[7 SOLID SQUARE BULLETS]
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LUTHERAN BROTHERHOOD
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FAMILY OF FUNDS
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[ART OF 3D SQUARE WITH TREE, ACORN AND LEAF
ON EACH OF IT'S THREE VISIBLE FACETS.]
Cross bar reads:
GROWTH [DIAMOND] INCOME [DIAMOND] STABILITY
Semiannual Report
April 30, 1996
[LUTHERAN BROTHERHOOD LOGO HERE]
[PHOTO OF MR. BJELLAND]
Our Message To You
April 30, 1996
Dear Shareholder:
Enclosed is the Semiannual Report for the Lutheran Brotherhood Family of
Funds for the six months ended April 30, 1996. Included is an economic
and market overview that explains how stocks, bonds and money market
securities performed during that time, as well as individual portfolio
reviews that describe how fund managers responded to this environment.
The past six months have been a somewhat confusing period for investors.
After falling throughout 1995, interest rates reversed course in the
first months of 1996. Stock prices rose further despite this shift, due
to continued strength in corporate earnings and a huge inflow of cash in
the market, but prices fluctuated more than they had for some time.
Although bond prices rallied for several months, they fell when interest
rates started to rise.
Most of these changes were the result of evidence indicating that the
economy was picking up steam, which made investors worry about higher
inflation. It remains unclear, however, how long this added strength
will continue, or how strong an upturn might be.
The Lutheran Brotherhood Family of Funds is committed to monitoring its
investments for current market conditions. At the same time, we continue
to select securities that can perform well over the long haul.
Besides seeking investments with good value, we also maintain high
standards of quality and liquidity. In all cases we strive for well-
diversified portfolios representing a broad range of securities. These
strategies serve investors particularly well in all types of market
conditions.
We hope you, too, will take a long-term approach in managing your
investments. What seem to be sizable market changes now, will probably
smooth out over time. By maintaining a consistent investment approach,
we believe you'll have a better chance of earning returns that will help
you meet your long-term financial goals.
We encourage you to review this Semiannual Report for information
regarding your investments and the other mutual funds in the LB Family
of Funds. These reports and your quarterly statements can help you
monitor your investment program. If you have questions, please contact
your LB representative or call us toll free at 800-328-4552, or locally at
612-339-8091.
Sincerely,
/s/ Rolf F. Bjelland
Rolf F. Bjelland
President and Chairman
Lutheran Brotherhood Family of Funds
Economic and Market Overview April 30, 1996
Evidence of a stronger economy sparked concerns of higher inflation in
the six months ended April 30, 1996, causing a reversal in interest rate
trends. Although stock prices continued to rise, bond prices lost ground
for much of the period. During this time the S&P 500 Index rose by
13.73%, while the Lehman Aggregate Bond Index returned just 0.53%.
By investing in stocks that made the most of the rally, Lutheran
Brotherhood's stock funds earned solid returns for their shareholders.
Lutheran Brotherhood's bond funds weathered the turnaround in bond
prices by adapting maturities of their investments to changes in
interest rates.
The Economy Picks Up
When the six-month period began, the economy was still growing slowly
and investors believed the Federal Reserve (the "Fed") would have to
lower interest rates to hold off a recession. On December 19, 1995, the
Fed responded, cutting short-term rates from 5.75% to 5.5%. As we moved
into 1996, the economy showed better-than-expected growth. Corporate
earnings were strong and fears of a recession had turned to concerns of
potential inflation. In February, after the Fed cut short-term rates to
5.25%, long-term rates reversed course and started heading higher. As
expected, the stock and bond markets reacted differently to these
events.
Stocks continued to perform extremely well, fueled by the stronger-than-
expected economic growth, solid corporate earnings and a heavy flow of
new investments into stock mutual funds, which rose to a monthly record
of $33 billion in January of 1996.
Bonds, on the other hand, were adversely affected by the reversal in
long-term interest rates. After yields for 30-year Treasury bonds
declined from 6.33% to 5.94% in the last months of 1995, their rise to
6.89% by the end of April sent bond prices down. The same unexpected
economic strength and solid corporate earnings that drove stock prices
higher caused bond investors to worry that inflation would accelerate.
Higher inflation typically has a negative impact on the bond market
because rising consumer prices erode the purchasing power of bond
interest and principal.
Adjusting to Stronger Growth
The economy appears poised for a moderate growth rate of 2% to 3% in
coming months, with inflation holding steady. Personal income is rising,
but we have not experienced the wage increases necessary for significant
price inflation to consumers. In addition, substantial productivity
improvements should continue, helping hold back the rate of inflation.
While the yield for 30-year Treasuries may be above 7% throughout much
of 1996, we expect bond prices to be more stable during the rest of the
year. And while many would agree that stock returns could become more
volatile, we believe that the prospects of a more stable bond market,
continued cash flows into stock funds and strong corporate earnings
should continue to make stocks an attractive investment.
LB Opportunity Growth Fund
[PHOTO OF MICHAEL A. BINGER OMITTED]
Michael A. Binger is a Chartered Financial Analyst and was named
portfolio manager for the LB Opportunity Growth Fund in October 1994. He
has been with Lutheran Brotherhood since 1987.
Investment Objective: To seek long-term growth of capital by investing
in small-company stocks.
As a stable economic outlook sent stock prices higher in the past six
months, the stocks of small companies performed especially well. Having
first invested higher inflows of cash in liquid large-company stocks,
many mutual fund managers turned to small-company issues for additional
investments. After lagging the market at the end of 1995, many small-
company stocks offered prices that were quite appealing in a growing
economy.
This small-company stock outperformance was particularly strong for
technology companies, as well as stocks of health care, drug and
biotechnology firms. By emphasizing such issues, the LB Opportunity
Growth Fund earned an outstanding return for the six months ended April
30, 1996, outpacing its market benchmark as well as other funds in its
class.
During that time, the Fund had a total return (based on NAV) of 26.34%.
That compares to an average return of 20.22% for small-company growth
funds tracked by Lipper Analytical Services and a return of 18.42% for
the Russell 2000 Index.
[FIGURES BELOW USED TO CREATE OMITTED WORM CHART]
Growth of $10,000 January 31, 1993 - April 30, 1996
LB Opportunity Growth Fund
Annualized Total Returns* Period Ending 4/30/96
- -------------------------------------------------
Since Fund
Based on Inception - 1/8/93 1 Year
- -------------------------------------------------
Net Asset Value 24.64% 53.67%
Public Offering Price 22.73% 45.97%
- -------------------------------------------------
Lipper Average
Russell Small Co. Growth
LBOGF 2000 Stocks
Month End Total Total Total
Date Value Value Value
- -------------------------------------------------
01/31/93 $10,000 $10,000 $10,000
02/28/93 9,056 9,769 9,608
03/31/93 9,407 10,086 9,934
04/30/93 9,166 9,809 9,619
05/31/93 9,857 10,243 10,127
06/30/93 10,011 10,307 10,206
07/31/93 9,945 10,449 10,263
08/31/93 10,637 10,900 10,737
09/30/93 11,317 11,208 11,076
10/31/93 11,701 11,497 11,232
11/30/93 11,262 11,122 10,886
12/31/93 11,559 11,503 11,348
01/31/94 11,833 11,863 11,650
02/28/94 11,712 11,820 11,643
03/31/94 10,922 11,197 11,014
04/30/94 10,999 11,263 11,016
05/31/94 10,582 11,137 10,778
06/30/94 9,967 10,762 10,388
07/31/94 10,318 10,938 10,451
08/31/94 11,218 11,547 11,048
09/30/94 11,383 11,508 11,285
10/31/94 11,811 11,462 11,275
11/30/94 11,570 10,999 10,848
12/31/94 11,866 11,295 11,265
01/31/95 11,350 11,153 11,229
02/28/95 11,954 11,617 11,539
03/31/95 12,393 11,816 11,892
04/30/95 12,481 12,079 12,050
05/31/95 12,821 12,286 12,232
06/30/95 13,985 12,924 12,880
07/31/95 15,543 13,669 13,823
08/31/95 15,796 13,962 14,062
09/30/95 16,136 14,212 14,375
10/31/95 15,181 13,577 13,864
11/30/95 15,873 14,147 14,366
12/31/95 16,341 14,521 14,592
01/31/96 16,071 14,505 14,520
02/29/96 17,125 14,957 15,088
03/31/96 17,504 15,267 15,450
04/30/96 19,180 16,084 16,600
[END WORM CHART]
A Note About Performance
As you compare performance, please note that the LB Opportunity Growth
Fund's performance reflects the maximum 5% sales charge. The performance
of the index does not reflect any such charges. If you were to purchase
any of the individual stocks represented in this index, any sales
charges you would pay would reduce your total return as well.
*See accompanying notes to Portfolio Management Reviews.
Making the Most of the Rally
We made several changes to the Fund's portfolio that helped take
advantage of the small-company stock rally. Recognizing that U.S.
companies lead in world technology markets, we continued to keep sizable
investments in that sector. To seize opportunities in other sectors as
well, we reduced the weightings in technology stocks from 50% to 30%.
Within the technology sector, we traded electronics issues for stocks of
software, telecommunications and business service firms, which offered
greater promise for growth. Among these issues, stocks such
as InaCom, Intermedia Communications, ACT Networks and Viasoft performed
especially well during the period.
[FIGURES BELOW USED TO CREATE OMITTED PIE CHART]
Portfolio Composition
Short-term Securities 6.9%
Common Stocks 93.1%
[END PIE CHART]
At the same time, we started to build a significant position in
biotechnology firms, another leading area for U.S. companies. These
stocks also produced strong returns during the period.
New Opportunities
With the large advance of recent months, prices for small-company stocks
are now more in line with prices for large-company issues. Although
gains for small-company stocks may be more moderate in the months ahead,
we believe these types of stocks should fully participate in further
improvements for stocks as a whole.
As long as investors remain uncertain about the economy and earnings,
small-company issues may be vulnerable to a price correction. If the
economy continues to improve as we expect, such a correction would
probably be brief and offer additional investment opportunities at
attractive prices. In this environment, we will make an extra effort to
pick stocks with the potential for strong long-term earnings and sales
growth regardless of current economic conditions. For this reason, we
expect to keep substantial holdings in technology, drug and
biotechnology stocks. We will also keep an eye on the specialty retail
sector, which could stage a comeback as the economy improves.
% of
Top 10 Holdings Portfolio
Sterling Software, Inc. 3.4%
Liposome Company, Inc. 2.9%
Metrocall, Inc. 2.6%
Madge N.V. 2.6%
Memtec, Ltd. 2.4%
PDT, Inc. 2.3%
Cannondale Corp. 2.3%
InaCom Corp. 2.3%
VIASOFT, Inc. 2.2%
US Satellite
Broadcasting Co. 2.1%
These holdings represent 25%
of the Fund's total investment portfolio.
LB World Growth Fund
[PHOTO OF MARTIN G. WADE OMITTED]
Martin G. Wade is president of Rowe Price-Fleming, tbe investment
subadvisor for the LB World Growth Fund. He leads a team of 12 portfolio
managers who have managed the assets of the LB World Growth Fund since
its inception in September of 1995. Martin G. Wade has 28 years of
experience in research and investment management, including 17 years
with Rowe Price-Fleming.
Investment Objective: To seek long-term growth of capital by investing
primarily in common stocks of established companies outside tbe United
States.
Continued improvement in economies abroad drove foreign stock prices
higher in the six months ended April 30, 1996. Although somewhat muted
by further strength in the U.S. dollar, there were strong advances in
Japanese stocks, as well as those in Southeast Asian markets such as
Malaysia and Hong Kong. European stocks also fared well, led by solid
gains in France and Sweden. At the same time, Brazil and Mexico lead
rallies in Latin America.
During the period the LB World Growth Fund had a total return (based on
NAV) of 12.05%. That compares to a return of 11.97% for the average
international fund tracked by Lipper Analytical Services and a return of
13.37% for the Morgan Stanley Capital International Europe, Australia
and Far East (EAFE) Index.
Geographic Composition of Portfolio
% of
Country Portfolio
Japan 25.6%
United Kingdom 13.8%
Netherlands 9.0%
France 6.9%
Hong Kong 4.5%
Germany 4.1%
Switzerland 4.0%
Malaysia 2.9%
Spain 2.4%
Singapore 2.4%
Sweden 2.4%
Italy 1.9%
Brazil 1.8%
Mexico 1.7%
Australia 1.6%
Norway 1.4%
Korea 0.9%
Belgium 0.9%
Thailand 0.9%
Argentina 0.7%
China 0.5%
New Zealand 0.5%
Chile 0.5%
Portugal 0.5%
Canada 0.4%
Denmark 0.2%
Finland 0.1%
Austria 0.1%
Short-term
Securities 7.4%
Portfolio Strategies
When the period started, 21% of the Fund's assets were invested in
Japan, which was somewhat less than Japan's representation in the EAFE
Index. The Fund's position in European stocks was somewhat greater than
that of the Index. During the period, we increased the Fund's holding in
Japan slightly, focusing on stocks that are particularly sensitive to a
growing economy, and made a small reduction in the Fund's European
holdings.
[FIGURES BELOW USED TO CREATE OMITTED PIE CHART]
Portfolio Composition
Short-term Securities 7.4%
Common & Preferred
Stocks 92.6%
[END PIE CHART]
We continued to keep the Fund underweighted in Japan relative to the
Index. This gave us the opportunity to invest more heavily in the
smaller markets of Southeast Asia and Latin America. During the period
the Fund enjoyed especially strong performances from investments in Hong
Kong, Thailand and Brazil. The Fund also benefited from an overweighting
in stocks from the Netherlands.
Looking Ahead
After a strong start, we expect foreign stock markets to advance further
for the remainder of the year. We believe that many positive economic
factors are now in place, corporate earnings growth is healthy, and
inflation and interest rates should remain at reasonable levels.
In the months ahead, we expect some of the biggest gains to come from
stocks in the smaller markets of Asia and Latin America, with selective
improvements from stocks in Europe and Japan. In this environment we
expect to find many opportunities to buy attractively priced stocks with
good potential for long-term growth.
% of
Top 10 Holdings Portfolio
Wolters Kluwer NV 1.9%
Elsevier NV 1.7%
Royal Dutch Petroleum 1.6%
National Westminster 1.2%
SmithKline Beecham 1.2%
Reed International 1.1%
Eaux (cie generale) 1.0%
Astra AB 1.0%
Kyocera Corp. 1.0%
Roche Holdings AG 0.9%
These holdings represent 13% of the Fund's total investment portfolio.
The LB World Growth Fund was introduced on September 5, 1995. Given its
limited performance history, the growth of a $10,000 investment in the
LB World Growth Fund is not illustrated in this report.
LB Fund
[PHOTO OF JAMES M. WALLINE OMITTED]
James M. Walline is a Chartered Financial Analyst and portfolio manager
for the LB Fund. He is a vice president of Lutheran Brotherhood and has
been with Lutheran Brotherhood Research Corp. since its inception in
1970.
Investment Objective: To seek growth of capital and income by investing
in the stocks of leading companies.
In the last six months investors moved from one stock group to another
in search of issues that would perform well under different economic
climates. When the economy was weak at the end of 1995, investors
abandoned technology stocks for defensive issues such as health care
stocks and interest-sensitive issues such as financial stocks. As
prospects for the economy improved, investors headed for cyclical issues
that could benefit more directly from stronger economic growth. By
anticipating some of these changes, and maintaining core positions that
could do well wherever the economy headed, we helped the LB Fund deliver
solid returns for the six months ended April 30, 1996.
Over this period, The Fund had a total return (based on NAV) of 11.40%.
This compares with returns of 13.75% for the average growth and income
fund tracked by Lipper Analytical Services and 13.73% for the S&P 500
Index.
[FIGURES BELOW USED TO CREATE OMITTED WORM CHART]
Growth of $10,000 April 30, 1986 - April 30, 1996
- ------------------------------------------------------
LB Fund
Annualized Total Returns* Period Ending 4/30/96
Based on 10 Years 5 Years 1 Year
- ------------------------------------------------------
Net Asset Value 11.03% 12.67% 27.60%
Public Offering Price 10.46% 11.51% 21.22%
Lipper Average
LBF S & P 500 Growth & Income
Month End Total Total TOTAL
Date Value Value VALUE
- -------------------------------------------------------------
04/30/86 $10,000 $10,000 $10,000
05/31/86 9,755 10,533 10,388
06/30/86 9,777 10,711 10,537
07/31/86 9,508 10,113 10,027
08/31/86 10,126 10,864 10,598
09/30/86 9,654 9,964 9,944
10/31/86 9,978 10,543 10,366
11/30/86 10,211 10,796 10,520
12/31/86 9,935 10,521 10,329
01/31/87 10,767 11,939 11,391
02/28/87 11,197 12,407 11,883
03/31/87 11,322 12,766 12,050
04/30/87 11,156 12,653 11,884
05/31/87 11,203 12,760 11,942
06/30/87 11,657 13,406 12,402
07/31/87 12,116 14,088 12,871
08/31/87 12,445 14,613 13,247
09/30/87 12,139 14,293 13,019
10/31/87 9,566 11,214 10,518
11/30/87 8,990 10,286 9,923
12/31/87 9,612 11,070 10,559
01/31/88 9,830 11,550 10,988
02/29/88 10,149 12,067 11,495
03/31/88 9,821 11,700 11,320
04/30/88 9,855 11,846 11,414
05/31/88 9,869 11,923 11,427
06/30/88 10,260 12,479 11,957
07/31/88 10,143 12,447 11,877
08/31/88 9,859 12,007 11,589
09/30/88 10,241 12,522 11,991
10/31/88 10,471 12,885 12,195
11/30/88 10,311 12,680 12,021
12/31/88 10,500 12,904 12,226
01/31/89 11,232 13,862 12,929
02/28/89 10,978 13,495 12,750
03/31/89 11,271 13,816 13,011
04/30/89 11,808 14,552 13,543
05/31/89 12,218 15,111 14,000
06/30/89 12,111 15,037 13,928
07/31/89 13,241 16,409 14,871
08/31/89 13,689 16,713 15,185
09/30/89 13,647 16,647 15,115
10/31/89 12,833 16,274 14,681
11/30/89 13,262 16,589 14,902
12/31/89 13,294 16,988 15,107
01/31/90 12,329 15,864 14,246
02/28/90 12,438 16,039 14,430
03/31/90 12,790 16,475 14,737
04/30/90 12,570 16,080 14,378
05/31/90 13,922 17,615 15,493
06/30/90 14,007 17,510 15,475
07/31/90 13,935 17,466 15,354
08/31/90 12,797 15,871 14,137
09/30/90 12,121 15,102 13,447
10/31/90 12,113 15,054 13,240
11/30/90 12,749 16,008 14,015
12/31/90 13,035 16,455 14,422
01/31/91 13,675 17,189 15,121
02/28/91 14,555 18,387 16,109
03/31/91 14,820 18,840 16,482
04/30/91 14,900 18,902 16,496
05/31/91 15,583 19,689 17,157
06/30/91 14,716 18,797 16,431
07/31/91 15,474 19,696 17,120
08/31/91 15,941 20,139 17,512
09/30/91 15,675 19,804 17,354
10/31/91 16,007 20,096 17,620
11/30/91 15,424 19,261 16,926
12/31/91 17,307 21,465 18,600
01/31/92 17,049 21,089 18,596
02/28/92 17,227 21,335 18,910
03/31/92 16,790 20,921 18,583
04/30/92 16,910 21,561 18,875
05/31/92 17,066 21,635 18,992
06/30/92 16,658 21,318 18,610
07/31/92 17,166 22,217 19,232
08/31/92 16,852 21,738 18,868
09/30/92 17,088 21,992 19,093
10/31/92 17,422 22,094 19,213
11/30/92 18,164 22,814 19,922
12/31/92 18,311 23,100 20,223
01/31/93 18,663 23,314 20,451
02/28/93 18,723 23,606 20,603
03/31/93 19,265 24,105 21,134
04/30/93 18,939 23,550 20,747
05/31/93 19,412 24,141 21,233
06/30/93 19,476 24,221 21,299
07/31/93 19,307 24,149 21,279
08/31/93 19,876 25,041 22,058
09/30/93 19,844 24,848 22,045
10/31/93 20,046 25,388 22,358
11/30/93 19,525 25,119 22,054
12/31/93 19,901 25,433 22,535
01/31/94 20,610 26,315 23,238
02/28/94 20,048 25,576 22,785
03/31/94 19,073 24,466 21,830
04/30/94 19,118 24,801 22,035
05/31/94 19,333 25,166 22,247
06/30/94 18,802 24,549 21,740
07/31/94 19,367 25,381 22,337
08/31/94 20,068 26,404 23,191
09/30/94 19,729 25,755 22,676
10/31/94 20,024 26,355 22,921
11/30/94 19,208 25,377 22,077
12/31/94 19,222 25,750 22,311
01/31/95 19,688 26,438 22,630
02/28/95 20,245 27,447 23,479
03/31/95 20,608 28,268 24,082
04/30/95 21,213 29,113 24,672
05/31/95 21,908 30,234 25,469
06/30/95 22,627 30,939 26,004
07/31/95 23,634 31,987 26,857
08/31/95 23,371 32,051 27,010
09/30/95 24,252 33,401 27,845
10/31/95 24,298 33,304 27,536
11/30/95 25,422 34,739 28,747
12/31/95 25,381 35,410 29,250
01/31/96 26,095 36,639 30,046
02/29/96 26,415 36,954 30,446
03/31/96 26,549 37,316 30,835
04/30/96 27,067 37,883 31,286
[END OF WORM CHART
A Note About Performance
As you compare performance, please note that the LB Fund's performance
reflects the maximum 5% sales charge. The performance of the index does
not reflect any such charges. If you were to purchase any of the
individual stocks represented in this index, any sales charges you would
pay would reduce your total return as well.
*See accompanying notes to Portfolio Management Reviews.
Responding to Sector Rotation
Late in 1995, when it looked like the advance in technology stocks was
nearing its peak, we reduced the portion of that sector in the Fund from
20% to a near market weighting of 15%. We have since returned the
technology weightings to 20%, adding new names such as Hewlett Packard,
StrataCom and Parametric Technology.
Once health care issues had advanced strongly (during the last couple
months of the period), we adjusted our exposure to the group by selling
three health care stocks. At the same time, we increased investments to
consumer and industrial cyclical stocks that could benefit from a
strengthening economy. On the consumer side, we concentrated on retail
stocks whose prices had become quite attractive -- adding Sears and
OfficeMax to the portfolio and increasing holdings in Gap and Federated
Department Stores. On the industrial side, we added shares of Champion
Paper and Nucor Corp., a steel producer.
[FIGURES BELOW USED TO CREATE OMITTED PIE CHART]
Portfolio Composition
U.S. Government 0.3%
Short-term
Securities 2.9%
Common Stocks 96.8%
[END PIE CHART]
We continued to maintain a strong position in financial stocks, while
underweighting the portfolio in utility shares. Both strategies
benefited the Fund's performance during the period.
Continued Focus on Technology
If the economy continues to thrive, as we expect, interest in technology
stocks is likely to grow. Technology companies should play a major role
in the growth of a service-based economy, and their stocks remain
attractively priced relative to their potential for long-term growth. As
a result, we expect to maintain a significant position in that sector.
Since continued nervousness about inflation and interest rates could
cause stock prices to correct later this year, we believe there may be
many attractive opportunities to make new investments. Because prices
for cyclical issues have now advanced strongly, new opportunities may
fall in more defensive sectors, whose prices have already become more
appealing. For this reason we may look for chances to add to consumer
staples stocks, which tend to be dependable performers over time.
% of
Top 10 Holdings Portfolio
Becton Dickinson & Co. 2.1%
Boeing Co. 2.1%
Gillette Co. 2.1%
AT&T Corp. 2.1%
MicroSoft, Corp. 2.1%
United Healthcare Corp. 2.1%
American International
Group, Inc. 2.1%
Procter & Gamble Co. 2.1%
Disney (Walt) Co. 2.1%
Sara Lee Corp. 2.1%
These holdings represent 21% of the Fund's total investment portfolio.
LB High Yield Fund
[PHOTO OF THOMAS N. HAAG OMITTED]
Thomas N. Haag, an assistant vice president of Lutheran Brotherhood, is
a Chartered Financial Analyst and portfolio manager for the LB High
Yield Fund. He has managed the Fund since January 1992.
Investment Objective: To seek high current income and growth of capital
by investing primarily in high-yielding ("junk") corporate bonds.
When interest rates rise and bond prices fall, prices for high-yield
issues tend to perform better than the market as a whole. This is
largely because the strong income from these bonds helps to offset the
declines in prices. Within the high-yield sector, higher-coupon bonds
with a "B" rating performed especially well during the recent interest
rate reversal. With significant holdings in such securities, the LB High
Yield Fund earned a strong return for the six months ended April 30,
1996.
During the period, the Fund had a total return (based on NAV) of 7.36%.
This exceeded returns for both the Lehman Brothers High Yield Index and
the average high-yield bond fund tracked by Lipper Analytical Services,
which were 4.51% and 5.87%, respectively.
Deregulation a Plus
When the period began, interest rates were falling and bond prices were
rising. The price gains were particularly strong for zero-coupon bonds
and other deferred-interest securities, especially in the media and
telecommunications sectors. Significant holdings in zero-coupon
securities issued by media and telecommunications firms helped to boost
the Fund's return.
[FIGURES BELOW USED TO CREATE OMITTED WORM CHART]
Growth of $10,000 April 30, 1987 - April 30, 1996
- ------------------------------------------------------
LB High Yield Fund
Annualized Total Returns* Period Ending 4/30/96
- ------------------------------------------------------
Since Fund
Inception
Based on 4/3/87 5 Years 1 Year
- ------------------------------------------------------
Net Asset Value 9.85% 14.77% 15.68%
Public Offering Price 9.23% 13.61% 9.91%
Lehman High Lipper Average
LBHYLD Yield Index High Current
Month End Total Total TOTAL
Date Value Value VALUE
- ------------------------------------------------------------
04/30/87 $10,000 $10,000 $10,000
05/31/87 9,462 10,072 9,942
06/30/87 9,690 10,201 10,072
07/31/87 9,729 10,228 10,100
08/31/87 9,769 10,292 10,165
09/30/87 9,468 9,968 9,920
10/31/87 9,166 9,642 9,499
11/30/87 9,453 9,919 9,721
12/31/87 9,624 10,158 9,804
01/31/88 9,979 10,498 10,107
02/28/88 10,300 10,838 10,385
03/31/88 10,181 10,725 10,344
04/30/88 10,195 10,807 10,407
05/31/88 10,167 10,823 10,434
06/30/88 10,404 10,981 10,646
07/31/88 10,468 11,053 10,752
08/31/88 10,436 11,037 10,764
09/30/88 10,545 11,176 10,861
10/31/88 10,655 11,311 10,993
11/30/88 10,655 11,378 11,008
12/31/88 10,811 11,431 11,065
01/31/89 11,029 11,633 11,256
02/28/89 11,088 11,658 11,304
03/31/89 10,998 11,567 11,265
04/30/89 10,924 11,616 11,258
05/31/89 11,168 11,841 11,421
06/30/89 11,449 11,988 11,611
07/31/89 11,409 11,972 11,627
08/31/89 11,478 12,013 11,634
09/30/89 11,241 11,811 11,452
10/31/89 10,777 11,531 11,113
11/30/89 10,712 11,508 11,058
12/31/89 10,522 11,527 10,979
01/31/90 10,200 11,279 10,697
02/28/90 9,953 11,046 10,436
03/31/90 9,995 11,336 10,558
04/30/90 9,998 11,317 10,551
05/31/90 10,326 11,535 10,782
06/30/90 10,454 11,814 11,000
07/31/90 10,639 12,132 11,228
08/31/90 10,232 11,442 10,770
09/30/90 9,778 10,606 10,227
10/31/90 9,433 10,050 9,787
11/30/90 9,584 10,363 9,826
12/31/90 9,738 10,421 9,857
01/31/91 9,794 10,708 9,995
02/28/91 10,510 11,879 10,713
03/31/91 11,010 12,579 11,246
04/30/91 11,411 13,095 11,678
05/31/91 11,514 13,118 11,750
06/30/91 11,840 13,506 11,998
07/31/91 12,171 13,939 12,356
08/31/91 12,350 14,259 12,588
09/30/91 12,546 14,457 12,800
10/31/91 12,997 14,940 13,208
11/30/91 13,196 15,018 13,331
12/31/91 13,253 15,234 13,447
01/31/92 13,867 15,771 13,980
02/28/92 14,255 16,160 14,315
03/31/92 14,513 16,360 14,536
04/30/92 14,639 16,423 14,641
05/31/92 14,868 16,654 14,855
06/30/92 14,953 16,811 15,005
07/31/92 15,212 17,065 15,274
08/31/92 15,420 17,288 15,467
09/30/92 15,578 17,464 15,627
10/31/92 15,296 17,218 15,366
11/30/92 15,562 17,435 15,593
12/31/92 15,920 17,634 15,801
01/31/93 16,573 18,147 16,230
02/28/93 16,774 18,466 16,544
03/31/93 17,097 18,705 16,871
04/30/93 17,165 18,867 17,005
05/31/93 17,456 19,092 17,273
06/30/93 17,994 19,493 17,674
07/31/93 18,138 19,682 17,849
08/31/93 18,282 19,847 17,981
09/30/93 18,275 19,899 18,037
10/31/93 18,848 20,301 18,441
11/30/93 18,918 20,398 18,559
12/31/93 19,241 20,651 18,833
01/31/94 19,808 21,099 19,282
02/28/94 19,740 21,045 19,245
03/31/94 19,008 20,249 18,625
04/30/94 18,717 20,111 18,355
05/31/94 18,790 20,121 18,397
06/30/94 18,802 20,184 18,372
07/31/94 18,650 20,355 18,339
08/31/94 18,787 20,500 18,350
09/30/94 18,699 20,502 18,350
10/31/94 18,759 20,551 18,331
11/30/94 18,308 20,292 18,086
12/31/94 18,224 20,442 18,107
01/31/95 18,306 20,720 18,254
02/28/95 19,004 21,431 18,751
03/31/95 19,199 21,663 18,921
04/30/95 19,662 22,213 19,383
05/31/95 20,061 22,835 19,813
06/30/95 20,170 22,988 19,875
07/31/95 20,805 23,277 20,224
08/31/95 20,892 23,349 20,279
09/30/95 21,073 23,637 20,520
10/31/95 21,184 23,783 20,684
11/30/95 21,438 23,993 20,823
12/31/95 21,756 24,369 21,140
01/31/96 22,278 24,798 21,579
02/29/96 22,849 24,818 21,763
03/31/96 22,627 24,801 21,682
04/30/96 22,744 24,855 21,853
[END WORM CHART]
A Note About Performance
As you compare performance, please note that the LB High Yield Fund's
performance reflects the maximum 5% sales charge. The performance of the
index does not reflect any such charges. If you were to purchase any of
the individual bonds represented in this index, any sales charges you
would pay would reduce your total return as well.
*See accompanying notes to Portfolio Management Reviews.
In the first part of 1996, when interest rates reversed and bond prices
fell, these issues benefited from deregulation of the telecommunications
industry. The positive influence of the deregulation helped to offset
the negative impact of rising interest rates on prices of zero-coupon
bonds.
During the period we continued to emphasize bonds from industries that
are less sensitive to the economy, such as supermarket chains and health
care firms. This, plus the addition of bonds with somewhat higher credit
quality, enhanced
[FIGURES BELOW USED TO CREATE OMITTED PIE CHART]
Portfolio Composition
Common Stocks &
Stock Warrants 5.1%
Preferred Stocks 11.7%
Foreign Government
Bonds 0.5%
Corporate Bonds 77.1%
Short-term
Securities 5.6%
[END OF PIE CHART]
Future Strategies
If interest rates stabilize, as we expect, high-yield issues should
continue to do well. Although supplies of new issues have started to
rise, adding downward pressure on prices, stronger economic growth is
protecting the credit quality of bond issuers, which should help prices.
Believing that telecommunications and media issues will continue to
experience the additional benefits of deregulation, we expect to
maintain sizable weightings in those sectors. As in previous months,
however, we may swap some of the Fund's investments for other issues in
those groups that seem to have greater potential.
We will continue, of course, to maintain a well-diversified portfolio
that represents a broad range of industries. If the economy continues to
strengthen, we may increase that diversification with bonds from
cyclical sectors. This strategy would allow us to continue providing
shareholders with a competitive overall total return.
[FIGURES BELOW USED TO CREATE HORIZONTAL BAR CHART]
Moody's Bond Quality
Rating Distribution
Baa 0.4%
Ba 10.7%
B 53.9%
Caa 17.0%
Ca 0.6%
D 0.1%
Not Rated 17.3%
[END OF HORIZONTAL BAR CHART]
LB Income Fund
[PHOTO OF CHARLES E. HEEREN]
Charles E. Heeren, a vice president of Lutheran Brotherhood, is a
Chartered Financial Analyst and portfolio manager for
the LB Income Fund. He has managed the Fund since January 1986.
Investment Objective: To seek high current income while preserving
principal by investing in investment-grade bonds and other income-
producing securities.
For the six months ended April 30, 1996, the LB Income Fund earned a
total return (based on NAV) of -0.51%. That compares with a return of -
0.30% for the average high-quality corporate bond fund tracked by Lipper
Analytical Services and a return of 0.53% for the Lehman Aggregate Bond
Index.
Adjusting Bond Maturities
After several strong months late in 1995 and early in 1996, the bond
market reversed course as interest rates quickly moved higher. As yields
on Treasury bonds rose to near 7% from a low of less than 6%, prices for
bonds in the LB Income Fund declined.
In reaction to this reversal in prices, we shortened maturities of the
Fund's bond investments in March of 1996 to minimize further price
declines. We had previously emphasized bonds with longer maturities
because they produced competitive returns while interest rates were
falling. Later in the period, we added longer-maturity investments once
again, expecting the market to rally by the end of June.
[FIGURES BELOW USED TO CREATE OMITTED WORM CHART]
Growth of $10,000 April 30, 1986 - April 30, 1996
- ------------------------------------------------------
LB Income Fund
Annualized Total Returns* Period Ending 4/30/96
- ------------------------------------------------------
Based on 10 Years 5 Years 1 Year
- ------------------------------------------------------
Net Asset Value 8.16% 7.68% 7.67%
Public Offering
Price 7.61% 6.57% 2.26%
Lehman Agg. Lipper Average
LBINC Bond Index Corp. Debt A
Month End Total Total TOTAL
Date Value Value VALUE
- ---------------------------------------------------------
04/30/86 $10,000 $10,000 $10,000
05/31/86 9,513 9,809 9,874
06/30/86 9,562 10,066 10,065
07/31/86 9,633 10,156 10,075
08/31/86 9,775 10,407 10,329
09/30/86 9,797 10,304 10,226
10/31/86 9,941 10,453 10,382
11/30/86 10,053 10,599 10,547
12/31/86 10,120 10,638 10,631
01/31/87 10,313 10,788 10,826
02/28/87 10,428 10,863 10,909
03/31/87 10,382 10,814 10,863
04/30/87 10,126 10,518 10,496
05/31/87 10,087 10,477 10,430
06/30/87 10,190 10,621 10,558
07/31/87 10,139 10,613 10,504
08/31/87 10,123 10,556 10,423
09/30/87 9,841 10,332 10,160
10/31/87 10,033 10,699 10,462
11/30/87 10,189 10,785 10,586
12/31/87 10,397 10,932 10,722
01/31/88 10,780 11,316 11,092
02/29/88 10,915 11,451 11,238
03/31/88 10,810 11,343 11,114
04/30/88 10,768 11,282 11,054
05/31/88 10,700 11,207 10,987
06/30/88 11,020 11,477 11,230
07/31/88 10,977 11,416 11,192
08/31/88 11,051 11,446 11,214
09/30/88 11,313 11,705 11,449
10/31/88 11,523 11,925 11,634
11/30/88 11,438 11,780 11,522
12/31/88 11,529 11,793 11,589
01/31/89 11,718 11,963 11,738
02/28/89 11,602 11,877 11,668
03/31/89 11,640 11,928 11,712
04/30/89 11,874 12,177 11,914
05/31/89 12,168 12,497 12,194
06/30/89 12,605 12,877 12,551
07/31/89 12,802 13,151 12,763
08/31/89 12,639 12,957 12,596
09/30/89 12,692 13,023 12,640
10/31/89 12,908 13,343 12,903
11/30/89 12,993 13,470 12,993
12/31/89 12,963 13,506 13,013
01/31/90 12,794 13,346 12,830
02/28/90 12,836 13,388 12,842
03/31/90 12,834 13,398 12,850
04/30/90 12,675 13,274 12,702
05/31/90 12,999 13,667 13,060
06/30/90 13,168 13,887 13,266
07/31/90 13,308 14,079 13,428
08/31/90 13,066 13,890 13,197
09/30/90 13,102 14,006 13,245
10/31/90 13,219 14,184 13,388
11/30/90 13,501 14,488 13,686
12/31/90 13,700 14,714 13,900
01/31/91 13,867 14,897 14,043
02/28/91 14,068 15,024 14,195
03/31/91 14,186 15,127 14,291
04/30/91 14,389 15,291 14,467
05/31/91 14,508 15,379 14,538
06/30/91 14,492 15,372 14,512
07/31/91 14,665 15,585 14,695
08/31/91 14,978 15,922 15,046
09/30/91 15,312 16,245 15,374
10/31/91 15,418 16,425 15,511
11/30/91 15,542 16,577 15,647
12/31/91 16,062 17,069 16,207
01/31/92 15,875 16,837 15,954
02/28/92 15,942 16,946 16,034
03/31/92 15,934 16,851 15,954
04/30/92 15,998 16,973 16,037
05/31/92 16,302 17,293 16,361
06/30/92 16,567 17,532 16,600
07/31/92 16,963 17,890 17,036
08/31/92 17,117 18,070 17,173
09/30/92 17,347 18,285 17,386
10/31/92 17,065 18,042 17,090
11/30/92 17,069 18,046 17,087
12/31/92 17,347 18,333 17,372
01/31/93 17,701 18,685 17,745
02/28/93 18,076 19,012 18,147
03/31/93 18,138 19,092 18,212
04/30/93 18,261 19,225 18,332
05/31/93 18,264 19,250 18,338
06/30/93 18,608 19,599 18,745
07/31/93 18,773 19,710 18,885
08/31/93 19,141 20,055 19,320
09/30/93 19,205 20,109 19,378
10/31/93 19,290 20,184 19,467
11/30/93 19,028 20,012 19,219
12/31/93 19,104 20,120 19,302
01/31/94 19,350 20,392 19,594
02/28/94 18,914 20,037 19,162
03/31/94 18,346 19,542 18,660
04/30/94 18,186 19,386 18,451
05/31/94 18,134 19,384 18,394
06/30/94 18,014 19,341 18,332
07/31/94 18,402 19,726 18,658
08/31/94 18,393 19,750 18,662
09/30/94 18,051 19,460 18,371
10/31/94 17,976 19,442 18,319
11/30/94 17,990 19,399 18,283
12/31/94 18,175 19,533 18,412
01/31/95 18,532 19,920 18,727
02/28/95 18,936 20,394 19,152
03/31/95 19,064 20,518 19,283
04/30/95 19,355 20,806 19,545
05/31/95 20,185 21,611 20,364
06/30/95 20,339 21,769 20,502
07/31/95 20,189 21,721 20,410
08/31/95 20,464 21,984 20,667
09/30/95 20,645 22,197 20,876
10/31/95 20,947 22,485 21,170
11/30/95 21,275 22,823 21,498
12/31/95 21,596 23,142 21,819
01/31/96 21,708 23,295 21,921
02/29/96 21,207 22,890 21,467
03/31/96 20,975 22,729 21,291
04/30/96 20,840 22,602 21,132
[END OF WORM CHART]
A Note About Performance
As you compare performance, please note that the LB Income Fund's
performance reflects the maximum 5% sales charge. The performance of the
index does not reflect any such charges. If you were to purchase any of
the individual bonds represented in this index, any sales charges you
would pay would reduce your total return as well.
*See accompanying notes to Portfolio Management Reviews.
[FIGURES BELOW USED TO CREATE OMITTED PIE CHART]
Portfolio Composition
Short-term Securities 9.6%
U.S. Government 18.3%
Morgage-backed
Securities 16.3%
Asset-backed
Securities 11.9%
Foreign Gov't
Bonds 11.2%
Corporate Bonds 32.7%
[END OF PIE CHART]
Throughout this time, we continued to add corporate bonds from retail
firms and other cyclical industries that could benefit from an improving
economy. We also made significant investments in bonds issued by
insurance companies, as well as the dollar-denominated "Yankee" bonds of
foreign issuers. We believed the yields for both Yankee bonds and
corporate bonds had become quite attractive when compared with yields
for U.S. Government bonds. As always, we maintained a well-diversified
mix of government and corporate securities.
Preparing for an Increase in Rates
The outlook for bonds in the second half of 1996 will depend on the
growth rate of the economy. If the economy continues to improve at the
current pace and the risk of increasing inflation becomes evident,
further increases in interest rates are possible.
If this scenario begins to unfold, we would again use defensive
strategies to reduce the Fund's vulnerability to declines in bond
prices. Besides increasing the Fund's cash reserves and shortening the
maturities of its investments, these strategies would probably include
adding callable corporate bonds and mortgage-backed securities. Such
issues typically hold up well when interest rates rise.
[FIGURES BELOW USED TO CREATE HORIZONTAL BAR CHART]
Moody's Bond Quality
Rating Distribution
U.S. Government
(Aaa Equiv.) 38.3%
Aaa 17.9%
Aa 17.9%
A 18.1%
Baa 7.1%
B 0.7%
[END OF HORIZONTAL BAR CHART]
LB Municipal Bond Fund
[PHOTO OF JANET I. GRANGAARD OMITTED]
Janet I. Grangaard is a Chartered Financial Analyst and portfolio
manager for the LB Municipal Bond Fund. She has managed the Fund since
January 1994 and has been with Lutheran Brotherhood since 1988.
Investment Objective: To seek high current income that is exempt from
federal income tax by investing in municipal bonds.
The LB Municipal Bond Fund performed relatively well in the changing
interest rate environment of the last six months. During that time,
municipal bonds outpaced taxable issues as fears of tax reform began to
ebb. The Fund also benefited by emphasizing longer-term issues when
rates were falling and shorter-term issues when rates were rising.
For the six months ended April 30, 1996, the Fund earned a total return
(based on NAV) of 0.78%. That compares to a return of 1.11%. for the
Lehman Municipal Bond Index and a return of 0.66% for the average of
general municipal bond funds tracked by Lipper Analytical Services.
Responding to Changes in Interest Rates
While interest rates were still falling at the end of 1995, we continued
to hold many issues with longer maturities. When rates fall, prices of
longer-term issues tend to benefit more than prices of shorter-term
issues. We further enhanced the Fund's performance by owning municipal
bonds that could not be called by their issuers.
By the start of 1996, we had begun to swap 30-year maturity municipal
bonds into 20-year issues. We did this with the
expectation that the prices for shorter-maturity issues would fare
better when interest rates began to rise. At the same time, we invested
more heavily in higher-coupon municipal bonds. These issues also tend to
outperform in weaker markets.
[FIGURES BELOW USED TO CREATE OMITTED WORM CHART]
Growth of $10,000 April 30, 1986 - April 30, 1996
- ------------------------------------------------------
LB Municipal Bond Fund
Annualized Total Returns* Period Ending 4/30/96
- ------------------------------------------------------
Based on 10 Years 5 Years 1 Year
- ------------------------------------------------------
Net Asset Value 7.74% 7.53% 7.31%
Public Offering
Price 7.19% 6.43% 1.89%
Lipper Average
Lehman Muni. Gen. Municipal
LBMBF Bond Index Debt Funds
Month End Total Total TOTAL
Date Value Value VALUE
- ------------------------------------------------------------
04/30/86 $10,000 $10,000 $10,000
05/31/86 9,324 9,837 9,849
06/30/86 9,371 9,930 9,961
07/31/86 9,501 9,991 10,008
08/31/86 9,870 10,439 10,488
09/30/86 9,835 10,465 10,434
10/31/86 10,015 10,646 10,672
11/30/86 10,197 10,857 10,867
12/31/86 10,210 10,826 10,868
01/31/87 10,403 11,152 11,126
02/28/87 10,500 11,207 11,214
03/31/87 10,435 11,088 11,146
04/30/87 9,909 10,531 10,458
05/31/87 9,858 10,479 10,358
06/30/87 10,057 10,787 10,587
07/31/87 10,156 10,897 10,691
08/31/87 10,166 10,922 10,724
09/30/87 9,803 10,519 10,263
10/31/87 9,879 10,556 10,295
11/30/87 10,136 10,831 10,562
12/31/87 10,356 10,988 10,756
01/31/88 10,710 11,379 11,183
02/29/88 10,827 11,500 11,299
03/31/88 10,611 11,367 11,079
04/30/88 10,702 11,453 11,137
05/31/88 10,673 11,420 11,156
06/30/88 10,901 11,586 11,347
07/31/88 10,939 11,662 11,416
08/31/88 10,978 11,672 11,457
09/30/88 11,198 11,883 11,674
10/31/88 11,405 12,093 11,917
11/30/88 11,306 11,981 11,807
12/31/88 11,473 12,104 11,985
01/31/89 11,642 12,354 12,168
02/28/89 11,569 12,213 12,067
03/31/89 11,568 12,184 12,059
04/30/89 11,855 12,473 12,351
05/31/89 12,071 12,732 12,581
06/30/89 12,186 12,905 12,744
07/31/89 12,332 13,081 12,876
08/31/89 12,212 12,953 12,738
09/30/89 12,152 12,914 12,696
10/31/89 12,314 13,071 12,850
11/30/89 12,523 13,300 13,051
12/31/89 12,628 13,409 13,140
01/31/90 12,459 13,346 12,999
02/28/90 12,549 13,465 13,128
03/31/90 12,563 13,469 13,123
04/30/90 12,421 13,372 12,955
05/31/90 12,716 13,663 13,292
06/30/90 12,871 13,784 13,418
07/31/90 13,072 13,986 13,639
08/31/90 12,798 13,784 13,343
09/30/90 12,841 13,792 13,362
10/31/90 13,045 14,041 13,556
11/30/90 13,347 14,324 13,872
12/31/90 13,455 14,381 13,931
01/31/91 13,646 14,574 14,103
02/28/91 13,723 14,700 14,184
03/31/91 13,739 14,706 14,213
04/30/91 13,934 14,902 14,420
05/31/91 14,029 15,035 14,550
06/30/91 13,974 15,020 14,505
07/31/91 14,189 15,203 14,714
08/31/91 14,355 15,403 14,902
09/30/91 14,607 15,604 15,094
10/31/91 14,720 15,744 15,229
11/30/91 14,731 15,788 15,250
12/31/91 15,092 16,128 15,610
01/31/92 15,099 16,165 15,599
02/28/92 15,071 16,170 15,621
03/31/92 15,070 16,176 15,627
04/30/92 15,241 16,320 15,771
05/31/92 15,450 16,513 15,992
06/30/92 15,716 16,790 16,283
07/31/92 16,260 17,294 16,859
08/31/92 15,970 17,124 16,590
09/30/92 16,015 17,236 16,656
10/31/92 15,835 17,067 16,356
11/30/92 16,201 17,372 16,773
12/31/92 16,443 17,549 16,979
01/31/93 16,603 17,753 17,171
02/28/93 17,212 18,396 17,844
03/31/93 17,098 18,201 17,636
04/30/93 17,260 18,384 17,826
05/31/93 17,344 18,487 17,928
06/30/93 17,668 18,796 18,236
07/31/93 17,672 18,821 18,236
08/31/93 18,059 19,212 18,641
09/30/93 18,266 19,431 18,861
10/31/93 18,384 19,468 18,899
11/30/93 18,176 19,297 18,700
12/31/93 18,576 19,704 19,072
01/31/94 18,782 19,928 19,292
02/28/94 18,251 19,412 18,778
03/31/94 17,398 18,622 17,958
04/30/94 17,479 18,780 18,023
05/31/94 17,646 18,944 18,185
06/30/94 17,512 18,828 18,067
07/31/94 17,831 19,173 18,386
08/31/94 17,892 19,240 18,432
09/30/94 17,649 18,957 18,134
10/31/94 17,294 18,620 17,789
11/30/94 16,962 18,283 17,421
12/31/94 17,355 18,685 17,846
01/31/95 17,884 19,219 18,376
02/28/95 18,459 19,779 18,922
03/31/95 18,656 20,006 19,092
04/30/95 18,673 20,030 19,090
05/31/95 19,302 20,669 19,686
06/30/95 19,046 20,489 19,471
07/31/95 19,179 20,684 19,596
08/31/95 19,420 20,946 19,811
09/30/95 19,570 21,078 19,932
10/31/95 19,882 21,384 20,237
11/30/95 20,288 21,739 20,626
12/31/95 20,510 21,948 20,855
01/31/96 20,662 22,115 20,953
02/29/96 20,486 21,964 20,787
03/31/96 20,144 21,683 20,457
04/30/96 20,038 21,622 20,365
[END OF WORM CHART]
A Note About Performance
As you compare performance, please note that the LB Municipal Bond
Fund's performance reflects the maximum 5% sales charge. The performance
of the index does not reflect any such charges. If you were to purchase
any of the individual bonds represented in this index, any sales charges
you would pay would reduce your total return as well.
*See accompanying notes to Portfolio Management Reviews.
[FIGURES BELOW USED TO CREATE OMITTED PIE CHART]
Portfolio Composition
Housing 2.2%
Pollution
Control 2.9%
Education 3.4%
Electric
Revenue 10.8%
Water &
Sewer 10.8%
Transportation 10.9%
Health Care 11.9%
General
Obligation 15.0%
Escrowed/
Pre-refunded 19.0%
Other 13.1%
[END OF PIE CHART]
Overall, municipal bond prices were hurt less by the reversal of
interest rates than the prices of taxable bonds. Having underperformed
taxable bonds in the second quarter of 1995, when investors worried that
Congress would remove the tax advantages of municipal bonds, the
market rebounded in the first quarter of 1996 as public interest in tax
reform began to fade. Because rising interest rates caused many state
and local governments to cancel plans for refinancing debt, the supply
of municipal bonds has been manageable. The total volume of outstanding
municipal bonds is shrinking over time as more bonds mature and are
called than are newly issued. This shrinking supply of municipal bonds
also helps to support their prices.
Going Forward
We expect to maintain the Fund's focus on less volatile issues for now.
Although bond prices have already reacted to a faster pace of economic
growth, uncertainty about future economic growth and inflation could
cause some additional weakening in months to come. In any event, we
remain committed to providing investors with the highest possible
current income exempt from federal taxes and expect the LB Municipal
Bond Fund's taxable equivalent yield to be competitive.
[FIGURES BELOW USED TO CREATE HORIZONTAL BAR CHART]
Moody's Bond Quality
Rating Distribution
Aaa 66.2%
Aa 14.5%
A 10.5%
Baa 8.6%
B 0.2%
[END OF HORIZONTAL BAR CHART]
LB Money Market Fund
[PHOTO OF GAIL R. ONAN OMITTED]
Gail R. Onan, assistant vice president of Lutheran Brotherhood Research
Corp., is portfolio manager for the LB Money Market Fund. She has
managed the Fund since January 1994.
Investment Objective: To seek current income with stability of principal
by investing in high-quality, short-term debt securities.**
Short-term yields grew more volatile in the six months ended April 30,
1996, as it became less clear where the economy was headed. After
starting the period near 5.5%, the yield for three-month Treasury bills
fell to a low of 4.76% late in February of 1996, then rose to 5.05% by
early April. By adjusting the maturities of its investments to make the
most of these changes, the LB Money Market Fund earned a total return of
2.28%.
Restructuring Maturities
When the period began, the Fund's investments had an average maturity of
42 days. As yields rose, we extended the average maturity to 48 days to
enhance income for shareholders. In doing this, we used a modified
"barbell" maturity structure for the Fund's investments, balancing
issues with maturities as long as six months with issues that matured
overnight. This allowed us to lock in higher yields and still have the
liquidity to move quickly if yields rose further.
During this time we continued to hold our historical investment mix --
we invested primarily in commercial paper and looked for opportunities
to invest in other short-term corporate issues and letters of credit
with attractive yields.
Going Forward
We expect to maintain the Fund's maturity structure in the months to
come. Many of the longer-term issues in the Fund will mature at the end
of 1996, when year-end market action often helps to boost yields. If the
short-term market reflects increased concern about inflation and money
market yields rise further, the Fund should be able to make the most of
this opportunity.
As always, we will maintain a diversified mix of securities with a focus
on strong liquidity and high credit quality.
[FIGURES BELOW USED TO CREATE OMITTED PIE CHART]
Portfolio Composition
Banker's Acceptances 2.6%
Variable Rate Notes 11.1%
Cerfificates of
Deposit 2.6%
Commercial Paper 80.1%
Bank Notes 3.6%
[END OF PIE CHART]
Annualized Total Returns*
Period Ending 4/30/96
10 Years 5 Years 1 Year
5.24% 3.63% 4.83%
Footnotes
*The annualized total return reflects the change in share price, the
reinvestment of all dividends and capital gains, and the effect of
compounding. Since performance varies, the annualized total return,
which assumes a steady rate of growth, differs from the Fund's actual
total return for the years indicated. POP returns have been adjusted for
the maximum 5% sales charge. NAV returns do not include a sales charge.
All returns represent past performance. The value of an investment
fluctuates so that shares, when redeemed, may be worth
more or less than the original investment.
**Investments in the LB Money Market Fund are neither guaranteed nor
insured by the U.S. Government and there is no assurance that the Fund
will maintain a stable net asset value.
This report must be preceded or accompanied by a prospectus of the
Lutheran Brotherhood Family of Funds.
<TABLE>
<CAPTION>
Lutheran Brotherhood Opportunity Growth Fund
Portfolio of Investments
April 30, 1996
(unaudited)
Shares Value
- ----------- ------------
<S> <C> <C>
COMMON STOCKS - 93.1% (a)
Automotive - 1.3%
136,900 Tower Automotive, Inc. $3,097,363
------------
Bank & Finance - 1.5%
235,700 NAL Financial Group, Inc. 3,447,113 (b)
------------
Broadcasting - 0.7%
37,700 Emmis Broadcasting Corp.,
Class A 1,621,100 (b)
------------
Chemicals - 1.3%
146,600 Airgas, Inc. 3,151,900 (b)
------------
Computer Software - 20.3%
40,000 Affinity Technology
Group, Inc. 940,000 (b)
145,200 Analogy, Inc. 1,560,900 (b)
113,100 Avant! Corp. 2,431,650 (b)
162,100 AXENT Technologies, Inc. 2,917,800 (b)
415,100 AmeriData Technology, Inc. 4,617,988 (b)
166,100 Glasgal Communications, Inc. 1,245,750 (b)
63,000 Hummingbird
Communications Ltd. 2,630,250 (b)
132,800 Inference Corp. 2,407,000 (b)
94,900 Intersolv, Inc. 1,032,038 (b)
73,600 Macromedia, Inc. 2,773,800 (b)
139,500 MDL Information
Systems, Inc. 3,871,125 (b)
216,200 Open Text Corp. 3,107,875 (b)
33,900 Premenos Technology Corp. 762,750 (b)
137,700 Softquad International, Inc. 981,113 (b)
103,400 Sterling Software, Inc. 8,039,350 (b)
108,300 Systemsoft Corp. 3,018,863 (b)
30,000 Tecnomatix Technologies Ltd. 547,500 (b)
143,800 Viasoft, Inc. 5,212,750 (b)
------------
48,098,502
------------
Computers &
Office Equipment - 6.5%
25,000 Alphanet Solutions, Inc. 250,000 (b)
241,900 DataWorks Corp. 3,568,025 (b)
260,500 InaCom Corp. 5,372,812 (b)
206,300 Madge N.V. 6,085,850 (b)
------------
15,276,687
------------
Drugs & Health Care - 13.0%
315,700 Alpha-Beta Technology, Inc. 3,275,387 (b)
169,600 Amrion, Inc. 2,628,800 (b)
16,000 Atrix Laboratories, Inc. 216,000 (b)
57,100 Depotech Corp. 1,398,950 (b)
162,000 GalaGen, Inc. 1,458,000 (b)
101,800 Integra Lifesciences Corp. 1,297,950 (b)
275,100 Lipsome Co., Inc. 6,739,950 (b)
114,200 Medicis Pharmaceutical
Corp, Class A $3,311,800 (b)
120,000 Orphan Medical, Inc. 975,000 (b)
117,250 PDT, Inc. 5,540,062 (b)
156,000 SEQUUS Pharmaceuticals, Inc. 2,710,500 (b)
39,300 Vertex Pharmaceuticals, Inc. 1,149,525 (b)
------------
30,701,924
------------
Electronics - 3.6%
58,400 Aavid Thermal Technologies 511,000 (b)
93,400 ElectroStar, Inc. 1,190,850 (b)
76,400 Etec Systems, Inc. 1,890,900 (b)
100,000 S3 Inc. 1,412,500 (b)
204,800 Smartflex Systems, Inc. 3,430,400 (b)
------------
8,435,650
------------
Healthcare Management - 4.5%
247,200 Complete Management, Inc. 1,977,600 (b)
313,800 Home Health Corp. of
America, Inc. 4,079,400 (b)
118,900 Horizon Mental Health
Management, Inc. 2,496,900 (b)
98,700 Neuromedical Systems, Inc. 2,159,063 (b)
------------
10,712,963
------------
Leisure &
Entertainment - 5.0%
245,800 Cannondale Corp. 5,469,050 (b)
411,500 Fairfield Communities, Inc. 4,423,625 (b)
186,400 Iwerks Entertainment, Inc. 1,957,200 (b)
------------
11,849,875
------------
Machinery &
Equipment - 4.5%
131,100 Adept Technology, Inc. 2,523,675 (b)
61,500 NN Ball & Roller, Inc. 1,506,750
243,300 Northwest Pipe Co. 3,831,975 (b)
155,300 Stratasys, Inc. 2,873,050 (b)
------------
10,735,450
------------
Pollution Control - 4.8%
287,700 IDM Environmental Corp. 2,067,844 (b)
205,700 Memtec Ltd., ADR 5,631,037 (b)
121,800 U.S. Filter Corp. 3,745,350 (b)
------------
11,444,231
------------
Restaurants - 3.7%
227,100 BAB Holdings, Inc. 2,072,287 (b)
20,000 Blimpie International, Inc. 305,000 (b)
126,500 Buffets, Inc. 1,755,187 (b)
257,300 New World Coffee 1,222,175 (b)
63,800 Quality Dining, Inc. 2,073,500 (b)
165,800 Sagebrush, Inc. 1,264,225 (b)
------------
8,692,374
------------
Retail - 4.2%
116,800 American Eagle Outfitters $1,503,800 (b)
113,900 Movie Gallery, Inc. 3,473,950 (b)
43,650 Pacific Sunwear of California 709,312 (b)
95,400 Sports Authority, Inc. (The) 2,838,150 (b)
305,100 Strouds, Inc. 1,372,950 (b)
------------
9,898,162
------------
Services - 3.2%
178,800 BT Office Products
International, Inc. 3,106,650 (b)
73,600 Cotelligent Group, Inc. 1,159,200 (b)
137,200 Personal Group of
America, Inc. 3,224,200 (b)
------------
7,490,050
------------
Telecommunications
Equipment - 4.1%
125,200 ACT Networks, Inc. 3,693,400 (b)
46,500 ADC Telecommunications, Inc. 1,953,000 (b)
81,500 Teltrend, Inc. 4,024,062 (b)
------------
9,670,462
------------
Telephone &
Telecommunications - 10.0%
63,000 American Portable
Telecom, Inc. 945,000 (b)
128,800 IntelCom Group (USA), Inc. 2,592,100 (b)
173,300 InterCel, Inc. 3,899,250 (b)
86,300 Intermedia Communications
of Florida, Inc. 2,135,925 (b)
293,600 Metrocall, Inc. 6,239,000 (b)
12,750 PriCellular Corp. 167,344 (b)
86,600 Pronet, Inc. 2,738,725 (b)
144,700 United States Satellite
Broadcasting Corp. 4,955,975 (b)
------------
23,673,319
------------
Textiles & Apparel - 0.9%
170,500 Cutter & Buck, Inc. 2,046,000 (b)
------------
Total Common Stocks
(cost $170,591,672) 220,043,125
------------
SHORT-TERM
SECURITIES - 6.9% (a)
6,400,000 Ciesco L.P.
5.22%, due 5/1/1996 $6,400,000
5,000,000 Coca-Cola Co.
5.28%, due 5/13/1996 4,991,200
5,000,000 Du Pont (E.I.) de Nemours
and Co. 5.27%,
due 5/7/1996 4,995,608
------------
Total Short-Term Securities
(at amortized cost) 16,386,808
------------
Total Investments
(cost $186,978,480) $236,429,933 (c)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of
total investments of the Lutheran Brotherhood Opportunity Growth Fund.
(b) Currently non-income producing.
(c) At April 30, 1996, the aggregate cost of securities for federal
income tax purposes was $186,978,480 and the net unrealized appreciation
of investments based on that cost was $49,451,453 which is comprised of
$55,132,940 aggregate gross unrealized appreciation and $5,681,487 aggregate
gross unrealized depreciation.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood World Growth Fund
Portfolio of Investments
April 30, 1996
(unaudited)
Shares Value
----------- -----------
<S> <C> <C>
ARGENTINA - 0.7% (a)
COMMON STOCKS
794 Banco de Galicia Buenos
Aires "B" ADR (USD) $18,659
456 Banco Frances del Rio de la
Plata ADR (USD) 13,110
130 Buenos Aires Embotelladora
ADR (USD) 2,064
150 Enron Global Power &
Pipeline (USD) 3,713
5,724 Naviera Perez "B" 35,607
1,590 Sociedad Comercial del
Plata ADR (USD) 4,755 (b)
150 Sociedad Comercial del
Plata ADR (USD) 4,463 (b)
910 Telecom Argentina
ADR (USD) 4,114
230 Telecom Argentina
ADR (USD) 10,408
3,220 Telefonica de Argentina
ADR (USD) 94,185
340 Transportadora de Gas del
Sur ADR (USD) 4,378
2,560 YPF Sociedad Anonima
ADR (USD) 56,000
-----------
Total Argentina 251,456
-----------
AUSTRALIA - 1.6% (a)
COMMON STOCKS
6,000 Amcor Ltd. 43,079
13,000 Australia Gas & Light 54,124
6,536 Broken Hill Proprietary 100,581
10,000 Burns Philip & Co. 20,503
4,000 Coca Cola Amatil 42,074
2,200 Lend Lease Corporation 33,527
4,000 National Australia Bank Ltd. 35,884
8,000 News Corporation 46,881
8,000 Publishing & Broadcasting 36,575
7,090 Smith (Howard) Ltd. 41,214
13,000 TNT 17,258 (b)
6,000 Western Mining 43,739
9,000 Westpac Banking 43,692
8,500 Woodside Petroleum 49,144
-----------
Total Australia 608,275
-----------
AUSTRIA - 0.1% (a)
COMMON STOCKS
60 Energie-Versorgung
Niederoesterreich AG 8,778
180 Flughafen Wien 12,624
-----------
21,402
-----------
PREFERRED STOCKS
170 Creditanstalt Bankverein $9,491
-----------
Total Austria 30,893
-----------
BELGIUM - 0.9% (a)
COMMON STOCKS
265 Generale Banque 93,440
670 Kredietbank 191,550
42 UCB 70,712
-----------
Total Belgium 355,702
-----------
BRAZIL - 1.8% (a)
COMMON STOCKS
470 Brazil Fund (USD) 10,164
4,120 Centrais Eletricas Brasileiras
S.A. ADR (USD) 49,955
500 Companhia Energetica
Brasilia 13,125
450 Companhia Energetica de
Sao Paulo ADR (USD) 4,163 (b)
2,950 Companhia Energetica
Minas Gerais ADR (USD) 77,438
6,596 Telecomunicacoes Brasilias
ADR (USD) 357,009
16,410 Usinas Siderurgicas de Minas
Gerais ADR (USD) 186,664
-----------
Total Brazil 698,518
-----------
CANADA - 0.4% (a)
COMMON STOCKS
3,080 Alcan Aluminum 98,746
1,490 MacMillan Bloedel 19,743
900 Royal Bank of Canada 21,488
-----------
Total Canada 139,977
-----------
CHILE - 0.5% (a)
COMMON STOCKS
100 AFP Providia ADR (USD) 2,288
750 Chile Fund (USD) 18,375
600 Chilectra ADR (USD) 33,000
1,140 Chilgener ADR (USD) 25,508
330 Compania Telecomunicaciones
ADR (USD) 30,113
1,895 Empresa Nacional De Electric
ADR (USD) 36,953
1,033 Enersis ADR (USD) 30,732
-----------
Total Chile 176,969
-----------
CHINA - 0.5% (a)
COMMON STOCKS
6,400 Huaneng Power International
ADR (USD) 100,000 (b)
189,000 Shanghai Petrochemical "H"
(HKD) 56,195
148,000 Yizheng Chemical Fibre "H"
(HKD) $39,700
-----------
Total China 195,895
-----------
DENMARK - 0.2% (a)
COMMON STOCKS
590 Den Danske Bank 38,487
190 Teledanmark 9,561
670 Unidanmark 29,856
-----------
Total Denmark 77,904
-----------
FINLAND - 0.1% (a)
COMMON STOCKS
1,130 Nokia Oy "A" 40,370
-----------
FRANCE - 6.9% (a)
COMMON STOCKS
485 Accor 67,388
360 Alcatel Alsthom 33,858
1,090 Assurances Generales de
France 29,763
150 Canal Plus 36,749
350 Carrefour 273,498
180 Castorama Dubois 34,450
303 Chargeurs 80,624
1,250 Cie de St. Gobain 149,734
880 Credit Local De France 69,497
3,570 Eaux Cie Generale 388,261
525 Ecco 117,954
460 GTM Entrepose 29,643
278 Guilbert S.A. 45,674
390 Havas SA 32,392
50 Hermes International 13,246
930 Lapeyre 51,274
180 Legrand 35,007
140 L'Oreal 43,267
820 Pinault Printemps Redoute 248,975
890 Poliet 91,282
450 Primagaz 48,244
120 Promodes 34,485
225 Rexel 53,948
520 Sanofi 41,962
750 Schneider SA 34,949
230 Societe Generale 26,705
1,600 Societe Nationale Elf Aquitaine 118,990
240 Sodexho 95,164
1,990 Television Francaise 215,656
1,820 Total "B" 123,517
-----------
Total France 2,666,156
-----------
GERMANY - 4.1% (a)
COMMON STOCKS
129 Allianz Holdings 221,615
26 Altana 16,032
680 Bayer 218,982
130 Bilfinger & Berger $49,210
70 Buderas 25,606
1,820 Deutsche Bank 87,225
500 Gehe 288,719
120 Hoechst 40,415
200 Hornbach Baumarkt 7,577
185 Mannesmann 63,201
390 Praktiker Bau und Heimwerker
Markte 8,738
650 Rhon Klinikum 78,549
706 Schering 51,881
108 Siemans AG 59,139
4,460 Veba 221,704
110 Veba International, Finance
Warrants Expiring 4/6/98 26,370 (b)
93 Volkswagen 32,106
-----------
1,497,069
-----------
PREFERRED STOCKS
390 Fielmann 17,132
540 Hornbach Holdings AG 34,568
40 Krones 13,953
-----------
65,653
-----------
Total Germany 1,562,722
-----------
HONG KONG - 4.5% (a)
COMMON STOCKS
25,000 Doa Heng Bank Ltd. 95,663
134,000 First Pacific 178,424
111,000 Guangdong Investments 68,519
361,000 Guangzhou Investments 89,602
28,000 Guoco Group 139,358
116,786 Hong Kong Land Holdings 249,922
296,000 Hopewell Holdings 180,803
32,000 Hutchison Whampoa 198,565
40,000 New World Development
Co. Ltd. 179,432
18,000 Swire Pacific "A" 153,578
50,000 Wharf Holdings 185,185
-----------
Total Hong Kong 1,719,051
-----------
ITALY - 1.9% (a)
COMMON STOCKS
6,200 Assicurazioni Generali 154,603
40,480 Banca Fideuram 69,972
3,000 Danieli & Company 10,794
9,000 Ente Nazionale Idrocarburi 38,892
4,000 Finanziaria Autogrill SpA 4,251 (b)
2,000 Imi 15,877
9,000 Istituto Naz Delle
Assicurazioni 13,828
10,000 Italgas 34,571
3,000 Rinascente 20,762
1,100 Riunione Adriatica di
Securita SpA 12,271
2,000 Sasib 7,913
5,175 Sasib Di Risp 10,072
4,000 SME Meridonale $4,453
32,000 Stet 108,169
14,000 Stet Di Risp 36,703
26,771 Telecom Italia 54,587
52,896 Telecom Italia Mobile 116,832 (b)
13,784 Telecom Italia Mobile DRNC 19,326
2,000 Unicem 13,700
-----------
Total Italy 747,576
-----------
JAPAN - 25.6% (a)
COMMON STOCKS
1,100 Advantest Corp. 54,576
6,000 Alps Electric 70,550
13,000 Amada 151,617
15,000 Canon 298,264
8,000 Citizen Watch Company 69,978
11,000 Dai Nippon Screen
Manufacturing 111,467
3,000 Daifuku 47,321
12,000 Daiichi Pharmaceutical 201,902
15,000 Daiwa House 239,472
17 DDI Corp. 146,102
37 East Japan Railway 197,725
3,000 Fanuc 130,491
19,000 Hitachi 205,248
16,000 Hitachi Zosen 87,797
2,000 Honda Motor Company 45,696
6,000 Inax 65,389
5,000 Ishihara Sangyo 18,546 (b)
4,000 Ito-Yokado 235,935
2,000 Kawada Industries 18,164
6,000 Kokuyo 166,340
16,000 Komatsu 154,486
5,000 Komori 132,881
11,000 Kumagai Gumi 47,216
12,000 Kuraray 138,808
5,000 Kyocera 376,655
9,000 Makita 145,404
10,000 Marui 220,831
14,000 Matsushita Electric Industrial 247,598
9,000 Mitsubishi 128,197
39,000 Mitsubishi Heavy Industries 348,224
7,000 Mitsubishi Paper Mills 44,969
22,000 Mitsui Fudosan 290,235
6,000 Mitsui Petrochemical Industries 50,648
6,000 Murata Manufacturing 232,876
3,000 National House 53,057
27,000 NEC 343,291
14,000 Nippon Denso 305,148
3,000 Nippon Hodo 53,344
68,000 Nippon Steel 245,724
17 Nippon Telegraph &
Telephone Corp. 131,801
14,000 Nomura Securities 305,148
7,000 Pioneer Electronic 156,589
1,000 Sangetsu $24,855
10,000 Sankyo 242,818
2,000 Sega Enterprises 102,098
14,000 Sekisui Chemical 176,665
11,000 Sekisui House 136,705
2,100 Seven-Eleven Japan 148,760
18,000 Sharp 313,178
8,350 Shinetsu Chemical 182,797
5,000 Sony 325,032
21,000 Sumitomo 250,944
20,000 Sumitomo Electric 286,793
7,000 Sumitomo Forestry 107,739
4,000 TDK 229,052
25,000 Teijin 137,422
7,000 Tokio Marine & Fire Insurance 96,363
2,000 Tokyo Electronics 74,375
7,000 Tokyo Steel Manufacturing 141,198
10,000 Toppan Printing 147,220
3,000 Yurtec 56,785
-----------
Total Japan 9,896,509
-----------
KOREA - 0.9% (a)
COMMON STOCKS
1,000 Korea Electric Power Corp. 27,750
8,100 Korea Equity Fund (USD) 194,400
500 Pohang Iron & Steel
ADR (USD) 13,750
1,300 Samsung Electronics GDR 98,150 (b)
391 Samsung Electronics
GDR Bonus 26,555 (b)
-----------
Total Korea 360,605
-----------
MALAYSIA - 2.9% (a)
COMMON STOCKS
13,000 Affin Holdings - Warrants 13,661 (b)
88,000 Affin Holdings 217,062
12,000 Commerce Asset Holdings -
Stock Rights 48,129 (b)
53,000 MBF Capital 79,501
80,000 Multi-Purpose Holdings 139,253
70,000 Renong 121,847
10,000 Renong Berhad - 4% ICULS
Rights 60
6,250 Renong Berhad - Warrant
Rights 1,755 (b)
84,000 Technology Resources
Industries 286,367 (b)
28,000 United Engineers 192,035
-----------
Total Malaysia 1,099,670
-----------
MEXICO - 1.7% (a)
COMMON STOCKS
1,190 Panamerican Beverages
ADR (USD) 52,211
10,840 Cementos de Mexico
ADR (USD) 88,075
13,267 Cemex "B" 56,246
10,744 Cemex SA 42,730
72,334 Cifra ADR (USD) $97,289
10,470 Gruma "B" 41,570 (b)
13,539 Grupo Embotellador de Mexico 20,591
423 Grupo Financiero Banamex
Accival SA 869
14,100 Grupo Financiero
Banamex "C" 32,451
26,760 Grupo Industrial Maseca 26,148
1,221 Grupo Televisa GDR (USD) 37,851
2,110 Kimberly-Clark Mexico
(Class A) 38,480
3,970 Telefonos de Mexico
ADR (USD) 134,980
-----------
Total Mexico 669,491
-----------
NETHERLANDS - 9.0% (a)
COMMON STOCKS
2,990 ABN Amro Holdings 154,779
1,620 Ahold 79,889
137 Akzo Nobel 15,911
4,180 CSM 201,499
42,282 Elsevier 636,636
1,650 Fortis AMEV 117,864
680 Hagemeyer 46,550
4,310 International Nederland Groep 332,777
1,392 Koninklijke PTT Nederland 52,236
590 Nutricia 63,046
4,420 Polygram 263,111
4,330 Royal Dutch Petroleum 616,839
1,390 Unilever 189,660
6,771 Wolters Kluwer 740,127
-----------
Total Netherlands 3,510,924
-----------
NEW ZEALAND - 0.5% (a)
COMMON STOCKS
14,000 Carter Holt Harvey 33,180
7,000 Fernz 21,639
2,250 Fletcher Challenge Building 5,332
2,250 Fletcher Challenge Energy 4,822
18,000 Fletcher Challenge Forests
Division 23,247
4,500 Fletcher Challenge Paper 9,274
20,000 Telecom Corporation of
New Zealand 84,908
-----------
Total New Zealand 182,402
-----------
NORWAY - 1.4% (a)
COMMON STOCKS
1,200 Bergesen "A" 21,554
480 Kvaerner "A" 19,727
6,030 Norsk Hydro 274,900
3,860 Orkla "A" 188,605
1,460 Saga Petroleum "B" 19,779
-----------
Total Norway 524,565
-----------
PORTUGAL - 0.5% (a)
COMMON STOCKS
2,180 Jeronimo Martins $175,251
-----------
SINGAPORE - 2.4% (a)
COMMON STOCKS
18,000 DBS Land 72,983
5,000 Development Bank of
Singapore 63,309
7,000 Far East Levingston
Shipbuilding 40,831
3,400 Fraser & Neave Ltd. 37,729
6,000 Jurong Shipyard 34,358
4,000 Keppel 36,136
17,000 Neptune Orient Lines 18,865
18,000 Overseas Union Bank 139,565
6,000 Sembawang 31,157
2,000 Singapore Airlines 20,202
21,000 Singapore Land 149,381
4,000 Singapore Press 75,686
32,000 United Industrial 32,551
15,000 United Overseas Bank 146,180
3,000 United Overseas Bank,
Warrants 6/17/97 12,751 (b)
-----------
Total Singapore 911,684
-----------
SPAIN - 2.4% (a)
COMMON STOCKS
580 Banco Popular Espanol 96,119
2,190 Banco Santander 101,752
1,661 Centros Commerciales Pryca 38,326
1,192 Corporacion Bancaria de
Espana S.A. 48,261
3,970 Empresa Nacional de
Electridad ADR (USD) 249,373
190 Fomento de Construcciones y
Contra 16,207
645 Gas Natural 117,236
9,230 Iberdrola 90,341
4,433 Repsol 162,578
-----------
Total Spain 920,193
-----------
SWEDEN - 2.4% (a)
COMMON STOCKS
660 Asea "A" 67,542
8,630 Astra AB "B" 381,132
4,080 Atlas Copco "B" 77,610
2,690 Electrolux "B" 135,658
570 Esselte "B" 11,431
1,120 Hennes & Mauritz "B" 77,291
660 Sandvik "A" 14,550
4,610 Sandvik "B" 101,627
430 Scribona "B" 4,121
2,540 Stora Kopparberg "B" 34,083
-----------
Total Sweden 905,045
-----------
SWITZERLAND - 4.0% (a)
COMMON STOCKS
206 BBC Brown Boveri $248,209
145 Ciba Geigy 168,287
730 CS Holding 66,291
295 Nestle 328,121
46 Roche Holdings 361,783
190 Sandoz 207,506
34 Schweizerische
Bankgesellschaft 33,792
325 Schweizerischer Bankverein 121,718
-----------
Total Switzerland 1,535,707
-----------
THAILAND - 0.9% (a)
COMMON STOCKS
2,400 Advanced Information
Service plc 40,690
1,700 Advanced Information
Service plc (Foreign
Registered) 28,418
6,520 Bangkok Bank 94,528
5,800 Bank of Ayudhya 34,233
700 Land & House 10,814
400 Siam Cement 20,599
4,140 Siam Commercial Bank 61,007
3,700 Thai Farmers Bank 42,504
1,600 Total Access
Communication (USD) 14,080
-----------
Total Thailand 346,873
-----------
UNITED KINGDOM - 13.8% (a)
COMMON STOCKS
29,000 Abbey National 247,959
17,900 Argos 174,742
22,000 Argyll Group 109,949
75,000 Asda Group 128,142
4,000 BAA 32,877
14,000 British Gas 49,737
10,000 British Petroleum 90,245
27,100 Cable & Wireless 212,745
19,400 Cadbury Schweppes 150,399
37,000 Caradon 128,105
13,000 Coats Viyella 37,476
11,000 Compass Group 90,577
20,000 David S. Smith 89,719
5,600 East Midlands Electricity 52,813
7,000 Electrocomponents 41,992
2,000 GKN 29,580
17,500 Glaxo Wellcome 212,197
33,000 Grand Metropolitan 217,086
5,000 Heywood Williams Group 18,591
12,000 Hillsdown Holdings 32,515
11,000 John Laing "A" 50,918
27,000 Kingfischer 241,630
19,000 Ladbroke Group 55,916
11,000 London Electricity 136,610
16,960 National Grid Group 52,210
49,000 National Westminster Bank $451,791
22,000 Rank Organisation 176,517
25,000 Reed International 430,152
8,000 Rolls Royce 28,541
12,800 RTZ 201,547
10,000 Sears 15,129
23,000 Shell Transport & Trading 303,470
42,000 SmithKline Beecham 445,732
25,000 T & N 67,552
18,000 Tesco 76,005
56,000 Tomkins 230,980
21,500 United News & Media 224,451
-----------
Total United Kingdom 5,336,597
-----------
Principal
Amount
--------------
SHORT-TERM
SECURITIES - 7.4% (a)
2,850,000 Federal Home Loan Mortgage
Discount Notes
5.30%, due 5/1/1996 2,850,000
-----------
Total Investments $38,496,980 (c,d)
===========
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage
of total investments of the Lutheran Brotherhood World Growth Fund.
(b) Currently non-income producing.
(c) Security Classification:
% of Portfolio Cost Value
------------ ---------- ----------
Common Stocks &
Warrants 92.4% $32,929,752 $35,571,836
Preferred Stocks 0.2% 94,817 75,144
Short-Term 7.4% 2,850,000 2,850,000
------------ ----------- -----------
Total Investments 100.0% $35,874,569 $38,496,980
============ =========== ===========
(d) At April 30, 1996, the aggregate cost of securities for federal
income tax purposes was $35,874,569 and the net unrealized appreciation
of investments based on that cost was $2,622,411 which is comprised
of $2,975,902 aggregate gross unrealized appreciation and $353,491
aggregate gross unrealized depreciation.
(e) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
(GDR) - Global Depository Receipts
(HKD) - Denominated in Hong Kong Dollars
(USD) - Denominated in U.S. Dollars
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Fund
Portfolio of Investments
April 30, 1996
(unaudited)
Shares Value
------------ ------------
<S> <C> <C>
COMMON STOCKS - 96.8% (a)
Aerospace - 2.1%
172,500 Boeing Co. $14,166,562
------------
Airlines - 0.5%
120,000 Southwest Airlines Co. 3,570,000
------------
Automotive - 2.0%
255,200 General Motors Corp. 13,844,600
------------
Bank & Finance - 11.4%
153,600 American International
Group, Inc. 14,035,200
400,000 Banc One Corp. 13,900,000
440,700 Federal National Mortgage
Association 13,496,437
122,000 Green Tree Financial Corp. 4,117,500
135,000 MBNA Corp. 3,830,625
165,900 Morgan (J.P.) and Co., Inc. 13,956,338
57,000 Wells Fargo & Co. 13,829,625
------------
77,165,725
------------
Broadcasting - 1.0%
243,000 Infinity Broadcasting Corp.,
Class A 7,047,000 (c)
------------
Chemicals - 2.1%
244,600 Air Products & Chemicals, Inc. 13,972,775
------------
Computer Software - 2.8%
124,200 Microsoft Corp. 14,081,175 (c)
108,000 Oracle Systems Corp. 3,645,000 (c)
34,000 Parametric Technology Corp. 1,368,500 (c)
------------
19,094,675
------------
Computers & Office
Equipment - 2.2%
23,200 Danka Business Systems
plc ADR 1,113,600
128,000 International Business
Machines 13,760,000
------------
14,873,600
------------
Conglomerates - 2.1%
240,400 AlliedSignal, Inc. 13,973,250
------------
Drugs & Health Care - 8.7%
339,100 Abbott Laboratories 13,775,938
122,200 Amgen, Inc. 7,026,500 (c)
178,000 Becton Dickinson & Co. 14,351,250
105,000 Biogen, Inc. 6,916,875 (b,c)
225,300 Merck & Co., Inc. 13,630,650
60,000 SmithKline Beecham
plc ADR 3,240,000
------------
58,941,213
------------
Electric Utilities - 3.2%
225,000 Entergy Corp. $5,962,500
178,900 FPL Group, Inc. 7,715,063 (b)
347,000 Southern Co. 7,634,000
------------
21,311,563
------------
Electrical Equipment - 2.1%
180,400 General Electric Co. 13,981,000
------------
Electronics - 4.6%
38,200 Adaptec, Inc. 2,196,500 (c)
205,200 Intel Corp. 13,902,300
226,600 Motorola, Inc. 13,879,250
16,100 Texas Instruments, Inc. 909,650
------------
30,887,700
------------
Food & Beverage - 4.7%
170,000 Coca-Cola Co. 13,855,000
50,000 CPC International, Inc. 3,456,250
44,500 Salomon, Inc., (Snapple, Inc.,
Equity-Linked Security) 659,156
451,300 Sara Lee Corp. 13,990,300
------------
31,960,706
------------
Healthcare
Management - 2.3%
32,100 Oxford Health Plans, Inc. 1,621,050 (c)
240,000 United Healthcare Corp. 14,040,000
------------
15,661,050
------------
Household Products - 5.2%
90,000 Colgate Palmolive Co. 6,896,250
260,900 Gillette Co. 14,088,600
166,000 Procter & Gamble Co. 14,027,000
------------
35,011,850
------------
Leisure &
Entertainment - 2.1%
226,200 Disney (Walt) Co. 14,024,400
------------
Machinery &
Equipment - 3.1%
75,000 Case Corp. 3,787,500
216,900 Caterpillar, Inc. 13,881,600
54,000 Fluor Corp. 3,570,750 (b)
------------
21,239,850
------------
Mining & Metals - 3.0%
120,000 Nucor Corp. 6,750,000
185,600 Phelps Dodge Corp. 13,641,600
------------
20,391,600
------------
Oil & Oil Service - 8.2%
190,900 Amoco Corp. 13,935,700
238,300 Chevron Corp. 13,821,400
242,500 Halliburton Co. $13,913,437
118,800 Mobil Corp. 13,662,000
------------
55,332,537
------------
Paper &
Forest Products - 1.1%
150,000 Champion International Corp. 7,237,500
------------
Railroads - 2.1%
272,500 CSX Corp. 13,965,625
------------
Restaurants - 2.6%
91,600 Lone Star Steakhouse &
Saloon 3,789,950 (c)
289,700 McDonald's Corp. 13,869,388
------------
17,659,338
------------
Retail - 7.4%
211,000 Federated Department Stores 7,042,125 (c)
135,000 Gap, Inc. 4,066,875
337,300 Kroger Co. 13,871,463 (c)
139,400 May Department Stores Co. 7,109,400
147,700 OfficeMax, Inc. 3,877,125 (c)
141,500 Sears, Roebuck & Co. 7,057,312
299,100 Wal-Mart Stores, Inc. 7,141,013
------------
50,165,313
------------
Services - 3.1%
85,500 Automatic Data
Processing, Inc. 3,323,812
183,500 First Data Corp. 13,946,000
65,000 General Motors Group,
Class E (Electronic
Data Services) 3,664,375
------------
20,934,187
------------
Telephone &
Telecommunications - 7.1%
238,400 Ameritech Corp. 13,916,600
230,000 AT&T Corp. 14,087,500
64,000 Lucent Technologies, Inc. 2,248,000 (c)
279,100 SBC Communications, Inc. 13,955,000
70,000 StrataCom, Inc. 3,640,000 (c)
------------
47,847,100
------------
Total Common Stocks
(cost $528,781,629) 654,260,719
------------
U.S. GOVERNMENT - 0.3% (a)
$2,000,000 U.S. Treasury Notes,
8.75%, due 10/15/1997
(cost $2,021,776) $2,078,122
------------
SHORT-TERM
SECURITIES - 2.9% (a)
Commercial Paper
19,875,000 Associates Corp. of
North America,
5.35%, due 5/1/1996
(at amortized cost) 19,875,000
------------
Total Investments
(cost $550,678,405) $676,213,841 (d)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of
total investments of the Lutheran Brotherhood Fund.
(b) Includes stock rights that automatically traded with the
stock and had no separate value at April 30, 1996.
(c) Currently non-income producing.
(d) At April 30, 1996, the aggregate cost of securities for federal
income tax purposes was $550,678,405 and the net unrealized appreciation
of investments based on that cost was $125,535,436 which is comprised of
$127,864,738 aggregate gross unrealized appreciation and $2,329,302
aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTON>
Lutheran Brotherhood High Yield Fund
Portfolio of Investments
April 30, 1996
(unaudited)
<CAPTION>
Principal Maturity
Amount Rate Date Value
- ---------------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Airlines - 1.2%
$2,950,000 Continental Airlines Holdings, Inc.,
Convertible Sr. Subordinated Notes 6.75% 4/15/06 $3,274,500
4,500,000 U.S. Air, Inc., Sr. Secured Equipment Trust, Series 1993-A-3 10.38% 3/1/13 4,398,750
------------
7,673,250
------------
Automotive - 0.4%
4,600,000 Exide Corp., Convertible Sr. Subordinated Notes 2.90% 12/15/05 2,794,500
------------
Bank & Finance - 3.3%
1,800,000 American Life Holding Corp., Sr. Subordinated Notes 11.25% 9/15/04 1,908,000
1,500,000 First Nationwide Holdings, Inc., Sr. Notes 12.25% 5/15/01 1,657,500
4,200,000 First Nationwide (Parent) Holdings, Inc., Sr. Notes 12.50% 4/15/03 4,284,000
7,000,000 Mutual Life Insurance Co. of New York, Surplus Notes Zero Coupon 8/15/24 5,670,000
4,272,000 Scotsman Holdings, Sr. Notes, Payment-In-Kind, Series B 11.00% 3/1/04 3,983,640
3,500,000 Trizec Finance Ltd., Sr. Notes 10.88% 10/15/05 3,552,500
------------
21,055,640
------------
Broadcasting - 19.9%
4,075,424 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 6/15/04 3,015,814
3,900,000 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 8/15/05 2,574,000
7,400,000 Australis Media Ltd., Sr. Subordinated Discount Notes Zero Coupon 5/15/03 5,069,000
5,100,000 Cablevision Industries, Debentures 9.25% 4/1/08 5,380,500
6,600,000 Charter Communications Southeast Holdings L.P.,
Sr. Discount Notes Zero Coupon 3/15/07 3,498,000
5,850,000 Comcast UK Cable Partners Ltd., Sr. Discount Debentures Zero Coupon 11/15/07 3,495,375
3,000,000 Continental Cablevision, Inc., Sr. Debentures 9.50% 8/1/13 3,292,500
4,100,000 Continental Cablevision, Inc., Sr. Notes 8.30% 5/15/06 4,182,000
13,008,000 CS Wireless Systems, Inc., Sr. Discount Notes Zero Coupon 3/1/06 6,845,460
8,400,000 Diamond Cable Communications plc, Sr. Discount Notes Zero Coupon 12/15/05 5,124,000
6,750,000 EchoStar Satellite Broadcast Corp., Sr. Secured Discount Notes Zero Coupon 3/15/04 4,201,875
6,119,164 Falcon Holdings Group L.P., Sr. Subordinated Notes, Series B 11.00% 9/15/03 5,904,993
4,900,000 Granite Broadcasting, Sr. Subordinated Notes, Series A 9.38% 12/1/05 4,612,125
2,850,000 International CabelTel, Inc., Sr. Notes, Series A Zero Coupon 4/15/05 1,863,187
3,350,000 International CableTel, Inc., Convertible Subordinated Notes 7.25% 4/15/05 3,969,750
1,450,000 International CableTel, Inc., Sr. Deferred Notes, Series A Zero Coupon 2/1/06 855,500
3,700,000 Le Groupe Videotron Ltee., Sr. Notes 10.63% 2/15/05 3,949,750
6,650,000 Marcus Cable Co., Sr. Discount Notes Zero Coupon 12/15/05 4,172,875
5,200,000 NWCG Holdings Corp., Sr. Secured Discount Notes, Series B Zero Coupon 6/15/99 3,822,000
7,900,000 People's Choice TV Corp., Sr. Discount Notes Zero Coupon 6/1/04 4,898,000
8,250,000 Robin Media Group, Sr. Subordinated Deferred Interest Bonds 11.13% 4/1/97 8,208,750
5,200,000 Rogers Cablesystems Ltd., Sr. Secured Second Priority Notes 9.63% 8/1/02 5,265,000
6,000,000 Rogers Communications, Inc., Convertible Debentures 2.00% 11/26/05 3,240,000
900,000 Rogers Communications, Inc., Convertible Liquid Yield
Option Notes Zero Coupon 5/20/13 321,750
2,750,000 Rogers Communications, Inc., Sr. Notes 9.13% 1/15/06 2,640,000
4,500,000 SCI Television, Inc., Sr. Second Priority Secured Notes 11.00% 6/30/05 4,736,250
5,000,000 Scott Cable Communications, Inc., Subordinated Debentures 12.25% 4/15/01 3,250,000 (c)
1,225,000 Tele-Communications International, Inc., Convertible
Subordinated Debentures 4.50% 2/15/06 1,157,625
3,400,000 Telemundo Group, Inc., Sr. Notes 7.00% 2/15/06 3,000,500
1,000,000 TeleWest plc, Sr. Debentures 9.63% 10/1/06 990,000
$3,850,000 TeleWest plc, Sr. Discount Debentures Zero Coupon 10/1/07 $2,396,625
9,600,000 United International Holdings, Inc., Sr. Discount Notes Zero Coupon 11/15/99 6,240,000
3,150,000 United International Holdings, Inc.,
Sr. Secured Discount Notes, Series B Zero Coupon 11/15/99 2,047,500
4,600,000 Wireless One, Inc., Sr. Notes 13.00% 10/15/03 4,876,000
------------
129,096,704
------------
Building Products & Materials - 1.1%
8,500,000 Dal-Tile International, Inc., Sr. Secured Notes Zero Coupon 7/15/98 6,927,500
------------
Computers & Office Equipment - 2.0%
8,950,000 Bell & Howell Co., Debentures Zero Coupon 3/1/05 6,041,250
3,600,000 Dictaphone Corp., Sr. Subordinated Notes, Series B 11.75% 8/1/05 3,573,000
3,400,000 Unisys Corp., Sr. Notes 12.00% 4/15/03 3,408,500
------------
13,022,750
------------
Construction & Home Building - 1.1%
7,350,000 Peters (J.M.) Co., Inc., Sr. Notes 12.75% 5/1/02 6,945,750
------------
Containers & Packaging - 0.5%
3,300,000 Owens-Illinois, Inc., Sr. Subordinated Notes 9.75% 8/15/04 3,353,625
------------
Drugs & Health Care - 2.8%
5,600,000 Dade International, Inc., Sr. Subordinated Notes 13.00% 2/1/05 6,636,000
4,003,800 General Medical Corp., Payment-In-Kind Debentures 12.13% 8/15/05 4,203,990
7,000,000 Unilab Corp., Sr. Notes 11.00% 4/1/06 6,947,500
------------
17,787,490
------------
Electric Utilities - 0.9%
1,750,000 Midland Cogen Venture Fund II, Secured Lease
Obligation Bonds, Series A 11.75% 7/23/05 1,849,388
3,600,000 Midland Cogen Venture Fund II, Subordinated Secured
Lease Obligation Bonds 13.25% 7/23/06 4,002,933
------------
5,852,321
------------
Electrical Equipment - 1.4%
5,550,000 Protection One Alarm Monitoring, Sr. Subordinated
Discount Notes Zero Coupon 6/30/05 4,800,750
3,750,000 Telex Communications, Inc., Sr. Notes 12.00% 7/15/04 3,956,250
------------
8,757,000
------------
Food & Beverage - 2.6%
3,900,000 Curtice-Burns Food, Inc., Sr. Subordinated Notes 12.25% 2/1/05 3,841,500
3,000,000 Dr. Pepper Bottling Holdings, Sr. Notes Zero Coupon 2/15/03 2,565,000
5,500,000 Fresh Del Monte Corp., Sr. Notes, Series B 10.00% 5/1/03 5,197,500
6,400,000 Specialty Foods Acquisition Co., Sr. Secured Discount
Debentures, Series B Zero Coupon 8/15/05 2,816,000
2,800,000 Specialty Foods Acquisition, Sr. Subordinated Notes 11.25% 8/15/03 2,352,000
------------
16,772,000
------------
Hospital Management - 3.7%
4,125,000 Integrated Health Services, Inc., Sr. Subordinated
Notes, Series A 9.63% 5/31/02 4,145,625
2,750,000 Magellan Health Services, Sr. Subordinated Notes 11.25% 4/15/04 3,066,250
5,250,000 Merit Behavioral Care Corp., Sr. Subordinated Notes 11.50% 11/15/05 5,578,125
$6,850,000 Regency Health Services, Inc., Sr. Subordinated Notes 9.88% 10/15/02 $6,815,750
4,050,000 Tenet Healthcare Corp., Sr. Subordinated Notes 10.13% 3/1/05 4,353,750
------------
23,959,500
------------
Household Products - 1.2%
15,000,000 Coleman Worldwide Corp., Convertible Liquid Yield
Option Notes Zero Coupon 5/27/13 5,343,750
2,200,000 Simmons Co., Sr. Subordinated Notes 10.75% 4/15/06 2,222,000
------------
7,565,750
------------
Leisure & Entertainment - 2.7%
10,600,000 AMF Group, Inc., Sr. Subordinated Discount Notes Zero Coupon 3/15/06 5,856,500
5,000,000 Host Marriott Travel Plazas, Sr. Secured Notes, Series B 9.50% 5/15/05 4,881,250
3,000,000 IMAX Corp., Sr. Notes 7.00% 3/1/01 2,985,000
3,750,000 Prime Hospitality Corp., First Mortgage Notes 9.25% 1/15/06 3,618,750
------------
17,341,500
------------
Oil & Gas - 2.8%
4,000,000 Gulf Canada Resources Ltd., Sr. Subordinated Debentures 9.63% 7/1/05 4,111,596
9,000,000 Kelley Oil & Gas Corp., Sr. Notes 13.50% 6/15/99 9,450,000
4,258,000 Petroleum Heat & Power Co., Inc., Subordinated Debentures 12.25% 2/1/05 4,758,315
------------
18,319,911
------------
Paper & Forest Products - 0.4%
2,500,000 Container Corp. of America, Sr. Notes, Series A 11.25% 5/1/04 2,568,750
------------
Pollution Control - 0.5%
3,000,000 Norcal Waste Systems, Inc., Sr. Notes 12.50% 11/15/05 3,153,750
------------
Publishing & Printing - 2.8%
2,500,000 K-III Communications Corp., Sr. Notes 10.25% 6/1/04 2,662,500
8,500,000 Neodata Services, Inc., Sr. Notes, Series B Zero Coupon 5/1/03 8,723,125
3,500,000 News America Holdings, Inc., Convertible Liquid Yield
Option Notes Zero Coupon 3/11/13 1,750,000
750,000 News America Holdings, Inc., Subordinated Notes Zero Coupon 3/31/02 761,250
4,150,000 Sullivan Graphics, Inc., Sr. Subordinated Notes 12.75% 8/1/05 3,890,625
------------
17,787,500
Retail - 0.1% ------------
2,250,000 F & M Distributors, Inc., Sr. Subordinated Notes 11.50% 4/15/03 70,313 (c)
5,000,000 Wherehouse Entertainment, Inc., Sr. Subordinated Notes 13.00% 8/1/02 450,000 (c)
------------
520,313
------------
Retail: Food - 5.0%
5,400,000 Dominick's Finer Foods, Sr. Subordinated Notes 10.88% 5/1/05 5,670,000
4,000,000 Farm Fresh, Inc., Sr. Notes 12.25% 10/1/00 3,460,000
3,550,000 Jitnay-Jungle Stores of America, Sr. Notes 12.00% 3/1/06 3,647,625
2,600,000 Pueblo Xtra International, Inc., Sr. Notes 9.50% 8/1/03 2,327,000
9,150,000 Ralph's Supermarkets, Inc., Sr. Subordinated Notes 11.00% 6/15/05 8,589,562
4,500,000 Smitty's SuperValu, Inc., Sr. Subordinated Notes, Series B 12.75% 6/15/04 5,169,375
3,475,000 TLC Beatrice International Holdings, Sr. Secured Notes 11.50% 10/1/05 3,535,813
------------
32,399,375
------------
Telecommunications - 19.5%
$9,900,000 American Communications Services, Sr. Discount Notes Zero Coupon 11/1/05 $5,445,000
2,900,000 American Communications Services, Sr. Discount Notes Zero Coupon 4/1/06 1,508,000
4,300,000 Arch Communications Group, Inc., Sr. Discount Notes Zero Coupon 3/15/08 2,424,125
5,400,000 A+ Network, Inc., Sr. Subordinated Notes 11.88% 11/1/05 5,481,000
9,560,000 Brooks Fiber Properties, Sr. Discount Notes Zero Coupon 3/1/06 5,305,800
6,550,000 Call-Net Enterprises, Inc., Sr. Discount Notes Zero Coupon 12/1/04 4,879,750
9,000,000 Clearnet Communications, Inc., Sr. Discount Notes Zero Coupon 12/15/05 5,625,000
3,700,000 Comcast Cellular, Inc., Sr. Participation Redeemable Notes,
Series B Zero Coupon 3/5/00 2,775,000
9,050,000 Comcast Cellular, Inc., Sr. Redeemable Notes Zero Coupon 3/5/00 6,697,000
1,105 GST Telecommunications, Inc., Units (each unit consists of
$8,000 principal amount of senior discount notes and $1,000
principal amount of convertible senior subordinated
discount notes) Zero Coupon 12/15/05 6,077,500
5,700,000 Horizon Cellular Telephone Co., Sr. Subordinated
Discount Notes, Series B Zero Coupon 10/1/00 5,101,500
11,200,000 Hyperion Telecommunications, Sr. Discount Notes Zero Coupon 4/15/03 5,992,000
4,300,000 In-Flight Phone Corp., Sr. Discount Notes, Series B Zero Coupon 5/15/02 1,354,500
6,800,000 IntelCom Group (U.S.A.), Inc., Sr. Discount Notes Zero Coupon 9/15/05 4,250,000
4,000,000 IntelCom Group (U.S.A.), Inc., Sr. Discount Notes Zero Coupon 5/1/06 2,210,000
5,800,000 InterCel, Inc., Sr. Discount Notes Zero Coupon 5/1/06 3,262,500
3,300,000 Intermedia Communications of Florida, Sr. Notes, Series B 13.50% 6/1/05 3,712,500
13,000,000 IXC Communications, Inc., Sr. Notes, Series A 13.00% 10/1/05 13,455,000
12,750,000 NEXTEL Communications, Inc., Sr. Discount Notes Zero Coupon 8/15/05 7,458,750
7,150,000 Nextlink Communications LLC, Sr. Notes 12.50% 4/15/06 7,221,500
11,400,000 PageMart Nationwide, Inc., Sr. Discount Exchange Notes Zero Coupon 2/1/05 7,467,000
2,100,000 Pagemart, Inc., Sr. Discount Notes Zero Coupon 11/1/03 1,580,250
2,150,000 USA Mobile Communications, Inc., Sr. Notes 14.00% 11/1/04 2,526,250
2,250,000 USA Mobile Communications, Inc., Sr. Notes 9.50% 2/1/04 2,182,500
8,000,000 Viatel, Inc., Sr. Discount Notes Zero Coupon 1/15/05 4,400,000
3,900,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/05 2,554,500
9,800,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/05 5,586,000
------------
126,532,925
------------
Transportation - 1.2%
7,400,000 Alamo Rent-A-Car, Inc., Sr. Notes 11.75% 1/31/06 7,455,500
------------
Total Corporate Bonds (cost $490,812,940) 497,643,304
------------
FOREIGN GOVERNMENT BONDS - 0.5% (a,e)
5,845,134 Brazil, (Republic of), Emerging Markets (Brady Bonds)
(cost $3,041,654) 8.0% 4/15/14 3,518,040
------------
<CAPTION>
Shares
-----------
<S> <C> <C>
PREFERRED STOCKS - 11.7% (a)
33,266 Cablevision Systems Corp., Preferred Stock 3,285,017
34,090 Cablevision Systems Corp., Red. Exch., Preferred Stock,
Series G 3,468,657
32,000 California Federal Bank, Preferred Stock, Series B 3,460,000
117,000 Chevy Chase Savings Bank, Preferred Stock 3,714,750
29,845 Communications & Power Industries, Inc., Convertible Preferred
Stock, Series B 2,984,500
5,150 Consolidated Hydro, Inc., Preferred Stock 52,788
40,000 First Nationwide Bank, Noncumulative Preferred Stock 4,490,000
35,000 Flagstar Cos., Convertible Preferred Stock, Series A 472,500
45,500 Grand Union Holdings Corp., Cumulative Preferred Stock,
Series A 0 (b,d)
150,000 Granite Broadcasting Corp., Convertible Preferred Stock $10,050,000
196,465 Harvard Industries, Inc., Exchangeable Payment-In-Kind
Preferred Stock 5,255,439
23,655 K-III Communications Corp., Exchangeable Preferred Stock,
Series B 2,418,717
40,500 K-III Communications Corp., Preferred Stock, Series C 3,898,125
93,000 K-III Communications Corp., Exchangeable Preferred Stock 2,511,000
115,000 MFS Communication, Inc., 8% Cumulative Convertible Preferred Stock 6,785,000
57,000 Mobile Telecommunications Tech, Preferred Stock 1,417,875
87,000 Network Imaging Corp., Convertible Preferred Stock, Series A 1,272,375
90,000 Newscorp Overseas Ltd., Cumulative Guaranteed Preferred
Stock, Series A 2,227,500
7,635 PanAmSat Corp., Convertible Preferred Stock 8,856,600
74,942 Riggs National Corp., Preferred Stock 2,089,008
122,500 River Bank America, Preferred Stock 3,077,812
3,600 Time Warner, Inc., Series K Exchangeable Preferred Stock 3,600,000
------------
Total Preferred Stocks (cost $72,359,465) 75,387,663
------------
COMMON STOCKS & STOCK WARRANTS - 5.1% (a)
9,900 American Communications Services, Stock Warrants 717,750 (b)
28,000 American Telecasting, Inc., Stock Warrants 147,000 (b)
3,900 American Telecasting, Inc., Stock Warrants 124,800 (b)
147,860 Arch Communications Group, Common Stock 3,511,675 (b)
50,000 Bell & Howell Co., Common Stock 1,575,000 (b)
1,890 Communications & Power Industries, Inc., Common Stock 189,000 (b)
9,270 Consolidated Hydro, Inc., Stock Warrants 0 (b,d)
3,086 Dial Page Communications, Inc., Stock Warrants 31 (b)
1,500 Dial Page Communications, Inc., Stock Warrants 15 (b)
75,500 Envirotest Systems Corp., Class A Common Stock 207,625 (b)
112,013 Gaylord Container Corp., Class A Common Stock 1,148,133 (b)
154,623 Gaylord Container Corp., Stock Warrants 1,546,230 (b)
14,905 Grand Union Co., Stock Warrants 5,962 (b)
29,811 Grand Union Co., Stock Warrants 1,789 (b)
70,000 Harvard Industries, Inc., Class B Common Stock 1,531,250 (b)
7,400 In-Flight Phone Corp., Warrants 0 (b)
182,000 IntelCom Group (USA), Inc., Common Stock 3,662,750 (b)
50,335 IntelCom Group (USA), Inc., Stock Warrants 528,517 (b)
145,000 InterCel, Inc., Common Stock 3,262,500 (b)
4,100 Intermedia Communications of Florida, Stock Warrants 123,000 (b)
32,180 JPS Textiles Group, Common Stock, Class A 160,900 (b)
99,948 Magellan Health Services, Common Stock 2,148,882 (b)
143,834 Memorex Telex N.V. ADR, Common Stock 116,865 (b)
3,981 Memorex Telex N.V. ADR, Stock Warrants 40 (b)
143,000 MobileMedia Corp., Class A Common Stock 2,860,000 (b)
15,000 News Corp. Ltd. ADR, Ordinary Shares, Common Stock 305,625
20,000 News Corp. Ltd. ADR, Preference Shares, Common Stock 470,000
26,250 PageMart Nationwide, Inc., Common Stock 249,375 (b)
19,200 Payless Cashways, Inc., Stock Warrants 2,400 (b)
7,900 People's Choice TV Corp., Common Stock 79,000 (b)
76,000 Plantronics, Inc., Common Stock 3,049,500 (b)
19,360 Protection One Alarm Monitoring, Common Stock 193,600 (b)
4,500 Terex Corp., Stock Appreciation Rights 225 (b,d)
20,000 Triangle Wire & Cable, Inc., Stock Warrants 0 (b,d)
87,000 United International Holdings, Inc., Class A Common Stock 1,250,625 (b)
20,100 United International Holdings, Inc., Stock Warrants 582,900 (b)
288,800 Viatel, Inc., Common Stock 1,155,200 (b,d)
145,000 Wireless One, Inc., Common Stock 2,247,500 (b)
13,800 Wireless One, Inc., Stock Warrants 69,000 (b)
------------
Total Common Stocks & Stock Warrants (cost $28,216,283) 33,224,664
------------
<CAPTION>
Principal Maturity
Amount Rate Date Value
- ---------------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Commercial Paper
$5,100,000 Delaware Funding Corp. 5.25% 5/3/96 $5,098,513
5,000,000 Ford Motor Credit Co. 5.25% 5/1/96 5,000,000
5,100,000 Harvard University 5.34% 5/1/96 5,100,000
16,000,000 Lincoln National Corp. 5.38% 5/1/96 16,000,000
5,000,000 Prudential Funding Corp. 5.25% 5/7/96 4,995,625
------------
Total Short-Term Securities (at amortized cost) 36,194,138
------------
Total Investments (cost $630,624,480) $645,967,809 (f)
============
Notes to Portfolio of Investments
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood High Yield Fund.
(b) Currently non-income producing.
(c) Currently non-income producing and in default.
(d) Denotes restricted securities. These securities have been valued from the date of acquisition through April 30, 1996,
by obtaining quotations from brokers who are active with the issues. The following table indicates the acquisition
date and cost of restricted securities the Fund owned as of April 30, 1996.
<CAPTION>
Aquisition
Security Date Cost
-------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Consolidated Hydro, Inc., Stock Warrants 2/8/94 $ 202,776
Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 6/14/93 5,218,975
Terex Corp., Stock Appreciation Rights 7/27/92 11,250
Triangle Wire & Cable, Inc., Stock Warrants 1/3/92 1,998
Viatel, Inc., Common Stock 8/15/95 1,084,601
(e) Denominated in U.S. Dollars.
(f) At April 30, 1996, the aggregate cost of securities for federal tax purposes was $630,624,480 and the net
unrealized appreciation of investments based on that cost was $15,343,329 which is comprised of $47,415,894
aggregate gross unrealized appreciation and $32,072,565 aggregate gross unrealized depreciation.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Income Fund
Portfolio of Investments
30-Apr-96
(unaudited)
Principal Maturity
Amount Rate Date Value
- ---------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 32.7% (a)
Aerospace - 0.3%
$2,500,000 Boeing Co., Debentures 7.25% 6/15/25 $2,414,115
------------
Automotive - 0.5%
5,000,000 Ford Motor Credit Co., Notes 6.38% 10/6/00 4,901,160
------------
Bank & Finance - 14.0%
7,500,000 Associates Corp. of North America, Notes 6.63% 5/15/98 7,537,448
13,000,000 Associates Corp. of North America, Sr. Notes 9.13% 4/1/00 14,078,961
2,000,000 Chase Manhattan Corp., Subordinated Notes 9.38% 7/1/01 2,203,864
6,000,000 Chemical New York Corp., Debentures 9.75% 6/15/99 6,516,174
6,000,000 Dresdner Bank- New York, Subordinated Notes 7.25% 9/15/15 5,771,466
7,000,000 Equitable Life Assurance Society of the United States,
Surplus Notes 6.95% 12/1/05 6,714,008
5,000,000 First Bank National Association, Subordinated Notes 8.75% 4/1/06 4,854,420
15,500,000 General Electric Capital Corp., Debentures 8.85% 4/1/05 17,256,181
8,000,000 Merita Bank Ltd., New York Branch Subordinated Notes 6.50% 1/15/06 7,485,736
5,000,000 Metropolitan Life Insurance Co., Surplus Notes 7.70% 11/1/15 4,800,840
9,000,000 Nationwide CSN Trust, Trust Notes 9.88% 2/15/25 9,724,401
8,000,000 New York Life Insurance Co., Surplus Notes 6.40% 12/15/03 7,640,968
4,500,000 Norwest Financial, Inc., Sr. Notes 6.25% 11/1/02 4,335,156
4,000,000 Prudential Insurance Co., Surplus Notes 8.10% 7/15/15 3,938,104
9,000,000 Prudential Insurance Co., Surplus Notes 8.30% 7/1/25 8,843,274
3,000,000 Reliastar Financial Corp., Sr. Notes 8.63% 2/15/05 3,186,783
7,000,000 Societe-Generale, Subordinated Notes 9.88% 7/15/03 8,029,392
4,500,000 Swiss Bank Corp., Subordinated Debentures,
(New York Branch) 7.50% 7/15/25 4,362,215
8,000,000 Wells Fargo & Co., Subordinated Notes 6.88% 4/1/06 7,761,600
------------
135,040,991
------------
Broadcasting - 1.2%
8,500,000 Cox Communications, Inc., Notes 6.38% 6/15/00 8,357,319
3,000,000 TCI Communications, Inc., Sr. Notes 8.00% 8/1/05 2,934,900
------------
11,292,219
------------
Chemicals - 0.6%
3,000,000 Methanex Corp., Notes 7.40% 8/15/02 2,970,402
3,000,000 Methanex Corp., Notes 7.75% 8/15/05 2,981,319
------------
5,951,721
------------
Computers & Office Equipment - 1.2%
11,000,000 Electronic Data Systems Corp., Notes 6.85% 5/15/00 11,206,250
------------
Electric Utilities - 0.6%
5,712,000 DQU Funding Corp., Collateralized Lease Obligation Bonds 7.23% 12/1/99 5,732,717
------------
Electrical Equipment - 0.5%
5,000,000 Litton Industries, Inc., Debentures 7.75% 3/15/26 4,844,745
------------
Food & Beverage - 0.6%
6,000,000 Nabisco, Inc., Notes 6.70% 6/15/02 5,824,200
------------
Household Products - 1.2%
10,000,000 Procter & Gamble, Guaranteed ESOP Debentures 9.36% 1/1/21 12,000,290
------------
Leisure & Entertainment - 1.0%
$5,000,000 Disney (Walt) Co., Sr. Bonds, Series A 6.38% 3/30/01 $4,922,500
5,000,000 Disney (Walt) Co., Sr. Notes, Series B 6.75% 3/30/06 4,858,545
------------
9,781,045
------------
Natural Gas - 2.5%
6,000,000 Coastal Corp., Sr. Debentures 9.75% 8/1/03 6,786,648
6,000,000 Coastal Corp., Sr. Notes 10.38% 10/1/00 6,735,414
11,000,000 Columbia Gas Systems, Inc., Series A Notes 6.39% 11/28/00 10,769,550
------------
24,291,612
------------
Oil & Gas - 0.6%
5,000,000 Union Texas Petroleum Holdings, Inc. 8.38% 3/15/05 5,272,295
------------
Paper & Forest Products - 0.5%
5,000,000 Smurfit Capital Funding plc, Guaranteed Notes 6.75% 11/20/05 4,773,440
------------
Petroleum - 2.1%
7,405,648 Mobil Oil Corp., ESOP Sinking Fund Debentures 9.17% 2/29/00 7,831,317
12,500,000 Texaco Capital, Inc., Debentures 7.50% 3/1/43 12,033,563
------------
19,864,880
------------
Retail - 2.8%
10,000,000 Dayton Hudson Corp., Debentures 8.50% 12/1/22 9,984,300
7,000,000 Dayton Hudson Corp., Notes 6.40% 2/15/03 6,673,660
5,500,000 Sears Roebuck Acceptance Corp., Medium Term Notes, Series I 5.96% 12/7/00 5,311,680
5,500,000 Sears Roebuck Acceptance Corp., Medium Term Notes, Series I 6.05% 12/14/00 5,330,413
------------
27,300,053
------------
Telephone - 2.5%
5,500,000 New York Telephone Co., Debentures 9.38% 7/15/31 6,108,652
8,500,000 NYNEX Capital Funding, Medium Term Notes, Series B 8.75% 12/1/04 9,263,810
10,000,000 U.S. West Communications, Inc., Debentures 7.13% 11/15/43 9,034,230
------------
24,406,692
------------
Total Corporate Bonds (cost $320,574,534) 314,898,425
------------
FOREIGN GOVERNMENT BONDS - 11.2% (a,c)
7,000,000 African Development Bank, Subordinated Notes 8.80% 9/1/19 7,960,379
7,000,000 British Columbia Hydro & Power, Debentures 1.25% 9/1/13 8,143,163
20,325,000 British Columbia Hydro & Power, Debentures 15.50% 7/15/11 22,028,032
3,000,000 Empresa Electrica Pehuienche S.A., Notes 7.30% 5/1/03 2,985,000
5,000,000 Inter American Development Bank, Notes 7.00% 6/15/25 4,721,410
15,000,000 International Bank for Reconstruction &
Development, Debentures 12.38% 10/15/02 19,294,425
2,500,000 Korea Electric Power Corp., Debentures 7.75% 4/1/13 2,451,385
6,000,000 Korean Development Bank, Sr. Notes 6.50% 11/15/02 5,744,862
10,000,000 Ontario Province, Canada, Debentures 15.13% 5/1/11 10,605,500
7,500,000 Ontario Province, Canada, Debentures 11.75% 4/25/13 8,559,968
9,000,000 Ontario Province, Canada, Sr. Bonds 7.38% 1/27/03 9,216,441
7,000,000 Tenaga Nasional Berhad, Debentures 7.50% 11/1/25 6,568,310
------------
Total Foreign Government Bonds (cost $118,165,608) 108,278,875
------------
ASSET-BACKED SECURITIES - 11.9% (a)
$13,000,000 AT&T Universal Card Master Trust, Class A, Series 1995-2 5.95% 10/17/02 $12,690,847
25,000,000 Deutsche Floorplan Receivables Master Trust, Series 1994-1-A 5.70% 2/15/01 25,062,500 (b)
10,000,000 Discover Card Master Trust I, Series 1996-3-A 6.05% 8/18/08 9,219,790
6,835,485 IBM Credit Receivables Lease Trust, Series 1993-1 4.55% 11/15/00 6,766,358
11,000,000 NationsBank Credit Card Master, Series 1995-A 6.45% 4/15/03 10,960,609
23,000,000 Sears Credit Account Master Trust II, Master Trust Certificates,
Series 1995-4-A 6.25% 1/15/03 23,005,267
13,000,000 Standard Credit Master Trust 1, Credit Card Participation
Certificates, Series 1995-9-A 6.55% 10/7/07 12,478,037
15,000,000 World Financial Network Credit Card Master Trust, Series 1996-B 9.90% 2/15/04 14,789,063
------------
Total Asset-Backed Securites (cost $116,941,042) 114,972,471
------------
MORTGAGE-BACKED SECURITIES - 16.3% (a)
15,300,000 Federal Home Loan Mortgage Corp., Participation Certificates 6.00% 4/1/11 14,520,656
26,000,000 Federal National Mortgage Association,
Participation Certificates 7.00% 2026 25,065,625 (d)
79,000,000 Government National Mortgage Association, Modified Pass
Through Certificates 6.50% 2026 73,939,063 (d)
45,677,362 Government National Mortgage Association, Modified Pass
Through Certificates 7.00% 2024-2025 44,101,297
------------
Total Mortgage-Backed Securities (cost $159,169,060) 157,626,641
------------
U.S. GOVERNMENT - 18.3% (a)
116,500,000 U.S. Treasury Bonds 6.875 - 13.125% 2003 - 2025 137,321,843
37,000,000 U.S. Treasury Notes 6.375 - 7.875% 1998 - 2004 39,289,952
------------
Total U.S. Government (cost $184,830,798) 176,611,795
------------
OPTIONS ON U.S. TREASURY BOND FUTURES - .004% (a)
U.S. Treasury Bond Futures, 100 call option contracts,
exercise price of $122, expires 5/18/1996 1,563
U.S. Treasury Bond Futures, 50 call option contracts,
exercise price of $110, expires 5/18/1996 37,500
------------
Total Options on U.S. Treasury Bond Futures (cost $207,055) 39,063
------------
SHORT-TERM SECURITIES - 9.6% (a)
Commercial Paper - 9.1%
10,000,000 Ford Motor Credit Co. 5.33% 5/17/96 9,976,311
23,000,000 Gillette Co. 5.35% 5/1/96 23,000,000
9,000,000 Heinz (H.J.) Co. 5.30% 5/13/96 8,984,100
13,600,000 Koch Industries 5.35% 5/1/96 13,600,000
4,000,000 McDonald's Corp. 5.32% 5/3/96 3,998,818
18,800,000 SmithKline Beecham Corp. 5.30% 5/20/96 18,747,412
10,000,000 Toys R Us, Inc. 5.32% 5/13/96 9,982,267
------------
88,288,908
------------
U.S. Government Agencies - 0.5%
4,850,000 Federal Home Loan Mortgage Corp., Discount Notes 5.20% 5/20/96 4,836,689
------------
Total Short-Term Securities (at amortized cost) 93,125,597
------------
Total Investments (cost $993,013,694) $965,552,867 (e)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Income Fund.
(b) Denotes variable rate obligations for which current yield is shown.
(c) Denominated in U.S. dollars.
(d) Denotes investments purchased on a when-issued basis.
(e) At April 30, 1996, the aggregate cost of securities for federal
income tax purposes was $993,013,694 and the net unrealized
depreciation of investments based on that cost was $27,460,827 which is
comprised of $4,020,572 aggregate gross unrealized
appreciation and $31,481,399 aggregate gross unrealized depreciation.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Municipal Bond Fund
Portfolio of Investments
April 30, 1996
(unaudited)
Principal Maturity
Amount Rate Date Value
- ------------- ------ ----------- ------------
<S> <C> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES - 98.4% (a)
Alabama - 0.9%
$4,000,000 City of Mobile, Alabama, General Obligation Refunding Warrants,
Series 1996, Insured by AMBAC 5.00% 2/15/16 $3,599,840 (d)
2,000,000 Huntsville, Alabama, General Obligation Warrants, Series B 7.88% 8/1/12 2,136,120 (b)
------------
5,735,960
------------
Arizona - 0.6%
1,700,000 Pima County, Arizona (Catalina Foothills Unified School District
#16), Unlimited Tax General Obligation Bonds, Series A, Insured
by MBIA 8.90% 7/1/05 2,166,480
1,500,000 Tucson, Arizona, Unlimited Tax General Obligation Refunding
Bonds, Insured by FGIC 6.10% 7/1/12 1,540,545
------------
3,707,025
------------
Arkansas - 0.6%
1,340,000 Arkansas Development Finance Authority, Correctional
Facilities Construction Revenue Bonds, Insured by MBIA 7.13% 11/15/10 1,452,292
1,000,000 Arkansas Housing Development Agency, Single Family Mortgage
Bonds, Series A 8.38% 7/1/10 1,193,430 (b)
875,000 Pope County, Arkansas, Pollution Control Revenue Refunding Bonds,
Series 1994 (Arkansas Power and Light Company Project),
Insured by FSA 6.30% 12/1/16 907,979
------------
3,553,701
------------
California - 9.9%
2,500,000 Alameda, California, Unified School District, Alameda County,
Crossover Refunding Bonds, Series A, Insured by AMBAC 6.10% 7/1/13 2,526,925
2,000,000 Alameda County, California, Certificates of Participation,
Revenue Refunding Bonds, 6/1/09 1,980,460
1,000,000 California Educational Facilities Authority (Stanford University),
Revenue Bonds 5.00% 1/1/15 910,500
4,400,000 California State Department of Water Resources
(Central Valley Project), Water System Revenue Bonds,
Series H 6.90% 12/1/25 4,844,224 (b)
3,000,000 California State Public Works Board, Department of Corrections,
Lease Revenue Bonds, State Prison, Series A 7.40% 9/1/10 3,462,420
2,000,000 California State Public Works Board, Lease Revenue Refunding
Bonds (Department of Corrections, Various State Prisons),
Series 1993A, Insured by AMBAC 5.25% 12/1/08 1,972,760
2,490,000 California Statewide Communities Development Authority,
Certificates of Participation (The Trustees of the J. Paul
Getty Trust) 5.00% 10/1/15 2,224,939
1,000,000 California State, Unlimited Tax General Obligation Bonds,
Veteran's Series AT 9.50% 2/1/10 1,378,540
2,000,000 California State, Various Purpose General Obligation Bonds,
Insured by AMBAC 6.30% 9/1/10 2,161,140
1,000,000 Central Valley Financing Authority, California, Cogeneration
Project Revenue Bonds, (Carson Ice-Gen Project), Series 1993 6.00% 7/1/09 967,250
1,900,000 El Cajon, California, Redevelopment Agency Tax Allocation
Refunding Bonds (El Cajon Redevelopment Project),
Insured by AMBAC 6.60% 10/1/22 2,025,799
2,000,000 Los Angeles County, California, Transportation Commission
Sales Tax Revenue Bonds, Proposition C, Series A,
Insured by MBIA 6.25% 7/1/13 2,052,420
2,000,000 Metropolitan Water District of Southern California, Unlimited
Tax General Obligation Bonds, Series G 6.63% 3/1/09 2,120,920 (b)
2,000,000 Rancho, California, Water District Financing Authority,
Revenue Refunding Bonds, Insured by FGIC 5.90% 11/1/15 2,001,640
1,000,000 Rio Linda, California, Union School District, Series 1992-A,
Insured by AMBAC 7.40% 8/1/10 1,140,210
2,815,000 Riverside County Transportation Commission, California,
Sales Tax Revenue Capital Appreciation Bonds,
Insured by MBIA Zero Coupon 6/1/04 1,862,376
4,000,000 Sacramento, California, Municipal Utility District Electric
Revenue Refunding Bonds,
Series D, Insured by MBIA 5.25% 11/15/20 3,621,880
2,000,000 Sacramento, California, Municipal Utility District, Electric
Revenue Bonds, Series Y, Insured by MBIA 6.75% 9/1/09 2,174,820
1,000,000 Sacramento Cogeneration Authority, Cogeneration Project
Revenue Bonds, (Procter & Gamble Project), 1995 Series 6.38% 7/1/10 998,500
1,500,000 San Francisco Bay Area Rapid Transit District, California,
Sales Tax Revenue Refunding Bonds, Series 1990,
Insured by MBIA 6.75% 7/1/10 1,677,915
15,000,000 San Joaquin Hills Transportation Corridor Agency, California,
Sr. Lien Convertible Toll Revenue Bonds Zero Coupon 1/1/13 11,055,150
3,000,000 San Mateo County, California, Joint Powers Financing Authority,
Lease Revenue Refunding Bonds, Capital Projects Program,
1993 Series, Insured by MBIA 5.00% 7/1/21 2,616,210
1,500,000 State of California, General Obligation Bonds 7.00% 8/1/06 1,709,610
2,490,000 University of California Revenue Bonds, Multiple Purpose
Projects, Series 1989-B, Insured by AMBAC 11.00% 9/1/98 2,850,701
------------
60,337,309
------------
Colorado - 5.7%
3,000,000 Arapahoe County, Colorado, E-470 Public Highway Authority,
Capital Improvement Trust Fund, Highway Revenue Bonds,
(E-470 Project) 6.95% 8/31/20 3,151,920
845,000 Colorado Housing & Finance Authority, Single Family Residential
Housing Revenue Bonds, Series 1987-B 9.00% 9/1/17 879,865
3,100,000 Colorado Springs, Colorado, Utilities System Refunding
Bonds, Series 1991-B 7.00% 11/15/21 3,491,716 (b)
1,945,000 Colorado State Colleges Board, Western State College,
Housing & Student Fee Revenue Bonds, Series 1992,
Insured by Connie Lee 6.63% 5/1/15 2,157,277 (b)
1,195,000 Colorado Water Resources Power Development Authority,
Clean Water Revenue Bonds, Series A, Insured by FSA 6.25% 9/1/13 1,235,570
1,850,000 Denver, Colorado, City & County Revenue Bonds, Sisters of
Charity of Leavenworth 5.00% 12/1/23 1,573,388
2,680,000 Douglas County School District RE-1, Colorado, Douglas &
Elbert Counties, Colorado, Project Fixed Rate Certificates
of Participation, (Colorado Association of School Board Leases
Purchase Finance Program) Series 1991-D 7.25% 12/1/96 2,732,019
2,000,000 Douglas County School District, Number RE 1, Douglas & Elbert
Counties, Colorado, General Obligation Bonds,
Insured by MBIA 6.50% 12/15/16 2,133,800
1,000,000 Eagle, Garfield, and Routt Counties, Colorado, Eagle County
School District No. RE50J, General Obligation Bonds,
Series 1994, Insured by FGIC 6.30% 12/1/12 1,046,300
1,885,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 12/1/08 949,154
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 6/1/07 1,043,998
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 6/1/08 983,745
3,000,000 Larimer County, Colorado, School District No. R-2, Poudre
Valley Unlimited Tax General Obligation Bonds,
Insured by MBIA 7.00% 12/15/16 3,505,470
4,485,000 Regional Transportation District, Colorado, Sales Tax
Revenue Refunding & Improvement Bonds, Series 1992,
Insured by FGIC 6.25% 11/1/12 4,655,833
5,000,000 St. Vrain Valley School District, Boulder, Larimer & Weld
Counties, Colorado, General Obligation Refunding &
Improvement Bonds, Series 1990-A, Insured by MBIA Zero Coupon 12/15/04 3,231,550
2,500,000 St. Vrain Valley School District, Boulder, Larimer & Weld
Counties, Colorado, General Obligation Refunding &
Improvement Bonds, Series 1990-A, Insured by MBIA Zero Coupon 12/15/03 1,699,750
------------
34,471,355
------------
Connecticut - 0.9%
4,000,000 Connecticut Special Tax Obligation, Transportation Infrastructure
Revenue Bonds, Series B 6.50% 10/1/10 4,419,520
1,000,000 Connecticut State Health & Education Facilities Authority,
Revenue Bonds, Hospital of St. Raphael, Series H,
Insured by AMBAC 5.25% 7/1/12 960,960
------------
5,380,480
------------
Florida - 3.3%
17,270,000 Broward County, Florida, Housing Finance Authority,
Home Mortgage Revenue Bonds, 1983 Series A Zero Coupon 4/1/14 2,750,420
3,000,000 City of Jacksonville, Florida, Sales Tax Revenue Bonds,
Series 1995 (River City Renaissance Project), Insured by FGIC 5.38% 10/1/18 2,826,690
1,000,000 Florida State Board of Education, Public Education Capital
Outlay General Obligation Bonds, Series B-1 7.88% 6/1/19 1,092,780 (b)
5,750,000 Florida State Turnpike Authority, Turnpike Revenue Refunding
Bonds, (Department of Transportation), Series A,
Insured by FGIC 5.00% 7/1/19 5,093,925
3,200,000 Hillsborough County, Florida, Industrial Development Authority
(Weyerhaeuser Company, Inc.), Industrial Development
Revenue Bonds, Series 1983 9.25% 6/1/08 3,259,968
1,705,000 Hillsborough County, Florida, Industrial Development Authority,
Florida (Tampa Electric Project), Pollution Control Revenue
Bonds, Series 1991 7.88% 8/1/21 1,955,976
3,000,000 Lee County, Florida, Transportation Facilities, Revenue Bonds,
Series 1995, Insured by MBIA 5.75% 10/1/22 2,939,940
------------
19,919,699
------------
Georgia - 2.9%
1,500,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series A, Insured by MBIA 6.10% 10/1/19 1,566,990
2,000,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series 1992, Insured by MBIA 6.00% 10/1/11 2,071,260
5,000,000 Cherokee County, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Insured by MBIA 5.50% 8/1/18 4,807,300
2,000,000 Development Authority of Fulton County, Georgia, Revenue
Bonds, (Clark Atlanta University Project), Series 1995, 5.13% 1/1/10 1,866,500
2,000,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-B 5.65% 3/1/12 2,016,500
3,500,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-D 5.00% 8/1/12 3,306,100
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series B 6.30% 3/1/09 1,093,110
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series B 6.30% 3/1/10 1,088,830
------------
17,816,590
------------
Idaho - 0.5%
1,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/07 565,690
3,115,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/10 1,476,323
2,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/11 885,400
------------
2,927,413
------------
Illinois - 1.3%
3,940,000 Central Lake County, Illinois, Joint Action Water Agency,
Unlimited Tax General Obligation Refunding Bonds 6.00% 2/1/19 3,867,661
1,000,000 City of Alton, Madison County, Illinois, Hospital Facility
Revenue Refunding Bonds, Series 1996,
(Saint Anthony's Health Center) 6.00% 9/1/14 909,000
2,000,000 Illinois Health Facilities Authority Revenue Refunding Bonds,
Lutheran General Health, Insured by FSA 6.00% 4/1/18 1,973,480
1,027,046 Illinois Health Facilities Authority (Community Provider
Pooled Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.90% 8/15/03 1,056,779 (b)
169,954 Illinois Health Facilities Authority (Community Provider
Pooled Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.90% 8/15/03 197,236
------------
8,004,156
------------
Indiana - 1.4%
2,450,000 Indiana Municipal Power Agency, Power Supply System
Revenue Bonds, Series A, Insured by MBIA 5.50% 1/1/23 2,266,421
1,100,000 Indianapolis Airport Authority Refunding Revenue Bonds,
Series 1996-A, Insured by FGIC 5.60% 7/1/15 1,052,601 (d)
410,000 Indianapolis, Indiana, Resource Recovery Revenue Bonds,
1985 Series A 7.90% 12/1/08 429,922
2,190,000 Indianapolis, Indiana, Resource Recovery Revenue Bonds,
1985 Series B 7.90% 12/1/08 2,296,412
2,100,000 Indianapolis, Indiana, Resource Recovery Revenue Bonds,
Ogden Martin
Systems, Series A 7.80% 12/1/04 2,200,863
------------
8,246,219
------------
Iowa - 1.5%
2,000,000 Iowa Finance Authority Revenue Bonds, Series 1995A,
(Correctional Facility Program), Insured by AMBAC 5.50% 6/15/15 1,946,840
3,500,000 Iowa Finance Authority, Iowa State Revolving Fund Revenue
Bonds, Combined Series 1993 5.20% 5/1/23 3,106,635
2,000,000 Iowa Finance Authority, Iowa State Revolving Fund Revenue
Bonds, Combined Series 1994 6.25% 5/1/24 2,042,700
2,275,000 Woodbury County, Iowa, Hospital System Revenue Refunding
Bonds, St. Luke's Obligated Group, Series 1995-A,
Insured by MBIA 5.50% 9/1/20 2,111,769
------------
9,207,944
------------
Kansas - 1.6%
8,000,000 Kansas City, Kansas, Utility System Refunding and
Improvement Revenue Bonds, Series 1994, Insured by FGIC 6.38% 9/1/23 8,454,720
1,255,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds,
Insured by AMBAC Zero Coupon 3/1/07 698,897 (b)
920,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds,
Insured by AMBAC Zero Coupon 3/1/07 512,339
------------
9,665,956
------------
Kentucky - 0.7%
45,000 Jefferson County, Kentucky, Home Mortgage Revenue Bonds,
Series 1983 9.63% 5/1/14 45,000
1,000,000 Kentucky Development Finance Authority, Refunding and
Improvement Revenue Bonds (Ashland Hospital, Kings
Daughter Project) 9.75% 8/1/05 1,081,700
750,000 Kentucky Turnpike Authority, Economic Development
Road Revenue and Revenue Refunding Bonds, Series 1993,
Insured by AMBAC 5.50% 7/1/09 759,052
5,345,000 Kentucky Turnpike Authority, Economic Development Road
Revenue Bonds, Insured by FGIC Zero Coupon 1/1/10 2,454,050
------------
4,339,802
------------
Louisiana - 1.0%
6,500,000 New Orleans, Louisiana, General Obligation Bonds, Series 1991,
Insured by AMBAC Zero Coupon 9/1/12 2,467,855
3,000,000 Orleans Parish School Board #87, Louisiana, Insured by MBIA 8.95% 2/1/08 3,901,590 (b)
------------
6,369,445
------------
Maine - 0.3%
1,250,000 Maine Health & Higher Education Facilities Authority,
Revenue Bonds, Series 1994, Insured by FSA 7.00% 7/1/24 1,356,012
350,000 Regional Waste Systems, Inc., Maine, Solid Waste Resource
Recovery System Revenue Bonds, Series A,B,C 7.95% 7/1/10 381,101
------------
1,737,113
------------
Maryland - 1.6%
2,000,000 Maryland Health & Higher Education Authority, Union Hospital of
Cecil County Revenue Bonds, Series 1992 6.70% 7/1/22 1,992,420
2,250,000 Maryland Health & Higher Education Facilities Authority,
Revenue Refunding Bonds, (Suburban Hospital Issue),
Series 1993 5.13% 7/1/21 1,979,932
4,500,000 Morgan State University, Maryland, Academic Fee and Auxiliary
Facilities Fees Revenue Refunding Bonds, Series 1993,
Insured by MBIA 6.05% 7/1/15 4,703,220
1,000,000 Prince George's County, Maryland, Dimensions Health Corp.,
Hospital Revenue Bonds, Series 1992 7.00% 7/1/22 1,133,850 (b)
------------
9,809,422
------------
Massachusetts - 4.9%
5,000,000 Commonwealth of Massachusetts, General Obligation Bonds,
Consolidated Loan of 1993, Series A 5.50% 11/1/08 5,044,950
2,000,000 Commonwealth of Massachusetts, General Obligation Refunding
Bonds, Series B 8/1/08 2,191,240
1,800,000 Commonwealth of Massachusetts, Limited Tax General Obligation
Bonds, Construction Loan, Series C 7.38% 12/1/08 1,970,496 (b)
1,500,000 Massachusetts Health and Education Facilities Authority
(Newton - Wellesley Hospital) Revenue Bonds, Series C 8.00% 7/1/18 1,645,515 (b)
2,500,000 Massachusetts Health and Education Facilities Authority,
Revenue Bonds, Daughters of Charity National Health System,
The Carney Hospital, Series D 6.10% 7/1/14 2,511,000
1,000,000 Massachusetts Health & Educational Facilities Authority
Revenue Bonds, Newton-Wellesley Hospital Issue, Series E,
Insured by MBIA 6.00% 7/1/18 1,003,130
1,500,000 Massachusetts Health & Education Facilities Authority,
Revenue Bonds, Series F 6.50% 7/1/12 1,572,315
5,000,000 Massachusetts State Port Authority, Revenue Bonds, Series B 6.00% 7/1/23 4,979,550
4,000,000 Massachusetts State Turnpike Authority, Turnpike Revenue Bonds,
Series A, Insured by FGIC 5.00% 1/1/20 3,497,600
2,500,000 Massachusetts State Water Resources Authority, General Refunding
Revenue Bonds, Series B, Insured by MBIA 5.00% 3/1/22 2,179,525
3,000,000 Plymouth County, Massachusetts, Correctional Facility Certificates
of Participation Bonds 7.00% 4/1/12 3,265,530
------------
29,860,851
------------
Michigan - 5.0%
10,000,000 Detroit, Michigan, Sewer Disposal Revenue Bonds, Linked Pars &
Inflows, Insured by FGIC 5.70% 7/1/23 9,599,400
2,000,000 Economic Development Corporation of the County of St. Clair,
Michigan, Pollution Control Revenue Refunding Bonds
(Detroit Edison Company Project), Series 1993-AA,
Insured by AMBAC 6.40% 8/1/24 2,093,240
1,400,000 Kent County, Michigan, Limited Tax General Obligation Refuse
Disposal System Refunding Bonds 8.30% 11/1/07 1,507,310
1,500,000 Livonia Public Schools, County of Wayne, Michigan, 1992 School
Building and Site Bonds, Series II (Unlimited Tax General
Obligation), Insured by FGIC Zero Coupon 5/1/09 725,370
2,460,000 Michigan Municipal Bond Authority, Government Loan Revenue
Refunding Bonds, Series A, Insured by FGIC Zero Coupon 12/1/05 1,475,336
390,000 Michigan State Hospital Finance Authority, Hospital Revenue and
Refunding Bonds, (Detroit Medical Center Obligated Group),
Series 1988-A 8.13% 8/15/12 429,601 (b)
110,000 Michigan State Hospital Finance Authority, Hospital Revenue and
Refunding Bonds, (Detroit Medical Center Obligated Group),
Series 1988-A 8.13% 8/15/12 116,971
2,750,000 Michigan State Hospital Finance Authority, Hospital Revenue
Bonds, (Holland Community Hospital), Series 1993 5.25% 1/1/08 2,611,703
1,100,000 Michigan State Hospital Finance Authority, Refunding Hospital
Bonds, St. Johns Hospital, Series A, Insured by AMBAC 5.75% 5/15/16 1,073,160
3,000,000 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds, (Sisters of Mercy Health Corp.), Insured by MBIA 5.38% 8/15/14 2,870,189
3,320,000 Sault St. Marie Chippewa Indians Housing Authority,
Health Facilities Revenue Bonds, (Tribal Health & Human
Services Center Project), Series 1992 7.75% 9/1/12 3,364,023
1,000,000 Vicksburg, Michigan, Community Schools, Qualified School
General Obligation Bonds, Kalamazoo & St. Joseph Counties,
Insured by MBIA 7.00% 5/1/07 1,119,560 (b)
1,860,000 West Ottawa, Michigan, Public School District, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/05 1,163,951
3,455,000 West Ottawa, Michigan, Public School District, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/04 2,304,520
------------
30,454,334
------------
Minnesota - 4.0%
2,500,000 City of Minneapolis, (Lifespan Inc., Abbott - Northwestern Hospital),
Hospital Facilities Refunding Revenue Bonds, 1987 Series B 9.13% 12/1/14 2,744,900 (b)
1,850,000 City of Minneapolis, (Lifespan Inc., Abbott - Northwestern Hospital),
Hospital Facilities Revenue Bonds, 1988 Series A 7.88% 12/1/14 1,997,667 (b)
285,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Prerefunded Revenue Bonds, (The Duluth Clinic, Ltd.),
Series 1992, Insured by AMBAC 6.30% 11/1/22 311,417 (b)
715,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Unrefunded Revenue Bonds, (The Duluth Clinic, Ltd.),
Series 1992, Insured by AMBAC 6.30% 11/1/22 734,369
7,685,000 Minneapolis, Minnesota, Community Development Agency, Tax
Increment Revenue Appreciation Bonds, Insured by MBIA Zero Coupon 3/1/09 3,774,565
3,500,000 St. Louis Park, Minnesota, Health Care Facilities (Park Nicollet
Medical Center Project), Revenue Bonds, Series 1990-A 9.25% 1/1/20 4,095,035 (b)
7,600,000 St. Louis Park, Minnesota, Health Care Facilities, Revenue Bonds,
(HealthSystem Minnesota Obligated Group), Series 1993,
Insured by AMBAC 5.10% 7/1/13 6,985,616
1,000,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series C, Insured by AMBAC 7.25% 7/1/18 1,117,800 (b)
1,180,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series A, Insured by AMBAC 7.25% 7/1/15 1,304,773 (b)
1,400,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series C, Insured by AMBAC 7.25% 7/1/15 1,564,920 (b)
------------
24,631,062
------------
Missouri - 2.4%
2,000,000 Boone County, Missouri, Hospital Revenue Refunding Bonds,
Series 1993 5.50% 8/1/09 1,904,040
2,650,000 Missouri State Health and Education Facilities Authority
(Christian Health Services), Health Facilities Refunding &
Improvement Revenue Bonds, Series 1991 A, Insured by FGIC 6.88% 2/15/21 2,948,602 (b)
3,000,000 Missouri State Health and Education Facilities Authority, Health
Facilities Revenue Bonds, (Barnes-Jewish, Inc./Christian
Health Services), Series 1993-A 5.25% 5/15/12 2,814,300
1,425,000 Missouri State Health and Education Facilities Authority, Health
Facilities Revenue Refunding Bonds, Lester E. Cox Medical
Center Project, Series 1993-I, Insured by MBIA 5.35% 6/1/09 1,415,666
Missouri - (continued)
2,925,000 Missouri State Health and Education Facilities Authority, Heartland
Health System Revenue Bonds, Series 1992,
Insured by AMBAC 6.35% 11/15/17 3,049,985
1,500,000 Missouri State Health and Education Facilities Authority,
SSM Health Care Refunding Revenue Bonds, Series A,
Insured by MBIA 6.25% 6/1/07 1,593,585
1,000,000 State Environmental Improvement and Energy Resources
Authority, (State of Missouri), Water Pollution Control Revenue
Bonds, (State Revolving Fund Program - Multiple Participant
Series), Series 1995-E 5.63% 7/1/16 980,430
------------
14,706,608
------------
Montana - 0.8%
1,240,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Insured by MBIA 6.88% 6/1/20 1,377,119 (b)
775,148 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.88% 6/1/20 848,771 (b)
2,384,852 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.88% 6/1/20 2,577,715
------------
4,803,605
------------
Nebraska - 0.6%
3,455,000 Omaha Public Power District, Nebraska, Electric Revenue
Refunding Bonds, Series B 6.15% 2/1/12 3,614,794
------------
New Hampshire - 0.2%
1,100,000 New Hampshire Turnpike System, Residual Interest Bonds,
1991 Refunding, Series C, Insured by FGIC 9.74% 5/9/96 1,279,674 (c)
------------
New Jersey - 2.6%
1,035,000 Camden County, New Jersey, Municipal Utility Authority Sewer
Revenue Bonds, Insured by FGIC 8.25% 12/1/17 1,122,665 (b)
665,000 Camden County, New Jersey, Municipal Utility Authority Sewer
Revenue Bonds, Insured by FGIC 8.25% 12/1/17 714,609
1,250,000 East Orange, New Jersey, Unlimited Tax General Obligation Bonds,
Insured by FSA 8.40% 8/1/06 1,552,013
1,000,000 Mercer County, New Jersey, Improvement Authority, County
Guaranteed Solid Waste Revenue Bonds, Series 1988 7.90% 4/1/13 1,055,640 (b)
1,000,000 Mercer County, New Jersey, Improvement Authority, Revenue Bonds,
Series 1991 6.60% 11/1/14 1,096,670 (b)
2,585,000 New Jersey Health Care Facilities Financing Authority, Jersey Shore
Medical Center Revenue Bonds, Insured by AMBAC 6.10% 7/1/10 2,683,876
3,000,000 New Jersey Transit Corp., (Raymond Plaza East, Inc.), Certificates
of Participation, Insured by FSA 6.38% 10/1/06 3,298,200
1,390,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
1984 Series 10.38% 1/1/03 1,663,107 (b)
2,195,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/07 1,172,657
2,595,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/09 1,218,404
------------
15,577,841
------------
New Mexico - 2.3%
2,000,000 City of Rio Rancho, New Mexico, Water and Wastewater
System Bonds, Series 1995-A, Insured by FSA 6.00% 5/15/22 2,004,420
5,000,000 Farmington, New Mexico, Power Revenue Refunding Bonds,
Series 1983 9.88% 1/1/13 6,560,450 (b)
4,040,000 Farmington, New Mexico, Utility Systems Revenue Bonds,
Insured by AMBAC 9.88% 1/1/08 5,318,862 (b)
------------
13,883,732
------------
New York - 5.5%
4,225,000 Metropolitan Transportation Authority, New York, Transit
Facilities Service Contract Bonds, Series O 5.75% 7/1/13 4,051,268
5,200,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series A, Insured by MBIA 6.38% 7/1/18 5,446,948
4,250,000 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Bonds, Series B, Insured by MBIA 6.25% 7/1/14 4,384,980
2,000,000 New York City Municipal Water Finance Authority, Water & Sewer
System Revenue Bonds, Series A, Insured by AMBAC 5.88% 6/15/12 2,044,920
1,250,000 New York City Municipal Water Finance Authority, Water & Sewer
System Revenue Bonds 8.75% 6/15/10 1,341,613 (b)
2,000,000 New York State Dorm Authority (City University), Construction
Revenue Bonds, Series A 8.13% 7/1/17 2,136,660 (b)
5,000,000 New York State Dorm Authority, Revenue Refunding Bonds,
State University Educational Facilities, Series B 5.00% 5/15/18 4,231,150
2,215,000 New York State Medical Care Facilities Finance Agency
(Ellis Hospital), Insured Mortgage Hospital Bonds, Series B,
Insured by FHA 8.00% 2/15/08 2,398,513 (b)
2,860,000 New York State Thruway Authority, Highway & Bridge Trust
Fund, Revenue Bonds, Series 1994-B, Insured by FGIC 6.00% 4/1/14 2,906,790
1,620,000 New York State Urban Development Corp., Project Revenue Bonds,
(Syracuse University Center for Science and Technology Loan),
1995 Refunding Series 6.00% 1/1/09 1,604,286
1,720,000 New York State Urban Development Corp., Project Revenue Bonds,
(Syracuse University Center for Science and Technology Loan),
1995 Refunding Series 6.00% 1/1/10 1,694,647
1,000,000 Triborough Bridge & Tunnel Authority, New York, General Purpose
Revenue Bonds, Series Q 6.75% 1/1/09 1,124,520
------------
33,366,295
------------
North Carolina - 1.9%
2,500,000 County of Pitt, North Carolina, Pitt County Memorial Hospital
Revenue Bonds, Series 1995 5.50% 12/1/15 2,373,550
1,000,000 Union County, North Carolina, Enterprise System Revenue Bonds,
Series 1996, Insured by MBIA 5.50% 6/1/21 958,000 (d)
2,250,000 County of Pasquotank, North Carolina, 1995, (Elizabeth City
Pasquotank Public Schools Project) Insured by MBIA 5.00% 6/1/15 2,031,773
2,500,000 North Carolina Municipal Power Agency #1 (Catawba Electric),
Electric Revenue Bonds, Insured by MBIA 5.00% 1/1/18 2,229,450
4,000,000 North Carolina Municipal Power Agency #1, Catawba Electric
Revenue Refunding Bonds, Series 1992, Insured by MBIA 6.00% 1/1/11 4,162,280
------------
11,755,053
------------
North Dakota - 0.7%
1,000,000 Mercer County, North Dakota, Pollution Control Revenue
Refunding Bonds, (Ottertail Power Co. Project) 6.90% 2/1/19 1,064,470
1,000,000 North Dakota Municipal Bond Bank, State Revolving Fund
Program Bonds, Series A 6.25% 10/1/14 1,014,120
2,000,000 North Dakota Municipal Bond Bank, State Revolving Fund
Program Bonds, Series 1995-A 6.30% 10/1/15 2,040,640
------------
4,119,230
------------
Ohio - 4.0%
1,050,000 Akron, Bath & Copley Joint Township, Ohio, (Children's Hospital
Medical Center), Hospital District Revenue Bonds,
Insured by AMBAC 7.45% 11/15/20 1,192,884 (b)
3,785,000 City of Cleveland, Ohio, Public Power System, First Mortgage
Revenue Bonds, Series 1994-A, Insured by MBIA 7.00% 11/15/24 4,193,174
1,000,000 Cleveland, Ohio, Waterworks Improvement First Mortgage
Refunding Revenue Bonds, Series 1993-G, Insured by MBIA 5.50% 1/1/09 1,000,820
1,000,000 County of Franklin, Ohio, Hospital Refunding and Improvement
Revenue Bonds, 1996 Series A, (The Children's
Hospital Project) 5.75% 11/1/20 948,490 (d)
1,630,000 Cuyahoga County, Ohio, (Deaconess Hospital), Hospital
Revenue Bonds, Series C 7.45% 10/1/18 1,856,994 (b)
1,470,000 Lorain County, Ohio, (Humility of Mary Health System),
Hospital Revenue Bonds 7.13% 12/15/06 1,590,040
2,000,000 Ohio Higher Educational Facility Commission (Case Western
Reserve University Project), Series B 6.50% 10/1/20 2,124,480
1,500,000 Ohio Higher Educational Facility Commission, Higher
Educational Revenue Bonds, (Ohio Dominican College
1994 Project) 6.63% 12/1/14 1,542,960
5,000,000 Ohio State Air Quality Development Authority, Cleveland Electric,
Pollution Control Revenue Bonds, Insured by FGIC 8.00% 12/1/13 5,900,250
2,250,000 Ohio State Air Quality Development Authority, Columbus &
Southern Pollution Control Revenue Bonds, Insured by FGIC 6.38% 12/1/20 2,340,945
1,795,000 Trumbull County, Ohio (Memorial Hospital), Hospital Revenue
Refunding & Improvement Bonds, Series 1991-B,
Insured by FGIC 6.90% 11/15/12 1,932,892
------------
24,623,929
------------
Oklahoma - 1.8%
5,220,000 Bass, Oklahoma, Memorial Baptist Hospital 8.35% 5/1/09 6,532,726 (b)
1,175,000 Grand River Dam Authority, Oklahoma, Revenue
Refunding Bonds, Series 1993, Insured by FSA 5.75% 6/1/08 1,220,602
1,500,000 Oklahoma Municipal Power Authority, Electric Revenue
Refunding Bonds, Series B, Insured by MBIA 5.75% 1/1/24 1,524,945
1,500,000 Oklahoma Municipal Power Authority, Power Supply System
Revenue Bonds, Series 1992-B, Insured by MBIA 5.88% 1/1/12 1,553,610
------------
10,831,883
------------
Oregon - 0.8%
2,700,000 Clackamas County, Oregon, Health Facilities Authority, Adventist
Health-West Revenue Refunding Bonds, Series 1992-A,
Insured by MBIA 6.35% 3/1/09 2,840,616
2,000,000 Hospital Facility Authority of the Western Lane Hospital District,
Oregon, Revenue Refunding Bonds, Series 1994, (Sisters of
St. Joseph of Peace, Health & Hospital Services),
Insured by MBIA 5.88% 8/1/12 2,015,860
------------
4,856,476
------------
Pennsylvania - 1.8%
2,100,000 Allegheny County, Pennsylvania, Hospital Development Authority,
Hospital Revenue Bonds, Series A-1995, (Allegheny General
Hospital Project), Insured by MBIA 6.20% 9/1/15 2,147,817
2,575,000 Allegheny County, Pennsylvania, Sanitary Authority, Sewer
Revenue Bonds, Series A, Insured by FGIC Zero Coupon 6/1/08 1,303,027
2,000,000 Delaware River Joint Toll Bridge Commission, Pennsylvania,
Toll Bridge Revenue Bonds 7.88% 7/1/18 2,184,540 (b)
3,170,000 Millcreek Township, Pennsylvania, School District, General
Obligation Bonds, Insured by FGIC Zero Coupon 8/15/09 1,498,681
2,000,000 Monroeville, Pennsylvania, Hospital Authority, Forbes Health
System Revenue Bonds, Series 1992 7.00% 10/1/03 2,108,320
3,000,000 Pennsylvania State, General Obligation Bonds, Second
Series of 1992, Insured by AMBAC Zero Coupon 7/1/06 1,766,610
------------
11,008,995
------------
Puerto Rico - 2.5%
4,000,000 Puerto Rico Commonwealth, Aqueduct & Sewer Revenue Bonds,
Series A 9.00% 7/1/09 5,113,000 (b)
2,000,000 Puerto Rico Commonwealth, Unlimited Tax General
Obligation Bonds 6.45% 7/1/17 2,082,960
6,500,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series T 6.00% 7/1/16 6,514,040
1,500,000 University of Puerto Rico, University System Revenue Bonds,
Series M, Insured by MBIA 5.25% 6/1/25 1,380,720
------------
15,090,720
------------
South Carolina - 1.4%
2,000,000 Greenville, South Carolina, Hospital System, Hospital Facility
Revenue Bonds, Series A, Insured by FGIC 7.50% 5/1/16 2,040,000 (b)
2,000,000 Piedmont Municipal Power Agency, South Carolina,
Electric Revenue Refunding Bonds, Series 1991,
Insured by FGIC 6.25% 1/1/21 2,095,500
5,000,000 Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, Insured by FGIC 5.00% 1/1/22 4,331,450
------------
8,466,950
------------
Tennessee - 0.3%
1,750,000 Bristol, Tennessee, Health and Educational Facilities Authority,
Bristol Memorial Hospital Revenue Bonds, Insured by FGIC 7.00% 9/1/21 1,953,875 (b)
------------
Texas - 9.9%
2,165,000 Arlington, Texas, Independent School District, Unlimited Tax
Refunding & Improvement Bonds, Series 1992, Permanent
School Fund Guarantee Zero Coupon 2/15/09 1,042,404
7,000,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA Zero Coupon 11/15/08 3,456,530
8,100,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA Zero Coupon 11/15/09 3,731,346
1,000,000 Austin, Texas, Utility System Revenue Refunding Bonds,
Insured by FGIC 6.00% 11/15/13 1,044,280
1,575,000 Bexar County, Texas, Limited Tax General Obligation Bonds 5.00% 6/15/15 1,417,028
2,500,000 Bexar Metropolitan Water District, Texas, Waterworks System
Revenue Bonds, Series 1994, Insured by AMBAC 5.00% 5/1/19 2,258,225 (b)
1,000,000 Brazos River Authority, Texas, Collateralized Revenue
Refunding Bonds (Houston Lighting & Power Co.),
1988 Series B 8.25% 5/1/15 1,077,700
2,000,000 Brazos River Authority, Texas, Houston Lighting
& Power Co., Revenue Refunding Bonds, Insured by MBIA 8.25% 5/1/15 2,165,720
1,500,000 Conroe, Texas, Independent School District Unlimited Tax
General Obligation Refunding Bonds, Permanent School
Fund Guarantee 5.50% 8/15/21 1,406,580
2,000,000 Copperas Cove, Texas, Independent School District,
Unlimited Tax General Obligation Bonds, Permanent School
Fund Guarantee 6.90% 8/15/14 2,262,180 (b)
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.38% 11/1/08 1,135,020
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.38% 11/1/09 1,128,070
2,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.38% 11/1/10 2,256,140
4,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds
Series 1994-A, Insured by MBIA 6.00% 11/1/12 4,058,360
2,285,000 Denton, Texas, Independent School District, Unlimited Tax General
Obligation Refunding Bonds, Permanent School Fund Guarantee 6.25% 2/15/09 2,438,438
1,000,000 Georgetown, Texas, Higher Education Finance Corp., Higher
Education Revenue Bonds, Series 1994 (Southwestern
University Project) 6.30% 2/15/14 1,019,570
2,250,000 Harris County, Texas, Toll Road Sr. Lien Bonds, Series A,
Insured by MBIA 6.38% 8/15/24 2,368,485
1,750,000 Harris County, Texas, Tollroad Unlimited Tax & Subordinated Lien,
Revenue Refunding Bonds, Series 1988 8.13% 8/1/15 1,925,368 (b)
1,205,000 Houston, Texas, Housing Finance Corp., Single Family Mortgage
Revenue Bonds, Series 1983 10.00% 9/15/14 1,202,711
4,000,000 Houston, Texas, Water & Sewer System Revenue Refunding Jr.
Lien Bonds; Series A, Insured by MBIA 6.20% 12/1/20 4,092,480
3,000,000 Leander Independent School District, Texas, (Travis and
Williamson Counties), Unlimited Tax School Building and
Refunding Bonds, Series 1994-A, Permanent School Fund
Guarantee 6.00% 8/15/18 2,974,200
1,845,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.38% 7/1/10 2,089,942
1,000,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.38% 7/1/11 1,125,740
11,615,000 Southeastern Texas Housing Finance Corp., Single Family
Mortgage Revenue Bonds Zero Coupon 9/1/17 3,093,655 (b)
4,315,000 Texas State, Veterans Land Board General Obligation Bonds 0.05% 7/1/10 1,914,479 (b)
2,500,000 Travis County, Texas, Housing Finance Corporation, Single
Family Mortgage Revenue Refunding Bonds, Series 1994-A 6.75% 4/1/14 2,605,650
3,210,000 Willis, Texas, Independent School District, Government Obligation
Bonds, Permanent School Fund Guarantee 6.50% 2/15/16 3,482,433 (b)
440,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guarantee 6.50% 2/15/16 458,405
1,175,000 Wylie, Texas, Independent School District, (Collin County),
Unlimited Tax School Building & Refunding Bonds,
Series 1994, Permanent School Fund Guarantee 6.88% 8/15/14 1,296,695
------------
60,527,834
------------
Utah - 1.6%
1,000,000 Intermountain Power Agency, Utah, Power Supply Revenue
Bonds, Series A, Insured by MBIA 6.00% 7/1/09 1,002,790
3,405,000 Timpanogos Special Service District, Utah County, Utah, Sewer
Revenue Bonds, Series 1996-A, Insured by AMBAC 6.10% 6/1/19 3,410,550
3,750,000 Utah Associated Municipal Power Systems, San Juan Project
Revenue Bonds, Series O, Insured by MBIA 6.25% 6/1/14 3,859,875
1,580,000 West Valley City, Utah, Municipal Building Authority, Lease
Refunding Bonds, Insured by MBIA 6.00% 1/15/10 1,612,975
------------
9,886,190
------------
Virginia - 2.2%
2,750,000 Fairfax County, Virginia, Economic Development Authority,
Lease Revenue Bonds, (Government Center Properties),
Series 1994 5.50% 5/15/14 2,628,808
3,000,000 Industrial Development Authority of Fairfax County, Virginia,
Health Care Revenue Bonds, (Inova Health System Project),
Series 1996 5.88% 8/15/16 2,952,540
4,300,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1994 Series H, Subseries H-2 6.50% 1/1/14 4,422,722
1,200,000 Virginia State Housing Development Authority, Commonwealth
Mortgage Bonds, Series D Subseries D-2, Insured by MBIA 5.55% 1/1/11 1,186,860
2,000,000 Virginia State, Unlimited Tax General Obligation Bonds 6.50% 6/1/15 2,230,480 (b)
------------
13,421,410
------------
Washington - 5.4%
1,655,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A 8.75% 9/1/18 2,170,202 (b)
1,395,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A 8.75% 9/1/18 1,736,147
2,000,000 Grant County, Washington, Public Utility District No. 2,
Columbia River, Priest Rapids Hydro Electric Development
Project, Second Series Revenue Bonds, Series A,
Insured by AMBAC 5.00% 1/1/23 1,718,860
5,000,000 King County, Washington, Unlimited Tax General Obligation
Bonds, Series A 6.75% 12/1/09 5,428,200 (b)
2,015,000 Tacoma, Washington, Utilities Refuse Revenue Bonds,
Insured by MBIA 6.63% 12/1/11 2,122,520
5,000,000 Washington State Public Power Supply System, Nuclear
Project No. 1, Revenue Refunding Bonds 7.50% 7/1/15 5,388,400
2,500,000 Washington State Public Power Supply System, Nuclear
Project No. 3, Revenue Refunding Bonds
Series B, Insured by MBIA Zero Coupon 7/1/10 1,088,300
1,000,000 Washington State Public Power Supply System, Nuclear
Project No. 3, Revenue Refunding Bonds, Insured by FGIC 7.25% 7/1/15 1,105,200 (b)
3,000,000 Washington State, Unlimited Tax General Obligation Bonds,
Series 93A 5.75% 10/1/12 3,041,250
1,500,000 Washington State, Unlimited Tax General Obligation Bonds,
Series A 6.25% 2/1/11 1,585,980
2,400,000 Washington State, Unlimited Tax General Obligation Bonds 6.70% 6/1/16 2,614,464 (b)
2,000,000 Washington State, Unlimited Tax General Obligation Bonds 6.00% 6/1/12 2,079,640
2,500,000 Washington State, Various Purpose General Obligation Bonds 6.25% 6/1/10 2,654,175
------------
32,733,338
------------
Wisconsin - 0.7%
4,315,000 State of Wisconsin, Clean Water Revenue Bonds, 1995 Series 1 5.80% 6/1/15 4,231,850
------------
Wyoming - 0.4%
2,500,000 State of Wyoming, Farm Loan Board, Capital Facilities
Revenue Bonds, Series 1994 6.10% 4/1/24 2,522,825
------------
Total Long-Term Municipal Securities (cost $569,730,222) 599,438,943
------------
SHORT-TERM MUNICIPAL SECURITIES - 1.6% (a,c)
500,000 Berkeley County, South Carolina, (Amoco Chemical Co. Project),
Pollution Control Revenue Refunding Bonds, Series 1994 4.00% 5/1/96 500,000
2,000,000 City of Hammond, Indiana, (Amoco Chemical Co. Project),
Pollution Control Revenue Refunding Bonds, Series 1994 4.00% 5/1/96 2,000,000
1,900,000 Illinois Development Finance Authority, (Amoco Oil Company
Project), Pollution Control Revenue Refunding Bonds,
Series 1994 4.00% 5/1/96 1,900,000
100,000 Maricopa County, Arizona Pollution Control Corp.,
Pollution Control Revenue Refunding Bonds, (Arizona
Public Service Co. Palo Verde Project), 1994 Series B 4.10% 5/1/96 100,000
2,700,000 Maricopa County, Arizona Pollution Control Corp.,
Pollution Control Revenue Refunding Bonds, (Arizona
Public Service Co. Palo Verde Project), 1994 Series E 4.10% 5/1/96 2,700,000
$2,700,000 Michigan Strategic Fund, Variable Rate Demand
Pollution Control Revenue Refunding Bonds,
(Consumers Power Company Project), Series 1988-A 4.10% 5/1/96 2,700,000
------------
Total Short-Term Municipal Securities (at amortized cost) 9,900,000
------------
Total Investments (cost $579,630,222) $609,338,943 (e)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood Municipal
Bond Fund.
(b) Denotes securities that have been pre-refunded or escrowed to maturity. Under such an arrangement, money is
deposited into an irrevocable escrow account and is used to purchase U.S. Treasury securities or Government Agency
securities with maturing principal and interest earnings sufficient to pay all debt service requirements of the pre-refunded
bonds. Because the original bonds assume a quality rating equivalent to the escrowed U.S. Government securities, they
are considered to be U.S. Government securities for purposes of portfolio diversification requirements.
(c) Denotes variable rate obligations for which the current yield and next scheduled interest reset date are shown.
(d) Denotes investments purchased on a when-issued basis.
(e) At April 30, 1996, the aggregate cost of securities for federal income tax purposes was $579,630,222 and the net
unrealized appreciation of investments based on that cost was $29,708,721 which is comprised of $33,510,835 aggregate
gross unrealized appreciation and $3,802,114 aggregate gross unrealized depreciation.
(f) Miscellaneous abbreviations:
AMBAC- AMBAC Indemnity Corp.
Connie Lee- Connie Lee Insurance Co.
FGIC- Financial Guaranty Insurance Co.
FHA- Federal Housing Administration
FSA- Federal Security Assurance, Inc.
MBIA- Municipal Bond Investors Assurance Corp.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Money Market Fund
Portfolio of Investments
April 30, 1996
(unaudited)
Principal Maturity
Amount Rate Date Value
---------- ----- ------------ ------------
<S> <C> <C> <C> <C>
BANKER'S ACCEPTANCES - 2.6% (a)
$5,000,000 Banker's Trust Co., New York 5.22% 9/9/96 $4,905,025
5,000,000 Nationsbank, N.A. (South) 5.25% 7/1/96 4,955,521
------------
Total Bank's Acceptances 9,860,546
------------
BANK NOTES - 3.6%
5,000,000 Nationsbank, N.A. 5.15% 5/3/96 5,000,000
5,000,000 Nationsbank, N.A. 5.12% 5/28/96 5,000,000
4,000,000 PNC Bank, Pittsburgh, N.A., Medium Term Bank Notes 5.65% 9/18/96 3,999,525
------------
Total Bank Notes 13,999,525
------------
COMMERCIAL PAPER - 80.1% (a)
Agriculture - 1.3%
5,000,000 Canadian Wheat Board 4.98% 6/5/96 4,975,792
------------
Banking-Domestic - 1.3%
5,000,000 Norwest Corp 5.04% 5/20/96 4,986,700
------------
Banking-Foreign - 9.7%
5,000,000 Accor S.A., (Banque Nationale de Paris, Direct Pay
Letter of Credit) 5.30% 8/2/96 4,931,541
5,000,000 Finance One Funding Corp., (Credit Suisse, Direct Pay
Letter of Credit) 5.56% 5/7/96 4,995,367
3,500,000 Finance One Funding Corp., (Credit Suisse, Direct Pay
Letter of Credit) 5.33% 7/26/96 3,455,435
5,000,000 Kaempfer Capital Corp., (Barclay's Bank plc, Direct Pay
Letter of Credit) 5.08% 5/2/96 4,999,294
5,000,000 PEMEX Capital, Inc., (Credit Suisse, Direct Pay Letter
of Credit) 5.32% 6/25/96 4,959,361
5,000,000 PEMEX Capital, Inc., (Swiss Bank Corp., Direct Pay
Letter of Credit) 5.33% 6/17/96 4,965,207
5,000,000 U.S. Prime Property, Inc., (ABN AMRO Bank, N.V., Direct
Pay Letter of Credit) 5.10% 5/6/96 4,996,458
4,000,000 U.S. Prime Property, Inc., (ABN AMRO Bank, N.V., Direct
Pay Letter of Credit) 5.12% 6/10/96 3,977,244
------------
37,279,907
------------
Computer & Office Equipment - 5.2%
5,000,000 Electronic Data Systems Corp. 5.25% 5/20/96 4,986,146
5,000,000 Electronic Data Systems Corp. 5.12% 6/7/96 4,973,689
5,000,000 Hewlett-Packard Co. 4.95% 6/25/96 4,962,188
5,000,000 IBM Credit Corp. 5.30% 5/15/96 4,989,694
19,911,717
------------
Cosmetics & Toiletries - 0.5%
2,000,000 Unilever Capital Corp. 4.90% 10/25/96 1,951,817
------------
Drugs & Healthcare - 2.0%
3,000,000 Lilly (Eli) & Co. 5.07% 6/18/96 2,979,720
5,000,000 Warner Lambert Co 5.08% 7/26/96 4,939,322
------------
7,919,042
------------
Education - 5.3%
4,000,000 Leland H. Stanford Junior University 5.07% 5/21/96 3,988,733
850,000 Leland H. Stanford Junior University 5.19% 7/10/96 841,422
5,000,000 Leland H. Stanford Junior University 4.97% 6/18/96 4,966,867
5,000,000 Leland H. Stanford Junior University 5.35% 10/7/96 4,881,854
5,895,000 Yale University 5.28% 7/29/96 5,818,051
------------
20,496,927
------------
Finance-Automotive - 3.8%
5,000,000 Ford Motor Credit Co 5.28% 7/24/96 4,938,400
5,000,000 General Motors Acceptance Corp 5.38% 9/16/96 4,896,883
2,000,000 General Motors Acceptance Corp 5.34% 7/16/96 1,977,453
3,000,000 General Motors Acceptance Corp 5.10% 7/2/96 2,973,650
------------
14,786,386
------------
Finance-Commercial - 6.4%
5,000,000 CIT Group Holdings, Inc 5.32% 5/8/96 4,994,828
5,000,000 CIT Group Holdings, Inc 5.29% 7/15/96 4,944,896
5,000,000 General Electric Capital Corp 5.26% 5/16/96 4,989,042
5,000,000 General Electric Capital Corp 5.45% 5/3/96 4,998,486
5,000,000 General Electric Capital Corp 5.26% 9/3/96 4,908,681
------------
24,835,933
------------
Finance-Consumer - 6.4%
5,000,000 Associates Corp. of North America 5.29% 6/24/96 4,960,325
5,000,000 Associates Corp. of North America 5.26% 6/26/96 4,959,089
5,000,000 AVCO Financial Services, Inc 5.28% 5/20/96 4,986,067
5,000,000 AVCO Financial Services, Inc 5.11% 5/16/96 4,989,354
5,000,000 Beneficial Corp 5.17% 5/22/96 4,984,921
------------
24,879,756
------------
Finance-Retail - 3.9%
5,000,000 Sears Roebuck Acceptance Corp 5.10% 5/3/96 4,998,583
5,000,000 Sears Roebuck Acceptance Corp 5.35% 6/26/96 4,958,389
5,000,000 Sears Roebuck Acceptance Corp 5.15% 5/31/96 4,978,542
------------
14,935,514
------------
Finance-Structured - 12.9%
3,000,000 Ciesco L.P 5.27% 6/10/96 2,982,432
4,000,000 Ciesco L.P 5.06% 5/17/96 3,991,004
2,100,000 Corporate Asset Funding Co 5.15% 5/10/96 2,097,296
5,100,000 Corporate Asset Funding Co 5.32% 7/9/96 5,047,997
4,000,000 Corporate Asset Funding Co 5.13% 5/3/96 3,998,860
5,000,000 CXC, Inc 5.27% 6/19/96 4,964,135
5,000,000 CXC, Inc 5.23% 6/14/96 4,968,039
1,967,000 Delaware Funding Corp 5.28% 5/2/96 1,966,712
5,000,000 New Center Asset Trust 5.26% 8/16/96 4,921,831
5,000,000 New Center Asset Trust 5.29% 8/30/96 4,911,099
4,900,000 Preferred Receivables Funding Corp 5.32% 5/28/96 4,880,449
5,000,000 Preferred Receivables Funding Corp 5.25% 6/19/96 4,964,271
------------
49,694,125
------------
Financial Services - 2.6%
5,000,000 American Express Credit Corp 5.23% 6/6/96 4,973,850
5,000,000 American Express Credit Corp 4.94% 7/12/96 4,950,600
------------
9,924,450
------------
Food & Beverage - 5.1%
5,000,000 Cargill, Inc 5.22% 6/7/96 4,973,175
5,000,000 CPC International, Inc. 5.27% 8/5/96 4,929,733
5,000,000 Heinz (H.J.) Co 5.07% 5/10/96 4,993,663
5,000,000 Nestle Capital Corp 5.04% 5/6/96 4,996,500
------------
19,893,071
------------
Household Products - 1.3%
5,000,000 Colgate-Palmolive Co. 5.30% 7/19/96 4,941,847
------------
Industrial - 4.6%
3,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.) 5.13% 5/29/96 2,988,030
5,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.) 5.15% 6/21/96 4,963,521
5,000,000 Monsanto Co 5.26% 7/8/96 4,950,322
5,000,000 Monsanto Co 5.28% 8/23/96 4,916,400
------------
17,818,273
------------
Insurance - 2.6%
5,000,000 A.I. Credit Corp 5.28% 7/18/96 4,942,800
5,000,000 Prudential Funding Corp 5.05% 6/4/96 4,976,153
------------
9,918,953
------------
Petroleum - 3.9%
15,275,000 Koch Industries, Inc. 5.35% 5/1/96 15,275,000
------------
Transportation - 1.3%
5,000,000 United Parcel Service of America, Inc. 5.05% 6/3/96 4,976,854
------------
Total Commercial Paper 309,402,064
------------
CERTIFICATES OF DEPOSIT - 2.6% (a)
Euro Dollar
5,000,000 Morgan Guaranty Trust Co. of New York 5.35% 7/15/96 5,000,203
5,000,000 Republic National Bank- New York (Canada) 5.20% 6/10/96 4,998,693
------------
Total Certificates of Deposits 9,998,896
------------
VARIABLE RATE NOTES - 11.1% (a,b)
8,000,000 Boatmen's National Bank of St. Louis (Bank Note) 5.48% 5/13/96 8,000,000
10,000,000 Federal National Mortgage Association 5.25% 5/1/96 9,994,623
10,000,000 Illinois Student Assistance Commission, (Student Loan
Market Association, Direct Pay Letter of Credit) 5.37% 5/1/96 10,000,000
5,000,000 Illinois Student Assistance Commission, (Bank of America,
Illinois, Direct Pay Letter of Credit) 5.45% 5/1/96 5,000,000
$10,000,000 Wachovia Bank of North Carolina, N.A. 5.38% 5/8/96 10,000,000
------------
Total Variable Rate Notes 42,994,623
------------
Total Investments (at amortized cost) $386,255,654 (c)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Money Market Fund.
(b) Denotes variable rate obligations for which the current yield and
the next scheduled interest reset date are shown.
(c) Also represents cost for federal income tax purposes.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Opportunity Growth Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1996
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $186,978,480 ) $236,429,933
Cash 105,868
Receivable for investment securities sold 10,358,283
Receivable for capital stock sold 18,195
Unamortized organization costs 16,740
------------
Total assets 246,929,019
------------
LIABILITIES:
Payable for investment securities purchased 5,505,453
Accrued expenses 122,228
------------
Total liabilities 5,627,681
------------
NET ASSETS $241,301,338
============
NET ASSETS CONSIST OF:
Trust capital (17,004,791 shares of beneficial
interest outstanding) $184,873,120
Accumulated net investment loss (870,558)
Accumulated net realized gain from sale ------------
of investments 7,847,323
Unrealized net appreciation of investments 49,451,453
------------
NET ASSETS $241,301,338
============
Net asset value and redemption price per share
($241,301,338 (divided by) 17,004,791 shares of beneficial
interest outstanding) $14.19
======
Maximum public offering price per share
($14.19 (divided by) 0.95 for a 5% sales charge) $14.94
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1996
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $29,338
Interest income 367,945
------------
Total income 397,283
------------
Expenses --
Investment advisory fee 668,852
Transfer agent services 380,831
Custodian fee 60,073
Administrative personnel and services 22,156
Printing and postage 87,126
Trust share registration costs 30,636
Auditing fees 5,155
Legal fees 910
Trustees' fees 3,822
Amortization of organization costs 4,914
Miscellaneous 3,366
------------
Total expenses 1,267,841
------------
Net investment loss (870,558)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 8,135,379
Net change in unrealized appreciation
of investments 40,709,621
------------
Net gain on investments 48,845,000
------------
Net increase in net assets resulting
from operations $47,974,442
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/96 Year Ended
(unaudited) 10/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment loss ($870,558) ($1,136,040)
Net realized gain on investments 8,135,379 38,531,937
Net change in unrealized appreciation or depreciation
of investments 40,709,621 (4,581,612)
------------ ------------
Net increase in net assets resulting from operations 47,974,442 32,814,285
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gain on investments (33,354,709) --
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 41,626,914 50,139,416
Reinvested dividend distributions 33,047,619 --
Cost of shares redeemed (13,675,825) (16,847,223)
------------ ------------
Net increase in net assets from trust share transactions 60,998,708 33,292,193
------------ ------------
Net increase in net assets 75,618,441 66,106,478
NET ASSETS:
Beginning of period 165,682,897 99,576,419
------------ ------------
End of period $241,301,338 $165,682,897
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood World Growth Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1996
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $35,874,569) $38,496,980
Cash (including foreign currency
holdings of $576,981) 652,805
Receivable for investment securities sold 196,915
Receivable for capital stock sold 3,050
Dividend and interest receivable 182,097
Unamortized organization costs 43,875
------------
Total assets 39,575,722
------------
LIABILITIES:
Payable for investment securities purchased 505,321
Accrued expenses 45,254
------------
Total liabilities 550,575
------------
NET ASSETS $39,025,147
============
NET ASSETS CONSIST OF:
Trust capital (4,134,682 shares of beneficial
interest outstanding) $36,115,196
Undistributed net investment income 135,972
Accumulated net realized gain from sale
of investments and foreign
currency transactions 151,180
Unrealized net appreciation of investments and
on translation of assets and liabilities in
foreign currencies 2,622,799
------------
NET ASSETS $39,025,147
============
Net asset value and redemption price per share
($39,025,147 (divided by) 4,134,682 shares of beneficial
interest outstanding) $9.44
=====
Maximum public offering price per share
($9.44 (divided by) 0.95 for a 5% sales charge) $9.94
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1996
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $39,759) $304,536
Interest income 101,961
----------
Total income 406,497
----------
Expenses --
Investment advisory fee 150,842
Transfer agent services 57,673
Custodian fee 25,823
Administrative personnel and services 2,979
Printing and postage 14,431
Trust share registration costs 27,731
Auditing fees 4,026
Legal fees 61
Trustees' fees 3,549
Amortization of organization costs 5,061
Miscellaneous 1,330
----------
Total expenses before expense reimbursement 293,506
Expense reimbursement from investment advisor (41,731)
----------
Net expenses 251,775
----------
Net investment income 154,722
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investment transactions 161,748
Net realized loss on foreign currency transactions (8,906)
----------
Net realized gain on investments and foreign
currency transactions 152,842
Net change in unrealized appreciation of investments 2,756,127
Net change in unrealized appreciation on translation
of assets and liabilities in foreign currencies 1,699
----------
Net change in unrealized appreciation of investments
and on translation of assets and liabilities in
foreign currencies 2,757,826
----------
Net gain on investments and foreign currency 2,910,668
----------
Net increase in net assets resulting
from operations $3,065,390
==========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months For the period
Ended September 5, 1995
4/30/96 (effective date)
(unaudited) to October 31, 1995
------------ ----------------
<S> <C> <C>
OPERATIONS:
Net investment income $154,722 $22,819
Net realized gain (loss) on investments
and foreign currency transactions 152,842 (5,560)
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and liabilities
in foreign currencies 2,757,826 (135,027)
----------- -----------
Net change in net assets resulting from operations 3,065,390 (117,768)
----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (37,672) --
----------- -----------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 22,898,904 14,107,250
Reinvested dividend distributions 26,203 --
Cost of shares redeemed (895,709) (21,451)
----------- -----------
Net increase in net assets from trust share transactions 22,029,398 14,085,799
----------- -----------
Net increase in net assets 25,057,116 13,968,031
NET ASSETS:
Beginning of period 13,968,031 --
----------- -----------
End of period (including undistributed net investment
income of $135,972 and $18,922, respectively) $39,025,147 $13,968,031
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1996
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $550,678,405 ) $676,213,841
Cash 9,018
Receivable for investment securities sold 54,044,330
Receivable for capital stock sold 14,400
Dividend and interest receivable 942,071
------------
Total assets 731,223,660
------------
LIABILITIES:
Payable for investment securities purchased 5,748,630
Accrued expenses 246,754
------------
Total liabilities 5,995,384
------------
NET ASSETS $725,228,276
============
NET ASSETS CONSIST OF:
Trust capital (33,052,328 shares of beneficial
interest outstanding) $569,894,180
Undistributed net investment income 691,972
Accumulated net realized gain from sale
of investments 29,106,688
Unrealized net appreciation of investments 125,535,436
------------
NET ASSETS $725,228,276
============
Net asset value and redemption price per share
($725,228,276 (divided by) 33,052,328 shares of beneficial
interest outstanding) $21.94
======
Maximum public offering price per share
($21.94 (divided by) 0.95 for a 5% sales charge) $23.09
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1996
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $6,016,509
Interest income 733,535
-----------
Total income 6,750,044
-----------
Expenses --
Investment advisory fee 2,188,523
Transfer agent services 778,969
Custodian fee 80,664
Administrative personnel and services 80,198
Printing and postage 181,239
Trust share registration costs 24,785
Auditing fees 12,468
Legal fees 3,640
Trustees' fees 7,644
Miscellaneous 10,918
-----------
Total expenses 3,369,048
-----------
Net investment income 3,380,996
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 30,319,609
Net change in unrealized appreciation
of investments 39,909,480
-----------
Net gain on investments 70,229,089
-----------
Net increase in net assets resulting
from operations $73,610,085
===========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/96 Year Ended
(unaudited) 10/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $3,380,996 $6,673,188
Net realized gain on investments 30,319,609 46,207,184
Net change in unrealized appreciation or depreciation
of investments 39,909,480 61,523,937
------------ ------------
Net increase in net assets resulting from operations 73,610,085 114,404,309
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (3,176,848) (6,749,604)
Net realized gain on investments (44,162,422) (88,151)
------------ ------------
Total distributions (47,339,270) (6,837,755)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 43,979,159 51,345,084
Reinvested dividend distributions 46,299,132 6,678,353
Cost of shares redeemed (36,822,413) (68,673,955)
------------ ------------
Net change in net assets from trust share transactions 53,455,878 (10,650,518)
------------ ------------
Net increase in net assets 79,726,693 96,916,036
NET ASSETS:
Beginning of period 645,501,583 548,585,547
------------ ------------
End of period (including undistributed net investment
income of $691,972 and $487,824 , respectively) $725,228,276 $645,501,583
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood High Yield Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1996
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $630,624,480 ) $645,967,809
Cash 66,372
Receivable for investment securities sold 1,635,184
Receivable for capital stock sold 55,570
Interest and dividend receivable 8,013,590
------------
Total assets 655,738,525
------------
LIABILITIES:
Payable for investment securities purchased 3,025,047
Accrued expenses 169,371
------------
Total liabilities 3,194,418
------------
NET ASSETS $652,544,107
============
NET ASSETS CONSIST OF:
Trust capital (70,493,106 shares of beneficial
interest outstanding) $642,713,004
Undistributed net investment income 591,482
Accumulated net realized loss from sale
of investments (6,103,708)
Unrealized net appreciation of investments 15,343,329
------------
NET ASSETS $652,544,107
============
Net asset value and redemption price per share
($652,544,107 (divided by) 70,493,106 shares of beneficial
interest outstanding) $9.26
=====
Maximum public offering price per share
($9.26 (divided by) 0.95 for a 5% sales charge) $9.75
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1996
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $27,541,779
Dividend income 2,664,051
-----------
Total income 30,205,830
-----------
Expenses --
Investment advisory fee 1,996,663
Transfer agent services 508,496
Custodian fee 84,041
Administrative personnel and services 72,728
Printing and postage 129,092
Trust share registration costs 38,486
Auditing fees 11,161
Legal fees 3,397
Trustees' fees 7,644
Miscellaneous 10,524
-----------
Total expenses 2,862,232
-----------
Net investment income 27,343,598
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 8,619,878
Net change in unrealized appreciation
of investments 7,872,670
-----------
Net gain on investments 16,492,548
-----------
Net increase in net assets resulting
from operations $43,836,146
===========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/96 Year Ended
(unaudited) 10/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $27,343,598 $51,789,230
Net realized gain (loss) on investment transactions 8,619,878 (14,450,136)
Net change in unrealized appreciation or depreciation
of investments 7,872,670 30,065,533
------------ ------------
Net increase in net assets resulting from operations 43,836,146 67,404,627
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (28,798,283) (52,185,840)
Net realized gain on investments -- (3,034,747)
------------ ------------
Total distributions (28,798,283) (55,220,587)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 67,291,386 117,628,453
Reinvested dividend distributions 19,648,590 37,541,814
Cost of shares redeemed (43,770,642) (72,649,892)
------------ ------------
Net increase in net assets from trust share transactions 43,169,334 82,520,375
------------ ------------
Net increase in net assets 58,207,197 94,704,415
NET ASSETS:
Beginning of period 594,336,910 499,632,495
------------ ------------
End of period (including undistributed net investment
income of $591,482 and $2,046,167, respectively) $652,544,107 $594,336,910
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Income Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1996
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $993,013,694) $965,552,867
Cash 17,759
Receivable for investment securities sold 32,487,587
Receivable for capital stock sold 11,923
Interest receivable 15,293,582
------------
Total assets 1,013,363,718
------------
LIABILITIES:
Payable for investment securities purchased 120,202,389
Accrued expenses 237,689
------------
Total liabilities 120,440,078
------------
NET ASSETS 892,923,640
============
NET ASSETS CONSIST OF:
Trust capital (106,788,462 shares of beneficial
interest outstanding) 949,958,763
Undistributed net investment income 1,292,340
Accumulated net realized loss from sale
of investments (30,866,636)
Unrealized net depreciation of investments (27,460,827)
------------
NET ASSETS $892,923,640
============
Net asset value and redemption price per share
($892,923,640 (divided by) 106,788,462 shares of beneficial
interest outstanding) $8.36
=====
Maximum public offering price per share
($8.36 (divided by) 0.95 for a 5% sales charge) $8.80
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1996
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $34,718,172
-----------
Expenses --
Investment advisory fee 2,735,208
Transfer agent services 694,715
Custodian fee 93,453
Administrative personnel and services 108,546
Printing and postage 180,973
Trust share registration costs 19,290
Auditing fees 12,468
Legal fees 5,458
Trustees' fees 7,644
Miscellaneous 16,983
-----------
Total expenses 3,874,738
-----------
Net investment income 30,843,434
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 9,344,245
Net realized gain on closed or expired option
contracts written 47,886
-----------
Net realized gain on investments 9,392,131
Net change in unrealized depreciation of investments (43,773,483)
-----------
Net loss on investments (34,381,352)
-----------
Net change in net assets resulting from operations ($3,537,918)
===========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/96 Year Ended
(unaudited) 10/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $30,843,434 $64,659,606
Net realized gain on investment transactions 9,392,131 9,256,703
Net change in unrealized appreciation or depreciation
of investments (43,773,483) 66,244,804
------------ ------------
Net change in net assets resulting from operations (3,537,918) 140,161,113
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (34,525,215) (62,451,862)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 32,634,532 45,763,710
Reinvested dividend distributions 26,011,330 46,818,208
Cost of shares redeemed (69,800,780) (135,320,068)
------------ ------------
Net change in net assets from trust share transactions (11,154,918) (42,738,150)
------------ ------------
Net change in net assets (49,218,051) 34,971,101
NET ASSETS:
Beginning of period 942,141,691 907,170,590
------------ ------------
End of period (including undistributed net investment
income of $1,292,340 and $4,974,121 , respectively) $892,923,640 $942,141,691
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Municipal Bond Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1996
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
( cost, $579,630,222 ) $609,338,943
Cash 49,431
Receivable for investment securities sold 1,417,985
Interest receivable 10,390,455
------------
Total assets 621,196,814
------------
LIABILITIES:
Payable for investment securities purchased 7,151,851
Accrued expenses 113,212
------------
Total liabilities 7,265,063
------------
NET ASSETS $613,931,751
============
NET ASSETS CONSIST OF:
Trust capital (72,744,472 shares of beneficial
interest outstanding) $590,861,038
Undistributed net investment income 1,253,849
Accumulated net realized loss from sale
of investments (7,891,857)
Unrealized net appreciation of investments 29,708,721
------------
NET ASSETS $613,931,751
============
Net asset value and redemption price per share
($613,931,751 (divided by) 72,744,472 shares of beneficial
interest outstanding) $8.44
=====
Maximum public offering price per share
($8.44 (divided by) 0.95 for a 5% sales charge) $8.88
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1996
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $18,334,066
----------
Expenses --
Investment advisory fee 1,799,665
Transfer agent services 259,225
Custodian fee 77,230
Administrative personnel and services 73,392
Printing and postage 78,044
Trust share registration costs 18,624
Auditing fees 12,468
Legal fees 3,639
Trustees' fees 7,644
Miscellaneous 12,100
----------
Total expenses 2,342,031
----------
Net investment income 15,992,035
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 165,349
Net change in unrealized appreciation of investments (11,139,994)
----------
Net loss on investments (10,974,645)
----------
Net increase in net assets resulting
from operations $5,017,390
==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/96 Year Ended
(unaudited) 10/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $15,992,035 $33,203,173
Net realized gain (loss) on investment transactions 165,349 (338,306)
Net change in unrealized appreciation or depreciation
of investments (11,139,994) 52,104,109
------------ ------------
Net increase in net assets resulting from operations 5,017,390 84,968,976
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (15,292,158) (33,124,129)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 23,628,136 39,483,970
Reinvested dividend distributions 11,749,318 25,171,137
Cost of shares redeemed (39,868,904) (82,987,994)
------------ ------------
Net change in net assets from trust share transactions (4,491,450) (18,332,887)
------------ ------------
Net change in net assets (14,766,218) 33,511,960
NET ASSETS:
Beginning of period 628,697,969 595,186,009
------------ ------------
End of period (including undistributed net investment
income of $1,253,849 and $553,972, respectively) $613,931,751 $628,697,969
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Money Market Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1996
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at amortized
cost and value $386,255,654
Cash 296,986
Receivable for trust shares sold 67,357
Interest receivable 530,640
------------
Total assets 387,150,637
------------
LIABILITIES:
Dividends payable 37,430
Accrued expenses 242,581
------------
Total liabilities 280,011
------------
NET ASSETS $386,870,626
============
NET ASSETS CONSIST OF:
Trust capital (386,870,626 shares of beneficial
interest outstanding) $386,870,626
============
Net asset value, offering price and redemption
price per share ($386,870,626 (divided by) 386,870,626 shares
of beneficial interest outstanding) $1.00
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1996
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $10,322,087
----------
Expenses --
Investment advisory fee 919,469
Transfer agent services 598,222
Custodian fee 169,178
Administrative personnel and services 42,836
Printing and postage 210,029
Trust share registration costs 47,512
Auditing fees 6,110
Legal fees 1,839
Trustees' fees 4,572
Miscellaneous 6,101
----------
Total expenses before expense reimbursement 2,005,868
Expense reimbursement from investment advisor (37,845)
----------
Net expenses 1,968,023
----------
Net investment income $8,354,064
==========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/96 Year Ended
(unaudited) 10/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $8,354,064 $14,921,673
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (8,354,064) (14,921,673)
------------ ------------
TRUST SHARE TRANSACTIONS:
Proceeds from sale of shares 339,942,223 547,639,011
Reinvested dividend distributions 8,191,298 14,549,671
Cost of shares redeemed (302,347,162) (497,972,433)
------------ ------------
Net increase in net assets from trust share transactions 45,786,359 64,216,249
------------ ------------
Net increase in net assets 45,786,359 64,216,249
NET ASSETS:
Beginning of period 341,084,267 276,868,018
------------ ------------
End of period $386,870,626 $341,084,267
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
The Lutheran Brotherhood Family of Funds
Financial Highlights
For a share outstanding throughout each period
For the period
January 8,
1993
Six Months (effective
Ended Year Year April 30,
LUTHERAN BROTHERHOOD 4/30/96 Ended Ended October 31
OPPORTUNITY GROWTH FUND (a) (unaudited) 10/31/95 10/31/94 1993
------------ -------- -------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $13.83 $10.76 $10.66 $8.43
------- ------- ------- -------
Income From Investment Operations:
Net investment income (0.05) (0.09) (0.06) (0.07)
Net realized and unrealized gain
(loss) on investments 3.14 3.16 0.16 2.30
------- ------- ------- -------
Total from investment operations 3.09 3.07 0.10 2.23
------- ------- ------- -------
Less Distributions:
Distributions from net realized
gain on investments (2.73) -- -- --
------- ------- ------- -------
Net asset value, end of period $14.19 $13.83 $10.76 $10.66
======= ======= ======= =======
Total investment return at
net asset value (b) 26.34% 28.53% 0.94% 26.45%
Net assets, end of period ($ millions) $241.3 $165.7 $99.6 $40.8
Ratio of expenses to average
net assets 1.33%(c) 1.43% 1.66% 2.33%(c)
Ratio of net investment income to
average net assets (0.91%)(c) (0.88%) (0.83%) -1.76%(c)
Portfolio turnover rate 92% 213% 64% 97%
Average Commission Rate (h) $0.0641 n/a n/a n/a
</TABLE>
<TABLE>
<CAPTION>
The Lutheran Brotherhood Family of Funds
Financial Highlights
For a share outstanding throughout each period
For the period
September 5,
Six Months 1995
Ended (effective
date) to
LUTHERAN BROTHERHOOD 1996 October 31
WORLD GROWTH FUND (a) (unaudited) 1995
---------- -------------
<S> <C> <C>
Net asset value, beginning of period $8.44 $8.50
------- -------
Income From Investment Operations:
Net investment income 0.04 0.01
Net realized and unrealized gain
(loss) on investments 0.98 (0.07)
------- -------
Total from investment operations 1.02 (0.06)
------- -------
Less Distributions:
Distributions from net realized
gain on investments (0.02) --
------- -------
Net asset value, end of period $9.44 $8.44
======= =======
Total investment return at
net asset value (b) 12.05% -0.71%
Net assets, end of period ($ millions) $39.0 $14.0
Ratio of expenses to average
net assets 1.95%(c,d) 1.95%(c,d)
Ratio of net investment income to
average net assets 1.20%(c,d) 1.60%(c,d)
Portfolio turnover rate 8% 0%
Average Commission Rate (h) $0.0210 n/a
</TABLE>
<TABLE>
<CAPTION>
Six Months Year Year Nine Months Year Year
Ended Ended Ended Ended Ended Ended
4/30/96 October 31, October 31, October 31, January 31, January 1,
LUTHERAN BROTHERHOOD (unaudited) 1995 1994 1993 1993 1992
FUND (a) ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $21.19 $17.67 $18.85 $18.53 $19.14 $17.10
------- ------- ------- ------- ------- -------
Income From Investment Operations:
Net investment income 0.10 0.22 0.19 0.29 0.27 0.32
Net realized and unrealized gain
(loss) on investments 2.20 3.52 (.20) 1.04 1.42 3.90
------- ------- ------- ------- ------- -------
Total from investment operations 2.30 3.74 (.01) 1.33 1.69 4.22
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income (0.10) (0.22) (0.20) (0.28) (0.27) (0.31)
Distributions from net realized
gain on investments (1.45) -- (.97) (.73) (2.03) (1.87)
------- ------- ------- ------- ------- -------
Total distributions (1.55) (.22) (1.17) (1.01) (2.30) (2.18)
------- ------- ------- ------- ------- -------
Net asset value, end of period $21.94 $21.19 $17.67 $18.85 $18.53 $19.14
======= ======= ======= ======= ======= =======
Total investment return at
net asset value (b) 11.40% 21.34% -0.11% 7.41% 9.47% 24.67%
Net assets, end of period ($ millions) $725.2 $645.5 $548.6 $527.3 $460.9 $380.3
Ratio of expenses to average
net assets 0.98%(c) 1.02% 1.04% 1.01%(c) 0.97% 1.00%
Ratio of net investment income to
average net assets 0.98%(c) 1.15% 1.10% 2.15%(c) 1.44% 1.69%
Portfolio turnover rate 45% 127% 234% 237% 249% 175%
Average Commission Rate (h) $0.0677 n/a n/a n/a n/a n/a
</TABLE>
<TABLE>
<CAPTION>
Six Months Year Year Nine Months Year Year
Ended Ended Ended Ended Ended Ended
April 30, 1996 October 31, October 31, October 31, January 31, January 1,
LUTHERAN BROTHERHOOD FUND (unaudited) 1995 1994 1993 1993 1992
HIGH YEILD FUND (a) ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.03 $8.86 $9.73 $9.12 $8.45 $6.72
------- ------- ------- ------- ------- -------
Income From Investment Operations:
Net investment income 0.40 0.83 0.83 0.61 0.88 0.93
Net realized and unrealized gain
(loss) on investments 0.25 0.24 (0.86) 0.60 0.68 1.72
------- ------- -------- ------- ------- -------
Total from investment operations 0.65 1.07 (0.03) 1.21 1.56 2.65
------- ------- -------- ------- ------- -------
Dividends from net investment income (0.42) (0.85) (0.82) (0.60) (0.89) (0.92)
Distributions from net realized
gain on investments -- (.05) (.02) -- -- --
------- ------- -------- ------- ------- -------
Total distributions (0.42) (0.90) (0.84) (0.60) (0.89) (0.92)
------- ------- -------- ------- ------- -------
Net asset value, end of period $9.26 $9.03 $8.86 $9.73 $9.12 $8.45
======= ======= ======= ======= ======= =======
Total investment return at
net asset value (b) 7.36% 12.93% -0.47% 13.72% 19.51% 41.59%
Net assets, end of period ($ millions) $652.5 $594.3 $499.6 $440.3 $330.2 $217.0
Ratio of expenses to average
net assets 0.91%(c) 0.93% 0.95% 0.94%(c) 0.99% 1.16%
Ratio of net investment income to
average net assets 8.74%(c) 9.53% 8.92% 8.72%(c) 10.04% 11.95%
Portfolio turnover rate 43% 71% 50% 66% 86% 145%
See accompanying notes to the financial highlights.
</TABLE>
<TABLE>
<CAPTION>
Six Months Year Year Nine Months Year Year
Ended Ended Ended Ended Ended Ended
April 30, 1996 October 31, October 31, October 31, January 31, January 1,
LUTHERAN BROTHERHOOD FUND (unaudited) 1995 1994 1993 1993 1992
INCOME FUND (a) ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.72 $8.01 $9.43 $9.10 $8.35 $8.79
------- ------- -------- ------- ------- -------
Income From Investment Operations:
Net investment income 0.29 0.59 0.58 0.47 0.66 0.72
Net realized and unrealized gain
(loss) on investments (0.33) 0.69 (1.19) 0.33 0.31 0.44
------- ------- -------- ------- ------- -------
Total from investment operations (0.04) 1.28 (0.61) 0.80 0.97 1.16
------- ------- -------- ------- ------- -------
Less Distributions:
Dividends from net investment income (0.32) (0.57) (0.56) (0.47) (0.66) (0.72)
Distributions from net realized
gain on investments -- -- (0.25) -- -- --
------- ------- -------- ------- ------- -------
Total distributions (0.32) (0.57) (0.81) (0.47) (0.66) (0.72)
------- ------- -------- ------- ------- -------
Net assets, end of period $8.36 $8.72 $8.01 $9.43 $9.10 $8.79
======= ======= ======= ======= ======= =======
Total return investment return
at net asset value (b) (0.51%) 16.53% (6.81%) 8.97% 11.50% 14.48%
Net assets, end of period ($millions) $892.90 $942.1 $907.2 $1,042.2 $944.6 $819.5
Ratio of expenses to average
net assets 0.83%(c) 0.83% 0.82% 0.80%(c,e) 0.90% 0.97%
Ratio of net investment income to
average net assets 6.63%(c) 7.01% 6.77% 6.87%(c,e) 7.40% 8.38%
Portfolio turnover rate 58% 131% 155% 84% 104% 117%
</TABLE>
<TABLE>
<CAPTION>
Six Months Year Year Nine Months Year Year
Ended Ended Ended Ended Ended Ended
April 30, 1996 October 31, October 31, October 31, January 31, January 1,
LUTHERAN BROTHERHOOD FUND (unaudited) 1995 1994 1993 1993 1992
MUNICIPAL BOND FUND (a) ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$8.58 $7.88 $9.00 $8.52 $8.45 $8.32
Net asset value, beginning of period ------- ------- -------- ------- ------- -------
Income From Investment Operations: 0.22 0.45 0.46 0.37 0.53 0.56
Net investment income
Net realized and unrealized gain (0.15) 0.70 (0.96) 0.51 0.28 0.29
(loss) on investments ------- ------- -------- ------- ------- -------
0.07 1.15 (0.50) 0.88 0.81 0.85
Total from investment operations ------- ------- -------- ------- ------- -------
Less Distributions: (0.21) (0.45) (0.46) (0.37) (0.52) (0.56)
Dividends from net investment income
Distributions from net realized -- -- (0.16) (0.03) (0.22) (0.16)
gain on investments ------- ------- -------- ------- ------- -------
(0.21) (0.45) (0.62) (0.40) (0.74) (0.72)
Total distributions ------- ------- -------- ------- ------- -------
$8.44 $8.58 $7.88 $9.00 $8.52 $8.45
Net asset value, end of period ======= ======= ======= ======= ======= =======
Total investment return 0.78% 14.97% (5.93%) 10.73% 9.96% 10.64%
at net asset value (b) $613.9 $628.7 $595.2 $629.7 $532.6 $448.4
Net assets, end of period ($ millions)
Ratio of expenses to average 0.74%(c) 0.74% 0.75% 0.74%(c,f) 0.80% 0.83%
net assets
Ratio of net investment income to 5.09%(c) 5.43% 5.44% 5.69%(c,f) 6.22% 6.65%
average net assets 14% 36% 38% 46% 77% 78%
Portfolio turnover rate
See accompanying notes to the financial highlights.
</TABLE>
<TABLE>
<CAPTION>
Six Months Year Year Nine Months Year Year
Ended Ended Ended Ended Ended Ended
April 30, 1996 October 31, October 31, October 31, January 31, January 1,
LUTHERAN BROTHERHOOD FUND (unaudited) 1995 1994 1993 1993 1992
MONEY MARKET FUND (a) ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net asset value, beginning of period ------- ------- -------- ------- ------- -------
0.02 0.05 0.03 0.02 0.03 0.05
Net investment income from
investment operations (0.02) (0.05) (0.03) (0.02) (0.03) (0.05)
Less: Dividends from net investment income ------- ------- -------- ------- ------- -------
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net asset value, end of period ======= ======= ======= ======= ======= =======
Total investment return 2.28% 4.95% 2.89% 1.63% 2.77% 5.10%
at net asset value (b) $386.9 $341.1 $276.9 $275.1 $317.0 $412.3
Net assets, end of period ($ millions)
Ratio of expenses to average 1.07%(c,g) 1.10%(g) 1.10%(g) 1.10%(c,g) 1.10%(g) 1.08%
net assets
Ratio of net investment income to 4.54%(c,g) 4.85%(g) 2.85%(g) 2.16%(c,g) 2.76%(g) 5.01%
average net assets
Notes to Financial Highlights:
(a) All per share amounts have been rounded to the nearest cent.
(b) Total return is based on the change in net asset value during the period
and assumes reinvestment of all distributions.
(c) Computed on an annualized basis.
(d) Effective September 5, 1995, Lutheran Brotherhood Research Corp. (LBRC)
has voluntarily undertaken to limit the World Growth Fund's expense ratio to 1.95%.
Had LBRC not undertaken such action, the ratio of expenses to average net assets
would have been 2.27% and 2.89% and the ratio of net investment income to average
net assets would have been 0.88% and 0.66% respectively, for the six months ended
April 30, 1996 and for the period from September 5, 1995 to October 31, 1995.
(e) During the nine month period ended October 31, 1993, Lutheran Brotherhood Research
Corp. (LBRC) undertook a voluntary reduction of the Income Fund's investment advisory
fee equal to 0.10% of average daily net assets. Had LBRC not undertaken such action,
the ratio of expenses to average net assets would have been 0.90% and the ratio of
net investment income to average net assets would have been 6.77%
(f) During the nine month period ended October 31, 1993, Lutheran Brotherhood Research Corp.
(LBRC) had undertaken a voluntary reduction of the Municipal Bond Fund's investment
advisory fee equal to 0.05% of average daily net assets. Had LBRC not undertaken such
action, the ratio of expenses to average net assets would have been 0.79% and the ratio
of net investment income to average net assets would have been 5.64%.
(g) Effective February 1, 1992 through March 31, 1996, Lutheran Brotherhood Research Corp.
(LBRC) had voluntarily undertaken to limit the Money Market Fund's expense ratio to
1.10% of annual average daily net assets. Effective April 1, 1996, LBRC voluntarily
lowered the expense limit prospectively to 0.95% of average daily net assets. Had LBRC
not undertaken such action to limit expenses, the ratio of expenses to average net
assets would have been 1.09%, 1.18%, 1.36%, 1.44% and 1.23% and the ratio of net investment
income to average net assets would have been 4.52%, 4.77%, 2.59%, 1.82% and 2.63%,
respectively, for the six months ended April 30, 1996, the years ended October 31,
1995 and 1994, the nine month period ended October 31, 1993 and the year ended January
31, 1993.
(h) Average commission rate is based on total broker commissions incurred in connection with
execution of portfolio transactions during the period divided by the sum of all portfolio
shares purchased and sold during the period that were subject to a commission. Broker
commissions are treated as capital items that increase the cost of securities purchased
or reduce the proceeds of securities sold.
See accompanying notes are an integral part of these financial highlights.
</TABLE>
The Lutheran Brotherhood Family of Funds
Notes to Financial Statements
April 30, 1996
(unaudited)
(1) Organization
The Lutheran Brotherhood Family of Funds (the "Trust") is a Delaware
business trust and a diversified, open-end investment company registered
under the Investment Company Act of 1940. The Trust is divided into
seven series (the "Fund(s)"), each with its own investment objective and
policies. The seven Funds of the Trust are: Lutheran Brotherhood
Opportunity Growth Fund, Lutheran Brotherhood World Growth Fund,
Lutheran Brotherhood Fund, Lutheran Brotherhood High Yield Fund,
Lutheran Brotherhood Income Fund, Lutheran Brotherhood Municipal Bond
Fund and Lutheran Brotherhood Money Market Fund. The Lutheran
Brotherhood World Growth Fund's registration was declared effective by
the Securities Exchange Commission and began operations as a series of
The Lutheran Brotherhood Family of Funds on September 5, 1995.
(2) Significant Accounting Policies
Investment Security Valuations
Securities traded on U.S. or foreign securities exchanges or included in
a national market system are valued at the last quoted sales price at
the close of each business day. Securities traded on the over-the-
counter market and listed securities for which no price is readily
available are valued at prices within the range of the current bid and
asked prices considered best to represent the value in the
circumstances, based on quotes that are obtained from an independent
pricing service or by dealers that make markets in the securities. The
pricing service, in determining values of securities, takes into
consideration such factors as current quotations by broker/dealers,
coupon, maturity, quality, type of issue, trading characteristics, and
other yield and risk factors it deems relevant in determining
valuations. Exchange listed options and futures contracts are valued at
the last quoted sales price. For all Funds other than the Money Market
Fund, short-term securities with maturities of 60 days or less are
valued at amortized cost; those with maturities greater than 60 days are
valued at the mean between bid and asked price. Short-term securities
held by the Money Market Fund are valued on the basis of amortized cost
(which approximates market value), whereby a portfolio security is
valued at its cost initially, and thereafter valued to reflect a
constant amortization to maturity of any discount or premium. The Money
Market Fund follows procedures necessary to maintain a constant net
asset value of $1.00 per share. All other securities for which market
values are not readily available are appraised at fair value as
determined in good faith by or under the direction of the Board of
Trustees.
Repurchase Agreements
The Funds may engage in repurchase agreement transactions in pursuit of
their investment objectives. When a fund engages in such transactions,
it is policy to require the custodian bank to take possession of all
securities held as collateral in support of repurchase agreement
investments. In addition, the Fund monitors the market value of the
underlying collateral on a daily basis. If the seller defaults or if
bankruptcy proceedings are initiated with respect to the seller, the
realization or retention of the collateral may be subject to legal
proceedings.
Investment Income
Interest income is determined on the basis of interest or discount
earned on any short-term investments and interest earned on all other
debt securities, including accrual of original issue discount. Interest
earned on debt securities also includes amortization of premium for the
Opportunity Growth, World Growth Fund, LB Fund, High Yield and Municipal
Bond Funds and the accrual of market discount for the Opportunity
Growth, World Growth, LB Fund and High Yield Funds. Market discount, if
any, is recognized for tax purposes when bonds are sold for the Income
and Municipal Bond Funds. Dividend income is recorded on the ex-
dividend date. For payment-in-kind securities, income is recorded on the
ex-dividend date in the amount of the value received.
Options, Financial Futures and
Forward Foreign Currency Contracts
All Funds except the Money Market Fund may buy put and call options,
write covered call options and buy and sell futures contracts. The Funds
intend to use such derivative instruments as hedges to facilitate buying
or selling securities or to provide protection against adverse movements
in security prices or interest rates. The LB World Growth Fund may also
enter into options and futures contracts on foreign currencies and
forward currency contracts to protect against adverse foreign exchange
rate fluctuation.
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sale for a written call option or the cost of
a security for purchased put and call options is adjusted by the amount
of premium received or paid.
Upon entering into a futures contract, the Fund is required to deposit
initial margin, either cash or securities in an amount equal to a
certain percentage of the contract value. Subsequent variation margin
payments are made or received by the Fund each day. The variation margin
payments are equal to the daily changes in the contract value and are
recorded as unrealized gains and losses. The Fund realizes a gain or
loss when the contract is closed or expires.
Foreign currency contracts are valued daily and unrealized appreciation
or depreciation is recorded daily as the difference between the contract
exchange rate and the closing forward rate applied to the face amount of
the contract. A realized gain or loss is recorded at the time a forward
contract is closed.
Foreign Currency Translations
Securities and other assets and liabilities of the LB World Growth Fund
that are denominated in foreign currencies are translated into U.S.
dollars at the daily closing rate of exchange. Foreign currency amounts
related to the purchase or sale of securities and income and expenses
are translated at the exchange rate on the transaction date. Currency
gains and losses are recorded from sales of foreign currency, exchange
gains or losses between the trade date and settlement dates on
securities transactions, and other translation gains or losses on
dividends, interest income and foreign withholding taxes. The effect of
changes in foreign exchange rates on realized and unrealized security
gains or losses are not segregated from gains and losses that arise from
changes in market prices of investments, and are included with the net
realized and unrealized gain or loss on investments.
Federal Income Taxes
It is the policy of each Fund to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and
to distribute to shareholders each year substantially all of their
taxable income on a timely basis, including any net realized gain on
investments each year. It is also the intention of the Funds to
distribute an amount sufficient to avoid imposition of any federal
excise tax. Accordingly, no provision for federal income tax is
necessary. Each Fund is treated as a separate taxable entity for federal
income tax purposes.
(2) Significant Accounting Policies (continued)
When-Issued and Delayed Delivery Transactions
The Funds may engage in when-issued or delayed delivery transactions. To
the extent that a Fund engages in such transactions, it will do so for
the purpose of acquiring securities consistent with its investment
objectives and policies and not for the purpose of investment leverage
or to speculate on interest rate changes. On the trade date, assets of
the Fund are segregated on the Fund's records in a dollar amount
sufficient to make payment for the securities to be purchased. Income is
not accrued until settlement date.
Dollar Roll Transactions
The Income Fund enters into dollar roll transactions, with respect to
mortgage securities issued by GNMA, FNMA and FHLMC, in which the Fund
sells mortgage securities and simultaneously agrees to repurchase
similar (same type, coupon and maturity) securities at a later date at
an agreed upon price. During the period between the sale and repurchase,
the Fund forgoes principal and interest paid on the mortgage securities
sold. The Fund is compensated by the interest earned on the cash
proceeds of the initial sale and from negotiated fees paid by brokers
offered as an inducement to the Fund to "roll over" its purchase
commitments. The Income Fund earned $207,852 from such fees.
Organization Costs
Organization costs incurred in connection with the start up and initial
registration of the Funds are capitalized and amortized over a period of
60 months from the date of commencement. If any initial shares are
redeemed during the amortization period, the redemption proceeds will be
reduced by a pro-rata portion of the unamortized balance at the time of
redemption, in the same proportion that the number of initial shares
being redeemed bears to the number of initial shares outstanding at the
time of redemption.
Distributions to Shareholders
Dividends from net investment income, if available, are declared and
paid annually for the Opportunity Growth and World Growth Funds,
declared and paid quarterly for the LB Fund, declared and paid monthly
for the High Yield, Income and Municipal Bond Funds, and declared daily
(including short-term net realized gains and losses) and paid monthly
for the Money Market Fund. Net realized gains from securities
transactions, if any, are distributed at least annually for all Funds,
after the close of the fiscal year. Dividends and capital gain
distributions to shareholders are recorded on the ex-dividend date.
The character of distributions made during the year from net investment
income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividend distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or net realized gains were
recorded by the Fund.
Other
Security transactions are accounted for on the date the securities are
purchased or sold. Realized gains and losses are determined on the
identified cost basis. Each Fund is charged for the operating expenses
that are directly attributable to it. Fund operating expenses that
cannot be directly attributable to a Fund are either shared equally or
allocated among them based on the relative net assets of each Fund or
via other methodologies.
(3) Fees and Compensation Paid To Affiliates
Investment Advisory Fees
Each Fund pays Lutheran Brotherhood Research Corp. (LBRC), the Trust's
investment advisor, a fee for its advisory services. The fees are
accrued daily and paid monthly. The fees are based on the following
annual rates of average daily net assets: Opportunity Growth Fund, 0.75%
for the first $100 million in assets, 0.65% for the next $150 million in
assets, 0.60% for the next $250 million in assets, 0.55% for the next
$500 million in assets, and 0.50% for assets over $1 billion; World
Growth Fund, 1.25% for the first $20 million in assets, 1.10% for the
next $30 million in assets, and 1.0% of net assets over $50 million; LB
Fund and High Yield Fund, 0.65% for the first $500 million in assets,
0.60% for the next $500 million, and 0.55% for assets over $1 billion;
Income Fund, 0.60% for the first $500 million in assets, 0.575% for the
next $500 million in assets, and 0.55% for assets over $1 billion;
Municipal Bond Fund, 0.575% for the first $500 million in assets,
0.5625% for the next $500 million, and 0.55% for assets over $1 billion;
Money Market Fund, 0.50% for the first $500 million in assets, 0.475%
for the next $500 million, 0.45% for the next $500 million, 0.425% for
the next $500 million, and 0.40% for assets over $2 billion.
LBRC has entered into a sub-advisory agreement with Rowe Price - Fleming
International, Inc. for the performance of various sub-advisory services
for the World Growth Fund. For these services, LBRC pays a portion of an
annual sub-advisory fee that is based on the following annual rates of
combined average daily net assets of the World Growth Fund and the LB
Series Fund, Inc. - World Growth Portfolio: 0.75% for the first $20
million in assets; 0.60% for the next $30 million, and 0.50% for assets
over $50 million. When combined annual average assets exceed $200
million, the fee will be equal to 0.50% of all of the World Growth
Fund's annual average daily net assets.
During the six months ended April 30, 1996, the advisory fees of the
World Growth Fund totaled $150,842 of which $41,731 were voluntarily
waived by LBRC to limit the World Growth Fund's expense ratio to 1.95%
of average daily net assets. The Money Market Fund advisory fees totaled
$919,469 of which $37,845 were voluntarily waived by LBRC to limit the
Money Market Fund's expense ratio. LBRC had voluntarily assumed expenses
in excess 1.10% of average daily net assets of the Money Market Fund
through March 31, 1996. Effective April 1, 1996, LBRC voluntarily
lowered the expense limit prospectively to 0.95% of the Money Market
Fund's average daily net assets. LBRC can terminate its voluntary waiver
of expenses for these Funds at any time at its discretion.
Sales Charges and Other Fees
For the six months ended April 30, 1996, Lutheran Brotherhood Securities
Corp. (LBSC), the Trust's distributor, received sales charges paid by
purchasers of Fund shares of: Opportunity Growth Fund, $1,129,399; World
Growth Fund, $514,838; LB Fund, $1,249,706; High Yield Fund, $1,648,763;
Income Fund, $908,607; and Municipal Bond Fund, $557,512. Sales charges
are not an expense of the Trust and are not reflected in the financial
statements of any of the Funds. LBSC also received fees pursuant to an
agreement to provide certain administrative personnel and services to
the Funds. Effective January 1, 1996, the annual fee for theses services
was lowered from 0.025% to 0.0225% of annual daily average daily net
assets. LBSC received the following compensation for the six months
ended April 30, 1996:
(3) Fees and Compensation Paid To Affiliates
(continued)
Sales Charges and Other Fees (continued)
Opportunity Growth Fund, $22,156; World Growth Fund, $2,979; LB Fund,
$80,198; High Yield Fund, $72,728; Income Fund, $108,546; Municipal Bond
Fund, $73,392; and Money Market Fund, $42,836. In addition, LBSC
provides the Funds with transfer agent services pursuant to an agreement
and received the following compensation: Opportunity Growth Fund,
$380,831; World Growth Fund, $57,673; LB Fund, $778,969; High Yield
Fund, $508,496; Income Fund, $694,715; Municipal Bond Fund, $259,225;
and Money Market Fund, $598,222.
Certain officers and non-independent trustees of the Fund are officers
and directors of LBRC and LBSC; however, they receive no compensation
from the Funds.
(4) Securities Lending
To generate additional income, the Funds may participate in a securities
lending program administered by the Fund's custodian bank. Securities
are periodically loaned to brokers, banks or other institutional
borrowers of securities, for which collateral in the form of cash, U.S.
government securities, or letter of credit is received by the custodian
in an amount at least equal to the market value of securities loaned.
Collateral received in the form of cash is invested in short-term
investments by the custodian from which earnings are shared between the
borrower, the custodian and the Fund at negotiated rates. The risks to
the Fund are that it may experience delays in recovery or even loss of
rights in the collateral should the borrower of securities fail
financially. There were no security loans during the six months ended
April 30, 1996.
(5) Distributions From Capital Gains
During the six months ended April 30, 1996, distributions from net
realized capital gains of $33,354,709, and $44,162,422, were paid by the
LB Opportunity Growth Fund and the LB Fund, respectively. These
distributions related to net capital gains realized during the prior
fiscal year ended October 31, 1995.
(6) Capital Loss Carryover
At October 31, 1995, the High Yield, Income and Municipal Bond Funds had
accumulated net realized capital loss carryovers of $14,624,938,
$40,056,911 and $6,542,389, respectively, expiring $40,056,911 and
$6,407,670 in the year 2002 for the Income and Municipal Bond Funds,
respectively, and $14,624,938 and $134,719 in 2003 for the High Yield
Fund and Municipal Bond Fund, respectively. To the extent these Funds
realize future net capital gains, taxable distributions will be reduced
by any unused capital loss carryovers.
(7) Investment Transactions
Purchases and Sales of Investment Securities
For the six months ended April 30, 1996, the cost of purchases and the
proceeds from sales of investment securities other than U.S. Government
and short term securities were as follows:
$thousands
---------------------
Fund Purchases Sales
- ----------------------------------------------------------
Opportunity Growth $185,782 $166,943
World Growth Fund 23,176 1,870
LB Fund 294,388 349,024
High Yield 284,419 250,866
Income 302,615 270,840
Municipal Bond 88,701 95,261
Purchases and sales of U.S. Government securities were:
$thousands
---------------------
Fund Purchases Sales
- ----------------------------------------------------------
LB Fund $ 973 $ 1,709
Income 307,990 289,737
Investments in Restricted Securities
The High Yield Fund owns restricted securities that were purchased in
private placement transactions without registration under the Securities
Act of 1933. Unless such securities subsequently become registered, they
generally may be resold only in privately negotiated transactions with a
limited number of purchasers. The aggregate value of restricted
securities was $1,155,425 at April 30, 1996 which represented 0.2% of
net assets of the High Yield Fund.
Investments in High Yielding Securities
The High Yield Fund invests primarily in high yielding fixed income
securities. These securities will typically be in the lower rating
categories or will be non-rated and generally will involve more risk
than securities in the higher rating categories. Lower rated or unrated
securities are more likely to react to developments affecting market
risk and credit risk than are more highly rated securities, which react
primarily to movements in the general level of interest rates.
Investments in Options and Futures Contracts
The movement in the price of the instrument underlying an option or
futures contract may not correlate perfectly with the movement in the
prices of the portfolio securities being hedged. A lack of correlation
could render the Fund's hedging strategy unsuccessful and could result
in a loss to the Fund. In the event that a liquid secondary market would
not exist, the Fund could be prevented from entering into a closing
transaction which could result in additional losses to the Fund.
(7) Investment Transactions (continued)
Open Option Contracts
The number of contracts and premium amounts associated with call option
contracts written during the six months ended April 30, 1996 were as
follows:
LB Income Fund
----------------------
Number of Premium
Contracts Amount
---------- ----------
Balance at October
31, 1995 -- $ --
Opened 100 56,756
Closed (100) (56,756)
Expired -- --
Exercised -- --
---------- ----------
Balance at April
30, 1996 -- $ --
========= ==========
Foreign Denominated Investments
The LB World Growth Fund invests primarily in foreign denominated
stocks. Foreign denominated assets and currency contracts may involve
more risks than domestic transactions, including: currency risk,
political and economic risk, regulatory risk, and market risk. The Fund
may also invest in securities of companies located in emerging markets.
Future economic or political developments could adversely affect the
liquidity or value, or both, of such securities.
(8) Shares Of Beneficial Interest
The Master Trust Agreement permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest ($0.001 par
value) of all of the Funds. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Opportunity World High Income Municipal Money
Growth Growth LB Fund Yield Fund Bond Market
---------- --------- ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares outstanding at
October 31, 1994 9,251,022 -- 31,038,031 56,392,328 113,189,726 75,488,401 276,868,018
Shares sold 4,092,712 1,656,709 2,728,955 13,395,549 5,470,573 4,792,917 547,639,011
Shares issued on reinvestment
of dividends and distributions -- -- 354,095 4,301,940 5,624,521 3,067,030 14,549,671
Shares redeemed (1,368,095) (2,513) (3,657,566) (8,273,232) (16,216,513) (10,087,527) (497,972,433)
---------- --------- ---------- ---------- ----------- ---------- -----------
Shares outstanding at
October 31, 1995 11,975,639 1,654,196 30,463,515 65,816,585 108,068,307 73,260,821 341,084,267
Shares sold 3,281,909 2,577,905 2,050,204 7,274,122 3,756,929 2,725,308 339,942,223
Shares issued on reinvestment
of dividends and distributions 2,800,647 2,995 2,247,685 2,135,010 3,004,837 1,360,708 8,191,298
Shares redeemed (1,053,404) (100,414) (1,709,076) (4,732,611) (8,041,611) (4,602,365) (302,347,162)
---------- --------- ---------- ---------- ----------- ---------- -----------
Shares outstanding at
April 30, 1996 17,004,791 4,134,682 33,052,328 70,493,106 106,788,462 72,744,472 386,870,626
========== ========= ========== ========== =========== ========== ===========
</TABLE>
The Lutheran Brotherhood Family of Funds
Lutheran Brotherhood Opportunity Growth Fund
Lutheran Brotherhood World Growth Fund
Lutheran Brotherhood Fund
Lutheran Brotherhood High Yield Fund
Lutheran Brotherhood Income Fund
Lutheran Brotherhood Municipal Bond Fund
Lutheran Brotherhood Money Market Fund
Trustees
Rolf F. Bjelland
Charles W. Arnason
Herbert F. Eggerding, Jr.
Connie M. Levi
Bruce J. Nicholson
Ruth E. Randall
Officers
Rolf F. Bjelland Wade M. Voigt
Chairman and President Treasurer
James R. Olson Rand E. Mattsson
Vice President Assistant Treasurer
James M. Walline James M. Odland
Vice President Assistant Secretary
Otis F. Hilbert Randall L. Wetherille
Secretary and Vice President Assistant Secretary
Richard B. Ruckdashel
Vice President
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the
current prospectuses.
[LUTHERAN BROTHERS LOGO]
LUTHERAN BROTHERHOOD
SECURITIES CORP.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Bulk Rate
U.S. Postage
PAID
Minneapolis, MN
Permit No.1529
SC 502
[GRAPHIC OF PRINTED WITH SOY INK LOGO OMITTED]
