[GRAPHIC OMITTED: 7 SQUARE BULLETS CENTERED UNDER SOLID
BLACK BAR]
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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 ITS THREE VISIBLE FACETS.
Cross bar reads:
GROWTH [DIAMOND] INCOME [DIAMOND] STABILITY]
Semiannual Report
April 30, 1997
[LUTHERAN BROTHERHOOD LOGO OMITTED]
LUTHERAN
BROTHERHOOOD
SECURITIES CORP.
[GRAHIC OMITTED: PHOTO OF ROLF F. BJELLAND]
Our Message To You
April 30, 1997
Dear Shareholder,
Enclosed is the Semiannual Report for the Lutheran Brotherhood Family of
Funds covering the six months ended April 30, 1997. The Report includes
a summary of the economic and market trends that shaped the behavior of
stocks, bonds and money market instruments over the period--as well as
reviews of recent investment strategies for the Funds. You'll also find
lists of holdings and unaudited financial statements for the LB Family
of Funds.
The last six months brought mixed results for investors. Although a
strengthening economy helped major stock market indexes reach new highs,
it brought below-average returns from bonds. Results also varied among
individual sectors of the stock market. The S&P 500 Index reached new
highs partly because investors favored stocks in the Index. Fearing that
higher interest rates might eventually slow corporate earnings,
investors preferred shares of larger companies--whose earnings tend to
be more reliable. Meanwhile, stocks of smaller companies lagged far
behind. Financial, health care and consumer staples stocks outpaced
retail and cyclical shares as investors continued to move from one
industry to another searching for value. At the same time, stocks of
small technology companies, which led the market in previous years,
continued their retreat to lower levels.
Such discrepancies show the importance of a long-term investment
approach. Many market sectors that underperformed in recent months now
have good value and may outperform in months to come. By sticking with
those sectors, you have the best chance of benefiting from their
rebound.
Recent market behavior also illustrates the value of diversification.
Clearly the bond market can view the economic climate differently from
the stock market, and even individual stock market sectors can react
differently to the very same economic conditions. Simultaneously
investing in a variety of asset classes and market sectors increases the
likelihood that there's always a portion of your portfolio that's
performing well--which can smooth your returns over time.
As part of our commitment to provide you with a range of investment
choices, we've introduced the Lutheran Brotherhood Mid Cap Growth Fund.
Launched on June 1, 1997, the Fund invests in stocks of medium-sized
companies--whose earnings tend to be more stable than earnings of
smaller companies, and have potential for faster growth than earnings of
larger companies. The Fund looks for quality firms with records of
superior growth, market leadership, proven business concepts, sound
management and strong financials.
If you'd like more information on the LB Mid Cap Growth Fund, including
a free prospectus that lists fees and expenses, or if you have questions
about this report, please call us toll free at 1-800-328-4552.
Sincerely,
/S/ ROLF F. BJELLAND
Rolf F. Bjelland
President and Chairman
Lutheran Brotherhood Family of Funds
Economic and Market Overview April 30, 1997
During the six months ended April 30, 1997, the economy continued to
strengthen but inflation remained moderate. This proved an ideal climate
for some segments of the stock market, pushing large-company market
benchmarks higher over the period. Prices for bonds were somewhat
choppier over this time, due to concerns about higher interest rates.
Despite a brief correction at the end of the period, the S&P 500 Index
had a six-month total return of 14.72%--soundly outpacing its historical
average. Stocks rose on further improvement in corporate earnings and a
positive balance of supply and demand. New cash pouring into equity
mutual funds kept demand high while ongoing mergers, acquisitions and
corporate buyback programs further reduced stock supplies. At the same
time, a strong dollar sustained the foreign appetite for U.S. stocks.
Stock prices were mixed overseas. Although European stocks performed
well, Japanese stocks weakened. For the period, Morgan Stanley Capital
International's Europe, Australia and Far East (EAFE) Index returned
0.77%.
After much fluctuation, U.S. bond prices ended slightly lower than where
they began, giving the Lehman Brothers Aggregate Bond Index a total
return of 1.70%. Although inflation was moderate, investors worried that
stronger economic growth would force the Federal Reserve to curb future
inflation by raising interest rates. At the end of March, the Fed
fulfilled these expectations and raised short-term rates by 0.25%. As a
result, bond prices edged lower for several weeks as investors
anticipated another rate hike by the Fed. Signs of slower growth at the
end of April made a second hike seem less likely, however, and bond
prices began to rebound.
Variations on a Theme
Although there was strong growth in the gross domestic product (GDP),
economic news varied from day to day. This left many investors confused
about where the economy, inflation and interest rates were headed.
Just as stocks and bonds responded differently to this environment, the
paths of individual market sectors diverged. Nearly all of the gains in
stock prices came from large-company issues. Of that group, about two
dozen companies dominated returns most of the time. Stocks of smaller
companies fell far behind--especially shares of very small firms.
Bonds showed a similar split. Because investors feared that higher
interest rates would stall further corporate earnings growth, prices for
corporate bonds suffered more than prices for government issues. In
addition, because demand for municipal bonds strengthened during this
time, they outperformed taxable securities.
A Tug-of-War
Recent market uncertainties may reflect a healthy tension among
different forces in the economy. While the Federal Reserve may feel that
the economy is approaching full capacity, companies are showing that
capacity is ample by their use of excess cash for acquisitions and stock
buyback programs. Although unemployment is low, and labor costs are
beginning to rise, productivity remains strong, and global competition
has left little room for companies to charge higher prices.
This tug-of-war signals both continued growth and moderate inflation for
the foreseeable future. If that's the case, the current bull market in
stocks should remain intact. Pricing restraints may stifle corporate
profits, however, which could slow the market's advance and cause
occasional corrections.
While bond prices may remain unpredictable as investors sort future
economic news, we do not expect interest rates to soar. Whether the Fed
slows economic growth by tightening monetary policy, or the economy
simply slows on its own, we believe growth will moderate during the
year. We are also encouraged by recent legislative progress on balancing
the federal budget. We will, of course, keep an eye on the value of the
dollar versus other world currencies. If the dollar remains strong,
foreign investors should continue to find the U.S. stock and bond
markets appealing.
LB Opportunity Growth Fund
[GRAPHIC OMITTED: PHOTO OF MICHAEL A. BINGER]
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. Prior to managing this
fund, Mike served as portfolio manager for LB's Convertible Securities
Portfolio.
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Fund Objective: To seek long-term
growth of capital by investing in
small-company stocks.
- ---------------------------------
In seeking long-term growth, the LB Opportunity Growth Fund focuses on
stocks of small companies--whose prices tend to fluctuate more than
stock prices in general. The Fund also emphasizes industries with above-
average potential for long-term growth, such as technology and health
care.
For several years, the small-company and growth sectors of the stock
market have led its advance. Recently, however, investors have preferred
stocks of larger companies and firms whose earnings are closely tied to
the economy. Stocks of companies with market capitalizations under $250
million--where the Fund has large investments--suffered most in this
shift. While we made minor adjustments in the Fund's portfolio to curb
the effect of such market changes, we maintained the basic investment
strategies that have outperformed over longer periods. In the past six
months, however, the Fund underperformed.
For the six months ended April 30, 1997, the Fund had a total return,
based on net asset value (NAV), of -21.91%. That compares to average
returns of -3.5% for small-company growth funds tracked by Lipper
Analytical Services and 1.52% for the Russell 2000 Index.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1997
GROWTH OF $10,000 INVESTED SINCE 1/31/93]
Lipper Average
Small Co. Growth
LBOGF Russell 2000 Stocks
Month End Total Total Total
Date Value Value Value CPI
- ------------------------------------------------------------------
1993 10,000 10,000 10,000 10,000
1993 9,056 9,769 9,608 10,035
1993 9,407 10,086 9,934 10,070
1993 9,166 9,809 9,619 10,098
1993 9,857 10,243 10,127 10,112
1993 10,011 10,307 10,206 10,126
1993 9,945 10,449 10,263 10,126
1993 10,637 10,900 10,737 10,154
1993 11,317 11,208 11,076 10,175
1993 11,701 11,497 11,232 10,217
1993 11,262 11,122 10,886 10,224
1994 11,559 11,503 11,348 10,224
1994 11,833 11,863 11,650 10,252
1994 11,712 11,820 11,643 10,288
1994 10,922 11,197 11,014 10,323
1994 10,999 11,263 11,016 10,337
1994 10,582 11,137 10,778 10,344
1994 9,967 10,762 10,388 10,379
1994 10,318 10,938 10,451 10,407
1994 11,218 11,547 11,048 10,449
1994 11,383 11,508 11,285 10,477
1994 11,811 11,462 11,275 10,484
1994 11,570 10,999 10,848 10,498
1995 11,866 11,295 11,265 10,498
1995 11,350 11,153 11,229 10,540
1995 11,954 11,617 11,539 10,582
1995 12,393 11,816 11,892 10,617
1995 12,481 12,079 12,050 10,652
1995 12,821 12,286 12,232 10,673
1995 13,985 12,924 12,880 10,694
1995 15,543 13,669 13,823 10,694
1995 15,796 13,962 14,062 10,722
1995 16,136 14,212 14,375 10,743
1995 15,181 13,577 13,864 10,778
1995 15,873 14,147 14,366 10,771
1996 16,341 14,521 14,592 10,764
1996 16,071 14,505 14,520 10,827
1996 17,125 14,957 15,088 10,863
1996 17,504 15,267 15,450 10,919
1996 19,180 16,084 16,600 10,961
1996 20,531 16,717 17,262 10,982
1996 19,126 16,030 16,594 10,989
1996 17,436 14,631 15,222 11,010
1996 18,477 15,481 16,109 11,031
1996 19,937 16,086 16,919 11,066
1996 18,409 15,839 16,601 11,101
1996 17,747 16,491 17,108 11,122
1997 18,329 16,923 17,381 11,122
1997 18,680 17,262 17,769 11,157
1997 16,986 16,844 17,149 11,192
1997 15,093 16,049 16,291 11,227
1997 14,376 16,094 16,238 11,241
INSET LEGEND READS:
LB Opportunity Growth Fund
$14,376
Lipper Average Small Co. Stock
Funds
$16,238
Russell 2000 Index
$16,094
Consumer Price Index
$11,241
INSET BOX ON CHART READS:
LB Opportunity
Growth Fund
Annualized Total Returns*
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Net Asset Value
Since Inception
1/8/93 10.76%
1 Year -25.05%
Public Offering Price
Since Inception
1/8/93 9.46%
1 Year -28.81%
Footnote reads:
* See accompanying notes to Portfolio Management Reviews.
As you compare performance, please note that the LB Opportunity Growth
Fund's performance reflects the maximum 5% sales charge. The performance
of the Russell 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.
Portfolio Adjustments
Throughout the period the Fund continued to look for companies with
unique products, quality management, and strong earnings growth. Because
the market was nervous about corporate earnings, we closely reviewed
every company in the portfolio to identify any firms with potential
earnings problems. While continuing to believe that technology and
health care firms offer the greatest growth opportunities in American
business today, we added shares of energy and financial companies for
greater diversification.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 11.5%
Corporate Bonds 0.4%
Common Stocks 88.1%
We also increased investments in firms with market capitalizations above
$500 million. This is a natural evolution for small-company stock funds
with growing assets. While the Fund remains focused on stocks under $1
billion in capitalization, the weighted average market capitalization of
stocks in the Fund is about $300 million. We believe adding slightly
larger firms will help reduce the Fund's future price volatility, with
little impact on its growth potential.
Improving Values
Although the recent retreat in small-company stocks has been
disconcerting, history has shown that greater volatility has typically
accompanied stronger growth potential. Since prices of small-company
stocks have declined, many now have exceptional value relative to large-
company issues. The stage has been set for a small-company stock rally
by continued improvement in the economy, stable interest rates and
moderate inflation.
Meanwhile, we'll continue to look for stocks whose prices have been
unfairly punished. These issues can help us turn the retreat of the
small-company market to the Fund's long-term advantage. As we uncover
attractive opportunities, we'll continue to diversify the Fund's
holdings into energy and financial stocks, as well as other industry
sectors.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
% of
Top 10 Holdings Portfolio
- ----------------------------------------------------------------------
BMC Industries, Inc. 2.6%
Xpedite Systems, Inc. 2.6%
Steiner Leisure Limited 2.4%
Cameron Ashley
Building Products 2.2%
Cannondale Corporation 2.1%
Fairfield Communities, Inc. 1.9%
Memtec Limited 1.9%
Information Management
Resources, Inc. 1.9%
DataWorks Corporation 1.8%
Complete Management, Inc. 1.8%
These holdings represent 21.2% of the Fund's total investment portfolio.
LB World Growth Fund
[GRAPHIC OMITTED: PHOTO OF MARTIN G. WADE]
Martin G. Wade is president of Rowe Price-Fleming, the 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 has 28 years of experience in
research and investment management, including 17 years with Rowe Price-
Fleming.
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Fund Objective: To seek long-term
growth of capital by investing
primarily in common stocks of
established companies outside the U.S.
- ---------------------------------
Foreign stock returns were mixed for the six months ended April 30,
1997. While stocks in European and Latin American markets advanced
strongly, stocks in Japan and other Pacific markets continued to lag. By
overweighting Latin American stocks versus Morgan Stanley Capital
International's Europe, Australia, Far East (EAFE) Index, and
underweighting Japanese stocks, the LB World Growth Fund outperformed
its market benchmark for the six-month period. The Fund also benefited
from its selection of individual stocks.
During the period the LB World Growth Fund had an NAV total return of
4.94%. That compares to average returns of 0.77% for the EAFE Index, and
6.22% for international equity funds tracked by Lipper Analytical
Services.
Japanese Holdings Still Modest
When the six-month period began, Japanese stocks represented 22.6% of
the Fund's assets compared to 35% of the EAFE Index. Although Japanese
exports were strong, weak domestic consumption and problems in the
financial sector continued to hurt Japan's economy. Given this, we
emphasized Japanese export stocks, such as NEC and Canon, and avoided
Japanese bank stocks. As stock prices in Japan grew more attractive, we
modestly increased the Fund's holdings there. Even though the Fund's
number of holdings in Japan increased during the period, declines in
market value resulted in a 0.3% reduction in Japanese holdings as a
percentage of the Fund's total assets.
<TABLE>
<CAPTION>
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1997
GROWTH OF $10,000 INVESTED SINCE 9/30/95]
Morgan Stanley Lipper Average
Capital International International Fund
LBWGF EAFE Index Stocks
Month End Total Total Total
Date Value Value Value CPI
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 10,000 10,000 10,000 10,000
1995 9,336 9,734 9,790 10,033
1995 9,414 10,008 9,893 10,026
1996 9,719 10,413 10,203 10,020
1996 9,941 10,458 10,413 10,078
1996 10,007 10,495 10,443 10,111
1996 10,162 10,721 10,625 10,163
1996 10,462 11,035 10,957 10,202
1996 10,417 10,834 10,899 10,222
1996 10,528 10,898 10,975 10,228
1996 10,196 10,582 10,581 10,248
1996 10,340 10,607 10,691 10,268
1996 10,572 10,892 10,919 10,300
1996 10,506 10,783 10,829 10,333
1996 10,982 11,214 11,290 10,352
1997 11,024 11,073 11,320 10,352
1997 10,868 10,688 11,247 10,385
1997 10,980 10,865 11,394 10,418
1997 10,957 10,907 11,421 10,451
1997 11,024 10,967 11,449 10,464
</TABLE>
INSET LEGEND READS:
LB Opportunity Growth Fund
$11,024
Lipper Average International
Stock Funds
$11,449
Morgan Stanley
Capital International
Eafe Index
$10,967
Consumer Price Index
$10,464
INSET BOX ON CHART READS:
LB World
Growth Fund
Annualized Total Returns*
- ----------------------------------------------------------
Net Asset Value
Since Inception
9/5/95 10.08%
1 Year 5.38%
Public Offering Price
Since Inception
9/5/95 6.70%
1 Year 0.08%
Footnote reads:
* See accompanying notes to Portfolio Management Reviews.
As you compare performance, please note that the LB World Growth Fund's
performance reflects the maximum 5% sales charge. The performance of the
EAFE 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.
By underweighting Japan, we were able to start the period with a 4.6%
weighting in Latin American stocks, which the EAFE Index does not
include. In Brazil, where privatization and deregulation helped stock
prices gain 30% in the past six months, the Fund benefited from strong
performances by Telecomunicacoes Brasileiras, a telecommunications
company. In Mexico, the Fund enjoyed good returns from Telefonos de
Mexico, another telecommunications firm, and Cifra, a retail company.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 4.1%
Preferred Stocks 0.5%
Common Stocks 95.4%
The Fund's weighting in Europe was about the same as that of the EAFE
Index for most of the period. Although the Fund was underweighted in
Germany, which performed strongly, it benefited from an overweighting in
the Netherlands --where prices also strengthened. During the period, we
took profits in holdings from the Netherlands and the United Kingdom and
added investments in Germany, Switzerland and France that offered
stronger growth potential.
A Recipe for Improvement
We believe the outlook for international markets should brighten as 1997
progresses. Most nations abroad should enjoy slow growth, with low
inflation and interest rates --a recipe for further improvements in
corporate profits. While foreign markets are not necessarily inexpensive
by historical measures, most offer good value compared to the U.S.
equity markets.
We think Japanese stocks have largely discounted that nation's economic
problems and could rise for the rest of the year. There should also be
selective opportunities in the established markets of Europe and the
developing nations of Asia and Latin America. We believe the LB World
Growth Fund is well-diversified in both its country weightings and its
individual stock selection and can take advantage of these positive
trends as they unfold.
[GRAPHIC OMITTED:
PORTFOLIO COMPOSITION TOP 10 COUNTRIES]
Portfolio Composition
Top 10 Countries
% of
Country Portfolio
- ----------------------------------------------------------------------
Japan 22.3%
United Kingdom 15.4%
Netherlands 10.8%
France 7.9%
Switzerland 5.7%
Germany 4.4%
Hong Kong 4.0%
Brazil 3.1%
Sweden 2.5%
Italy 2.3%
------
78.4%
LB Fund
[GRAPHIC OMITTED: PHOTO OF JAMES M. WALLINE]
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
managed the Fund since 1994. He has been with Lutheran Brotherhood
Research Corp. since its inception in 1970.
- ---------------------------------
Fund Objective: To seek growth of
capital and income by investing in the
stocks of leading companies.
- ---------------------------------
In the six months ended April 30, 1997, stock investors continued to
"rotate" quickly from one market sector to another. With stock prices
breaking new highs, investors were constantly on the lookout for value,
searching different sectors as economic forecasts and opinions changed.
During this time, we completed the move to a "core group" of companies
that dominate their respective industries. This gave the LB Fund a mix
of investments that could prosper in different economic environments and
a return that outpaced the returns for other funds with similar
investment objectives.
For the six-month period, the Fund had a total return (based on NAV) of
12.64%. This compares with an average return of 10.45% for growth and
income funds tracked by Lipper Analytical Services and 14.72% for the
S&P 500 Index.
Industry Leaders Outperform
The Fund's focus on leading companies proved particularly helpful in
recent months--as economic uncertainty drove investors to larger firms,
whose earnings tend to be more reliable and whose stocks have greater
liquidity. With good performances from financial, health care and
technology shares generally, the Fund enjoyed particularly strong
returns from MBNA, Abbott Laboratories, Johnson & Johnson and Microsoft.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1997
GROWTH OF $10,000 INVESTED SINCE 4/30/87]
Lipper Average
LBF S & P 500 Growth & Income
Month End Total Total Total
Date Value Value Value CPI
- ----------------------------------------------------------------------
1987 10,000 10,000 10,000 10,000
1987 9,540 10,085 10,049 10,030
1987 9,926 10,596 10,436 10,071
1987 10,318 11,134 10,830 10,092
1987 10,597 11,549 11,147 10,148
1987 10,337 11,296 10,955 10,198
1987 8,146 8,863 8,850 10,225
1987 7,655 8,129 8,350 10,240
1988 8,185 8,749 8,885 10,237
1988 8,370 9,129 9,246 10,264
1988 8,643 9,537 9,673 10,290
1988 8,363 9,247 9,526 10,335
1988 8,392 9,363 9,605 10,388
1988 8,404 9,423 9,615 10,423
1988 8,737 9,863 10,061 10,468
1988 8,637 9,838 9,994 10,512
1988 8,396 9,490 9,752 10,556
1988 8,721 9,897 10,090 10,627
1988 8,917 10,184 10,262 10,663
1988 8,780 10,021 10,115 10,672
1989 8,941 10,199 10,288 10,689
1989 9,564 10,956 10,880 10,743
1989 9,349 10,665 10,729 10,787
1989 9,597 10,919 10,949 10,849
1989 10,055 11,501 11,396 10,920
1989 10,404 11,942 11,780 10,982
1989 10,313 11,884 11,720 11,009
1989 11,275 12,969 12,514 11,035
1989 11,657 13,209 12,778 11,053
1989 11,621 13,156 12,719 11,089
1989 10,928 12,862 12,354 11,142
1989 11,293 13,111 12,539 11,168
1990 11,321 13,426 12,712 11,186
1990 10,498 12,538 11,988 11,301
1990 10,591 12,677 12,142 11,355
1990 10,891 13,021 12,401 11,417
1990 10,704 12,709 12,098 11,435
1990 11,855 13,922 13,037 11,461
1990 11,927 13,839 13,022 11,523
1990 11,867 13,804 12,920 11,568
1990 10,897 12,544 11,895 11,674
1990 10,322 11,935 11,315 11,772
1990 10,315 11,897 11,141 11,843
1990 10,857 12,652 11,794 11,869
1991 11,100 13,005 12,136 11,869
1991 11,645 13,585 12,724 11,940
1991 12,394 14,532 13,555 11,958
1991 12,620 14,890 13,870 11,976
1991 12,688 14,939 13,881 11,993
1991 13,270 15,561 14,437 12,029
1991 12,531 14,856 13,827 12,064
1991 13,176 15,567 14,406 12,082
1991 13,575 15,917 14,736 12,117
1991 13,348 15,652 14,603 12,171
1991 13,631 15,882 14,827 12,188
1991 13,134 15,222 14,242 12,224
1992 14,738 16,965 15,651 12,233
1992 14,518 16,667 15,648 12,251
1992 14,670 16,862 15,912 12,295
1992 14,298 16,535 15,637 12,357
1992 14,400 17,041 15,883 12,375
1992 14,533 17,099 15,981 12,393
1992 14,185 16,848 15,660 12,437
1992 14,618 17,559 16,183 12,464
1992 14,350 17,181 15,877 12,499
1992 14,551 17,381 16,066 12,534
1992 14,836 17,462 16,167 12,579
1992 15,468 18,031 16,764 12,597
1993 15,592 18,257 17,017 12,588
1993 15,892 18,426 17,209 12,650
1993 15,944 18,657 17,336 12,694
1993 16,405 19,052 17,784 12,739
1993 16,127 18,613 17,458 12,774
1993 16,530 19,080 17,867 12,792
1993 16,584 19,143 17,922 12,810
1993 16,441 19,086 17,906 12,810
1993 16,925 19,791 18,561 12,845
1993 16,898 19,639 18,550 12,872
1993 17,070 20,065 18,814 12,925
1993 16,626 19,852 18,558 12,934
1994 16,947 20,101 18,962 12,934
1994 17,550 20,798 19,554 12,969
1994 17,071 20,214 19,173 13,014
1994 16,242 19,336 18,369 13,058
1994 16,280 19,601 18,542 13,076
1994 16,462 19,889 18,720 13,084
1994 16,011 19,402 18,293 13,129
1994 16,492 20,060 18,796 13,164
1994 17,089 20,868 19,514 13,218
1994 16,800 20,355 19,081 13,253
1994 17,051 20,829 19,287 13,262
1994 16,357 20,056 18,577 13,280
1995 16,369 20,351 18,774 13,280
1995 16,766 20,895 19,043 13,333
1995 17,240 21,693 19,757 13,386
1995 17,549 22,341 20,265 13,430
1995 18,063 23,009 20,761 13,475
1995 18,656 23,895 21,432 13,501
1995 19,268 24,452 21,882 13,528
1995 20,125 25,281 22,600 13,528
1995 19,901 25,332 22,728 13,563
1995 20,652 26,398 23,431 13,590
1995 20,691 26,321 23,171 13,634
1995 21,647 27,456 24,190 13,626
1996 21,613 27,986 24,613 13,617
1996 22,221 28,957 25,283 13,697
1996 22,493 29,206 25,619 13,741
1996 22,608 29,492 25,947 13,812
1996 23,049 29,940 26,326 13,865
1996 23,448 30,680 26,821 13,892
1996 23,312 30,800 26,783 13,901
1996 22,186 29,451 25,637 13,927
1996 22,785 30,063 26,337 13,954
1996 23,975 31,750 27,548 13,998
1996 24,334 32,645 28,105 14,043
1996 26,106 35,100 29,985 14,069
1997 25,335 34,405 29,613 14,069
1997 26,930 36,576 30,872 14,114
1997 26,884 36,843 31,054 14,158
1997 25,834 35,325 29,930 14,202
1997 27,409 37,448 31,037 14,220
INSET LEGEND READS:
LB Fund
$27,409
Standard & Poor's
500 Stock Index
$37,448
Lipper Average
Growth & Income
Funds
$31,037
Consumer Price Index
$14,220
INSET BOX ON CHART READS:
LB Fund
Annualized Total Returns*
- -----------------------------------------------------------
Net Asset Value
10 Years 11.18%
5 Years 13.74%
1 Year 18.92%
Public Offering Price
10 Years 10.61%
5 Years 12.58%
1 Year 12.95%
Footnote reads:
* See accompanying notes to Portfolio Management Reviews.
As you compare performance, please note that the LB Fund's performance
reflects the maximum 5% sales charge. The performance of the S&P 500
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.
Besides repositioning the Fund to emphasize industry leaders, we
realigned certain investments to give the Fund industry weightings
similar to the S&P 500 Index. In addition, we traded individual stocks
within industry sectors for others that we believed had better value.
This led us to add shares of Marriott, HFS and Carnival Corp. in the
consumer growth area; Caterpillar, DuPont and Monsanto in the basic
industry sector; WorldCom in the telecommunications sector; and Avon in
the consumer staples group.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 2.3%
U.S. Treasury 0.6%
Common Stocks 97.1%
A Good Position
If the economy continues to grow as we expect, with moderate inflation
and stable interest rates, stock prices should continue to advance. The
pace of the rally may become more moderate, however, and stock prices
may weaken from time to time as investor psychology shifts.
We feel the LB Fund is well positioned for such an environment.
Investors should continue to favor the leading companies where the Fund
has focused its holdings. The Fund should also benefit from its
attention to value, which should remain important to investors as stock
prices head higher. As before, we will continue to look for the best
investment opportunities from leading firms in each industry sector--
giving special emphasis to companies with a particular earnings
"catalyst" that can help their stocks outperform.
[GRAPHIC OMITTED:
TOP 10 HOLDINGS % OF PORTFOLIO]
% of
Top 10 Holdings Portfolio
- ------------------------------------------------------------------------
American International
Group, Inc. 2.1%
Citicorp 2.1%
SBC Communications, Inc. 2.1%
Ameritech Corp. 2.1%
Cisco Systems, Inc. 2.1%
Federal National Mtg Assoc. 2.0%
Coca-Cola Co. 2.0%
First Bank Systems, Inc. 2.0%
Intel Corp. 2.0%
McDonald's Corp. 2.0%
These holdings represent 20.5% of the Fund's total investment portfolio.
LB High Yield Fund
[GRAPHIC OMITTED: PHOTO OF THOMAS N. HAAG]
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, and has been
with LB since 1986.
- -----------------------------
Fund Objective: To seek high
current income and growth of
capital by investing primarily in
high-yielding ("junk") corporate
bonds.
- -----------------------------
Returns in the high-yield bond market continue to outpace those of other
fixed-income securities, and during the period were very near their
historical averages. In past years, the LB High Yield Fund enjoyed
above-market returns as a result of securities selection and an
overweighting of the media/telecommunications sector. Though this
strategy still holds great potential for long-term performance, it
stifled the Fund's return during the period.
For the six months ended April 30, 1997, the LB High Yield Fund earned a
total return (based on NAV) of 1.31%. That compares with an average
return of 4.69% for high-yield bond funds tracked by Lipper Analytical
Services, and a return of 4.95% for the Lehman Brothers High-Yield
Index.
Reducing Volatility
For some time, the Fund has had large investments in zero-coupon
securities and bonds issued by media/telecommunications firms. In early
1996, these issues benefited significantly from industry deregulation
and performed especially well when interest rates were falling. However,
as interest rates rose and initiatives to deregulate became more
clouded, media/telecommunications firms fell out of market favor.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1997
GROWTH OF $10,000 INVESTED SINCE 4/30/87]
Lehman High Lipper Average
LBHYLD Yield Index High Current
Month End Total Total Total
Date Value Value Value CPI
- -----------------------------------------------------------------------
1987 10,000 10,000 10,000 10,000
1987 9,464 10,072 9,942 10,030
1987 9,691 10,201 10,072 10,071
1987 9,730 10,228 10,100 10,092
1987 9,770 10,292 10,165 10,148
1987 9,470 9,968 9,920 10,198
1987 9,167 9,642 9,499 10,225
1987 9,455 9,919 9,721 10,240
1988 9,625 10,158 9,804 10,237
1988 9,980 10,498 10,107 10,264
1988 10,301 10,838 10,385 10,290
1988 10,182 10,725 10,344 10,335
1988 10,196 10,807 10,407 10,388
1988 10,169 10,823 10,434 10,423
1988 10,406 10,981 10,646 10,468
1988 10,470 11,053 10,752 10,512
1988 10,438 11,037 10,764 10,556
1988 10,546 11,176 10,861 10,627
1988 10,656 11,311 10,993 10,663
1988 10,656 11,378 11,008 10,672
1989 10,813 11,431 11,065 10,689
1989 11,030 11,633 11,256 10,743
1989 11,090 11,658 11,304 10,787
1989 10,999 11,567 11,265 10,849
1989 10,926 11,616 11,258 10,920
1989 11,170 11,841 11,421 10,982
1989 11,451 11,988 11,611 11,009
1989 11,411 11,972 11,627 11,035
1989 11,480 12,013 11,634 11,053
1989 11,242 11,811 11,452 11,089
1989 10,779 11,531 11,113 11,142
1989 10,713 11,508 11,058 11,168
1990 10,523 11,527 10,979 11,186
1990 10,201 11,279 10,697 11,301
1990 9,955 11,046 10,436 11,355
1990 9,997 11,336 10,558 11,417
1990 9,999 11,317 10,551 11,435
1990 10,328 11,535 10,782 11,461
1990 10,455 11,814 11,000 11,523
1990 10,640 12,132 11,228 11,568
1990 10,233 11,442 10,770 11,674
1990 9,779 10,606 10,227 11,772
1990 9,434 10,050 9,787 11,843
1990 9,585 10,363 9,826 11,869
1991 9,740 10,421 9,857 11,869
1991 9,795 10,708 9,995 11,940
1991 10,511 11,879 10,713 11,958
1991 11,012 12,579 11,246 11,976
1991 11,413 13,095 11,678 11,993
1991 11,515 13,118 11,750 12,029
1991 11,842 13,506 11,998 12,064
1991 12,173 13,939 12,356 12,082
1991 12,352 14,259 12,588 12,117
1991 12,548 14,457 12,800 12,171
1991 12,999 14,940 13,208 12,188
1991 13,198 15,018 13,331 12,224
1992 13,255 15,234 13,447 12,233
1992 13,869 15,771 13,980 12,251
1992 14,257 16,160 14,315 12,295
1992 14,515 16,360 14,536 12,357
1992 14,642 16,423 14,641 12,375
1992 14,870 16,654 14,855 12,393
1992 14,956 16,811 15,005 12,437
1992 15,215 17,065 15,274 12,464
1992 15,423 17,288 15,467 12,499
1992 15,580 17,464 15,627 12,534
1992 15,298 17,218 15,366 12,579
1992 15,564 17,435 15,593 12,597
1993 15,922 17,634 15,801 12,588
1993 16,576 18,147 16,230 12,650
1993 16,776 18,466 16,544 12,694
1993 17,099 18,705 16,871 12,739
1993 17,167 18,867 17,005 12,774
1993 17,459 19,092 17,273 12,792
1993 17,997 19,493 17,674 12,810
1993 18,140 19,682 17,849 12,810
1993 18,285 19,847 17,981 12,845
1993 18,278 19,899 18,037 12,872
1993 18,850 20,301 18,441 12,925
1993 18,921 20,398 18,559 12,934
1994 19,244 20,651 18,833 12,934
1994 19,811 21,099 19,282 12,969
1994 19,743 21,045 19,245 13,014
1994 19,011 20,249 18,625 13,058
1994 18,720 20,111 18,355 13,076
1994 18,793 20,121 18,397 13,084
1994 18,805 20,184 18,372 13,129
1994 18,652 20,355 18,339 13,164
1994 18,790 20,500 18,350 13,218
1994 18,701 20,502 18,350 13,253
1994 18,762 20,551 18,331 13,262
1994 18,310 20,292 18,086 13,280
1995 18,226 20,442 18,107 13,280
1995 18,309 20,720 18,254 13,333
1995 19,007 21,431 18,751 13,386
1995 19,201 21,663 18,921 13,430
1995 19,665 22,213 19,383 13,475
1995 20,064 22,835 19,813 13,501
1995 20,173 22,988 19,875 13,528
1995 20,808 23,277 20,224 13,528
1995 20,896 23,349 20,279 13,563
1995 21,076 23,637 20,520 13,590
1995 21,188 23,783 20,684 13,634
1995 21,441 23,993 20,823 13,626
1996 21,759 24,369 21,140 13,617
1996 22,281 24,798 21,579 13,697
1996 22,853 24,818 21,763 13,741
1996 22,630 24,801 21,682 13,812
1996 22,748 24,855 21,853 13,865
1996 22,964 25,004 22,024 13,892
1996 22,786 25,212 22,053 13,901
1996 22,607 25,328 22,172 13,927
1996 22,980 25,601 22,524 13,954
1996 23,736 26,218 23,114 13,998
1996 23,655 26,420 23,239 14,043
1996 23,881 26,941 23,669 14,069
1997 24,144 27,135 23,951 14,069
1997 24,430 27,401 24,190 14,114
1997 24,745 27,853 24,623 14,158
1997 23,967 27,438 24,133 14,202
1997 23,965 27,726 24,329 14,220
INSET LEGEND READS:
LB High Yield Fund
$23,965
Lehman High
Yield Index
$27,726
Lipper Average
High Yield
Funds
$24,329
Consumer Price Index
$14,220
INSET BOX ON CHART READS:
LB High Yield Fund
Annualized Total Returns*
- -----------------------------------------------------------
Net Asset Value
10 Years 9.69%
5 Years 10.36%
1 Year 5.35%
Public Offering Price
10 Years 9.13%
5 Years 9.23%
1 Year 0.08%
Footnote reads:
* See accompanying notes to Portfolio Management Reviews.
As you compare performance, please note that the LB High Yield Fund's
performance reflects the maximum 5% sales charge. The performance of the
Lehman 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.
Late in the period, media/telecommunications issues experienced a price
rally. Therefore, as the Fund's holdings in this sector regained lost
ground, some of them were sold and the proceeds were used to purchase
positions in a variety of other industries, including paper and
forest products, financial firms and energy companies. Under current
market conditions, shifting some of the Fund's assets away from
media/telecommunications issues should help lessen the Fund's share
price volatility.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Foreign Government Bonds 0.4%
Short-term Securities 8.4%
Common Stocks & Stock Warrants 2.5%
Preferred Stocks 12.8%
Corporate Bonds 75.9%
We further reduced price volatility in the Fund by giving more attention
to issues with higher credit ratings and somewhat shorter maturities. In
times when Federal Reserve activity creates bond market uncertainty,
these issues can produce greater price stability than lower-rated,
longer-maturity bonds.
A Positive Outlook for Cyclicals
With slow but steady economic growth, stable interest rates and moderate
inflation, we believe the investments we've added in cyclical sectors
should perform well in coming months. If the long-term economic outlook
remains unclear, however, bond prices may continue to fluctuate.
We expect, therefore, to maintain our investment strategies of recent
months and lessen the Fund's volatility where we can. This may mean
putting extra emphasis on issues with higher credit quality. Also, if
the media/telecommunications sector of the market remains choppy, we may
take advantage of additional sector rallies to replace some of these
holdings with less-volatile issues. However, we continue to like the
added return potential of media/telecommunications issues and, though we
may trim some positions, we intend to maintain a greater-than-
market weighting in that sector.
[GRAPHIC BAR CHART OMITTED:
MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Baa 0.9%
Ba 10.6%
B 60.0%
Caa 9.3%
Ca 0.0%
D 0.0%
Not Rated 19.1%
LB Income Fund
[GRAPHIC OMITTED: 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, and has been with LB
since 1976.
- ----------------------------
Fund Objective: To seek high
current income while preserving
principal by investing in investment-
grade bonds and other income-
producing securities.
- ----------------------------
As the mood of bond investors vacillated in the last six months, spreads
between the yields of different sectors of the bond market changed as
well. By adjusting investments in the LB Income Fund to take advantage
of changing yield spreads, we helped the Fund earn a competitive return
in this environment.
For the six months ended April 30, 1997, the LB Income Fund earned a
total return (based on NAV) of 1.20%. That compares to an average return
of 1.31% for high-quality corporate bond funds tracked by Lipper
Analytical Services. Over the same time, the Lehman Aggregate Bond Index
had a return of 1.70%.
Good Returns from Corporate Bonds
When the period began, we had large investments in shorter-term asset-
backed securities. These issues provided the Fund with attractive yields
while interest rates fell at the end of 1996 and added price stability
when interest rates rose in 1997. Prices for short-term issues are
generally less sensitive to interest rate changes than prices for long-
term issues.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1997
GROWTH OF $10,000 INVESTED SINCE 4/30/87]
Lehman Agg. Lipper Average
LBINC Bond Index Corp. Debt A
Month End Total Total Total
Date Value Value Value CPI
- ---------------------------------------------------------------
1987 10,000 10,000 10,000 10,000
1987 9,462 9,961 9,937 10,030
1987 9,558 10,098 10,059 10,071
1987 9,510 10,090 10,008 10,092
1987 9,496 10,037 9,931 10,148
1987 9,231 9,823 9,680 10,198
1987 9,411 10,173 9,967 10,225
1987 9,558 10,254 10,086 10,240
1988 9,752 10,394 10,215 10,237
1988 10,112 10,760 10,568 10,264
1988 10,238 10,888 10,707 10,290
1988 10,140 10,785 10,589 10,335
1988 10,100 10,727 10,532 10,388
1988 10,036 10,655 10,467 10,423
1988 10,337 10,912 10,699 10,468
1988 10,296 10,854 10,664 10,512
1988 10,366 10,882 10,684 10,556
1988 10,611 11,129 10,908 10,627
1988 10,808 11,339 11,084 10,663
1988 10,729 11,200 10,977 10,672
1989 10,814 11,213 11,041 10,689
1989 10,991 11,374 11,183 10,743
1989 10,883 11,292 11,116 10,787
1989 10,918 11,341 11,159 10,849
1989 11,138 11,578 11,351 10,920
1989 11,413 11,882 11,617 10,982
1989 11,824 12,243 11,958 11,009
1989 12,008 12,504 12,160 11,035
1989 11,855 12,319 12,000 11,053
1989 11,905 12,382 12,042 11,089
1989 12,108 12,687 12,293 11,142
1989 12,187 12,807 12,379 11,168
1990 12,159 12,842 12,398 11,186
1990 12,000 12,689 12,224 11,301
1990 12,040 12,729 12,235 11,355
1990 12,038 12,738 12,242 11,417
1990 11,889 12,621 12,102 11,435
1990 12,193 12,995 12,443 11,461
1990 12,351 13,204 12,639 11,523
1990 12,482 13,386 12,794 11,568
1990 12,256 13,207 12,574 11,674
1990 12,290 13,316 12,619 11,772
1990 12,399 13,486 12,755 11,843
1990 12,664 13,775 13,040 11,869
1991 12,850 13,990 13,243 11,869
1991 13,007 14,164 13,379 11,940
1991 13,196 14,284 13,524 11,958
1991 13,306 14,383 13,616 11,976
1991 13,496 14,538 13,783 11,993
1991 13,608 14,622 13,851 12,029
1991 13,593 14,615 13,826 12,064
1991 13,756 14,818 14,000 12,082
1991 14,049 15,138 14,335 12,117
1991 14,362 15,446 14,647 12,171
1991 14,462 15,617 14,778 12,188
1991 14,578 15,761 14,908 12,224
1992 15,066 16,229 15,441 12,233
1992 14,891 16,008 15,200 12,251
1992 14,954 16,112 15,276 12,295
1992 14,946 16,022 15,200 12,357
1992 15,006 16,137 15,279 12,375
1992 15,291 16,442 15,588 12,393
1992 15,539 16,669 15,815 12,437
1992 15,911 17,009 16,231 12,464
1992 16,055 17,181 16,361 12,499
1992 16,271 17,386 16,564 12,534
1992 16,007 17,154 16,282 12,579
1992 16,011 17,158 16,279 12,597
1993 16,272 17,431 16,551 12,588
1993 16,604 17,765 16,907 12,650
1993 16,955 18,076 17,289 12,694
1993 17,013 18,152 17,351 12,739
1993 17,129 18,279 17,466 12,774
1993 17,132 18,303 17,471 12,792
1993 17,454 18,634 17,859 12,810
1993 17,609 18,740 17,993 12,810
1993 17,954 19,068 18,407 12,845
1993 18,014 19,120 18,462 12,872
1993 18,094 19,191 18,547 12,925
1993 17,848 19,027 18,311 12,934
1994 17,919 19,130 18,390 12,934
1994 18,150 19,388 18,668 12,969
1994 17,741 19,051 18,257 13,014
1994 17,208 18,581 17,779 13,058
1994 17,058 18,432 17,579 13,076
1994 17,009 18,430 17,525 13,084
1994 16,897 18,389 17,465 13,129
1994 17,261 18,755 17,776 13,164
1994 17,253 18,778 17,780 13,218
1994 16,932 18,502 17,502 13,253
1994 16,861 18,485 17,453 13,262
1994 16,874 18,445 17,418 13,280
1995 17,048 18,572 17,542 13,280
1995 17,383 18,940 17,842 13,333
1995 17,761 19,390 18,247 13,386
1995 17,882 19,509 18,371 13,430
1995 18,155 19,782 18,621 13,475
1995 18,933 20,547 19,401 13,501
1995 19,078 20,697 19,533 13,528
1995 18,937 20,652 19,445 13,528
1995 19,195 20,902 19,690 13,563
1995 19,365 21,104 19,889 13,590
1995 19,648 21,379 20,170 13,634
1995 19,955 21,699 20,482 13,626
1996 20,257 22,003 20,787 13,617
1996 20,362 22,148 20,885 13,697
1996 19,892 21,763 20,453 13,741
1996 19,674 21,611 20,285 13,812
1996 19,548 21,490 20,133 13,865
1996 19,514 21,447 20,093 13,892
1996 19,765 21,734 20,328 13,901
1996 19,803 21,793 20,368 13,927
1996 19,698 21,756 20,320 13,954
1996 20,071 22,134 20,679 13,998
1996 20,544 22,626 21,132 14,043
1996 20,945 23,013 21,523 14,069
1997 20,704 22,799 21,293 14,069
1997 20,769 22,869 21,331 14,114
1997 20,832 22,926 21,393 14,158
1997 20,525 22,672 21,130 14,202
1997 20,789 23,012 21,419 14,220
INSET LEGEND READS:
LB Income Fund
$20,789
Lehman Aggregate
Bond Index
$23,012
Lipper Average
Corporate Bond Funds
$21,419
Consumer Price Index
$14,220
INSET BOX ON CHART READS:
LB Income Fund
Annualized Total Returns*
- -----------------------------------------------------------
Net Asset Value
10 Years 8.15%
5 Years 6.74%
1 Year 6.35%
Public Offering Price
10 Years 7.59%
5 Years 5.64%
1 Year 1.03%
Footnote reads:
* See accompanying notes to Portfolio Management Reviews.
As you compare performance, please note that the LB Income Fund's
performance reflects the maximum 5% sales charge. The performance of the
Lehman 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.
As bond prices slid between December of 1996 and February of 1997, we
traded Treasury bonds for longer-term corporate securities. Many of
these were issues of banks and insurance firms--as well as electric
utility, gas and telephone companies. Bought at attractive prices and
yields, these issues performed well for the remainder of the period.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio composition (% of portfolio)
Short-Term Securities 17.4%
Common & Preferred Stocks 1.7%
U.S. Government 12.9%
Mortgage-Backed Securities 14.4%
Asset-Backed Securities 11.7%
Foreign Government Bonds 4.9%
Corporate Bonds 37.0%
In March and April of 1997--as concern that the Federal Reserve would
raise short-term rates drove bond prices lower --we de-emphasized
investments in corporate bonds. Because corporate bonds had outperformed
earlier in the period, we expected them to underperform as interest
rates rose and investors grew concerned about a slowing economy.
Future Strategies
We have recently begun to re-emphasize corporates in the Fund's
portfolio, feeling that most of the retreat in corporate prices has
already occurred. Whether the Federal Reserve raises interest rates
further to curb growth, or the economy slows on its own, we believe the
slowdown will be moderate and see no near-term threat of recession.
Also, because the outlook for corporate earnings remains positive, and
corporate bond prices are attractive, we think corporates are now quite
appealing. Although we expect to maintain sizable investments in asset-
backed securities, we will probably sell some of those issues to take
advantage of new opportunities in the corporate sector.
With slower growth in the months ahead, we expect yields for longer-term
Treasury bonds to remain between 6.50% and 7.25%. When inflationary
pressures or concerns of further Fed rate hikes push yields to the top
of that range, and bond prices become more attractive, we will likely
purchase longer-term issues. This would help us lock in higher yields
for more time and increase the Fund's potential for capital
appreciation. When yields are at the bottom of the range, we expect to
emphasize shorter-term securities. This will give the Fund greater
agility in the event that trends in bond yields and prices reverse
themselves.
[GRAPHIC BAR CHART OMITTED:
MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
U.S. Government
(Aaa Equivalent) 33.9%
Aaa 18.5%
Aa 10.8%
A 17.6%
Baa 15.4%
Ba 3.8%
LB Municipal Bond Fund
[PHOTO OMITTED: JANET I. GRANGAARD]
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 LB since 1988.
- -----------------------------------
Fund Objective: To seek high
current income that is exempt from
federal income tax by investing in
municipal bonds.
- -----------------------------------
Prices for municipal bonds outperformed prices for Treasury issues in
the last six months, and were somewhat less volatile. During the period,
demand for municipals was relatively strong--as higher yields attracted
tax-conscious individual investors to the market. Market demand was also
spurred by purchases from property and casualty insurance companies, who
tend to be cyclical investors in municipal bonds. At the same time, the
supply of municipal bonds was down slightly. Most of the heavy-debt
refinancing of recent years has been completed, and higher interest
rates have delayed some discretionary issuance, which also acts to limit
supply.
By maximizing yields where we could, and minimizing price volatility, we
helped the LB Municipal Bond Fund earn a competitive return in this
market. For the six months ended April 30, 1997, the Fund earned a total
return (based on NAV) of 1.71%. That compares to a return of 2.01% for
the Lehman Municipal Bond Index and an average return of 1.68% for
municipal bond funds tracked by Lipper Analytical Services.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1997
GROWTH OF $10,000 INVESTED SINCE 4/30/87]
Lipper Average
Lehman Muni. Gen. Municipal
LBMBF Bond Index Debt Funds
Month End Total Total Total
Date Value Value Value CPI
- -----------------------------------------------------------------
1987 10,000 10,000 10,000 10,000
1987 9,446 9,950 9,905 10,030
1987 9,637 10,243 10,124 10,071
1987 9,732 10,347 10,223 10,092
1987 9,741 10,371 10,255 10,148
1987 9,394 9,988 9,814 10,198
1987 9,466 10,023 9,844 10,225
1987 9,713 10,285 10,100 10,240
1988 9,924 10,434 10,285 10,237
1988 10,263 10,805 10,693 10,264
1988 10,375 10,920 10,805 10,290
1988 10,168 10,793 10,594 10,335
1988 10,256 10,875 10,650 10,388
1988 10,228 10,844 10,668 10,423
1988 10,446 11,002 10,851 10,468
1988 10,483 11,073 10,917 10,512
1988 10,520 11,083 10,956 10,556
1988 10,730 11,284 11,163 10,627
1988 10,929 11,483 11,395 10,663
1988 10,834 11,377 11,290 10,672
1989 10,995 11,493 11,461 10,689
1989 11,156 11,731 11,635 10,743
1989 11,086 11,597 11,539 10,787
1989 11,085 11,569 11,532 10,849
1989 11,360 11,844 11,811 10,920
1989 11,567 12,090 12,030 10,982
1989 11,678 12,254 12,187 11,009
1989 11,817 12,421 12,312 11,035
1989 11,703 12,299 12,181 11,053
1989 11,645 12,262 12,140 11,089
1989 11,800 12,412 12,287 11,142
1989 12,001 12,629 12,480 11,168
1990 12,101 12,733 12,565 11,186
1990 11,939 12,673 12,431 11,301
1990 12,025 12,786 12,554 11,355
1990 12,039 12,790 12,549 11,417
1990 11,903 12,697 12,388 11,435
1990 12,185 12,974 12,710 11,461
1990 12,334 13,088 12,831 11,523
1990 12,526 13,281 13,043 11,568
1990 12,264 13,088 12,760 11,674
1990 12,305 13,096 12,777 11,772
1990 12,501 13,333 12,963 11,843
1990 12,790 13,601 13,265 11,869
1991 12,894 13,656 13,322 11,869
1991 13,077 13,838 13,486 11,940
1991 13,151 13,959 13,564 11,958
1991 13,166 13,964 13,591 11,976
1991 13,352 14,150 13,789 11,993
1991 13,444 14,276 13,914 12,029
1991 13,391 14,262 13,870 12,064
1991 13,597 14,436 14,070 12,082
1991 13,756 14,626 14,250 12,117
1991 13,997 14,817 14,434 12,171
1991 14,106 14,950 14,563 12,188
1991 14,116 14,992 14,583 12,224
1992 14,463 15,314 14,927 12,233
1992 14,469 15,349 14,917 12,251
1992 14,442 15,354 14,937 12,295
1992 14,442 15,360 14,943 12,357
1992 14,606 15,497 15,081 12,375
1992 14,806 15,680 15,292 12,393
1992 15,060 15,943 15,570 12,437
1992 15,581 16,421 16,122 12,464
1992 15,303 16,260 15,864 12,499
1992 15,347 16,366 15,927 12,534
1992 15,174 16,206 15,640 12,579
1992 15,525 16,496 16,039 12,597
1993 15,757 16,664 16,237 12,588
1993 15,910 16,857 16,420 12,650
1993 16,494 17,468 17,064 12,694
1993 16,385 17,282 16,864 12,739
1993 16,540 17,457 17,046 12,774
1993 16,620 17,555 17,143 12,792
1993 16,931 17,848 17,438 12,810
1993 16,935 17,871 17,438 12,810
1993 17,306 18,243 17,825 12,845
1993 17,504 18,451 18,036 12,872
1993 17,617 18,486 18,072 12,925
1993 17,417 18,323 17,882 12,934
1994 17,801 18,710 18,238 12,934
1994 17,998 18,923 18,448 12,969
1994 17,489 18,433 17,957 13,014
1994 16,672 17,683 17,172 13,058
1994 16,750 17,833 17,234 13,076
1994 16,910 17,988 17,389 13,084
1994 16,781 17,878 17,276 13,129
1994 17,087 18,206 17,582 13,164
1994 17,146 18,269 17,626 13,218
1994 16,913 18,001 17,340 13,253
1994 16,573 17,680 17,011 13,262
1994 16,254 17,360 16,659 13,280
1995 16,631 17,742 17,065 13,280
1995 17,138 18,250 17,572 13,333
1995 17,689 18,781 18,094 13,386
1995 17,878 18,997 18,257 13,430
1995 17,894 19,020 18,255 13,475
1995 18,496 19,626 18,824 13,501
1995 18,252 19,456 18,619 13,528
1995 18,379 19,640 18,738 13,528
1995 18,610 19,890 18,945 13,563
1995 18,754 20,015 19,060 13,590
1995 19,052 20,305 19,352 13,634
1995 19,442 20,642 19,723 13,626
1996 19,655 20,841 19,942 13,617
1996 19,800 20,999 20,036 13,697
1996 19,631 20,856 19,878 13,741
1996 19,304 20,589 19,562 13,812
1996 19,202 20,532 19,474 13,865
1996 19,190 20,523 19,477 13,892
1996 19,387 20,747 19,661 13,901
1996 19,562 20,936 19,837 13,927
1996 19,552 20,932 19,822 13,954
1996 19,845 21,225 20,105 13,998
1996 20,068 21,465 20,322 14,043
1996 20,456 21,857 20,680 14,069
1997 20,330 21,766 20,589 14,069
1997 20,369 21,807 20,591 14,114
1997 20,548 22,008 20,770 14,158
1997 20,277 21,715 20,500 14,202
1997 20,411 21,897 20,668 14,220
INSET LEGEND READS:
LB Municipal Bond Fund
$20,411
Lehman Municipal
Bond Index
$21,897
Lipper Average
General Municipal
Bond Funds
$20,668
Consumer Price Index
$14,220
INSET BOX ON CHART READS:
LB Municipal
Bond Fund
Annualized Total Returns*
- -----------------------------------------------------------
Net Asset Value
10 Years 7.95%
5 Years 6.92%
1 Year 6.30%
Public Offering Price
10 Years 7.40%
5 Years 5.83%
1 Year 1.03%
Footnote reads:
* See accompanying notes to Portfolio Management Reviews.
As you compare performance, please note that the LB Municipal Bond
Fund's performance reflects the maximum 5% sales charge. The performance
of the Lehman 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.
Improving Yields, Protecting Prices
During the period, we took several steps to enhance the Fund's yield.
While maintaining investments of strong credit quality, we added issues
with higher coupons. Besides providing the Fund with greater tax-free
income, these issues performed well against other municipals as interest
rates rose. As a result, the Fund earned higher-than-anticipated income,
which was distributed to shareholders in December 1996 as a special
dividend.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio composition (% of portfolio)]
Education 4.1%
Transportation 10.6%
Housing 1.8%
Water & Sewer 9.0%
Pollution Control 3.0%
Utility 13.1%
Health Care 10.4%
General Obligation 17.2%
Escrowed 18.8%
Other 12.0%
When market gyrations changed the spreads between yields for different
types of municipals, we swapped some of the Fund's holdings for others
with better value. During the period this reduced the Fund's holdings in
California, while raising its positions in Texas.
We also tried to make the most of changing prices. At the end of 1996,
when interest rates seemed relatively stable, we added longer-term
issues to pick up extra yield. We trimmed these positions in January of
1997, however, as it looked like interest rates would rise and bond
prices would fall. Because the yields of lower-quality bonds were not
strong enough to compensate the Fund for the extra risk these issues
carry, we de-emphasized these issues in favor of higher-quality
municipals.
Focus on Income
We expect municipal prices to be relatively stable in coming months, if
inflation and interest rates stay near current levels. Prices may dip
from time to time, however, as the bond market reacts to news about the
pace of economic growth. When that happens, we may look for attractive
opportunities to "buy the dips" in longer-term issues. This would give
the Fund additional income while increasing potential for capital
appreciation as municipal prices rebound.
Since income will become more important if prices are stable, we expect
to maintain sizable holdings in higher-coupon securities. Until the
yields on lower-quality issues become more attractive, we'll remain
focused on municipals of higher quality.
[GRAPHIC BAR CHART OMITTED:
MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 69.3%
Aa 15.1%
A 7.3%
Baa 8.3%
LB Money Market Fund
[GRAPHIC PHOTO OMITTED: GAIL R. ONAN]
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, and has been with LB since 1969.
- -------------------------------
Fund Objective: To seek current
income with stability of principal by
investing in high-quality, short-term
debt securities.**
- -------------------------------
Short-term yields continued to fluctuate in the six months ended April
30, 1997, as investors tried to predict whether economic growth was
strong enough for the Federal Reserve to raise interest rates. After
starting the period at 5.14%, the annualized yield for three-month
Treasury bills fell to a low of 5.08% in January 1997. It then moved as
high as 5.4% in late March, after the Fed raised short-term rates by
0.25%. Short-term yields edged lower in the weeks that followed, as
signs of continued low inflation and slower economic growth lowered
expectations for another Fed rate hike. At the end of the period, the
yield for three-month Treasuries had retreated somewhat and stood at
5.28% as April came to a close.
By adjusting investments in the LB Money Market Fund to make the most of
these changes, we helped the Fund earn a total return of 2.28% over the
six-month period.
Adding Flexibility
For most of the period we kept the average maturity of the Fund's
investments shorter than the average for its benchmark. Believing the
Fed would raise interest rates, we wanted the flexibility to invest in
higher-yielding instruments quickly as interest rates rose. To maintain
this flexibility without sacrificing yield, we balanced instruments
maturing in 30 days or less with instruments maturing in six to 12
months. Some of the Fund's shorter-term instruments were floating-rate
issues, whose coupons reset frequently.
We also added investments in taxable municipal paper. Issued by state
and local governments to fund commercial projects, these high-quality
issues represent a small segment of the market that few analysts follow.
As a result, there is often less demand for this paper--which can mean
attractive prices and yields.
More Fluctuation Ahead
We expect further fluctuations in money market yields during 1997.
Historically, the Federal Reserve has raised interest rates in several
steps. So, until it's clear that the Fed has finished its rate hikes,
money market yields should rise and fall on changing expectations of
further increases.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Certificates of Deposit 3.4%
Variable Rate Notes 11.5%
Bank Notes 1.6%
Medium-Term Notes 1.2%
Commercial Paper 82.3%
While such market volatility continues, we will watch for new investment
opportunities that might occur as the spreads between yields for various
instruments change. Recently the yield spreads between instruments of
different maturities have become relatively small. Although we expect to
keep floating-rate issues in the portfolio, we've started to add
maturities between 30 days and six months and reduce maturities of six
to 12 months. When it looks like yields have reached their market peak,
we may again add longer-term issues to secure greater income for the
Fund.
[GRAPHIC OMITTED:
PERFORMANCE AS OF APRIL 30, 1997]
Performance as of
April 30, 1997
Annualized Total Returns*
- ------------------------------------
10 Years 5.17%
5 Years 3.67%
1 Year 4.62%
Seven-Day Yields***
- ------------------------------------
Current 4.66%
Effective 4.77%
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. Sales charges do not apply to the LB Money Market
Fund. 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.
*** Seven-day yields of the LB Money Market Fund refer to the income
generated by an investment in the Fund over a specified seven-day
period. Effective yields reflect the reinvestment of income. Yields
are subject to daily fluctuation and should not be considered an
indication of future results.
World Growth Fund, LB Fund, High Yield Fund, Income Fund, Municipal
Bond Fund, and Money Market Fund are subject to a partial voluntary
waiver of advisory fees by the funds' investment advisor, which has
the effect of improving the funds' performances. The waiver of fees
may be discontinued at any time.
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, 1997
(unaudited)
Shares Value
------------ ------------
<S> <C> <C>
COMMON STOCKS - 88.1% (a)
Automotive - 1.8%
241,300 Lithia Motors, Inc. $2,714,625 (b)
36,900 Tower Automotive, Inc. 1,365,300 (b)
--------------
4,079,925
--------------
Bank & Finance - 2.2%
349,100 ACC Consumer Finance Corp. 2,923,713 (b)
25,600 American General
Hospitality Corp. 630,400
21,300 AMRESCO, Inc. 310,181 (b)
6,000 Apartment Investment &
Management Co. 166,500
10,700 Cali Realty Corp. 315,650
42,600 Sunstone Hotel Investors, Inc. 569,775
--------------
4,916,219
--------------
Building Products &
Materials - 4.7%
361,700 Cameron Ashley
Building Products 4,882,950 (b)
211,300 Dayton Superior Corp.,
Class A 2,456,363 (b)
213,400 Northwest Pipe Co. 3,414,400 (b)
--------------
10,753,713
--------------
Computer Software - 8.8%
109,900 Avant! Corp. 1,559,206 (b)
302,100 AXENT Technologies, Inc. 3,511,913 (b)
279,700 DataWorks Corp. 4,055,650 (b)
166,900 Information Management
Resources, Inc. 4,255,950 (b)
227,700 Pure Atria Corp. 2,220,075 (b)
240,100 Softquad International, Inc. 465,194 (b)
114,300 Summit Design, Inc. 800,100 (b)
297,000 Unison Software, Inc. 1,893,375 (b)
60,500 Wall Data, Inc. 1,266,719 (b)
--------------
20,028,182
--------------
Drugs & Health Care - 16.3%
44,300 ADAC Labs, Inc. 1,024,438
363,700 Alpha-Beta Technology, Inc. 2,955,063 (b)
193,500 Amrion, Inc. 3,386,250 (b)
199,700 Amylin Pharmaceuticals, Inc. 2,046,925 (b)
248,800 Atrix Laboratories, Inc. 2,767,900 (b)
105,800 Cephalon, Inc. 1,772,150 (b)
49,800 CN Biosciences, Inc. 722,100 (b)
129,700 Cytyc Corp. 2,756,125 (b)
265,700 DepoTech Corp. 3,885,863 (b)
287,700 Eclipse Surgical
Technologies, Inc. 1,690,238 (b)
244,600 GalaGen, Inc. 550,350 (b)
104,300 Isis Pharmaceuticals, Inc. 1,538,425 (b)
268,900 Matritech, Inc. 1,327,694 (b)
135,100 Orphan Medical, Inc. 548,844 (b)
137,850 PDT, Inc. 3,515,175 (b)
60,800 Sepracor, Inc. 1,185,600 (b)
78,400 STERIS Corp. 2,567,600 (b)
260,000 Sunquest Information
Systems, Inc. 2,665,000 (b)
--------------
36,905,740
--------------
Electronics - 9.5%
93,800 Cypress Semiconductor Corp. 1,301,475 (b)
26,700 Electro Scientific
Industries, Inc. 744,263 (b)
121,100 ESS Technology, Inc. 1,665,125 (b)
92,500 FSI International, Inc. 1,110,000 (b)
20,000 Hutchinson Technology, Inc. 542,500 (b)
153,800 Integrated Silicon Solution 1,115,050 (b)
147,200 Intevac, Inc. 1,913,600 (b)
132,300 Read-Rite Corp. 3,423,262 (b)
143,100 S3, Inc. 1,368,394 (b)
188,600 Sierra Semiconductor Corp. 3,182,625 (b)
83,200 Silicon Valley Group, Inc. 1,710,800 (b)
93,200 Trident Microsystems, Inc. 1,258,200 (b)
52,000 Ultrateck Stepper, Inc. 932,750 (b)
60,000 VLSI Technology, Inc. 1,192,500 (b)
--------------
21,460,544
--------------
Healthcare Management - 9.1%
371,700 American Oncology
Resources, Inc. 3,298,838 (b)
361,700 Complete Management, Inc. 4,023,913 (b)
114,600 FPA Medical Management, Inc. 1,862,250 (b)
444,400 Home Health Corp. of
America, Inc. 3,999,600 (b)
236,850 Horizon Mental Health
Management, Inc. 3,878,419 (b)
83,400 UroCor, Inc. 771,450 (b)
417,300 U.S. Diagnostic Labs, Inc. 2,790,694 (b)
--------------
20,625,164
--------------
Leisure &
Entertainment - 7.6%
247,900 Cannondale Corp. 4,834,050 (b)
169,600 Fairfield Communities, Inc. 4,409,600 (b)
111,800 Signature Resorts, Inc. 2,473,575 (b)
222,300 Steiner Leisure Ltd. 5,390,775 (b)
--------------
17,108,000
--------------
Machinery &
Equipment - 1.6%
97,300 Stratasys, Inc. 1,885,187 (b)
64,800 Triumph Group, Inc. 1,644,300 (b)
--------------
3,529,487
--------------
Manufacturing - 3.1%
204,800 BMC Industries, Inc. 5,939,200
198,200 Zomax Optical Media, Inc. 1,090,100 (b)
--------------
7,029,300
--------------
Oil & Oil Service - 1.3%
124,400 Pool Energy Services Co. 1,617,200 (b)
72,600 Pride Petroleum Services, Inc. 1,252,350 (b)
--------------
2,869,550
--------------
Pollution Control - 2.4%
425,900 IDM Environmental Corp. 625,540 (b)
166,400 Memtec Ltd., ADR 3,848,000
689,500 Recycling Industries, Inc. 883,421 (b)
--------------
5,356,961
--------------
Restaurants - 2.1%
251,100 BAB Holdings, Inc. 753,300 (b)
121,500 Lone Star Steakhouse &
Saloon 2,399,625 (b)
271,300 New World Coffee 373,037 (b)
232,000 Sagebrush, Inc. 1,276,000 (b)
--------------
4,801,962
--------------
Retail - 4.7%
213,200 Movie Gallery, Inc. 1,092,650 (b)
67,500 Proffitt's, Inc. 2,522,812 (b)
125,250 Sports Authority, Inc. (The) 2,223,187 (b)
91,300 The North Face, Inc. 1,289,612 (b)
220,800 Travis Boats & Motors, Inc. 2,373,600 (b)
197,600 West Coast
Entertainment Corp. 1,086,800 (b)
--------------
10,588,661
--------------
Services - 3.9%
186,200 Cotelligent Group, Inc. 1,536,150 (b)
100,000 F.Y.I., Inc. 1,800,000 (b)
142,700 Personal Group of
America, Inc. 3,424,800 (b)
145,600 StaffMark, Inc. 1,965,600 (b)
--------------
8,726,550
--------------
Telecommunications
Equipment - 4.6%
260,800 ACE*COMM Corp. 2,999,200 (b)
292,200 ACT Networks, Inc. 3,944,700 (b)
225,500 Larscom, Inc. 1,402,328 (b)
206,900 Orckit Communications Ltd. 2,081,931 (b)
--------------
10,428,159
--------------
Telephone &
Telecommunications - 3.4%
188,800 LCC International, Inc.,
Class A 1,935,200 (b)
291,900 Xpedite Systems, Inc. 5,874,487 (b)
--------------
7,809,687
--------------
Textiles & Apparel - 1.0%
835,400 Chaus (Bernard), Inc. 678,762 (b)
142,300 Cutter & Buck, Inc. 1,707,600 (b)
--------------
2,386,362
--------------
Total Common Stocks
(cost $237,732,930) 199,404,166
--------------
Principal
Amount
--------------
CORPORATE
BONDS - 0.4% (a)
$1,500,000 Kushner-Locke Co.,
Convertible Subordinated
Debentures, 8.0%,
due 12/15/2000
(cost $1,167,667) 941,250
--------------
SHORT-TERM
SECURITIES - 11.5% (a)
Commercial Paper
6,900,000 Corporate Asset Funding
Co., Inc. 5.55%,
due 5/13/1997 6,887,235
2,100,000 General Mills, Inc.
5.54%, due 5/6/1997 2,098,384
3,400,000 Household Finance Corp.
5.47%, due 5/2/1997 3,399,483
10,500,000 Koch Industries, Inc.
5.60%, due 5/9/1997 10,500,000
3,293,000 MetLife Funding, Inc.
5.47%, due 5/9/1997 3,288,997
--------------
Total Short-Term Securities
(at amortized cost) 26,174,099
--------------
Total Investments
(cost $265,074,696) $226,519,515 (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, 1997, the aggregate cost of securities for federal income tax
purposes was $265,074,696 and the net unrealized depreciation of investments
based on that cost was $38,555,181 which is comprised of $17,088,343 aggregate
gross unrealized appreciation and $55,643,524 aggregate gross unrealized
depreciation.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
Portfolio of Investments
April 30, 1997
(unaudited)
Shares Value
------------ ------------
<S> <C> <C>
ARGENTINA - 0.9% (a)
COMMON STOCKS
2,003 Banco de Galicia Buenos
Aires "B" ADR (USD) $48,729
2,600 Banco Frances del Rio de la
Plata ADR (USD) 78,975
150 Enron Global Power &
Pipeline (USD) 4,425
17,294 Naviera Perez "B" 140,268
430 Sociedad Comercial del
Plata ADR (USD) 13,008 (b)
910 Telecom Argentina Stet "B" 4,505
230 Telecom Argentina Stet "B"
ADR (USD) 11,500
3,770 Telefonica de Argentina
ADR (USD) 125,353
340 Transportadora de Gas del
Sur ADR (USD) 4,250
4,800 YPF Sociedad Anonima
ADR (USD) 132,600
--------------
Total Argentina 563,613
--------------
AUSTRALIA - 1.5% (a)
COMMON STOCKS
19,343 Australia Gas & Light 110,872
8,000 Australia & New Zealand
Banking Group Ltd. 51,096
11,000 Boral Ltd. 32,426
9,536 Broken Hill Proprietary 134,454
1,200 Coca Cola Amatil 13,718
9,000 Commonwealth Instalment
Receipt Trustee Ltd. 67,379
3,200 Lend Lease Corp. 61,240
6,151 National Australia Bank Ltd. 84,185
19,000 National Mutual Holdings Ltd. 28,153
20,024 News Corp. 92,289
11,000 Publishing & Broadcasting 58,075
10,000 St. George Bank Ltd. 61,452
12,000 Western Mining 71,122
10,000 Westpac Banking 53,888
10,500 Woodside Petroleum 83,522
--------------
Total Australia 1,003,871
--------------
AUSTRIA - 0.05% (a)
COMMON STOCKS
60 EVN Energie-Versorgung
Niederoesterreich AG 7,422
330 Flughafen Wien 13,679
--------------
Total Austria 21,101
--------------
BELGIUM - 1.2% (a)
COMMON STOCKS
302 Credit Communal
Holding/Dexia 29,989 (b)
530 Generale de Banque S.A. 219,783
35 Generale de Banque S.A.,
VVPR (reduced tax) Strips 17
1,130 Kredietbank 440,147
40 UCB 109,762
--------------
Total Belgium 799,698
--------------
BRAZIL - 3.1% (a)
COMMON STOCKS
470 Brazil Fund (USD) 11,985
7,270 Centrais Eletricas Brasileiras
S.A. ADR (USD) 162,775
1,950 Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar GDR (USD) 40,463
500 Companhia Energetica
Brasilia (USD) 22,375
450 Companhia Energetica de Sao
Paulo ADR (USD) 7,144 (b)
5,828 Companhia Energetica Minas
Gerais ADR (USD) 260,803
1,000 Companhia Siderurgica
Nacional (ADR) 35,500
9,883 Telecomunicacoes Brasileiras
ADR (USD) 1,134,074
29,910 Usinas Siderurgicas de Minas
Gerais ADR (USD) 351,443
--------------
Total Brazil 2,026,562
--------------
CANADA - 0.3% (a)
COMMON STOCKS
4,980 Alcan Aluminum 168,971
1,330 Royal Bank of Canada 53,076
--------------
Total Canada 222,047
--------------
CHILE - 0.4% (a)
COMMON STOCKS
100 AFP Providia ADR (USD) 1,800
750 Chile Fund (USD) 18,188
780 Chilectra ADR (USD) 47,970
1,140 Chilgener ADR (USD) 32,490
1,912 Compania de Telecomunicaciones
de Chile (ADR) 61,901
2,375 Empresa Nacional de Electric
ADR (USD) 45,719
1,333 Enersis S.A. ADR (USD) 41,990
1,160 Santa Isabel (ADR) 28,275
--------------
Total Chile 278,333
--------------
CHINA - 0.4% (a)
COMMON STOCKS
7,400 Huaneng Power International
"N" ADR (USD) 179,450 (b)
275,000 Shanghai Petrochemical
"H" (HKD) 68,160
198,000 Yizheng Chemical Fibre
"H" (HKD) 38,851
--------------
Total China 286,461
--------------
CZECH REPUBLIC - 0.05% (a)
COMMON STOCKS
250 SPT Telecom a.s. 26,420 (b)
--------------
DENMARK - 0.2% (a)
COMMON STOCKS
1,020 Den Danske Bank 88,215
190 Tele Danmark "B" 9,139
930 Unidanmark "A" 46,001
--------------
Total Denmark 143,355
--------------
FINLAND - 0.2% (a)
COMMON STOCKS
2,370 Oy Nokia "A" 147,840
--------------
FRANCE - 7.9% (a)
COMMON STOCKS
435 Accor 62,382
2,340 Alcatel Alsthom 260,200
1,520 Assurances Generales
de France 49,456
997 AXA 61,342
630 Canal Plus 113,770
945 Carrefour 590,008
353 Chargeurs International S.A. 20,866 (b)
2,360 Cie de St. Gobain 316,203
190 Credit Local de France 17,579
690 Credit Local de France -
Dexia France 63,840 (b)
6,430 Eaux Cie Generale 895,672
630 GTM Entrepose 37,941
753 Guilbert S.A. 117,404
510 Havas S.A. 38,186
1,340 Lapeyre 80,816
459 Legrand 77,463
231 L'Oreal 81,967
353 Pathe S.A. 82,436 (b)
909 Pinault Printemps Redoute 382,352
760 Primagaz 74,483
186 Rexel 49,555
2,141 Sanofi 199,922
3,670 Schneider S.A. 206,876
340 Societe Generale 38,098
3,030 Societe Nationale Elf Aquitaine 293,837
680 Sodexho 312,242
2,080 Television Francaise 200,641
5,553 Total "B" 460,490
--------------
Total France 5,186,027
--------------
GERMANY - 4.4% (a)
COMMON STOCKS
1,470 Allianz AG 285,206
46 Altana 35,593
9,059 Bayer 360,414
4,380 Bayerische Hypotheken - und
Wechse - Bank 136,575
1,600 Bilfinger & Berger Bau AG 59,499
100 Buderas 46,888
2,410 Commerzbank AG 64,641
4,214 Deutsche Bank 222,404
3,183 Deutsche Telekom 69,071
7,292 Gehe AG 485,067
1,560 Hoechst AG 61,254
200 Hornbach Baumarkt 6,352
255 Mannesmann 100,274
800 Praktiker Bau und
Heimwerker Markte 12,842
1,470 Rhoen Klinikum 190,137
380 SAP AG 69,185
550 Schering 52,720
7,370 Veba 379,607
110 Veba International, Finance
Warrants Expiring 4/6/98 31,886 (b)
123 Volkswagen 78,198
--------------
2,747,813
--------------
PREFERRED STOCKS
610 Fielmann 15,710
710 Hornbach Holdings AG 45,508
40 Krones 15,475
354 SAP AG 65,187
--------------
141,880
--------------
Total Germany 2,889,693
--------------
HONG KONG - 4.0% (a)
COMMON STOCKS
65,000 Cathay Pacific Airways 101,110
32,000 Doa Heng Bank Ltd. 152,017
149,217 First Pacific 178,178
44,000 Guoco Group 209,023
196,625 Hong Kong Land Holdings
(USD) 408,980
248,000 Hopewell Holdings 128,858
53,000 Hutchison Whampoa 393,403
74,090 New World Development
Co. Ltd. 427,525
37,000 Swire Pacific "A" 285,387
83,000 Wharf Holdings 313,935
--------------
Total Hong Kong 2,598,416
--------------
ITALY - 2.3% (a)
COMMON STOCKS
25,680 Banca Fideuram 64,493
16,000 Banca Commerciale Italiana 34,342
44,170 Credito Italiano 61,914
32,000 Ente Nazionale Idrocarburi 162,413
12,010 IMI SpA 102,306
2,278 Industrie Natuzzi SpA
ADR (USD) 50,686
14,000 Italgas 47,875
5,100 Mediolanum SpA 48,850 (b)
5,000 Rinascente 26,662
46,000 Seat SpA 14,078 (b)
18,000 Seat SpA, RNC 3,564 (b)
52,000 Societa' Finaziaria
Telefonica SpA 245,851
18,000 Societa' Finaziaria Telefonica
SpA, RNC 66,757
37,771 Telecom Italia 99,381
134,896 Telecom Italia Mobile 424,264
13,784 Telecom Italia Mobile RNC 25,480
--------------
Total Italy 1,478,916
--------------
JAPAN - 22.3% (a)
COMMON STOCKS
1,210 Advantest Corp. 67,204
8,000 Alps Electric 93,276
17,000 Amada 127,097
29,000 Canon 687,675
10,000 Citizen Watch Co. 71,927
15,000 Dai Nippon Screen
Manufacturing Co. Ltd. 119,352
3,000 Daifuku 34,506
19,000 Daiichi Pharmaceutical 305,353
29,000 Daiwa House 324,418
33 DDI Corp. 219,159
57 East Japan Railway 246,528
4,000 Fanuc 136,448
37,000 Hitachi 335,211
22,000 Hitachi Zosen 76,433
2,000 Honda Motor Co. 62,079
7,000 Inax 43,455
8,000 Ishihara Sangyo Kaisha 20,105 (b)
7,000 Ito-Yokado 335,841
13,000 Kao Corp. 151,574
2,000 Kawada Industries 7,327
8,000 Kokuyo 173,947
21,000 Komatsu 153,527
8,000 Komori 170,796
15,000 Kumagai Gumi 20,089
20,000 Kuraray 176,468
11,000 Kyocera 658,605
13,000 Makita 178,201
19,000 Marui 312,837
32,000 Matsushita Electric Industrial 511,758
14,000 Mitsubishi 131,248
96,000 Mitsubishi Heavy Industries 633,773
11,000 Mitsubishi Paper Mills 35,010
42,000 Mitsui Fudosan 479,773
6,000 Mitsui Petrochemical Industries 28,219
9,000 Murata Manufacturing 331,823
4,000 National House Industrial 47,268
61,000 NEC 744,869
31,000 Nippon Denso 705,794
4,000 Nippon Hodo 28,266
114,000 Nippon Steel 325,111
22 Nippon Telegraph & Telecom 155,119
25,000 Nomura Securities 279,671
11,000 Pioneer Electronic 196,715
2,000 Sangetsu Co. Ltd. 33,718
19,000 Sankyo 508,922
2,700 Sega Enterprises 71,044
27,000 Sekisui Chemical 259,503
14,000 Sekisui House 124,631
2,100 Seven-Eleven Japan 133,178
27,000 Sharp 350,967
15,350 Shin-Etsu Chemical 309,576
5,000 Shiseido Co. Ltd. 71,690
6,400 Sony 465,876
31,000 Sumitomo 208,563
47,000 Sumitomo Electric 636,861
10,000 Sumitomo Forestry 101,627
7,000 TDK 504,589
46,000 Teijin 185,906
8,000 Tokio Marine & Fire Insurance 78,150
3,300 Tokyo Electronics 127,388
8,000 Tokyo Steel Manufacturing 85,713
13,000 Toppan Printing 167,960
10,000 Uny Co. 175,680
3,150 Yurtec 30,275
--------------
Total Japan 14,575,672
--------------
MALAYSIA - 1.8% (a)
COMMON STOCKS
58,000 Affin Holdings BHD 139,756
30,000 Commerce Asset
Holdings BHD 179,226
60,000 MBF Capital 88,896
103,000 Multi-Purpose Holdings
BHD, Rights
(Exp. 1/13/2002) 38,356 (b)
156,000 Renong BHD 213,733
10,000 Renong BHD - 4% ICULS
Rights 3,545 (b)
27,000 Technology Resources
Industries BHD 49,466 (b)
28,000 Time Engineering BHD 51,298
55,000 United Engineers 389,916
--------------
Total Malaysia 1,154,192
--------------
MEXICO - 1.7% (a)
COMMON STOCKS
15,620 Cementos de Mexico
ADR (USD) 103,483
13,267 Cemex "B" 48,751
10,744 Cemex S.A. de C.V. 35,288
88,062 Cifra "B" ADR (USD) 131,653
20,338 Gruma "B" 95,976 (b)
3,492 Gruma S.A. GDR (USD) 67,221 (b)
423 Grupo Financiero Banamex
Accival "L" 846
18,000 Grupo Financiero
Banamex "B" 38,508
36,760 Grupo Industrial Maseca "B" 35,897
740 Grupo Televisa GDR (USD) 17,113 (b)
23,799 Kimberly-Clark Mexico "A" 86,553
5,980 Panamerican Beverages "A"
ADR (USD) 173,420
5,920 Telefonos de Mexico "L"
ADR (USD) 244,200
--------------
Total Mexico 1,078,909
--------------
NETHERLANDS - 10.8% (a)
COMMON STOCKS
5,810 ABN Amro Holdings 399,301
4,343 Ahold 296,473
547 Akzo Nobel 70,470
1,370 Baan Co. NV 73,638
5,469 CSM 314,110
59,056 Elsevier 945,720
6,620 Fortis Amev N.V. 249,741
863 Gucci Group N.V. (USD) 59,871
1,090 Hagemeyer 94,829
20,155 ING Groep N.V. 791,386
6,129 ING Groep N.V.,
Stock Warrants 55,587 (b)
1,942 Koninklijke PTT Nederland 68,976
840 Nutricia 127,446
940 Otra N.V. 14,957
8,510 Polygram 417,135
9,010 Royal Dutch Petroleum 1,610,266
2,340 Unilever 455,077
8,411 Wolters Kluwer 996,818
--------------
Total Netherlands 7,041,801
--------------
NEW ZEALAND - 0.4% (a)
COMMON STOCKS
11,600 Carter Holt Harvey 25,733
7,000 Fernz 23,536
18,550 Fletcher Challenge Building 52,081
2,250 Fletcher Challenge Energy 6,536
53,407 Fletcher Challenge
Forests Division 73,678
12,500 Fletcher Challenge Paper 27,730
17,000 Telecom Corp. of
New Zealand 76,250
--------------
Total New Zealand 285,544
--------------
NORWAY - 1.9% (a)
COMMON STOCKS
1,200 Bergesen "A" 24,771
13,060 Norsk Hydro 636,384
6,510 Orkla "A" 545,761
1,460 Saga Petroleum "B" 23,577
--------------
Total Norway 1,230,493
--------------
PANAMA - 0.05% (a)
COMMON STOCKS
585 Banco Latinoamericano de
Exportaciones S.A. "E" 26,837
--------------
PERU - 0.2% (a)
COMMON STOCKS
1,320 Credicorp Ltd. 27,720
3,328 Telefonica del Peru S.A.
ADR (USD) 79,872
--------------
Total Peru 107,592
--------------
PHILIPPINES - 0.4% (a)
COMMON STOCKS
2,500 Philippine Long Distance
Telephone Company 142,681
16,500 Philippine National Bank 108,248
--------------
Total Philippines 250,929
--------------
PORTUGAL - 0.5% (a)
COMMON STOCKS
5,479 Jeronimo Martins 327,763
456 Jeronimo Martins, Stock
Warrants (Exp. 9/15/2003) 8,262 (b)
--------------
Total Portugal 336,025
--------------
RUSSIA - 0.05% (a)
COMMON STOCKS
860 Gazprom ADR (USD) 13,416 (b)
--------------
SINGAPORE - 2.1% (a)
COMMON STOCKS
9,000 City Developments Ltd. 72,746
23,000 DBS Land 74,363
7,000 Development Bank of
Singapore 83,178
9,400 Fraser & Neave Ltd. 68,187
2,500 Keppel 10,881
4,000 Oversea - Chinese Banking
Corp. Ltd. 46,701
34,000 Overseas Union Bank 223,143
37,000 Singapore Land 172,539
15,000 Singapore Press 277,720
43,000 United Industrial 32,380
29,000 United Overseas Bank 272,470
3,000 United Overseas Bank,
Stock Warrants 10,321
20,000 Wing Tai Holdings Ltd. -
Preference Shares 51,675
--------------
Total Singapore 1,396,304
--------------
SOUTH KOREA - 0.6% (a)
COMMON STOCKS
5,700 Korea Electric Power Corp.
ADR (USD) 96,900
19,043 Korea Equity Fund (USD) 245,179
780 Samsung Electronics
GDR (USD) 37,830 (b)
--------------
Total South Korea 379,909
--------------
SPAIN - 2.3% (a)
COMMON STOCKS
1,050 Banco Bilbao Vizcaya, S.A. 70,668
720 Banco Popular Espanol 152,662
3,280 Banco Santander 246,777
2,131 Centros Comerciales Pryca 37,022
1,682 Corporacion Bancaria de
Espana S.A. 75,009
2,662 Empresa Nacional de
Electridad 186,079
1,304 Gas Natural 276,934
13,280 Iberdrola 149,872
4,024 Repsol S.A. 168,716
13 Sociedade General de Aguas
de Barcelona 497
5,482 Telefonica de Espana 140,420
--------------
Total Spain 1,504,656
--------------
SWEDEN - 2.5% (a)
COMMON STOCKS
10,700 ABB AB 130,260
15,280 Astra AB "B" 606,743
6,070 Atlas Copco "B" 150,498
4,020 Electrolux "B" 230,602
1,100 Esselte "B" 25,100
2,280 Hennes & Mauritz "B" 329,879
660 Sandvik "A" 16,280
5,970 Sandvik "B" 146,878
1,370 Scribona "B" 17,027
--------------
Total Sweden 1,653,267
--------------
SWITZERLAND - 5.7% (a)
COMMON STOCKS
386 ABB AG 467,411
934 Adecco S.A. 311,735
694 Ciba Specialty Chemicals AG 59,791 (b)
860 Credit Suisse Group 96,846
525 Nestle 637,508
934 Novartis AG 1,230,465
86 Roche Holdings 726,341
830 Schwizerischer Bankverein 181,304
--------------
Total Switzerland 3,711,401
--------------
THAILAND - 0.2% (a)
COMMON STOCKS
4,100 Advanced Information Service
plc (Foreign Registered) 27,310
6,020 Bangkok Bank 55,770
400 Siam Cement 10,719
5,800 Thai Farmers Bank Public
Co. Ltd. 35,081
--------------
Total Thailand 128,880
--------------
UNITED KINGDOM - 15.4% (a)
COMMON STOCKS
29,000 Abbey National 404,214
26,706 Argos plc 279,179
113,000 Asda Group 210,616
21,000 BG plc 60,583
19,000 British Petroleum 218,023
57,100 Cable & Wireless 439,702
31,400 Cadbury Schweppes 260,564
56,000 Caradon 224,182
21,000 Centrica plc 19,230 (b)
13,000 Coats Viyella 27,391
18,000 Compass Group 197,212
26,000 David S. Smith 94,392
15,000 Electrocomponents 96,029
3,000 GKN 46,288
39,500 Glaxo Wellcome 776,556
5,000 Heywood Williams Group 19,895
16,000 Hillsdown Holdings 47,196
11,000 John Laing "A" 65,875
60,000 Kingfisher 649,595
87,000 National Westminster Bank 1,029,335
29,000 Rank Group plc 199,757
42,000 Reed International 773,971
11,000 Rolls Royce 43,323
23,800 RTZ 378,023
40,000 Safeway plc 221,718
10,000 Sears 12,480
47,000 Shell Transport & Trading 831,070
81,000 SmithKline Beecham 1,301,645
30,000 T & N 66,126
32,000 Tesco 185,673
95,000 Tomkins 409,561
37,500 United News & Media 458,265
--------------
Total United Kingdom 10,047,669
--------------
VENEZUELA - 0.1% (a)
COMMON STOCKS
1,290 Compania Anonima Nacional
Telefonos de Venezuela
ADR (USD) 38,700
--------------
Principal
Amount
------------
SHORT-TERM SECURITIES - 4.1% (a)
Commercial Paper
$2,700,000 Associates Corp. of North
America, 5.61%
due 5/1/97 2,700,000
--------------
Total Investments $65,334,549 (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:
<CAPTION>
Cost Value % of Portfolio
<S> ---------------- --------------- ----------------
Common Stocks & <C> <C> <C>
Warrants $57,523,918 $62,350,032 95.4%
Preferred Stocks 289,719 284,517 0.5%
Short-Term 2,700,000 2,700,000 4.1%
---------------- --------------- ----------------
Total Investment $60,513,637 $65,334,549 100.0%
================ =============== ================
(d) At April 30, 1997, the aggregate cost of securities for federal income
tax purposes was $60,513,637 and the net unrealized appreciation of
investments based on that cost was $4,820,912 which is comprised of
$7,746,859 aggregate gross unrealized appreciation and $2,925,947 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
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD FUND
Portfolio of Investments
April 30, 1997
(unaudited)
Shares Value
-------------- --------------
<S> <C> <C>
COMMON STOCKS - 97.1% (a)
Aerospace - 1.9%
166,100 Boeing Co. $16,381,613
--------------
Airlines - 1.1%
333,900 Southwest Airlines Co. 9,182,250
--------------
Automotive - 1.0%
149,500 General Motors Corp. 8,652,313
--------------
Bank & Finance - 15.4%
142,900 American International
Group, Inc. 18,362,650
231,800 Bank of New York Co., Inc. 9,156,100
98,000 Chase Manhattan Corp. 9,077,250
162,500 Citicorp 18,301,563
435,100 Federal National Mortgage
Association 17,893,488
231,400 First Bank System, Inc. 17,759,950
283,400 Green Tree Financial Corp. 8,395,725
278,700 MBNA Corp. 9,197,100
109,100 MGIC Investment Corp. 8,864,375
148,500 NationsBank Corp. 8,965,688
33,700 Wells Fargo & Co. 8,989,475
--------------
134,963,364
--------------
Chemicals - 4.1%
158,300 Air Products &
Chemicals, Inc. 11,358,025
79,500 E.I. du Pont de Nemours
and Co. 8,436,938
214,100 Monsanto Co. 9,152,775
126,400 Praxair, Inc. 6,525,400
--------------
35,473,138
--------------
Computer Software - 3.2%
191,000 Computer Associates
International, Inc. 9,932,000
73,200 Microsoft Corp. 8,893,800 (b)
223,300 Oracle Corp. 8,876,175 (b)
--------------
27,701,975
--------------
Computers &
Office Equipment - 4.2%
346,700 Cisco Systems, Inc. 17,941,725 (b)
170,700 Hewlett Packard Co. 8,961,750
30,000 Ingram Micro, Inc., Class A 682,500 (b)
59,200 International Business
Machines 9,516,400
--------------
37,102,375
--------------
Conglomerates - 3.8%
228,600 AlliedSignal, Inc. 16,516,350
316,600 Dover Corp. 16,779,800
--------------
33,296,150
--------------
Drugs & Health Care - 8.8%
140,800 Abbott Laboratories 8,588,800
360,600 Becton, Dickinson & Co. 16,587,600
98,200 Eli Lilly & Co. 8,629,325
145,300 Johnson & Johnson 8,899,625
192,100 Merck & Co., Inc. 17,385,050
91,000 Pfizer, Inc. 8,736,000
85,300 Warner-Lambert Co. 8,359,400
--------------
77,185,800
--------------
Electric Utilities - 2.4%
269,100 Entergy Corp. 6,290,213
192,700 FPL Group, Inc. 8,599,238
313,400 Southern Co. 6,385,525
--------------
21,274,976
--------------
Electrical Equipment - 2.0%
157,400 General Electric Co. 17,451,725
--------------
Electronics - 3.6%
208,900 Atmel Corp. 5,196,387 (b)
115,300 Intel Corp. 17,655,312
145,000 Motorola, Inc. 8,301,250
--------------
31,152,949
--------------
Food & Beverage - 5.0%
279,800 Coca-Cola Co. 17,802,275
253,500 PepsiCo, Inc. 8,840,812
415,000 Sara Lee Corp. 17,430,000
--------------
44,073,087
--------------
Healthcare
Management - 1.0%
136,500 Oxford Health Plans, Inc. 8,991,937 (b)
--------------
Household Products - 5.0%
147,900 Avon Products, Inc. 9,114,337
78,100 Colgate Palmolive Co. 8,669,100
105,400 Gillette Co. 8,959,000
134,300 Procter & Gamble Co. 16,888,225
--------------
43,630,662
--------------
Leisure &
Entertainment - 6.1%
236,600 Carnival Cruise Lines, Inc. 8,724,625
213,100 Disney (Walt) Co. 17,474,200
150,200 HFS, Inc. 8,899,350 (b)
157,200 Marriot International, Inc. 8,685,300
337,200 Mattel, Inc. 9,399,450
--------------
53,182,925
--------------
Machinery &
Equipment - 1.9%
94,600 Caterpillar, Inc. 8,419,400
181,800 Deere & Co. 8,362,800
--------------
16,782,200
--------------
Mining & Metals - 1.0%
120,500 Aluminum Co. of America 8,419,937
--------------
Oil & Oil Service - 9.7%
201,900 Amoco Corp. 16,883,887
253,100 Chevron Corp. 17,337,350
307,200 Exxon Corp. 17,395,200
229,400 Halliburton Co. 16,201,375
134,100 Mobil Corp. 17,433,000
--------------
85,250,812
--------------
Photography - 1.0%
103,900 Eastman Kodak Co. 8,675,650
--------------
Restaurants - 2.0%
327,400 McDonald's Corp. 17,556,825
--------------
Retail - 5.0%
260,400 Albertson's, Inc. 8,593,200
175,600 CVS Corp. 8,714,150
254,500 Federated Department Stores 8,653,000 (b)
329,200 Kroger Co. 9,053,000 (b)
301,100 Wal-Mart Stores, Inc. 8,506,075
--------------
43,519,425
--------------
Services - 1.9%
488,700 First Data Corp. 16,860,150
--------------
Telecommunications
Equipment - 0.5%
79,674 Lucent Technologies, Inc. 4,710,725
--------------
Telephone &
Telecommunications - 5.5%
294,500 Ameritech Corp. 18,001,312
438,000 Paging Network, Inc. 3,052,312 (b)
325,800 SBC Communications, Inc. 18,081,900
374,700 WorldCom, Inc. 8,992,800 (b)
--------------
48,128,324
--------------
Total Common Stocks
(cost $660,228,175) 849,601,287
--------------
Principal
Amount
-----------
U.S. TREASURY - 0.6% (a)
$3,000,000 U.S. Treasury Bills,
5.21%, due 8/7/97 2,957,970 (c)
2,000,000 U.S. Treasury Notes,
8.75%, due 10/15/97 2,027,500 (c)
--------------
Total U.S. Treasury
(cost $4,964,521) 4,985,470
--------------
SHORT-TERM
SECURITIES - 2.3% (a)
Commercial Paper
19,800,000 UBS Finance
(Delaware), Inc.,
5.6%, due 5/1/97 19,800,000
--------------
Total Investments
(cost $684,992,696) $874,386,757 (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) Currently non-income producing.
(c) Denotes securities pledged as initial margin on the following financial futures
contracts as of April 30, 1997:
<CAPTION>
Number Notional
of Market Principal Unrealized
Type Contracts Expiration Position Value Amount Loss
- ------ ---------- ---------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 190 June, 1997 Short $76,266,000 $73,722,200 ($2,543,800)
(d) At April 30, 1997, the aggregate cost of securities for federal income tax purposes
was $684,992,696 and the net unrealized appreciation of investments based on that
cost was $189,394,061 which is comprised of $202,275,777 aggregate gross unrealized
appreciation and $12,881,716 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD HIGH YIELD FUND
Portfolio of Investments
April 30, 1997
(unaudited)
Principal Maturity
Amount Rate Date Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 75.9% (a)
Aerospace - 0.3%
$1,800,000 L-3 Communications Corp., Sr. Subordinated Notes 10.375% 5/1/2007 $1,854,000
-------------
Airlines - 1.3%
2,800,000 Northwest Airlines, Inc., Notes 8.7% 3/15/2007 2,802,265
2,000,000 Northwest Airlines, Inc., Notes 8.375% 3/15/2004 1,995,548
4,500,000 U.S. Air, Inc., Sr. Secured Equipment Trust, Series 1993-A-3 10.375% 3/1/2013 4,719,375
-------------
9,517,188
-------------
Automotive - 0.4%
4,950,000 Exide Corp., Convertible Sr. Subordinated Notes 2.9% 12/15/2005 2,840,063
-------------
Bank & Finance - 8.0%
6,400,000 AmeriCredit Corp., Sr. Notes 9.25% 2/1/2004 6,080,000
3,250,000 Chevy Chase Savings Bank, Subordinated Debentures 9.25% 12/1/2005 3,217,500
5,200,000 Dollar Financial Group, Inc., Sr. Notes, Series A 10.875% 11/15/2003 5,317,000
6,000,000 First Nationwide Holdings, Inc., Sr. Notes 12.5% 4/15/2003 6,600,000
2,598,000 HomeSide, Inc., Sr. Secured Second Priority Bonds, Series B 11.25% 5/15/2003 2,961,720
6,000,000 Integon Capital I, Capital Securities 10.75% 2/15/2027 5,730,000
4,700,000 Mego Mortgage Corp., Sr. Subordinated Notes 12.5% 12/1/2001 4,676,500
3,600,000 Riggs Capital Trust II, Trust Preferred Securities, Series C 8.875% 3/15/2027 3,539,160
7,200,000 Scotsman Holdings, Sr. Notes, Payment-In-Kind, Series B 11.0% 3/1/2004 7,812,000
2,000,000 Trizec Finance Ltd., Sr. Notes 10.875% 10/15/2005 2,195,000
4,650,000 Veritas Holdings GMBH, Sr. Notes 9.625% 12/15/2003 4,713,938
6,100,000 Wilshire Financial Services Group, Inc., Notes 13.0% 1/1/2004 6,023,750
-------------
58,866,568
-------------
Broadcasting - 12.4%
3,900,000 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 8/15/2005 1,228,500
3,200,000 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 6/15/2004 1,072,000
2,400,000 Australis Holdings Pty Ltd., Sr. Discount Notes Zero Coupon 11/1/2002 1,392,000
10,450,000 Australis Media Ltd., Sr. Discount Notes Zero Coupon 5/15/2003 6,113,250
6,000,000 Benedek Communications Corp., Sr. Discount Notes Zero Coupon 5/15/2006 3,450,000
5,100,000 Cablevision Industries, Debentures, Series B 9.25% 4/1/2008 5,345,009
6,000,000 CS Wireless Systems, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2006 1,710,000
8,000,000 EchoStar Satellite Broadcasting Corp., Sr. Secured Discount Notes Zero Coupon 3/15/2004 5,780,000
8,819,193 Falcon Holdings Group L.P., Sr. Subordinated Notes, Series B 11.0% 9/15/2003 7,760,890
8,100,000 Groupo Televisa S.A., Sr. Notes 11.875% 5/15/2006 8,717,625
6,000,000 Intermedia Capital Partners, Sr. Notes 11.25% 8/1/2006 6,180,000
4,100,000 International CableTel, Inc., Convertible Subordinated Notes 7.0% 6/15/2008 3,556,750
2,500,000 International CableTel, Inc., Convertible Subordinated Notes 7.25% 4/15/2005 2,415,625
1,000,000 International CableTel, Inc., Sr. Deferred Notes, Series A Zero Coupon 2/1/2006 655,000
2,800,000 International CableTel, Inc., Sr. Notes 10.0% 2/15/2007 2,737,000
4,200,000 International CableTel, Inc., Sr. Notes, Series A Zero Coupon 4/15/2005 3,076,500
4,000,000 Jacor Communications, Inc., Convertible Liquid Yield
Option Notes Zero Coupon 6/12/2011 1,865,000
4,000,000 Olympus Communications, L.P., Sr. Notes 10.625% 11/15/2006 4,080,000
5,200,000 Rogers Cablesystems Ltd., Sr. Secured Second Priority Notes 9.625% 8/1/2002 5,356,000
6,000,000 Rogers Communications, Inc., Convertible Debentures 2.0% 11/26/2005 3,225,000
2,750,000 Rogers Communications, Inc., Sr. Notes 9.125% 1/15/2006 2,691,563
5,000,000 Scott Cable Communications, Inc., Subordinated Debentures 12.25% 4/15/2001 4,037,500 (c)
5,600,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series B Zero Coupon 5/15/2006 2,828,000
4,800,000 United International Holdings, Inc., Sr. Discount Notes Zero Coupon 11/15/1999 3,516,000
4,000,000 Wireless One, Inc., Sr. Notes 13.0% 10/15/2003 2,760,000
-------------
91,549,212
-------------
Building Products & Materials - 2.1%
5,600,000 Atrium Cos., Inc., Sr. Subordinated Notes 10.5% 11/15/2006 5,586,000
5,300,000 CEMEX S.A. de C.V., Notes 12.75% 7/15/2006 5,916,125
3,600,000 Nortek, Inc., Sr. Notes 9.25% 3/15/2007 3,591,000
-------------
15,093,125
-------------
Computers & Office Equipment - 2.2%
6,500,000 Dictaphone Corp., Sr. Subordinated Notes 11.75% 8/1/2005 5,947,500
6,150,000 Unisys Corp., Sr. Notes 11.75% 10/15/2004 6,503,625
3,400,000 Unisys Corp., Sr. Notes 12.0% 4/15/2003 3,595,500
-------------
16,046,625
-------------
Construction & Home Building - 1.6%
7,200,000 Peters (J.M.) Co., Inc., Sr. Notes 12.75% 5/1/2002 7,020,000
4,400,000 The Fortress Group, Inc., Sr. Notes 13.75% 5/15/2003 4,587,000
-------------
11,607,000
-------------
Containers & Packaging - 1.2%
5,150,000 BPC Holding Corp., Sr. Secured Notes, Series B 12.5% 6/15/2006 5,330,250
3,350,000 Radnor Holdings Corp., Sr. Notes 10.0% 12/1/2003 3,391,875
-------------
8,722,125
-------------
Drugs & Health Care - 0.9%
2,450,000 Owens & Minor, Inc., Sr. Subordinated Notes 10.875% 6/1/2006 2,609,250
3,600,000 UROHEALTH Systems, Inc., Units 12.5% 4/1/2004 3,681,000
-------------
6,290,250
-------------
Electric Utilities - 1.2%
1,750,000 Midland Cogen Venture Fund II, Secured Lease Obligation
Bonds, Series A 11.75% 7/23/2005 1,973,125
3,000,000 Midland Cogen Venture Fund II, Subordinated Secured Lease
Obligation Bonds 13.25% 7/23/2006 3,581,250
3,600,000 Panda Global Energy Co., Sr. Secured Notes 12.5% 4/15/2004 3,420,000
-------------
8,974,375
-------------
Electrical Equipment - 2.3%
2,800,000 EV International, Inc., Sr. Subordinated Notes 11% 3/15/2007 2,870,000
1,600,000 GST Acquisition Corp., Sr. Subordinated Notes 10.5% 5/1/2007 1,610,000
4,000,000 Protection One Alarm Monitoring, Convertible Sr.
Subordinated Notes 6.75% 9/15/2003 3,825,000
4,000,000 Protection One Alarm Monitoring, Sr. Subordinated
Discount Notes Zero Coupon 6/30/2005 3,900,000
3,750,000 Telex Communications, Inc., Sr. Notes 12.0% 7/15/2004 4,275,000
-------------
16,480,000
-------------
Food & Beverage - 2.1%
6,650,000 Fresh Del Monte Corp., Sr. Notes, Series B 10.0% 5/1/2003 6,483,750
5,600,000 Gorges/Quik-to-Fix Foods, Inc., Sr. Subordinated Notes 11.5% 12/1/2006 5,726,000
3,250,000 International Home Foods, Inc., Sr. Subordinated Notes 10.375% 11/1/2006 3,323,125
-------------
15,532,875
-------------
Hospital Management - 3.9%
4,400,000 Merit Behavioral Care Corp., Sr. Subordinated Notes 11.5% 11/15/2005 4,796,000
2,800,000 PhyMatrix Corp., Convertible Subordinated Debentures 6.75% 6/15/2003 2,310,000
3,350,000 Regency Health Services, Inc., Sr. Subordinated Notes 9.875% 10/15/2002 3,391,875
3,400,000 Regency Health Services, Inc., Subordinated Notes 12.25% 7/15/2003 3,638,000
3,000,000 Rotech Medical Corp., Convertible Subordinated Debentures 5.25% 6/1/2003 2,587,500
5,200,000 Tenet Healthcare Corp., Sr. Subordinated Notes 8.625% 1/15/2007 5,174,000
7,600,000 Unison HealthCare Corp., Sr. Notes 12.25% 11/1/2006 6,365,000
-------------
28,262,375
-------------
Household Products - 2.8%
2,800,000 Anchor Advanced Products, Inc., Sr. Notes 11.75% 4/1/2004 2,884,000
18,000,000 Coleman Worldwide Corp., Convertible Liquid Yield Option Notes Zero Coupon 5/27/2013 5,377,500
4,000,000 Kindercare Learning Centers, Inc., Sr. Subordinated Notes 9.5% 2/15/2009 3,805,000
4,000,000 Lifestyle Furnishings International Ltd., Sr. Subordinated Notes 10.875% 8/1/2006 4,310,000
4,000,000 Simmons Co., Sr. Subordinated Notes 10.75% 4/15/2006 4,090,000
-------------
20,466,500
-------------
Leisure & Entertainment - 2.2%
2,400,000 AMC Entertainment, Inc., Sr. Subordinated Notes 9.5% 3/15/2009 2,364,000
8,500,000 AMF Group, Inc., Sr. Subordinated Discount Notes, Series B Zero Coupon 3/15/2006 5,695,000
2,000,000 IMAX Corp., Sr. Notes 7.0% 3/1/2001 2,030,000
6,000,000 Lodgenet Entertainment, Sr. Notes 10.25% 12/15/2006 5,850,000
-------------
15,939,000
-------------
Mining & Metals - 0.7%
4,800,000 Westmin Resources Ltd., Sr. Notes 11.0% 3/15/2007 4,800,000
-------------
Oil & Gas - 2.9%
6,800,000 Abraxas Petroleum Corp., Sr. Notes, Series B 11.5% 11/1/2004 7,242,000
2,000,000 Bellwether Exploration Co., Sr. Subordinated Notes 10.875% 4/1/2007 2,050,000
2,000,000 Kelley Oil & Gas Corp., Sr. Subordinated Notes, Series B 10.375% 10/15/2006 1,990,000
3,200,000 National Energy Group, Inc., Sr. Notes 10.75% 11/1/2006 3,200,000
6,400,000 Petroleum Heat & Power Co., Inc., Subordinated Debentures 12.25% 2/1/2005 6,496,000
-------------
20,978,000
-------------
Paper & Forest Products - 2.4%
2,400,000 APP International Finance, Guaranteed Secured Notes 11.75% 10/1/2005 2,520,000
5,400,000 Fonda Group, Inc., Sr. Subordinated Notes 9.5% 3/1/2007 5,130,000
3,150,000 FSW International Finance Co. B.V., Guaranteed Secured Notes 12.5% 11/1/2006 3,087,000
4,800,000 National Fiberstock Corp., Sr. Notes Series B 11.625% 6/15/2002 4,932,000
2,000,000 Tembec Finance Corp., Sr. Notes 9.875% 9/30/2005 1,990,000
-------------
17,659,000
-------------
Pollution Control - 0.5%
3,000,000 Norcal Waste Systems, Inc., Sr. Notes, Series B 12.75% 11/15/2005 3,345,000
-------------
Publishing & Printing - 3.4%
2,500,000 K-III Communications Corp., Sr. Notes 10.25% 6/1/2004 2,643,750
5,500,000 MDC Communications Corp., Sr. Subordinated Notes 10.5% 12/1/2006 5,747,500
9,200,000 Neodata Services, Inc., Sr. Notes, Series B 12.0% 5/1/2003 9,844,000
3,500,000 News America Holdings, Inc., Convertible Liquid Yield
Option Notes Zero Coupon 3/11/2013 1,557,500
750,000 News America Holdings, Inc., Subordinated Notes Zero Coupon 3/31/2002 580,313
4,150,000 Sullivan Graphics, Inc., Sr. Subordinated Notes 12.75% 8/1/2005 4,212,250
-------------
24,585,313
-------------
Retail - 0.4%
2,250,000 F & M Distributors, Inc., Sr. Subordinated Notes 11.5% 4/15/2003 8,438 (c)
3,200,000 TravelCenters of America, Inc., Sr. Subordinated Notes 10.25% 4/1/2007 3,204,000
-------------
3,212,438
-------------
Retail: Food - 2.1%
3,200,000 Jitney-Jungle Stores of America, Sr. Notes 12.0% 3/1/2006 3,480,000
3,750,000 Pueblo Xtra International, Inc., Sr. Notes 9.5% 8/1/2003 3,487,500
750,000 Pueblo Xtra International, Inc., Sr. Notes, Series B 9.5% 8/1/2003 691,875
3,200,000 Ralphs Grocery Co., Sr. Notes 10.45% 6/15/2004 3,408,000
2,000,000 Ralphs Grocery Co., Sr. Subordinated Notes 11.0% 6/15/2005 2,135,000
2,500,000 Smith's Food & Drug Centers, Pass Through Certificates 8.64% 7/2/2012 2,362,500
-------------
15,564,875
-------------
Services - 0.4%
2,800,000 Intertek Finance plc, Sr. Subordinated Notes 10.25% 11/1/2006 2,877,000
-------------
Telecommunications - 16.9%
9,450,000 American Communications Services, Sr. Discount Notes Zero Coupon 11/1/2005 4,961,250
6,400,000 Clearnet Communications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 3,968,000
1,000,000 Comcast Cellular, Inc., Sr. Participation Redeemable Notes,
Series B Zero Coupon 3/5/2000 737,500
4,600,000 Comcast Cellular, Inc., Sr. Redeemable Notes Zero Coupon 3/5/2000 3,392,500
8,800,000 Dobson Communications Corp., Sr. Notes 11.75% 4/15/2007 8,459,000
1,060,000 GST Telecommunications, Inc., Sr. Subordinated Notes Zero Coupon 12/15/2005 689,000
2,800,000 GST Telecommunications, Inc., Sr. Subordinated Notes Zero Coupon 12/15/2005 2,817,500
7,400,000 GST USA, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 4,329,000
8,800,000 Hyperion Telecommunications, Sr. Discount Notes, Series B Zero Coupon 4/15/2003 4,554,000
1,950,000 IntelCom Group (U.S.A.), Inc., Sr. Discount Ntoes Zero Coupon 5/1/2003 1,189,500
3,300,000 Intermedia Communications of Florida, Sr. Notes, Series B 13.5% 6/1/2005 3,646,500
10,200,000 Ionica plc, Sr. Notes 13.5% 8/15/2006 10,404,000
4,000,000 IXC Communications, Inc., Sr. Notes, Series B 12.5% 10/1/2005 4,410,000
6,800,000 Microcell Telecommunications, Inc., Sr. Discount Notes Zero Coupon 6/1/2006 3,315,000
8,800,000 Millicom International Cellular, Sr. Discount Notes Zero Coupon 6/1/2006 6,171,000
5,600,000 NEXTEL Communications, Inc., Sr. Discount Notes Zero Coupon 8/15/2004 4,088,000
3,600,000 NEXTLINK Communications LLC, Sr. Discount Notes 12.5% 4/15/2006 3,744,000
6,000,000 ORBCOMM Global, L.P., Sr. Notes 14.0% 8/15/2004 6,180,000
6,800,000 PageMart Nationwide, Inc., Sr. Discount Exchange Notes Zero Coupon 2/1/2005 4,590,000
900,000 Paging Network, Inc., Sr. Subordinated Notes 10.0% 10/15/2008 803,250
5,850,000 Phonetel Technologies, Inc., Sr. Notes 12.0% 12/15/2006 5,762,250
6,400,000 RSL Communications Ltd., Units 12.25% 11/15/2006 6,448,000
9,000,000 UNIFI Communications, Inc., Units 14.00% 3/1/2004 8,910,000
5,900,000 USA Mobile Communications, Inc., Sr. Notes 14.00% 11/1/2004 6,018,000
9,650,000 Viatel, Inc., Sr. Discount Notes Zero Coupon 1/15/2005 6,224,250
4,000,000 WinStar Communications, Inc., Convertible Sr. Subordinated
Discount Notes Zero Coupon 10/15/2005 2,480,000
9,600,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/2005 5,400,000
-------------
123,691,500
-------------
Textiles & Apparel - 1.3%
5,600,000 Anvil Knitwear, Inc., Sr. Notes 10.875% 3/15/2007 5,460,000
4,000,000 CMI Industries, Inc., Sr. Subordinated Notes 9.5% 10/1/2003 3,900,000
-------------
9,360,000
-------------
Total Corporate Bonds (cost $558,820,862) 554,114,407
-------------
FOREIGN GOVERNMENT BONDS - 0.4% (a,e)
3,150,000 Altos Hornos de Mexico, Bonds
(cost $3,137,652) 11.875% 4/30/2004 3,189,375
-------------
<CAPTION>
Shares
-----------
PREFERRED STOCKS - 12.8% (a)
<S> <C> <C>
4,800,000 APP Finance II Mauritus Ltd., Preferred Stock 4,536,000
29,127 Cablevision Systems Corp., Preferred Stock 2,697,888
38,289 Cablevision Systems Corp., Redeemable Exchangeable, Preferred Stock, Series H 3,637,455
28,000 California Federal Bank, Noncumulative Preferred Stock 3,185,000
6,000 California Federal Bank, Preferred Stock, Series B 646,500
36,000 Chancellor Radio Broadcasting, Exchangeable Preferred Stock 3,600,000
60,000 Chevy Chase Capital Corp., Noncumulative Exchangeable Preferred Stock, Series A 2,962,500
34,222 Communications & Power Industries, Inc., Convertible Preferred Stock, Series B 3,731,738
5,150 Consolidated Hydro, Inc., Preferred Stock 775,075 (b)
45,500 Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 0 (b,d)
146,000 Granite Broadcasting Corp., Convertible Preferred Stock 6,332,750
3,269 Granite Broadcasting Corp., Cumulative Exchangeable Preferred Stock 2,995,221
276,736 Harvard Industries, Inc., Exchangeable Payment-In-Kind Preferred Stock 1,037,760
60,000 Host Marriott Financial Trust, Convertible Preferred Stock 3,412,500
2,485 ICG Communications, Inc., Preferred Stock 2,355,159
190 Intermedia Communications, Inc., Preferred Stock 1,843,000
10,000 Jitney-Jungle Stores of America, Sr. Exchangeable Preferred Stock, Class A 1,350,000
93,000 K-III Communications Corp., Exchangeable Preferred Stock 2,452,875
25,777 K-III Communications Corp., Exchangeable Preferred Stock, Series B 2,790,356
40,500 K-III Communications Corp., Preferred Stock, Series D 4,019,625
58,500 Network Imaging Corp., Convertible Preferred Stock, Series A 731,250
104,000 NEXTLINK Communications, Inc., Preferred Stock 4,836,000
3,400 Paxson Communications Corp., Payment-In-Kind Preferred Stock 3,247,000
170,000 Petroleum Heat & Power, Preferred Stock 3,740,000
122,500 River Bank America, Preferred Stock 3,001,250
41,000 SFX Broadcasting, Inc., Payment-In-Kind Preferred Stock 4,059,000
2,145 Silgan Holdings, Inc., Payment-In-Kind Preferred Stock 2,305,875
28,000 Sinclair Capital, Preferred Stock 2,814,000
1,600 Spanish Broadcasting Systems, Payment-In-Kind Preferred Stock 1,400,000
40,000 TIMET Capital Trust I, Convertible Preferred Stock 1,885,000
100,000 USX Corp. (Marathon Group), Convertible Preferred Stock 2,200,000
112,000 WorldCom, Inc., Convertible Preferred Stock 9,352,000
-------------
Total Preferred Stocks (cost $99,631,994) 93,932,777
-------------
COMMON STOCKS & STOCK WARRANTS - 2.5% (a,b)
11,700 American Communications Services, Stock Warrants 409,500
26,000 American Telecasting, Inc., Stock Warrants 26,000
2,400 American Telecasting, Inc., Stock Warrants 2,400
127,860 Arch Communications Group, Common Stock 743,186
2,400 Australis Holdings Pty Ltd., Stock Warrants 72
11,650 Australis Media Ltd., Stock Warrants 117
120,000 Bell & Howell Co., Common Stock 2,835,000
23,925 Clearnet Communications, Inc., Stock Warrants 95,700
1,890 Communications & Power Industries, Inc., Common Stock 283,500
9,270 Consolidated Hydro, Inc., Stock Warrants 0 (d)
2,453 CS Wireless Systems, Inc., Common Stock 2
75,500 Envirotest Systems Corp., Class A Common Stock 132,125
112,013 Gaylord Container Corp., Class A Common Stock 623,072
154,623 Gaylord Container Corp., Stock Warrants 889,082
29,811 Grand Union Co., Stock Warrants 894
14,905 Grand Union Co., Stock Warrants 2,981
70,000 Harvard Industries, Inc., Class B Common Stock 61,250
8,400 Hyperion Telecommunications, Stock Warrants 252,000
152,000 IntelCom Group Communications, Inc., Common Stock 1,596,000
50,335 IntelCom Group (U.S.A.), Inc., Stock Warrants 251,675
127,000 InterCel, Inc., Common Stock 1,238,250
4,100 Intermedia Communications of Florida, Stock Warrants 82,000
10,200 Ionica plc, Stock Warrants 1,326,000
32,180 JPS Textiles Group, Common Stock, Class A 322
70,948 Magellan Health Services, Common Stock 1,862,385
143,834 Memorex Telex N.V., ADR, Common Stock 9,349
3,981 Memorex Telex N.V., ADR, Stock Warrants 0
27,200 Microcell Telecommunications, Inc., Stock Warrants 340,000
27,200 Microcell Telecommunications, Inc., Stock Warrants 17,000
268,000 MobileMedia Corp., Class A Common Stock 142,375
3,086 NEXTEL Communications, Stock Warrants 31
1,500 NEXTEL Communications, Stock Warrants 15
26,250 PageMart Nationwide, Inc., Common Stock 131,250
121,000 Pagemart Wireless, Inc., Class A Common Stock 680,625
27,400 Plantronics, Inc., Common Stock 1,150,800
19,360 Protection One Alarm Monitoring, Stock Warrants 106,480
20,000 Triangle Wire & Cable, Inc., Stock Warrants 0 (d)
87,000 United International Holdings, Inc., Class A Common Stock 837,375
20,100 United International Holdings, Inc., Stock Warrants 100,500
192,533 Viatel, Inc., Sr. Discount Notes 1,203,331
4,545 Wherehouse Entertainment, Inc., Class B Stock Warrants 4,545
4,545 Wherehouse Entertainment, Inc., Class C Stock Warrants 45
26,181 Wherehouse Entertainment, Inc., Stock Warrants, Class A 199,498
92,000 Wireless One, Inc., Common Stock 322,000
13,800 Wireless One, Inc., Stock Warrants 138
-------------
Total Common Stocks & Stock Warrants (cost $28,867,474) 17,958,870
-------------
<CAPTION>
SHORT-TERM SECURITIES - 8.4% (a)
<S> <C> <C> <C> <C>
Commercial Paper - 6.8%
7,500,000 American Express Credit Corp. 5.49% 5/7/1997 7,493,138
5,000,000 Ford Motor Credit Co. 5.50% 5/16/1997 4,988,542
16,600,000 General Electric Capital Corp. 5.62% 5/1/1997 16,600,000
17,500,000 Gillette Co. 5.60% 5/1/1997 17,500,000
3,000,000 Sheffield Receivables Corp. 5.25% 11/1/1996 2,993,063
-------------
49,574,743
-------------
U.S. Government Agency - 1.6%
2,000,000 Federal Home Loan Mortgage, Discount Notes 5.38% 5/14/1997 1,996,114
5,000,000 Federal Home Loan Mortgage, Discount Notes 5.35% 5/2/1997 4,999,257
5,000,000 Federal Home Loan Mortgage, Discount Notes 5.34% 5/12/1997 4,991,842
-------------
11,987,213
-------------
Total Short-Term Securities (at amortized cost) 61,561,956
-------------
Total Investments (cost $752,019,938) $730,757,385 (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, 1997, 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, 1997:
<CAPTION>
Aquisition
Security Date Cost
------------ ------------ ------------
<S> <C> <C>
Consolidated Hydro, Inc., Stock Warrants 2/8/1994 $22,776
Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 6/14/1993 5,218,975
Triangle Wire & Cable, Inc., Stock Warrants 1/3/1992 1,998
(e) Denominated in U.S. Dollars.
(f) At April 30, 1997, the aggregate cost of securities for federal tax purposes was $752,019,938 and the
net unrealized depreciation of investments based on that cost was $21,262,553 which is comprised of
$29,737,529 aggregate gross unrealized appreciation and $51,000,082 aggregate gross unrealized
depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD INCOME FUND
Portfolio of Investments
April 30, 1997
(unaudited)
Principal Maturity
Amount Rate Date Value
------------ -------- ----------- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 37.0% (a)
Automotive - 0.6%
$5,000,000 Ford Motor Credit Co., Notes 6.375% 10/6/2000 $4,925,910
-------------
Bank & Finance - 17.7%
3,500,000 Aon Capital Trust A 8.205% 1/1/2027 3,497,442
7,500,000 Associates Corp. of North America, Notes 6.625% 5/15/1998 7,524,968
14,000,000 Associates Corp. of North America, Sr. Notes 9.125% 4/1/2000 14,855,386
4,000,000 Banc One Corp., Subordinated Debentures 8.0% 4/29/2027 3,989,400
2,000,000 Chase Manhattan Corp., Subordinated Notes 9.375% 7/1/2001 2,174,684
3,000,000 Chase Manhattan Corp., Subordinated Notes 10.375% 3/15/1999 3,195,168
7,000,000 Chemical New York Corp., Debentures 9.75% 6/15/1999 7,422,002
5,000,000 CS First Boston Mortgage Security Corp., Series 1997-1-A3 6.91% 5/25/2007 5,010,500
5,000,000 CS First Boston Mortgage Security Corp., Series 1997-1-A4 7.15% 5/25/2010 5,017,250
2,000,000 Delphi Funding, LLC, Capital Securities, Series A 9.31% 3/25/2027 2,019,880
13,000,000 Equitable Life Assurance Society of the United States,
Surplus Notes 6.95% 12/1/2005 12,572,014
15,500,000 General Electric Capital Corp., Debentures 8.85% 4/1/2005 17,170,342
10,000,000 Mellon Capital I, Capital Trust Preferred Securities 7.72% 12/1/2026 9,489,210
9,000,000 Metropolitan Life Insurance Co., Surplus Notes 7.7% 11/1/2015 8,766,828
5,000,000 National Westminster Bank plc, Subordinated Notes 9.45% 5/1/2001 5,439,915
8,000,000 New York Life Insurance Co., Surplus Notes 6.4% 12/15/2003 7,680,328
8,000,000 Prudential Insurance Co., Surplus Notes 8.3% 7/1/2025 7,946,840
5,500,000 Riggs Capital Trust II, Trust Preferred Securities, Series C 8.875% 3/15/2027 5,407,050
5,000,000 Riggs Capital Trust, Capital Trust Preferred Securities, Series 8.625% 12/31/2026 4,835,990
6,000,000 Societe-Generale- New York, Subordinated Notes 7.4% 6/1/2006 5,971,488
7,000,000 Societe-Generale- New York, Subordinated Notes 9.875% 7/15/2003 7,900,102
7,000,000 Wells Fargo Capital, Capital Trust Preferred Securities 7.73% 12/1/2026 6,565,650
-------------
154,452,437
-------------
Broadcasting - 2.0%
4,000,000 Continental Cablevision, Inc., Sr. Debentures 8.875% 9/15/2005 4,353,244
10,000,000 TCI Communications, Inc., Sr. Notes 10.125% 8/1/2001 10,886,030
2,500,000 TCI Communications, Inc., Sr. Notes 8.65% 9/15/2004 2,594,640
-------------
17,833,914
-------------
Computers & Office Equipment - 0.6%
6,000,000 International Business Machines Corp., Debentures 7.125% 12/1/2096 5,468,220
-------------
Electric Utilities - 2.2%
4,000,000 ComEd Financing II Capital Securities 8.5% 1/15/2027 3,916,000
4,000,000 Commonwealth Edison Co., Notes 7.625% 1/15/2007 3,963,220
4,099,000 DQU Funding Corp., Collateralized Lease Obligation Bonds 7.23% 12/1/1999 4,122,934
7,000,000 Empresa Electrica Pehuienche S.A., Notes 7.3% 5/1/2003 6,963,187
-------------
18,965,341
-------------
Electronics - 0.2%
2,000,000 Motorola, Inc., Convertible Liquid Yield Option Notes Zero Coupon 9/27/2013 1,495,000
-------------
Hospital Management - 0.6%
5,000,000 Allegiance Corp., Debentures 7.8% 10/15/2016 4,970,665
-------------
Household Products - 1.8%
4,000,000 First Brands Corp., Sr. Notes 7.25% 3/1/2007 3,937,560
10,000,000 Procter & Gamble, Guaranteed ESOP Debentures 9.36% 1/1/2021 11,825,770
-------------
15,763,330
-------------
Leisure & Entertainment - 1.1%
5,000,000 Time Warner, Inc., Debentures 9.125% 1/15/2013 5,388,365
4,000,000 Time Warner, Inc., Notes 7.75% 6/15/2005 4,021,768
-------------
9,410,133
-------------
Natural Gas - 1.2%
11,000,000 Columbia Gas Systems, Inc., Series A Notes 6.39% 11/28/2000 10,809,469
-------------
Petroleum - 1.8%
1,500,000 Baker Hughes, Inc., Convertible Liquid Yield Option Notes Zero Coupon 5/5/2008 1,141,875
5,859,203 Mobil Oil Corp., ESOP Sinking Fund Debentures 9.17% 2/29/2000 6,097,408
4,000,000 Petroliam Nasional BHD, Notes 7.75% 8/15/2015 4,018,720
5,000,000 Phillips 66 Capital Trust II 8.0% 1/15/2037 4,870,685
-------------
16,128,688
-------------
Pollution Control - 0.2%
2,000,000 USA Waste Services, Inc., Convertible Subordinated Notes 4.0% 2/1/2002 1,985,000
-------------
Publishing & Printing - 0.1%
1,000,000 Omnicom Group, Inc., Convertible Subordinated Debentures 4.25% 1/3/2007 1,096,250
-------------
Retail - 3.8%
10,000,000 Dayton Hudson Corp., Notes 6.4% 2/15/2003 9,663,420
1,000,000 Kroger Co. (The), Sr. Notes 8.15% 7/15/2006 1,030,398
4,000,000 Penney (J.C.) Co. Inc., Notes 6.95% 4/1/2000 4,017,492
4,000,000 Safeway, Inc., Sr. Subordinated Debentures 9.875% 3/15/2007 4,671,576
4,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes 6.56% 11/20/2003 3,876,748
10,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes, Series II 6.86% 7/3/2001 9,968,320
-------------
33,227,954
-------------
Telephone - 2.3%
4,000,000 New York Telephone Co., Debentures 9.375% 7/15/2031 4,391,548
6,000,000 US West Capital Funding, Inc., Debentures 7.9% 2/1/2027 5,917,326
10,000,000 US West Capital Funding, Inc., Notes 6.85% 1/15/2002 9,907,190
-------------
20,216,064
-------------
Textiles & Apparel - 0.8%
7,000,000 Levi Strauss & Co., Notes 6.8% 11/1/2003 6,883,457
-------------
Total Corporate Bonds (cost $328,266,064) 323,631,832
-------------
FOREIGN GOVERNMENT BONDS - 4.9% (a,c)
2,000,000 African Development Bank, Subordinated Notes 6.875% 10/15/2015 1,895,128
7,000,000 British Columbia Hydro & Power, Debentures 12.5% 9/1/2013 7,797,433
5,500,000 Korea Electric Power Corp., Debentures 7.75% 4/1/2013 5,489,429
2,500,000 Korea Electric Power Corp., Debentures 6.38% 12/1/2003 2,373,305
8,000,000 Korean Development Bank, Unsecured Bonds 7.25% 5/15/2006 7,880,488
7,500,000 Ontario Province, Canada, Debentures 11.75% 4/25/2013 8,238,825
4,500,000 Ontario Province, Canada, Sr. Bonds 7.375% 1/27/2003 4,607,321
6,000,000 Republic Of Poland, Unsecured Bonds 4.0% 10/27/2014 4,897,500
-------------
Total Foreign Government Bonds (cost $45,153,341) 43,179,429
-------------
ASSET-BACKED SECURITIES - 11.7% (a)
19,000,000 Chase Manhattan Credit Card, Series 1996-4, Class A 6.73% 2/15/2002 19,131,290
4,515,671 Chase Manhattan Grantor Trust, Series 1996-B-A 6.61% 9/15/2002 4,541,591
5,000,000 CS First Boston Mortgage Security Corp., 1996-2 Class A4 6.62% 9/25/2009 4,890,625
20,000,000 Deutsche Floorplan Receivables Master Trust, Series 1994-1-A 5.58% 2/15/2001 20,065,400 (b)
10,000,000 Discover Card Master Trust I, Series 1996-3-A 6.05% 8/18/2008 9,345,500
13,000,000 Standard Credit Master Trust 1, Credit Card Participation
Certificates, Series 1995-9-A 6.55% 10/7/2007 12,599,340
15,000,000 World Financial Network Credit Card Master Trust,
Series 1996-B 6.95% 4/15/2006 15,098,850
17,000,000 World Omni Automobile Lease Securitization Trust,
Series 1997-A, Class A4 6.9% 6/25/2003 17,098,260
-------------
Total Asset-Backed Securities (cost $103,329,943) 102,770,856
-------------
MORTGAGE-BACKED SECURITIES - 14.4% (a)
11,330,644 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 3/1/2011 10,820,300
14,329,463 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 4/1/2011 13,684,050
60,000,000 Federal National Mortgage Association, Participation Certificat 7.5% 2/1/2027 59,381,250 (d)
45,000,000 Government National Mortgage Association, Modified Pass
Through Certificates 6.5% 12/15/2026 42,300,000 (d)
-------------
Total Mortgage-Backed Securities (cost $125,397,789) 126,185,600
-------------
U.S. GOVERNMENT - 12.9% (a)
66,000,000 U.S. Treasury Bonds 6.5 - 13.125% 2001 - 2026 81,551,536 (e)
30,000,000 U.S. Treasury Notes 6.25 - 7.875% 2001 - 2007 31,082,494
-------------
Total U.S. Government (cost $115,796,094) 112,634,030
-------------
<CAPTION>
Shares
--------
COMMON STOCKS - 0.2% (a)
<S> <C> <C>
10,000 CarrAmerica Realty Corp., Common Stock 278,750
12,500 Cresent Real Estate Equities, Common Stock 328,125
10,000 First Industrial Realty Trust, Common Stock 295,000
7,500 Highwoods Properties, Inc., Common Stock 233,438
12,500 Simon Debartolo Group, Inc., Common Stock 357,812
10,000 Spieker Properties, Inc., Common Stock 348,750
-------------
Total Common Stocks (cost $1,878,556) 1,841,875
-------------
PREFERRED STOCKS - 1.5% (a)
20,000 AirTouch Communications, Inc., Convertible Preferred Stock 910,000
15,000 McKesson Financing Trust, Convertible Preferred Stock 858,750
80,000 National Australia Banks, Preferred Stock 2,120,000
5,000 Rouse Company, Preferred Stock 226,875
17,500 Security Capital Industrial Trust, Preferred Stock 457,188
17,500 Security Capital Pacific, Preferred Stock 531,563
150,000 SI Financing Trust I, Preferred Stock 3,900,000
100,000 TransCanada Pipelines Ltd., Preferred Stock 2,537,500
20,000 Unocal Capital Trust, Preferred Stock 1,130,000
-------------
Total Preferred Stocks (cost $12,470,646) 12,671,876
-------------
<CAPTION>
SHORT-TERM SECURITIES - 17.4% (a)
<S> <C> <C> <C> <C>
Commercial Paper - 12.3%
20,000,000 Barclay's U.S. Funding Corp. 5.51% 5/19/1997 19,944,900
12,647,000 Corporate Asset Funding Co., Inc. 5.53% 6/5/1997 12,579,005
6,600,000 CXC Inc. 5.58% 6/11/1997 6,558,057
6,400,000 Great Lakes Chemical Corp. 5.5% 5/12/1997 6,389,244
24,500,000 Koch Industries, Inc. 5.6% 5/1/1997 24,500,000
10,000,000 Nationsbank, N.A. (South) 5.53% 5/5/1997 9,993,855
20,056,000 Harvard University 5.48% 5/8/1997 20,034,629
8,000,000 Sheffield Receivables Corp. 5.53% 5/13/1997 7,985,253
-------------
107,984,943
-------------
U.S. Government Agency - 5.1%
10,000,000 Federal Home Loan Mortgage Corp. 5.35% 5/6/1997 9,992,569
1,400,000 Federal Home Loan Mortgage Corp. 5.35% 5/6/1997 1,398,960
7,500,000 Federal Home Loan Mortgage Corp. 5.42% 5/6/1997 7,494,354
15,100,000 Federal Home Loan Mortgage, Discount Notes 5.4% 5/1/1997 15,100,000
10,000,000 Federal Home Loan Mortgage, Discount Notes 5.37% 5/22/1997 9,968,675
-------------
43,954,558
-------------
Total Short-Term Securities (at amortized cost) 151,939,501
-------------
Total Investments (cost $884,231,934) $874,854,999 (f)
=============
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) Denotes securities pledged as initial margin on the following financial futures contracts as
of April 30, 1997:
<CAPTION>
Notional
Number of Market Principal Unrealized
Type Contracts Expiration Position Value Amount Loss
- ------- --------- ---------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 6 June, 1997 Short $2,408,400 $2,316,875 $(91,525)
(f) At April 30, 1997, the aggregate cost of securities for federal income tax purposes was
$884,231,934 and the net unrealized depreciation of investments based on that cost was
$9,376,935 which is comprised of $4,003,665 aggregate gross unrealized appreciation and
$13,380,600 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
Portfolio of Investments
April 30, 1997
(unaudited)
Principal Maturity
Amount Rate Date Value
- -------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES - 98.9% (a)
Alabama - 0.8%
$3,000,000 City of Mobile, Alabama, General Obligation Refunding
Warrants, Series 1996, Insured by AMBAC 5.0% 2/15/2016 $2,762,790
2,000,000 Huntsville, Alabama, General Obligation Warrants, Series B 7.875% 8/1/2012 2,058,800 (b)
--------------
4,821,590
--------------
Arizona - 1.3%
1,700,000 Pima County, Arizona (Catalina Foothills Unified School District
#16), Unlimited Tax General Obligation Bonds, Series A,
Insured by MBIA 8.9% 7/1/2005 2,138,107
1,000,000 Pinal County, Arizona, Unified School District No. 43,
(Apache Junction), School Improvement Bonds, Series 1996-A,
Insured by FGIC 5.8% 7/1/2011 1,032,260
2,500,000 Salt River Project, Arizona, Electric System, Revenue Bonds,
Series 1992-C 6.0% 1/1/2016 2,546,350
1,500,000 Tucson, Arizona, Unlimited Tax General Obligation Refunding
Bonds, Insured by FGIC 6.1% 7/1/2012 1,563,315
--------------
7,280,032
--------------
Arkansas - 1.2%
1,340,000 Arkansas Development Finance Authority, Correctional
Facilities Construction Revenue Bonds, Insured by MBIA 7.125% 11/15/2010 1,455,803
1,000,000 Arkansas Housing Development Agency, Single Family
Mortgage Bonds, Series A 8.375% 7/1/2010 1,185,560 (b)
3,000,000 City of Jonesboro, Arkansas, Residential Housing and Health
Care Facilities Board, Hospital Revenue Refunding &
Construction Bonds, (St. Bernards Regional Medical Center),
Series 1996-B, Insured by AMBAC 5.8% 7/1/2011 3,079,080
875,000 Pope County, Arkansas, Pollution Control Revenue Refunding
Bonds, Series 1994 (Arkansas Power and Light Company Project),
Insured by FSA 6.3% 12/1/2016 921,235
--------------
6,641,678
--------------
California - 11.3%
2,500,000 Alameda, California, Unified School District, Alameda County,
Crossover Refunding Bonds, Series A, Insured by AMBAC 6.1% 7/1/2013 2,583,050
3,450,000 Anaheim, California, Public Financing Authority, Lease
Revenue Bonds, (Anaheim Public Improvements Project),
1997 Series A 6.0% 9/1/2024 3,601,938
2,500,000 Bakersfield, California, Certificates of Participation (Convention
Center Expansion - Arena Project, 1997) 5.8% 4/1/2017 2,499,825
3,000,000 California Educational Facilities Authority (Stanford Unversity),
Revenue Refunding Bonds, Series M 5.25% 12/1/2026 2,791,800
4,400,000 California State Department of Water Resources (Central Valley
Project), Water System Revenue Bonds, Series H 6.9% 12/1/2025 4,750,592 (b)
3,000,000 California State Public Works Board, Department of Corrections,
Lease Revenue Bonds, State Prison, Series A 7.4% 9/1/2010 3,532,980
6,285,000 California State, Unlimited Tax General Obligation Bonds,
Insured by MBIA 6.0% 8/1/2016 6,382,229
1,000,000 California State, Unlimited Tax General Obligation Bonds,
Veteran's Series AT 9.5% 2/1/2010 1,376,230
2,000,000 California State, Various Purpose General Obligation Bonds,
Insured by AMBAC 6.3% 9/1/2010 2,193,200
1,400,000 Central Valley Financing Authority, California, Cogeneration
Project Revenue Bonds, (Carson Ice-Gen Project), Series 1993 6.0% 7/1/2009 1,416,044
3,135,000 County of Orange, California, 1996 Recovery Certificates of
Participation, Series A, Insured by MBIA 5.8% 7/1/2016 3,131,113
1,900,000 El Cajon, California, Redevelopment Agency Tax Allocation
Refunding Bonds (El Cajon Redevelopment Project),
Insured by AMBAC 6.6% 10/1/2022 2,035,280
2,000,000 Los Angeles County, California, Transportation Commission
Sales Tax Revenue Bonds, Proposition C, Series A, Insured
by MBIA 6.25% 7/1/2013 2,089,960
2,000,000 Metropolitan Water District of Southern California, Unlimited
Tax General Obligation Bonds, Series G 6.625% 3/1/2009 2,081,120 (b)
1,000,000 Rio Linda, California, Union School District, Series 1992-A,
Insured by AMBAC 7.4% 8/1/2010 1,134,670
2,815,000 Riverside County Transportation Commission, California, Sales
Tax Revenue Capital Appreciation Bonds, Insured by MBIA Zero Coupon 6/1/2004 1,974,216
1,000,000 Sacramento Cogeneration Authority, Cogeneration Project
Revenue Bonds, (Procter & Gamble Project), 1995 Series 6.375% 7/1/2010 1,031,940
2,000,000 Sacramento, California, Municipal Utility District, Electric
Revenue Bonds, Series Y, Insured by MBIA 6.75% 9/1/2009 2,172,360
1,500,000 San Francisco Bay Area Rapid Transit District, California,
Sales Tax Revenue Refunding Bonds, Series 1990,
Insured by MBIA 6.75% 7/1/2010 1,707,075
15,000,000 San Joaquin Hills Transportation Corridor Agency,
California, Sr. Lien Convertible Toll Revenue Bonds Zero Coupon 1/1/2013 12,399,900
1,500,000 State of California, General Obligation Bonds 7.0% 8/1/2006 1,711,290
2,490,000 University of California Revenue Bonds, Multiple Purpose
Projects, Series 1989-B, Insured by AMBAC 11.0% 9/1/1998 2,709,294
--------------
65,306,106
--------------
Colorado - 5.2%
1,000,000 Colorado Housing & Finance Authority, Single Family Program,
Revenue Bonds 7.0% 11/1/2016 1,074,070
655,000 Colorado Housing & Finance Authority, Single Family Residential
Housing Revenue Bonds, Series 1987-B 9.0% 9/1/2017 675,377
3,100,000 Colorado Springs, Colorado, Utilities System Refunding
Bonds, Series 1991-B 7.0% 11/15/2021 3,424,539 (b)
1,945,000 Colorado State Colleges Board, Western State College,
Housing & Student Fee Revenue Bonds, Series 1992, Insured
by Connie Lee 6.625% 5/1/2015 2,122,442 (b)
1,195,000 Colorado Water Resources Power Development Authority,
Clean Water Revenue Bonds, Series A, Insured by FSA 6.25% 9/1/2013 1,244,700
3,350,000 Douglas County, Colorado, School District No. 1, General
Obligation Bonds 6.5% 12/15/2016 3,687,647 (b)
150,000 Douglas County, Colorado, School District No. 1, General
Obligation Bonds 6.5% 12/15/2016 162,444
1,000,000 Eagle, Garfield, and Routt Counties, Colorado, Eagle County
School District No. RE50J, General Obligation Bonds,
Series 1994, Insured by FGIC 6.3% 12/1/2012 1,071,940
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 6/1/2008 1,059,062
1,885,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 12/1/2008 1,023,197
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 6/1/2007 1,115,932
3,000,000 Larimer County, Colorado, School District No. R-2, Poudre Valley
Unlimited Tax General Obligation Bonds, Insured by MBIA 7.0% 12/15/2016 3,580,080
4,485,000 Regional Transportation District, Colorado, Sales Tax
Revenue Refunding & Improvement Bonds, Series 1992,
Insured by FGIC 6.25% 11/1/2012 4,697,454
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 12/15/2003 1,788,550
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 12/15/2004 3,400,450
--------------
30,127,884
--------------
Connecticut - 0.8%
4,000,000 Connecticut Special Tax Obligation, Transportation Infrastructure
Revenue Bonds, Series B 6.5% 10/1/2010 4,456,200
--------------
Florida - 3.3%
13,845,000 Broward County, Florida, Housing Finance Authority, Home
Mortgage Revenue Bonds, 1983 Series A Zero Coupon 4/1/2014 2,444,473
1,000,000 Florida State Board of Education, Public Education Capital Outlay
General Obligation Bonds, Series B-1 7.875% 6/1/2019 1,058,850 (b)
3,500,000 Florida State Board of Education, Public Education Capital Outlay,
General Obligation Bonds, Series B 5.875% 6/1/2020 3,530,380
2,000,000 Florida State Correctional Facilities, Certificates of Participation,
Polk County Project 5.0% 8/1/2017 1,821,760
5,750,000 Florida State Turnpike Authority, Turnpike Revenue Refunding
Bonds, (Department of Transportation), Series A,
Insured by FGIC 5.0% 7/1/2019 5,146,940
3,200,000 Hillsborough County, Florida, Industrial Development Authority
(Weyerhaeuser Company, Inc.), Industrial Development
Revenue Bonds, Series 1983 9.25% 6/1/2008 3,243,392
1,705,000 Hillsborough County, Florida, Industrial Development Authority,
Florida (Tampa Electric Project), Pollution Control Revenue
Bonds, Series 1991 7.875% 8/1/2021 1,941,313
--------------
19,187,108
--------------
Georgia - 2.8%
1,500,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series A, Insured by MBIA 6.1% 10/1/2019 1,579,185
2,000,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series 1992, Insured by MBIA 6.0% 10/1/2011 2,135,520
5,000,000 Cherokee County, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Insured by MBIA 5.5% 8/1/2018 4,956,250
2,000,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-B 5.65% 3/1/2012 2,064,840
3,500,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-D 5.0% 8/1/2012 3,380,195
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series B 6.3% 3/1/2009 1,097,070
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series B 6.3% 3/1/2010 1,097,980
--------------
16,311,040
--------------
Idaho - 0.5%
3,115,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2010 1,566,066
1,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2007 598,490
2,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2011 934,160
--------------
3,098,716
--------------
Illinois - 1.2%
1,000,000 City of Alton, Madison County, Illinois, Hospital Facility
Revenue Refunding Bonds, Series 1996, (Saint Anthony's
Health Center) 6.0% 9/1/2014 950,350
2,000,000 Illinois Health Facilities Authority Revenue Refunding Bonds,
Lutheran General Health, Insured by FSA 6.0% 4/1/2018 2,026,120
937,000 Illinois Health Facilities Authority (Community Provider Pooled
Loan Program), Revenue Bonds, Series 1988-B, Insured
by MBIA 7.9% 8/15/2003 955,215 (b)
170,000 Illinois Health Facilities Authority (Community Provider
Pooled Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.9% 8/15/2003 192,160 (b)
10,000,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Expansion Project, Refunding Bonds, Series 1996-A Zero Coupon 6/15/2018 2,847,200
--------------
6,971,045
--------------
Indiana - 0.6%
2,450,000 Indiana Municipal Power Agency, Power Supply System
Revenue Bonds, Series A, Insured by MBIA 5.5% 1/1/2023 2,308,709
1,100,000 Indianapolis Airport Authority Refunding Revenue Bonds,
Series 1996-A, Insured by FGIC 5.6% 7/1/2015 1,071,796
--------------
3,380,505
--------------
Iowa - 0.4%
2,000,000 Iowa Finance Authority, Iowa State Revolving Fund Revenue
Bonds, Combined Series 1994 6.25% 5/1/2024 2,073,680
--------------
Kansas - 1.8%
8,000,000 Kansas City, Kansas, Utility System Refunding and Improvement
Revenue Bonds, Series 1994, Insured by FGIC 6.375% 9/1/2023 8,450,640
1,255,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds, Insured by
AMBAC Zero Coupon 3/1/2007 745,031 (b)
920,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds, Insured by
AMBAC Zero Coupon 3/1/2007 554,052
600,000 Kansas Development Finance Authority, Health Facilities
Revenue Bonds, (Stormont- Vail Healthcare, Inc.),
Series F, Insured by MBIA 5.8% 11/15/2016 600,852
--------------
10,350,575
--------------
Kentucky - 0.8%
1,000,000 Kentucky Development Finance Authority, Refunding and
Improvement Revenue Bonds (Ashland Hospital, Kings
Daughter Project) 9.75% 8/1/2005 1,048,810
750,000 Kentucky Turnpike Authority, Economic Development Road
Revenue and Revenue Refunding Bonds, Series 1993,
Insured by AMBAC 5.5% 7/1/2009 759,225
5,345,000 Kentucky Turnpike Authority, Economic Development Road
Revenue Bonds, Insured by FGIC Zero Coupon 1/1/2010 2,650,425
--------------
4,458,460
--------------
Louisiana - 1.1%
6,500,000 New Orleans, Louisiana, General Obligation Bonds, Series 1991,
Insured by AMBAC Zero Coupon 9/1/2012 2,739,165
3,000,000 Orleans Parish School Board #87, Louisiana, Insured by MBIA 8.95% 2/1/2008 3,873,150 (b)
--------------
6,612,315
--------------
Maine - 0.3%
1,250,000 Maine Health & Higher Education Facilities Authority, Revenue
Bonds, Series 1994, Insured by FSA 7.0% 7/1/2024 1,368,725
350,000 Regional Waste Systems, Inc., Maine, Solid Waste Resource
Recovery System Revenue Bonds, Series A-C 7.95% 7/1/2010 375,092
--------------
1,743,817
--------------
Maryland - 1.4%
2,000,000 Maryland Health & Higher Education Authority, Union
Hospital of Cecil County Revenue Bonds, Series 1992 6.7% 7/1/2022 2,059,180
4,500,000 Morgan State University, Maryland, Academic Fee and
Auxiliary Facilities Fees Revenue Refunding Bonds,
Series 1993, Insured by MBIA 6.05% 7/1/2015 4,765,545
1,000,000 Prince George's County, Maryland, Dimensions Health Corp.,
Hospital Revenue Bonds, Series 1992 7.0% 7/1/2022 1,112,570 (b)
--------------
7,937,295
--------------
Massachusetts - 2.3%
2,000,000 Commonwealth of Massachusetts, General Obligation Refunding
Bonds, Series B 6.5% 8/1/2008 2,213,580
1,800,000 Commonwealth of Massachusetts, Limited Tax General Obligation
Bonds, Construction Loan, Series C 7.375% 12/1/2008 1,922,562 (b)
1,500,000 Massachusetts Health and Education Facilities Authority (Newton -
Wellesley Hospital) Revenue Bonds, Series C 8.0% 7/1/2018 1,593,855 (b)
2,500,000 Massachusetts Health and Education Facilities Authority, Revenue
Bonds, Daughters of Charity National Health System,
The Carney Hospital, Series D 6.1% 7/1/2014 2,559,575
1,500,000 Massachusetts Health & Education Facilities Authority,
Revenue Bonds, Series F 6.5% 7/1/2012 1,597,440
3,000,000 Plymouth County, Massachusetts, Correctional Facility Certificates
of Participation Bonds 7.0% 4/1/2012 3,270,150
--------------
13,157,162
--------------
Michigan - 3.0%
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 6.4% 8/1/2024 2,126,760
1,400,000 Kent County, Michigan, Limited Tax General Obligation Refuse
Disposal System Refunding Bonds 8.3% 11/1/2007 1,460,074
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 5/1/2009 783,600
2,460,000 Michigan Municipal Bond Authority, Government Loan Revenue
Refunding Bonds, Series A, Insured by FGIC Zero Coupon 12/1/2005 1,572,358
390,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, (Detroit Medical Center Obligated
Group), Series 1988-A 8.125% 8/15/2012 416,458 (b)
110,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, (Detroit Medical Center Obligated
Group), Series 1988-A 8.125% 8/15/2012 115,331
3,000,000 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds, (Sisters of Mercy Health Corp.), Insured by MBIA 5.375% 8/15/2014 2,922,360
3,320,000 Sault St. Marie Chippewa Indians Housing Authority,
Health Facilities Revenue Bonds, (Tribal Health & Human
Services Center Project), Series 1992 7.75% 9/1/2012 3,393,638
1,000,000 Vicksburg, Michigan, Community Schools, Qualified School
General Obligation Bonds, Kalamazoo & St. Joseph Counties,
Insured by MBIA 7.0% 5/1/2007 1,097,460 (b)
1,860,000 West Ottawa, Michigan, Public School District, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/2005 1,237,123
3,455,000 West Ottawa, Michigan, Public School District, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/2004 2,426,585
--------------
17,551,747
--------------
Minnesota - 5.2%
2,500,000 City of Minneapolis, (Lifespan Inc., Abbott - Northwestern Hospital),
Hospital Facilities Refunding Revenue Bonds, 1987 Series B 9.125% 12/1/2014 2,623,450 (b)
1,850,000 City of Minneapolis, (Lifespan Inc., Abbott - Northwestern Hospital),
Hospital Facilities Revenue Bonds, 1988 Series A 7.875% 12/1/2014 1,928,940 (b)
285,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Revenue Bonds, (The Duluth Clinic, Ltd), Series 1992,
Insured by AMBAC 6.3% 11/1/2022 307,905 (b)
715,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Revenue Bonds, (The Duluth Clinic, Ltd), Series 1992,
Insured by AMBAC 6.3% 11/1/2022 743,936
7,685,000 Minneapolis, Minnesota, Community Development Agency, Tax
Increment Revenue Appreciation Bonds, Insured by MBIA Zero Coupon 3/1/2009 4,046,383
8,200,000 Minnesota Agricultural and Economic Development Board, Health
Care System Revenue Bonds, Series 1997-A (Fairview
Hospital and Healthcare Services) 5.75% 11/15/2026 8,006,398
2,500,000 Minnesota Higher Education Facilities Authority, (Augsburg
College), Mortgage Revenue Bonds, Series Four-F1 Bonds 6.25% 5/1/2023 2,480,925
1,740,000 Stewartville, MN, Independent School District, Unlimited Tax
General Obligation Bonds, Series A 5.75% 2/1/2014 1,764,760
3,500,000 St. Louis Park, Minnesota, Health Care Facilities (Park Nicollet
Medical Center Project), Revenue Bonds, Series 1990-A 9.25% 1/1/2020 3,954,720 (b)
1,180,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series A, Insured by AMBAC 7.25% 7/1/2015 1,278,506 (b)
1,000,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series C, Insured by AMBAC 7.25% 7/1/2018 1,092,700 (b)
1,400,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series C, Insured by AMBAC 7.25% 7/1/2015 1,529,780 (b)
--------------
29,758,403
--------------
Missouri - 2.3%
2,000,000 Health & Educational Facilities Authority of Missouri, Health
Facilities Revenue Bonds, Series 1996, (Lake of the Ozarks
General Hospital, Inc.) 6.5% 2/15/2021 2,021,340
2,000,000 Missouri State Health and Education Facilities Authority
(Barnes - Jewish, Inc. /Christian Health Services), Health
Facilities Refunding & Improvement Revenue Bonds,
Series 1993-A 5.25% 5/15/2014 1,925,880
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 6.875% 2/15/2021 2,891,601 (b)
750,000 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% 6/1/2009 757,275
2,925,000 Missouri State Health and Education Facilities Authority,
Heartland Health System Revenue Bonds, Series 1992,
Insured by AMBAC 6.35% 11/15/2017 3,059,989
1,500,000 Missouri State Health and Education Facilities Authority,
SSM Health Care Refunding Revenue Bonds, Series A,
Insured by MBIA 6.25% 6/1/2007 1,600,095
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 5.625% 7/1/2016 993,540
--------------
13,249,720
--------------
Montana - 1.1%
775,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.875% 6/1/2020 840,573 (b)
2,385,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.875% 6/1/2020 2,586,795 (b)
1,240,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Insured by MBIA 6.875% 6/1/2020 1,344,916 (b)
1,600,000 State of Montana, The Board of Regents of Higher Education,
Montana State University, Facilities Improvement & Refunding
Revenue Bonds, Series D-1996, Insured by MBIA 5.375% 11/15/2021 1,531,712
--------------
6,303,996
--------------
Nebraska - 1.4%
4,000,000 Nebraska Public Power District, Power Supply System Revenue
Bonds, Insured by MBIA 6.125% 1/1/2015 4,116,400
3,455,000 Omaha Public Power District, Nebraska, Electric Revenue
Refunding Bonds, Series B 6.15% 2/1/2012 3,713,883
--------------
7,830,283
--------------
New Hampshire - 0.3%
1,100,000 New Hampshire Turnpike System, Residual Interest Bonds,
1991 Refunding, Series C, Insured by FGIC 9.549% 5/29/1997 1,316,447 (c)
--------------
New Jersey - 3.4%
1,035,000 Camden County, New Jersey, Municipal Utility Authority Sewer
Revenue Bonds, Insured by FGIC 8.25% 12/1/2017 1,081,037 (b)
665,000 Camden County, New Jersey, Municipal Utility Authority Sewer
Revenue Bonds, Insured by FGIC 8.25% 12/1/2017 693,256
1,250,000 East Orange, New Jersey, Unlimited Tax General Obligation
Bonds, Insured by FSA 8.4% 8/1/2006 1,537,238
1,000,000 Mercer County, New Jersey, Improvement Authority, Revenue
Bonds, Series 1991 6.6% 11/1/2014 1,077,480 (b)
2,585,000 New Jersey Health Care Facilities Financing Authority, Jersey Shore
Medical Center Revenue Bonds, Insured by AMBAC 6.1% 7/1/2010 2,712,208
3,000,000 New Jersey Transit Corp., (Raymond Plaza East, Inc.), Certificates
of Participation, Insured by FSA 6.375% 10/1/2006 3,303,960
1,240,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
1984 Series 10.375% 1/1/2003 1,460,323 (b)
4,700,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
Series C, Insured by AMBAC 6.5% 1/1/2016 5,185,322
2,195,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/2007 1,259,996
2,595,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/2009 1,315,535
--------------
19,626,355
--------------
New Mexico - 2.0%
5,000,000 Farmington, New Mexico, Power Revenue Refunding Bonds,
Series 1983 9.875% 1/1/2013 6,517,550 (b)
4,040,000 Farmington, New Mexico, Utility Systems Revenue Bonds,
Insured by AMBAC 9.875% 1/1/2008 5,277,573 (b)
--------------
11,795,123
--------------
New York - 6.2%
2,500,000 Metropolitan Transit Authority, New York, Commuter Facilities
Revenue Bonds, Series 1996-A 6.1% 7/1/2026 2,564,875
5,200,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series A, Insured by MBIA 6.375% 7/1/2018 5,473,676
4,250,000 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Bonds, Series O, Insured by MBIA 6.25% 7/1/2014 4,426,843
4,225,000 Metropolitan Transportation Authority, New York, Transit Facilities
Service Contract Bonds, Series O 5.75% 7/1/2013 4,167,836
2,000,000 New York City, Municipal Water Finance Authority, Water & Sewer
System Revenue Bonds, Series A, Insured by AMBAC 5.875% 6/15/2012 2,059,560
1,250,000 New York City, Municipal Water Finance Authority, Water &
Sewer System Revenue Bonds 8.75% 6/15/2010 1,281,625 (b)
2,000,000 New York State Dorm Authority (City University), Construction
Revenue Bonds, Series A 8.125% 7/1/2017 2,052,960 (b)
5,000,000 New York State Dorm Authority, Revenue Refunding Bonds,
State University Educational Facilities, Series B 5.0% 5/15/2018 4,305,400
2,030,000 New York State Medical Care Facilities Finance Agency
(Ellis Hospital), Insured Mortgage Hospital Bonds,
Series B, Insured by FHA 8.0% 2/15/2008 2,150,684
2,860,000 New York State Thruway Authority, Highway & Bridge Trust
Fund, Revenue Bonds, Series 1994-B, Insured by FGIC 6.0% 4/1/2014 2,923,092
1,620,000 New York State Urban Development Corp., Project Revenue Bonds,
(Syracuse University Center for Science and Technology Loan),
1995 Refunding Series 6.0% 1/1/2009 1,667,774
1,720,000 New York State Urban Development Corp., Project Revenue Bonds,
(Syracuse University Center for Science and Technology Loan),
1995 Refunding Series 6.0% 1/1/2010 1,759,680
1,000,000 Triborough Bridge & Tunnel Authority, New York, General
Purpose Revenue Bonds, Series Q 6.75% 1/1/2009 1,136,940
--------------
35,970,945
--------------
North Carolina - 1.3%
1,500,000 County of Pitt, North Carolina, Pitt County Memorial Hospital
Revenue Bonds, Series 1995 5.5% 12/1/2015 1,454,130
2,250,000 North Carolina Municipal Power Agency #1 (Catawba Electric),
Electric Revenue Bonds, Insured by MBIA 5.0% 1/1/2018 2,024,730
4,000,000 North Carolina Municipal Power Agency #1, Catawba Electric
Revenue Refunding Bonds, Series 1992, Insured by MBIA 6.0% 1/1/2011 4,189,920
--------------
7,668,780
--------------
North Dakota - 0.5%
1,000,000 Mercer County, North Dakota, Pollution Control Revenue
Refunding Bonds, (Ottertail Power Co. Project) 6.9% 2/1/2019 1,065,740
2,000,000 North Dakota Municipal Bond Bank, State Revolving Fund
Program Bonds, Series 1995-A 6.3% 10/1/2015 2,090,220
--------------
3,155,960
--------------
Ohio - 4.3%
1,050,000 Akron, Bath & Copley Joint Township, Ohio, (Children's
Hospital Medical Center), Hospital District Revenue Bonds,
Insured by AMBAC 7.45% 11/15/2020 1,164,293 (b)
2,500,000 Akron, Ohio, Certificates of Participation, Series 1996, Akron
Municipal Baseball Stadium Project Zero Coupon 12/1/2016 1,873,700 (d)
3,785,000 City of Cleveland, Ohio, Public Power System, First Mortgage
Revenue Bonds, Series 1994-A, Insured by MBIA 7.0% 11/15/2024 4,320,010 (b)
1,630,000 Cuyahoga County, Ohio, (Deaconess Hospital), Hospital
Revenue Bonds, Series C 7.45% 10/1/2018 1,813,929 (b)
1,470,000 Lorain County, Ohio, (Humility of Mary Health System), Hospital
Revenue Bonds 7.15% 12/15/2006 1,592,657
2,000,000 Ohio Higher Educational Facility Commission (Case Western
Reserve University Project), Series B 6.5% 10/1/2020 2,202,480
1,500,000 Ohio Higher Educational Facility Commission, Higher Educational
Revenue Bonds, (Ohio Dominican College 1994 Project) 6.625% 12/1/2014 1,560,780
5,000,000 Ohio State Air Quality Development Authority, Cleveland Electric,
Pollution Control Revenue Bonds, Insured by FGIC 8.0% 12/1/2013 5,766,500
2,250,000 Ohio State Air Quality Development Authority, Columbus &
Southern Pollution Control Revenue Bonds, Insured by FGIC 6.375% 12/1/2020 2,353,478
1,795,000 Trumbull County, Ohio (Memorial Hospital), Hospital Revenue
Refunding & Improvement Bonds, Series 1991-B,
Insured by FGIC 6.9% 11/15/2012 1,936,805
--------------
24,584,632
--------------
Oklahoma - 1.9%
5,220,000 Bass, Oklahoma, Memorial Baptist Hospital 8.35% 5/1/2009 6,566,134 (b)
1,175,000 Grand River Dam Authority, Oklahoma, Revenue Refunding
Bonds, Series 1993, Insured by FSA 5.75% 6/1/2008 1,235,900
1,500,000 Oklahoma Municipal Power Authority, Electric Revenue
Refunding Bonds, Series B, Insured by MBIA 5.75% 1/1/2024 1,560,585
1,500,000 Oklahoma Municipal Power Authority, Power Supply System
Revenue Bonds, Series 1992-B, Insured by MBIA 5.875% 1/1/2012 1,580,730
--------------
10,943,349
--------------
Oregon - 0.9%
2,700,000 Clackamas County, Oregon, Health Facilities Authority, Adventist
Health-West Revenue Refunding Bonds, Series 1992-A,
Insured by MBIA 6.35% 3/1/2009 2,872,827
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 5.875% 8/1/2012 2,050,640
--------------
4,923,467
--------------
Pennsylvania - 1.9%
1,600,000 Allegheny County, Pennsylvania, Hospital Development
Authority, Hospital Revenue Bonds, Series A-1995,
(Allegheny General Hospital Project), Insured by MBIA 6.2% 9/1/2015 1,650,272
2,575,000 Allegheny County, Pennsylvania, Sanitary Authority, Sewer
Revenue Bonds, Series A, Insured by FGIC Zero Coupon 6/1/2008 1,422,816
2,000,000 Delaware River Joint Toll Bridge Commission, Pennsylvania,
Toll Bridge Revenue Bonds 7.875% 7/1/2018 2,121,180 (b)
3,170,000 Millcreek Township, Pennsylvania, School District, General
Obligation Bonds, Insured by FGIC Zero Coupon 8/15/2009 1,620,567
2,000,000 Monroeville, Pennsylvania, Hospital Authority, Forbes Health
System Revenue Bonds, Series 1992 7.0% 10/1/2003 2,138,860
3,000,000 Pennsylvania State, General Obligation Bonds, Second
Series of 1992, Insured by AMBAC Zero Coupon 7/1/2006 1,868,310
--------------
10,822,005
--------------
Puerto Rico - 1.9%
4,000,000 Puerto Rico Commonwealth, Aqueduct & Sewer Revenue
Bonds, Series A 9.0% 7/1/2009 5,014,560 (b)
3,000,000 Puerto Rico Commonwealth, Unlimited Tax General
Obligation Bonds 6.45% 7/1/2017 3,191,460
3,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series T 6.0% 7/1/2016 3,020,700
--------------
11,226,720
--------------
South Carolina - 1.1%
2,000,000 Piedmont Municipal Power Agency, South Carolina,
Electric Revenue Refunding Bonds, Series 1991,
Insured by FGIC 6.25% 1/1/2021 2,147,160
5,000,000 Piedmont Municipal Power Agency, South Carolina,
Electric Revenue Refunding Bonds, Insured by FGIC 5.0% 1/1/2022 4,460,350
--------------
6,607,510
--------------
Tennessee - 0.3%
1,750,000 Bristol, Tennessee, Health and Educational Facilities Authority,
Bristol Memorial Hospital Revenue Bonds, Insured by FGIC 7.0% 9/1/2021 1,915,235 (b)
--------------
Texas - 10.4%
2,165,000 Arlington, Texas, Independent School District, Unlimited Tax
Refunding & Improvement Bonds, Series 1992, Permanent
School Fund Guarantee Zero Coupon 2/15/2009 1,137,448
7,000,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA Zero Coupon 11/15/2008 3,753,470
8,100,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA Zero Coupon 11/15/2009 4,064,823
1,000,000 Austin, Texas, Utility System Revenue Refunding Bonds,
Insured by FGIC 6.0% 11/15/2013 1,051,580
1,575,000 Bexar County, Texas, Limited Tax General Obligation Bonds 5.0% 6/15/2015 1,463,128
1,000,000 Brazos River Authority, Texas, Collateralized Revenue
Refunding Bonds (Houston Lighting & Power Co.),
1988 Series B 8.25% 5/1/2015 1,052,100
2,000,000 Brazos River Authority, Texas, Houston Lighting
& Power Co., Revenue Refunding Bonds, Insured by MBIA 8.25% 5/1/2015 2,109,200
1,390,000 City of Garland, Dallas County, Texas, Combination Tax and
Revenue Certificates of Obligation, Series 1996 5.25% 2/15/2016 1,297,079
1,310,000 City of Garland, Dallas County, Texas, Combination Tax and
Revenue Certificates of Obligation, Series 1996 5.25% 2/15/2015 1,231,989
2,000,000 Copperas Cove, Texas, Independent School District,
Unlimited Tax General Obligation Bonds, Permanent School
Fund Guarantee 6.9% 8/15/2014 2,229,240 (b)
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.375% 11/1/2009 1,155,360
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.375% 11/1/2008 1,155,360
2,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.375% 11/1/2010 2,304,300
4,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds
Series 1994-A, Insured by MBIA 6.0% 11/1/2012 4,123,840
2,285,000 Denton, Texas, Independent School District, Unlimited Tax General
Obligation Refunding Bonds, Permanent School Fund Guarantee 6.25% 2/15/2009 2,479,408
1,000,000 Georgetown, Texas, Higher Education Finance Corp., Higher
Education Revenue Bonds, Series 1994 (Southwestern
University Project) 6.3% 2/15/2014 1,027,580
2,250,000 Harris County, Texas, Toll Road Sr. Lien Bonds, Series A,
Insured by MBIA 6.375% 8/15/2024 2,387,970
1,750,000 Harris County, Texas, Tollroad Unlimited Tax & Subordinated Lien,
Revenue Refunding Bonds, Series 1988 8.125% 8/1/2015 1,866,235 (b)
5,005,000 Houston, Texas, Water & Sewer, Junior Lien Revenue Bonds,
Series 1997-C 5.375% 12/1/2027 4,708,654
2,500,000 Houston, Texas, Water & Sewer, Junior Lien Revenue Refunding
Bonds, Series A 5.375% 12/1/2027 2,351,975
5,315,000 Lewisville, Texas, Independent School District, Capital Appreciation
Refunding Bonds, Permanent School Fund Guarantee Zero Coupon 8/15/2019 1,396,622
1,845,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.375% 7/1/2010 2,099,665
1,000,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.375% 7/1/2011 1,132,330
11,615,000 Southeastern Texas Housing Finance Corp., Single Family
Mortgage Revenue Bonds Zero Coupon 9/1/2017 3,479,621 (b)
4,315,000 Texas State, Veterans Land Board General Obligation Bonds 0.05% 7/1/2010 2,053,508 (b)
1,675,000 Travis County, Texas, Housing Finance Corporation, Single
Family Mortgage Revenue Refunding Bonds, Series 1994-A 6.75% 4/1/2014 1,760,006
3,210,000 Willis, Texas, Independent School District, Government Obligation
Bonds, Permanent School Fund Guarantee 6.5% 2/15/2016 3,426,097 (b)
440,000 Willis, Texas, Independent School District, Government Obligation
Bonds, Permanent School Fund Guarantee 6.5% 2/15/2016 459,720
1,175,000 Wylie, Texas, Independent School District, (Collin County),
Unlimited Tax School Building & Refunding Bonds, Series 1994,
Permanent School Fund Guarantee 6.875% 8/15/2014 1,324,507
--------------
60,082,815
--------------
Utah - 2.4%
5,000,000 Intermountain Power Agency, Utah, Power Supply Revenue Bonds,
Series B 5.75% 7/1/2019 4,950,150
3,405,000 Timpanogos Special Service District, Utah County, Utah, Sewer
Revenue Bonds, Series 1996-A, Insured by AMBAC 6.1% 6/1/2019 3,470,681
3,750,000 Utah Associated Municipal Power Systems, San Juan Project
Revenue Bonds, Series O, Insured by MBIA 6.25% 6/1/2014 3,921,337
1,580,000 West Valley City, Utah, Municipal Building Authority, Lease
Refunding Bonds, Insured by MBIA 6.0% 1/15/2010 1,626,562
--------------
13,968,730
--------------
Virginia - 1.7%
3,000,000 Industrial Development Authority of Fairfax County, Virginia,
Health Care Revenue Bonds, (Inova Health System Project),
Series 1996 5.875% 8/15/2016 3,023,040
4,300,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1994 Series H, Subseries H-2 6.5% 1/1/2014 4,464,948
2,000,000 Virginia State, Unlimited Tax General Obligation Bonds 6.5% 6/1/2015 2,196,040
--------------
9,684,028
--------------
Washington - 6.6%
1,655,000 Douglas County, Washington, Public Utility District #1, Wells
Hydroelectric Revenue Bonds, Series A 8.75% 9/1/2018 2,138,756 (b)
1,395,000 Douglas County, Washington, Public Utility District #1, Wells
Hydroelectric Revenue Bonds, Series A 8.75% 9/1/2018 1,733,566
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 5.0% 1/1/2023 1,765,780
5,000,000 King County, Washington, Unlimited Tax General Obligation
Bonds, Series A 6.75% 12/1/2009 5,324,750 (b)
1,500,000 Tacoma, Washington, Conservation System Project Revenue Bonds,
Tacoma Public Utilities Light Division 6.6% 1/1/2015 1,581,705
2,015,000 Tacoma, Washington, Utilities Refuse Revenue Bonds, Insured
by MBIA 6.625% 12/1/2011 2,180,492 (b)
5,000,000 Washington State Public Power Supply System, Nuclear Project
No. 1, Revenue Refunding Bonds 7.50% 7/1/2015 5,395,250 (b)
3,000,000 Washington State Public Power Supply System, Nuclear Project
No. 1, Revenue Refunding Bonds, Series 1996-A,
Insured by MBIA 5.75% 7/1/2012 2,978,760
2,000,000 Washington State Public Power Supply System, Nuclear Project
No. 1, Revenue Refunding Bonds, Series 1996-A,
Insured by MBIA 5.75% 7/1/2011 2,006,360
1,000,000 Washington State Public Power Supply System, Nuclear Project
No. 3, Revenue Refunding Bonds, Insured by FGIC 7.25% 7/1/2015 1,081,860 (b)
3,000,000 Washington State, Unlimited Tax General Obligation Bonds,
Series 93A 5.75% 10/1/2012 3,083,340
1,500,000 Washington State, Unlimited Tax General Obligation Bonds,
Series A 6.25% 2/1/2011 1,625,430
2,400,000 Washington State, Unlimited Tax General Obligation Bonds 6.7% 6/1/2016 2,566,728 (b)
2,000,000 Washington State, Unlimited Tax General Obligation Bonds 6.0% 6/1/2012 2,105,660
2,500,000 Washington State, Various Purpose General Obligation Bonds 6.25% 6/1/2010 2,714,425
--------------
38,282,862
--------------
Wisconsin - 1.3%
4,315,000 State of Wisconsin, Clean Water Revenue Bonds, 1995 Series 1 5.8% 6/1/2015 4,328,549
3,000,000 Wisconsin Health & Educational Facilities Authority,
Series 1997, Revenue Bonds, (Marshfield Clinic) 5.625% 2/15/2017 2,921,190
--------------
7,249,739
--------------
Wyoming - 0.4%
2,500,000 State of Wyoming, Farm Loan Board, Capital Facilities Revenue
Bonds, Series 1994 6.1% 4/1/2024 2,542,725
--------------
Total Long-Term Municipal Securities (cost $536,134,537) 570,976,784
--------------
SHORT-TERM MUNICIPAL SECURITIES - 1.1% (a)
1,200,000 Berkeley County, South Carolina, (Amoco Chemical Co. Project),
Pollution Control Revenue Refunding Bonds, Series 1994 3.9% 5/1/1997 1,200,000
400,000 Lake Charles, Louisiana, Harbor & Terminal, Variable Rate
Demand Note 2.95% 5/1/1997 400,000 (c)
1,000,000 Lake Charles, Louisiana, Harbor & Terminal, Variable Rate
Demand Note 2.95% 5/1/1997 1,000,000 (c)
400,000 Maricopa County, Arizona Pollution Control Corp., Pollution
Control Revenue Refunding Bonds, (Arizona Public Service
Co. Palo Verde Project), 1994 Series E 3.95% 5/1/1997 400,000
1,300,000 Michigan Strategic Fund, Variable Rate Demand Pollution
Control Revenue Refunding Bonds, (Consumers Power
Company Project), Series 1988A 3.7% 5/1/1997 1,300,000
500,000 Sublette County, Wyoming, Pollution Control Revenue Bonds,
(Exxon Project), Series 1984 3.55% 5/1/1997 500,000
1,300,000 Sublette County, Wyoming, Pollution Control Revenue Bonds,
(Exxon Project), Series 1984 3.55% 5/1/1997 1,300,000
--------------
Total Short-Term Municipal Securities (at amortized cost) 6,100,000
--------------
Total Investments (cost $542,234,537) $577,076,784 (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, 1997, the aggregate cost of securities for federal income tax purposes was $542,234,537
and the net unrealized appreciation of investments based on that cost was $34,842,247 which is
comprised of $35,476,705 aggregate gross unrealized appreciation and $634,458 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, 1997
(unaudited)
Principal Maturity
Amount Rate Date Value
------------- ---------- --------- -------------
<S> <C> <C> <C> <C>
BANK NOTES - 1.6% (a)
$2,000,000 NBD Bank, N.A., Detroit 5.60% 6/13/1997 $2,001,746
5,000,000 Wachovia Bank of North Carolina, N.A. 6.20% 4/6/1998 4,995,564
-------------
Total Bank Notes 6,997,310
-------------
COMMERCIAL PAPER - 82.3% (a)
Banking-Domestic - 1.1%
5,000,000 Vehicle Services of America Ltd., (Nationsbank, Texas,
Direct Pay Letter of Credit) 5.39% 5/19/1997 4,986,700
-------------
Banking-Foreign - 14.6%
5,000,000 Alpargatas Funding Corp., (Union Bank of Switzerland.
Direct Pay Letter of Credit) 5.65% 5/30/1997 4,977,444
5,000,000 Banco Real, S.A., Grand Cayman, (Barclays Bank plc,
Direct Pay Letter of Credit) 5.43% 5/30/1997 4,978,411
3,000,000 Banco Real, S.A., Grand Cayman, (Barclays Bank plc,
Direct Pay Letter of Credit) 5.41% 5/30/1997 2,987,071
5,000,000 Enterprise Capital Funding, (Swiss Bank Corp.,
Direct Pay Letter of Credit) 5.66% 5/8/1997 4,994,536
4,000,000 Enterprise Capital Funding, (Swiss Bank Corp.,
Direct Pay Letter of Credit) 5.65% 6/18/1997 3,970,080
1,046,000 Enterprise Capital Funding, (Swiss Bank Corp.,
Direct Pay Letter of Credit) 5.36% 5/7/1997 1,045,076
3,623,000 Enterprise Capital Funding, (Swiss Bank Corp.,
Direct Pay Letter of Credit) 5.73% 7/15/1997 3,580,354
5,000,000 Finance One Funding Corp., (Credit Suisse,
Direct Pay Letter of Credit) 5.73% 7/17/1997 4,939,576
2,500,000 Finance One Funding Corp., (Credit Suisse,
Direct Pay Letter of Credit) 5.49% 6/4/1997 2,487,392
3,000,000 Finance One Funding Corp., (Credit Suisse,
Direct Pay Letter of Credit) 5.48% 8/11/1997 2,954,695
2,000,000 Finance One Funding Corp., (Credit Suisse,
Direct Pay Letter of Credit) 5.45% 6/6/1997 1,989,240
5,000,000 Formosa Plastics Corp., U.S.A. Series A, (ABN AMRO
Bank N.V., Direct Pay Letter of Credit) 5.41% 5/9/1997 4,994,067
600,000 Glencore Finance Bermuda Ltd., (ABN AMRO
Bank N.V., Direct Pay Letter of Credit) 5.62% 8/29/1997 589,060
5,000,000 Glencore Finance Bermuda Ltd., (Union Bank of
Switzerland, Direct Pay Letter of Credit) 5.61% 8/28/1997 4,909,593
5,000,000 PEMEX Capital, Inc., (Credit Suisse, Direct Pay
Letter of Credit) 5.38% 7/14/1997 4,945,836
4,194,000 River Fuel Funding Co. #3, Inc., (Union Bank of
Switzerland, Direct Pay Letter of Credit) 5.58% 5/13/1997 4,186,241
5,000,000 U.S. Prime Property, Inc., (ABN AMRO Bank N.V.,
Direct Pay Letter of Credit) 5.71% 9/12/1997 4,896,708
-------------
63,425,380
-------------
Computer & Office Equipment - 4.6%
5,000,000 IBM Credit Corp. 5.41% 5/12/1997 4,991,857
5,000,000 International Business Machines Corp. 5.61% 6/10/1997 4,969,111
10,000,000 International Business Machines Corp. 5.72% 6/20/1997 9,998,856
-------------
19,959,824
-------------
Cosmetics & Toiletries - 1.1%
5,000,000 Unilever Capital Corp. 5.64% 6/23/1997 4,958,999
-------------
Education - 7.9%
5,000,000 Duke University 5.35% 5/27/1997 4,980,933
6,500,000 Harvard University 5.60% 5/1/1997 6,500,000
5,000,000 Leland H. Stanford Junior University 5.55% 7/17/1997 4,942,250
5,000,000 Leland H. Stanford Junior University 5.89% 10/9/1997 4,872,094
3,200,000 Leland H. Stanford Junior University 5.52% 5/22/1997 3,189,939
5,000,000 Yale University 5.71% 7/10/1997 4,945,264
5,000,000 Yale University 5.37% 5/22/1997 4,984,542
-------------
34,415,022
-------------
Finance-Automotive - 8.2%
5,000,000 Ford Motor Credit Co. 5.47% 6/16/1997 4,965,819
5,000,000 Ford Motor Credit Co. 5.59% 5/30/1997 4,977,646
5,202,000 Ford Motor Credit Co. 5.69% 7/7/1997 5,147,493
5,000,000 General Motors Acceptance Corp. 5.77% 9/22/1997 4,887,800
4,000,000 General Motors Acceptance Corp. 5.95% 10/7/1997 3,897,887
3,000,000 General Motors Acceptance Corp. 5.55% 8/4/1997 2,957,092
4,000,000 General Motors Acceptance Corp. 5.57% 7/30/1997 3,945,800
5,000,000 General Motors Acceptance Corp. 5.50% 5/1/1997 5,000,000
-------------
35,779,537
-------------
Finance-Commercial - 6.6%
2,920,000 C.I.T. Group Holdings, Inc. 5.65% 6/26/1997 2,894,609
6,000,000 General Electric Capital Corp. 5.62% 5/1/1997 6,000,000
5,000,000 General Electric Capital Corp. 5.53% 7/9/1997 4,948,442
5,000,000 General Electric Capital Corp. 5.49% 6/9/1997 4,970,913
5,000,000 General Electric Capital Corp. 5.55% 6/30/1997 4,955,417
5,000,000 Norwest Financial, Inc. 5.44% 5/5/1997 4,997,033
-------------
28,766,414
-------------
Finance-Consumer - 8.3%
15,000,000 Associates Corp. of North America 5.61% 5/1/1997 15,000,000
5,000,000 AVCO Financial Services, Inc. 5.60% 5/5/1997 4,996,906
5,000,000 AVCO Financial Services, Inc. 5.61% 6/13/1997 4,966,794
5,000,000 Household Finance Corp. 5.59% 5/12/1997 4,991,506
5,000,000 Household Finance Corp. 5.74% 7/21/1997 4,936,438
1,200,000 Transamerica Finance Corp. 5.53% 7/14/1997 1,186,631
-------------
36,078,275
-------------
Finance-Retail - 2.3%
5,000,000 Sears Roebuck Acceptance Corp. 5.62% 6/11/1997 4,968,225
5,000,000 Sears Roebuck Acceptance Corp. 5.63% 6/17/1997 4,963,575
-------------
9,931,800
-------------
Finance-Structured - 9.1%
1,500,000 Asset Securitization Cooperative Corp. 5.47% 5/14/1997 1,497,064
5,000,000 Asset Securitization Cooperative Corp. 5.65% 5/27/1997 4,979,778
1,623,000 Delaware Funding Corp 5.52% 6/10/1997 1,613,172
5,000,000 Delaware Funding Corp 5.42% 5/5/1997 4,997,028
4,000,000 Delaware Funding Corp 5.71% 7/8/1997 3,957,462
2,887,135 Norwest Automobile Trust, Series 1996-A-1 5.59% 12/5/1997 2,887,135
5,000,000 Preferred Receivables Funding Corp. 5.55% 5/15/1997 4,989,267
5,000,000 Preferred Receivables Funding Corp. 5.71% 7/1/1997 4,952,386
5,000,000 Preferred Receivables Funding Corp. 5.59% 6/5/1997 4,973,021
4,550,000 Sheffield Receivables Corp. 5.57% 5/2/1997 4,549,299
-------------
39,395,612
-------------
Financial Services - 2.9%
3,000,000 American Express Credit Corp. 5.58% 7/15/1997 2,966,125
5,000,000 USAA Capital Corp. 5.79% 8/21/1997 4,911,489
1,088,000 USAA Capital Corp. 5.61% 5/2/1997 1,087,830
1,990,000 USAA Capital Corp. 5.42% 5/21/1997 1,984,107
1,750,000 USAA Capital Corp. 5.44% 5/20/1997 1,745,059
-------------
12,694,610
-------------
Food & Beverage - 0.7%
3,000,000 CPC International, Inc. 5.34% 6/2/1997 2,985,973
-------------
Industrial - 5.9%
5,000,000 Chevron Transport Corp., (Guaranteed Chevron Corp.) 5.60% 6/9/1997 4,969,883
5,000,000 Monsanto Co. 5.42% 6/2/1997 4,976,222
5,000,000 Monsanto Co. 5.69% 7/9/1997 4,946,142
3,750,000 Monsanto Co. 5.42% 6/2/1997 3,732,233
2,000,000 Monsanto Co. 5.35% 6/19/1997 1,985,681
5,000,000 Venantius AB (Guaranteed Kingdom of Sweden) 5.48% 6/23/1997 4,960,471
-------------
25,570,632
-------------
Insurance - 2.8%
2,500,000 A.I.G. Funding, Inc. 5.60% 8/21/1997 2,457,456
5,000,000 A.I.G. Funding, Inc. 5.33% 5/15/1997 4,989,772
5,000,000 A.I.G. Funding, Inc. 5.57% 7/21/1997 4,939,813
-------------
12,387,041
-------------
Sovereign/Foreign Government - 1.8%
3,000,000 Kingdom of Sweden 5.77% 8/8/1997 2,953,140
5,000,000 Kingdom of Sweden 5.58% 6/27/1997 4,957,488
-------------
7,910,628
-------------
U.S. Municipal - 4.4%
5,000,000 California Pollution Control Finance Authority 5.64% 6/5/1997 5,000,000
4,000,000 California Pollution Control Finance Authority 5.73% 7/23/1997 4,000,000
5,000,000 California Pollution Control Finance Authority 5.61% 5/13/1997 5,000,000
5,000,000 California Pollution Control Finance Authority 5.39% 5/20/1997 5,000,000
-------------
19,000,000
-------------
Total Commerical Paper 358,246,447
-------------
CERTIFICATES OF DEPOSIT - 3.4% (a)
Domestic - 1.1%
5,000,000 Bankers Trust Co., N.A., New York 5.75% 9/17/1997 5,000,000
-------------
Euro Dollar - 2.3%
5,000,000 ABN AMRO Bank, N.V. 5.52% 6/30/1997 4,999,905
5,000,000 Morgan Guaranty Trust Co. of NY 5.63% 8/12/1997 5,000,668
-------------
10,000,573
-------------
Total Certificates of Deposit 15,000,573
-------------
VARIABLE RATE NOTES - 11.5% (a,b)
8,000,000 Bankers Trust Co., New York 5.63% 5/1/1997 7,997,555
11,000,000 Federal Home Loan Bank, Consolidated Bonds 5.52% 5/23/1997 10,999,482
8,000,000 First Bank, N.A., Minneapolis 5.59% 5/20/1997 7,997,763
5,000,000 Illinois Student Assistance Commission, (Bank of America,
Illinois, Direct Pay Letter of Credit) 5.69% 5/7/1997 5,000,000
10,000,000 Illinois Student Assistance Commission, (Student Loan Market
Association, Direct Pay Letter of Credit) 5.60% 5/7/1997 10,000,000
8,000,000 PNC Bank, N.A., Pittsburgh, Medium Term Bank Note 5.59% 5/1/1997 7,998,663
-------------
Total Variable Rate Notes 49,993,463
-------------
MEDIUM TERM NOTES - 1.2% (a)
5,000,000 Associates Corp. of North America 5.52% 6/23/1997 5,008,191
-------------
Total Investments (at amortized cost) $435,245,984 (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.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
Financial Statements
Statement of Assets and Liabilities
April 30, 1997
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $265,074,696) $226,519,515
Cash 24,413
Receivable for investment securities sold 556,173
Interest receivable 30,000
Unamortized organization costs 6,885
------------
Total assets 227,136,986
------------
LIABILITIES:
Payable for investment securities purchased 3,018,331
Accrued expenses 137,838
------------
Total liabilities 3,156,169
------------
NET ASSETS $223,980,817
============
NET ASSETS CONSIST OF:
Trust capital (23,781,812 shares of beneficial
interest outstanding) $271,208,569
Accumulated net investment loss (1,073,182)
Accumulated net realized loss from sale
of investments (7,599,389)
Unrealized net depreciation of investments (38,555,181)
------------
NET ASSETS $223,980,817
============
Net asset value and redemption price per share
($223,980,817 [divided by] 23,781,812 shares of beneficial
interest outstanding) $ 9.42
======
Maximum public offering price per share
($9.42 [divided by] 0.95 for a 5% sales charge) $ 9.92
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1997
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 20,736
Interest income 594,430
------------
Total income 615,166
------------
Expenses --
Investment advisory fee 879,617
Transfer agent services 552,002
Custodian fee 65,056
Administrative personnel and services 26,694
Printing and postage 111,196
Trust share registration costs 36,040
Auditing fees 4,185
Legal fees 1,265
Trustees' fees 2,353
Amortization of organization costs 4,887
Miscellaneous 4,343
------------
Total expenses 1,687,638
------------
Net investment loss (1,072,472)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investment transactions (7,150,088)
Net change in unrealized depreciation of investments (53,462,599)
------------
Net loss on investments (60,612,687)
------------
Net change in net assets resulting
from operations $ (61,685,159)
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/97 Year Ended
(unaudited) 10/31/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (1,072,472) $ (2,076,149)
Net realized gain (loss) on investments (7,150,088) 33,047,405
Net change in unrealized appreciation or depreciation
of investments (53,462,599) 6,165,586
------------ ------------
Net change in net assets resulting from operations (61,685,159) 37,136,842
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gain on investments (29,848,815) (33,356,556)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 41,814,164 89,874,940
Reinvested dividend distributions 29,592,075 33,057,094
Cost of shares redeemed (21,728,788) (26,557,877)
------------ ------------
Net increase in net assets from trust share transactions 49,677,451 96,374,157
------------ ------------
Net change in net assets (41,856,523) 100,154,443
NET ASSETS:
Beginning of period 265,837,340 165,682,897
------------ ------------
End of period (including accumulated net investment
loss of $1,073,182 and $710, respectively) $223,980,817 $265,837,340
============ ============
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, 1997
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $60,513,637) $ 65,334,549
Cash (including foreign currency holdings
of $124,934) 162,363
Receivable for investment securities sold 86,027
Dividend receivable 350,163
Unamortized organization costs 34,068
------------
Total assets 65,967,170
------------
LIABILITIES:
Payable for investment securities purchased 34,992
Accrued expenses 47,935
------------
Total liabilities 82,927
------------
NET ASSETS $65,884,243
============
NET ASSETS CONSIST OF:
Trust capital (6,680,580 shares of beneficial
interest outstanding) $ 60,412,229
Undistributed net investment income 25,284
Accumulated net realized gain from sale
of investments and foreign
currency transactions 632,332
Unrealized net appreciation of investments and
on translation of assets and liabilities in
foreign currencies 4,814,398
------------
NET ASSETS $ 65,884,243
============
Net asset value and redemption price per share
($65,884,243 [divided by] 6,680,580 shares of beneficial
interest outstanding) $ 9.86
======
Maximum public offering price per share
($9.86 [divided by] 0.95 for a 5% sales charge) $10.38
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1997
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $67,234) $ 512,720
Interest income 82,517
------------
Total income 595,237
------------
Expenses --
Investment advisory fee 299,219
Transfer agent services 140,377
Custodian fee 46,675
Administrative personnel and services 6,166
Printing and postage 31,263
Trust share registration costs 31,195
Auditing fees 2,455
Legal fees 270
Trustees' fees 2,353
Amortization of organization costs 5,068
Miscellaneous 2,355
------------
Total expenses 567,396
------------
Net investment income 27,841
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investment transactions 667,587
Net realized gain on foreign currency transactions 39,742
------------
Net realized gain on investments and foreign
currency transactions 707,329
------------
Net change in unrealized appreciation of investments 2,050,807
Net change in unrealized depreciation on translation
of assets and liabilities in foreign currencies (7,701)
------------
Net change in unrealized appreciation of investments
and on translation of assets and liabilities in
foreign currencies 2,043,106
------------
Net gain on investments and foreign currency 2,750,435
------------
Net increase in net assets resulting
from operations $ 2,778,276
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/97 Year Ended
(unaudited) 10/31/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 27,841 $ 243,405
Net realized gain on investments
and foreign currency transactions 707,329 204,436
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and liabilities
in foreign currencies 2,043,106 2,906,319
------------ ------------
Net increase in net assets resulting from operations 2,778,276 3,354,160
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (257,593) (37,674)
Net realized gain on investments (247,812) --
------------ ------------
Total distributions (505,405) (37,674)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 15,136,988 39,161,715
Reinvested dividend distributions 442,880 26,205
Cost of shares redeemed (4,905,120) (3,535,813)
------------ ------------
Net increase in net assets from trust share transactions 10,674,748 35,652,107
------------ ------------
Net increase in net assets 12,947,619 38,968,593
NET ASSETS:
Beginning of period 52,936,624 13,968,031
------------ ------------
End of period (including undistributed net investment
income of $25,284 and $255,036, respectively) $ 65,884,243 $ 52,936,624
============ ============
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, 1997
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $684,992,696) $874,386,757
Cash 14,236
Receivable for investment securities sold 1,148,695
Dividend and interest receivable 1,052,459
------------
Total assets 876,602,147
------------
LIABILITIES:
Payable for investment securities purchased 2,953,602
Accrued expenses 206,082
Payable for variation margin on open
futures contracts 285,000
------------
Total liabilities 3,444,684
------------
NET ASSETS $873,157,463
============
NET ASSETS CONSIST OF:
Trust capital (36,348,240 shares of beneficial
interest outstanding) $648,122,056
Undistributed net investment income 672,476
Accumulated net realized gain from sale
of investments 37,512,670
Unrealized net appreciation of investments 186,850,261
------------
NET ASSETS $873,157,463
============
Net asset value and redemption price per share
($873,157,463 [divided by] 36,348,240 shares of beneficial
interest outstanding) $24.02
======
Maximum public offering price per share
($24.02 [divided by] 0.95 for a 5% sales charge) $25.28
=======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1997
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 6,424,948
Interest income 794,137
------------
Total income 7,219,085
------------
Expenses --
Investment advisory fee 2,592,221
Transfer agent services 862,889
Custodian fee 88,422
Administrative personnel and services 85,633
Printing and postage 174,482
Trust share registration costs 32,005
Auditing fees 10,816
Legal fees 3,978
Trustees' fees 6,335
Miscellaneous 10,437
------------
Total expenses before expense reimbursement 3,867,218
Expense reimbursement from investment advisor (138,529)
------------
Net expenses 3,728,689
------------
Net investment income 3,490,396
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 37,735,332
Net realized gain on closed or expired option
contracts written 2,336
------------
Net realized gain on investments 37,737,668
Net change in unrealized appreciation of investments 56,092,886
------------
Net gain on investments 93,830,554
------------
Net increase in net assets resulting
from operations $ 97,320,950
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/97 Year Ended
(unaudited) 10/31/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,490,396 $ 6,672,089
Net realized gain on investments 37,737,668 62,729,282
Net change in unrealized appreciation or depreciation
of investments 56,092,886 45,131,419
------------ ------------
Net increase in net assets resulting from operations 97,320,950 114,532,790
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (3,483,644) (6,494,190)
Net realized gain on investments (58,599,470) (44,162,422)
------------ ------------
Total distributions (62,083,114) (50,656,612)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 51,147,041 84,069,262
Reinvested dividend distributions 60,665,867 49,537,622
Cost of shares redeemed (42,735,399) (74,142,527)
------------ ------------
Net increase in net assets from trust share transactions 69,077,509 59,464,357
------------ ------------
Net increase in net assets 104,315,345 123,340,535
NET ASSETS:
Beginning of period 768,842,118 645,501,583
------------ ------------
End of period (including undistributed net investment
income of $672,476 and $665,724, respectively) $873,157,463 $768,842,118
============ ============
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, 1997
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $752,019,938) $730,757,385
Cash 361,788
Receivable for investment securities sold 12,192,190
Interest and dividend receivable 13,957,438
------------
Total assets 757,268,801
------------
LIABILITIES:
Payable for investment securities purchased 15,617,080
Accrued expenses 163,028
------------
Total liabilities 15,780,108
------------
NET ASSETS $741,488,693
============
NET ASSETS CONSIST OF:
Trust capital (83,722,937 shares of beneficial
interest outstanding) $764,014,471
Undistributed net investment income 1,659,743
Accumulated net realized loss from sale
of investments (2,922,968)
Unrealized net depreciation of investments (21,262,553)
------------
NET ASSETS $741,488,693
============
Net asset value and redemption price per share
($741,488,693 [divided by] 83,722,937 shares of beneficial
interest outstanding) $ 8.86
======
Maximum public offering price per share
($8.86 [divided by] 0.95 for a 5% sales charge) $ 9.33
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1997
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 33,855,314
Dividend income 3,056,013
------------
Total income 36,911,327
------------
Expenses --
Investment advisory fee 2,306,155
Transfer agent services 581,780
Custodian fee 89,738
Administrative personnel and services 75,722
Printing and postage 126,844
Trust share registration costs 38,028
Auditing fees 8,873
Legal fees 3,617
Trustees' fees 6,335
Miscellaneous 9,775
------------
Total expenses before expense reimbursement 3,246,867
Expense reimbursement from investment advisor (122,201)
------------
Net expenses 3,124,666
------------
Net investment income 33,786,661
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investment transactions (1,988,972)
Net change in unrealized depreciation of investments (23,418,572)
------------
Net loss on investments (25,407,544)
------------
Net increase in net assets resulting
from operations $ 8,379,117
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/97 Year Ended
(unaudited) 10/31/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 33,786,661 $ 59,976,148
Net realized gain (loss) on investment transactions (1,988,972) 16,240,947
Net change in unrealized appreciation or depreciation
of investments (23,418,572) (5,314,640)
------------ ------------
Net increase in net assets resulting from operations 8,379,117 70,902,455
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (35,439,652) (58,709,581)
Net realized gain on investments (2,451,356) --
------------ ------------
Total distributions (37,891,008) (58,709,581)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 91,789,243 145,880,542
Reinvested dividend distributions 26,056,457 40,091,272
Cost of shares redeemed (49,992,052) (89,354,662)
------------ ------------
Net increase in net assets from trust share transactions 67,853,648 96,617,152
------------ ------------
Net increase in net assets 38,341,757 108,810,026
NET ASSETS:
Beginning of period 703,146,936 594,336,910
------------ ------------
End of period (including undistributed net investment
income of $1,659,743 and $3,312,734, respectively $741,488,693 $703,146,936
============ ============
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, 1997
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $884,231,934) $874,854,999
Cash 39,077
Receivable for investment securities sold 90,551,085
Interest and dividend receivable 11,724,897
------------
Total assets 977,170,058
------------
LIABILITIES:
Payable for investment securities purchased 183,977,372
Accrued expenses 154,180
Payable for variation margin on open
futures contracts 23,327
------------
Total liabilities 184,154,879
------------
NET ASSETS $793,015,179
============
NET ASSETS CONSIST OF:
Trust capital (95,323,481 shares of beneficial
interest outstanding) $853,394,082
Undistributed net investment income 814,451
Accumulated net realized loss from sale
of investments (51,724,888)
Unrealized net depreciation of investments (9,468,466)
------------
NET ASSETS $793,015,179
============
Net asset value and redemption price per share
($793,015,179 [divided by] 95,323,481 shares of beneficial
interest outstanding) $ 8.32
======
Maximum public offering price per share
($8.32 [divided by] 0.95 for a 5% sales charge) $ 8.76
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1997
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 29,793,389
Dividend income 592,660
------------
Total income 30,386,049
------------
Expenses --
Investment advisory fee 2,451,288
Transfer agent services 653,054
Custodian fee 95,671
Administrative personnel and services 86,732
Printing and postage 150,369
Trust share registration costs 20,203
Auditing fees 11,944
Legal fees 4,618
Trustees' fees 6,335
Miscellaneous 12,679
------------
Total expenses before expense reimbursement 3,492,893
Expense reimbursement from investment advisor (135,240)
------------
Net expenses 3,357,653
------------
Net investment income 27,028,396
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investment transactions (2,674,938)
Net realized loss on closed or expired option
contracts written (34,033)
Net realized gain on closed futures contracts 117,481
------------
Net realized loss on investments (2,591,490)
Net change in unrealized depreciation of investments (14,170,798)
------------
Net loss on investments (16,762,288)
------------
Net increase in net assets resulting
from operations $ 10,266,108
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/97 Year Ended
(unaudited) 10/31/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 27,028,396 $ 59,871,426
Net realized loss on investment transactions (2,591,490) (8,854,736)
Net change in unrealized appreciation or depreciation
of investments (14,170,798) (11,610,324)
------------ ------------
Net increase in net assets resulting from operations 10,266,108 39,406,366
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (27,724,598) (63,354,789)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 18,272,149 55,392,852
Reinvested dividend distributions 20,992,384 47,792,081
Cost of shares redeemed (99,766,902) (150,402,163)
------------ ------------
Net change in net assets from trust share transactions (60,502,369) (47,217,230)
------------ ------------
Net change in net assets (77,960,859) (71,165,653)
NET ASSETS:
Beginning of period 870,976,038 942,141,691
------------ ------------
End of period (including undistributed net investment
income of $814,451 and $1,510,653, respectively) $793,015,179 $870,976,038
============ ============
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, 1997
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value
(cost, $542,234,537) $577,076,784
Cash 348,762
Receivable for investment securities sold 4,770,930
Interest receivable 9,498,742
------------
Total assets 591,695,218
------------
LIABILITIES:
Payable for investment securities purchased 4,915,364
Accrued expenses 59,001
Payable for variation margin on open
futures contracts 51,563
------------
Total liabilities 5,025,928
------------
NET ASSETS $586,669,290
============
NET ASSETS CONSIST OF:
Trust capital (68,862,116 shares of beneficial
interest outstanding) $557,646,031
Undistributed net investment income 1,565,480
Accumulated net realized loss from sale
of investments (7,281,343)
Unrealized net appreciation of investments 34,739,122
------------
NET ASSETS $586,669,290
============
Net asset value and redemption price per share
($586,669,290 [divided by] 68,862,116 shares of beneficial
interest outstanding) $ 8.52
======
Maximum public offering price per share
($8.52 [divided by] 0.95 for a % sales charge) $ 8.97
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1997
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 17,611,088
------------
Expenses --
Investment advisory fee 1,708,251
Transfer agent services 248,751
Custodian fee 75,602
Administrative personnel and services 62,185
Printing and postage 64,783
Trust share registration costs 19,781
Auditing fees 10,114
Legal fees 3,169
Trustees' fees 6,335
Miscellaneous 9,539
------------
Total expenses before expense reimbursement 2,208,510
Expense reimbursement from investment advisor (98,110)
------------
Net expenses 2,110,400
------------
Net investment income 15,500,688
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 713,780
Net realized loss on closed futures contracts (6,020)
------------
Net realized gain on investments 707,760
Net change in unrealized appreciation of investments (5,751,464)
------------
Net loss on investments (5,043,704)
------------
Net increase in net assets resulting
from operations $ 10,456,984
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/97 Year Ended
(unaudited) 10/31/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 15,500,688 $ 31,876,162
Net realized gain on investment transactions 707,760 102,442
Net change in unrealized appreciation or depreciation
of investments (5,751,464) (358,129)
------------ ------------
Net increase in net assets resulting from operations 10,456,984 31,620,475
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (15,739,639) (30,660,042)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net proceeds from sale of shares 16,223,661 41,275,499
Reinvested dividend distributions 12,089,740 23,551,470
Cost of shares redeemed (45,833,466) (85,013,361)
------------ ------------
Net change in net assets from trust share transactions (17,520,065) (20,186,392)
------------ ------------
Net change in net assets (22,802,720) (19,225,959)
NET ASSETS:
Beginning of period 609,472,010 628,697,969
------------ ------------
End of period (including undistributed net investment
income of $1,565,480 and $1,804,431, respectively) $586,669,290 $609,472,010
============ ============
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, 1997
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at amortized
cost and value $435,245,984
Cash 3,317,818
Interest receivable 919,860
------------
Total assets 439,483,662
------------
LIABILITIES:
Dividends payable 41,213
Accrued expenses 164,319
------------
Total liabilities 205,532
------------
NET ASSETS $439,278,130
============
NET ASSETS CONSIST OF:
Trust capital (439,278,130 shares of beneficial
interest outstanding) $439,278,130
============
Net asset value, offering price and redemption
price per share ($439,278,130 [divided by] 439,278,130
shares of beneficial interest outstanding) $ 1.00
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1997
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 11,784,925
------------
Expenses --
Investment advisory fee 1,070,892
Transfer agent services 670,720
Custodian fee 179,583
Administrative personnel and services 44,597
Printing and postage 213,120
Trust share registration costs 44,302
Auditing fees 5,686
Legal fees 2,142
Trustees' fees 3,576
Miscellaneous 6,425
------------
Total expenses before expense reimbursement 2,241,043
Expense reimbursement from investment advisor (206,332)
------------
Net expenses 2,034,711
------------
Net investment income $ 9,750,214
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/97 Year Ended
(unaudited) 10/31/96
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 9,750,214 $ 17,421,840
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income (9,750,214) (17,421,840)
------------ ------------
TRUST SHARE TRANSACTIONS:
Proceeds from sale of shares 376,273,010 692,236,105
Reinvested dividend distributions 9,541,233 17,063,037
Cost of shares redeemed (364,144,702) (632,774,820)
------------ ------------
Net increase in net assets from trust share transactions 21,669,541 76,524,322
------------ ------------
Net increase in net assets 21,669,541 76,524,322
NET ASSETS:
Beginning of period 417,608,589 341,084,267
------------ ------------
End of period $439,278,130 $417,608,589
============ ============
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 (a)
Six Months For the period
Ended Year Year Year January 8, 1993
LUTHERAN BROTHERHOOD 4/30/97 Ended Ended Ended (effective date) to
OPPORTUNITY GROWTH FUND (a) (unaudited) 10/31/96 10/31/95 10/31/94 October 31, 1993
------------ -------- -------- -------- --------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $13.62 $13.83 $10.76 $10.66 $8.43
-------- -------- -------- -------- --------
Income From Investment Operations:
Net investment loss (0.05) (0.11) (0.09) (0.06) (0.07)
Net realized and unrealized gain
(loss) on investments (b) (2.66) 2.63 3.16 0.16 2.30
-------- -------- -------- -------- --------
Total from investment operations (2.71) 2.52 3.07 0.10 2.23
-------- -------- -------- -------- --------
Less Distributions:
Distributions from net realized
gain on investments (1.49) (2.73) -- -- --
-------- -------- -------- -------- --------
Net asset value, end of period $9.42 $13.62 $13.83 $10.76 $10.66
======== ======== ======== ======== ========
Total investment return at
net asset value (c) -21.91% 21.27% 28.53% 0.94% 26.45%
Net assets, end of period ($ millions) $224.0 $265.8 $165.7 $99.6 $40.8
Ratio of expenses to average
net assets 1.32%(d) 1.28% 1.43% 1.66% 2.33%(d)
Ratio of net investment income to
average net assets -0.84%(d) -0.92% -0.88% -0.83% -1.76%(d)
Portfolio turnover rate 43% 176% 213% 64% 97%
Average commission rate (e) $0.0487 $0.0488 n/a n/a n/a
<CAPTION>
Six Months For the period
Ended Year September 5, 1995
LUTHERAN BROTHERHOOD 4/30/97 Ended (effective date) to
WORLD GROWTH FUND (a) (unaudited) 10/31/96 October 31, 1995
------------ ------------ --------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.48 $8.44 $8.50
-------- -------- --------
Income From Investment Operations:
Net investment income -- 0.04 0.01
Net realized and unrealized gain
(loss) on investments (b) 0.46 1.02 (0.07)
-------- -------- --------
Total from investment operations 0.46 1.06 (0.06)
-------- -------- --------
Less Distributions:
Dividends from net investment income (0.04) (0.02) --
Distribution from net realized gain on investments (0.04) -- --
-------- -------- --------
Total distributions (0.08) (0.02) --
-------- -------- --------
Net asset value, end of period $9.86 $9.48 $8.44
======== ======== ========
Total investment return at
net asset value (c) 4.94% 12.53% -0.71%
Net assets, end of period ($ millions) $65.9 $52.9 $14.0
Ratio of expenses to average
net assets 1.91%(d) 1.95%(f) 1.95%(d,f)
Ratio of net investment income to
average net assets 0.09%(d) 0.67%(f) 1.60%(d,f)
Portfolio turnover rate 9% 11% 0%
Average commission rate (e) $0.0256 $0.0216 n/a
See accompanying notes to the financial highlights.
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended Year Year Year Nine Months Year
4/30/97 Ended Ended Ended Ended Ended
LUTHERAN BROTHERHOOD FUND (a) (unaudited) 10/31/96 10/31/95 10/31/94 10/31/93 1/31/93
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.07 $21.19 $17.67 $18.85 $18.53 $19.14
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.10 0.20 0.22 0.19 0.29 0.27
Net realized and unrealized gain
(loss) on investments (b) 2.71 3.33 3.52 (0.20) 1.04 1.42
-------- -------- -------- -------- -------- --------
Total from investment operations 2.81 3.53 3.74 (0.01) 1.33 1.69
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.10) (0.20) (0.22) (0.20) (0.28) (0.27)
Distributions from net realized
gain on investments (1.76) (1.45) -- (0.97) (0.73) (2.03)
-------- -------- -------- -------- -------- --------
Total distributions (1.86) (1.65) (0.22) (1.17) (1.01) (2.30)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $24.02 $23.07 $21.19 $17.67 $18.85 $18.53
======== ======== ======== ======== ======== ========
Total investment return at
net asset value (c) 12.64% 17.61% 21.34% -0.11% 7.41% 9.47%
Net assets, end of period ($ millions) $873.2 $768.8 $645.5 $548.6 $527.3 $460.9
Ratio of expenses to average
net assets 0.91%(d,g) 0.97% 1.02% 1.04% 1.01%(d) 0.97%
Ratio of net investment income to
average net assets 0.85%(d,g) 0.94% 1.15% 1.10% 2.15%(d) 1.44%
Portfolio turnover rate 26% 91% 127% 234% 237% 249%
Average Commission Rate (e) $0.0598 $0.0664 n/a n/a n/a n/a
<CAPTION>
Six Months
Ended Year Year Year Nine Months Year
LUTHERAN BROTHERHOOD 4/30/97 Ended Ended Ended Ended Ended
HIGH YIELD FUND (a) (unaudited) 10/31/96 10/31/95 10/31/94 10/31/93 1/31/93
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.21 $9.03 $8.86 $9.73 $9.12 $8.45
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.42 0.84 0.83 0.83 0.61 0.88
Net realized and unrealized gain
(loss) on investments (b) (0.30) 0.17 0.24 (0.86) 0.60 0.68
-------- -------- -------- -------- -------- --------
Total from investment operations 0.12 1.01 1.07 (0.03) 1.21 1.56
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.44) (0.83) (0.85) (0.82) (0.60) (0.89)
Distributions from net realized
gain on investments (0.03) -- (0.05) (0.02) -- --
-------- -------- -------- -------- -------- --------
Total distributions (0.47) (0.83) (0.90) (0.84) (0.60) (0.89)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $8.86 $9.21 $9.03 $8.86 $9.73 $9.12
======== ======== ======== ======== ======== ========
Total investment return at
net asset value (c) 1.31% 11.64% 12.93% -0.47% 13.72% 19.51%
Net assets, end of period ($ millions) $741.5 $703.1 $594.3 $499.6 $440.3 $330.2
Ratio of expenses to average
net assets 0.86%(d,g) 0.91% 0.93% 0.95% 0.94%(d) 0.99%
Ratio of net investment income to
average net assets 9.32%(d,g) 9.23% 9.53% 8.92% 8.72%(d) 10.04%
Portfolio turnover rate 59% 104% 71% 50% 66% 86%
See accompanying notes to the financial highlights.
<CAPTION>
Six Months
Ended Year Year Year Nine months Year
LUTHERAN BROTHERHOOD 4/30/97 Ended Ended Ended Ended Ended
INCOME FUND (a) (unaudited) 10/31/96 10/31/95 10/31/94 10/31/93 1/31/93
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.50 $8.72 $8.01 $9.43 $9.10 $8.79
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.27 0.57 0.59 0.58 0.47 0.66
Net realized and unrealized gain
(loss) on investments (b) (0.17) (0.19) 0.69 (1.19) 0.33 0.31
-------- -------- -------- -------- -------- --------
Total from investment operations 0.10 0.38 1.28 (0.61) 0.80 0.97
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.28) (0.60) (0.57) (0.56) (0.47) (0.66)
Distributions from net realized
gain on investments -- -- -- (0.25) -- --
-------- -------- -------- -------- -------- --------
Total distributions (0.28) (0.60) (0.57) (0.81) (0.47) (0.66)
-------- -------- -------- -------- -------- --------
Net assets, end of period $8.32 $8.50 $8.72 $8.01 $9.43 $9.10
======== ======== ======== ======== ======== ========
Total return investment return
at net asset value (c) 1.20% 4.56% 16.53% -6.81% 8.97% 11.50%
Net assets, end of period ($millions) $793.0 $871.0 $942.1 $907.2 $1,042.2 $944.6
Ratio of expenses to average
net assets 0.81%(d,g) 0.83% 0.83% 0.82% 0.80%(d,h) 0.90%
Ratio of net investment income to
average net assets 6.50%(d,g) 6.61% 7.01% 6.77% 6.87%(d,h) 7.40%
Portfolio turnover rate 53% 142% 131% 155% 84% 104%
<CAPTION>
Six Months
Ended Year Year Year Nine months Year
LUTHERAN BROTHERHOOD 4/30/97 Ended Ended Ended Ended Ended
MUNICIPAL BOND FUND (a) (unaudited) 10/31/96 10/31/95 10/31/94 10/31/93 1/31/93
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.60 $8.58 $7.88 $9.00 $8.52 $8.45
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.22 0.44 0.45 0.46 0.37 0.53
Net realized and unrealized gain
(loss) on investments (b) (0.07) 0.01 0.70 (0.96) 0.51 0.28
-------- -------- -------- -------- -------- --------
Total from investment operations 0.15 0.45 1.15 (0.50) 0.88 0.81
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.23) (0.43) (0.45) (0.46) (0.37) (0.52)
Distributions from net realized
gain on investments -- -- -- (0.16) (0.03) (0.22)
-------- -------- -------- -------- -------- --------
Total distributions (0.23) (0.43) (0.45) (0.62) (0.40) (0.74)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $8.52 $8.60 $8.58 $7.88 $9.00 $8.52
======== ======== ======== ======== ======== ========
Total investment return
at net asset value (c) 1.71% 5.33% 14.97% -5.93% 10.73% 9.96%
Net assets, end of period ($ millions) $586.7 $609.5 $628.7 $595.2 $629.7 $532.6
Ratio of expenses to average
net assets 0.71%(d,g) 0.74% 0.74% 0.75% 0.74%(d,i) 0.80%
Ratio of net investment income to
average net assets 5.20%(d,g) 5.14% 5.43% 5.44% 5.69%(d,i) 6.22%
Portfolio turnover rate 8% 33% 36% 38% 46% 77%
See accompanying notes to the financial highlights.
<CAPTION>
Six Months
Ended Year Year Year Nine months Year
LUTHERAN BROTHERHOOD 4/30/97 Ended Ended Ended Ended Ended
MONEY MARKET FUND (a) (unaudited) 10/31/96 10/31/95 10/31/94 10/31/93 1/31/93
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- --------
Net investment income from investment operations 0.02 0.05 0.05 0.03 0.02 0.03
Less: Dividends from net investment income (0.02) (0.05) (0.05) (0.03) (0.02) (0.03)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ========
Total investment return
at net asset value (c) 2.28% 4.63% 4.95% 2.89% 1.63% 2.77%
Net assets, end of period ($ millions) $439.3 $417.6 $341.1 $276.9 $275.1 $317.0
Ratio of expenses to average
net assets 0.95%(d,j) 1.01%(j) 1.10%(j) 1.10%(j) 1.10%(d,j) 1.10%(j)
Ratio of net investment income to
average net assets 4.55%(d,j) 4.53%(j) 4.85%(j) 2.85%(j) 2.16%(d,j) 2.76%(j)
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the
change in aggregate gains and losses of portfolio securities due to the
timing of sales and redemption of fund shares.
(c) Total return is based on the change in net asset value during the
period and assumes reinvestment of all distributions.
(d) Computed on an annualized basis.
(e) 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 basis of
securities purchased, or reduce the proceeds of securities sold.
(f) Effective September 5, 1995, Lutheran Brotherhood Research Corp.
(LBRC) has voluntarily undertaken to limit the LB 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 2.13% and 2.89% and
the ratio of net investment income to average net assets would have been
0.49% and 0.66% respectively, for the year ended October 31, 1996 and
for the period from September 5, 1995 to October 31, 1995.
(g) Effective January 1, 1997, LBRC has voluntarily agreed to waive 5
basis points (0.05%) from the advisory fees payable by the LB Fund, LB
High Yield Fund, LB Income Fund and the LB Municipal Bond Fund. Had LBRC
not undertaken such action, the ratio of expenses to average net assets
would have been 0.94%, 0.89%, 0.84% and 0.74% respectively and the ratio
of net investment income to average net assets would have been 0.82%,
9.29%, 6.47% and 5.17% respectively.
(h) During the nine month period ended October 31, 1993, 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%.
(i) During the nine month period ended October 31, 1993, LBRC undertook
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%.
(j) Effective February 1, 1992 through March 31, 1996, LBRC had
voluntarily undertaken to limit the LB 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
1.05 %, 1.07%, 1.18% ,1.36%, 1.44% and 1.23% and the ratio of net
investment income to average net assets would have been 4.45%, 4.47%,
4.77%, 2.59%, 1.82% and 2.63%, respectively, the six months ended April
30, 1997, the years ended October 31, 1996, 1995 and 1994, the nine
month period ended October 31, 1993 and the year ended January 31, 1993.
The accompanying notes are an integral part of the financial statements.
</TABLE>
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
Notes to Financial Statements
April 30, 1997
(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.
(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 over-the-counter and
listed securities for which no price is readily available are valued at
prices within the range of the current bid and asked prices considered
best to represent the value in the circumstances, based on quotes that
are obtained from an independent pricing service approved by the Board
of Trustees. The pricing service, in determining values of securities,
takes into consideration such factors as current quotations by
broker/dealers, coupon, maturity, quality, type of issue, trading
characteristics, and other yield and risk factors it deems relevant in
determining valuations. Securities which cannot be valued by the
approved pricing service are valued using valuations obtained from
dealers that make markets in the securities. Exchange listed options and
futures contracts are valued at the last quoted sales price. For all
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.
Foreign Currency Translations
The accounting records of the Fund are maintained in U.S. dollars.
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.
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, 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 foreign currency contracts to protect against adverse foreign
exchange rate fluctuation.
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sale for a written call option or the cost of
a security for purchased put and call options is adjusted by the amount
of premium received or paid.
Upon entering into a futures contract, the Fund is required to deposit
initial margin, either cash or securities in an amount equal to a
certain percentage of the contract value. Subsequent variation margin
payments are made or received by the Fund each day. The variation margin
payments are equal to the daily changes in the contract value and are
recorded as unrealized gains and losses. The Fund realizes a gain or
loss when the contract is closed or expires.
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.
Federal Income Taxes
It is the policy of the 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.
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 $753,475 from such fees for the six
month period ended April 30, 1997.
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.
Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of distributions
made during the year from net investment income or net realized gains
may differ from their ultimate characterization for federal income tax
purposes. Also, due to timing of 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
Investment transactions are accounted for on the date the investments
are purchased or sold. Realized gains and losses on investments and
unrealized appreciation and depreciation are determined on an identified
cost basis, which is the same basis used for federal income tax
purposes.
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. Fund operating expenses are accrued daily.
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
(3) 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 Lutheran Brotherhood 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.
Effective January 1, 1997, LBRC voluntarily agreed to waive 5 basis points
(0.05%) on an annual basis from the advisory fees payable by the
LB Fund, LB High Yield Fund, LB Income Fund and LB Municipal Bond Fund.
Expense reimbursements amounted to $138,529, $122,201 $135,240 and
$98,110 respectively, for the aforementioned Funds through April 30,
1997. The Money Market Fund advisory fees totaled $1,070,892 of which
$206,332 were voluntarily waived by LBRC to limit the Money Market
Fund's expense ratio to 0.95% of its 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, 1997, Lutheran Brotherhood Securities
Corp. (LBSC), the Trust's distributor, received sales charges paid by
purchasers of Fund shares of: Opportunity Growth Fund, $1,070,600; World
Growth Fund, $340,583; LB Fund, $1,314,926; High Yield Fund, $1,918,098;
Income Fund, $467,053; and Municipal Bond Fund, $352,897. 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,
1997, a new agreement went into effect whereby LBSC will receive an
annual fee equal to 0.02% of average daily net assets. LBSC received the
following compensation for the six months ended April 30, 1997:
Opportunity Growth Fund, $26,694; World Growth Fund, $6,166; LB Fund,
$85,633; High Yield Fund, $75,722; Income Fund, $86,732; Municipal Bond
Fund, $62,185; and Money Market Fund, $44,597.
In addition, LBSC provides the Funds with transfer agent services
pursuant to an agreement and received the following compensation:
Opportunity Growth Fund, $552,002; World Growth Fund, $140,377; LB Fund,
$862,889; High Yield Fund, $581,780; Income Fund, $653,054; Municipal
Bond Fund, $248,751; and Money Market Fund, $670,720.
The Funds have adopted a trustee fee deferral plan which allows the
Trustees to defer the receipt of all or a portion of their trustee fees.
The deferred fees remain in the fund and are invested within the
Lutheran Brotherhood Family of Funds until distribution in accordance
with the plan.
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 Fund bears
the risk 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, 1997.
(5) DISTRIBUTIONS FROM CAPITAL GAINS
During the six months ended April 30, 1997, distributions from net
realized capital gains of $29,848,815, $247,812, $58,599,470 and
$2,451,356, were paid by the LB Opportunity Growth Fund, LB World Growth
Fund, LB Fund and the LB High Yield Fund, respectively. These
distributions related to net capital gains realized during the prior
fiscal year ended October 31, 1996.
(6) CAPITAL LOSS CARRYOVER
At October 31, 1996, the LB Income Fund and the LB Municipal Bond Fund
had accumulated net realized capital loss carryovers expiring as
follows:
Income Municipal Bond
Year Fund Fund
-------- ------------ ------------
2002 $40,056,911 $6,216,650
2003 -- 134,719
2004 8,472,280 --
------------ ------------
Total $48,529,191 $6,351,369
============ ============
To the extent these Funds realize future net capital gains, taxable
distributions will be reduced by any unused capital loss carryovers.
Temporary timing differences of $438,772, $74,997, $224,998, $933,996,
$604,205, and $1,637,733 existed between net realized capital gains or
losses for financial statement and tax purposes as of October 31, 1996
for the Opportunity Growth, World Growth, LB Fund, LB High Yield Fund,
LB Income and Municipal Bond Funds, respectively. These differences are
due primarily to deferral of capital losses for tax purposes.
(7) INVESTMENT TRANSACTIONS
Purchases and Sales of Investment Securities
For the six months ended April 30, 1997, 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 $113,314 $103,576
World Growth Fund 14,747 4,645
LB Fund 210,481 218,340
High Yield 441,296 408,099
Income 301,106 298,062
Municipal Bond 49,238 72,862
Purchases and sales of U.S. Government securities were:
$thousands
----------------------------------
Fund Purchases Sales
- ------------------------------------------------------------------------
LB Fund -- $ 1,828
Income $ 125,594 287,262
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. At April 30, 1997, the restricted
securities held by the High Yield Fund had no market value.
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.
Open Option Contracts
The number of contracts and premium amounts associated with call option
contracts written during the six months ended April 30, 1997 were as
follows:
LB Fund
--------------------------------------
Number of Premium
Contracts Amount
----------------- -----------------
Balance at October 31, 1996 -- --
Opened 520 $ 81,896
Closed (520) (81,896)
Expired -- --
Exercised -- --
----------------- -----------------
Balance at April 30, 1997 -- $ --
================= =================
Income Fund
--------------------------------------
Number of Premium
Contracts Amount
----------------- ------------------
Balance at October 31, 1996 400 $ 142,648
Opened 1,100 313,026
Closed (800) (233,695)
Expired (700) (221,979)
Exercised -- --
----------------- -----------------
Balance at April 30, 1997 -- $ --
================= =================
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.
<TABLE>
<CAPTION>
(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:
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, 1995 11,975,639 1,654,196 30,463,515 65,816,585 108,068,307 73,260,821 341,084,267
Shares sold 6,711,097 4,309,447 3,864,306 15,831,978 6,482,945 4,807,171 692,236,105
Shares issued on reinvestment
of dividends and distributions 2,801,319 2,995 2,392,606 4,373,177 5,621,887 2,755,029 17,063,037
Shares redeemed (1,973,395) (381,546) (3,398,596) (9,697,248) (17,687,759) (9,927,341) (632,774,820)
------------ ---------- ---------- ---------- ----------- ---------- ------------
Shares outstanding at
October 31, 1996 19,514,660 5,585,092 33,321,831 76,324,492 102,485,380 70,895,680 417,608,589
Shares sold 3,605,168 1,551,996 2,178,914 10,006,743 2,164,091 1,884,092 376,273,010
Shares issued on reinvestment
of dividends and distributions 2,555,428 45,753 2,663,957 2,856,301 2,493,064 1,408,433 9,541,233
Shares redeemed (1,893,444) (502,261) (1,816,462) (5,464,599) (11,819,054) (5,326,089) (364,144,702)
------------ ---------- ---------- ---------- ------------ ------------ -------------
Shares outstanding at
April 30, 1997 23,781,812 6,680,580 36,348,240 83,722,937 95,323,481 68,862,116 439,278,130
============ ========= ========== ========== ========== ========== =============
</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 BROTHERHOOD 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]
