EASTERN EUROPE. Changes occurring in Eastern Europe and Russia today could
have long-term potential consequences. As restrictions fall, this could
result in rising standards of living, lower manufacturing costs, growing
consumer spending, and substantial economic growth. However, investment in
the countries of Eastern Europe and Russia is highly speculative at this time.
Political and economic reforms are too recent to establish a definite trend
away from centrally-planned economies and state owned industries. In many of
the countries of Eastern Europe and Russia, there is no stock exchange or
formal market for securities. Such countries may also have government
exchange controls, currencies with no recognizable market value relative to
the established currencies of western market economies, little or no
experience in trading in securities, no financial reporting standards, a lack
of a banking and securities infrastructure to handle such trading, and a legal
tradition which does not recognize rights in private property. In addition,
these countries may have national policies which restrict investments in
companies deemed sensitive to the country's national interest. Further, the
governments in such countries may require governmental or quasi-governmental
authorities to act as custodian of the Fund's assets invested in such
countries and these authorities may not qualify as a foreign custodian under
the Investment Company Act of 1940 and exemptive relief from such Act may be
required. All of these considerations are among the factors which could cause
significant risks and uncertainties to investment in Eastern Europe and
Russia. The Fund will only invest in a company located in, or a government
of, Eastern Europe or Russia, if the Sub-advisor believes the potential return
justifies the risk. To the extent any securities issued by companies in
Eastern Europe and Russia are considered illiquid, the Fund will be required
to include such securities within its 15% restriction on investing in illiquid
securities.
It is contemplated that most foreign securities will be purchased in over-the-
counter markets or on stock exchanges located in the countries in which the
respective principal offices of the issuers of the various securities are
located, if that is the best available market.
The Fund may invest in investment portfolios which have been authorized by the
governments of certain countries specifically to permit foreign investment in
securities of companies listed and traded on the stock exchanges in these
respective countries. The Fund's investment in these portfolios is subject to
the provisions of the 1940 Act discussed below. If the Fund invests in such
investment portfolios, the Fund's shareholders will bear not only their
proportionate share of the expenses of the Fund (including operating expenses
and the fees of the Investment Manager), but also will bear indirectly similar
expenses of the underlying investment portfolios. In addition, the securities
of these investment portfolios may trade at a premium over their net asset
value.
Apart from the matters described herein, the Fund is not aware at this time of
the existence of any investment or exchange control regulations which might
substantially impair the operations of the Fund as described in the Trust's
Prospectus and this Statement. It should be noted, however, that this
situation could change at any time.
FOREIGN CURRENCY TRANSACTIONS. The Fund will generally enter into forward
foreign currency exchange contracts under two circumstances. First, when the
Fund enters into a contract for the purchase or sale of a security denominated
in a foreign currency, it may desire to "lock in" the U.S. dollar price of the
security.
Second, when the Sub-advisor believes that the currency of a particular
foreign country may suffer or enjoy a substantial movement against another
currency, including the U.S. dollar, it may enter into a forward contract to
sell or buy the amount of the former foreign currency, approximating the value
of some or all of the Fund's portfolio securities denominated in such foreign
currency. Alternatively, where appropriate, the Fund may hedge all or part of
its foreign currency exposure through the use of a basket of currencies or a
proxy currency where such currency or currencies act as an effective proxy for
other currencies. In such a case, the Fund may enter into a forward contract
where the amount of the foreign currency to be sold exceeds the value of the
securities denominated in such currency. The use of this basket hedging
technique may be more efficient and economical than entering into separate
forward contracts for each currency held in the Fund. The precise matching of
the forward contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The projection of short-term currency market movement is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Other than as set forth above, and immediately
below, the Fund will also not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the Fund's portfolio securities or other assets denominated in that
currency. The Fund, however, in order to avoid excess transactions and
transaction costs, may maintain a net exposure to forward contracts in excess
of the value of the Fund's portfolio securities or other assets to which the
forward contracts relate (including accrued interest to the maturity of the
forward on such securities) provided the excess amount is "covered" by liquid,
high-grade debt securities, denominated in any currency, at least equal at all
times to the amount of such excess. For these purposes "the securities or
other assets to which the forward contracts relate may be securities or assets
denominated in a single currency, or where proxy forwards are used, securities
denominated in more than one currency. Under normal circumstances,
consideration of the prospect for currency parities will be incorporated into
the longer term investment decisions made with regard to overall
diversification strategies. However, the Sub-advisor believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of the Fund will be served.
At the maturity of a forward contract, the Fund may either sell the portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract obligating it to purchase, on
the same maturity date, the same amount of the foreign currency.
As indicated above, it is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of the forward
contract. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it
may be necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security if its market value exceeds
the amount of foreign currency the Fund is obligated to deliver. However, as
noted, in order to avoid excessive transactions and transaction costs, the
Fund may use liquid, high-grade debt securities denominated in any currency,
to cover the amount by which the value of a forward contract exceeds the value
of the securities to which it relates.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of
the currency it has agreed to purchase. Should forward prices increase, the
Fund will suffer a loss to the extent of the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The Fund's dealing in forward foreign currency exchange contracts will
generally be limited to the transactions described above. However, the Fund
reserves the right to enter into forward foreign currency contracts for
different purposes and under different circumstances. Of course, the Fund is
not required to enter into forward contracts with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate
by the Sub-advisor. It also should be realized that this method of hedging
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It simply establishes a rate of
exchange at a future date. Additionally, although such contracts tend to
minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time, they tend to limit any potential gain which might
result from an increase in the value of that currency.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on
a daily basis. It will do so from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund
at one rate, while offering a lesser rate of exchange should the Fund desire
to resell that currency to the dealer.
In addition to the restrictions described above, some foreign countries limit,
or prohibit, all direct foreign investment in the securities of their
companies. However, the governments of some countries have authorized the
organization of investment portfolios to permit indirect foreign investment in
such securities. For tax purposes these portfolios may be known as Passive
Foreign Investment Companies. The Fund is subject to certain percentage
limitations under the 1940 Act and certain states relating to the purchase of
securities of investment companies, and may be subject to the limitation that
no more than 10% of the value of the Fund's total assets may be invested in
such securities.
For an additional discussion of certain risks involved in foreign investing,
see this Statement and the Trust's Prospectus under "Certain Risk Factors and
Investment Methods."
FUND MANAGEMENT
The officers and Trustees of the Trust and their addresses, positions
with the Trust, and principal occupations are set forth below. The officers
and Trustees own less than 1% of any Fund's outstanding shares.
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS THE TRUST DURING THE PAST 5 YEARS
---------------- ------------- -----------------------
<S> <C> <C>
Rolf F. Bjelland* Chairman, Trustee Executive Vice President and Chief Investment
625 Fourth Avenue South and President Officer, Lutheran Brotherhood; President
Minneapolis, MN and Director, Lutheran Brotherhood Research Corp.; Director
Age 57 and Vice President-Investments, Lutheran
Brotherhood Variable Insurance Products Company;
Director and Executive Vice President, Lutheran
Brotherhood Financial Corporation; Director,
Lutheran Brotherhood Securities Corp.; Director,
Lutheran Brotherhood Real Estate Products Company;
Director, Chairman and President of LB Series Fund,
Inc.
Charles W. Arnason Trustee Lawyer in private practice; formerly member of
101 Judd Street, Suite 1 Head, Hempel, Seifert & Vander Weide;
P. O. Box 150 formerly Executive Director of Minnesota
Marine-On-St. Croix, MN Technology Corridor; formerly Senior Vice President,
Age 67 Secretary and General Counsel of Cowles Media
Company; Officer, Director or Trustee of various
community non-profit boards and organizations;
Director of LB Series Fund, Inc.
Herbert F. Eggerding, Jr. Trustee Retired Executive Vice President and Chief
12587 Glencroft Dr. Financial Officer, Petrolite Corporation;
St. Louis, MO Director, Wheat Ridge Foundation; Director, Lutheran
Age 58 Charities Association of St. Louis, MO.; Director of
LB Series Fund, Inc.
Connie M. Levi Trustee Retired President of the Greater Minneapolis
50 Peninsula Rd. Chamber of Commerce; Director or member of
Dellwood, MN numerous governmental, public service and non-profit
Age 56 boards and organizations; Director of LB Series Fund,
Inc.
Bruce J. Nicholson* Trustee Executive Vice President and Chief Financial Officer,
625 Fourth Avenue South Lutheran Brotherhood; Director, Executive Vice
Minneapolis, MN President and Chief Financial Officer, Lutheran
Age 48 Brotherhood Financial Corporation; Director, Lutheran
Brotherhood Research Corp; Director, Lutheran
Brotherhood Securities Corp.; Director and Chief
Financial Officer, Lutheran Brotherhood Variable
Insurance Products Company; Director, Lutheran
Brotherhood Real Estate Products Company; Director, LB
Series Fund, Inc.
Ruth E. Randall Trustee Interim Dean, Division of Continuing Studies,
University of Nebraska-Lincoln University of Nebraska-Lincoln; formerly
Clifford Hardin Nebraska Center Associate Dean, Teachers College, and Professor,
for Continuing Education, Room 340 Department of Educational Administration, Teachers
P.O. Box 839300 College, University of Nebraska-Lincoln;
Lincoln, NE Commissioner of Education for the State of Minnesota;
Age 66 Director or member of numerous governmental, public
service and non-profit boards and organizations;
Director of LB Series Fund, Inc.
James R. Olson Vice President Vice President, Lutheran Brotherhood; Vice President,
625 Fourth Avenue South Lutheran Brotherhood Variable Insurance Products
Minneapolis, MN Company; Vice President, Lutheran Brotherhood Research
Age 53 Corp.; Vice President, Lutheran Brotherhood Securities
Corp.; Vice President, Lutheran Brotherhood Real
Estate Products Company; Vice President of LB Series
Fund, Inc.
Richard B. Ruckdashel Vice President Assistant Vice President, Lutheran Brotherhood;
625 Fourth Avenue South Vice President of LB Series Fund, Inc.
Minneapolis, MN
Age 40
James M. Walline Vice President Vice President, Lutheran Brotherhood; Vice President,
625 Fourth Avenue South Lutheran Brotherhood Research Corp.; Vice President,
Minneapolis, MN Lutheran Brotherhood Variable Insurance Products
Age 50 Company; Vice President of LB Series Fund, Inc.
Wade M. Voigt Treasurer Manager, Mutual Fund Accounting, Lutheran
625 Fourth Avenue South Brotherhood; Treasurer of LB Series Fund, Inc.
Minneapolis, MN
Age 39
Otis F. Hilbert Secretary and Vice President, Lutheran Brotherhood; Counsel,
625 Fourth Avenue South Vice President Vice President and Secretary, Lutheran Brotherhood
Minneapolis, MN Securities Corp.; Counsel and Secretary of Lutheran
Age 58 Brotherhood Research Corp.; Vice President and
Secretary, Lutheran Brotherhood Real Estate Products
Company; Vice President and Assistant Secretary,
Lutheran Brotherhood Variable Insurance Products
Company; Secretary and Vice President of LB Series
Fund, Inc.
_____________________
(*) "Interested person" of the Fund as defined in the Investment Company
Act of 1940 by virtue of his positions with affiliated entities referred
to elsewhere herein.
</TABLE>
Lutheran Brotherhood, directly and through its wholly-owned subsidiary
companies, owned 10.63% of the outstanding shares of Lutheran Brotherhood
Money Market Fund as of November 30, 1994.
COMPENSATION OF TRUSTEES AND OFFICERS
The Fund make no payments to any of its officers for services performed for
the Fund. Trustees of the Trust who are not interested persons of the Trust
are paid an annual retainer fee by the Trust of $18,500 and an annual fee of
$9,000 per year to attend meetings of Board of Trustees.
Trustees who are not interested persons of the Trust are reimbursed by
the Trust for any expenses they may incur by reason of attending Board
meetings or in connection with other services they may perform in
connection with their duties as Trustees of the Trust. The Trustees
receive no pension or retirement benefits in connection with their
service to the Fund.
For the fiscal year ended October 31, 1994, the Trustees of the Trust received
the following amounts of compensation:
Total
Aggregate Compensation
Name and Position Compensation Paid by Fund and
of Person From Trust Fund Complex(1)
----------------- ------------ -----------------
Rolf F. Bjelland(2) $0 $0
Chairman
and Trustee
Charles W. Arnason $18,982 $23,375
Trustee
Herbert F. Eggerding, Jr. $18,982 $23,375
Trustee
Luther O. Forde(2)(3) $0 $0
Bobby I. Griffin(4) $13,768 $16,875
Connie M. Levi $18,982 $23,375
Trustee
Bruce J. Nicholson(2) $0 $0
Trustee
Ruth E. Randall $18,982 $23,375
Trustee
(1) The "Fund Complex" includes The Lutheran Brotherhood Family of Funds and
LB Series Fund, Inc.
(2) "Interested person" of the Fund as defined in the Investment Company
Act of 1940.
(3) Retired as a Trustee of the Funds effective April 30, 1995.
(4) Resigned as a Trustee to accept appointment to the Board of Directors of
Lutheran Brotherhood June 30, 1994.
INVESTMENT ADVISORY SERVICES
The Fund's investment adviser, LB Research, was organized as a
Pennsylvania corporation in 1969 and was reincorporated as a Minnesota
corporation in 1987. It has been in the investment advisory business since
1970. LB Research is a wholly-owned subsidiary of Lutheran Brotherhood
Financial Corporation which, in turn, is a wholly-owned subsidiary of
Lutheran Brotherhood, a fraternal benefit society. The officers and
directors of LB Research who are affiliated with the Trust are set forth
under "Fund Management".
LB Research provides overall investment supervision of the Fund's
investments. LB Research assumes the expense of providing the personnel
to perform its advisory functions. Lutheran Brotherhood, the indirect parent
company of LB Research, also serves as the investment adviser for each of the
other Funds in the Lutheran Brotherhood Family of Funds and for LB Series
Fund, Inc. The Master Advisory Contract (the "Advisory Contract") for the
Funds provides that Lutheran Brotherhood has reserved the right to grant the
non-exclusive use of the name "Lutheran Brotherhood" or any derivative thereof
to any other investment company, investment adviser, distributor or other
business enterprise, and to withdraw from each Fund the use of the name
"Lutheran Brotherhood". The name "Lutheran Brotherhood" will continue to be
used by each Fund as long as such use is mutually agreeable to Lutheran
Brotherhood and the Funds.
Investment decisions for the Fund are made by Rowe Price-Fleming
International, Inc. (the "Sub-advisor"), which LB Research has engaged the
sub-advisor for the Fund. The Sub-advisor manages the Fund on a daily basis,
subject to the overall direction of LB Research and the Fund's Board of
Trustees.
The Sub-advisor was founded in 1979 as a joint venture between T. Rowe
Price Associates, Inc. and Robert Fleming Holdings Limited. The Sub-advisor is
one of the world's largest international mutual fund asset managers with
approximately $17 billion under management as of December 31, 1994 in its
offices in Baltimore, London, Tokyo and Hong Kong.
To the extent required under applicable state regulatory requirements,
the Investment Manager will reduce its management fee up to the amount of
any expenses (exclusive of interest, taxes, brokerage expenses, distribution
expenses, extra-ordinary items and any other items allowed to be excluded by
applicable state law) paid or incurred by the Fund in any fiscal year which
exceed specified percentages of the average daily net assets of such Fund
for such fiscal year. The most restrictive of such percentage limitations is
(which does not presently apply to the Fund) currently 2.5% of the first
$30 million of average net assets, 2.0% of the next $70 million of average
net assets and 1.5% of the remaining average net assets. These commitments
may be amended or rescinded in response to changes in the requirements of
the various states by the Trustees without shareholder approval.
The Advisory Contract provides that it shall continue in effect with
respect to each Fund from year to year as long as it is approved at least
annually both (i) by a vote of a majority of the outstanding voting
securities of such Fund (as defined in the 1940 Act) or by the Trustees of
the Trust, and (ii) in either event by a vote of a majority of the Trustees
who are not parties to the Advisory Contract or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Advisory Contract may be terminated on 60 days'
written notice by either party and will terminate automatically in the event
of its assignment, as defined under the 1940 Act and regulations thereunder.
Such regulations provide that a transaction which does not result in a
change of actual control or management of an adviser is not deemed an
assignment.
The Sub-advisory Contract provides that it shall continue in effect with
respect to the LB World Growth Fund from year to year as long as it is
approved at least annually both (i) by a vote of a majority of the outstanding
voting securities of such Fund (as defined in the 1940 Act) or by the Trustees
of the Trust, and (ii) in either event by a vote of a majority of the Trustees
who are not parties to the Sub-advisory Contract or "interested persons" of
any party thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Sub-advisory Contract may be terminated on 60
days' written notice by either party and will terminate automatically in the
event of its assignment, as defined under the 1940 Act and regulations
thereunder. Such regulations provide that a transaction which does not result
in a change of actual control or management of an adviser is not deemed an
assignment.
LB Research receives an annual investment advisory fee from the Fund equal
to 1.25% of average daily net assets up to $20 million, 1.10% of average daily
net assets over $20 million but not over $50 million, and 1.00% of average
daily net assets over $50 million.
LB Research pays the sub-advisor for the Fund an annual sub-advisory fee for
the performance of sub-advisory services. The fee payable is equal to .75% of
average daily net assets up to $20 million, .60% of average daily net assets
over $20 million but not over $50 million, and .50% of average daily net
assets over $50 million.
Effective September 5, 1995, LB Research has undertaken to limit the Fund's
total expenses to 1.95% of its average daily net assets by means of a
voluntary waiver of advisory fees. This partial advisory fee waiver is
voluntary and may be discontinued at any time.
ADMINISTRATIVE SERVICES
Lutheran Brotherhood Securities Corp. ("LB Securities") provides
administrative personnel and services necessary to operate the Fund on a
daily basis for a fee equal to 0.025 percent of the Fund's average daily
net assets.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Fund's custodian. As custodian, State Street
Bank and Trust Company is responsible for, among other things, safeguarding
and controlling the Fund's cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Fund's
investments.
TRANSFER AGENT
LB Securities serves as transfer agent for the shares of the Fund.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 3100 Multifoods Tower, 33 South Sixth Street,
Minneapolis, Minnesota 55402, serves as the Fund's independent accountants,
providing professional services including audits of the Fund's annual
financial statements, assistance and consultation in connection with
Securities and Exchange Commission filings, and review of the annual income
tax returns filed on behalf of the Fund.
DISTRIBUTOR
The Fund's distributor, LB Securities, is a Pennsylvania corporation
organized in 1969. LB Securities is a wholly-owned subsidiary of LB Research
and is located in Minneapolis, Minnesota. The officers and directors of LB
Securities who are affiliated with the Trust are set forth under "Fund
Management". LB Securities makes a continuous offering of the Fund's shares
on a best efforts basis.
BROKERAGE TRANSACTIONS
PORTFOLIO TRANSACTIONS
In connection with the management of the investment and reinvestment of
the assets of the Fund, the Advisory Contract authorizes LB Research,
acting by its own officers, directors or employees or by a duly authorized
subcontractor, including the Sub-advisor, to select the brokers or dealers
that will execute purchase and sale transactions for the Fund. In executing
portfolio transactions and selecting brokers or dealers, if any, LB Research
and the Sub-advisor will use reasonable efforts to seek on behalf of the Fund
the best overall terms available. In assessing the best overall terms
available for any transaction, LB Research and the Sub-advisor will consider
all factors it deems relevant, including the breadth of the market in and the
price of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any (for the
specific transaction and on a continuing basis). In evaluating the best
overall terms available, and in selecting the broker or dealer, if any, to
execute a particular transaction, LB Research and the Sub-advisor may also
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to any other
accounts over which LB Research or the Sub-advisor or an affiliate of LB
Research or the Sub-advisor exercises investment discretion. LB Research and
the Sub-advisor may pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if, but only if, LB Research or the
Sub-advisor determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided.
To the extent that the receipt of the above-described services may
supplant services for which LB Research or the Sub-advisor might otherwise
have paid, it would, of course, tend to reduce the expenses of LB Research
or the Sub-advisor.
The investment decisions for the Fund are and will continue to be made
independently from those of other investment companies and accounts managed
by LB Research, the Sub-advisor, or their affiliates. Such other investment
companies and accounts may also invest in the same securities as the Fund.
When purchases and sales of the same security are made at substantially the
same time on behalf of such other investment companies and accounts,
transactions may be averaged as to the price and available investments
allocated as to the amount in a manner which LB Research and its affiliates
believe to be equitable to each investment company or account, including the
Fund. In some instances, this investment procedure may affect the price paid
or received by the Fund or the size of the position obtainable or sold by the
Fund.
ROWE PRICE-FLEMING AFFILIATED TRANSACTIONS
Subject to applicable SEC rules, as well as other regulatory requirements,
the Sub-advisor of Fund may allocate orders to brokers or dealers affiliated
with the Sub-advisor. Such allocation shall be in such amounts and proportions
as the Sub-advisor shall determine and the Sub-advisor will report such
allocations either to LB Research, which will report such allocations to the
Board of Trustees, or, if requested, directly to the Board of Trustees. It is
expected that less than 20% of the aggregate brokerage commissions for LB
World Growth Fund will be paid to affiliates of that Fund's Sub-advisor for
the fiscal year ending October 31, 1995.
PORTFOLIO TURNOVER RATE
The rate of portfolio turnover in the Fund will not be a limiting factor when
LB Research or the Sub-advisor deems changes in the Fund's portfolio
appropriate in view of its investment objectives. As a result, while the Fund
will not purchase or sell securities solely to achieve short term trading
profits, the Fund may sell portfolio securities without regard to the length
of time held if consistent with the Fund's investment objective. A higher
degree of equity portfolio activity will increase brokerage costs to the Fund.
The portfolio turnover rate is computed by dividing the dollar amount
of securities purchased or sold (whichever is smaller) by the average value
of securities owned during the year. Short-term investments such as
commercial paper and short-term U.S. Government securities are not
considered when computing the turnover rate.
PURCHASING SHARES
Initial purchases of Fund shares must be made by check and accompanied
by an application. Subsequent purchases may be made by:
* check;
* Federal Reserve or bank wire;
* Invest-by-Phone;
* Systematic Investment Plan (SIP); and
* automatic payroll deduction.
Use of checks, Federal Reserve or bank wire and Invest-by-Phone is
explained in the General Information section of the Fund's prospectus under
"Buying Shares of The Fund".
SYSTEMATIC INVESTMENT PLAN
Under the Systematic Investment Plan program, funds may be withdrawn
monthly from the shareholder's checking account and invested in the Fund.
LB Securities representatives will provide shareholders with the necessary
authorization forms.
AUTOMATIC PAYROLL DEDUCTION
Under the Automatic Payroll Deduction program, funds may be withdrawn
monthly from the payroll account of any eligible shareholder of the Fund
and invested in the Fund. To be eligible for this program, the shareholder's
employer must permit and be qualified to conduct automatic payroll
deductions. LB Securities representatives will provide shareholders with the
necessary authorization forms.
SALES CHARGES
Initial purchases of Fund shares carry sales charges as explained in
the section of the Fund's prospectus entitled, "Sales Charges", which also
lists ways to reduce or avoid sales charges on subsequent purchases.
In addition to the situations described in the prospectus, sales
charges are waived when shares are purchased by:
* directors and regular full-time and regular part-time employees of
Lutheran Brotherhood;
* registered representatives of LB Securities; and
* any trust, pension, profit-sharing or other benefit plan for such
persons.
FULL-TIME EMPLOYEES
Regular full-time and regular part-time employees of Lutheran Brotherhood
are persons who are defined as such by the Lutheran Brotherhood Human
Resources Policy Manual.
RESTRICTION ON SALE OF SHARES PURCHASED
Sales to any of the persons or groups mentioned in this section are
made only with the purchaser's written promise that the shares will not be
resold, except through redemption or repurchase by or on behalf of a Fund.
NET ASSET VALUE
The net asset value per share is determined at the close of each day
the New York Stock Exchange is open, except the day after
Thanksgiving, or any other day as provided by Rule 22c-1 under the
Investment Company Act of 1940. Determination of net asset value may be
suspended when the Exchange is closed or if certain emergencies have been
determined to exist by the Securities and Exchange Commission, as allowed by
the Investment Company Act of 1940.
Net asset value is determined by adding the market or appraised value
of all securities and other assets; subtracting liabilities; and dividing
the result by the number of shares outstanding.
The market value of the Fund's portfolio securities is determined at the
close of regular trading of the New York Stock Exchange (the "Exchange")
on each day the Exchange is open, except the day after Thanksgiving. The value
of portfolio securities is determined in the following manner:
* Equity securities traded on the Exchange or any other national securities
exchange are valued at the last sale price. If there has been no sale on
that day or if the security is unlisted, it is valued at the mean between
current bid and asked prices.
* Equity securities not traded on a national securities exchange
are valued at the mean between bid and asked prices at the close
of regular trading on the New York Stock Exchange, except that
securities for which quotations are furnished through the
nationwide automated quotation system approved by the NASDAQ will
be valued at their last sales prices so furnished on the date of
valuation, if such quotations are available for sales occurring on
that day.
* Bonds and other income securities traded on a national securities
exchange will be valued at the last sale price on such national
securities exchange that day. LB Research may value such
securities on the basis of prices provided by an independent
pricing service or on the basis of the mean between bid and asked
prices in the over-the-counter market, if those prices are
believed to better reflect the fair market value of such exchange
listed securities.
* Bonds and other income securities not traded on a national
securities exchange will be valued at the mean between bid and
asked prices. Such securities may also be valued on the basis of
prices provided by an independent pricing service if those prices
are believed to reflect the fair market value of such securities.
Short-term obligations are usually valued at the mean between bid and
asked prices as furnished by independent pricing services. However,
short-term obligations with maturities of 60 days or less will be valued at
amortized cost unless the Board of Trustees determines that such value does
not represent fair value.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may consider institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data
employed in determining valuation for such securities.
All other securities and assets will be appraised at fair value as
determined by the Board of Trustees.
Generally, trading in foreign securities, as well as U.S. Government
securities, money market instruments and repurchase agreements, is
substantially completed each day at various times prior to the close of the
Exchange. The values of such securities used in computing the net asset value
of shares of a Fund are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of such securities and
exchange rates may occur between the times at which they are determined and
the close of the Exchange, which will not be reflected in the computation of
net asset values. If during such periods events occur which materially affect
the value of such securities, the securities will be valued at their fair
market value as determined in good faith by the Trustees of the Fund.
For purposes of determining the net asset value of shares of the Fund
all assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing
service that takes into account the quotes provided by a number of such major
banks.
REDEEMING SHARES
Shares may be redeemed with requests made:
* in writing;
* through Redeem-by-Phone; or
* through the Lutheran Brotherhood systematic withdrawal plan.
All methods of redemption are described in the Fund's prospectus under
"Redeeming Shares".
TAX STATUS
THE FUND'S TAX STATUS
The Fund expects to pay no federal income tax because it intends to
meet requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
* derive at least 90% of its gross income from dividends, interest
and gains from the sale of securities;
* derive less than 30% of its gross income from the sale of
securities held less than three months;
* invest in securities within certain statutory limits; and
* distribute at least 90% of its ordinary income to shareholders.
It is the Fund's policy to distribute substantially all of its
income on a timely basis, including any net realized gains on
investments each year.
To avoid payment of a 4% Excise tax, the Fund is also required to
distribute to shareholders at least 98% of its ordinary income earned during
the calendar year and 98% of its net capital gains realized during the
12-month period ending October 31.
SHAREHOLDERS' TAX STATUS
Shareholders of the Fund will be subject to federal income tax on dividends
and distributions received as cash or additional shares. To the extent the
Fund earns interest from U.S. government obligations, a number of states may
allow pass-through treatment and permit a shareholder to exclude a portion of
their dividends from state income tax.
The Fund will mail annually to each shareholder advice as to the tax
status of each year's dividends and distributions.
CAPITAL GAINS
Distributions by the Fund representing net long-term capital gains
realized by the Fund will be taxable to shareholders as long-term capital
gains no matter how long the shareholder may have held the shares. While the
Fund does not intend to engage in short-term trading, it may dispose of
securities held for only a short time if LB Research believes it to be
advisable. Such changes may result in the realization of capital gains. The
Fund distributes its realized gains in accordance with federal tax
regulations. Distributions from any net realized capital gains will usually
be declared in December.
GENERAL INFORMATION
The Lutheran Brotherhood Family of Funds, a business trust organized
under the laws of the State of Delaware, was established pursuant to a
Master Trust Agreement dated July 15, 1993. The Trust is authorized to issue
shares of beneficial interest, par value $.001 per share, divisible into an
indefinite number of different series and classes and operates as a "series
company" as provided by Rule 18f-2 under the 1940 Act. The interests of
investors in the various series of the Trust will be separate and distinct.
All consideration received for the sales of shares of a particular series of
the Trust, all assets in which such consideration is invested, and all
income earnings and profits derived from such investments, will be allocated
to that series.
Except for the LB World Growth Fund, each Fund is the successor to a fund of
the same name that previously operated as a separate corporation or trust. At
a Special Meeting of Shareholders of each such fund held on October 28, 1993,
the shareholders of each fund approved a reorganization of the respective
funds as separate series of the Trust, which reorganization became effective
on November 1, 1993. The LB World Growth Fund commenced operations as a series
of The Lutheran Brotherhood Family of Funds on September 5, 1995.
CALCULATION OF PERFORMANCE DATA
TOTAL RETURN
Average annual total return is computed by determining the average
annual compounded rates of return over the designated periods that, if
applied to the initial amount invested would produce the ending redeemable
value, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
designated period assuming a hypothetical $1,000
payment made at the beginning of the designated
period
The calculation is based on the further assumptions that the maximum
initial sales charge applicable to the investment is deducted, and that all
dividends and distributions by the Fund are reinvested at net asset value on
the reinvestment dates during the periods. All accrued expenses are also
taken into account as described later herein.
ACCRUED EXPENSES
Accrued expenses include all recurring expenses that are charged to all
shareholder accounts in proportion to the length of the base period. The
average annual total return and yield results take sales charges, if
applicable, into account, although the results do not take into account
recurring and nonrecurring charges for optional services which only certain
shareholders elect and which involve nominal fees.
Accrued expenses do not include the subsidization by affiliates of fees or
expenses relating to the Fund, during the subject period.
NONSTANDARDIZED TOTAL RETURN
The Fund may provide the above described average annual total return results
for periods which end no earlier than the most recent calendar quarter end
and which begin twelve months before and at the time of commencement of the
Fund's operations. In addition, the Fund may provide nonstandardized total
return results for differing periods, such as for the most recent six months,
and/or without taking sales charges into account. Such nonstandardized total
return is computed as otherwise described under "Total Return" except that
the result may or may not be annualized, and as noted any applicable sales
charge may not be taken into account and therefore not deducted from the
hypothetical initial payment of $1,000.
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