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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, 1998
[LUTHERAN BROTHERHOOD LOGO OMITTED]
LUTHERAN
BROTHERHOOD
SECURITIES CORP.
[GRAPHIC OMITTED: PHOTO OF ROLF F. BJELLAND]
Our Message to You
April 30, 1998
Dear Shareholder,
Enclosed is the Lutheran Brotherhood Family of Funds Semiannual
Report, which covers the six months ended April 30, 1998. The report
includes a summary of the economic and market conditions that affected
your investments during this time, as well as comments from the
managers of individual fund portfolios describing the strategies they
used in this environment. At the end of the report, you'll find a
financial statement for each fund, as well as a list of each fund's
investment holdings.
The past six months have brought continued rewards to investors.
Nourished by a nearly perfect U.S. economic and market climate, both
stocks and bonds thrived. Returns for stocks were especially
impressive, after several years of above-average gains. Taken
together, the Standard & Poor's 500 Index had a total cumulative
return of nearly 130% for the 36 months ended April 30, 1998. Not
since the 1950s have stocks had a better three-year run. Although
returns for bonds were closer to historic norms during the period,
bond prices became strong enough to drive the yield for 30-year U.S.
Treasury bonds to its lowest level since the bonds were first
introduced in 1977.
I'm often asked what investors should do now that the markets are so
high. With stocks at record valuations, and vulnerable to periodic
weakness, many shareholders wonder whether they should continue
putting money into stocks or seek refuge in bonds and cash. Clearly,
stock investors have been well compensated for staying invested
through the market volatility of recent years. This has also been the
case historically. Going forward, I believe stock investors can also
reap healthy returns over the long term. Whether you, personally,
should invest more in stocks depends largely on the amount of time
your money will remain invested.
If your time frame is short, and near-term stock fluctuations make you
nervous, consult your Lutheran Brotherhood Securities Corp. (LBSC)
registered representative to determine an investment allocation that
suits your needs. Even if you have a longer time frame, this
discussion will be useful, since tremendous growth in the securities
markets in recent years may have significantly altered the asset
allocation of your investment portfolio.
As noted in our last report, Lutheran Brotherhood has developed a
program called AssetMatchSM that you and your LBSC registered
representative can use to find a mix of mutual funds appropriate for
your time frame, risk tolerance, and financial goals. For more
information about AssetMatch, this report, and any of the Lutheran
Brotherhood Family of Funds, contact your LBSC registered
representative, or call us toll free at 1-800-328-4552.
Sincerely,
/S/ROLF F. BJELLAND
Rolf F. Bjelland
Chairman and President
Lutheran Brotherhood Family of Funds
Economic and Market Overview April 30, 1998
Stocks and bonds continued to flourish in recent months, fed by a
strong U.S. economy with low inflation and interest rates. Although
investors were unsure whether such conditions would continue, causing
short-term market fluctuations, the Standard and Poor's 500 Index had
a total return of 22.49% for the six months ended April 30, 1998, and
the Lehman Brothers Aggregate Bond Index returned 3.59%.
Nearly As Good as It Gets
During the period, the gross domestic product (GDP), which measures
the total value of U.S. goods and services, continued to strengthen.
After growing at an annualized rate of 3.1% in the third quarter of
1997, GDP improved at a rate of 3.7% in the fourth quarter and a rate
of 4.8% in the first quarter of 1998. This growth brought unemployment
to its lowest level in several decades, which helped boost consumer
confidence and spending. Meanwhile, the annual rate of inflation fell
from 2.1% to 1.4% during the period, with further gains in
productivity and healthy competition in product pricing.
Overseas, the currency problems that surfaced early in the period in
Asia spawned a full-blown economic crisis there. Although this raised
concerns about future U.S. trade and growth, it tended to calm fears
of higher inflation. With the possibility of slower growth, the
Federal Reserve left interest rates unchanged. At the same time, the
troubles in Asia sparked an investor "flight to quality" that boosted
demand for U.S. bonds. This, plus the first federal budget surplus
since 1969, helped drive the yield for 30-year U.S. Treasury bonds
down to 5.69%--an all-time low.
Although U.S. corporate earnings weakened slightly with reduced Asian
trade, they continued to exceed expectations--due in part to lower
prices for products imported from Asia. Stock investors were further
encouraged by interventions of the International Monetary Fund (IMF),
which lent stability to some economies and markets in Asia. With low
bond yields, demand for stocks remained strong. Meanwhile, corporate
consolidations and stock buyback programs continued to shrink the
supply of stock shares. Although stocks encountered a brief correction
in January, they quickly rebounded to new highs. Gains for stocks
overseas were also strong, with a healthy advance in Europe and
rebounds in many parts of Asia. For the six-month period, the Morgan
Stanley Capital International Europe, Australasia, Far East (EAFE)
Index had a total return of 15.59%.
Sector Performance
As stocks rallied, shares of large companies continued to outpace
those of small- and medium-sized companies. Because investors were
uncertain where the economy would head, they remained loyal to large
firms with greater earnings consistency. Even so, returns for small-
cap stocks were quite strong by historical measures-with the Russell
2000 Index earning a total return of 11.87%. Mid-cap issues were also
strong, with the S&P 400 Mid-Cap Index returning 19.17% during the
period.
Treasury bonds outperformed corporate bonds in this environment.
Demand for corporates softened on concerns about future economic
growth, as low interest rates spurred large supplies of new issues. In
the U.S. Treasury market, however, there was increased demand from
foreign investors and the prospect of smaller supplies resulting from
the federal budget surplus. The strong supply of municipal bonds
somewhat outpaced demand, causing municipals to underperform U.S.
Treasuries, too.
New Opportunities
Now that the U.S. economy has reached a near-perfect balance of
growth, employment and inflation, where do we go from here? Because
stock and bond prices reflect the good news, what happens if storm
clouds appear?
One of those clouds may be a worsening of Asia's economic problems.
Although U.S. exports to the Far East account for only 5% of domestic
goods and services, even small damage to U.S. earnings could weaken
many stock prices here, since current prices reflect an expectation of
continued strong earnings growth. Another cloud may be the tight U.S.
labor market, which could put enough pressure on wages and inflation
to force a rate hike by the Federal Reserve. The Fed has also signaled
it may boost rates if rising stock prices overstimulate the economy.
In either case, slower economic growth seems likely in coming months.
While this may cause a near-term correction in stock prices, it could
help prolong the current expansion and lay the groundwork for further
stock gains. And, because slower growth would also help keep inflation
low, it could also signal additional gains for bonds.
LB Opportunity Growth Fund
[GRAPHIC OMITTED: PHOTO OF ROLF F. BJELLAND]
In early 1998, management of LB Opportunity Growth Fund assets was
temporarily placed with a committee of experienced Lutheran
Brotherhood equity managers under the general direction of Rolf
Bjelland, Chairman and President of the Lutheran Brotherhood Family of
Funds. In early May 1998, Fund shareholders overwhelmingly approved a
temporary agreement between Lutheran Brotherhood and T. Rowe Price
Associates (TRP) of Baltimore, Md., making TRP the LB Opportunity
Growth Fund's investment subadvisor. In this role, TRP will be
responsible for the day-to-day management of the Fund's assets under
the supervision of Lutheran Brotherhood Research Corp., the Fund's
investment adviser.
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Investment Objective:
To seek long-term growth of
capital by investing in small-
company stocks.
- -----------------------------
Fund Facts
Inception Date: 1/8/93
Shareholder
Accounts: 59,636
Total Assets
(in millions): $296.3
In the last six months economic uncertainty caused investors to favor
stocks of large companies with reliable earnings and strong liquidity.
Although stock returns for small companies were strong compared to
their historic norms, they lagged returns for large and medium-sized
firms during the period. This was especially true for stocks with
market capitalizations under $250 million, where the LB Opportunity
Growth Fund has many investments. Market capitalization categorizes
companies by size, and is calculated by multiplying a company's number
of outstanding shares of stock by the stock's price per share.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Compostion (% of Portfolio)
Short-term Securities 4.3%
Common Stocks 56.3%
The Fund's portfolio composition and top holdings represent all share
classes.
With portfolio restructuring still underway, including moves into
stocks with larger market capitalizations, the Fund underperformed for
the period. During the six months ended April 30, 1998, the Fund had a
total return (based on NAV) of -1.20%. That compares to an average
return of 11.08% for small-company growth funds tracked by Lipper
Analytical Services and a return of 11.87% for the Russell 2000 Index.
Nevertheless, the Fund's one-year return (based on NAV) was 36.03%,
significantly stronger than the six-month return.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
Top 10 Holdings % of Portfolio
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Coach USA, Inc. 1.5%
F.Y.I. Incorporated 0.9%
Atrix Laboratories, Inc. 0.9%
Lithia Motors, Inc. 0.9%
Silverleaf Resorts, Inc. 0.8%
Complete Management, Inc. 0.7%
US Office Products Company 0.7%
Metamor Worldwide, Inc. 0.7%
PMT Services, Inc. 0.6%
Macromedia, Inc. 0.6%
These holdings represent 8.3% of the Fund's total investment
portfolio.
Adding Stability
When the period began, the LB Opportunity Growth Fund had a weighted
average market capitalization of about $673 million. In the six months
that followed, we began selling stocks with market capitalizations of
$200 million or less and bought stocks with market capitalizations of
$500 million or more. By the end of the period this gave the Fund a
weighted average market capitalization of about $1.5 billion. Such a
strategy is the typical evolution for a small company fund with
increasing assets. We believe the strategy should help reduce
volatility in the Fund's returns over time with little loss of long-
term growth potential.
To give the Fund additional stability in a volatile market, we made
adjustments in the portfolio weightings of certain market sectors.
This--along with changes in market values--resulted in reduced
emphasis on consumer growth stocks. At the same time, there was a
greater focus on stocks from the technology, financial,
transportation, and consumer staples sectors. As in previous periods,
we continued to diversify the Fund's portfolio across a broader range
of investments. Over the last six months we increased the number of
stocks in the Fund from 163 to 320. New additions included Universal
Health Services, Outdoor Systems, Inc., Proffitt's, Inc., and
Cambridge Technology Partners.
[GRAPHIC OMITTED: TOP 10 SECTORS]
Bank & Finance 8.8%
Computer Software 7.4%
Services 6.9%
Oil and Oil Service 6.5%
Computer & Office Equipment 6.2%
Electronics 5.9%
Drugs & Health Care 5.7%
Retail 6.5%
Insurance 3.6%
Health Care Management 2.8%
These sectors represent 59.3% of the Fund's total investment
portfolio.
Attractive Valuations
If investors remain confident that U.S. economic growth will continue,
stocks of smaller companies could outperform stocks of larger firms in
the months ahead. Already, there are signs that the attractive
valuations of small-cap issues are finding favor among investors
looking for opportunities in an increasingly expensive market. Small-
cap stocks may also draw investors who want to avoid multinational
firms with strong trade ties to Asia. Because of their greater
sensitivity to economic change, however, small-company stocks could
underperform even further if investors expect economic growth to slow.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1998
GROWTH OF $10,000 INVESTED SINCE 1/31/93]
Performance Through April 30, 1998
LB Opportunity Consumer
Growth Russell Lipper Price
Fund 2000 Index Average Index
1993 10,000 10,000 10,000 10,000
1993 9,156 9,769 9,608 10,035
1993 9,512 10,086 9,934 10,070
1993 9,267 9,809 9,619 10,098
1993 9,967 10,243 10,127 10,112
1993 10,122 10,307 10,206 10,126
1993 10,055 10,449 10,263 10,126
1993 10,755 10,900 10,737 10,154
1993 11,443 11,208 11,076 10,175
1993 11,831 11,497 11,232 10,217
1993 11,387 11,122 10,886 10,224
1993 11,687 11,503 11,348 10,224
1994 11,964 11,863 11,650 10,252
1994 11,842 11,820 11,643 10,288
1994 11,043 11,197 11,014 10,323
1994 11,121 11,263 11,016 10,337
1994 10,699 11,137 10,778 10,344
1994 10,078 10,762 10,388 10,379
1994 10,433 10,938 10,451 10,407
1994 11,343 11,547 11,048 10,449
1994 11,509 11,508 11,285 10,477
1994 11,942 11,462 11,275 10,484
1994 11,698 10,999 10,848 10,498
1994 11,998 11,295 11,265 10,498
1995 11,476 11,153 11,229 10,540
1995 12,087 11,617 11,539 10,582
1995 12,531 11,816 11,892 10,617
1995 12,619 12,079 12,050 10,652
1995 12,963 12,286 12,232 10,673
1995 14,140 12,924 12,880 10,694
1995 15,716 13,669 13,823 10,694
1995 15,971 13,962 14,062 10,722
1995 16,315 14,212 14,375 10,743
1995 15,350 13,577 13,864 10,778
1995 16,049 14,147 14,366 10,771
1995 16,523 14,521 14,592 10,764
1996 16,249 14,505 14,520 10,827
1996 17,315 14,957 15,088 10,863
1996 17,698 15,267 15,450 10,919
1996 19,393 16,084 16,600 10,961
1996 20,759 16,717 17,262 10,982
1996 19,338 16,030 16,594 10,989
1996 17,630 14,631 15,222 11,010
1996 18,682 15,481 16,109 11,031
1996 20,158 16,086 16,919 11,066
1996 18,614 15,839 16,601 11,101
1996 17,944 16,491 17,108 11,122
1996 18,532 16,923 17,381 11,122
1997 18,887 17,262 17,769 11,157
1997 17,174 16,844 17,149 11,192
1997 15,261 16,049 16,291 11,220
1997 14,535 16,094 16,238 11,234
1997 16,757 17,883 18,111 11,227
1997 17,683 18,651 19,098 11,241
1997 18,686 19,518 20,250 11,255
1997 19,134 19,965 20,663 11,276
1997 21,340 21,426 22,205 11,304
1997 20,013 20,486 21,239 11,332
1997 19,165 20,352 20,994 11,325
1997 18,457 20,709 21,221 11,311
1998 17,911 20,381 20,843 11,332
1998 19,002 21,888 22,436 11,353
1998 19,725 22,789 23,457 11,374
1998 19,773 22,915 23,616 11,396
As you compare performance, please note that the LB Opportunity Growth
Fund's performance reflects the maximum 4% sales charge. The
performance of the Russell 2000 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.
LB Opportunity Growth Fund
Annualized Total Returns*
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Since
Inception
Class A shares 1-Year 5-Year 1/8/93
Net Asset Value 36.03% 16.36% 15.13%
Public Offering Price 30.62% 15.40% 14.26%
Since
Inception
Class B shares 1-Year 5-Year 10/31/97
If Held (NAV) NA NA -1.52%
If Redeemed (CDSC) NA NA -6.44%
Institutional shares
Net Asset Value NA NA -1.12%
*See accompanying notes to Portfolio Management Reviews.
As in previous months, we expect to seek sector allocations and
investment diversity that should help foster greater stability in the
Fund's returns. At the same time, we will continue to seek stocks that
add value with the potential to incrementally enhance returns over
time.
LB Mid Cap Growth Fund
[GRAPHIC OMITTED: PHOTO OF BRIAN L. THORKELSON]
Brian L. Thorkelson is portfolio manager for the Lutheran Brotherhood
Mid Cap Growth Fund. He joined Lutheran Brotherhood in 1987, working
for five years as a bond trader and another five years as an equity
analyst for several Lutheran Brotherhood portfolios.
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Investment Objective:
To seek long-term growth of
capital by investing in common
stocks of medium-sized companies.
- --------------------------------
Fund Facts
Inception Date: 5/30/97
Shareholder
Accounts: 11,097
Total Assets
(in millions): $33.0
In the uncertain economic environment of the last six months, stocks
of medium-sized firms outperformed stocks of small-sized firms but
slightly underperformed stocks of large companies. Concerned that a
hike in interest rates or trouble in Asia might curb U.S. economic
growth, investors sought the greater earnings reliability and
liquidity associated with larger firms.
During this time, the LB Mid Cap Growth Fund continued to build a
portfolio of high-quality stocks with reasonable valuations. Like most
new mutual funds, however, there were often times when we held large
amounts of cash as we waited for attractive investment opportunities
to put this cash to work. This caused the Fund to underperform its
benchmarks during the recent reporting period. By historical mid-cap
market standards, however, the Fund's return was still quite strong.
In the six months ended April 30, 1998, the Fund had a total return
(based on NAV) of 13.58%. That compares to an average return of 14.40%
for mid-cap growth funds tracked by Lipper Analytical Services and a
return of 19.17% for the Standard & Poor's 400 Mid-Cap Index.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
Top 10 Holdings % of Portfolio
- ------------------------------------------------
USA Waste Services, Inc. 0.8%
SunGard Data Systems Inc. 0.8%
Clear Channel Communications 0.7%
BMC Software, Inc. 0.7%
HBO & Company 0.7%
Watson Pharmaceuticals, Inc. 0.7%
Compuware Corp. 0.7%
Equifax Inc. 0.7%
Advanced Fibre Communications 0.6%
Franklin Resources 0.6%
These holdings represent 7% of the Fund's total investment portfolio.
Technology and Consumer Stocks Lead
During the period, the Fund enjoyed especially strong gains from
holdings in the technology and consumer cyclical sectors--as well as
from many individual positions. Among the top performers were Avid
Technology (a manufacturer of audio and video editing systems),
Lexmark International (a manufacturer of computer printers), McKesson
Corp. (a distributor of drugs and toiletries), Harley Davidson (a
manufacturer of motorcycles and related gear), and Total Renal Care (a
provider of dialysis services). Returns from these stocks helped
offset disappointing performances in the energy, basic materials, and
capital goods sectors, as well as weak show-ings by individual
holdings like PSS World Medical, Cendant, and Ikon Office Solutions.
[GRAPHIC OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Compostion (% of Portfolio)
Short-term Securities 4.8%
Common Stocks 96.2%
The Fund's portfolio composition and top holdings represent all share
classes.
Because stock prices for medium-sized firms remained relatively
volatile during this time, we adjusted industry sector weightings in
the portfolio to improve the stability of Fund returns. Given the
economic turmoil in Asia, we continued to emphasize companies that
focus on domestic sales. These strategies, plus changes in market
valuations, resulted in fewer investments in the consumer growth and
basic industry sectors, and more investments in the energy and
consumer staples sectors. We further encouraged stability by adding
new positions to increase the portfolio's diversification. Among the
stocks we introduced during the period were Apollo Group, Advanced
Fibre Communication, BMC Software and Clear Channel Communications.
Looking Homeward
With less exposure to Asia's economic troubles than stocks of larger,
multinational firms, shares of mid-cap companies could perform
relatively well in the months ahead. Mid-cap stocks should also
benefit from their stronger potential for growth and better
valuations. As in previous months, we plan to continue focusing on
growth investment opportunities--especially in the retail and health
care sectors. We will also maintain sector weightings that can add
stability to Fund returns in times of market volatility.
[GRAPHIC OMITTED: TOP 10 SECTORS]
Bank & Finance 12.5%
Services 8.3%
Drug & Health Care 7.5%
Retail 7.4%
Computer Software 7.4%
Electronics 6.0%
Computer & Office Equipment 5.3%
Oil & Oil Service 5.3%
Telephone & Telecommunications 5.2%
Telecommunications Equipment 2.3%
These sectors represent 67.2% of the Fund's total investment
portfolio.
Performance as of 4/30/98
LB Mid Cap Growth Fund
Annualized Total Returns*
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Since
Inception
Class A shares 5/30/97
Net Asset Value 26.84%
Public Offering Price 21.71%
Since
Inception
Class B shares 10/31/97
If Held (NAV) 13.17%
If Redeemed (CDSC) 8.17%
Institutional shares
Net Asset Value 13.70%
*See accompanying notes to Portfolio Management Reviews.
The LB Mid Cap Growth Fund was introduced on May 30, 1997.
Given its brief performance history, the growth of a
$10,000 investment in the Fund is not illustrated in this report.
LB World Growth Fund
[GRAPHIC OMITTED: PHOTO OF MARTIN G. WADE]
Martin G. Wade is president of Rowe Price-Fleming International, 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 been
working in research and investment management since 1968 and has been
with Rowe Price Fleming since 1979.
- ------------------------------------
Investment Objective:
To seek long-term growth of capital
by investing primarily in common
stocks of established companies
outside the United States.
- ------------------------------------
Fund Facts
Inception Date: 9/5/95
Shareholder
Accounts: 19,422
Total Assets
(in millions): $88.3
As economic problems in Southeast Asia became a full-blown crisis, the
Japanese economy and stock market also weakened. Although stocks
initially retreated in Europe, too, they rebounded strongly once
Southeast Asian economies began to stabilize. For some time, we've
held a smaller portion of Japanese stocks in the LB World Growth Fund
than those stocks represented in its market benchmark, the Morgan
Stanley Capital International Europe, Australasia, Far East (EAFE)
Index. This has allowed us to overweight the Fund in European stocks
versus its benchmark. These regional weightings helped the Fund earn a
total return (based on NAV) of 13.87% for the six months ended April
30, 1998, which was quite high by historic norms.
[GRAPHIC OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Compostion (% of Portfolio)
Short-Term Securities 4.3%
Preferred Stocks 0.2%
Common Stocks & Stock Warrants 56.5%
The Fund's portfolio composition and top holdings represent all share
classes.
Although overweightings in France, Norway, Sweden, and the Netherlands
helped the Fund's performance over the period, underweightings in the
strongly advancing markets of Germany, Spain, Portugal, and the United
Kingdom limited Fund returns. As a result of this--and disappointing
performances by certain individual stocks--the Fund lagged its
benchmark slightly. During the six-month period, the EAFE Index had a
return of 15.59%. Over the same time, the average international equity
fund tracked by Lipper Analytical Services had a return of 16.22%.
De-emphasizing Asia
When the reporting period started, Japanese stocks represented about
21% of the Fund's assets, versus 29% of the EAFE Index. Having been
slightly overweight in stocks in the emerging markets of Asia, we
continued to reduce positions there--selling stocks of financial and
real estate firms in Malaysia, Singapore and Hong Kong. We also
trimmed positions in European firms with large Asian ties. We used the
proceeds from sales of companies like Generale Des Eaux, a water
distribution and hydraulic engineering firm, and engineering firms
like Siemens and Asea Brown Boveri to buy shares of European banks,
including Dresdner Bank in Germany and UBS in Switzerland. In Latin
America we took profits in stocks from Brazil and Argentina and added
Televisa, a media firm in Mexico.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
% of
Top 10 Holdings Country Portfolio
- ---------------------------------------------------------------------
National Westminster Bank United Kingdom 2.8%
Royal Dutch Petroleum Netherlands 2.2%
Novartis AG Switzerland 1.9%
SmithKline Beecham plc United Kingdom 1.9%
ING Groep N.V. Netherlands 1.8%
Wolters Kluwer Netherlands 1.7%
Nestle Switzerland 1.7%
Telecomunicacoes Brasilias ADR (USD) Brazil 1.6%
Glaxo Wellcome United Kingdom 1.5%
Shell Transport & Trading United Kingdom 1.4%
These holdings represent 18.5% of the Fund's total investment
portfolio.
[GRAPHIC OMITTED: TOP 10 COUNTRIES]
Top 10 Countries
- ------------------------------
United Kingdom 18.9%
Japan 17.1%
Netherlands 11.1%
France 9.9%
Switzerland 7.8%
Germany 6.4%
Italy 5.4%
Sweden 3.9%
Spain 2.9%
Brazil 2.4%
These countries represent 85.8% of the Fund's total investment
portfolio.
During the first months of 1998, we further reduced investments in
Japan, Malaysia and Singapore. By the end of April, Japanese stocks
represented about 16% of the portfolio, versus 22% of the Index.
Stocks in other parts of Asia represented 6% of the Fund at the end of
the period versus 7% of the EAFE Index and 6.5% of the Fund when the
period began. With the proceeds from these sales, we added European
financial stocks such as AXA-UAP in France, a large insurance and
financial services company that is the parent of Equitable Life. We
also added Banca di Roma in Italy, and Credit Suisse in Switzerland,
and restructured some holdings in Hong Kong and Australia.
Further Potential in Europe
Although stocks in Europe have advanced strongly in recent months, we
believe further gains are possible. Economic fundamentals there are
supportive of additional earnings growth, and European companies are
committed to maximizing profits through corporate restructuring.
We continue to be wary of the Japanese market. Valuations for many
growth companies are quite high, effective solutions to the country's
economic problems seem elusive, and most corporations are unwilling to
take on the restructuring necessary to improve earnings. We are also
concerned about the outlook for smaller Asian markets, which may be
plagued by regional economic woes for years to come. The future seems
brighter for the emerging markets of Latin America, where the
commitment to political and economic reform remains strong and stock
valuations are still attractive.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1998
GROWTH OF $10,000 INVESTED SINCE 9/30/95]
Performance Through April 30, 1998
Growth of a $10,000 Investment
Class A shares (since 9/30/95)
Morgan Stanley Lipper Average Consumer
LB World Capial International International Price
Growth Fund EAFE Index Stock Funds Index
1995 10,000 10,000 10,000 10,000
1995 9,430 9,734 9,790 10,033
1995 9,508 10,008 9,893 10,026
1995 9,817 10,413 10,203 10,020
1996 10,041 10,458 10,413 10,078
1996 10,108 10,495 10,443 10,111
1996 10,265 10,721 10,625 10,163
1996 10,567 11,035 10,957 10,202
1996 10,522 10,834 10,899 10,222
1996 10,634 10,898 10,975 10,228
1996 10,298 10,582 10,581 10,248
1996 10,444 10,607 10,691 10,268
1996 10,679 10,892 10,919 10,300
1996 10,612 10,783 10,829 10,333
1996 11,093 11,214 11,290 10,352
1996 11,135 11,073 11,320 10,352
1997 10,977 10,688 11,247 10,385
1997 11,090 10,865 11,394 10,418
1997 11,068 10,907 11,421 10,444
1997 11,135 10,967 11,449 10,457
1997 11,869 11,683 12,144 10,450
1997 12,378 12,331 12,702 10,463
1997 12,705 12,533 13,039 10,477
1997 11,531 11,599 12,078 10,496
1997 12,299 12,251 12,839 10,522
1997 11,395 11,311 11,862 10,548
1997 11,350 11,198 11,763 10,542
1997 11,377 11,299 11,862 10,529
1998 11,779 11,819 12,158 10,548
1998 12,458 12,580 12,944 10,568
1998 12,883 12,970 13,584 10,587
1998 12,975 13,075 13,772 10,607
As you compare performance, please note that the LB World Growth
Fund's performance reflects the maximum 4% 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.
LB World Growth Fund
Annualized Total Returns*
- ------------------------------------------------
Since
Inception
Class A shares 1-Year 9/5/95
Net Asset Value 16.53% 12.49%
Public Offering Price 11.87% 10.79%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) NA 13.57%
If Redeemed (CDSC) NA 8.57%
Institutional shares
Net Asset Value NA 14.07%
*See accompanying notes to Portfolio Management Reviews.
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.
- ----------------------------------
Investment Objective:
To seek long-term growth of
capital by investing in the stocks
of leading U.S. companies.
- ----------------------------------
Fund Facts
Inception Date: 6/2/70
Shareholder
Accounts: 101,304
Total Assets
(in millions): $1,217.1
In a nearly perfect domestic investment climate, stocks continued to
climb during the period while continued growth in corporate earnings
became less certain. In this climate, investors moved quickly among
different market sectors, looking for stocks whose prices were
reasonable considering the potential earnings growth of their
companies. Individual stock selection, rather than sector selection
and timing, became increasingly important as a result of this
environment. By staying focused on high-quality companies with
reasonable valuations, sound fundamentals and good earnings prospects,
we helped the LB Fund make the most of the market's advance.
[GRAPHIC OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Compostion (% of Portfolio)
Short-Term Securities 3.4%
Common Stocks 96.6%
The Fund's portfolio composition and top holdings represent all share
classes.
For the six months ended April 30, 1998, the Fund had a total return
(based on NAV) of 20.90%. This compared to a return of 17.39% for the
average growth and income fund tracked by Lipper Analytical Services
and a return of 22.49% for the S&P 500 Index.
Consumer Sector Leads the Way
Stock selection in the consumer sector was especially beneficial to
Fund returns--particularly in the drug, health care and retail groups.
Within those groups there were strong contributions from companies
such as Merck, Pfizer and WalMart. Communications firms such as
Ameritech and WorldCom also helped Fund performance, along with
capital goods companies like Honeywell and AlliedSignal. Certain
technology stocks, such as Lucent, Microsoft and Cisco enjoyed sizable
gains, too. Returns from these and other holdings far outweighed
disappointing performances from the Fund's energy stocks, which were
hurt by falling oil prices, and shares of home loan resellers like the
Federal National Mortgage Association, which were hurt by proposed
changes in mortgage insurance laws.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
Top 10 Holdings % of Portfolio
- ---------------------------------------------------
Cisco Systems, Inc. 2.1%
Halliburton Co. 2.1%
Exxon Corp. 2.1%
American International Group Inc. 2.1%
NationsBank Corp. 2.1%
E.I. duPont de Nemours and Co. 2.1%
AlliedSignal Inc. 2.0%
Dover Corp. 2.0%
Intel Corp. 2.0%
U.S. Bancorp 2.0%
These holdings represent 20.6% of the Fund's total investment
portfolio.
By maintaining a good balance among different market sectors, we were
able to give more attention to individual issues, as investors rotated
from one sector to another. As in previous months, we focused Fund
investments on leading companies that can thrive in a mix of economic
climates. This proved to be a sound strategy in an environment where
investors remained committed to firms with reliable earnings. It also
took advantage of the growing movement toward one-stop shopping for
goods and services that large companies can provide.
[GRAPHIC OMITTED: TOP 10 SECTORS]
Bank & Finance 17.9%
Drugs & Health Care 10.1%
Oil & Oil Service 10.0%
Food & Beverage 5.5%
Telephone & Telecommunications 5.3%
Conglomerates 5.1%
Chemicals 5.0%
Household Products 4.8%
Retail 4.8%
Computers & Office Equipment 4.4%
These sectors represent 72.9% of the Fund's total investment
portfolio.
As part of our focus on strong fundamentals, we sold General Motors
and Oracle during the period and bought American Home Products and
American Express. Within the energy sector, we traded shares of Unocal
and Amoco for shares of energy services firms whose earnings should be
less dependent on changing oil prices, such as Schlumberger. In the
banking sector, we reduced holdings in Citicorp and added BankAmerica
to the portfolio.
Greater Attention to Yield
We believe the Fund's broad diversification and focus on relative
value will continue to serve shareholders if a cloudy economic
forecast keeps stock prices volatile. As before, we're focusing on
companies with a definable competitive advantage that can enhance
returns in a variety of market environments, as well as companies that
can improve earnings by controlling costs. To limit volatility even
further, we're looking for stocks that offer strong yield as well as
solid growth potential.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1998
GROWTH OF $10,000 INVESTED SINCE 4/30/88]
Performance Through April 30, 1998
Growth of a $10,000 Investment
Class A shares (since 4/30/88)
Lipper Average Consumer
Standard & Poor's Growth & Price
LB fund 500 Stock Index Income Fund Index
1988 10,000 10,000 10,000 10,000
1988 9,612 10,065 10,011 10,034
1988 9,994 10,534 10,476 10,077
1988 9,879 10,507 10,405 10,120
1988 9,603 10,136 10,154 10,162
1988 9,975 10,571 10,506 10,231
1988 10,199 10,877 10,684 10,265
1988 10,043 10,704 10,532 10,273
1988 10,227 10,893 10,712 10,290
1989 10,940 11,702 11,328 10,342
1989 10,693 11,392 11,170 10,384
1989 10,978 11,663 11,399 10,444
1989 11,501 12,284 11,865 10,512
1989 11,901 12,756 12,265 10,572
1989 11,796 12,693 12,203 10,598
1989 12,897 13,852 13,029 10,623
1989 13,333 14,109 13,304 10,640
1989 13,293 14,052 13,243 10,675
1989 12,500 13,738 12,863 10,726
1989 12,917 14,004 13,055 10,751
1989 12,949 14,341 13,236 10,769
1990 12,008 13,392 12,481 10,880
1990 12,114 13,540 12,642 10,931
1990 12,458 13,907 12,911 10,991
1990 12,243 13,574 12,596 11,008
1990 13,560 14,870 13,574 11,033
1990 13,643 14,781 13,558 11,093
1990 13,573 14,744 13,452 11,136
1990 12,465 13,398 12,385 11,238
1990 11,806 12,748 11,781 11,332
1990 11,798 12,707 11,599 11,401
1990 12,418 13,513 12,279 11,426
1990 12,697 13,890 12,635 11,426
1991 13,320 14,510 13,248 11,494
1991 14,177 15,522 14,113 11,512
1991 14,435 15,904 14,440 11,529
1991 14,513 15,956 14,452 11,546
1991 15,178 16,621 15,032 11,580
1991 14,333 15,867 14,396 11,614
1991 15,071 16,626 14,999 11,631
1991 15,527 17,000 15,342 11,665
1991 15,268 16,717 15,204 11,716
1991 15,591 16,964 15,437 11,734
1991 15,023 16,259 14,829 11,768
1991 16,858 18,120 16,295 11,776
1992 16,606 17,802 16,292 11,793
1992 16,780 18,010 16,567 11,836
1992 16,354 17,661 16,281 11,896
1992 16,471 18,201 16,536 11,913
1992 16,623 18,263 16,639 11,930
1992 16,225 17,995 16,304 11,973
1992 16,720 18,754 16,849 11,998
1992 16,414 18,350 16,531 12,032
1992 16,644 18,564 16,727 12,067
1992 16,970 18,651 16,833 12,109
1992 17,692 19,258 17,454 12,126
1992 17,835 19,500 17,717 12,118
1993 18,178 19,680 17,917 12,178
1993 18,237 19,927 18,050 12,220
1993 18,764 20,349 18,516 12,263
1993 18,447 19,880 18,177 12,297
1993 18,907 20,379 18,602 12,314
1993 18,969 20,446 18,660 12,331
1993 18,805 20,385 18,643 12,331
1993 19,360 21,139 19,325 12,366
1993 19,328 20,976 19,314 12,391
1993 19,525 21,431 19,588 12,442
1993 19,018 21,204 19,322 12,451
1993 19,384 21,469 19,743 12,451
1994 20,075 22,214 20,359 12,485
1994 19,527 21,590 19,962 12,528
1994 18,578 20,653 19,126 12,570
1994 18,622 20,936 19,305 12,588
1994 18,830 21,244 19,491 12,596
1994 18,314 20,723 19,046 12,639
1994 18,864 21,426 19,570 12,673
1994 19,547 22,289 20,318 12,724
1994 19,217 21,741 19,867 12,758
1994 19,504 22,247 20,081 12,767
1994 18,709 21,422 19,342 12,784
1994 18,723 21,737 19,547 12,784
1995 19,177 22,317 19,827 12,835
1995 19,719 23,170 20,570 12,886
1995 20,073 23,863 21,099 12,929
1995 20,661 24,576 21,616 12,972
1995 21,339 25,522 22,314 12,997
1995 22,039 26,117 22,783 13,023
1995 23,020 27,002 23,530 13,023
1995 22,764 27,056 23,664 13,057
1995 23,622 28,195 24,395 13,083
1995 23,666 28,114 24,124 13,126
1995 24,761 29,325 25,186 13,117
1995 24,722 29,891 25,627 13,108
1996 25,417 30,928 26,324 13,185
1996 25,728 31,194 26,674 13,228
1996 25,859 31,500 27,015 13,296
1996 26,364 31,979 27,410 13,348
1996 26,820 32,769 27,925 13,373
1996 26,664 32,897 27,886 13,382
1996 25,376 31,456 26,692 13,407
1996 26,063 32,110 27,421 13,433
1996 27,423 33,911 28,682 13,476
1996 27,833 34,868 29,262 13,518
1996 29,860 37,490 31,219 13,544
1996 28,979 36,747 30,832 13,544
1997 30,803 39,066 32,143 13,587
1997 30,751 39,351 32,332 13,629
1997 29,550 37,730 31,162 13,664
1997 31,351 39,998 32,315 13,681
1997 32,917 42,402 34,296 13,672
1997 34,314 44,305 35,630 13,689
1997 36,851 47,832 38,306 13,706
1997 34,785 45,144 36,938 13,732
1997 36,420 47,631 38,803 13,766
1997 35,346 46,060 37,422 13,800
1997 36,538 48,174 38,485 13,792
1997 37,065 49,002 39,139 13,775
1998 37,457 49,566 39,241 13,800
1998 40,085 53,120 41,952 13,826
1998 42,314 55,845 43,853 13,851
1998 42,735 56,414 44,182 13,851
As you compare performance, please note that the LB Fund's performance
reflects the maximum 4% 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.
LB Fund
Annualized Total Returns*
- -------------------------------------------------------------------
Since
Inception
Class A shares 1-Year 5-Year 10-Year 6/2/70
Net Asset Value 36.31% 18.29% 16.10% 12.17%
Public Offering Price 30.86% 17.33% 15.62% 12.00%
Since
Inception
Class B shares 1-Year 5-Year 10-Year 10/31/97
If Held (NAV) NA NA NA 20.51%
If Redeemed (CDSC) NA NA NA 15.51%
Institutional shares
Net Asset Value NA NA NA 21.06%
*See accompanying notes to Portfolio Management Reviews.
LB High Yield Fund
[GRAPHIC OMITTED: PHOTO OF PAUL J. OCENASEK]
Paul J. Ocenasek, is a Chartered Financial Analyst and portfolio
manager of the LB High Yield Fund. Paul has worked in Lutheran
Brotherhood's Investment Division since 1987 and served in many roles:
analyst, researcher, associate management and portfolio manager.
- ---------------------------------
Investment Objective:
To seek high current income and growth
of capital by investing primarily in high-
yielding ("junk") corporate bonds.
- ---------------------------------
Fund Facts
Inception Date: 4/3/87
Shareholder
Accounts: 63,841
Total Assets
(in millions): $941.7
Prices for corporate bonds, like those for stocks, fluctuated on
earnings concerns in the past six months but ended the period in a
position of strength. Corporate bond prices softened early in the
period, as falling interest rates boosted supplies of new bond issues
and trouble in Asia raised the fear of lower corporate earnings. The
corporate bond sector later rebounded, however, as concerns about
earnings eased. With particularly strong income streams, high-yield
corporate bonds earned good returns in this environment and
outperformed other fixed-income issues.
For the six months ended April 30, 1998, the LB High Yield Fund had a
total return (based on NAV) of 5.45%. That compares with a return of
6.36% for the average high-yield bond fund tracked by Lipper
Analytical Services, and a return of 5.68% for the Lehman Brothers
High-Yield Index.
Curbing Volatility
During the period the Fund remained heavily weighted in issues of
media/telecommunications firms, which we expect to benefit from long-
term trends like industry deregulation. These issues performed
particularly well in the early and middle parts of the period--before
earnings concerns and large supplies of new bonds weakened their
prices. We tried to make the most of this environment by trimming
media/telecommunications issues when their prices became expensive and
adding to those positions when their prices became more attractive.
[GRAPHIC OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Compostion (% of Portfolio)
Corporate Bonds 83.6%
Foreign Gov't Bonds 0.3%
Short-Term Securities 2.4%
Common Stocks & Stock Warrants 2.8%
Non-Convertible Preferred Stocks 7.9%
Convertible Preferred Stocks 3.1%
The Fund's portfolio composition and top holdings represent all share
classes.
Throughout the period, we took several steps to offset the extra
volatility often encountered in the media/telecommunications sector.
With investors increasingly nervous about earnings, we continued to
give greater attention to corporate debt with higher credit ratings.
Over the period, we increased holdings in bonds with a Moody's quality
rating of "Ba" from 13% of the portfolio to 19%. We further enhanced
the stability of Fund returns by adding issues with somewhat shorter
maturities, which tend to be less sensitive to changes in market
interest rates. In making these changes, we purchased issues from a
broad range of industry groups, which gave the portfolio greater
diversity.
[GRAPHIC OMITTED: TOP 10 INDUSTRIES]
TOP 10 INDUSTRIES
- ----------------------------------------
Telecommunications 17.5%
Broadcasting 12.2%
Bank & Finance 6.5%
Oil & Gas 4.2%
Food & Beverage 3.9%
Leisure & Entertainment 3.3%
Paper & Forest Products 2.8%
Textiles & Apparel 2.5%
Computers & Office Equipment 2.4%
Mining & Metals 2.2%
These industries represent 57.5% of the Fund's total investment
portfolio.
Further Choppiness Ahead
Although returns for high-yield corporates may be choppy in coming
months, as investors respond to short-term economic news and signals
from the Fed, we believe the high yield market should continue to
perform well against other fixed-income securities. High-yield
corporates should continue to benefit from good economic conditions
and coupon yields that are particularly attractive in today's climate
of low inflation.
[GRAPHIC BAR CHART OMITTED:
MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 0.0%
Aa 0.0%
A 0.4%
Baa 0.8%
Ba 18.8%
B 61.9%
Caa 10.8%
Ca 0.1%
C 0.0%
D 0.2%
Not Rated 7.0%
We plan to remain heavily committed to the media/telecommunications
area, which we expect to enhance the Fund's long-term performance
potential. As before, we'll trim holdings in that sector when prices
become expensive and add positions when prices are more reasonable. As
long as a significant slowdown in economic growth remains possible, we
will maintain stronger weightings in higher-quality high-yield issues.
Additionally, we'll carefully manage bond maturities to help maximize
yields and minimize interest rate risk.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1998
GROWTH OF $10,000 INVESTED SINCE 4/30/88]
Performance Through April 30, 1998
Growth of a $10,000 Investment
Class A shares (since 4/30/88)
LB High Lehman High Lipper Average Consumer
Yield Fund Yield Index High Current Price Index
1988 10,000 10,000 10,000 10,000
1988 9,572 10,015 10,026 10,034
1988 9,795 10,161 10,230 10,077
1988 9,856 10,228 10,332 10,120
1988 9,825 10,213 10,343 10,162
1988 9,928 10,342 10,436 10,231
1988 10,031 10,467 10,564 10,265
1988 10,031 10,529 10,577 10,273
1988 10,179 10,578 10,632 10,290
1989 10,383 10,764 10,816 10,342
1989 10,439 10,788 10,862 10,384
1989 10,354 10,704 10,825 10,444
1989 10,285 10,749 10,818 10,512
1989 10,514 10,957 10,974 10,572
1989 10,779 11,093 11,157 10,598
1989 10,742 11,079 11,173 10,623
1989 10,806 11,116 11,180 10,640
1989 10,583 10,930 11,004 10,675
1989 10,146 10,671 10,678 10,726
1989 10,085 10,649 10,626 10,751
1989 9,906 10,666 10,550 10,769
1990 9,603 10,437 10,278 10,880
1990 9,371 10,222 10,028 10,931
1990 9,410 10,490 10,145 10,991
1990 9,413 10,472 10,139 11,008
1990 9,722 10,674 10,361 11,033
1990 9,842 10,932 10,570 11,093
1990 10,016 11,226 10,789 11,136
1990 9,633 10,588 10,349 11,238
1990 9,205 9,815 9,827 11,332
1990 8,881 9,299 9,405 11,401
1990 9,023 9,590 9,442 11,426
1990 9,168 9,643 9,472 11,426
1991 9,221 9,908 9,604 11,494
1991 9,894 10,992 10,294 11,512
1991 10,366 11,640 10,806 11,529
1991 10,743 12,117 11,221 11,546
1991 10,840 12,139 11,291 11,580
1991 11,147 12,498 11,529 11,614
1991 11,459 12,898 11,873 11,631
1991 11,627 13,195 12,096 11,665
1991 11,812 13,378 12,299 11,716
1991 12,236 13,825 12,691 11,734
1991 12,424 13,897 12,810 11,768
1991 12,477 14,097 12,921 11,776
1992 13,055 14,593 13,434 11,793
1992 13,421 14,954 13,755 11,836
1992 13,664 15,139 13,968 11,896
1992 13,783 15,197 14,069 11,913
1992 13,998 15,411 14,274 11,930
1992 14,078 15,556 14,418 11,973
1992 14,322 15,791 14,676 11,998
1992 14,518 15,998 14,863 12,032
1992 14,666 16,161 15,016 12,067
1992 14,400 15,933 14,765 12,109
1992 14,651 16,134 14,984 12,126
1992 14,988 16,318 15,183 12,118
1993 15,603 16,792 15,596 12,178
1993 15,792 17,088 15,897 12,220
1993 16,096 17,308 16,212 12,263
1993 16,160 17,459 16,340 12,297
1993 16,434 17,667 16,598 12,314
1993 16,941 18,038 16,983 12,331
1993 17,076 18,213 17,151 12,331
1993 17,212 18,366 17,278 12,366
1993 17,205 18,413 17,332 12,391
1993 17,744 18,785 17,720 12,442
1993 17,811 18,876 17,833 12,451
1993 18,115 19,110 18,097 12,451
1994 18,649 19,524 18,528 12,485
1994 18,584 19,474 18,493 12,528
1994 17,896 18,737 17,897 12,570
1994 17,622 18,610 17,638 12,588
1994 17,691 18,619 17,678 12,596
1994 17,701 18,677 17,654 12,639
1994 17,558 18,836 17,622 12,673
1994 17,687 18,970 17,632 12,724
1994 17,604 18,971 17,632 12,758
1994 17,661 19,017 17,615 12,767
1994 17,236 18,777 17,379 12,784
1994 17,157 18,916 17,400 12,784
1995 17,235 19,174 17,540 12,835
1995 17,892 19,831 18,018 12,886
1995 18,075 20,045 18,182 12,929
1995 18,511 20,555 18,625 12,972
1995 18,887 21,130 19,039 12,997
1995 18,990 21,272 19,098 13,023
1995 19,587 21,540 19,434 13,023
1995 19,670 21,606 19,486 13,057
1995 19,839 21,872 19,718 13,083
1995 19,944 22,008 19,876 13,126
1995 20,184 22,202 20,009 13,117
1995 20,483 22,550 20,313 13,108
1996 20,974 22,947 20,736 13,185
1996 21,512 22,965 20,912 13,228
1996 21,303 22,949 20,835 13,296
1996 21,413 23,000 20,999 13,348
1996 21,617 23,138 21,163 13,373
1996 21,449 23,330 21,190 13,382
1996 21,281 23,437 21,305 13,407
1996 21,632 23,690 21,644 13,433
1996 22,343 24,261 22,211 13,476
1996 22,267 24,448 22,331 13,518
1996 22,480 24,930 22,744 13,544
1996 22,728 25,109 23,014 13,544
1997 22,997 25,355 23,245 13,587
1997 23,293 25,774 23,661 13,629
1997 22,561 25,389 23,190 13,664
1997 22,559 25,656 23,378 13,681
1997 23,423 26,205 23,978 13,672
1997 24,062 26,569 24,367 13,689
1997 24,889 27,300 25,000 13,706
1997 24,965 27,237 25,050 13,732
1997 25,724 27,894 25,637 13,766
1997 25,480 28,108 25,537 13,800
1997 25,531 28,662 25,741 13,792
1997 25,790 28,869 26,029 13,775
1998 26,315 29,151 26,529 13,800
1998 26,676 29,632 26,728 13,826
1998 27,011 29,191 27,067 13,851
1998 26,870 29,497 27,143 13,851
As you compare performance, please note that the LB High Yield Fund's
performance reflects the maximum 4% sales charge. The performance of
the Lehman High Yield 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.
LB High Yield Fund
Annualized Total Returns*
- ------------------------------------------------------------------
Since
Inception
Class A shares 1-Year 5-Year 10-Year 4/3/87
Net Asset Value 19.11% 10.70% 10.84% 10.23%
Public Offering Price 14.34% 9.79% 10.38% 9.82%
Since
Inception
Class B shares 1-Year 5-Year 10-Year 10/31/97
If Held (NAV) NA NA NA 5.20%
If Redeemed (CDSC) NA NA NA 0.20%
Institutional shares
Net Asset Value NA NA NA 5.68%
*See accompanying notes to Portfolio Management Reviews.
LB Income Fund
[GRAPHIC OMITTED: PHOTO OF CHARLES E. HEEREN AND MIKE G. LANDREVILLE]
Charles E. Heeren (on right), a vice president of Lutheran
Brotherhood, is a Chartered Financial Analyst and co-portfolio manager
for the LB Income Fund. He has managed the Fund since January 1986,
and has been with Lutheran Brotherhood since 1976.
Mike G. Landreville, an assistant vice president of Lutheran
Brotherhood, is co-portfolio manager of the LB Income Fund. He has
worked in Lutheran Brotherhood's bond department for more than 14
years and managed various fixed-income portfolios. Mike is a Certified
Public Accountant and Chartered Financial Analyst.
- ---------------------------------
Investment Objective:
To seek high current income while
preserving principal by investing in
investment-grade bonds and other
income-producing securities.
- ---------------------------------
Fund Facts
Inception Date: 6/1/72
Shareholder
Accounts: 54,349
Total Assets
(in millions): $760.3
With bonds trading in a relatively narrow range during the past six
months, we used several strategies to enhance returns of the
LB Income Fund. Beginning last November, we began investing a limited
portion of the Fund's assets in lower-rated, higher-yielding corporate
bonds. Besides providing greater income, these bonds enjoyed good
price appreciation while economic strength caused some of their credit
ratings to advance. In addition, we maintained positions in dollar-
denominated "Yankee" bonds issued in the United States by foreign
companies and governments. Some of these bonds were from Asian issuers
and rebounded strongly in early 1998 after underperforming late in
1997 as the Asian economic crisis reached its peak. We also held a
small position in bonds that can be converted into equities. With the
continued rally in stock prices, these convertibles enjoyed strong
price gains, too.
[GRAPHIC OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Compostion (% of Portfolio)
Short-Term Securities 6.9%
Corporate Bonds 47.5%
Foreign Government Bonds 9.2%
Asset-Backed Bonds 11.3%
Mortagage-Backed Securities 13.0%
U.S. Government 13.3%
Common Stocks 0.2%
Preferred Stocks 1.2%
The Fund's portfolio composition and top holdings represent all share
classes.
These strategies helped the LB Income Fund earn a total return (based
on NAV) of 3.63% for the six months ended April 30, 1998. That
exceeded the average return of 3.29% for high-quality corporate bond
funds tracked by Lipper Analytical Services. Over the same time, the
Lehman Aggregate Bond Index had a return of 3.59%.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
% of
Top 10 Holdings Security Portfolio
- ---------------------------------------------------------------------
Government National Mortgage Association Mortgage-backed 5.5%
U.S. Treasury Bonds U.S. Government 4.6%
U.S. Treasury Bonds U.S. Government 3.7%
U.S. Treasury Bonds U.S. Government 3.1%
U.S. Treasury Bonds U.S. Government 2.8%
Federal National Mortgage Association Mortgage-backed 2.5%
World Omni Auto Lease Trust Asset-backed 2.2%
World Financial Network Credit Card Asset-backed 2.0%
U.S. Treasury Bonds U.S. Government 1.8%
Equitable Life Assurance Society Corporate 1.7%
These holdings represent 29.9% of the Fund's total investment
portfolio.
Focus on Value
The strategies we used during the period were part of a larger effort
to find investments that represented good value for the Fund. Our move
into higher-yielding corporates, made possible by a minor change to
the Fund's investment policy, focused on issues that we think have
been oversold. These included bonds of energy companies hurt by
falling oil prices and bonds of utility firms left behind in the stock
rally. We also found attractive prices in high-yield issues of
media/telecommunications firms.
We offset the greater risk associated with high-yield bonds by trading
some asset-backed securities and better-quality corporate bonds for
U.S. Treasury issues. In changing the mix of corporate bonds we
reduced holdings in some financial firms, which had performed strongly
for some time, as well as transportation issues.
[GRAPHIC BAR CHART OMITTED:
MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 46.8%
Aa 8.7%
A 17.0%
Baa 14.8%
Ba 12.1%
B 1.6%
Caa 0.0%
Ca 0.0%
C 0.0%
Not Rated 0.0%
Keeping an Eye on Profits
We continue to hold a greater weighting in corporate bonds than the
Fund's benchmark index. If a relapse in Asia's problems or a hike in
interest rates threatens U.S. economic growth, we may trade additional
corporates for U.S. Treasuries and trim investments in some of the
Fund's high-yield issues. Recently, we reduced the Fund's holdings in
long-term corporate bonds, which are especially sensitive to concerns
about the economy and company profits.
Besides buying long-term Treasuries with the proceeds from these
sales, we've purchased mortgage-backed securities, whose prices have
become increasingly attractive. We believe the recent underperformance
of these securities may have resulted from a temporary overreaction by
investors to higher levels of home-loan prepayments. By focusing our
purchases on lower-coupon mortgages, and maintaining a mortgage
weighting similar to that of the Fund's benchmark, we think we've
minimized that prepayment risk. In the context of the Fund's overall
investment objectives, these strategies leave the Fund well positioned
for the months ahead.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1998
GROWTH OF $10,000 INVESTED SINCE 4/30/88]
Performance Through April 30, 1998
Growth of a $10,000 Investment
Class A shares (since 4/30/88)
Lipper Average
LB Income Lehman Aggregate Corporate Consumer
Fund Bond Index Bond Fund Price Index
1988 10,000 10,000 10,000 10,000
1988 9,540 9,933 9,939 10,034
1988 9,825 10,172 10,159 10,077
1988 9,787 10,118 10,125 10,120
1988 9,853 10,145 10,144 10,162
1988 10,086 10,375 10,357 10,231
1988 10,274 10,570 10,524 10,265
1988 10,198 10,441 10,423 10,273
1988 10,279 10,453 10,484 10,290
1989 10,447 10,603 10,619 10,342
1989 10,345 10,527 10,555 10,384
1989 10,378 10,572 10,595 10,444
1989 10,587 10,793 10,777 10,512
1989 10,849 11,077 11,031 10,572
1989 11,239 11,414 11,354 10,598
1989 11,414 11,657 11,546 10,623
1989 11,268 11,484 11,395 10,640
1989 11,316 11,543 11,434 10,675
1989 11,509 11,827 11,672 10,726
1989 11,584 11,939 11,754 10,751
1989 11,557 11,971 11,772 10,769
1990 11,407 11,829 11,607 10,880
1990 11,445 11,867 11,617 10,931
1990 11,442 11,875 11,624 10,991
1990 11,301 11,766 11,491 11,008
1990 11,590 12,114 11,815 11,033
1990 11,740 12,309 12,001 11,093
1990 11,865 12,479 12,148 11,136
1990 11,650 12,312 11,939 11,238
1990 11,682 12,414 11,982 11,332
1990 11,786 12,572 12,111 11,401
1990 12,037 12,842 12,381 11,426
1990 12,214 13,042 12,574 11,426
1991 12,364 13,204 12,704 11,494
1991 12,543 13,316 12,841 11,512
1991 12,648 13,408 12,928 11,529
1991 12,829 13,553 13,087 11,546
1991 12,935 13,631 13,152 11,580
1991 12,921 13,625 13,128 11,614
1991 13,075 13,814 13,293 11,631
1991 13,355 14,112 13,611 11,665
1991 13,652 14,399 13,908 11,716
1991 13,746 14,559 14,031 11,734
1991 13,857 14,693 14,155 11,768
1991 14,320 15,129 14,662 11,776
1992 14,154 14,923 14,433 11,793
1992 14,214 15,020 14,505 11,836
1992 14,206 14,936 14,433 11,896
1992 14,263 15,044 14,508 11,913
1992 14,535 15,328 14,801 11,930
1992 14,771 15,540 15,017 11,973
1992 15,124 15,857 15,412 11,998
1992 15,261 16,017 15,535 12,032
1992 15,466 16,207 15,728 12,067
1992 15,215 15,992 15,460 12,109
1992 15,219 15,995 15,457 12,126
1992 15,467 16,249 15,715 12,118
1993 15,782 16,561 16,053 12,178
1993 16,117 16,851 16,416 12,220
1993 16,172 16,922 16,475 12,263
1993 16,281 17,040 16,584 12,297
1993 16,284 17,062 16,589 12,314
1993 16,591 17,371 16,957 12,331
1993 16,738 17,470 17,084 12,331
1993 17,066 17,776 17,477 12,366
1993 17,123 17,824 17,530 12,391
1993 17,199 17,890 17,610 12,442
1993 16,965 17,738 17,387 12,451
1993 17,033 17,834 17,461 12,451
1994 17,253 18,074 17,725 12,485
1994 16,864 17,760 17,335 12,528
1994 16,357 17,321 16,881 12,570
1994 16,214 17,183 16,692 12,588
1994 16,168 17,181 16,640 12,596
1994 16,061 17,143 16,584 12,639
1994 16,407 17,484 16,879 12,673
1994 16,399 17,505 16,882 12,724
1994 16,094 17,248 16,619 12,758
1994 16,027 17,232 16,572 12,767
1994 16,040 17,195 16,539 12,784
1994 16,205 17,313 16,656 12,784
1995 16,523 17,656 16,941 12,835
1995 16,883 18,076 17,326 12,886
1995 16,997 18,187 17,444 12,929
1995 17,257 18,441 17,681 12,972
1995 17,997 19,155 18,422 12,997
1995 18,134 19,295 18,547 13,023
1995 18,000 19,252 18,464 13,023
1995 18,246 19,485 18,696 13,057
1995 18,407 19,674 18,885 13,083
1995 18,676 19,930 19,151 13,126
1995 18,968 20,229 19,448 13,117
1995 19,255 20,512 19,738 13,108
1996 19,355 20,647 19,831 13,185
1996 18,908 20,288 19,420 13,228
1996 18,701 20,146 19,261 13,296
1996 18,581 20,033 19,117 13,348
1996 18,549 19,993 19,078 13,373
1996 18,787 20,261 19,301 13,382
1996 18,824 20,316 19,340 13,407
1996 18,723 20,281 19,294 13,433
1996 19,078 20,634 19,635 13,476
1996 19,527 21,092 20,065 13,518
1996 19,909 21,453 20,436 13,544
1996 19,680 21,253 20,218 13,544
1997 19,742 21,319 20,254 13,587
1997 19,801 21,373 20,313 13,629
1997 19,509 21,135 20,063 13,664
1997 19,761 21,452 20,338 13,681
1997 19,942 21,656 20,511 13,672
1997 20,238 21,914 20,761 13,689
1997 20,824 22,506 21,369 13,706
1997 20,593 22,314 21,130 13,732
1997 20,918 22,645 21,449 13,766
1997 21,099 22,973 21,726 13,800
1997 21,182 23,079 21,813 13,792
1997 21,325 23,312 22,029 13,775
1998 21,634 23,610 22,313 13,800
1998 21,644 23,591 22,273 13,826
1998 21,753 23,671 22,339 13,851
1998 21,864 23,795 22,440 13,851
As you compare performance, please note that the LB Income Fund's
performance reflects the maximum 4% sales charge. The performance of
the Lehman Aggregate Bond 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.
LB Income Fund
Annualized Total Returns*
- ---------------------------------------------------------------------
Since
Inception
Class A shares 1-Year 5-Year 10-Year 6/1/72
Net Asset Value 10.64% 6.07% 8.57% 8.60%
Public Offering Price 6.18% 5.22% 8.13% 8.43%
Since
Inception
Class B shares 1-Year 5-Year 10-Year 10/31/97
If Held (NAV) NA NA NA 3.25%
If Redeemed (CDSC) NA NA NA -1.75%
Institutional shares
Net Asset Value NA NA NA 3.75%
*See accompanying notes to Portfolio Management Reviews.
LB Municipal Bond Fund
[GRAPHIC OMITTED: PHOTO OF JANET L. GRANGAARD]
Janet I. Grangaard, an assistant vice president of Lutheran
Brotherhood, is a Chartered Financial Analyst and portfolio manager
for the LB Municipal Bond Fund. She has managed the Fund since January
1994, and has been with Lutheran Brotherhood since 1988.
- -----------------------------------
Investment Objective:
To seek long-term high current income
exempt from federal income tax by
investing in municipal bonds.
- -----------------------------------
Fund Facts
Inception Date: 12/3/76
Shareholder
Accounts: 21,429
Total Assets
(in millions): $591.5
Municipal bond prices traded in a very narrow range over the six-month
period. In the low interest rate environment, the supply of municipals
remained strong as issuers continued to refinance their older, higher-
cost debt and bring new issues to the market. Meanwhile, the prices
and yields for municipal bonds grew more attractive compared to U.S.
Treasury bonds, which kept demand for municipals relatively healthy.
With little change in price, returns from municipals came largely from
coupon income. In addition, a further decline in the Consumer Price
Index helped the real (inflation-adjusted) income for municipals
improve.
[GRAPHIC OMITTED: TOP 10 STATES]
% of
Top 10 States Portfolio
- -----------------------------------
California 10.8%
Texas 9.8%
Washington 5.8%
Ohio 5.5%
Colorado 5.3%
New York 5.1%
Minnesota 4.5%
New Jersey 3.2%
Pennsylvania 3.2%
Missouri 3.1%
These holdings represent 56.3% of the Fund's total investment
portfolio.
[GRAPHIC OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Compostion (% of Portfolio)
Special Tax 4.8%
Escrowed 36.3%
Education 2.8%
Airport 3.5%
Electric 11.5%
Lease 5.4%
General Obligation 16.8%
Housing 3.0%
Health Care 11.0%
Pollution Control 3.3%
Transportation 3.3%
Water & Sewer 8.8%
Other 1.4%
The Fund's portfolio composition and top holdings represent all share
classes.
For the six months ended April 30, 1998, the LB Municipal Bond Fund
earned returns that were competitive with its benchmark and other
funds with similar investment objectives. The Fund's total return for
the period (based on NAV) was 2.78%. That compares to returns of 2.77%
for the Lehman Municipal Bond Index and an average return of 2.45% for
municipal bond funds tracked by Lipper Analytical Services.
Looking for Value
During the period, the Fund continued to benefit from "advance
refunding" of certain holdings. In an advance refunding, the credit
supporting the refunded municipal bond assumes the quality of the
underlying Treasury bonds held in escrow. Therefore, when the Fund
experiences an advance refunding on an existing holding, the price of
that holding rises to reflect the higher quality of the credit. This
price appreciation added incremental return throughout the period.
With the municipal market relatively quiet in recent months, we
maintained our earlier strategies, while still making a few changes in
the Fund's portfolio. As municipal bond prices fluctuated during the
period, there were changes in the yield spreads between issues of
various states that created new value opportunities. In trading the
portfolio's holdings, this is where we focused our attention. As a
result, there was little change in the sector weightings of the
portfolio. The one exception was the greater weighting in higher-
quality issues, which occurred as a result of the advance refundings
mentioned previously.
Throughout the period we kept the duration of the portfolio near the
Fund's benchmark. In doing so, we hoped to limit the Fund's exposure
to falling bond prices if the Fed had raised interest rates.
[GRAPHIC BAR CHART OMITTED:
MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 69.2%
Aa 14.1%
A 3.5%
Baa 3.2%
Ba 0.0%
B 0.0%
Caa 0.0%
Ca 0.0%
C 0.0%
Non-Rated 0.0%
Demand Likely to Continue
By the end of the reporting period, municipals had reached their
cheapest levels versus taxable bonds in two years. Investors should
continue to recognize the added value that municipals offer as they
rebalance their portfolios to reduce their equity exposure. Although
low market interest rates should continue to encourage refundings and
the issuance of new municipal debt, we believe solid demand for
municipals should help support their prices. Municipal investments
offering good value should continue to perform in this environment. As
a result, we will continue to focus on individual securities
selection, searching for specific value opportunities and keeping a
close watch on economic growth and potential changes in Federal
Reserve monetary policy.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1998
GROWTH OF $10,000 INVESTED SINCE 4/30/88]
Performance Through April 30, 1998
Growth of a $10,000 Investment
Class A shares (since 4/30/88)
Lipper Average
Month End LB Municipal Lehman Municipal General Municipal Consumer
Date Bond Fund Bond Index Debt Funds Price Index
- --------- ------ ------ ------ ------
1988 10,000 10,000 10,000 10,000
1988 9,575 9,971 10,017 10,034
1988 9,779 10,117 10,188 10,077
1988 9,813 10,182 10,250 10,120
1988 9,848 10,191 10,287 10,162
1988 10,045 10,376 10,482 10,231
1988 10,231 10,559 10,700 10,265
1988 10,142 10,461 10,601 10,273
1988 10,293 10,568 10,761 10,290
1989 10,444 10,787 10,925 10,342
1989 10,378 10,664 10,834 10,384
1989 10,377 10,638 10,828 10,444
1989 10,635 10,890 11,090 10,512
1989 10,829 11,117 11,296 10,572
1989 10,932 11,268 11,443 10,598
1989 11,063 11,421 11,561 10,623
1989 10,956 11,310 11,437 10,640
1989 10,901 11,276 11,399 10,675
1989 11,047 11,413 11,537 10,726
1989 11,235 11,613 11,718 10,751
1989 11,328 11,708 11,798 10,769
1990 11,176 11,653 11,672 10,880
1990 11,258 11,757 11,787 10,931
1990 11,270 11,760 11,783 10,991
1990 11,143 11,676 11,632 11,008
1990 11,407 11,930 11,934 11,033
1990 11,546 12,035 12,048 11,093
1990 11,726 12,212 12,247 11,136
1990 11,481 12,035 11,981 11,238
1990 11,519 12,042 11,998 11,332
1990 11,702 12,260 12,172 11,401
1990 11,973 12,507 12,455 11,426
1990 12,071 12,557 12,509 11,426
1991 12,242 12,725 12,663 11,494
1991 12,311 12,836 12,736 11,512
1991 12,325 12,841 12,761 11,529
1991 12,500 13,012 12,948 11,546
1991 12,586 13,127 13,064 11,580
1991 12,536 13,114 13,024 11,614
1991 12,729 13,274 13,211 11,631
1991 12,877 13,449 13,380 11,665
1991 13,103 13,624 13,553 11,716
1991 13,205 13,747 13,674 11,734
1991 13,215 13,785 13,693 11,768
1991 13,539 14,082 14,016 11,776
1992 13,545 14,114 14,006 11,793
1992 13,520 14,118 14,026 11,836
1992 13,519 14,124 14,031 11,896
1992 13,673 14,250 14,160 11,913
1992 13,860 14,418 14,359 11,930
1992 14,098 14,660 14,620 11,973
1992 14,586 15,100 15,138 11,998
1992 14,326 14,952 14,895 12,032
1992 14,367 15,049 14,955 12,067
1992 14,205 14,902 14,686 12,109
1992 14,534 15,168 15,060 12,126
1992 14,751 15,323 15,246 12,118
1993 14,894 15,501 15,418 12,178
1993 15,441 16,062 16,022 12,220
1993 15,338 15,892 15,835 12,263
1993 15,484 16,052 16,006 12,297
1993 15,559 16,142 16,097 12,314
1993 15,849 16,412 16,374 12,331
1993 15,853 16,433 16,374 12,331
1993 16,201 16,775 16,737 12,366
1993 16,386 16,966 16,935 12,391
1993 16,492 16,998 16,969 12,442
1993 16,305 16,849 16,791 12,451
1993 16,664 17,204 17,125 12,451
1994 16,849 17,400 17,322 12,485
1994 16,372 16,950 16,861 12,528
1994 15,608 16,260 16,124 12,570
1994 15,680 16,398 16,182 12,588
1994 15,830 16,541 16,328 12,596
1994 15,710 16,440 16,222 12,639
1994 15,996 16,741 16,509 12,673
1994 16,051 16,799 16,550 12,724
1994 15,833 16,552 16,282 12,758
1994 15,514 16,258 15,972 12,767
1994 15,217 15,963 15,642 12,784
1994 15,569 16,315 16,024 12,784
1995 16,043 16,781 16,499 12,835
1995 16,560 17,269 16,989 12,886
1995 16,736 17,468 17,142 12,929
1995 16,751 17,489 17,141 12,972
1995 17,315 18,047 17,675 12,997
1995 17,086 17,890 17,483 13,023
1995 17,205 18,060 17,595 13,023
1995 17,422 18,289 17,788 13,057
1995 17,556 18,404 17,897 13,083
1995 17,836 18,671 18,171 13,126
1995 18,200 18,981 18,519 13,117
1995 18,399 19,164 18,725 13,108
1996 18,536 19,309 18,813 13,185
1996 18,378 19,178 18,664 13,228
1996 18,071 18,932 18,368 13,296
1996 17,976 18,879 18,285 13,348
1996 17,965 18,872 18,289 13,373
1996 18,149 19,078 18,460 13,382
1996 18,313 19,251 18,627 13,407
1996 18,304 19,247 18,612 13,433
1996 18,577 19,517 18,878 13,476
1996 18,787 19,737 19,082 13,518
1996 19,150 20,098 19,418 13,544
1996 19,032 20,014 19,332 13,544
1997 19,068 20,052 19,334 13,587
1997 19,236 20,237 19,502 13,629
1997 18,982 19,967 19,249 13,664
1997 19,108 20,135 19,407 13,681
1997 19,391 20,437 19,684 13,672
1997 19,584 20,656 19,897 13,689
1997 20,163 21,228 20,496 13,706
1997 19,927 21,028 20,252 13,732
1997 20,237 21,279 20,497 13,766
1997 20,343 21,415 20,622 13,800
1997 20,472 21,541 20,737 13,792
1997 20,809 21,856 21,065 13,775
1998 21,032 22,081 21,261 13,800
1998 21,023 22,087 21,248 13,826
1998 21,013 22,107 21,252 13,851
1998 20,910 22,008 21,116 13,851
Footnote reads:
As you compare performance, please note that the LB Municipal Bond
Fund's performance reflects the maximum 4% sales charge. The
performance of the Lehman Municipal Bond 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.
LB Municipal Bond Fund
Annualized Total Returns*
- -----------------------------------------------------------------
Since
Inception
Class A shares 1-Year 5-Year 10-Year 12/3/76
Net Asset Value 9.43% 6.19% 8.09% 6.73%
Public Offering Price 5.00% 5.33% 7.65% 6.53%
Since
Inception
Class B shares 1-Year 5-Year 10-Year 10/31/97
If Held (NAV) NA NA NA 2.40%
If Redeemed (CDSC) NA NA NA -2.60%
Institutional shares
Net Asset Value NA NA NA 2.91%
*See accompanying notes to Portfolio Management Reviews.
LB Money Market Fund
[GRAPHIC OMITTED: PHOTO OF 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 Lutheran
Brotherhood since 1969.
Investment Objective:
To seek current income with stability of principal by investing in high-
quality, short-term debt securities.**
Fund Facts
Inception Date: 2/1/79
Shareholder
Accounts: 56,088
Total Assets
(in millions): $505.9
With investors uncertain where the economy and interest rates would
head, money market yields remained in a narrow range over the last six
months. When the reporting period began, money market funds in the IBC
Donoghue's Index had an average yield of 5.03%. As corporations issued
large amounts of short-term debt in the final months of 1997, money
market yields moved higher. This pushed the yield for the Donoghue Index
to 5.23% early in 1998. Meanwhile, further economic trouble in Asia
encouraged the Federal Reserve to take a neutral stance toward interest
rates. This, plus the perception of some larger institutional investors
that the Fed might even reduce rates, drove money market yields lower.
At the end of the period the Index had an average yield
of 5.00%.
During this time we adjusted maturities in the LB Money Market Fund to
make the most of such yield fluctuations. We also took advantage of
special yield opportunities that were available in some instruments.
These strategies helped the Fund earn a total return of 2.41% for the
six months ended April 30, 1998.
[GRAPHIC WORM CHART OMITTED: Portfolio Composition]
Portfolio Composition
(% of Portfolio)
Variable Rate Notes - 9.2%
Bank Notes - 4.8%
Commercial Paper - 80.7%
Certificates of Deposit - 4.0%
Medium Term Notes - 1.3%
Footnote reads:
The Fund's portfolio composition and top holdings represent all
share classes.
Managing Maturities
In managing the Fund's maturities, we emphasized longer-term issues when
we felt yields were attractive and shorter-term issues when we thought
yields might rise. When the period began, the Fund had a weighted
average maturity of 51 days compared to the Donoghue Index average of 55
days. As increased supplies of money market instruments pushed yields a
bit higher, we added longer maturities to take advantage of this trend.
To maintain adequate liquidity in the portfolio, we balanced these
investments with shorter-term issues. This gave the Fund an average
maturity of 52 days by the end of 1997, versus 54 days for the Index.
Once it appeared that the Fed would not raise interest rates, and yields
began to ease, the spread between yields of shorter- and longer-term
issues narrowed. Feeling the yields for longer-term issues were not as
attractive as they had been, we re-focused on shorter maturities. This
strategy would let us move more quickly into higher-yielding issues if
interest rates did rise. By the end of April, the Fund had a weighted
average maturity of 47 days, versus 58 days for the Index.
[GRAPHIC WORM CHART OMITTED: Top 10 Holdings]
% of
Top 10 Holdings Industry Portfolio
Harvard University Education 5.0%
Koch Industries, Inc. Petroleum 2.8%
PNC Bank, N.A. Pittsburgh Banking-Domestic 2.2%
Metrocrest Hospital Authority U.S. Municipal 2.1%
Gulf Coast Waste Disposal Authority U.S. Municipal 2.0%
City of New York Government Bonds,
Fiscal 1995, Series B U.S. Municipal 1.7%
City of Whiting, Indiana Series 1995,
Sewage & Waste Disposal U.S. Municipal 1.6%
Wachovia Bank, N.A. Banking-Domestic 1.6%
California Pollution Control Finance Authority U.S. Municipal 1.4%
Indiana Development Board Parish Calcasieu,
Series 1996 U.S. Municipal 1.4%
Footnote reads:
These holdings represent 21.8% of the Fund's total investment portfolio.
Throughout the period, we looked for individual investments that offered
special yield opportunities. As in previous months, we added yield with
taxable municipal paper issued by state and local governments for
commercial projects with credit enhancements from major corporations and
banks. We further supported the Fund's yield with U.S. dollar-
denominated securities issued by foreign issuers outside of Asia.
[GRAPHIC OMITTED: Performance as of 4/30/98
LB Money Market Fund]
Performance as of 4/30/98
LB Money Market Fund
Annualized Total Returns*
- -------------------------------------------------------------
Since
Inception
Class A shares 1-Year 5-Year 10-Year 2/1/79
Net Asset Value 4.88% 4.14% 5.03% 7.38%
Since
Inception
Class B shares 10/31/97
If Held (NAV) NA NA NA 2.41%
Seven-Day Yields ***
- -------------------------------------------------------------
Effective 4.76%
Annualized Current Net 4.66%
Little Change in Yields Likely
We believe money market yields won't fall much farther unless the Fed
cuts short-term interest rates. Given the potential inflationary
pressure from a tight labor market, such a cut seems unlikely. Because
Asia's economic woes still threaten U.S. growth, a Fed hike in rates
also seems improbable. We expect money market yields, therefore, to
remain in a relatively narrow range.
Although we have once again extended maturities slightly, we plan to keep
the Fund's investments on the short side for now. That way, we can move
quickly into higher-yielding instruments if rates should rise. In the
meantime, we'll maintain a watchful eye for individual opportunities to
enhance the Fund's yield.
Footnotes
* Annualized total returns represent past performance and reflect
changes in share prices, the reinvestment of all dividends and
capital gains, and the effects of compounding. Since performance
varies, annualized total returns, which assume a steady rate of
growth,differ from the Fund's actual total return for the years
indicated. Class A POP(public offering price) returns have been
adjusted for the maximum 4% sales charge. NAV (net asset value)
returns do not include sales charges. The investment return and
principal value will fluctuate so that shares, when redeemed, may be
worth more or less than the original investment. Class B maximum
CDSC returns have been adjusted for the maximum 5% contingent
deferred sales charge. NAV (net asset value) returns do not
include sales charges. There is an asset based sales charge of 0.75%
annually for Class B shares. Institutional (no-load) shares, which
are available to qualifying Lutheran institutions, do not impose a
sales charge. The value of an investment fluctuates so that shares,
when redeemed, may be worth more or less than the original
investment.
Opportunity Growth Fund, World Growth Fund, Mid Cap 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.
** 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.
This report must be preceded or accompanied by a prospectus of the
Lutheran Brotherhood Family of Funds.
AssetMatchSM -- A program for personalized investment strategies
Your financial goals are as unique as you are. And because of this, it's
essential to design investment strategies that are specific to your
individual circumstances.
Whether you're developing a new strategy or revisiting an existing one,
proper planning is key.
- -----------------------------
That's where Lutheran Brotherhood's AssetMatch program comes in.
- -----------------------------
Your LBSC registered representative is trained in portfolio strategy and
guides you through the program:
[BULLET] Collecting information on your investment profile
[BULLET] Exploring various asset mixes and their historical risk and
return characteristics
[BULLET] Identifying an optimal mix of investments for your
circumstances
You can rely on the knowledge and experience of your LBSC registered
representative. He or she can provide solid footing for your
personalized investment strategy.
Based on Proven Principles
AssetMatch is based on the same proven principles that have
guided successful investors for decades: diversification and
asset allocation.
Diversification is the spreading of risk by including a variety of
securities (e.g., small-cap stocks, international stocks, high-yield
bonds, etc.) in your portfolio.
Why Asset Allocation?
Asset allocation is the process of choosing how much to invest among
different asset classes (e.g., stocks, bonds and money market
instruments). Studies have shown that portfolio performance depends
largely on how you allocate your assets.
The chart below illustrates how nearly 92% of an investment
portfolio's performance is due to asset-class selection, while
individual security selection and timing of purchase account for only
about 6%.
[GRAPHIC WORM CHART OMITTED: Asset Allocation:
Main determinant of performance]
Asset allocation policy - 91.5%
Other factors - 2.1%
Market timing - 1.8%
Security selection - 4.6%
Footnote reads:
Used with permission. [Copyright] 1997 Ibbotson Associates,
Inc. All rights reserved.
With such a large part of performance hinging on asset-class selection,
it's critical to have help from your LBSC registered representative, who
is trained in asset allocation strategies.
Jumpstart Your Strategy
The first step in the AssetMatch program is to assess your needs.
Completing an AssetMatch questionnaire helps your LBSC registered
representative gauge the following:
[BULLET] Your risk tolerance
[BULLET] Your investment preferences
[BULLET] Your time horizon
[BULLET] Your liquidity needs
[GRAPHIC OMITTED: AssetMatch Questionnaire]
The questionnaire is short, yet comprehensive, and you can complete it
on your own or with the help of your LBSC registered representative.
Once completed, forward your confidential questionnaire to
your LBSC registered representative for analysis. He or she enters your
answers into the AssetMatch computer program and determines an optimal
mix for your situation. Your LBSC registered representative can then
review your AssetMatch results and discuss whether further analysis or
adjustments to your strategy are necessary.
- --------------------------------
Get started today To obtain an AssetMatch questionnaire, call your LBSC
registered representative, or call LBSC at 1-800-328-4552.
- --------------------------------
This page does not constitute part of the report.
[LUTHERAN BROTHERHOOD LOGO OMITTED]
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]
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
Portfolio of Investments
April 30, 1998
(unaudited)
Shares Value
- -------------- --------------
<S> <C> <C>
COMMON STOCKS - 95.3% (a)
Aerospace - 0.6%
32,310 Aar Corp. $ 846,118 (c)
34,300 BE Aerospace, Inc. 1,069,731 (b)
----------------
1,915,849
----------------
Airlines - 0.9%
26,400 America West Holdings Corp. 798,600 (b)
20,040 Expeditors International of
Washington, Inc. 851,700
98,800 Trans World Airlines, Inc. 957,125 (b)
----------------
2,607,425
----------------
Automotive Parts - 2.1%
30,200 Aftermarket Technology Corp. 588,900 (b)
14,700 Arvin Industries, Inc. 601,781
12,200 Federal-Mogul Corp. 789,188
27,600 Group 1 Automotive, Inc. 414,000 (b)
169,300 Lithia Motors, Inc. 2,539,500 (b)
23,400 Tower Automotive, Inc. 1,247,513 (b)
----------------
6,180,882
----------------
Bank & Finance - 8.8%
21,500 Affiliated Managers Group, Inc. 798,188 (b)
11,800 Ahmanson (H.F.) & Co. 899,750
37,000 AMRESCO, Inc. 1,341,250 (b)
25,800 Annaly Mortgage Management, Inc. 280,575
30,300 ARM Financial Group, Inc. 649,556
10,500 Astoria Financial Corp. 615,563
16,400 Bank United Corp. 848,700
31,600 Bay View Capital Corp. 1,030,950
11,200 Community First Bank Shares, Inc. 564,200
28,200 Dime Bancorp, Inc. 865,388
5,700 Donaldson, Lufkin &
Jenrette, Inc. 540,431
11,800 FIRSTPLUS Financial Group, Inc. 572,300 (b)
16,500 Hambrecht & Quist Group 551,719 (b)
21,700 HealthCare Financial
Partners, Inc. 1,093,138 (b)
55,100 Imperial Credit Commercial
Mortgage Investment Corp. 795,506
37,280 Imperial Credit Industries 941,320 (b)
5,100 Lehman Brothers Holdings, Inc. 362,419
11,400 Metris Companies, Inc. 646,238
14,600 New Century Financial Corp. 170,638
42,000 North Fork Bancorporation, Inc. 1,559,250 (c)
26,600 Ocwen Financial Corp. 688,275 (b)
35,100 Peoples Heritage Financial
Group, Inc. 1,693,575
29,800 Pioneer Group, Inc. 938,700
9,500 Provident Financial Group, Inc. 502,906
64,080 Resource Bancshares Mortgage Group, Inc. 1,137,420
17,800 Sirrom Capital Corp. 531,775
59,900 Southern Pacific Funding Corp. 1,055,738
32,880 Sovereign Bancorp, Inc. 620,610
21,400 Union Planters Corp. 1,316,100
61,700 UST Corp. 1,739,169
18,600 Webster Financial Corp. 630,075
----------------
25,981,422
----------------
Broadcasting - 1.7%
30,200 Chancellor Media Corp. 1,432,613 (b)
11,200 Emmis Broadcasting Corp., Class A 579,600
35,800 News Corp. Ltd. 977,788
24,300 Sinclair Broadcast Group, Inc. 1,260,563
27,600 Westwood One, Inc. 828,000
----------------
5,078,564
----------------
Building Products &
Materials - 2.2%
73,300 Dayton Superior Corp., Class A 1,466,000 (b)
10,600 Fastenal Co. 592,938
10,100 Lone Star Industries, Inc. 834,513
15,100 Martin Marietta Materials 708,756
23,700 Shaw Group, Inc. 556,950 (b)
16,400 Texas Industries, Inc. 1,056,775
47,700 Watsco, Inc. 1,395,225
----------------
6,611,157
----------------
Chemicals - 1.0%
22,100 Crompton & Knowles Corp. 661,619
13,100 Cytec Industries, Inc. 717,225 (b)
38,200 Lilly Industries, Inc. 718,638
21,200 Zoltek Companies, Inc. 734,050 (b)
----------------
2,831,532
----------------
Computer Software - 7.4%
8,500 Aspen Technology, Inc. 415,438 (b)
16,600 Autodesk, Inc. 780,200
46,600 AXENT Technologies, Inc. 1,223,250 (b)
31,600 Business Objects, S.A. 596,450 (b)
32,600 CBT Group plc ADS 1,658,525 (b)
23,600 Electronic Arts, Inc. 1,091,500
18,000 Engineering Animation, Inc. 848,250 (b)
8,400 Filenet Corp. 457,800 (b)
26,000 Harbinger Corp. 945,750
13,000 HBO & Co. 777,563
25,800 Infinium Software Corp. 454,725 (b)
13,100 JDA Software Group, Inc. 662,369 (b)
22,000 Keane, Inc. 1,105,500 (b)
123,800 Macromedia, Inc. 1,849,263
51,500 Midway Games, Inc. 952,750
24,700 Network Associates, Inc. 1,691,950 (b)
53,100 Rational Software Corp. 892,744
26,000 Saville Systems Ireland plc 1,296,750 (b)
32,000 Siebel Systems, Inc. 828,000 (b)
55,500 Summit Design, Inc. 856,781 (b)
29,500 Symantec Corp. 855,500 (b)
24,700 Transaction Systems Architects 1,037,400 (b)
16,400 Viasoft, Inc. 285,975
20,000 XcelleNet, Inc. 410,000 (b)
----------------
21,974,433
----------------
Computers &
Office Equipment - 6.2%
25,300 Analysis International Corp. 733,700
22,270 Apex PC Solutions, Inc 665,316 (b)
23,100 Avid Technology, Inc. 1,001,963 (b)
21,100 Bay Networks, Inc. 494,531 (b)
18,500 Black Box Corp. 615,125 (b)
19,000 Cambridge Technology
Partners, Inc. 992,750 (b)
25,200 Computer Products, Inc. 554,400 (b)
12,200 Computer Task Group, Inc. 474,275 (c)
14,800 Comverse Technology, Inc. 701,150 (b)
36,500 Cotelligent Group, Inc. 942,156 (b)
16,900 Data General Corp. 257,725 (b)
100,000 F.Y.I., Inc. 2,725,000 (b)
20,800 Gateway 2000, Inc. 1,220,700 (b)
79,000 Hypercom Corporation 1,027,000 (b)
16,900 Insight Enterprise, Inc. 673,888 (b)
11,000 International Network Services 369,875 (b)
11,800 Knoll, Inc. 410,788 (b)
48,860 National Computer Systems, Inc. 1,221,500
23,300 Network Appliance, Inc. 840,256 (b)
18,700 Read-Rite Corp. 258,294 (b)
9,700 Tech Data Corp. 483,788 (b)
20,700 Technology Solutions Co. 664,988 (b)
42,200 Vanstar Corp. 561,788 (b)
29,500 Western Digital Corp. 582,625 (b,c)
----------------
18,473,581
----------------
Construction &
Home Building - 0.7%
14,800 Jacobs Engineering Group, Inc. 493,950 (b)
38,000 Morrison Knudsen Corp. 453,625 (b)
19,000 Service Experts, Inc. 631,750 (b)
13,200 Zurn Industries, Inc. 569,250
----------------
2,148,575
----------------
Cosmetics & Toiletries - 0.3%
42,200 Helen of Troy Ltd. 865,100 (b)
----------------
Drugs & Health Care - 5.7%
67,800 ADAC Labs, Inc. 1,474,650
14,400 AmeriSource Health Corp. 784,800 (b)
140,400 Atrix Laboratories, Inc. 2,562,300 (b)
83,300 Eclipse Surgical
Technologies, Inc. 968,363 (b)
35,250 ICN Pharmaceuticals, Inc. 1,736,063
21,400 Incyte Pharmacueticals, Inc. 963,000 (b)
177,300 IRIDEX Corp. 1,606,781
62,200 Kendle International, Inc. 1,687,175
275,900 Matritech, Inc. 1,241,550 (b)
35,750 Miravant Medical Technologies 862,469 (b)
61,600 PSS World Medical, Inc. 1,382,150 (b)
25,710 Serologicals Corp. 771,300 (b)
27,900 Theragenics Corp. 795,150 (b)
----------------
16,835,751
----------------
Electric Utilities - 0.5%
17,100 AES (The) Corp. 943,706 (b)
25,300 Eastern Utilities Associates 664,125
----------------
1,607,831
----------------
Electrical Equipment - 0.6%
38,700 Elsag Bailey Process Automation N.V. 771,581 (b)
25,300 Essex International, Inc. 907,638 (b)
----------------
1,679,219
----------------
Electronics - 5.9%
19,300 Berg Electronics Corporation 459,581 (b)
15,750 Burr-Brown Corp. 479,391 (b)
38,700 DII Group, Inc. 899,775 (b)
25,600 GenRad, Inc. 513,600 (b)
27,700 IFR Systems, Inc. 588,625 (c)
63,800 Integrated Silicon Solution 566,225 (b)
83,600 International Manufacturing Services, Inc. 830,775 (b)
18,600 Jabil Circuit, Inc. 653,325 (b)
37,200 Kulicke & Soffa Industries, Inc. 799,800 (b)
10,600 Linear Technology Corp. 853,300
22,000 MRV Communications, Inc. 591,250 (b)
11,060 Natural Microsystems Corp. 356,685 (b)
21,100 QLogic Corp. 938,950 (b)
21,100 REMEC, Inc. 524,863 (b)
15,800 Sanmina Corp. 1,422,000 (b)
18,500 Semitool, Inc. 235,875
21,900 Semtech Corp 522,862 (b)
55,900 Sensormatic Electronics Corp. 873,437
22,600 Smart Modular Technologies, Inc. 557,938 (b)
12,750 STB Systems, Inc. 182,484 (b)
25,400 ThermoQuest Corp. 454,025 (b)
14,300 Uniphase Corp. 775,775 (b)
17,300 Veeco Instruments, Inc. 698,487 (b)
11,800 Vitesse Semiconductor Corp. 680,712
33,800 VLSI Technology, Inc. 697,125 (b)
27,300 Waters Corp. 1,460,550 (b)
----------------
17,617,415
----------------
Food & Beverage - 1.0%
31,300 Authentic Specialty Foods, Inc. 446,025 (b)
30,600 J & J Snack Foods Corp. 596,700 (b)
26,700 Smithfield Foods, Inc. 811,012 (b)
34,200 U.S. Foodservice 1,207,687 (b)
----------------
3,061,424
----------------
Healthcare Management - 2.8%
33,400 American Oncology Resources, Inc. 501,000 (b)
262,700 Complete Management, Inc. 2,118,019 (b)
54,000 FPA Medical Management, Inc. 675,000 (b)
48,600 Home Health Corp. of America, Inc. 167,062 (b)
21,000 Integrated Health Services, Inc. 809,812
31,700 Medaphis Corp. 291,244 (b)
42,200 MedPartners, Inc. 432,550
23,000 Omnicare, Inc. 787,750
93,000 PharMerica, Inc. 1,290,375 (b)
296,900 U.S. Diagnostic Labs, Inc. 1,187,600 (b)
----------------
8,260,412
----------------
Hospital Management - 1.2%
22,800 Concentra Managed Care, Inc. 709,650 (b)
13,100 Healthcare Recoveries, Inc. 312,762 (b)
35,550 Horizon Health Corp. 844,312
49,300 PhyMatrix Corp. 496,081
22,000 Universal Health Services, Inc. 1,266,375 (b)
----------------
3,629,180
----------------
Household Products - 1.2%
12,600 Aptargroup, Inc. 787,500
30,900 Benckiser NV 1,796,062 (b)
33,700 Donaldson Company, Inc. 855,137
----------------
3,438,699
----------------
Industrial - 0.8%
46,700 Innovative Valve Technologies, Inc. 776,387 (b)
70,000 TETRA Technologies, Inc. 1,675,625
----------------
2,452,012
----------------
Insurance - 3.6%
23,600 Allied Group, Inc. 705,050
23,400 American Heritage Life Invst 536,738
10,900 Arthur J. Gallagher & Company 478,237
15,100 Berkley (WR) Corp. 704,037
15,500 CMAC Investment Corp. 1,000,719
15,200 Conseco, Inc. 754,300
12,913 Delphi Financial Group, Inc. 736,052 (b)
12,300 Executive Risk, Inc. 820,256
20,300 E.W. Blanch Holdings, Inc. 710,500
22,100 Fremont General Corp. 1,232,075
38,600 Frontier Insurance Group, Inc. 1,022,900
26,900 IPC Holdings Ltd. 870,887
13,400 UICI, Inc. 388,600 (b)
12,600 Vesta Insurance Group, Inc. 713,475
----------------
10,673,826
----------------
Leisure & Entertainment - 2.8%
77,700 Cannondale Corp. 1,233,487 (b)
31,796 Fairfield Communities, Inc. 743,231 (b)
18,660 Promus Hotel Corp. 843,199 (b)
79,050 Signature Resorts, Inc. 1,413,019 (b)
100,100 Silverleaf Resorts, Inc. 2,377,375
56,550 Steiner Leisure Ltd. 1,784,859
----------------
8,395,170
----------------
Machinery &
Equipment - 2.6%
19,800 Applied Industrial Tech, Inc. 502,425
19,000 Applied Power, Inc. 710,125
14,400 Black & Decker Corp. 743,400
54,800 Denison International plc 986,400
24,800 DT Industries, Inc. 830,800
21,100 MagnTek, Inc. 415,406 (b)
83,100 Miller Industries, Inc. 654,412
21,600 MSC Industrial Direct Co., Inc.,
Class A 1,098,900 (b)
27,300 Roper Industries, Inc. 846,300
35,700 Stewart & Stevenson Services, Inc 794,325
----------------
7,582,493
----------------
Manufacturing - 0.6%
52,900 BMC Industries, Inc. 965,425
46,300 Zomax Optical Media, Inc. 758,162 (b)
----------------
1,723,587
----------------
Media - 0.2%
21,150 Outdoor Systems, Inc. 671,513 (b)
----------------
Mining & Metals - 2.1%
25,300 Allegheny Teldyne, Inc. 641,987
80,600 Cambior, Inc. 634,725
22,400 Carpenter Technology Corp. 1,300,600
201,500 Dayton Mining Corp. 302,250 (b)
84,600 Greenstone Resources Ltd. 518,175 (b)
161,200 Meridian Gold, Inc. 634,725 (b)
24,300 Reliance Steel & Aluminum Co. 981,113
33,600 Steel Dynamics, Inc. 768,600 (b)
19,100 Titanium Metals Corp. 508,537 (b)
----------------
6,290,712
----------------
Oil & Oil Service - 6.5%
9,700 Cooper Cameron Corp. 644,444 (b)
15,600 Diamond Offshore Drilling, Inc. 789,750
133,700 Domain Energy Corp. 1,738,100
84,100 Eagle Geophysical, Inc. 1,566,362
16,900 Enron Corp. 831,269
13,500 EVI, Inc. 718,875 (b)
58,500 Forcenergy, Inc. 1,349,156
31,700 Global Industries Ltd. 719,194 (b)
19,800 Global Marine, Inc. 466,537 (b)
31,600 Gulf Island Fabrication, Inc. 734,700 (b)
83,700 Lomak Petroleum, Inc. 1,156,106
26,600 Marine Drilling Companies, Inc. 646,712 (b)
25,300 National-Oilwell, Inc. 959,819 (b)
25,300 Noble Drilling Corp. 817,506 (b)
13,700 Nuevo Energy Co. 488,063
57,200 Ocean Energy, Inc. 1,401,400 (b)
22,500 Pool Energy Services Co. 593,437 (b)
19,900 Pride International, Inc. 483,819 (b)
18,700 Rowan Companies, Inc. 550,481 (b)
45,160 Swift Energy Co. 900,378
23,200 Varco International, Inc. 713,400 (b)
44,600 Vintage Petroleum, Inc. 869,700
----------------
19,139,208
----------------
Paper &
Forest Products - 0.6%
44,300 Boise Cascade Corp. 1,664,019
----------------
Pollution Control - 1.6%
53,400 Allied Waste Industries, Inc. 1,468,500
194,700 IDM Environmental Corp. 675,366 (b)
122,000 Recycling Industries, Inc. 915,000 (b)
47,840 U.S. Filter Corp. 1,560,780
----------------
4,619,646
----------------
Publishing &
Printing - 0.4%
25,400 Day Runner, Inc. 609,600 (b)
14,600 Scholastic Corp. 543,850 (b)
----------------
1,153,450
----------------
Real Estate Investment Trust - 1.3%
30,200 American General Hospitality Corp. 756,887
29,170 Apartment Investment & Management Co 1,090,229
27,800 First Industrial Realty Trust, Inc. 903,500
20,200 Glimcher Realty Trust 429,250
24,000 Highwoods Properties, Inc. 816,000
----------------
3,995,866
----------------
Restaurants - 1.7%
31,900 Apple South, Inc. 502,425
116,700 Buffets, Inc. 1,728,619
37,300 Dave & Busters, Inc. 974,462 (b)
29,820 Landry's Seafood Restaurant, Inc. 849,870 (b)
27,600 Outback Steakhouse, Inc. 1,052,250 (b)
----------------
5,107,626
----------------
Retail - 5.5%
23,180 Central Garden & Pet Company 793,915 (b)
13,500 CompUSA, Inc. 250,594 (b)
19,400 Department 56, Inc. 697,188 (b)
21,000 Dole Food, Inc. 943,687
32,375 Dollar General Corp. 1,226,203
14,300 Dominicks Supermarkets, Inc. 572,894 (b)
97,700 Food Lion, Inc. 989,212
19,610 Fred Meyer, Inc. 879,999 (b)
34,300 Hot Topic, Inc. 990,412
11,400 Men's (The) Wearhouse, Inc. 480,225 (b)
49,100 OfficeMax, Inc. 923,694
14,300 Pacific Sunwear of California 630,987 (b)
18,600 Proffitt's, Inc. 739,350 (b)
24,000 Ross Stores, Inc. 1,111,500
22,700 Stage Store, Inc. 1,167,631 (b)
37,300 Travis Boats & Motors, Inc. 1,007,100
111,950 US Office Products Company 1,980,116
38,600 West Coast Entertainment Corp. 101,325 (b)
27,400 Zale Corp. 825,425 (b)
----------------
16,311,457
----------------
Services - 6.9%
41,000 AccuStaff, Inc. 1,470,875 (b)
24,400 Affiliated Computer Services 857,050 (b)
27,960 Apollo Group, Inc. 957,630 (b)
28,500 Brightpoint, Inc. 555,750 (b)
23,600 Budget Group, Inc. 790,600 (b)
41,700 CKS Group, Inc. 930,431 (b)
96,800 Coach USA, Inc. 4,591,950
2,262 Corporate Express, Inc. 22,761
11,490 Equity Corporation International 285,096 (b)
23,200 ETrade Group, Inc. 578,550 (b)
33,400 Gartner Group, Inc. 1,106,375 (b)
25,790 HA LO Industries, Inc. 865,577 (b)
51,400 Metamor Worldwide, Inc. 1,966,050 (b)
95,000 PMT Services, Inc. 1,852,500
80,700 Professional Staff plc 1,452,600
11,910 Renters Choice, Inc. 326,036 (b)
12,600 StaffMark, Inc. 535,500 (b)
40,300 True North Communications, Inc. 1,229,150
----------------
20,374,481
----------------
Telecommunications Equipment - 2.6%
20,000 Aspect Telecommunications Corp. 575,000 (b)
19,500 Bisys (The) Group, Inc. 770,250 (b)
13,500 Cellstar Corp. 440,437 (b)
28,200 Gilat Satellite Networks Ltd. 1,078,650
22,600 Inter-Tel, Inc. 533,925
134,400 Larscom, Inc. 1,260,000 (b)
30,600 Nice - Systems Ltd. 1,315,800 (b)
77,300 Orckit Communications Ltd. 1,599,144 (b)
----------------
7,573,206
----------------
Telephone & Telecommunications - 2.4%
25,300 Advanced Fibre Communications 1,072,087 (b)
17,000 Davox Corp. 380,375 (b)
39,200 LCI International, Inc. 1,558,200 (b)
41,100 Paging Network, Inc. 577,969 (b)
36,900 P-Com, Inc. 726,469 (b)
42,000 STARTEC Global Communications Corp. 1,071,000 (b)
18,900 Tekelec 949,725 (b)
39,650 Tel-Save Holdings, Inc 904,516 (b)
----------------
7,240,341
----------------
Textiles & Apparel - 1.1%
40,200 Nautica Enterprises, Inc. 999,975 (b)
10,500 Springs Industries, Inc. 578,156
30,800 Tefron Ltd. 825,825
19,000 Warnaco Group, Inc. 802,750
----------------
3,206,706
----------------
Transportation - 0.3%
29,800 Teekay Shipping Corp. 916,350
----------------
Trucking - 0.9%
38,300 Heartland Express, Inc. 952,712 (b)
30,800 USFreightways Corp. 1,101,100
16,900 Wabash National Corp. 521,787
----------------
2,575,599
----------------
Total Common Stocks
(cost $258,139,005) 282,465,719
----------------
OTHER - .0004% (a)
Atrix Laboratories, Inc., 100 put
option contracts, exercise price
of $12.50, expires May, 1998 1,250
----------------
Total Other (cost $15,300) 1,250
----------------
Principal
Amount Value
- --------- ------------
SHORT-TERM
SECURITIES - 4.7% (a)
Commercial Paper
13,900,000 New Center Asset Trust, 5.55%,
due 5/01/98 13,900,000
----------------
Total Investments
(cost $272,054,305) $296,366,969 (d)
================
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) Includes stock rights that automatically traded with the
stock and had no separate value at April 30, 1998.
(d) At April 30, 1998, the aggregate cost of securities for
federal income tax purposes was $272,054,305 and the net
unrealized appreciation of investments based on that cost was
$24,312,664 which is comprised of $41,534,028 aggregate gross
unrealized appreciation and $17,221,364 aggregate gross
unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
Portfolio of Investments
April 30, 1998
(unaudited)
Shares Value
- -------------- --------------
<S> <C> <C>
COMMON STOCKS - 95.2% (a)
Aerospace - 0.5%
2,300 Sunstrand Corp. $ 158,844
----------------
Airlines - 1.1%
2,860 ASA Holdings, Inc. 108,680
3,280 Expeditors International of
Washington Inc. 139,400
3,690 Southwest Airlines Co. 101,244
----------------
349,324
----------------
Automotive - 1.3%
2,420 Borg-Warner Automotive, Inc. 150,494
2,410 Lear Corp. 129,086
4,730 Superior Industries
International, Inc. 151,951
----------------
431,531
----------------
Automotive Parts - 0.4%
2,700 Tower Automotive, Inc. 143,944 (b)
----------------
Bank & Finance - 12.5%
2,490 Associates First Capital Corp. 186,128
1,000 Bankers Trust NY Corp. 129,125
1,770 Charter One Financial, Inc. 119,807
3,810 City National Corp. 141,684
2,290 Crestar Financial Corp. 136,971
1,320 Donaldson, Lufkin & Jenrette, Inc. 125,153
3,020 Finova Group, Inc. 176,859
2,600 First American Corp. 128,213
3,150 Firstar Corp. 117,534
2,700 FIRSTPLUS Financial Group, Inc. 130,950 (b)
3,810 Franklin Resources, Inc. 203,835
1,120 Golden West Financial Corp. 117,950
1,930 Mellon Bank Corp. 138,960
3,200 Mercantile Bancorporation, Inc. 177,200
2,180 MGIC Investment Corp. 137,340
4,090 Mutual Risk Management Ltd. 138,549
2,000 Northern Trust Corp. 146,000
2,880 PaineWebber Group, Inc. 129,060
1,460 PMI Group 118,625
3,930 Provident Companies, Inc. 153,516
4,440 Sirrom Capital Corp. 132,645
1,740 State Street Corp. 124,410
2,515 Summit Bancorp 126,064
2,920 SunAmerica, Inc. 145,818
3,970 TCF Financial Corp. 129,273
2,533 Travelers Group, Inc. 154,988
3,640 Travelers Property Casualty Corp. 152,880
2,050 Union Planters Corp. 126,075
1,910 Washington Mutual, Inc. 133,819
----------------
4,079,431
----------------
Broadcasting - 1.1%
3,670 CBS Corp. 130,744
2,580 Clear Channel Communications, Inc. 243,165 (b)
----------------
373,909
----------------
Building Products & Materials - 0.4%
2,800 Leggett & Platt, Inc. 145,425
----------------
Chemicals - 1.2%
6,800 Airgas, Inc. 105,400 (b)
4,040 Crompton & Knowles Corp. 120,948
3,010 Cytec Industries, Inc. 164,798 (b)
----------------
391,146
----------------
Computer Software - 7.4%
2,180 Autodesk, Inc. 102,460
2,500 BMC Software, Inc. 233,906 (b)
4,790 Cadence Design Systems, Inc. 173,937 (b)
5,100 Cerner Corp. 152,044 (b)
4,690 Compuware Corp. 229,224 (b)
3,070 Documentum, Inc. 165,396 (b)
3,910 HBO & Co. 233,867
3,750 Information Management Resources, Inc. 101,719 (b)
6,980 Learning (The) Company, Inc. 199,803 (b)
1,300 Microsoft Corp. 117,162 (b)
1,990 Network Associates, Inc. 136,315 (b)
1,990 PeopleSoft, Inc. 92,535 (b)
5,310 Platinum Technology, Inc. 135,405 (b)
2,420 Saville Systems Ireland plc 120,697 (b)
1,800 Shared Medical Systems Corp. 131,287
4,000 Symantec Corp. 116,000 (b)
----------------
2,441,757
----------------
Computers & Office Equipment - 5.3%
8,900 Aspec Technology, Inc. 123,487 (b)
4,560 Avid Technology, Inc. 197,790 (b)
3,380 Cambridge Technology Partners, Inc. 176,605 (b)
2,110 Cisco Systems, Inc. 154,558 (b)
3,560 EMC Corp. 164,205 (b)
7,080 FORE Systems, Inc. 161,955 (b)
3,440 Furniture Brands Int'l, Inc. 101,050 (b)
2,270 Gateway 2000, Inc. 133,221 (b)
4,420 Herman Miller, Inc. 133,429
4,120 Hon Industries, Inc. 131,840
2,470 Lexmark Intl Group, Inc. 142,951 (b)
2,700 Systems & Computer Technology Corp. 152,550 (b)
----------------
1,773,641
----------------
Conglomerates - 0.9%
2,800 Tyco International Ltd. 152,600
4,970 U.S. Industries, Inc. 134,811
----------------
287,411
----------------
Construction & Home Building - 0.4%
6,830 Clayton Homes 137,027
----------------
Containers & Packaging - 0.4%
3,390 Owens-Illinois, Inc. 134,117 (b)
----------------
Drugs & Health Care - 7.5%
2,330 Arrow International, Inc. 76,890
5,660 Ballard Medical Products 142,207
1,890 Cardinal Health, Inc. 181,912
3,100 Centocor, Inc. 130,781 (b)
2,400 Elan Corp. plc, ADS 149,100 (b)
3,520 Forest Laboratories, Inc. 127,380 (b)
4,000 Genzyme Corp. 123,750 (b)
3,450 Gilead Sciences, Inc. 131,100 (b)
2,630 Guidant Corporation 175,881
2,880 IDEC Pharmaceuticals Corp. 103,680 (b)
6,440 Luxottica Group S.P.A. 107,468
2,400 McKesson Corp. 169,650
5,775 PSS World Medical, Inc. 129,577 (b)
3,050 Sola Int'l, Inc. 129,625 (b)
2,980 STERIS Corp. 175,261 (b)
5,900 Sybron Corp. 156,350 (b)
5,420 Watson Pharmaceuticals, Inc. 233,060 (b)
----------------
2,443,672
----------------
Electric Utilities - 0.4%
2,680 AES (The) Corp. 147,902 (b)
----------------
Electrical Equipment - 1.9%
3,780 Applied Materials, Inc. 136,553 (b)
3,480 KLA Instruments Corp. 140,287 (b)
2,180 Novellus Systems, Inc. 104,368 (b)
3,405 Symbol Technologies, Inc. 131,093
3,842 Thermo Instrument Systems, Inc. 113,339 (b)
----------------
625,640
----------------
Electronics - 6.0%
3,310 Altera Corp. 134,055 (b)
3,940 Analog Devices, Inc. 153,414 (b)
6,660 Berg Electronics Corporation 158,591 (b)
1,930 Emerson Electric Company 122,796
2,510 Maxim Integrated Products, Inc. 101,341 (b)
4,700 Microchip Technology, Inc. 133,363 (b)
3,600 Oak Industries, Inc. 130,725 (b)
3,490 PMC-Sierra, Inc. 158,795 (b)
1,640 Sanmina Corp. 147,600 (b)
2,600 Solectron Corp. 115,212 (b)
3,100 Uniphase Corp. 168,175 (b)
2,400 Vitesse Semiconductor Corp. 138,450
3,800 Waters Corp. 203,300 (b)
2,650 Xilinx, Inc. 121,237 (b)
----------------
1,987,054
----------------
Food & Beverage - 1.2%
7,030 Flowers Industries, Inc. 150,266
1,750 Suiza Foods Corp. 103,687 (b)
3,800 U.S. Foodservice 134,188 (b)
----------------
388,141
----------------
Healthcare Management - 2.1%
4,940 HEALTHSOUTH Rehabilitation Corp. 149,126 (b)
4,500 Omnicare, Inc. 154,125
8,110 Oxford Health Plans, Inc. 138,884 (b)
2,650 Pediatrix Medical Group, Inc. 111,797 (b)
4,280 Total Renal Care Holdings, Inc. 141,775 (b)
----------------
695,707
----------------
Hospital Management - 2.0%
3,730 Concentra Managed Care, Inc. 116,096 (b)
4,140 Curative Health Services, Inc. 128,340 (b)
5,010 Health Management Associates, Inc. 157,815 (b)
4,930 Quorum Health Group, Inc. 158,376 (b)
1,600 Universal Health Services, Inc. 92,100 (b)
----------------
652,727
----------------
Household Products - 1.4%
1,720 Colgate Palmolive Co. 154,263
5,660 Dial Corp. 137,962
3,780 Newell Company 182,621
----------------
474,846
----------------
Insurance - 1.9%
2,090 Conseco, Inc. 103,716
2,710 Nac Re Corp. 135,500
3,090 Nationwide Financial Services 134,029
2,950 Old Republic Int'l Corp. 133,487
3,590 PLC Capital Trust II 133,279
----------------
640,011
----------------
Leisure &
Entertainment - 1.8%
3,370 CapStar Hotel Co. 108,261 (b)
4,850 Harley Davidson, Inc. 174,600 (c)
7,700 Host Marriott Corp. 149,669
2,700 Premier Parks, Inc. 150,187 (b)
----------------
582,717
----------------
Machinery & Equipment - 1.3%
2,960 Black & Decker Corp. 152,810
2,840 Kennametal, Inc. 151,407
2,580 MSC Industrial Direct Co., Inc.,
Class A 131,258 (b)
----------------
435,475
----------------
Media - 0.8%
3,620 Outdoor Systems, Inc. 114,935 (b)
4,850 Tele-Communications, Inc., Liberty
Media Group, Series A 160,959 (b)
----------------
275,894
----------------
Mining & Metals - 0.9%
2,830 Carpenter Technology Corp. 164,317
1,720 Mueller Industries, Inc. 116,422 (b)
----------------
280,739
----------------
Oil & Oil Service - 5.3%
3,260 BJ Services Co. 122,250 (b)
2,400 Camco International, Inc. 162,900
2,010 Cooper Cameron Corp. 133,539 (b)
2,650 Diamond Offshore Drilling, Inc. 134,156
4,140 ENSCO International, Inc. 116,955
5,840 Global Marine, Inc. 137,605 (b)
4,400 Noble Drilling Corp. 142,175 (b)
4,438 R&B Falcon Corp. 142,293 (b)
2,410 Smith Int'l, Inc. 141,587 (b)
2,960 Sun Company, Inc. 119,695
3,330 Tosco Corp. 118,631
2,390 Transocean Offshore, Inc. 133,541
3,630 USX-Marathon Group 129,999
----------------
1,735,326
----------------
Pollution Control - 0.8%
5,240 USA Waste Services, Inc. 257,087
----------------
Publishing & Printing - 0.3%
3,390 World Color Press, Inc. 108,480 (b)
----------------
Railroads - 0.6%
1,920 CSX Corp. 100,800
2,500 Kansas City Southern Industries, Inc. 112,969
----------------
213,769
----------------
Real Estate Investment Trust - 0.4%
2,120 AMBAC, Inc. 120,178
----------------
Restaurants - 1.0%
4,300 Papa John's International, Inc. 179,525 (b)
3,100 Starbucks Corp. 149,187 (b)
----------------
328,712
----------------
Retail - 7.4%
2,440 Bed, Bath & Beyond, Inc. 120,170 (b)
4,490 Borders Group, Inc. 144,241 (b)
3,100 Consolidated Stores Corp. 124,000 (b)
3,820 Dollar General Corp. 144,683
2,480 Dollar Tree Stores, Inc. 134,540 (b)
2,700 Fred Meyer, Inc. 121,163 (b)
4,890 General Nutrition Companies 175,429 (b)
4,120 Kohl's Corp. 170,208 (b)
3,330 Lands' End, Inc. 122,794 (b)
4,260 Long Drug Stores, Inc. 123,274
3,890 Men's (The) Wearhouse, Inc. 163,866 (b)
3,900 Office Depot, Inc. 129,187 (b)
4,300 Proffitt's, Inc. 170,925 (b)
3,550 Ross Stores, Inc. 164,409
2,420 Stage Store, Inc. 124,479 (b)
2,100 Williams-Sonoma, Inc. 115,369 (b)
6,280 Zale Corp. 189,185 (b)
----------------
2,437,922
----------------
Services - 8.3%
5,500 AccuStaff, Inc. 197,313 (b)
5,430 American Management Systems, Inc. 157,131 (b)
5,040 Apollo Group, Inc. 172,620 (b)
6,097 Cendant Corporation 152,425 (b)
3,540 Computer Horizons Corp. 134,299 (b)
2,930 Crane Company 157,671
5,680 Equifax, Inc. 219,745
1,800 Fiserv, Inc. 117,675 (b)
4,070 Gartner Group, Inc. 134,819 (b)
2,910 Harsco Corp. 133,860
3,050 Interpublic Group of Cos., Inc. 194,819
2,870 Omnicom Group, Inc. 135,966
2,680 Paychex, Inc. 145,558
3,000 Robert Half Int'l, Inc. 162,375 (b)
3,190 Sterling Commerce, Inc. 135,774 (b)
4,800 Stewart Enterprises, Inc. 123,600
7,020 SunGard Data Systems, Inc. 250,087 (b)
----------------
2,725,737
----------------
Telecommunications Equipment - 2.3%
4,600 ADC Telecommunications, Inc. 137,712 (b)
3,600 Ascend Communications, Inc. 156,825 (b)
5,060 Aspect Telecommunications Corp. 145,475 (b)
2,910 Ericsson (L.M.) Telecommunications,
Class B, ADR 149,683
2,250 Tellabs, Inc. 159,469 (b)
----------------
749,164
----------------
Telephone & Telecommunications - 5.2%
4,910 Advanced Fibre Communications 208,061 (b)
3,450 Century Telephone Enterprises 146,841
5,660 NEXTEL Communications, Inc., Class A 162,371 (b)
5,920 Omnipoint Corp. 145,040 (b)
2,560 Tekelec 128,640 (b)
1,000 Telecomunicacoes Brasileiras 121,813
2,910 Telephone and Data Systems, Inc. 138,225
7,070 Tel-Save Holdings, Inc 161,284 (b)
4,400 US LEC Corp. 106,700 (b)
7,290 Vanguard Cellular Systems, Inc. 138,510 (b)
5,900 Western Wireless Corp. 115,050 (b)
3,440 WorldCom, Inc. 147,167 (b)
----------------
1,719,702
----------------
Textiles & Apparel - 0.8%
2,210 Jones Apparel Group, Inc. 132,186 (b)
3,440 Warnaco Group, Inc. 145,340
----------------
277,526
----------------
Trucking - 0.7%
3,340 USFreightways Corp. 119,405
4,050 Wabash National Corp. 125,044
----------------
244,449
----------------
Total Common Stocks
(cost $28,375,552) 31,396,084
----------------
Principal
Amount Value
- --------- ------------
SHORT-TERM
SECURITIES - 4.8% (a)
U.S. Government Agency
$ 1,580,000 Federal Home Loan Mortgage,
Discount Notes, 5.45%,
Due 5/01/98 $ 1,580,000
----------------
Total Investments
(cost $29,955,552) $ 32,976,084 (d)
================
Notes to Portfolio of Investments:
- ----------------------------------
(a) The categories of investments are shown as a percentage of
total investments of the Lutheran Brotherhood Mid Cap Growth
Fund.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock
and had no separate value at April 30, 1998.
(d) At April 30, 1998, the aggregate cost of securities for federal
income tax purposes was $29,955,552 and the net unrealized
appreciation of investments based on that cost was $3,020,532
which is comprised of $3,393,015 aggregate gross unrealized
appreciation and $372,483 aggregate gross unrealized
depreciation.
(e) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
(ADS) - American Depository Shares
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
Portfolio of Investments
April 30, 1998
(unaudited)
Shares Value
- -------------- --------------
<S> <C> <C>
ARGENTINA - 0.9% (a)
COMMON STOCKS
2,353 Banco de Galicia Buenos Aires 'B' ADR
(USD) $ 57,649
2,600 Banco Frances del Rio de la Plata ADR
(USD) 75,563
19,286 Naviera Perez 'B' 115,926
4,690 Telefonica de Argentina ADR (USD) 180,858
10,287 YPF Sociedad Anonima ADR (USD) 358,758
----------------
Total Argentina 788,754
----------------
AUSTRALIA - 2.0% (a)
COMMON STOCKS
22,711 Australia Gas & Light 169,049
4,000 Brambles Industries Ltd. 82,471
16,198 Broken Hill Proprietary 158,477
15,000 Colonial Ltd. 52,832
14,918 Commonwealth Bank of Australia 179,134
35,000 Goodman Fielder Ltd. 54,332
45,000 John Fairfax Holdings Ltd. 82,184
5,331 Lend Lease Corp. 122,396
6,306 National Australia Bank Ltd. 89,665
27,076 News Corp. 181,548
17,000 Publishing & Broadcasting 81,277
47,086 Telstra Corp. Ltd. 110,563
25,000 Westpac Banking 167,954
17,500 Woodside Petroleum 114,486
----------------
1,646,368
----------------
PREFERRED STOCKS
12,727 News Corp. 71,723
----------------
Total Australia 1,718,091
----------------
BELGIUM - 1.6% (a)
COMMON STOCKS
601 Credit Communal Holding/Dexia 82,358
530 Generale de Banque S.A. 306,199
35 Generale de Banque S.A., VVPR (reduced
tax) Strips 7
1,550 Kredietbank 874,540
25 UCB 119,533
----------------
Total Belgium 1,382,637
----------------
BRAZIL - 2.3% (a)
COMMON STOCKS
470 Brazil Fund (USD) 10,693
1,270 Centrais Eletricas Brasileiras S.A. ADR
(USD) 26,353
2,950 Companhia Brasileira de Distribuicao
Grupo Pao de Acucar GDR (USD) 78,544
500 Companhia Energetica Brasilia (USD) 24,000
5,828 Companhia Energetica Minas Gerais ADR
(USD) 279,744
2,000 Companhia Siderurgica Nacional (ADR) 62,250
10,883 Telecomunicacoes Brasilias ADR (USD) 1,325,684
29,910 Usinas Siderurgicas de Minas Gerais ADR
(USD) 209,370
----------------
Total Brazil 2,016,638
----------------
CANADA - 0.3% (a)
COMMON STOCKS
4,980 Alcan Aluminum 163,684
1,870 Royal Bank of Canada 111,942
----------------
Total Canada 275,626
----------------
CHILE - 0.1% (a)
COMMON STOCKS
1,950 Chilectra ADR (USD) 54,356
2,039 Enersis S.A. ADR (USD) 60,023
386 Santa Isabel (ADR) 6,369
----------------
Total Chile 120,748
----------------
CHINA - 0.3% (a)
COMMON STOCKS
11,400 Huaneng Power International'N' ADR
(USD) 250,800 (b)
----------------
CZECH REPUBLIC - 0.05% (a)
COMMON STOCKS
250 SPT Telecom a.s. 36,360 (b)
----------------
DENMARK - 0.2% (a)
COMMON STOCKS
1,020 Den Danske Bank 123,715
190 Tele Danmark 'B' 15,965
930 Unidanmark 'A' 78,144
----------------
Total Denmark 217,824
----------------
FINLAND - 0.4% (a)
COMMON STOCKS
5,340 Nokia Oyj 358,837
----------------
FRANCE - 9.5% (a)
COMMON STOCKS
435 Accor 118,610
2,430 Alcatel Alsthom 450,749
3,860 AXA 453,362
630 Canal Plus 109,524
417 Carrefour 238,989
2,930 Cie de St. Gobain 488,415
1,638 Credit Commercial de France 130,800
457 Credit Local de France 55,348
690 Credit Local de France - Dexia France 83,567
190 Dexia France 23,011
5,790 Eaux Cie Generale 1,076,896
950 Groupe Danone 224,422
630 GTM Entrepose 49,679
1,220 Lafarge Coppee 115,282
101 Lafarge SA 9,275
1,740 Lapeyre 132,287
649 Legrand 171,670
231 L'Oreal 110,293
503 Pathe S.A. 109,453
1,159 Pinault Printemps Redoute 863,417
760 Primagaz 65,620
3,993 Sanofi 484,262
6,112 Schneider S.A. 457,561
1,276 Societe Generale 265,771
2,440 Societe Nationale Elf Aquitaine 320,273
2,604 Sodexho 476,960
2,080 Television Francaise 292,397
7,443 Total 'B' 885,335
----------------
Total France 8,263,228
----------------
GERMANY - 6.3% (a)
COMMON STOCKS
1,360 Allianz AG 418,333
7,788 Bayer 346,317
6,210 Bayerische Hypotheken - und Wechse - Bank 354,353
4,636 Bayerische Vereinsbank AG 352,631
1,600 Bilfinger & Berger Bau AG 53,941
100 Buderas 46,976
2,410 Commerzbank AG 92,932
6,623 Deutsche Bank AG 509,674
11,445 Deutsche Telekom 289,545
5,805 Dresdner Bank AG 314,099
4,768 Dresdner Bank AG Warrants Expiring
4/30/2002 119,562 (b)
8,002 Gehe AG 414,692
2,640 Hoechst AG 106,494
200 Hornbach Baumarkt 9,139
264 Mannesmann 209,488
1,470 Rhoen Klinikum 153,590
1,200 SAP AG 568,388
2,571 Siemens AG 150,430
7,990 Veba AG 528,051
132 Volkswagen 105,112
----------------
5,143,747
----------------
PREFERRED STOCKS
610 Fielmann 17,081
410 Fresenius AG 98,356
710 Hornbach Holdings AG 68,842
294 SAP AG 146,627
----------------
330,906
----------------
Total Germany 5,474,653
----------------
HONG KONG - 1.9% (a)
COMMON STOCKS
16,000 Cheung Kong Holdings Ltd. 106,377
40,000 Doa Heng Bank Ltd. 118,255
14,000 Hang Seng Bank Ltd. 117,932
34,000 Henderson Land Development Ltd. 151,872
70,400 Hong Kong and China Gas Co. Ltd. 95,884
3,200 Hong Kong and China Gas Co. Ltd.,
Warrants Expiring 9/30/99 254 (b)
50,625 Hong Kong Land Holdings (USD) 71,381
3,200 Hong Kong Shanghai Bank Holdings 91,299
64,000 Hutchison Whampoa 395,766
57,699 New World Development Co. Ltd. 164,248
27,000 Sun Hung Kai Properties Ltd. 160,341
42,000 Swire Pacific 'A' 209,837
----------------
Total Hong Kong 1,683,446
----------------
INDIA - 0.1% (a)
COMMON STOCKS
7,000 Mahanager Telephone Nigam Ltd. 112,875
----------------
ITALY - 5.1% (a)
COMMON STOCKS
12,760 Assicurazioni Generali 383,949
16,000 Banca Commerciale Italiana 80,933
180,000 Banca di Roma 331,781 (b)
128,302 Credito Italiano 674,340
81,458 Ente Nazionale Idrocarburi 547,008
12,010 IMI SpA 196,624
3,278 Industrie Natuzzi SpA ADR (USD) 84,204
36,000 Istituto Nazionale Delle Assicurazioni 107,613
14,000 Italgas 64,809
7,589 Mediolanum SpA 227,496
5,000 Rinascente 50,103
147,896 Telecom Italia Mobile 843,283
118,983 Telecom Italia SpA 890,013
----------------
Total Italy 4,482,156
----------------
JAPAN - 16.3% (a)
COMMON STOCKS
1,331 Advantest Corp. 89,511
12,000 Alps Electric 125,132
17,000 Amada 68,724
39,000 Canon 922,397
10,000 Citizen Watch Co. 67,251
15,000 Dai Nippon Screen Manufacturing Co. Ltd. 69,707
3,000 Daifuku 11,856
25,000 Daiichi Pharmaceutical 358,735
19,000 Daiwa House 153,619
39 DDI Corp. 98,723
54 East Japan Railway 269,306
4,200 Fanuc 154,874
37,000 Hitachi 265,324
22,000 Hitachi Zosen 33,580
3,000 Honda Motor Co. 108,811
7,000 Inax 25,918
9,000 Ito-Yokado 465,846
16,000 Kao Corp. 235,152
10,000 Kokuyo 171,528
20,000 Komatsu 90,676
8,000 Komori 136,013
24,000 Kuraray 202,750
8,000 Kyocera 419,525
13,000 Makita 141,454
24,000 Marui 379,024
38,000 Matsushita Electric Industrial 608,735
25,000 Mitsubishi 188,907
100,000 Mitsubishi Heavy Industries 370,258
56,000 Mitsui Fudosan 511,168
11,000 Murata Manufacturing 322,503
4,000 National House Industrial 32,492
69,000 NEC 776,863
33,000 Nippon Denso 567,289
27 Nippon Telegraph & Telecom 236,663
35,000 Nomura Securities 427,120
13,000 Pioneer Electronic 213,163
2,000 Sangetsu Co. Ltd. 25,540
25,000 Sankyo Co. 619,616
2,700 Sega Enterprises 44,884
31,000 Sekisui Chemical 170,296
19,000 Sekisui House 148,451
3,100 Seven-Eleven Japan 207,307
13,000 Sharp Corp. 102,161
19,350 Shin-Etsu Chemical 377,233
13,000 Shiseido Co. Ltd. 171,415
9,000 Sony 748,753
38,000 Sumitomo 218,226
51,000 Sumitomo Electric 607,730
10,000 Sumitomo Forestry 58,561
8,000 TDK 632,311
17,000 Teijin 48,557
11,000 Tokio Marine & Fire Insurance 119,692
4,300 Tokyo Electronics 168,959
8,000 Tokyo Steel Manufacturing 35,243
20,000 Toppan Printing 237,721
10,000 Uny Co. 160,949
3,150 Yurtec 16,781
----------------
Total Japan 14,240,983
----------------
MEXICO - 1.7% (a)
COMMON STOCKS
15,620 Cementos de Mexico ADR (USD) 158,153
13,267 Cemex "B" 79,790
1,099 Cifra SA de CV 19,233
20,745 Gruma "B" 47,655 (b)
3,561 Gruma S.A. GDR (USD) 33,162 (b)
423 Grupo Financiero Banamex Accival "L" 1,082
30,000 Grupo Financiero Banamex "B" 93,042
36,760 Grupo Industrial Maseca "B" 26,530
2,740 Grupo Televisa GDR (USD) 112,340 (b)
30,799 Kimberly-Clark Mexico "A" 149,637
5,980 Panamerican Beverages "A" ADR (USD) 238,451
7,920 Telefonos de Mexico "L" ADR (USD) 448,470
4,800 TV Azteca S.A. ADR (USD) 89,400
----------------
Total Mexico 1,496,945
----------------
NETHERLANDS - 10.8% (a)
COMMON STOCKS
17,506 ABN Amro Holdings N.V. 426,363
547 Akzo Nobel 111,290
920 ASM Lithography Holding N.V. 83,525
2,740 Baan Co. N.V. 121,588 (b)
2,554 Bann Co. NV 112,143
33,000 CLP Holdings Ltd. 158,482
7,399 CSM 400,332
42,164 Elsevier 636,603
8,470 Fortis Amev N.V. 495,596
2,408 Gucci Group N.V. (USD) 112,123
23,125 ING Groep N.V. 1,503,051
6,129 ING Groep N.V., Stock Warrants 111,045 (b)
6,561 Koninklijke Ahold NV 204,615
5,480 Koninklijke Numico N.V. 183,110
1,942 Koninklijke PTT Nederland 100,364
940 Otra N.V. 17,217
7,390 Polygram 305,097
33,640 Royal Dutch Petroleum 1,856,766
2,380 Royal Phillips Electronics N.V. 209,712
12,230 Unilever NV 870,588
10,994 Wolters Kluwer 1,437,313
----------------
Total Netherlands 9,456,923
----------------
NEW ZEALAND - 0.3% (a)
COMMON STOCKS
18,841 Fletcher Challenge Building 38,097
17,596 Fletcher Challenge Energy 60,017
9,000 Telecom Corporation of New Zealand Ltd. 24,148
23,000 Telecom Corp. of New Zealand 109,238
----------------
Total New Zealand 231,500
----------------
NORWAY - 1.9% (a)
COMMON STOCKS
1,200 Bergesen "A" 25,910
13,060 Norsk Hydro 651,551
8,440 Orkla "A" 1,000,591
1,460 Saga Petroleum "B" 26,042
----------------
Total Norway 1,704,094
----------------
PANAMA - 0.05% (a)
COMMON STOCKS
585 Banco Latinoamericano de
Exportaciones S.A. "E" 20,914
----------------
PERU - 0.1% (a)
COMMON STOCKS
1,452 Credicorp Ltd. 24,322
3,328 Telefonica del Peru S.A. ADR (USD) 73,632
----------------
Total Peru 97,954
----------------
PORTUGAL - 0.4% (a)
COMMON STOCKS
8,166 Jeronimo Martins 370,677
----------------
RUSSIA - 0.1% (a)
COMMON STOCKS
3,470 Gazprom ADR (USD) 64,022
550 Lukoil holding AB 37,537
----------------
Total Russia 101,559
----------------
SINGAPORE - 0.5% (a)
COMMON STOCKS
18,800 Overseas Union Bank 71,280
19,140 Singapore Press Holdings Ltd. 211,659
41,000 Singapore Telecommunications Ltd. 70,471
17,000 United Overseas Bank 80,568
----------------
Total Singapore 433,978
----------------
SOUTH KOREA - 0.1% (a)
COMMON STOCKS
15,643 Korea Equity Fund (USD) 120,256
----------------
SPAIN - 2.8% (a)
COMMON STOCKS
3,150 Banco Bilbao Vizcaya S.A. 162,154
2,424 Banco Popular Espanol S.A. 198,949
9,793 Banco Santander SA 517,621
2,272 Corporacion Bancaria de Espana S.A. 189,458
12,830 Endesa S.A. 311,694
2,179 Gas Natural SDG, S.A. 139,639
16,100 Iberdrola 258,995
3,124 Repsol S.A. 171,277
11,542 Telefonica de Espana 481,990
11,542 Telefonica S.A. 9,094 (b)
----------------
Total Spain 2,440,871
----------------
SWEDEN - 3.7% (a)
COMMON STOCKS
14,050 ABB AB 227,754
39,636 Astra AB 788,420
9,010 Atlas Copco "B" 265,342
5,080 Electrolux "B" 472,436
2,460 Esselte "B" 56,241
2,010 Granges AB 36,607
11,400 Hennes & Mauritz AB 593,413
74,561 Nordbanken Holding AB 548,951
660 Sandvik "A" 19,053
7,570 Sandvik "B" 218,045
1,370 Scribona "B" 17,519
----------------
Total Sweden 3,243,781
----------------
SWITZERLAND - 7.5% (a)
COMMON STOCKS
286 ABB AG 468,884
1,154 Adecco S.A. 503,745
2,190 Credit Suisse Group 481,639
715 Nestle 1,386,638
984 Novartis AG 1,626,338
116 Roche Holdings 1,175,462
270 Schweizerische Bankgesellschaft 434,735
1,310 Schwizerischer Bankverein 454,855
----------------
Total Switzerland 6,532,296
----------------
THAILAND - 0.2% (a)
COMMON STOCKS
64,000 Thai Farmers Bank Public Co. Ltd. 146,546
----------------
UNITED KINGDOM - 18.1% (a)
COMMON STOCKS
26,000 Abbey National 488,395
30,706 Argos plc 332,440
101,000 Asda Group 338,308
29,117 BG plc 155,609
25,000 British Petroleum 395,175
57,100 Cable & Wireless 654,251
40,400 Cadbury Schweppes 589,272
72,400 Caradon plc 234,335
21,000 Centrica plc 36,444
26,000 Compass Group 450,123
26,000 David S. Smith 100,027
21,000 Electrocomponents 204,262
3,000 GKN 86,713
44,500 Glaxo Wellcome 1,257,954
5,000 Heywood Williams Group 21,411
16,000 Hillsdown Holdings 47,906
11,000 John Laing "A" 65,871
65,000 Kingfisher plc 1,180,759
115,000 National Westminster Bank 2,302,555
47,000 Rank Group plc 304,247
119,000 Reed International plc 1,051,986
22,000 Rolls Royce 102,670
29,800 RTZ 427,932
57,000 Safeway plc 339,901
161,000 Shell Transport & Trading 1,198,406
134,200 SmithKline Beecham plc 1,600,516
46,000 Tesco 430,887
130,000 Tomkins 765,426
41,500 United News & Media 562,971
----------------
Total United Kingdom 15,726,752
----------------
VENEZUELA - 0.1% (a)
COMMON STOCKS
2,248 Compania Anonima Nacional Telefonos
de Venezuela ADR (USD) 75,308
----------------
Principal
Amount
- --------------
SHORT-TERM
SECURITIES - 4.3% (a)
Commercial Paper
$ 3,800,000 New Center Asset Trust
5.55% due 5/1/1998 3,800,000
----------------
Total Investments $ 87,424,010 (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:
Cost Value % of Portfolio
------------ ---------- --------------
Common Stocks &
Warrants $66,381,275 $83,469,561 95.5%
Preferred Stocks 295,479 154,449 0.2%
Short-Term 3,800,000 3,800,000 4.3%
-------------- -------------- ------
Total Investments $70,476,754 $87,424,010 100.0%
============== ============== ======
(d) At April 30, 1998, the aggregate cost of securities for federal
income tax purposes was $70,476,754 and the net unrealized
appreciation of investments based on that cost was $16,947,256
which is comprised of $22,033,015 aggregate gross unrealized
appreciation and $5,085,759 aggregate gross unrealized
depreciation.
(e) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
(GDR) - Global Depository Receipts
(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, 1998
(unaudited)
Shares Value
- -------------- --------------
<S> <C> <C>
COMMON STOCKS - 96.6% (a)
Airlines - 0.9%
393,050 Southwest Airlines Co. $ 10,784,309
----------------
10,784,309
----------------
Bank & Finance - 17.9%
126,400 American Express Co. 12,892,800
191,450 American International Group, Inc. 25,187,641
190,600 Bank of New York Co., Inc. 11,257,312
150,100 BankAmerica Corp. 12,758,500
92,000 Chase Manhattan Corp. 12,747,750
84,400 Citicorp 12,702,200
238,600 Federal Home Loan Mortgage Corp. 11,050,163
188,700 Federal National Mortgage Association 11,298,413
88,000 Household International, Inc. 11,566,500
159,000 Lehman Brothers Holdings, Inc. 11,298,938
339,450 MBNA Corp. 11,498,869
143,100 Merrill Lynch & Co., Inc. 12,557,025
178,900 MGIC Investment Corp. 11,270,700
331,700 NationsBank Corp. 25,126,275
190,800 U.S. Bancorp 24,231,600
----------------
217,444,686
----------------
Chemicals - 5.0%
144,400 Air Products & Chemicals, Inc. 12,544,750
343,200 E.I. du Pont de Nemours and Co. 24,989,250
218,900 Monsanto Co. 11,574,337
243,100 Praxair, Inc. 12,230,969
----------------
61,339,306
----------------
Computer Software - 3.0%
206,700 Computer Associates International,
Inc. 12,104,869
134,100 Microsoft Corp. 12,085,763 (b)
367,600 Parametric Technology Corp. 11,751,713 (b)
----------------
35,942,345
----------------
Computers & Office Equipment - 4.4%
349,800 Cisco Systems, Inc. 25,622,850 (b)
186,900 Hewlett Packard Co. 14,075,906
114,200 International Business Machines 13,232,925
----------------
52,931,681
----------------
Conglomerates - 5.1%
568,500 AlliedSignal, Inc. 24,907,406
626,000 Dover Corp. 24,727,000
300,500 Thermo Electron Corp. 11,963,656 (b)
----------------
61,598,062
----------------
Drugs & Health Care - 10.1%
159,100 Abbott Laboratories 11,634,188
128,600 American Home Products Corp. 11,975,875
167,400 Becton, Dickinson & Co. 11,655,225
112,600 Bristol-Myers Squibb Co. 11,921,525
202,500 Eli Lilly & Co. 14,086,406
164,500 Johnson & Johnson 11,741,188
186,900 Merck & Co., Inc. 22,521,450
120,600 Pfizer, Inc. 13,725,788
73,800 Warner-Lambert Co. 13,962,038
----------------
123,223,683
----------------
Electric Utilities - 2.0%
192,200 FPL Group, Inc. 11,928,412
454,800 Southern Co. 12,052,200
----------------
23,980,612
----------------
Electrical Equipment - 3.0%
276,500 General Electric Co. 23,537,063
145,100 Honeywell, Inc. 13,512,438
----------------
37,049,501
----------------
Electronics - 3.0%
281,200 Adaptec, Inc. 6,660,925 (b)
272,800 Atmel Corp. 5,507,150 (b)
304,900 Intel Corp. 24,639,731
----------------
36,807,806
----------------
Food & Beverage - 5.5%
301,000 Coca-Cola Co. 22,838,375
551,900 PepsiCo, Inc. 21,903,531
379,700 Sara Lee Corp. 22,615,881
----------------
67,357,787
----------------
Household Products - 4.8%
149,400 Avon Products, Inc. 12,278,812
136,300 Colgate Palmolive Co. 12,224,406
199,000 Gillette Co. 22,972,062
135,500 Procter & Gamble Co. 11,136,406
----------------
58,611,686
----------------
Leisure & Entertainment - 3.9%
173,900 Carnival Cruise Lines, Inc. 12,096,919
111,700 Disney (Walt) Co. 13,885,706
150,900 Marriott Int'l, Inc. 4,979,700
150,900 Marriott Int'l, Inc. (New Marriott) 4,828,800
300,500 Mattel, Inc. 11,512,906
----------------
47,304,031
----------------
Machinery & Equipment - 0.9%
190,800 Deere & Co. 11,149,875
----------------
Mining & Metals - 1.1%
172,700 Aluminum Co. of America 13,384,250
----------------
Oil & Oil Service - 10.0%
137,600 Chevron Corp. 11,377,800
348,600 Exxon Corp. 25,426,012
464,900 Halliburton Co. 25,569,500
152,800 Mobil Corp. 12,071,200
407,300 Royal Dutch Petroleum Co. 23,037,906
153,200 Schlumberger Ltd. 12,696,450
315,000 USX-Marathon Group 11,280,937
----------------
121,459,805
----------------
Restaurants - 1.0%
198,700 McDonald's Corp. 12,294,562
----------------
Retail - 4.8%
152,500 CVS Corp. 11,246,875
231,800 Federated Department Stores 11,401,662 (b)
274,600 Kroger Co. 11,498,875 (b)
321,800 Safeway, Inc. 12,308,850 (b)
233,900 Wal-Mart Stores, Inc. 11,826,569
----------------
58,282,831
----------------
Services - 1.7%
298,726 Cendant Corporation 7,468,150 (b)
372,300 First Data Corp. 12,611,663
----------------
20,079,813
----------------
Telecommunications Equipment - 3.2%
188,348 Lucent Technologies, Inc. 14,337,992
205,400 Motorola, Inc. 11,425,375
178,400 Tellabs, Inc. 12,644,100 (b)
----------------
38,407,467
----------------
Telephone & Telecommunications - 5.3%
485,400 Ameritech Corp. 20,659,837
541,200 SBC Communications, Inc. 22,425,975
190,100 Teleport Communications Group, Inc. 10,241,638 (b)
274,300 WorldCom, Inc. 11,734,897 (b)
----------------
65,062,347
----------------
Total Common Stock
(cost $811,973,200) 1,174,496,445
----------------
Principal
Amount
- --------------
SHORT-TERM
SECURITIES - 3.4% (a)
Commercial Paper
$ 26,200,000 Koch Industries Corp., 5.55%,
Due 5/01/98 26,200,000
15,600,000 Mobil Corp., 5.51%, Due 5/01/98 15,600,000
----------------
Total Short-Term Securities
(at amortized cost) 41,800,000
----------------
Total Investments
(cost $853,773,200) $1,216,296,445 (c)
================
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) At April 30, 1998, the aggregate cost of securities for
federal income tax purposes was $853,773,200 and the net
unrealized appreciation of investments based on that cost was
$362,523,245 which is comprised of $371,908,408 aggregate
gross unrealized appreciation and $9,385,163 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, 1998
(unaudited)
Principal Maturity
Amount Rate Date Value
- ---------------- ------ ---------- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 83.6% (a)
Aerospace - 0.9%
$ 4,110,000 Alliant Techsystems, Inc., Sr. Subordinated Notes 11.75% 3/1/2003 $ 4,495,313
3,950,000 BE Aerospace, Inc., Sr. Subordinated Notes 8.0% 3/1/2008 3,910,500
--------------
8,405,813
--------------
Airlines - 1.3%
4,000,000 Continental Airlines, Inc., Sr. Notes 9.5% 12/15/2001 4,240,000
2,000,000 Northwest Airlines, Inc., Notes 8.375% 3/15/2004 2,069,174
3,000,000 Northwest Airlines, Inc., Sr. Notes 7.625% 3/15/2005 3,000,000
2,000,000 U.S. Air, Inc., Sr. Secured Equipment Trust,
Series 1993-A-3 10.375% 3/1/2013 2,318,522
--------------
11,627,696
--------------
Automotive - 0.2%
1,950,000 Delco Remy International, Inc., Sr. Notes 8.625% 12/15/2007 2,018,250
--------------
Bank & Finance - 6.5%
3,450,000 AmeriCredit Corp., Sr. Notes 9.25% 2/1/2004 3,519,000
3,000,000 AMRESCO, Inc., Sr. Subordinated Notes 9.875% 3/15/2005 3,105,000
2,450,000 Chevy Chase Savings Bank, Subordinated Debentures 9.25% 12/1/2005 2,517,375
4,400,000 Dollar Financial Group, Inc., Sr. Notes, Series A 10.875% 11/15/2003 4,774,000
3,200,000 Emergent Group, Inc., Sr. Notes 10.75% 9/15/2004 3,112,000
8,150,000 First Nationwide Holdings, Inc., Sr. Notes 12.5% 4/15/2003 9,311,375
2,598,000 HomeSide, Inc., Sr. Secured Second Priority Bonds,
Series B 11.25% 5/15/2003 3,091,620
5,900,000 Mego Mortgage Corp., Sr. Subordinated Notes 12.5% 12/1/2001 4,749,500
2,750,000 Metris Companies Inc., Sr. Notes 10.0% 11/1/2004 2,887,500
5,680,000 Trizec Finance Ltd., Sr. Notes 10.875% 10/15/2005 6,404,200
2,000,000 Veritas Capital Trust, Trust Preferred Securities 10.0% 1/1/2028 2,067,500
3,380,000 Veritas Holdings GMBH, Sr. Notes 9.625% 12/15/2003 3,582,800
5,000,000 Williams Scotsman, Inc., Sr. Notes 9.875% 6/1/2007 5,200,000
4,800,000 Wilshire Financial Services Group, Inc., Notes 13.0% 1/1/2004 5,208,000
--------------
59,529,870
--------------
Broadcasting - 12.2%
3,265,000 Adelphia Communications Corp., Sr. Debentures 11.875% 9/15/2004 3,607,825
3,500,000 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 8/15/2005 717,500
2,000,000 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 6/15/2004 470,000
2,400,000 Australis Holdings Pty Ltd., Sr. Discount Notes Zero Coupon 11/1/2002 660,000
12,155,970 Australis Media Ltd., Sr. Discount Notes Zero Coupon 5/15/2003 1,762,616
3,500,000 Chancellor Media Corp., Sr. Subordinated Notes 8.125% 12/15/2007 3,521,875
4,000,000 CS Wireless Systems, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2006 820,000
2,000,000 CSC Holdings, Inc., Sr. Notes 7.875% 12/15/2007 2,060,000
4,000,000 Diamond Cable Communications plc, Sr. Discount Notes Zero Coupon 12/15/2005 3,200,000
1,150,000 Diamond Cable Co., Sr. Discount Notes Zero Coupon 9/30/2004 1,075,250
1,600,000 Echostar DBS Corp., Sr. Secured Notes 12.5% 7/1/2002 1,800,000
4,000,000 EchoStar Satellite Broadcasting Corp., Sr. Secured
Discount Notes Zero Coupon 3/15/2004 3,680,000
4,300,000 Falcon Holding Group, L.P., Sr. Discount Debentures 11.0% 4/15/2010 2,741,250
10,455,298 Falcon Holdings Group L.P., Sr. Subordinated Notes,
Series B 11.0% 9/15/2003 11,239,445
7,200,000 Groupo Televisa S.A., Sr. Notes 11.875% 5/15/2006 8,325,000
5,500,000 Intermedia Capital Partners, Sr. Notes 11.25% 8/1/2006 6,201,250
4,600,000 International CableTel, Inc., Sr. Notes, Series A Zero Coupon 4/15/2005 3,979,000
4,700,000 Jacor Communications, Inc., Convertible Preferred Zero Coupon 2/9/2018 2,009,250
3,400,000 Jones Intercable, Inc., Sr. Notes 9.625% 3/15/2002 3,629,500
2,800,000 NTL, Inc., Sr. Notes, Series B 10.0% 2/15/2007 3,003,000
4,000,000 Olympus Communications, L.P., Sr. Notes 10.625% 11/15/2006 4,440,000
6,000,000 Orion Network Systems, Inc., Sr. Notes 11.25% 1/15/2007 6,945,000
5,500,000 Renaissance Media Group LLC, Sr. Discount Notes Zero Coupon 4/15/2008 3,382,500
5,200,000 Rogers Cablesystems Ltd., Sr. Secured Second Priority
Notes 9.625% 8/1/2002 5,538,000
6,000,000 Rogers Communications, Inc., Convertible Debentures 2.0% 11/26/2005 3,592,500
2,000,000 Rogers Communications, Inc., Sr. Notes 9.125% 1/15/2006 2,030,000
680,988 Scott Cable Communications, Jr. Subordinated Notes,
Payment-In-Kind 16.0% 7/18/2002 248,561
5,600,000 SFX Broadcasting, Inc., Sr. Subordinated Notes, Series B 10.75% 5/15/2006 6,202,000
2,000,000 Sinclair Broadcast Group, Sr. Subordinated Notes 8.75% 12/15/2007 2,035,000
2,000,000 Sinclair Broadcast Group, Sr. Subordinated Notes 9.0% 7/15/2007 2,070,000
2,900,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series B Zero Coupon 5/15/2006 1,943,000
1,500,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series D Zero Coupon 5/15/2006 1,005,000
8,000,000 United International Holdings, Inc., Sr. Notes, Series B Zero Coupon 2/15/2008 5,070,000
3,100,000 Wireless One, Inc., Sr. Notes 13.0% 10/15/2003 635,500
2,800,000 Young Broadcasting Corp., Sr. Subordinated Notes 11.75% 11/15/2004 3,101,000
--------------
112,740,822
--------------
Building Products & Materials - 1.7%
2,800,000 American Standard Cos Inc., Notes 7.375% 4/15/2005 2,766,089
4,400,000 American Standard Cos, Inc., Sr. Notes 7.375% 2/1/2008 4,279,000
3,500,000 Atrium Companies, Inc., Sr. Subordinated Notes 10.5% 11/15/2006 3,745,000
4,000,000 CEMEX S.A. de C.V., Notes 12.75% 7/15/2006 4,850,000
--------------
15,640,089
--------------
Chemicals - 0.6%
1,950,000 General Chemical Corp., Sr. Subordinated Notes 9.25% 8/15/2003 2,028,000
3,200,000 Sovereign Specialty Chemicals, Inc., Sr. Subordinated Notes 9.5% 8/1/2007 3,336,000
--------------
5,364,000
--------------
Computers & Office Equipment - 2.4%
3,500,000 Dictaphone Corp., Sr. Subordinated Notes 11.75% 8/1/2005 3,587,500
2,000,000 MCMS, Inc., Subordinated Notes 10.32031% 3/1/2008 1,990,000
3,200,000 Samsung Electronics America, Notes 9.75% 5/1/2003 3,232,000
2,400,000 Unisys Corp., Sr. Notes 12.0% 4/15/2003 2,724,000
4,000,000 Unisys Corp., Sr. Notes 11.75% 10/15/2004 4,635,000
3,250,000 Wam!Net, Inc., Units Zero Coupon 3/1/2005 2,096,250
4,200,000 Zilog, Inc., Sr. Notes 9.5% 3/1/2005 3,654,000
--------------
21,918,750
--------------
Conglomerates - 0.3%
2,750,000 Eagle-Picher Acquisition, Inc., Sr. Subordinated Notes 9.375% 3/1/2008 2,791,250
--------------
Construction & Home Building - 1.2%
6,400,000 Peters (J.M.) Co., Inc., Sr. Notes 12.75% 5/1/2002 6,912,000
3,600,000 The Fortress Group, Inc., Sr. Notes 13.75% 5/15/2003 4,176,000
--------------
11,088,000
--------------
Containers & Packaging - 1.5%
2,400,000 Graham Packaging Company, Sr. Subordinated Notes Zero Coupon 1/15/2008 2,400,000
3,350,000 Radnor Holdings Corp., Sr. Notes 10.0% 12/1/2003 3,509,125
1,050,000 Radnor Holdings Corp., Sr. Notes, Series B 10.0% 12/1/2003 1,099,875
2,191,000 Silgan Holdings, Inc., Subordinated Debentures,
Payment-In-Kind 13.25% 7/15/2006 2,503,218
1,900,000 Vicap, S.A. de C.V., Sr. Guaranteed Notes 10.25% 5/15/2002 1,980,750
2,300,000 Vicap, S.A. de C.V., Sr. Guaranteed Notes 11.375% 5/15/2007 2,530,000
--------------
14,022,968
--------------
Cosmetics & Toiletries - 0.6%
4,200,000 Revlon Consumer Products Corp., Sr Notes 8.625% 2/1/2008 4,210,500
1,200,000 Revlon Consumer Products Corp., Sr. Notes 8.125% 2/1/2006 1,200,000
--------------
5,410,500
--------------
Drugs & Health Care - 1.0%
3,200,000 Global Health Sciences, Inc., Sr. Notes 11.0% 5/1/2008 3,152,000
2,900,000 ICN Pharmaceuticals, Inc., Sr. Notes 9.25% 8/15/2005 3,110,250
2,450,000 Owens & Minor, Inc., Sr. Subordinated Notes 10.875% 6/1/2006 2,768,500
--------------
9,030,750
--------------
Electric Utilities - 1.9%
1,600,000 AES Corp., Sr. Subordinated Notes 8.5% 11/1/2007 1,648,000
1,000,000 CMS Energy Corp., Sr. Notes 7.625% 11/15/2004 1,013,490
4,000,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 4,107,648
1,600,000 CMS Energy, Sr Unsecured Notes 7.0% 1/15/2005 1,593,877
3,200,000 ESI Tractebel Acquisition Corp, Series A 7.99% 12/30/2011 3,197,763
1,750,000 Midland Cogen Venture Fund II, Secured Lease Obligation
Bonds, Series A 11.75% 7/23/2005 2,089,551
3,000,000 Midland Cogen Venture Fund II, Subordinated Secured Lease
Obligation Bonds 13.25% 7/23/2006 3,797,511
--------------
17,447,840
--------------
Electrical Equipment - 1.8%
3,100,000 EV International, Inc., Sr. Subordinated Notes, Series A 11.0% 3/15/2007 2,883,000
4,000,000 Fisher Scientific Int'l, Inc., Sr. Subordinated Notes 9.0% 2/1/2008 4,040,000
2,000,000 Protection One Alarm Monitoring, Inc., Convertible Sr.
Subordinated Notes 6.75% 9/15/2003 2,515,000
3,200,000 Protection One Alarm Monitoring, Inc., Sr. Subordinated
Discount Notes Zero Coupon 6/30/2005 3,600,000
3,900,000 Telex Communications, Inc., Unsecured Sr. Notes 10.5% 5/1/2007 3,588,000
--------------
16,626,000
--------------
Food & Beverage - 3.9%
3,200,000 Ameriserve Food Distribution, Inc., Sr. Notes 8.875% 10/15/2006 3,280,000
2,800,000 Cott Corp., Sr. Notes 8.5% 5/1/2007 2,786,000
6,000,000 Fresh Del Monte Corp., Sr. Notes, Series B 10.0% 5/1/2003 6,330,000
6,000,000 Gorges/Quik-to-Fix Foods, Sr. Subordinated Notes, Series B 11.5% 12/1/2006 6,315,000
4,000,000 Grupo Azucarero Mexico, Sr. Notes 11.5% 1/15/2005 3,610,000
4,700,000 Imperial Holly Corp., Sr. Subordinated Notes 9.75% 12/15/2007 4,747,000
2,000,000 Packaged Ice, Inc., Sr. Notes 9.75% 2/1/2005 2,040,000
4,000,000 Smithfield Foods, Inc., Sr. Subordinated Notes 7.625% 2/15/2008 3,980,000
2,400,000 Southern Foods Group, L.P., Sr. Subordinated Notes 9.875% 9/1/2007 2,556,000
--------------
35,644,000
--------------
Hospital Management - 1.5%
5,100,000 Integrated Health Svcs, Inc., Sr Subordinated Notes, Series A 9.25% 1/15/2008 5,265,750
2,800,000 PhyMatrix Corp., Convertible Subordinated Debentures 6.75% 6/15/2003 2,327,500
3,200,000 Tenet Healthcare Corp., Sr. Subordinated Notes 10.125% 3/1/2005 3,568,000
2,400,000 Vencor, Inc., Sr. Subordinated Notes 8.625% 7/15/2007 2,700,000
--------------
13,861,250
--------------
Household Products - 1.9%
5,150,000 BPC Holding Corp., Sr. Secured Notes, Series B 12.5% 6/15/2006 5,665,000
4,000,000 Lifestyle Furnishings International Ltd., Sr. Subordinated
Notes 10.875% 8/1/2006 4,500,000
2,000,000 Sealy Mattress Company, Sr. Discount Notes Zero Coupon 12/15/2007 1,350,000
1,800,000 Sealy Mattress Company, Sr. Subordinated Notes 9.875% 12/15/2007 1,910,250
4,000,000 Simmons Co., Sr. Subordinated Notes 10.75% 4/15/2006 4,320,000
--------------
17,745,250
--------------
Leisure & Entertainment - 3.3%
4,777,000 AMF Group, Inc., Sr. Subordinated Discount Notes,
Series B Zero Coupon 3/15/2006 3,845,485
2,000,000 CapStar Hotel Company, Convertible Subordinated Notes 4.75% 10/15/2004 1,775,000
1,600,000 CapStar Hotel Company, Sr. Subordinated Notes 8.75% 8/15/2007 1,668,000
2,000,000 Discovery Zone, Inc., Sr. Notes 13.5% 8/1/2002 1,940,000
4,000,000 HMH Properties, Inc., Sr. Secured Notes 8.875% 7/15/2007 4,455,000
2,000,000 IMAX Corp., Sr. Notes 10.0% 3/1/2001 2,085,000
3,600,000 Lodgenet Entertainment, Sr. Notes 10.25% 12/15/2006 3,726,000
3,300,000 Premier Parks, Inc., Sr. Discount Notes Zero Coupon 4/1/2008 2,107,875
3,000,000 Production Resource Group LLC, Sr. Subordinated Notes 11.5% 1/15/2008 2,985,000
1,600,000 Signature Resorts, Inc., Sr. Notes 9.25% 5/15/2006 1,616,000
2,000,000 Signature Resorts, Inc., Sr. Subordinated Notes 9.75% 10/1/2007 2,000,000
2,000,000 Silverleaf Resorts, Inc., Sr. Subordinated Notes 10.5% 4/1/2008 2,005,000
--------------
30,208,360
--------------
Machinery & Equipment - 1.5%
2,800,000 Motors & Gears, Inc., Sr. Discount Notes 10.75% 11/15/2006 3,017,000
4,800,000 Navistar Financial Corp., Sr. Subordinated Notes, Series B 9.0% 6/1/2002 5,052,000
3,600,000 Navistar International Corp., Sr. Notes, Series B 7.0% 2/1/2003 3,600,000
2,000,000 Scotsman Group, Inc., Sr. Subordinated Notes 8.625% 12/15/2007 2,045,000
--------------
13,714,000
--------------
Mining & Metals - 2.2%
3,465,000 AK Steel Corp., Sr. Notes 10.75% 4/1/2004 3,716,213
3,150,000 Altos Hornos de Mexico, Bonds, Series B 11.875% 4/30/2004 3,252,375
6,965,000 UCAR Global Enterprises, Inc., Sr. Subordinated Notes,
Series B 12.0% 1/15/2005 7,539,613
4,400,000 Westmin Resources Ltd., Sr. Notes 11.0% 3/15/2007 5,313,000
--------------
19,821,201
--------------
Oil & Gas - 4.2%
6,500,000 Abraxas Petroleum Corp., Sr. Notes, Series B 11.5% 11/1/2004 6,808,750
3,800,000 Belden & Blake Corp., Sr. Subordinated Notes 9.875% 6/15/2007 3,790,500
1,200,000 Chesapeake Energy Corp., Sr. Notes 9.625% 5/1/2005 1,213,500
3,200,000 Coho Energy, Inc., Sr. Subordinated Notes 8.875% 10/15/2007 3,024,000
2,800,000 Cross Timbers Oil Company, Sr. Subordinated Notes, Series B 8.75% 11/1/2009 2,866,500
1,950,000 Dailey Int'l, Inc., Sr. Notes 9.5% 2/15/2008 1,969,500
6,000,000 National Energy Group, Inc., Sr. Notes, Series C 10.75% 11/1/2006 5,640,000
2,400,000 Pride International, Inc., Convertible Subordinated
Debentures Zero Coupon 4/24/2018 1,032,000
3,400,000 Pride Petroleum Services, Inc., Sr. Notes 9.375% 5/1/2007 3,655,000
3,000,000 RAM Energy, Inc., Sr. Notes 11.5% 2/15/2008 3,045,000
3,150,000 Snyder Oil Corp., Sr. Subordinated Notes 8.75% 6/15/2007 3,240,562
2,350,000 Trico Marine Services, Inc., Sr. Unsecured Notes, Series E 8.5% 8/1/2005 2,361,750
--------------
38,647,062
--------------
Paper & Forest Products - 2.8%
1,400,000 APP Finance ( VII) Mauritius, Convertible Notes 3.5% 4/30/2003 1,408,750
2,400,000 APP Finance (II) Mauritius Ltd., Guaranteed Preferred
Securities, Series B 12.0% 2/15/2004 2,130,000
800,000 App Intl' Finance, Secured Notes 10.25% 10/1/2000 738,000
2,000,000 Fonda Group, Inc., Sr. Subordinated Notes, Series B 9.5% 3/1/2007 1,970,000
2,000,000 FSW International Finance Co. B.V., Guaranteed Secured Notes 12.5% 11/1/2006 545,000 (c)
1,200,000 Indah Kiat Finance Mauritius, Guaranteed Sr. Notes 10.0% 7/1/2007 1,005,000
5,400,000 National Fiberstok Corp., Sr. Notes Series B 11.625% 6/15/2002 5,778,000
2,400,000 Pindo Deli Finance Mauritius, Sr. Notes 10.25% 10/1/2002 1,998,000
4,000,000 S.D. Warren Co. Sr. Subordinated Notes 12.0% 12/15/2004 4,460,000
3,000,000 SF Holdings Group, Inc., Units Zero Coupon 3/15/2008 1,695,000
3,950,000 Tembec Finance Corp., Sr. Notes 9.875% 9/30/2005 4,206,750
--------------
25,934,500
--------------
Pollution Control - 0.4%
3,000,000 Norcal Waste Systems, Inc., Sr. Notes, Series B 13.25% 11/15/2005 3,480,000
--------------
Publishing & Printing - 2.1%
2,500,000 K-III Communications Corp., Sr. Notes 10.25% 6/1/2004 2,681,250
5,500,000 MDC Communications Corp., Sr. Subordinated Notes 10.5% 12/1/2006 5,967,500
6,000,000 Neodata Services, Inc., Sr. Notes, Series B 12.0% 5/1/2003 6,390,000
4,150,000 Sullivan Graphics, Inc., Sr. Subordinated Notes 12.75% 8/1/2005 4,357,500
--------------
19,396,250
--------------
Retail - 1.6%
5,800,000 Brylane L.P., Sr. Subordinated Notes, Series B 10.0% 9/1/2003 6,140,750
3,000,000 County Seat Stores, Inc., Units 12.75% 11/1/2004 3,045,000
2,250,000 F & M Distributors, Inc., Sr. Subordinated Notes 11.5% 4/15/2003 33,750 (c)
3,600,000 Hollywood Entertainment Corp., Sr. Subordinated Notes,
Series B 10.625% 8/15/2004 3,744,000
2,000,000 TravelCenters of America, Inc., Sr. Subordinated Notes 10.25% 4/1/2007 2,120,000
--------------
15,083,500
--------------
Retail: Food - 1.4%
3,400,000 Fleming Companies, Inc., Sr. Subordinated Notes, Series B 10.625% 7/31/2007 3,595,500
2,700,000 Jitney-Jungle Stores of America, Sr. Notes 12.0% 3/1/2006 3,030,750
1,200,000 Jitney-Jungle Stores of America, Sr. Subordinated Notes 10.375% 9/15/2007 1,251,000
5,000,000 Smith's Food & Drug Centers, Pass Through Certificates 8.64% 7/2/2012 5,250,000
--------------
13,127,250
--------------
Services - 0.9%
5,900,000 KinderCare Learning Centers, Inc., Sr. Subordinated Notes 9.5% 2/15/2009 5,959,000
2,700,000 Unicco Service Co., Sr. Subordinated Notes, Series B 9.875% 10/15/2007 2,747,250
--------------
8,706,250
--------------
Telecommunications - 17.5%
7,200,000 Allegiance Telecom, Inc., Units 11.75% 2/15/2008 4,086,000
2,400,000 American Mobile Satellite Corp., Units 12.25% 4/1/2008 2,448,000
3,100,000 CenCall Communications Corp., Sr. Redeemable Discount
Notes Zero Coupon 1/15/2004 3,026,375
4,000,000 Clearnet Communications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 3,360,000
4,000,000 Comcast Cellular Holdings, Inc., Sr. Notes 9.5% 5/1/2007 4,185,000
3,200,000 Esprit Telecom Group, plc, Sr. Notes 11.5% 12/15/2007 3,488,000
3,200,000 E.Spire Communications, Sr. Notes 13.75% 7/15/2007 3,792,000
2,400,000 Globalstar L.P., Sr. Notes 10.75% 11/1/2004 2,430,000
3,800,000 GST Equipment Funding, Inc., Sr. Secured Notes 13.25% 5/1/2007 4,446,000
2,000,000 GST Telecommunications Inc., Sr. Discount Notes Zero Coupon 5/1/2008 1,220,000
1,060,000 GST Telecommunications, Inc., Sr. Subordinated Notes Zero Coupon 12/15/2005 1,526,400
2,750,000 Hermes Europe Railtel B.V., Sr. Notes 11.5% 8/15/2007 3,121,250
200,000 HighwayMaster Communications, Inc., Sr. Notes 13.75% 9/15/2005 210,000
2,700,000 HighwayMaster Communications, Inc., Sr. Notes 13.75% 9/15/2005 2,835,000
1,600,000 Hyperion Telecommunications, Inc., Sr. Secured Notes 12.25% 9/1/2004 1,788,000
3,400,000 Hyperion Telecommunications, Sr. Discount Notes, Series B Zero Coupon 4/15/2003 2,541,500
2,300,000 IDT Corp., Sr. Notes 8.75% 2/15/2006 2,277,000
3,500,000 IntelCom Group (U.S.A.), Inc., Sr. Discount Ntoes Zero Coupon 5/1/2006 2,791,250
3,100,000 Intermedia Communications Inc., Sr. Notes, Series B 8.5% 1/15/2008 3,193,000
2,800,000 Ionica plc, Sr. Notes 13.5% 8/15/2006 2,478,000
800,000 Iridium LLC/Capital Corp., Sr. Notes 11.25% 7/15/2005 830,000
2,800,000 Iridium LLC/Capital Corp., Sr. Notes, Series A 13.0% 7/15/2005 3,104,500
3,150,000 Iridium LLC/Capital Corp., Sr. Notes, Series B 14.0% 7/15/2005 3,591,000
2,000,000 IXC Communications, Inc., Sr. Subordinated Notes 9.0% 4/15/2008 2,015,000
2,000,000 Jordan Telecommunication Products, Sr. Notes 9.875% 8/1/2007 2,120,000
4,000,000 Level 3 Communications, Inc., Sr. Subordinated Notes 9.125% 5/1/2008 3,760,000
7,200,000 McCaw International Ltd., Sr. Discount Notes Zero Coupon 4/15/2007 4,896,000
3,150,000 MGC Communications, Inc., Sr. Notes, Series B 13.0% 10/1/2004 3,323,250
6,000,000 Microcell Telecommunications, Inc., Sr. Discount Notes Zero Coupon 6/1/2006 4,485,000
8,400,000 Millicom International Cellular, Sr. Discount Notes Zero Coupon 6/1/2006 6,615,000
4,000,000 MJD Communications Inc., Notes 10.0025% 5/1/2008 4,000,000
1,200,000 MJD Communications Inc., Sr. Sub Notes 9.5% 5/1/2008 1,200,000
3,000,000 Netia Holdings BV, Sr. Discount Notes Zero Coupon 11/1/2007 2,186,250
2,950,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 2/15/2008 1,895,375
2,000,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 10/31/2007 1,310,000
3,100,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 9/15/2007 2,092,500
3,200,000 NEXTLINK Communications LLC, Sr. Discount Notes 12.5% 4/15/2006 3,680,000
1,600,000 NEXTLINK Communications, Inc., Sr. Notes 9.625% 10/1/2007 1,684,000
4,800,000 PageMart Nationwide, Inc., Sr. Discount Exchange Notes Zero Coupon 2/1/2005 4,272,000
2,800,000 Pagemart Wireless, Inc., Sr. Discount Notes Zero Coupon 2/1/2008 1,757,000
3,200,000 Pathinet, Inc., Units 12.25% 4/15/2008 3,288,000
3,400,000 Phonetel Technologies, Inc., Sr. Notes 12.0% 12/15/2006 3,026,000
3,000,000 Poland Telecom Finance BV 14.0% 12/1/2007 3,405,000
1,950,000 Price Communications Wireless, Sr Subordinated Notes 11.75% 7/15/2007 2,198,625
3,600,000 Primus Telecommunications Group, Inc., Sr. Notes 11.75% 8/1/2004 4,005,000
4,445,000 RSL Communications Ltd., Units 12.25% 11/15/2006 5,089,525
2,800,000 Telegroup, Inc., Sr. Discount Notes Zero Coupon 11/1/2004 2,282,000
4,000,000 Teletrac, Inc. Sr. B Notes 14.0% 8/1/2007 3,860,000
3,200,000 Teligent, Inc., Sr. Discount Notes Zero Coupon 3/1/2008 1,836,000
3,200,000 Teligent, Inc., Sr. Notes 11.5% 12/1/2007 3,336,000
6,000,000 UNIFI Communications, Inc., Sr. Notes 14.0% 3/1/2004 1,200,000
3,100,000 USA Mobile Communications, Inc., Sr. Notes 14.0% 11/1/2004 3,417,750
4,000,000 USN Communications, Inc., Sr. Discount Notes, Series B Zero Coupon 8/15/2004 3,280,000
3,000,000 VIALOG Corp., Sr. Notes 12.75% 11/15/2001 3,090,000
1,700,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/2005 1,377,000
2,000,000 WinStar Communications, Inc., Unsecured Sr. Notes 14.5% 10/15/2005 2,690,000
--------------
161,440,550
--------------
Textiles & Apparel - 2.5%
1,950,000 Anvil Knitwear, Inc., Sr. Notes, Series B 10.875% 3/15/2007 2,018,250
3,950,000 CMI Industries, Inc., Sr. Subordinated Notes 9.5% 10/1/2003 3,950,000
1,600,000 Dan River, Inc., Sr. Subordinated Notes 10.125% 12/15/2003 1,704,000
2,800,000 Delta Mills, Inc., Sr. Notes, Series B 9.625% 9/1/2007 2,870,000
2,800,000 Dyersburg Corp., Sr. Subordinated Notes 9.75% 9/1/2007 2,905,000
2,750,000 Galey & Lord, Inc., Sr. Subordinated Notes 9.125% 3/1/2008 2,770,625
6,010,000 Westpoint Stevens, Inc., Sr. Subordinated Debentures 9.375% 12/15/2005 6,385,625
--------------
22,603,500
--------------
Transportation - 1.8%
4,700,000 Allied Holdings, Inc., Sr. Notes, Series B 8.625% 10/1/2007 4,794,000
3,800,000 Equimar Shipholdings Ltd., First Priority Mtg 9.875% 7/1/2007 3,581,500
2,800,000 Panoceanic Bulk Carriers, Ltd., 1st Preferred Shipping
Notes 12.0% 12/15/2007 2,632,000
3,000,000 TFM S. A. de C.V., Sr. Discount Debentures Zero Coupon 6/15/2009 2,055,000
4,000,000 Windsor Petroleum, Notes 7.84% 1/15/2021 3,811,416
--------------
16,873,916
--------------
Total Corporate Bonds (cost $759,124,874) 769,949,437
--------------
FOREIGN GOVERNMENT BONDS - 0.2% (a)
2,000,000 Korea (Republic of), Notes
(cost $1,984,060) 8.75% 4/15/2003 2,005,350
--------------
<CAPTION>
Shares Value
---------------- ------------
<S> <C> <C> <C> <C>
PREFERRED STOCKS - 11.0% (a)
Convertible - 3.2%
24,000 AES Trust II, Convertible Preferred Stock 1,404,000
40,000 CalEnergy Capital Trust III, Convertible Preferred Stock 1,915,000
30,000 Central Parking Finance Trust, Convertible Preferred Stock 780,000
46,000 Chesapeake Energy Corp., Convertible Preferred Stock 2,150,500
75,000 Echostar Communications Corp., Preferred Stock, Series C 4,706,250
67,200 Granite Broadcasting Corp., Convertible Preferred Stock 4,015,200
60,000 Host Marriott Financial Trust, Convertible Preferred Stock 3,420,000
30,000 Intermedia Communication, Convertible Preferred Stock 1,016,250
58,500 Network Imaging Corp., Convertible Preferred Stock, Series A 561,234
29,500 Sinclair Broadcast Group, Inc., Convertible Preferred Stock 1,917,500
33,500 TIMET Capital Trust I, Convertible Preferred Stock 1,616,375
80,000 USX Corp. (Marathon Group), Convertible Preferred Stock 1,660,000
30,000 WorldCom, Inc., Convertible Preferred Stock 4,445,625
--------------
29,607,934
--------------
Non-Convertible - 7.8%
28,000 California Federal Bank, Non-cumulative Preferred Stock 3,192,000
29,646 Chancellor Media Corp., Payment-In-Kind Preferred Stock 3,639,046
65,000 Chevy Chase Capital Corp., Noncumulative Exchangeable Preferred Stock, Series A 3,558,750
39,269 Communications & Power Industries, Inc., Preferred Stock, Series B 4,266,577
42,865 CSC Holdings, Inc., Payment-In-Kind, Preferred Stock 5,004,489
19,471 CSC Holdings, Inc., Preferred Stock 2,239,165
1,484 Echostar Communications Corp., Payment-in-Kind, Series B Preferred 1,658,370
45,500 Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 0 (b,d)
276,736 Harvard Industries, Inc., Exchangeable Payment-In-Kind Preferred Stock 484,288 (b)
4,557 ICG Holdings, Inc., Preferred Stock 5,491,185
2,145 Intermedia Communications, Inc., Preferred Stock 2,627,625
2,189 IXC Communications, Inc., Preferred Stock 2,539,240
1,200 J Crew Group, Preferred Stock 1,080,000
28,000 Nebco Evans Holdings Company, Preferred Stock 2,919,000
2,950 Nextel Communications, Inc., Preferred Stock 3,149,125
61,133 NEXTLINK Communications, Inc., Payment-In-Kind Preferred Stock 3,721,471
4,030 Paxson Communications Corp., Payment-In-Kind Preferred Stock 4,130,750
160,000 Petroleum Heat & Power Co., Inc., Exchangeable Preferred Stock, Series B 2,120,000
17,000 Primedia, Inc., Preferred Stock 1,712,750
27,500 Primedia, Inc., Preferred Stock 2,729,375
36,500 Primedia, Inc., Preferred Stock, Series D 3,750,375
122,500 River Bank America, Preferred Stock 2,909,375
29,767 SFX Broadcasting, Inc., Payment-In-Kind Preferred Stock 3,505,064
4,000,000 SIG Capital Trust I, Preferred Stock 4,060,000
800 Winstar Communications, Inc., Preferred Stock 974,000
--------------
71,462,020
--------------
Total Preferred Stocks (cost $103,036,658) 101,069,954
--------------
COMMON STOCKS & STOCK WARRANTS - 2.8% (a, b)
26,000 American Telecasting, Inc., Stock Warrants 13,000
2,400 American Telecasting, Inc., Stock Warrants 1,200
125,000 Arch Communications Group, Common Stock 710,937
2,400 Australis Holdings Pty Ltd., Stock Warrants 24 (d)
10,920 Australis Media Ltd., Stock Warrants 109 (d)
70,000 Bell & Howell Co., Common Stock 1,933,750
23,925 Clearnet Communications, Inc., Stock Warrants 143,550
1,890 Communications & Power Industries, Inc., Common Stock 283,500
13,009 Consolidated Hydro, Inc., Stock Warrants, Class B 26,018 (d)
8,444 Consolidated Hydro, Inc., Stock Warrants, Class C 25,332 (d)
2,233 CS Wireless Systems, Inc., Common Stock 2
2,000 Discovery Zone, Inc., Stock Warrants 120,000
11,700 E.Spire Communications, Stock Warrants 2,189,363
112,013 Gaylord Container Corp., Class A Common Stock 1,078,125
154,623 Gaylord Container Corp., Stock Warrants 1,468,918
14,905 Grand Union Co., Stock Warrants 15 (d)
29,811 Grand Union Co., Stock Warrants 30 (d)
2,900 HighwayMaster Communications, Inc., Stock Warrants 29,000
9,200 Hyperion Telecommunications, Stock Warrants 644,000
60,000 IntelCom Group Communications, Inc., Common Stock 2,100,000
50,335 IntelCom Group (U.S.A.), Inc., Stock Warrants 1,113,662
4,100 Intermedia Communications of Florida, Stock Warrants 553,500
375 Intermedia Communications, Inc., Common Stock 27,369
10,200 Ionica plc, Stock Warrants 816,000
2,000 Iridium World Communications, Stock Warrants 510,000
32,180 JPS Textiles Group, Common Stock, Class A 322 (d)
35,000 Magellan Health Services, Common Stock 971,250
7,100 McCaw International Ltd., Stock Warrants 23,075
143,834 Memorex Telex N.V., ADR, Common Stock 359
3,981 Memorex Telex N.V., ADR, Stock Warrants 0 (d)
3,150 MGC Communications, Inc., Stock Warrants 157,500
27,200 Microcell Telecommunications, Inc., Stock Warrants 428,944
268,000 MobileMedia Corp., Class A Common Stock 33,500
1,500 NEXTEL Communications, Stock Warrants 8,295
3,086 NEXTEL Communications, Stock Warrants 1,296
26,250 PageMart Nationwide, Inc., Common Stock 262,500
112,000 Pagemart Wireless, Inc., Class A Common Stock 1,120,000
20,000 Plantronics, Inc., Common Stock 850,000
80,000 Powertel, Inc., Common Stock 1,830,000
3,200 Primus Telecommunications Group, Inc., Stock Warrants 91,200
19,360 Protection One Alarm Monitoring, Stock Warrants 307,340
6,000 RSL Communications Ltd., Stock Warrants 598,500
4,000 Teletrac Holdings, Inc., Stock Warrants 120,000
20,000 Triangle Wire & Cable, Inc., Stock Warrants 0 (d)
4,600 UIH Australia/Pacific, Inc., Stock Warrants 69,000
6,000 UNIFI Communications, Inc., Stock Warrants 1,650 (d)
87,000 United International Holdings, Inc., Class A Common Stock 1,479,000
20,100 United International Holdings, Inc., Stock Warrants 241,200
44,000 USN Communications, Inc., Stock Warrants 902,000
1,600 Vialog Corp., Warrants 96,000
192,533 Viatel, Inc., Sr. Common Stock 1,949,397
4,545 Wherehouse Entertainment, Inc., Class B Stock Warrants 17,044
4,545 Wherehouse Entertainment, Inc., Class C Stock Warrants 10,226
26,181 Wherehouse Entertainment, Inc., Stock Warrants, Class A 366,534
13,800 Wireless One, Inc., Stock Warrants 138
--------------
Total Common Stocks & Stock Warrants (cost $26,373,016) 25,723,674
--------------
<CAPTION>
Principal Maturity
Amount Rate Date
- ------------- ------ --------
<S> <C> <C>
SHORT-TERM SECURITIES - 2.4% (a)
Commercial Paper
$ 21,700,000 General Electric Capital 5.55% 5/1/1998 $ 21,700,000
--------------
Total Short-Term Securities (at amortized cost) 21,700,000
--------------
Total Investments (cost $912,218,608) $920,448,415 (e)
==============
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, 1998, 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, 1998:
<CAPTION>
Aquisition
Security Date Cost
- -------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Consolidated Hydro, Inc., Stock Warrants, Class B 6/15/1993 $ 2,440,822
Consolidated Hydro, Inc., Stock Warrants, Class C 6/15/1993 --
Grand Union Co., Stock Warrants 6/20/1995 2,981
Grand Union Co., Stock Warrants 6/20/1995 5,962
Grand Union Holdings Corp., Cumulative Preferred Stock, Series A 6/14/1993 5,218,975
JPS Textiles Group, Common Stock, Class A 1/13/1994 1,281,065
Memorex Telex N.V., ADR, Stock Warrants 3/25/1994 7,962
Triangle Wire & Cable, Inc., Stock Warrants 1/3/1992 1,998
Australis Holdings Pty Ltd., Stock Warrants 10/29/1996 --
Australis Media Ltd., Stock Warrants 5/16/1995 --
UNIFI Communications, Inc., Stock Warrants 2/14/1997 123,449
(e) At April 30, 1998, the aggregate cost of securities for federal tax purposes was $912,218,608 and the net
unrealized appreciation of investments based on that cost was $8,229,807 which is comprised of $64,522,040
aggregate gross unrealized appreciation and $56,292,233 aggregate gross unrealized depreciation.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD INCOME FUND
Portfolio of Investments
April 30, 1998
(unaudited)
Principal Maturity
Amount Rate Date Value
- ---------- ------ ---------- -----------
<S> <C> <C> <C>
CORPORATE BONDS - 47.6% (a)
Aerospace - 0.5%
$ 2,000,000 Raytheon Company, Notes 6.55% 3/15/2010 $ 2,007,198
1,500,000 United Defense Industries Inc, Sr. Subordinated Notes 8.75% 11/15/2007 1,526,250
--------------
3,533,448
--------------
Automotive - 1.5%
5,000,000 Ford Motor Credit Co., Notes 6.375% 10/6/2000 5,044,615
6,000,000 General Motors Acceptance Corp., Medium Term Notes 7.625% 5/5/2003 6,348,624
--------------
11,393,239
--------------
Bank & Finance - 13.2%
7,000,000 Associates Corp. of North America, Sr. Notes 9.125% 4/1/2000 7,383,502
3,500,000 Banc One Corp., Subordinated Debentures 8.0% 4/29/2027 3,995,327
4,000,000 BankBoston N.A. 6.375% 4/15/2008 3,975,120
3,000,000 Chase Manhattan Corp., Subordinated Notes 10.375% 3/15/1999 3,109,587
3,500,000 Chase Manhattan Corp., Subordinated Notes 9.375% 7/1/2001 3,832,332
7,000,000 Chemical New York Corp., Debentures 9.75% 6/15/1999 7,285,089
13,000,000 Equitable Life Assurance Society of the United States,
Surplus Notes 6.95% 12/1/2005 13,333,411
3,500,000 GenAmerica Capital I, Capital Securities 8.525% 6/30/2002 3,713,994
11,000,000 General Electric Capital Corp., Debentures 8.85% 4/1/2005 12,616,076
7,000,000 Metropolitan Life Insurance Co., Surplus Notes 7.7% 11/1/2015 7,556,255
8,000,000 New York Life Insurance Co., Surplus Notes 6.4% 12/15/2003 8,018,840
7,000,000 Prudential Insurance Co. of America, Capital Notes 6.875% 4/15/2003 7,100,282
7,000,000 Prudential Insurance Co., Surplus Notes 8.3% 7/1/2025 7,957,677
5,000,000 Societe Generale Real Estate Investment Trust,
LIBOR Bonds, Series A 7.64% 12/29/2049 5,026,025
7,500,000 Wells Fargo Capital, Capital Trust Preferred Securities 7.73% 12/1/2026 7,791,863
--------------
102,695,380
--------------
Broadcasting - 2.9%
1,500,000 Chancellor Media Corp., Sr. Subordinated Notes 8.125% 12/15/2007 1,509,375
400,000 Clear Channel Communications 2.625% 4/1/2003 402,000
3,000,000 CSC Holdings, Inc., Sr. Notes 7.875% 12/15/2007 3,090,000
4,000,000 Rogers Cablesystems, Inc., Sr. Secured Second Priority Notes 9.625% 8/1/2002 4,260,000
5,000,000 TCI Communications, Inc., Sr. Notes 10.125% 8/1/2001 5,545,650
4,000,000 Viacom, Inc., Subordinated Debentures 8.0% 7/7/2006 4,080,000
3,000,000 Westinghouse Electric Corp., Notes 8.875% 6/1/2001 3,170,706
--------------
22,057,731
--------------
Computers & Office Equipment - 1.3%
8,950,000 International Business Machines Corp., Debentures 7.125% 12/1/2096 9,339,450
750,000 Xerox Corp., Convertible Subordinated Notes Zero Coupon 4/21/2018 438,750
--------------
9,778,200
--------------
Construction & Home Building - 0.3%
2,000,000 American Standard Co., Inc., Notes 7.375% 4/15/2005 1,975,778
--------------
Containers & Packaging - 0.4%
3,000,000 Owens-Illinois, Inc., Sr. Notes 7.85% 5/15/2004 3,107,547
--------------
Drugs & Health Care - 1.0%
5,000,000 Allegiance Corp., Debentures 7.8% 10/15/2016 5,418,840
1,000,000 Athena Neurosciences, Inc., Convertible Bonds 4.75% 11/15/2004 1,148,750
1,400,000 Roche Holdings, Inc., Convertible Notes Zero Coupon 4/20/2010 794,500
--------------
7,362,090
--------------
Electric Utilities - 7.7%
1,500,000 AES Corp., Sr. Subordinated Notes 10.25% 7/15/2006 1,644,375
5,000,000 CalEnergy Company, Inc., Sr. Notes 7.63% 10/15/2007 5,010,900
2,000,000 Calpine Corp., Sr. Notes 7.875% 4/1/2008 2,005,000
5,000,000 Cleveland Electric Illumination Co., First Mortgage Bonds 7.625% 8/1/2002 5,163,725
4,000,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 4,107,648
6,500,000 Commonwealth Edison Co., Notes 7.625% 1/15/2007 6,891,105
3,000,000 Connecticut Light & Power Co., First Refunding Mortgage
Bonds, Series 97C 7.75% 6/1/2002 3,038,226
4,000,000 Consolidated Edison Co. NY, Inc., Debentures 6.45% 12/1/2007 4,043,964
1,500,000 El Paso Electric Co., First Mortgage Bonds, Series D 8.9% 2/1/2006 1,672,500
7,000,000 Empresa Electrica Pehuienche S.A., Notes 7.3% 5/1/2003 7,034,608
8,000,000 Korea Electric Power Corp., Debentures 6.75% 8/1/2027 7,024,920
4,000,000 NRG Energy, Inc., Sr. Notes 7.5% 6/15/2007 4,175,356
7,000,000 Texas Utilities Electric Company, Debentures 7.17% 8/1/2007 7,287,161
--------------
59,099,488
--------------
Electronics - 0.6%
5,000,000 Sony Corp., Notes 6.125% 3/4/2003 4,998,485
--------------
Food & Beverage - 0.9%
7,000,000 Archer Daniels Midland Co., Bonds 6.75% 12/15/2027 7,059,451
--------------
Hospital Management - 0.7%
2,000,000 Quorum Health Group, Inc., Sr. Subordinated Notes 8.75% 11/1/2005 2,100,000
3,000,000 Tenet Healthcare Corp., Sr. Notes 7.875% 1/15/2003 3,071,250
--------------
5,171,250
--------------
Household Products - 2.1%
3,000,000 Playtex Products Inc., Unsecured Sr. Notes 8.875% 7/15/2004 3,090,000
10,000,000 Procter & Gamble, Guaranteed ESOP Debentures 9.36% 1/1/2021 12,880,570
--------------
15,970,570
--------------
Leisure & Entertainment - 0.7%
4,500,000 Time Warner, Inc., Debentures 9.125% 1/15/2013 5,394,375
--------------
Natural Gas - 1.0%
8,000,000 Columbia Gas Systems, Inc., Series A Notes 6.39% 11/28/2000 8,063,936
--------------
Oil Service - 0.1%
500,000 Baker Hughes, Inc., Convertible Liquid Yield Option Notes 5/5/2008 412,500
250,000 Diamond Offshore Drilling, Inc., Convertible Subordinated Notes 3.75% 2/15/2007 338,125
200,000 Swiss Life Finance Ltd. 2.0% 5/20/2005 201,500
--------------
952,125
--------------
Oil & Gas - 3.0%
3,000,000 Gulf Canada Resources Ltd., Sr. Subordinated Debentures 9.625% 7/1/2005 3,262,500
4,096,639 Mobil Oil Corp., ESOP Sinking Fund Debentures 9.17% 2/29/2000 4,268,456
3,000,000 Newfield Exploration Company 7.45% 10/15/2007 3,020,427
1,000,000 Ocean Energy, Inc., Sr. Notes 8.875% 7/15/2007 1,065,000
3,000,000 Oryx Energy Co., Notes 8.375% 7/15/2004 3,220,707
3,500,000 Petroliam Nasional BHD, Notes 7.75% 8/15/2015 3,181,724
5,000,000 Triton Energy Ltd., Sr. Notes 8.75% 4/15/2002 5,226,440
--------------
23,245,254
--------------
Paper & Forest Products - 0.3%
2,500,000 Willamette Industries, Inc. 6.45% 2/1/2005 2,501,070
--------------
Pollution Control - 0.8%
1,000,000 USA Waste Services, Inc., Convertible Subordinated Notes 4.0% 2/1/2002 1,246,250
4,500,000 WMX Technologies, Inc., Notes 7.125% 6/15/2001 4,583,300
--------------
5,829,550
--------------
Publishing & Printing - 0.3%
2,000,000 PRIMEDIA, Inc. 7.625% 4/1/2008 1,965,000
--------------
Railroads - 0.4%
3,000,000 Norfolk Southern Corp., Notes 6.95% 5/1/2002 3,083,832
--------------
Retail - 4.9%
650,000 Costco Companies, Inc., Convertible Subordinated Notes Zero Coupon 8/19/2017 441,187
250,000 Costco Companies, Inc., Subordinated Notes Zero Coupon 8/19/2007 169,688
10,000,000 Dayton Hudson Corp., Notes 6.4% 2/15/2003 10,114,140
4,000,000 Federated Department Stores, Sr. Notes 8.5% 6/15/2003 4,365,392
4,000,000 Nordstrom, Inc. 6.95% 3/15/2028 4,045,516
4,000,000 Penney (J.C.) Co., Inc., Notes 6.95% 4/1/2000 4,057,396
4,000,000 Sears Roebuck Acceptance Corp, Medium Term Notes, Series III 7.03% 6/4/2003 4,116,668
10,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes, Series II 6.86% 7/3/2001 10,182,160
--------------
37,492,147
--------------
Retail: Food - 1.0%
1,000,000 Fred Meyer, Inc., Notes 7.375% 3/1/2005 1,004,528
5,000,000 Kroger Co. (The), Sr. Notes 8.15% 7/15/2006 5,513,090
1,500,000 Rite Aid Corp., Capital Notes 5.25% 9/15/2002 1,691,250
--------------
8,208,868
--------------
Services - 0.2%
500,000 Credit Suisse First Boston - NY, Convertible Medium Term Notes 2.25% 5/5/2003 500,000
600,000 Interpublic Group of Companies, Convertible Subordinated
Debentures 1.8% 9/16/2004 571,500
750,000 Omnicom Group Inc., Convertible Subordinated Debentures 2.25% 1/16/2013 841,875
--------------
1,913,375
--------------
Telecommunications - 0.4%
1,000,000 Bell Atlantic Financial Services 5.75% 4/1/2003 1,042,500
2,000,000 Cable & Wireless Communication 6.625% 3/6/2005 2,016,384
--------------
3,058,884
--------------
Telephone - 0.5%
4,000,000 Ameritech Capital Funding Corp. 6.15% 1/15/2008 3,963,292
--------------
Textiles & Apparel - 0.9%
7,000,000 Levi Strauss & Co., Notes 6.8% 11/1/2003 7,116,662
--------------
Total Corporate Bonds (cost $358,871,878) 366,991,027
--------------
Principal Maturity
Amount Rate Date Value
- ---------- ------ ---------- -----------
FOREIGN GOVERNMENT BONDS - 3.2% (a,c)
$ 7,000,000 British Columbia Hydro & Power, Debentures 12.5% 9/1/2013 7,438,130
5,000,000 Korea (Republic of), Bonds 8.875% 4/15/2008 4,917,340
8,000,000 Korea (Republic of), Notes 8.75% 4/15/2003 8,021,400
4,500,000 Ontario Province, Canada, Sr. Bonds 7.375% 1/27/2003 4,713,975
--------------
Total Foreign Government Bonds (cost $26,150,845) 25,090,845
--------------
ASSET-BACKED SECURITIES - 11.3% (a)
8,000,000 AESOP Funding II L.L.C., Rental Car Notes, Series 1997-1,
Class A-2 6.4% 10/20/2003 8,109,400
2,844,832 Chase Manhattan Grantor Trust, Series 1996-B-A 6.61% 9/15/2002 2,867,974
5,000,000 CS First Boston Mortgage Security Corp., 1996-2 Class A4 6.62% 9/25/2009 5,028,875
5,000,000 CS First Boston Mortgage Security Corp., Series 1997-1-A3 6.91% 5/25/2007 5,038,875
10,000,000 Deutsche Floorplan Receivables Master Trust, Series 1994-1-A 5.6% 2/15/2001 10,015,650 (b)
10,000,000 Discover Card Master Trust I, Series 1996-3-A 6.05% 8/18/2008 9,892,050
13,000,000 Standard Credit Master Trust 1, Credit Card Participation
Certificates, Series 1995-9-A 6.55% 10/7/2007 13,249,665
15,000,000 World Financial Network Credit Card Master Trust, Series 1996-B 6.95% 4/15/2006 15,583,842
17,000,000 World Omni Auto Lease Trust 6.9% 6/25/2003 17,256,105
--------------
Total Asset-Backed Securities (cost $85,678,184) 87,042,436
--------------
MORTGAGE-BACKED SECURITIES - 12.0% (a)
23,045,848 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 2011 22,795,339
8,000,000 Federal Home Loan Mortgage Corp. 6.0% 5/1/2013 7,900,000 (d)
20,000,000 Federal National Morgage Association 6.0% 5/1/2028 19,337,500 (d)
42,909,236 Government National Mortgage Association, Modified Pass
Through Certificates 6.5% 2/15/2027 42,599,860
--------------
Total Mortgage-Backed Securities (cost $90,920,875) 92,632,699
--------------
U.S. GOVERNMENT - 17.7% (a)
20,000,000 U.S. Treasury Bonds 7.25%-12.75% 2005-2022 109,090,831 (e)
25,500,000 U.S. Treasury Notes 6.125%-7.875% 2001-2006 27,305,176
--------------
Total U.S. Government (cost $136,544,688) 136,396,007
--------------
<CAPTION>
Shares
- ----------------
<S> <C> <C>
COMMON STOCKS - 0.2% (a)
5,000 CarrAmerica Realty Corp., Common Stock 146,250
7,000 Cresent Real Estate Equities, Common Stock 238,875
7,500 Federal National Mortgage Association, Common Stock 449,062
5,000 First Industrial Realty Trust, Inc., Common Stock 162,500
7,500 First Union Corp., Common Stock 452,813
8,000 Simon Debartolo Group, Inc., Common Stock 263,500
4,000 Spieker Properties, Inc., Common Stock 158,500
--------------
Total Common Stocks (cost $1,684,029) 1,871,500
--------------
Value
-----------
PREFERRED STOCKS - 1.2%
12,000 AirTouch Communications, Inc., Convertible Preferred Stock $ 921,750
20,000 Cendant Corp., Preferred Stock 823,750
12,500 Conseco, Inc., Convertible Preferred Stock 682,031
8,000 El Paso Energy Capital Trust I 420,500
15,000 Houston Industries, Inc., Preferred Stock 1,040,625
12,000 Life Re Capital Trust II 866,250
8,000 McKesson Financing Trust, Convertible Preferred Stock 776,000
20,000 National Australia Banks, Preferred Stock 588,750
30,000 Newell Financial Trust I., Convertible Preferred Stock 1,740,000
50,000 Philadelphia Consolidated Holding, Convertible Preferred Stock 531,250
15,000 Security Capital Industrial Trust Ltd., Preferred Stock 472,500
10,000 Unocal Capital Trust, Preferred Stock 576,250
--------------
Total Preferred Stocks (cost $8,032,909) 9,439,656
--------------
OPTIONS ON U.S. TREASURY BOND FUTURES - 0.02% (a)
U.S. Treasury Bond Futures, 100 call option contracts,
exercise price of $119, expires June 1998 (cost, $85,435) 159,375
--------------
<CAPTION>
Principal Maturity
Amount Rate Date
- -------------- ------ -------------
<S> <C> <C> <C>
SHORT-TERM SECURITIES - 6.8% (a)
U.S. Government Agency - 1.3%
$ 10,000,000 Federal Home Loan Mortgage Discount Notes 5.41% 5/14/1998 9,980,464
--------------
Commercial Paper - 5.5%
10,000,000 Metlife FDG Inc. 5.5% 5/13/1998 9,981,667
27,400,000 Shell Oil Co. 5.52% 5/1/1998 27,400,000
5,200,000 UBS Finance Delaware Inc. 5.53% 5/1/1998 5,200,000
--------------
Total Commercial Paper 42,581,667
--------------
Total Short-Term Securities (at amortized cost) 52,562,131
--------------
Total Investments (cost $760,530,974) $772,185,676 (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) At April 30, 1998, U.S. Treasury Bonds valued at $1,014,709 were held in escrow to cover open call options written as
follows:
<CAPTION>
Number of Exercise Expiration
Type Contracts Price Date Value
---------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
US Treasury Bond Futures 100 $122 6/15/1998 $ 18,750
US Treasury Bond Futures 200 120 6/15/1998 184,375
------ --------------
300 $203,125
====== ==============
(f) At April 30, 1998, the aggregate cost of securities for federal income tax purposes was $760,530,974
and the net unrealized appreciation of investments based on that cost was $11,654,702 which is
comprised of $18,466,133 aggregate gross unrealized appreciation and $6,811,431 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, 1998
(unaudited)
Principal Maturity
Amount Rate Date Value
- ----------- ------ ---------- ------------
<S> <C> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES - 99.8% (a)
Arizona - 1.3%
$ 1,700,000 Pima County, Arizona (Catalina Foothills Unified School
District #16), Unlimited Tax General Obligation Bonds,
Insured by MBIA 8.9% 7/1/2005 $ 2,145,978
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 1,077,060
2,500,000 Salt River Project, Arizona, Electric System, Revenue Bonds,
Series 1992-C 6.0% 1/1/2016 2,637,875
1,500,000 Tucson, Arizona, Unlimited Tax General Obligation Refunding
Bonds, Insured by FGIC 6.1% 7/1/2012 1,605,990
--------------
7,466,903
--------------
Arkansas - 1.3%
1,340,000 Arkansas Development Finance Authority, Correctional Facilities
Construction Revenue Bonds, Insured by MBIA 7.125% 11/15/2010 1,460,546 (b)
1,000,000 Arkansas Housing Development Agency, Single Family Mortgage
Bonds, Series A 8.375% 7/1/2010 1,252,300 (b)
3,000,000 City of Jonesboro, Arkansas, Residential Housing and Health Care
Facilities Board, Hospital Revenue Refunding and Construction
Bonds, (St. Bernards Regional Medical Center), Series 1996-B,
Insured by AMBAC 5.8% 7/1/2011 3,231,180
875,000 Pope County, Arkansas, Pollution Control Revenue Refunding
Bonds, Series 1994 (Arkansas Power and Light Project)
Insured by FSA 6.3% 12/1/2016 952,630
750,000 Sebastian County, Arkansas, Junior College, Unlimited General
Obligation Refunding and Improvement Bonds, Insured by
AMBAC 5.6% 4/1/2017 784,058
--------------
7,680,714
--------------
California - 10.8%
2,500,000 Alameda, California, Unified School District, Alameda County,
Crossover Refunding Bonds, Series A, Insured by AMBAC 6.1% 7/1/2013 2,671,750
3,450,000 Anaheim, California, Public Financing Authority, Lease Revenue
Bonds, (Anaheim Public Improvements Project), 1997 Series A,
Insured by FSA 6.0% 9/1/2024 3,832,398
1,000,000 Anaheim, California, Public Financing Authority, Senior Lease
Revenue Bonds (Anaheim Public Improvement Project),
Series A, Insured by FSA 5.0% 9/1/2027 954,100
2,500,000 Bakersfield, California, Certificates of Participation (Convention
Center Expansion - Arena Project, 1997), Insured by MBIA 5.8% 4/1/2017 2,622,725
3,000,000 California State Public Works Board, Department of Corrections,
Lease Revenue Bonds, State Prison, Series A 7.4% 9/1/2010 3,687,330
1,000,000 California State, Unlimited Tax General Obligation Bonds,
Veteran's Series AT 9.5% 2/1/2010 1,415,690
300,000 California State, Unlimited Tax General Obligation,
Insured by MBIA 6.0% 8/1/2016 321,072
5,985,000 California State, Unlimited Tax General Obligation,
Insured by MBIA 6.0% 8/1/2016 6,593,256 (b)
2,000,000 California State, Various Purpose General Obligation Bonds,
Insured by AMBAC 6.3% 9/1/2010 2,290,520
1,400,000 Central Valley Financing Authority, California,
Cogeneration Project Revenue Bonds,
(Carson Ice-Gen Project), Series 1993 6.0% 7/1/2009 1,466,948
3,135,000 County of Orange, California, 1996 Recovery Certificates of
Participation, Series A, Insured by MBIA 5.8% 7/1/2016 3,317,206
2,000,000 Los Angeles County, California, Transportation Commission
Sales Tax Revenue Bonds, Proposition C, Series A,
Insured by MBIA 6.250% 7/1/2013 2,180,340
2,000,000 Metropolitan Water District of Southern California,
Unlimited Tax General Obligation Bonds, Series G 6.625% 3/1/2009 2,055,820 (b)
4,975,000 Palmdale, California, Civic Authority Revenue Bonds
(Merged Redevelopment Project Areas), Series A 6.6% 9/1/2034 5,462,898
1,000,000 Rio Linda, California, Union School District, Series 1992-A,
Insured by AMBAC 7.4% 8/1/2010 1,135,560 (b)
2,815,000 Riverside County Transportation Commission, California,
Sales Tax Revenue Capital Appreciation Bonds,
Insured by MBIA Zero Coupon 6/1/2004 2,145,875
1,000,000 Sacramento Cogeneration Authority, Cogeneration Project
Revenue Bonds, (Proctor & Gamble Project), 1995 Series 6.375% 7/1/2010 1,085,100
1,500,000 San Francisco Bay Area Rapid Transit District, California,
Sales Tax Revenue Refunding Bonds, Series 1990,
Insured by MBIA 6.750% 7/1/2010 1,776,030
15,000,000 San Joaquin Hills Transportation Corridor Agency,
California, Sr. Lien, Convertible Toll Revenue Bonds Zero Coupon 1/1/2013 14,851,500 (b)
1,500,000 State of California, General Obligation Bonds 7.0% 8/1/2006 1,750,005
2,490,000 University of California Revenue Bonds, Multiple Purpose
Projects, Series 1989-B, Insured by AMBAC 11.0% 9/1/1998 2,546,548
--------------
64,162,671
--------------
Colorado - 5.3%
1,000,000 Colorado Housing & Finance Authority, Single Family Program,
Revenue Bonds 7.0% 11/1/2016 1,123,730
510,000 Colorado Housing & Finance Authority, Single Family Residential
Housing Revenue Bonds, Series 1987-B 9.0% 9/1/2017 520,200
3,100,000 Colorado Springs, Colorado, Utilities System Refunding
Bonds, Series 1991-B 7.0% 11/15/2021 3,429,933 (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 2,138,177 (b)
1,195,000 Colorado Water Resources Power Development Authority,
Clean Water Revenue Bonds, Series A, Insured by FSA 6.250% 9/1/2013 1,271,062
3,350,000 Douglas County, Colorado, School District No. 1, General
Obligation Bonds 6.5% 12/15/2016 3,774,680 (b)
150,000 Douglas County, Colorado, School District No. 1, General
Obligation Bonds 6.5% 12/15/2016 166,556
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 1,104,260
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 6/1/2007 1,239,991
1,885,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax General
Obligation Bonds, Insured by MBIA Zero Coupon 12/1/2008 1,147,531
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax General
Obligation Bonds, Insured by MBIA Zero Coupon 6/1/2008 1,177,905
3,000,000 Larimer County, Colorado, School District No. R-1, Poudre Valley
Unlimited Tax, General Obligation Bonds, Insured by MBIA 7.0% 12/15/2016 3,880,290
3,850,000 Regional Transportation District, Colorado, Sales Tax 6.250% 11/1/2012 4,177,096 (b)
635,000 Regional Transportation District, Colorado, Sales Tax 6.250% 11/1/2012 680,631
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 3,725,600
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 1,947,575
--------------
31,505,217
--------------
Connecticut - 0.8%
4,000,000 Connecticut Special Tax Obligation, Transportation Infrastructure
Revenue Bonds, Series B 6.5% 10/1/2010 4,625,800
--------------
Florida - 2.5%
10,330,000 Broward County, Florida, Housing Finance Authority, Home
Mortgage, Revene Bonds, 1983 Series A Revenue Bonds,
1983 Series A Zero Coupon 4/1/2014 2,075,090
3,500,000 Florida State Board of Education, Public Education Capital Outlay,
General Obligation Bonds Series B 5.875% 6/1/2020 3,646,930
3,200,000 Hillsborough County, Florida, Industrial Development Authority
(Weyerhaeuser Company, Inc.), Industrial Development
Revenue Bonds, Series 1983 9.250% 6/1/2008 3,228,064
1,705,000 Hillsborough County, Florida, Industrial Development Authority,
Florida (Tampa Electric Project), Pollution Control Revenue
Bonds, Series 1991 7.875% 8/1/2021 1,941,364
3,500,000 Jacksonville, Florida, Electric Authority (St. John's River Power
Project), Electric Revenue Refunding Bonds, Issue 2-13 5.375% 10/1/2016 3,575,530
--------------
14,466,978
--------------
Georgia - 2.9%
1,500,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series A, Insured by MBIA 6.1% 10/1/2019 1,698,165
2,000,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series 1992, Insured by MBIA 6.0% 10/1/2011 2,224,660
5,000,000 Cherokee County, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Insured by MBIA 5.5% 8/1/2018 5,269,650
2,000,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-B 5.650% 3/1/2012 2,136,720
3,500,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-D 5.0% 8/1/2012 3,503,255
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series B 6.3% 3/1/2009 1,138,070
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series B 6.3% 3/1/2010 1,137,920
--------------
17,108,440
--------------
Idaho - 0.7%
1,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2007 664,070
3,115,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2010 1,772,996
2,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2011 1,072,140
750,000 Idaho State Building Authority State Building Revenue Bonds,
Insured by MBIA 5.0% 9/1/2021 725,873
--------------
4,235,079
--------------
Illinois - 2.2%
2,500,000 Chicago, Illinois Wastewater Transmission Revenue, Second Lien,
Insured by AMBAC 5.250% 1/1/2028 2,433,850
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 1,038,890
2,500,000 Cook County, Illinois, Unlimited General Obligation Bonds,
Series A, Insured by MBIA 6.250% 11/15/2011 2,838,875
2,000,000 Illinois Health Facilities Authority Revenue Refunding Bonds,
Lutheran General Health, Insured by FSA 6.0% 4/1/2018 2,186,340
795,000 Illinois Health Facilities Authority (Community Provider Pooled
Loan Progam), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.9% 8/15/2003 806,877 (b)
170,000 Illinois Health Facilities Authority (Community Provider Pooled
Loan Progam), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.9% 8/15/2003 193,361 (b)
10,000,000 Metropolitan Pier & Expostion Authority, Illinois,
McCormick Place Expansion, Refunding Bonds,
Series 1993-A, Insured by FGIC Zero Coupon 6/15/2018 3,391,200
--------------
12,889,393
--------------
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 2,461,760
1,100,000 Indianapolis Airport Authority Refunding Revenue Bonds,
Series 1996-A, Insured by FGIC 5.6% 7/1/2015 1,133,407
--------------
3,595,167
--------------
Iowa - 0.4%
2,000,000 Iowa Finance Authority, Iowa State Revolving Fund Revenue Bonds,
Combined Series 1994 6.250% 5/1/2024 2,173,120
--------------
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 8,862,720
1,255,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds,
Insured by AMBAC Zero Coupon 3/1/2007 838,767 (b)
920,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds, Insured by
AMBAC Zero Coupon 3/1/2007 609,592 (b)
--------------
10,311,079
--------------
Kentucky - 0.8%
960,000 Kentucky Development Finance Authority, Refunding and
Improvement Revenue Bonds (Ashland Hospital,
Kings Daughter Project) 9.750% 8/1/2005 990,595
750,000 Kentucky Turnpike Authority, Economic Development Road
Revenue and Revenue Refunding Bonds, Series 1993,
Insured by AMBAC 5.5% 7/1/2009 802,245
5,345,000 Kentucky Turnpike Authority, Economic Development Road
Revenue Bonds, Insured by FGIC Zero Coupon 1/1/2010 3,033,287
--------------
4,826,127
--------------
Louisiana - 1.2%
6,500,000 New Orleans, Louisiana, General Obligation Bonds, Series 1991,
Insured by AMBAC Zero Coupon 9/1/2012 3,133,455
3,000,000 Orleans Parish School Board #87, Louisiana, Insured by MBIA 8.950% 2/1/2008 3,981,270 (b)
--------------
7,114,725
--------------
Maine - 0.3%
1,250,000 Maine Health & Higher Education Facilities Authority,
Revenue Bonds, Series 1994, Insured by FSA 7.0% 7/1/2024 1,417,925
350,000 Regional Waste Systems, Inc., Maine, Solid Waste Resource
Recovery, System Revenue Bonds, Series A-C 7.950% 7/1/2010 367,759
--------------
1,785,684
--------------
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 2,167,200
4,500,000 Morgan State University, Maryland, Academic Fee and Auxiliary
Facilities Fees Revenue Refunding Bonds, Series 1993,
Insured by MBIA 6.050% 7/1/2015 5,028,525
1,000,000 Prince George's County, Maryland, Dimensions Health Corp.,
Hospital Revenue Bonds, Series 1992 7.0% 7/1/2022 1,116,400 (b)
--------------
8,312,125
--------------
Massachusetts - 2.3%
2,000,000 Commonwealth of Massachusetts, General Obligation
Refunding Bonds, Series B 6.5% 8/1/2008 2,289,740
1,800,000 Commonwealth of Massachusetts, Limited Tax General
Obligation Bonds, Construction Loan, Series C 7.375% 12/1/2008 1,872,288 (b)
1,500,000 Massachusetts Health and Education Facilities Authority
(Newton - Wellesley Hospital), Revenue Bonds, Series C 8.0% 7/1/2018 1,539,675 (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 2,712,775
1,500,000 Massachusetts Health & Education Facilities Authority,
Revenue Bonds, Series F 6.5% 7/1/2012 1,630,215
3,000,000 Plymouth County, Massachusetts, Correctional Facility
Certificates of Participation Bonds 7.0% 4/1/2012 3,322,950
--------------
13,367,643
--------------
Michigan - 2.7%
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 2,220,560
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 896,430
2,460,000 Michigan Municipal Bond Authority, Government Loan Revenue
Refunding Bonds, Series A, Insured by FGIC Zero Coupon 12/1/2005 1,740,721
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 402,336 (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 113,274
3,000,000 Michigan State Hospital Finance Authority,
Revenue Refunding Bonds, (Sisters of Mercy Health Corp.),
Insured by MBIA 5.375% 8/15/2014 3,070,200
3,320,000 Sault St. Marie Chippewa Indians Housing Authority,
Health Facilities Revenue Bonds, (Tribal Health & Human
Services Center Project), Series 1992 7.750% 9/1/2012 3,591,974
3,455,000 West Ottawa, Michigan, Public School District, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/2004 2,646,668
1,860,000 West Ottawa, Michigan, Public School District, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/2005 1,353,541
--------------
16,035,704
--------------
Minnesota - 4.5%
2,500,000 City of Rochester, MN Health Care Facilities Revenue Bonds
(Mayo Foundation) , Series 1998A 5.5% 11/15/2027 2,496,325 (d)
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 772,114
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 314,432 (b)
7,685,000 Minneapolis, Minnesota, Community Development Agency, Tax
Increment Revenue Appreciation Bonds, Insured by MBIA Zero Coupon 3/1/2009 4,609,156
5,000,000 Minnesota Agricultural and Economic Development Board,
Health Care System Revenue Bonds, Series 1997-A, (Fairview
Hospital and Healthcare Services), Insured by MBIA 5.750% 11/15/2026 5,227,250
1,000,000 Minnesota Agricultural and Economic Development Board,
Health Care System Revenue Bonds, Series 97A, (Fairview
Hospital and Healthcare Services), Insured by MBIA 5.5% 11/15/2017 1,032,760
2,500,000 Minnesota Higher Education Facilities Authority, (Augsburg
College), Mortgage Revenue Bonds, Series Four-F1 Bonds 6.250% 5/1/2023 2,640,625
1,000,000 Minnesota State Unlimited Tax General Obligation 5.0% 8/1/2017 985,340
1,740,000 Stewartville, MN, Independent School District,
Unlimited Tax General Obligation Bonds, Series A 5.750% 2/1/2014 1,852,595
3,500,000 St. Louis Park, Minnesota, Health Care Facilities (Park Nicollet
Medical Center Project), Revenue Bonds, Series 1990-A 9.250% 1/1/2020 3,847,795 (b)
1,000,000 St. Louis Park, Minnesota, (Methodist Hospital),
Hospital Revenue Bonds, Series C, Insured by AMBAC 7.250% 7/1/2018 1,081,950 (b)
1,400,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series C, Insured by AMBAC 7.250% 7/1/2015 1,513,218 (b)
--------------
26,373,560
--------------
Missouri - 3.1%
3,000,000 City of St. Charles, Missouri Public Facilities Authority,
Leasehold Revenue Bonds, Series 1997A, Insured by MBIA 5.450% 2/1/2017 3,043,920
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 2,149,480
1,500,000 Missouri Housing Development Commission, Single Family
Mortgage Revenue Bonds (Home Ownership Loan Program),
Series C-1 6.550% 9/1/2028 1,655,970
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 5.250% 5/15/2014 2,041,340
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 2,881,027 (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 5.350% 6/1/2009 789,030
2,925,000 Missouri State Health and Education Facilities Authority, Heartland
Health System Revenue Bonds, Series 1992, Insured by AMBAC 6.350% 11/15/2017 3,147,241
1,500,000 Missouri State Health and Education Facilities Authority,
SSM Health Care Refunding Revenue Bonds, Series A,
Insured by MBIA 6.250% 6/1/2007 1,622,805
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 1,045,310
--------------
18,376,123
--------------
Montana - 0.8%
775,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.875% 6/1/2020 843,781 (b)
2,385,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.875% 6/1/2020 2,596,669
1,240,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.875% 6/1/2020 1,350,050 (b)
--------------
4,790,500
--------------
Nebraska - 1.6%
1,000,000 Lancaster County, Nebraska, Hospital Authority No. 1, Hospital
Revenue Bonds, (Bryan Memorial Hospital Project),
Series 1997-B, Insured by MBIA 5.375% 6/1/2022 1,000,390
4,000,000 Nebraska Public Power District, Power Supply System
Revenue Bonds, Insured by MBIA 6.125% 1/1/2015 4,263,560
3,455,000 Omaha Public Power District, Nebraska, Electric Revenue
Refunding Bonds, Series B 6.150% 2/1/2012 3,884,664
--------------
9,148,614
--------------
New Hampshire - 0.2%
1,100,000 New Hampshire Turnpike System, Residual Interest Bonds,
1991 Refunding, Series C, Insured by FGIC 9.789% 11/1/2017 1,434,653 (c)
--------------
New Jersey - 3.2%
1,250,000 East Orange, New Jersey, Unlimited Tax General Obligation Bonds,
Insured by FSA 8.4% 8/1/2006 1,564,725
1,000,000 Mercer County, New Jersey, Improvement Authority, Revenue Bonds,
Series 1991 6.6% 11/1/2014 1,074,180 (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 2,818,038
3,000,000 New Jersey Transit Corp., (Raymond Plaza East, Inc.),
Certificates of Participation, Insured by FSA 6.375% 10/1/2006 3,385,410
1,080,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
1984 Series 10.375% 1/1/2003 1,252,195 (b)
4,700,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, Series C,
Insured by AMBAC 6.5% 1/1/2016 5,538,292
2,195,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/2007 1,407,127
2,595,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/2009 1,499,443
--------------
18,539,410
--------------
New Mexico - 2.6%
3,315,000 City of Alamogordo, New Mexico Hospital Revenue Bonds,
(Gerald Champion Hospital Project), Series 1997 5.3% 1/1/2013 3,278,170
5,000,000 Farmington, New Mexico, Power Revenue Refunding Bonds,
Series 1983 9.875% 1/1/2013 6,492,950 (b)
4,040,000 Farmington, New Mexico, Utility Systems Revenue Bonds,
Insured by AMBAC 9.875% 1/1/2008 5,371,463 (b)
--------------
15,142,583
--------------
New York - 5.1%
2,500,000 Metropolitan Transit Authority, New York, Commuter Facilities
Revenue Bonds, Series 1996-A, Insured by FGIC 6.1% 7/1/2026 2,696,050
5,200,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series A, Insured by MBIA 6.375% 7/1/2018 5,792,904 (b)
4,250,000 Metropolitan Transportation Authority, New York,
Transit Facilities Revenue Bonds, Series O, Insured by MBIA 6.250% 7/1/2014 4,706,280 (b)
4,225,000 Metropolitan Transportation Authority, New York,
Transit Facilities Service Contract Bonds, Series O 5.750% 7/1/2013 4,470,810
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 2,181,880
1,820,000 New York State Medical Care Facilities Finance Agency
(Ellis Hospital), Insured Mortgage Hospital Bonds, Series B,
Insured by FHA 8.0% 2/15/2008 1,875,055
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 3,131,957 (b)
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 1,746,878
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 1,856,190
1,000,000 Triborough Bridge & Tunnel Authority, New York, General
Purpose Revenue Bonds, Series Q 6.750% 1/1/2009 1,163,820
--------------
29,621,824
--------------
North Carolina - 1.5%
2,500,000 Charlotte, North Carolina, Water and Sewer Unlimited Tax
General Obligation Bonds 5.6% 5/1/2021 2,609,550
1,500,000 County of Pitt, North Carolina, Pitt County Memorial Hospital
Revenue Bonds, Series 1995 5.5% 12/1/2015 1,531,260
4,000,000 North Carolina Municipal Power Agency #1, Catawba Electric
Revenue Refunding Bonds, Series 1992, Insured by MBIA 6.0% 1/1/2011 4,391,160
--------------
8,531,970
--------------
North Dakota - 1.0%
2,000,000 Mercer County, North Dakota, Pollution Control Revenue
Refunding Bonds, (Ottertail Power Co. Project) 6.9% 2/1/2019 2,149,000
2,000,000 North Dakota Municipal Bond Bank, State Revolving Fund
Program Bonds, Series 1995-A 6.3% 10/1/2015 2,170,440
1,340,000 North Dakota State Water Commission (Southwest Pipeline),
Revenue Bonds, Series A, Insured by AMBAC 5.750% 7/1/2027 1,386,123
--------------
5,705,563
--------------
Ohio - 5.5%
875,000 Akron Ohio Economic Development, Non-Tax Revenue Bonds,
Insured by MBIA 6.0% 12/1/2012 971,469
1,050,000 Akron, Bath & Copley Joint Township, Ohio, (Children's Hospital
Medical Center), Hospital District Revenue Bonds,
Insured by AMBAC 7.450% 11/15/2020 1,149,918 (b)
2,500,000 Akron, Ohio, Certificates of Participation, Series 1996,
Akron Municipal Baseball Stadium Project Zero Coupon 12/1/2016 2,213,125
3,000,000 Barberton City School District, Ohio School Improvement Bonds,
General Obligation Unlimited Tax, Series 1998 5.125% 11/1/2022 2,936,460
2,620,000 Batavia Local School District, Ohio School Improvement
Refunding Bonds, (Unlimited Tax General Obligation) 5.625% 12/1/2022 2,739,786
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 4,383,333 (b)
1,630,000 Cuyahoga County, Ohio, (Deaconess Hospital), Hospital
Revenue Bonds, Series C 7.450% 10/1/2018 1,794,157 (b)
1,470,000 Lorain County, Ohio, (Humility of Mary Health System), Hospital
Revenue Bonds 7.125% 12/15/2006 1,613,178 (b)
2,000,000 Ohio Higher Educational Facility Commission (Case Western
Reserve University Project), Series B 6.5% 10/1/2020 2,365,260
1,500,000 Ohio Higher Educational Facility Commission, Higher Educational
Revenue Bonds, (Ohio Dominican College 1994 Project) 6.625% 12/1/2014 1,616,385
5,000,000 Ohio State Air Quality Development Authority, Cleveland Electric,
Pollution Control Revenue Bonds, Insured by FGIC 8.0% 12/1/2013 5,755,200
2,250,000 Ohio State Air Quality Development Authority, Columbus &
Southern Pollution Control Revenue Bonds, Insured by FGIC 6.375% 12/1/2020 2,441,655
1,795,000 Trumbull County, Ohio (Memorial Hospital), Hospital Revenue
Refunding & Improvement Bonds, Series 1991-B,
Insured by FGIC 6.9% 11/15/2012 2,013,039 (b)
--------------
31,992,965
--------------
Oklahoma - 1.7%
5,220,000 Bass, Oklahoma, Memorial Baptist Hospital 8.350% 5/1/2009 6,458,184 (b)
1,500,000 Oklahoma Municipal Power Authority, Electric Revenue
Refunding Bonds, Series B, Insured by MBIA 5.750% 1/1/2024 1,656,870
1,500,000 Oklahoma Municipal Power Authority, Power Supply System
Revenue Bonds, Series 1992-B, Insured by MBIA 5.875% 1/1/2012 1,656,870
--------------
9,771,924
--------------
Oregon - 0.9%
2,700,000 Clackamas County, Oregon, Health Facilities Authority, Adventist
Health-West Revenue Refunding Bonds, Series 1992-A,
Insured by MBIA 6.350% 3/1/2009 2,914,974
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 2,158,960
--------------
5,073,934
--------------
Pennsylvania - 3.2%
7,500,000 Allegheny County, Pennsylvania, Airport Revenue Refunding
Bonds, Series 1997B, Insured by MBIA 5.0% 1/1/2019 7,218,975
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 1,742,784
2,575,000 Allegheny County, Pennsylvania, Sanitary Authority,
Sewer Revenue Bonds, Series A, Insured by FGIC Zero Coupon 6/1/2008 1,589,110
3,170,000 Millcreek Township, Pennsylvania, School District, General
Obligation Bonds, Insured by FGIC Zero Coupon 8/15/2009 1,864,879
2,000,000 Monroeville, Pennsylvania, Hospital Authority, Forbes
Health System Revenue Bonds, Series 1992 7.0% 10/1/2003 2,176,440
3,000,000 Pennsylvania State, General Obligation Bonds, Second
Series of 1992, Insured by AMBAC Zero Coupon 7/1/2006 2,062,080
1,000,000 York County Solid Waste and Refuse Authority
(Commonwealth of Pennsylvania) Refunding Revenue Bonds,
Series 1997, County Guaranteed, Insured by FGIC 5.5% 12/1/2012 1,060,850
--------------
17,715,118
--------------
Puerto Rico - 2.0%
4,000,000 Puerto Rico Commonwealth, Aqueduct & Sewer Revenue Bonds,
Series A 9.0% 7/1/2009 5,040,080 (b)
3,000,000 Puerto Rico Commonwealth, Unlimited Tax General
Obligation Bonds 6.450% 7/1/2017 3,371,310 (b)
3,000,000 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series T 6.0% 7/1/2016 3,224,490
--------------
11,635,880
--------------
South Carolina - 1.7%
3,000,000 Hilton Head No. 1 Public Service District, South Carolina
Waterworks and Sewer System Improvement Revenue Bonds,
Series 1998, Insured by FSA 5.0% 12/1/2023 2,874,630
2,000,000 Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, Series 1991, Insured by FGIC 6.250% 1/1/2021 2,271,660
5,000,000 Piedmont Municipal Power Agency, South Carolina,
Electric Revenue Refunding Bonds, Insured by FGIC 5.0% 1/1/2022 4,779,250
--------------
9,925,540
--------------
Tennessee - 0.5%
1,750,000 Bristol, Tennessee, Health and Educational Facilities Authority,
Bristol Memorial Hospital Revenue Bonds, Insured by FGIC 7.0% 9/1/2021 1,907,657 (b)
1,250,000 Gatlinburg, Tennessee General Obligation Parking Facility
Improvement, Series 1998, Insured by FGIC 5.0% 5/1/2020 1,211,088
--------------
3,118,745
--------------
Texas - 9.8%
2,165,000 Arlington, Texas, Independent School District, Unlimited Tax
Refunding & Improvement Bonds, Series 1992, Permanent
School Fund Guarantee Zero Coupon 2/15/2009 1,287,590
7,000,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA Zero Coupon 11/15/2008 4,213,580
8,100,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA Zero Coupon 11/15/2009 4,620,159
1,000,000 Austin, Texas, Utility System Revenue Refunding Bonds,
Insured by FGIC 6.0% 11/15/2013 1,118,600
1,575,000 Bexar County, Texas, Limited Tax General Obligation Bonds 5.0% 6/15/2015 1,564,180
1,000,000 Brazos River Authority, Texas, Collateralized Revenue Refunding
Bonds (Houston Lighting & Power Co.), 1988 Series B 8.250% 5/1/2015 1,020,000
2,000,000 Brazos River Authority, Texas, Houston Lighting
& Power Co., Revenue Refunding Bonds, Insured by MBIA 8.250% 5/1/2015 2,040,000
1,000,000 Cass County, Texas, Industrial Development Corporation,
Pollutions Control Revenue Refunding Bonds,
International Paper, Series 1997-B 5.350% 4/1/2012 1,025,630
1,390,000 City of Garland, Dallas County, Texas, Combination Tax and
Revenue Certificates of Obligation, Series 1996 5.250% 2/15/2016 1,394,587
1,310,000 City of Garland, Dallas County, Texas, Combination Tax and
Revenue Certificates of Obligation, Series 1996 5.250% 2/15/2015 1,317,297
2,000,000 Copperas Cove, Texas, Independent School District,
Unlimited Tax General Obligation Bonds, Permanent School
Fund Guarantee 6.9% 8/15/2014 2,265,620 (b)
4,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds
Series 1994-A, Insured by MBIA 6.0% 11/1/2012 4,244,280
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.375% 11/1/2008 1,156,200
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.375% 11/1/2009 1,159,620
2,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding Bonds,
Insured by FGIC 7.375% 11/1/2010 2,319,240
2,285,000 Denton, Texas, Independent School District, Unlimited Tax General
Obligation Refunding Bonds, Permanent School Fund Guarantee 6.250% 2/15/2009 2,581,616
1,000,000 Georgetown, Texas, Higher Education Finance Corp.,
Higher Education Revenue Bonds, Series 1994
(Southwestern University Project) 6.3% 2/15/2014 1,056,230
2,250,000 Harris County, Texas, Toll Road Sr. Lien Bonds, Series A,
Insured by MBIA 6.375% 8/15/2024 2,512,327 (b)
1,750,000 Harris County, Texas, Tollroad Unlimited Tax & Subordinated Lien,
Revenue Refunding Bonds, Series 1988 8.125% 8/1/2015 1,802,482 (b)
5,315,000 Lewisville, Texas, Independent School District, Capital
Appreciation Refunding Bonds, Permanent School Fund
Guarantee Zero Coupon 8/15/2019 1,696,335
1,000,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.375% 7/1/2011 1,144,300
1,845,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.375% 7/1/2010 2,111,234
11,615,000 Southeastern Texas Housing Finance Corp., Single Family
Mortgage Revenue Bonds Zero Coupon 9/1/2017 4,203,352 (b)
4,315,000 Texas State, Veterans Land Board General Obligation Bonds Zero Coupon 7/1/2010 2,403,843 (b)
1,000,000 Texas Water Development Board State Revolving Fund Revenue
Bond, Senior Lien, Series A 5.250% 7/15/2017 1,009,860
1,520,000 Travis County, Texas, Housing Finance Corporation, Single Family
Mortgage Revenue Refunding Bonds, Series 1994-A 6.750% 4/1/2014 1,654,155 (b)
440,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guarantee 6.5% 2/15/2016 465,212
3,210,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guarantee 6.5% 2/15/2016 3,441,987 (b)
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 1,371,789
--------------
58,201,305
--------------
Utah - 2.5%
5,000,000 Intermountain Power Agency, Utah, Power Supply Revenue Bonds,
Series B, Insured by MBIA 5.750% 7/1/2019 5,256,100
3,405,000 Timpanogos Special Service District, Utah County, Utah, Sewer
Revenue Bonds, Series 1996-A, Insured by AMBAC 6.1% 6/1/2019 3,629,560
3,750,000 Utah Associated Municipal Power Systems, San Juan Project
Revenue Bonds, Series O, Insured by MBIA 6.250% 6/1/2014 4,075,050
1,580,000 West Valley City, Utah, Municipal Building Authority,
Lease Refunding Bonds, Insured by MBIA 6.0% 1/15/2010 1,666,853
--------------
14,627,563
--------------
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 3,169,140
4,300,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1994 Series H, Subseries H-2 6.5% 1/1/2014 4,646,537
2,000,000 Virginia State, Unlimited Tax General Obligation Bonds 6.5% 6/1/2015 2,221,060 (b)
--------------
10,036,737
--------------
Washington - 5.8%
1,395,000 Douglas County, Washington, Public Utility Districe #1,
Wells Hydroelectric Revenue Bond Series A 8.750% 9/1/2018 1,772,780
1,655,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A 8.750% 9/1/2018 2,193,289 (b)
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 1,907,240
5,000,000 King County, Washington, Unlimited Tax General Obligation
Bonds, Series A 6.750% 12/1/2009 5,301,300 (b)
1,500,000 Tacoma, Washington, Conservation System Project Revenue Bonds,
Tacoma Public Utilities Light Division 6.6% 1/1/2015 1,644,990
2,015,000 Tacoma, Washington, Utilities Refuse Revenue Bonds,
Insured by MBIA 6.625% 12/1/2011 2,185,832 (b)
2,000,000 Washington State Public Power Supply System,
Nuclear Project No. 1, Revenue Refunding Bonds,
Series 1996-A, Insured by MBIA 5.750% 7/1/2011 2,113,260
3,000,000 Washington State Public Power Supply System,
Nuclear Project No. 2, Revenue Refunding Bonds,
Series 1996-A, Insured by MBIA 5.750% 7/1/2012 3,123,840
1,000,000 Washington State Public Power Supply System,
Nuclear Project No. 3, Revenue Refunding Bonds,
Insured by FGIC 7.250% 7/1/2015 1,067,710 (b)
2,000,000 Washington State, Unlimited Tax General Obligation Bonds 6.0% 6/1/2012 2,193,880
2,400,000 Washington State, Unlimited Tax General Obligation Bonds 6.7% 6/1/2016 2,564,016 (b)
3,000,000 Washington State, Unlimited Tax General Obligation Bonds,
Series 93A 5.750% 10/1/2012 3,219,300
1,500,000 Washington State, Unlimited Tax General Obligation Bonds,
Series A 6.250% 2/1/2011 1,685,505
2,500,000 Washington State, Various Purpose General Obligation Bonds 6.250% 6/1/2010 2,819,325
--------------
33,792,267
--------------
West Virginia - 0.2%
1,000,000 State of West Virginia University System Revenue Bonds,
Series 1997-A, Insured by AMBAC 5.125% 4/1/2017 982,720
--------------
Wisconsin - 0.9%
1,000,000 Southeast Wisconsin, Professional Baseball Park District Sales
Tax Revenue Bonds, Insured by MBIA 5.8% 12/15/2026 1,038,720
4,315,000 State of Wisconsin, Clean Water Revenue Bonds, 1995 Series 1 5.8% 6/1/2015 4,489,671
--------------
5,528,391
--------------
Wyoming - 0.5%
2,500,000 State of Wyoming, Farm Loan Board, Capital Facilities Revenue
Bonds, Series 1994 6.1% 4/1/2024 2,646,250
--------------
Total Long-Term Municipal Securities (cost $528,531,257) 584,376,708
--------------
SHORT-TERM MUNICIPAL SECURITIES - 0.2% (a, c)
300,000 Berkeley County, South Carolina, (Amoco Chemical Co. Project),
Pollution Control Revenue Refunding Bonds, Series 1994 4.2% 5/1/1998 300,000
100,000 Illinois Development Finance Authority, (Amoco Oil Company
Project), Pollution Control Revenue Refunding Bonds,
Series 1994 4.2% 5/1/1998 100,000
200,000 Maricopa County, Arizona Pollution Control Corp., Pollution
Control Revenue Refunding Bonds, (Arizona Public Service
Co. Palo Verde Project), 1994 Series B 4.2% 5/1/1998 200,000
500,000 Peninsula Ports Authority, Virginia, Variable Rates Notes 4.250% 5/1/1998 500,000
--------------
Total Short-Term Municipal Securities (at amortized cost) 1,100,000
--------------
Total Investments (cost $529,631,257) $585,476,708 (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, 1998, the aggregate cost of securities for federal income tax purposes was $529,631,257 and the net
unrealized appreciation of investments based on that cost was $55,845,451 which is comprised of $55,976,762 aggregate
gross unrealized appreciation and $131,311 aggregate gross unrealized depreciation.
(f) Miscellaneous abbreviations:
AMBAC - AMBAC Indemnity Corp. FHA - Federal Housing Administration
Connie Lee - Connie Lee Insurance Co. FSA - Federal Security Assurance, Inc.
FGIC - Financial Guaranty Insurance Co. MBIA - Municipal Bond Investors Assurance Corp.
See accompanying notes to portfolio of investments.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MONEY MARKET FUND
Portfolio of Investments
April 30, 1998
(unaudited)
Principal Maturity
Amount Yield Date Value
- ----------- ------ ---------- ------------
<S> <C> <C> <C> <C>
BANK NOTES - 4.8% (a)
$ 5,000,000 Bank of America, National Trust & Savings Association 5.84% 5/5/1998 $ 5,000,042
11,000,000 PNC Bank, N.A. Pittsburgh 5.58% 9/25/1998 11,003,790
8,000,000 Wachovia Bank, N.A. 5.60% 2/2/1999 7,997,068
--------------
24,000,900
--------------
COMMERCIAL PAPER - 80.7% (a)
Banking-Domestic - 3.2%
5,500,000 Allegheny University Hospital (PNC Bank, N.A.
Direct Pay Letter of Credit) 5.56% 5/12/1998 5,490,791
5,000,000 CommEd Fuel Company, Inc. (First National Bank of Chicago,
Direct Pay Letter of Credit) 5.60% 5/28/1998 4,979,263
1,772,000 Enterprise Funding Corp. (Nations Bank, N.A.) 5.67% 5/29/1998 1,764,365
4,250,000 Vehicle Services of America (NationsBank of Texas, N.A.
Direct Pay Letter of Credit) 5.58% 6/12/1998 4,222,580
--------------
16,456,999
--------------
Banking-Foreign - 8.3%
5,000,000 Banco BCN Barclays (Bahamas) (Barclays Bank plc, Direct Pay
Letter of Credit 5.56% 6/25/1998 4,958,368
5,000,000 CEMEX, S.A. de C.V. (Credit Suisse, Direct Pay Letter of Credit) 5.53% 6/18/1998 4,963,800
5,000,000 Comision Federal De Electricidad (Westdeutsche Landesbank,
Girozentrale Direct Pay Letter of Credit) 5.57% 6/12/1998 4,967,800
5,000,000 Comision Federal De Electricidad (Westdeutsche Landesbank,
Girozentrale Direct Pay Letter of Credit) 5.59% 6/8/1998 4,970,867
5,000,000 Comision Federal De Electricidad (Westdeutsche Landesbank,
Girozentrale Direct Pay Letter of Credit) 5.60% 6/18/1998 4,963,200
5,000,000 Formosa Plastics Corp., USA (ABN Amro Bank, NV,
Direct Pay Letter of Credit) 5.62% 6/26/1998 4,956,911
5,000,000 Glencore Finance (Bermuda) Ltd (Union Bank of Switzerland,
Direct Pay Letter of Credit) 5.53% 5/8/1998 4,994,701
7,000,000 Petroleo Brasileiro S.A. - Petrobras (Barclays Bank plc,
Direct Pay Letter of Credit) 5.62% 8/28/1998 6,873,430
--------------
41,649,077
--------------
Chemicals - 1.1%
5,450,000 Monsanto Co. 5.54% 7/7/1998 5,395,025
--------------
Drugs & Health Care - 0.3%
1,300,000 Schering Corp. 5.53% 7/21/1998 1,284,088
--------------
Education - 11.5%
6,000,000 Duke University 5.58% 7/6/1998 5,939,280
25,000,000 Harvard University 5.55% 5/1/1998 25,000,000
3,000,000 Leland Stanford Junior University 5.82% 6/22/1998 2,975,517
5,000,000 Leland Stanford Junior University 5.88% 6/9/1998 4,969,071
5,000,000 Leland Stanford Junior University 5.60% 12/7/1998 4,835,153
6,210,000 Yale University 5.57% 5/26/1998 6,186,195
3,000,000 Yale University 5.55% 5/12/1998 2,994,986
5,000,000 Yale University 5.58% 6/11/1998 4,968,737
--------------
57,868,939
--------------
Electronics - 2.0%
5,000,000 Seibe plc 5.58% 5/14/1998 4,989,979
5,000,000 Seibe plc 5.57% 5/14/1998 4,989,979
--------------
9,979,958
--------------
Finance-Automotive - 3.2%
5,000,000 Ford Motor Credit - Puerto Rico (Guaranteed Ford Motor
Credit Co.) 5.54% 5/7/1998 4,995,450
1,300,000 Ford Motor Credit Co. 5.53% 6/3/1998 1,293,446
5,000,000 Ford Motor Credit Co. 5.56% 7/10/1998 4,946,722
5,000,000 General Motors Acceptance Corp 5.60% 8/14/1998 4,919,938
--------------
16,155,556
--------------
Finance-Commercial - 8.1%
5,000,000 CIT Group Holdings, Inc. 5.58% 6/29/1998 4,955,094
5,000,000 CIT Group Holdings, Inc. 5.58% 8/12/1998 4,921,606
1,000,000 CIT Group Holdings, Inc. 5.66% 7/13/1998 1,001,490
5,000,000 CIT Group Holdings, Inc. 5.54% 5/15/1998 4,989,364
5,000,000 General Electric Capital Corp. 5.55% 8/17/1998 4,919,300
5,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.59% 9/8/1998 4,901,778
5,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.66% 9/25/1998 4,887,096
5,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.58% 7/27/1998 4,933,662
5,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.60% 5/18/1998 4,986,943
--------------
40,496,333
--------------
Finance-Consumer - 7.2%
3,810,000 Associates Financial Services Company of Puerto Rico
(Guaranteed Associates Corp. of North America) 5.55% 5/27/1998 3,794,811
3,100,000 Associates Financial Services Company of Puerto Rico
(Guaranteed Associates Corp. of North America) 5.62% 5/29/1998 3,086,570
4,000,000 Associates Financial Services Company of Puerto Rico
(Guaranteed Associates Corp. of North America) 5.57% 6/1/1998 3,980,987
5,000,000 AVCO Financial Services Inc. 5.58% 7/23/1998 4,936,713
5,000,000 AVCO Financial Services Inc. 5.62% 8/7/1998 4,924,731
5,000,000 AVCO Financial Services Inc. 5.58% 5/26/1998 4,980,833
5,000,000 Commercial Credit Co. 5.56% 6/10/1998 4,969,443
5,400,000 Commercial Credit Co. 5.58% 6/5/1998 5,371,125
--------------
36,045,213
--------------
Finance-Structured - 3.0%
6,421,000 Delaware Funding Corp. 5.57% 7/20/1998 6,342,664
4,045,000 Delaware Funding Corp. 5.54% 5/20/1998 4,033,215
4,598,000 Triple-A One Funding Corp. (Guaranteed MBIA) 5.56% 5/8/1998 4,593,101
--------------
14,968,980
--------------
Financial Services - 1.0%
5,000,000 USAA Capital Corp. 5.51% 5/27/1998 4,980,500
--------------
Food & Beverage - 0.5%
2,600,000 Canadian Wheat Board 5.56% 7/10/1998 2,572,196
--------------
Industrial - 8.3%
5,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.54% 7/17/1998 4,942,036
5,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.55% 6/12/1998 4,968,208
5,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.59% 6/04/1998 4,973,933
3,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.67% 10/26/1998 2,918,268
4,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.57% 5/22/1998 3,987,120
3,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.60% 9/14/1998 2,937,893
7,000,000 Dupont (E.I.) de Nemours and Co. 5.75% 6/2/1998 6,965,653
5,000,000 Monsanto Co. 5.56% 7/23/1998 4,936,828
5,000,000 Monsanto Co. 5.81% 5/11/1998 4,992,153
--------------
41,622,092
--------------
Insurance - 2.4%
2,188,000 Met-Life Funding Inc. 5.53% 5/27/1998 2,179,309
5,000,000 Prudential Funding Corp. 5.55% 5/19/1998 4,986,275
5,000,000 American Family Financial Services 5.54% 5/13/1998 4,990,817
--------------
12,156,401
--------------
Petroleum - 2.7%
13,800,000 Koch Industries, Inc. 5.55% 5/1/1998 13,800,000
--------------
Services - 3.2%
5,000,000 Block Financial Corp. 5.62% 5/22/1998 4,983,754
2,100,000 Block Financial Corp. 5.60% 6/29/1998 2,081,002
4,275,000 Block Financial Corp. 5.59% 5/19/1998 4,263,158
5,000,000 Block Financial Corp. 5.57% 7/7/1998 4,948,913
--------------
16,276,827
--------------
Transportation - 0.3%
1,500,000 United Parcel Service of America, Inc. 5.55% 9/30/1998 1,466,117
--------------
U.S. Municipal - 14.4%
7,000,000 California Pollution Control Finance Authority
(Guaranteed Shell Oil Co.) 5.58% 5/22/1998 7,000,000
5,000,000 California Pollution Control Finance Authority
(Guaranteed Shell Oil Co.) 5.57% 5/6/1998 5,000,000
5,000,000 California Pollution Control Finance Authority
(Guaranteed Shell Oil Co.) 5.60% 7/6/1998 5,000,000
8,400,000 City of New York General Obligation Bonds, Fiscal 1995, Series B
(Guaranteed FGIC, SPI) 5.66% 5/21/1998 8,400,000
8,000,000 City of Whiting, Indiana Series 1995, Sewage & Waste Disposal
(Guaranteed Amoco Co.) 5.58% 7/13/1998 8,000,000
5,000,000 Gulf Coast Waste Disposal Authority (Guaranteed Amoco Co.) 5.56% 5/12/1998 5,000,000
10,000,000 Gulf Coast Waste Disposal Authority (Guaranteed Amoco Co.) 5.60% 7/16/1998 10,000,000
7,000,000 Indiana Development Board of the Parish of Calcasieu Inc.,
(Guaranteed ABN AMRO Bank N.V.), Series 1996 5.59% 6/17/1998 7,000,000
10,450,000 Metrocrest Hospital Authority (Guaranteed Bank of New York) 5.60% 5/4/1998 10,445,191
6,350,000 Oakland-Alameda County Coliseum Authority, 1995, Series B1
(Guaranteed Canadian Imperial Bank of Commerce) 5.60% 6/5/1998 6,350,000
--------------
72,195,191
--------------
Total Commercial Paper 405,369,491
--------------
CERTIFICATES OF DEPOSIT - 4.0% (a)
Domestic - 2.4%
4,000,000 Bankers Trust Company, New York 6.00% 8/28/1998 3,999,626
3,000,000 Bankers Trust Company, New York 5.55% 7/7/1998 3,001,423
5,000,000 Morgan Guaranty Trust Co. of New York 5.80% 7/28/1998 4,998,457
--------------
11,999,506
--------------
Euro Dollar-Foreign - 1.0%
5,000,000 Westdeusche Landesbank Girozentrale 5.53% 8/3/1998 5,001,694
--------------
Yankee Dollar - 0.6%
2,900,000 Canadian Imperial Bank of Commerce 5.55% 9/2/1998 2,901,936
--------------
Total Certificates of Deposit 19,903,136
--------------
MEDIUM TERM NOTES - 1.3% (a)
1,500,000 Beneficial Corp. 5.61% 2/1/1999 1,500,715
5,000,000 IBM Credit Corp. 5.56% 8/11/1998 5,004,343
--------------
Total Medium Term Notes 6,505,058
--------------
VARIABLE RATE NOTES - 9.2% (a,b)
8,000,000 Abbey National Treasury Service PLC 5.76% 5/15/1998 7,999,186
10,000,000 Federal Home Loan Bank 5.54% 6/7/1998 9,998,186
10,000,000 IBM Credit Corp. 5.67% 5/15/1998 9,998,253
10,000,000 Illinois Student Assistance Commission (Student Loan Mktg.
Association, Direct Pay Letter of Credit) 5.56% 5/7/1998 10,000,000
8,000,000 Illinois Student Assistance Commission (Bank of America,
Illinois, Direct Pay Letter of Credit) 5.61% 5/7/1998 8,000,000
--------------
Total Variable Rate Notes 45,995,625
--------------
Total Investments (at amortized cost) $501,774,210 (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, 1998
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $272,054,305) $296,366,969
Cash 977,349
Dividend receivable 60,442
------------
Total assets 297,404,760
------------
LIABILITIES:
Payable for investment securities purchased 907,471
Accrued expenses 209,937
------------
Total liabilities 1,117,408
------------
NET ASSETS $296,287,352
============
NET ASSETS CONSIST OF:
Paid-in capital $273,486,613
Accumulated net investment loss (300,987)
Accumulated net realized loss from sale of investments (1,210,938)
Unrealized net appreciation of investments 24,312,664
------------
NET ASSETS $296,287,352
============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$289,890,279 and 23,536,645 shares of beneficial interest outstanding) $12.32
======
Maximum public offering price per share (based on a net asset
value per share of $12.32 divided by 0.96 for a 4% sales charge) $12.83
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $3,029,897 and 246,785 shares of
beneficial interest outstanding) $12.28
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $3,367,176 and 273,092 shares
of beneficial interest outstanding) $12.33
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1998
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 641,989
Interest income 921,772
------------
Total income 1,563,761
------------
Expenses --
Investment advisory fee 977,662
Distribution and service plan fees:
Class A 355,345
Class B 5,992
Transfer agent services 620,322
Custodian fee 63,235
Administrative personnel and services 28,870
Printing and postage 125,055
Trust share registration costs 30,219
Auditing fees 3,288
Legal fees 2,650
Trustees' fees 4,012
Amortization of organization costs 1,917
Miscellaneous 3,982
------------
Total expenses before expense reimbursement 2,222,549
Expense reimbursement from investment advisor (360,870)
------------
Net expenses 1,861,679
Net investment loss (297,918)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions (353,219)
Net realized gain on closed or expired option contracts written 146,828
------------
Net realized loss on investments (206,391)
Net change in unrealized appreciation of investments (3,942,645)
------------
Net loss on investments (4,149,036)
------------
Net change in net assets resulting from operations $ (4,446,954)
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/98 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/97
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (297,918) $ (1,653,212)
Net realized gain (loss) on investments (206,391) 11,990,683
Net change in unrealized appreciation or depreciation of investments (3,942,645) 13,347,891
------------ ------------
Net change in net assets resulting from operations (4,446,954) 23,685,362
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net realized gains:
Class A (10,384,367) (29,849,878)
Class B (18,018) --
Institutional Class (116,629) --
------------ ------------
Total distributions (10,519,014) (29,849,878)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A (3,111,829) 48,247,150
Class B 2,892,355 25,000
Institutional Class 49,203 3,478,617
------------ ------------
Net change in net assets resulting from trust share transactions (170,271) 51,750,767
------------ ------------
Net change in net assets (15,136,239) 45,586,251
NET ASSETS:
Beginning of period 311,423,591 265,837,340
------------ ------------
End of period $296,287,352 $311,423,591
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Mid Cap Growth Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1998
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $29,955,552) $ 32,976,084
Cash 2,516
Receivable for investment securities sold 96,197
Dividend receivable 10,388
Unamortized organization costs 21,704
------------
Total assets 33,106,889
------------
LIABILITIES:
Payable for investment securities purchased 117,414
Accrued expenses 17,796
------------
Total liabilities 135,210
------------
NET ASSETS $ 32,971,679
============
NET ASSETS CONSIST OF:
Paid-in capital $ 30,628,394
Accumulated net investment loss (90,621)
Accumulated net realized loss from sale of investments (586,626)
Unrealized net appreciation of investments 3,020,532
------------
NET ASSETS $ 32,971,679
============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$28,205,477 and 2,559,694 shares of beneficial interest outstanding) $11.02
======
Maximum public offering price per share (based on a net asset
value per share of $11.02 divided by 0.96 for a 4% sales charge) $11.48
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $4,005,766 and 364,944 shares of
beneficial interest outstanding) $10.98
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $760,436 and 68,971 shares
of beneficial interest outstanding) $11.03
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1998
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 719,680
Interest income 69,924
------------
Total income 789,604
------------
Expenses --
Investment advisory fee 76,177
Distribution and service plan fees:
Class A 24,580
Class B 7,060
Transfer agent services 80,326
Custodian fee 4,322
Administrative personnel and services 2,176
Printing and postage 19,997
Trust share registration costs 27,823
Auditing fees 991
Legal fees 30
Trustees' fees 2,687
Amortization of organization costs 3,461
Miscellaneous 728
------------
Total expenses 250,358
Expense reimbursement from investment advisor (33,716)
------------
Net expenses 216,642
------------
Net Investment Income 572,962
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions (470,023)
Net realized loss on closed futures contracts (102,920)
------------
Net realized loss on investments (572,943)
Net change in unrealized appreciation of investments 3,128,238
------------
Net gain on investments 2,555,295
------------
Net increase in net assets resulting
from operations $ 3,128,257
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months For the period from
Ended May 30, 1997
04/30/98 (effective date) to
INCREASE (DECREASE) IN NET ASSETS: (unaudited) October 31, 1997
------------ -------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ 572,962 $ (26,047)
Net realized gain (loss) on investments (572,943) 411,643
Net change in unrealized appreciation or depreciation of investments 3,128,238 (107,706)
------------ ------------
Net increase in net assets resulting from operations 3,128,257 277,890
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (593,201) --
Class B (20,517) --
Institutional Class (23,816) --
Net realized gains:
Class A (395,687) --
Class B (13,872) --
Institutional Class (15,767) --
------------ ------------
Total distributions (1,062,860) --
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 12,361,713 13,766,372
Class B 3,766,638 25,000
Institutional Class 175,291 533,378
------------ ------------
Net increase in net assets from trust share transactions 16,303,642 14,324,750
------------ ------------
Net increase in net assets 18,369,039 14,602,640
NET ASSETS:
Beginning of period 14,602,640 --
------------ ------------
End of period $ 32,971,679 $ 14,602,640
============ ============
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, 1998
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $70,476,754) $ 87,424,010
Cash (including foreign currency holdings of $322,639) 366,621
Receivable for investment securities sold 273,640
Dividend receivable 393,289
Unamortized organization costs 23,848
------------
Total assets 88,481,408
------------
LIABILITIES:
Payable for investment securities purchased 122,349
Accrued expenses 89,398
------------
Total liabilities 211,747
------------
NET ASSETS $ 88,269,661
============
NET ASSETS CONSIST OF:
Paid-in capital $ 72,597,983
Undistributed net investment income (54,911)
Accumulated net realized loss from sale of investments and
foreign currency transactions (1,218,838)
Unrealized net appreciation of investments and on translation of assets
and liabilities in foreign currencies 16,945,427
------------
NET ASSETS $ 88,269,661
============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$78,010,503 and 6,913,194 shares of beneficial interest outstanding) $11.28
======
Maximum public offering price per share (based on a net asset
value per share of $11.28 divided by 0.96 for a 4% sales charge) $11.75
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $1,920,382 and 170,767 shares of
beneficial interest outstanding) $11.25
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $8,338,776 and 737,766 shares
of beneficial interest outstanding) $11.30
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1998
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $69,018) $ 598,790
Interest income 73,182
------------
Total income 671,972
------------
Expenses --
Investment advisory fee 397,494
Distribution and service plan fees:
Class A 88,953
Class B 3,320
Transfer agent services 192,833
Custodian fee 50,631
Administrative personnel and services 7,950
Printing and postage 40,280
Trust share registration costs 28,819
Auditing fees 905
Legal fees 753
Trustees' fees 2,807
Amortization of organization costs 5,068
Miscellaneous 2,172
------------
Total expenses before expense reimbursement 821,985
Expense reimbursement from investment advisor (99,373)
------------
Net expenses 722,612
Net investment loss (50,640)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized loss on investment transactions (1,012,733)
Net realized loss on foreign currency transactions (21,917)
------------
Net realized loss on investments and foreign currency transactions (1,034,650)
Net change in unrealized appreciation of investments 11,708,996
Net change in unrealized depreciation on translation of assets
and liabilities in foreign currencies (6,335)
------------
Net change in unrealized appreciation of investments and on translation of
assets and liabilities in foreign currencies 11,702,661
------------
Net gain on investments and foreign currency 10,668,011
------------
Net increase in net assets resulting from operations $ 10,617,371
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
INCREASE (DECREASE) IN NET ASSETS: 4/30/98 Year Ended
(unaudited) 10/31/97
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (50,640) $ 118,799
Net realized gain (loss) on investments and foreign currency transactions (1,034,650) 1,182,206
Net change in unrealized appreciation or depreciation of investments and on translation
of assets and liabilities in foreign currencies 11,702,661 2,471,475
------------ ------------
Net increase in net assets resulting from operations 10,617,371 3,772,480
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (277,369) (257,604)
Class B (1,167) --
Institutional Class (30,222) --
Net realized gains:
Class A (946,412) (247,812)
Class B (3,960) --
Institutional Class (102,770) --
------------ ------------
Total distributions (1,361,900) (505,416)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 1,937,391 11,601,520
Class B 1,804,421 25,000
Institutional Class 140,143 7,302,027
------------ ------------
Net increase in net assets from trust share transactions 3,881,955 18,928,547
------------ ------------
Net increase in net assets 13,137,426 22,195,611
NET ASSETS:
Beginning of period 75,132,235 52,936,624
------------ ------------
End of period (including undistributed net investment income of $(54,911) and
$304,487, respectively) $ 88,269,661 $ 75,132,235
============ ============
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, 1998
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $853,773,220) $1,216,296,445
Cash 88,536
Receivable for capital stock sold 65,644
Dividend receivable 993,820
--------------
Total assets 1,217,444,445
--------------
LIABILITIES:
Accrued expenses 353,114
--------------
Total liabilities 353,114
--------------
NET ASSETS $1,217,091,331
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 778,803,624
Undistributed net investment income 279,387
Accumulated net realized gain from sale of investments 75,485,075
Unrealized net appreciation of investments 362,523,245
--------------
NET ASSETS $1,217,091,331
==============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$1,185,282,428 and 40,305,534 shares of beneficial interest outstanding) $29.41
======
Maximum public offering price per share (based on a net asset
value per share of $29.41 divided by 0.96 for a 4% sales charge) $30.64
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $13,560,402 and 462,043 shares of
beneficial interest outstanding) $29.35
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $18,248,501 and 620,280 shares
of beneficial interest outstanding) $29.42
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1998
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 6,336,047
Interest income 664,286
------------
Total income 7,000,333
------------
Expenses --
Investment advisory fee 3,345,570
Distribution and service plan fees:
Class A 1,325,244
Class B 24,143
Transfer agent services 988,339
Custodian fee 92,518
Administrative personnel and services 108,133
Printing and postage 197,484
Trust share registration costs 46,812
Auditing fees 10,262
Legal fees 9,456
Trustees' fees 8,390
Miscellaneous 9,715
------------
Total expenses before expense reimbursement 6,166,066
Expense reimbursement from investment advisor (1,621,992)
------------
Net Expenses 4,544,074
------------
Net investment income 2,456,259
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 75,808,362
Net change in unrealized appreciation of investments 130,039,944
------------
Net gain on investments 205,848,306
------------
Net increase in net assets resulting from operations $208,304,565
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/98 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/97
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,456,259 $ 6,855,260
Net realized gain on investments 75,808,362 99,986,085
Net change in unrealized appreciation or depreciation of investments 130,039,944 101,725,926
-------------- ------------
Net increase in net assets resulting from operations 208,304,565 208,567,271
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (2,501,775) (7,140,586)
Class B (964) --
Institutional Class (54,531) --
Net realized gains:
Class A (94,543,250) (58,599,470)
Class B (156,376) --
Institutional Class (1,494,748) --
------------ ------------
Total distributions (98,751,644) (65,740,056)
-------------- ------------
NET TRUST SHARE TRANSACTIONS:
Class A 102,977,119 63,484,688
Class B 12,728,193 25,000
Class Y 2,026,528 14,627,549
-------------- ------------
Net increase in net assets from trust share transactions 117,731,840 78,137,237
-------------- ------------
Net increase in net assets 227,284,761 220,964,452
NET ASSETS:
Beginning of period 989,806,570 768,842,118
-------------- ------------
End of period (including undistributed net investment income of $279,387 and
$380,398, respectively) $1,217,091,331 $989,806,570
============== ============
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, 1998
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $912,218,608) $920,448,415
Cash 1,473,050
Receivable for investment securities sold 16,091,424
Interest and dividend receivable 19,477,977
------------
Total assets 957,490,866
------------
LIABILITIES:
Payable for investment securities purchased 15,545,836
Accrued expenses 258,422
------------
Total liabilities 15,804,258
------------
NET ASSETS $941,686,608
============
NET ASSETS CONSIST OF:
Paid-in capital $912,933,948
Undistributed net investment income 2,625,955
Accumulated net realized gain from sale of investments 17,896,898
Unrealized net appreciation of investments 8,229,807
------------
NET ASSETS $941,686,608
============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$872,320,981 and 92,069,877 shares of beneficial interest outstanding) $ 9.47
======
Maximum public offering price per share (based on a net asset
value per share of $9.47 divided by 0.96 for a 4% sales charge) $ 9.86
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $11,451,900 and 1,209,339 shares of
beneficial interest outstanding) $ 9.47
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $57,913,727 and 6,109,824 shares
of beneficial interest outstanding) $ 9.48
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1998
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 40,035,981
Dividend income 4,461,369
------------
Total income 44,497,350
------------
Expenses --
Investment advisory fee 2,808,466
Distribution and service plan fees:
Class A 1,045,564
Class B 22,339
Transfer agent services 661,492
Custodian fee 94,271
Administrative personnel and services 89,483
Printing and postage 135,475
Trust share registration costs 48,654
Auditing fees 8,871
Legal fees 8,042
Trustees' fees 7,724
Miscellaneous 8,810
------------
Total expenses before expense reimbursement 4,939,191
Expense reimbursement from investment advisor (1,342,247)
------------
Net Expenses 3,596,944
------------
Net investment income 40,900,406
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 18,958,265
Net change in unrealized appreciation of investments (11,511,650)
------------
Net gain on investments 7,446,615
------------
Net increase in net assets resulting from operations $ 48,347,021
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/98 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/97
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 40,900,406 $ 70,796,335
Net realized gain on investment transactions 18,958,265 16,963,856
Net change in unrealized appreciation or depreciation of investments (11,511,650) 17,585,438
------------ ------------
Net increase in net assets resulting from operations 48,347,021 105,345,629
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income:
Class A (38,272,474) (71,372,708)
Class B (206,346) --
Institutional Class (2,531,992) --
Net realized gains:
Class A (15,571,878) (2,451,356)
Class B (30,431) --
Institutional Class (988,918) --
------------ ------------
Total distributions (57,602,039) (73,824,064)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 68,935,907 77,340,401
Class B 11,501,366 25,000
Class Y 7,554,650 50,915,801
------------ ------------
Net increase in net assets from trust share transactions 87,991,923 128,281,202
------------ ------------
Net increase in net assets 78,736,905 159,802,767
NET ASSETS:
Beginning of period 862,949,703 703,146,936
------------ ------------
End of period (including undistributed net investment income of $2,625,955 and
$2,736,361, respectively) $941,686,608 $862,949,703
============ ============
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, 1998
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $760,530,974) $772,185,676
Cash 63,105
Receivable for investment securities sold 5,334,640
Interest and dividend receivable 11,966,174
------------
Total assets 789,549,595
------------
LIABILITIES:
Open options written, at value (premium received $120,259) 203,125
Payable for investment securities purchased 28,839,661
Accrued expenses 252,746
------------
Total liabilities 29,295,532
------------
NET ASSETS $760,254,063
============
NET ASSETS CONSIST OF:
Paid-in capital $790,299,723
Undistributed net investment income 986,501
Accumulated net realized loss from sale of investments (42,603,997)
Unrealized net appreciation of investments 11,571,836
------------
NET ASSETS $760,254,063
============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$738,686,419 and 85,460,056 shares of beneficial interest outstanding) $ 8.64
======
Maximum public offering price per share (based on a net asset
value per share of $8.64 divided by 0.96 for a 4% sales charge) $ 9.00
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $3,207,131 and 371,662 shares of
beneficial interest outstanding) $ 8.63
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $18,360,513 and 2,124,948 shares
of beneficial interest outstanding) $ 8.64
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1998
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 26,752,586
Dividend income 362,297
------------
Total income 27,114,883
------------
Expenses --
Investment advisory fee 2,260,017
Distribution and service plan fees:
Class A 931,108
Class B 6,365
Transfer agent services 603,742
Custodian fee 84,365
Administrative personnel and services 76,453
Printing and postage 138,356
Trust share registration costs 26,154
Auditing fees 9,801
Legal fees 8,463
Trustees' fees 7,724
Miscellaneous 9,776
------------
Total expenses before expense reimbursement 4,162,324
Expense reimbursement from investment advisor (1,146,799)
------------
Net expenses 3,015,525
------------
Net investment income 24,099,358
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 2,919,479
Net realized gain on closed or expired option contracts written 376,908
Net realized loss on closed futures contracts (78,585)
------------
Net realized gain on investments 3,217,802
Net change in unrealized appreciation of investments 186,702
------------
Net gain on investments 3,404,504
------------
Net increase in net assets resulting from operations $ 27,503,862
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
INCREASE (DECREASE) IN NET ASSETS: 4/30/98 Year Ended
(unaudited) 10/31/97
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 24,099,358 $ 52,363,161
Net realized gain on investment transactions 3,217,802 3,329,161
Net change in unrealized appreciation or depreciation of investments 186,702 6,682,802
------------ ------------
Net increase in net assets resulting from operations 27,503,862 62,375,124
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (24,076,830) (52,271,463)
Class B (40,056) --
Institutional Class (615,885) --
------------ ------------
Total distributions (24,732,771) (52,271,463)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A (23,841,312) (121,262,283)
Class B 3,186,929 25,000
Institutional Class 119,769 18,175,170
------------ ------------
Net change in net assets from trust share transactions (20,534,614) (103,062,113)
------------ ------------
Net change in net assets (17,763,523) (92,958,452)
NET ASSETS:
Beginning of period 778,017,586 870,976,038
------------ ------------
End of period (including undistributed net investment income of $986,501 and
$1,619,914, respectively) $760,254,063 $778,017,586
============ ============
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, 1998
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $529,631,257) $585,476,708
Cash 22,711
Receivable for investment securities sold 2,004,297
Interest receivable 9,059,039
------------
Total assets 596,562,755
------------
LIABILITIES:
Payable for investment securities purchased 4,957,648
Accrued expenses 119,336
------------
Total liabilities 5,076,984
------------
NET ASSETS $591,485,771
============
NET ASSETS CONSIST OF:
Paid-in capital $538,274,031
Undistributed net investment income 1,753,784
Accumulated net realized loss from sale of investments (4,387,495)
Unrealized net appreciation of investments 55,845,451
------------
NET ASSETS $591,485,771
============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$585,628,812 and 65,999,458 shares of beneficial interest outstanding) $ 8.87
=======
Maximum public offering price per share (based on a net asset
value per share of $8.87 divided by 0.96 for a 4% sales charge) $ 9.24
=======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $1,924,742 and 217,280 shares of
beneficial interest outstanding). $ 8.86
=======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $3,932,217 and 443,238 shares
of beneficial interest outstanding) $ 8.87
=======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1998
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 16,764,619
------------
Expenses --
Investment advisory fee 1,699,159
Distribution and service plan fees:
Class A 735,415
Class B 3,693
Transfer agent services 237,913
Custodian fee 73,920
Administrative personnel and services 59,313
Printing and postage 60,475
Trust share registration costs 24,483
Auditing fees 7,117
Legal fees 6,204
Trustees' fees 7,724
Miscellaneous 7,815
------------
Total expenses before expense reimbursement 2,923,231
Expense reimbursement from investment advisor (889,688)
------------
Net expenses 2,033,543
------------
Net investment income 14,731,076
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment transactions 1,442,101
Net change in unrealized appreciation of investments 350,052
------------
Net gain on investments 1,792,153
------------
Net increase in net assets resulting from operations $ 16,523,229
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/98 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/97
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $14,731,076 $30,656,926
Net realized gain on investment transactions 1,442,101 2,152,165
Net change in unrealized appreciation or depreciation of investments 350,052 15,004,813
------------ ------------
Net increase in net assets resulting from operations 16,523,229 47,813,904
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (14,934,222) (30,372,431)
Class B (17,947) --
Institutional Class (106,708) --
------------ ------------
Total distributions (15,058,877) (30,372,431)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A (3,497,491) (39,259,157)
Class B 1,921,250 25,000
Class Y (264,764) 4,183,098
------------ ------------
Net change in net assets from trust share transactions (1,841,005) (35,051,059)
------------ ------------
Net change in net assets (376,653) (17,609,586)
NET ASSETS:
Beginning of period 591,862,424 609,472,010
------------ ------------
End of period (including undistributed net investment income of $1,753,784 and
$2,081,584, respectively) $591,485,771 $591,862,424
============ ============
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, 1998
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at amortized cost and value $501,774,210
Cash 2,380,491
Interest receivable 2,115,027
------------
Total assets 506,269,728
------------
LIABILITIES:
Dividends payable 39,524
Accrued expenses 361,485
------------
Total liabilities 401,009
------------
NET ASSETS $505,868,719
============
NET ASSETS CONSIST OF:
Paid-in capital $505,868,719
============
Class A Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $455,904,979 and 455,904,979 shares of
beneficial interest outstanding) $ 1.00
=======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $25,201 and 25,201 shares of
beneficial interest outstanding) $ 1.00
=======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $49,938,539 and 49,938,539 shares
of beneficial interest outstanding) $ 1.00
=======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1998
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 13,977,751
------------
Expenses --
Investment advisory fee 1,212,729
Service plan fees:
Class A 544,345
Class B 31
Transfer agent services 747,942
Custodian fee 182,413
Administrative personnel and services 48,509
Printing and postage 224,740
Trust share registration costs 59,160
Auditing fees 4,851
Legal fees 4,522
Trustees' fees 4,429
Miscellaneous 5,262
------------
Total expenses before expense reimbursement 3,038,933
Expense reimbursement from investment advisor (796,738)
------------
Net expenses 2,242,195
------------
Net investment income 11,735,556
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/98 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/97
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 11,735,556 $ 20,527,861
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (10,479,619) (20,527,861)
Class B (600) --
Institutional Class (1,255,337) --
------------ ------------
Total distributions (11,735,556) (20,527,861)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 39,626,146 (1,329,756)
Class B 201 25,000
Institutional Class (2,981,441) 52,919,980
------------ ------------
Net increase in net assets from trust share transactions 36,644,906 51,615,224
------------ ------------
Net increase in net assets 36,644,906 51,615,224
NET ASSETS:
Beginning of period 469,223,813 417,608,589
------------ ------------
End of period $505,868,719 $469,223,813
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
Financial Highlights
Institutional
Class B Class
Class A Shares Shares Shares
---------------------------------------------------------------------------- ---------- ------------
For a share Six Months For the Period Six Months Six Months
outstanding Ended Year Year Year Year January 8, 1993 Ended Ended
throughout 4/30/98 Ended Ended Ended Ended (effective date) to 4/30/98 4/30/98
each period (a) (unaudited) 10/31/97 10/31/96 10/31/95 10/31/94 October 31,1993 (unaudited) (unaudited)
---------- -------- -------- -------- -------- ------------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $12.97 $13.62 $13.83 $10.76 $10.66 $8.43 $12.97 $12.97
Income From
Investment
Operations:
- -----------
Net investment
income (0.01) (0.07) (0.11) (0.09) (0.06) (0.07) (0.02) --
Net realized and
unrealized gain
(loss) on
investments (b) (0.20) 0.91 2.63 3.16 0.16 2.30 (0.23) (0.20)
-------- -------- -------- -------- -------- -------- -------- --------
Total from
investment
operations (0.21) 0.84 2.52 3.07 0.10 2.23 (0.25) (0.20)
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
- -------------------
Distributions from
net realized
gain on investments (0.44) (1.49) (2.73) -- -- -- (0.44) (0.44)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.44) (1.49) (2.73) 0.00 0.00 0.00 (0.44) (0.44)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period $12.32 $12.97 $13.62 $13.83 $10.76 $10.66 $12.28 $12.33
======== ======== ======== ======== ======== ======== ======== ========
Total investment
return at
net asset value (c) (1.20%) 7.52% 21.27% 28.53% 0.94% 26.45% (1.52%) (1.12%)
Net assets, end of
period ($ millions) $289.9 $311.4 $265.8 $165.7 $99.6 $40.8 $3.0 $3.4
Ratio of expenses
to average
net assets 1.29%(d,e) 1.29% 1.28% 1.43% 1.66% 2.33%(d) 2.07%(d,e) 1.04%(d,e)
Ratio of net
investment income to
average net assets (0.21%)(d,e) (0.60%) (0.92%) (0.88%) (0.83%) (1.76%)(d) (0.99%)(d,e) 0.04%(d,e)
Portfolio turnover
rate 81% 136% 176% 213% 64% 97% 81% 81%
Average commission
rate (f) $0.0584 $0.0524 $0.0488 N/A N/A N/A $0.0584 $0.0584
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 redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
(e) Effective November 1, 1997, LBRC voluntarily agreed to permanently waive a portion of its advisory fee equal to 0.25% of
the average daily net assets of the Fund. Had LBRC not undertaken these waivers, the ratio of expenses to average net
assets would have been 1.54%, 2.32% and 1.29% and the ratio of net investment income to average net assets would have
been -0.46%, -1.24% and -0.21%, respectively, for Class A, Class B and Institutional Class shares for the six month
period ended April 30, 1998.
(f) 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.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
Financial Highlights
Institutional
Class B Class
Class A Shares Shares Shares
--------------------------------- ---------- ------------
Six Months For the Period Six Months Six Months
Ended May 30, 1997 Ended Ended
For a share outstanding throughout 4/30/98 (effective date) to 4/30/98 4/30/98
each period (a) (unaudited) October 31, 1997 (unaudited) (unaudited)
---------- ------------------- ---------- ------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.33 $9.25 $10.33 $10.33
-------- -------- -------- --------
Income From Investment Operations:
- ----------------------------------
Net investment income 0.36 (0.02) 0.29 0.39
Net realized and unrealized gain
(loss) on investments (b) 0.94 1.10 0.97 0.92
-------- -------- -------- --------
Total from investment operations 1.30 1.08 1.26 1.31
-------- -------- -------- --------
Less Distributions:
- -------------------
Dividends from net investment income (0.37) -- (0.37) (0.37)
Distributions from net realized
gain on investments (0.24) -- (0.24) (0.24)
-------- -------- -------- --------
Total distributions (0.61) -- (0.61) (0.61)
-------- -------- -------- --------
Net asset value, end of period $11.02 $10.33 $10.98 $11.03
-------- ======== ======== ========
Total investment return at
net asset value (c) 13.58% 11.68% 13.17% 13.70%
Net assets, end of period ($ millions) $28.2 $14.6 $4.0 $0.8
Ratio of expenses to average
net assets 1.95%(d,f) 1.95%(d,e) 2.70%(d,f) 1.70%(d,f)
Ratio of net investment income to
average net assets 5.63%(d,f) (0.84%)(d,e) (0.86%)(d,f) 7.37%(d,f)
Portfolio turnover rate 365% 94% 365% 365%
Average commission rate (g) $0.0600 $0.0588 $0.0600 $0.0600
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 redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
(e) Effective May 30, 1997 through October 31, 1997, LBRC has voluntarily undertaken to waive its advisory fee and, if
necessary, to bear certain expenses associated with operating the Fund in order to limit the Fund's total operating
expenses to an annual rate of 1.95% of the average daily net assets of the Fund. Had LBRC not undertaken this waiver,
the ratio of expenses to average net assets would have been 2.19% and the ratio of net investment income to average net
assets would have been -1.08% for the Fund for the period from May 30, 1997 to October 31, 1997.
(f) Effective November 1, 1997 through October 31, 1998, and thereafter until further notice, LBRC has voluntarily undertaken
to waive its advisory fee and, if necessary, to bear certain expenses associated with operating the Fund in order to
limit the Fund's total operating expenses for Class A shares, Class B shares and Institutional Class shares to an annual
rate of 1.95%, 2.70% and 1.70%, respectively, of the average daily net assets of the relevant class. In addition to the
aforementioned waiver, effective November 1, 1997, LBRC voluntarily agreed to permanently waive a portion of its advisory
fee equal to 0.25% of the average daily net assets of the Fund. Had LBRC not undertaken these waivers, the ratio of
expenses to average net assets would have been 2.26%, 3.01% and 2.01% and the ratio of net investment income to average
net assets would have been 5.32%, -1.17% and 7.06%, respectively, for Class A, Class B and Institutional Class shares for
the six month period ended April 30, 1998.
(g) 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.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
Financial Highlights
Institutional
Class B Class
Class A Shares Shares Shares
----------------------------------------------------- ---------- ------------
Six Months For the period from Six Months Six Months
Ended Year Year September 5, 1995 Ended Ended
For a share outstanding throughout 4/30/98 Ended Ended (effective date) to 4/30/98 4/30/98
each period (a) (unaudited) 10/31/97 10/31/96 October 31, 1995 (unaudited) (unaudited)
---------- -------- -------- ---------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.09 $9.48 $8.44 $8.50 $10.09 $10.09
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
- ----------------------------------
Net investment income (0.01) 0.02 0.04 0.01 0.03 --
Net realized and unrealized gain
(loss) on investments (b) 1.38 0.67 1.02 (0.07) 1.31 1.39
-------- -------- -------- -------- -------- --------
Total from investment operations 1.37 0.69 1.06 (0.06) 1.34 1.39
-------- -------- -------- -------- -------- --------
Less Distributions:
- -------------------
Dividends from net investment income (0.04) (0.04) (0.02) -- (0.04) (0.04)
Distributions from net realized
gain on investments (0.14) (0.04) -- -- (0.14) (0.14)
-------- -------- -------- -------- -------- --------
Total distributions (0.18) (0.08) (0.02) -- (0.18) (0.18)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $11.28 $10.09 $9.48 $8.44 $11.25 $11.30
======== ======== ======== ======== ======== ========
Total investment return at
net asset value (c) 13.87% 7.38% 12.53% (0.71%) 13.57% 14.07%
Net assets, end of period ($ millions) $78.0 $75.1 $52.9 $14.0 $1.9 $8.3
Ratio of expenses to average net assets 1.84%(d,f) 1.82% 1.95%(e) 1.95%(d,e) 2.61%(d,f) 1.59%(d,f)
Ratio of net investment income to
average net assets (0.15%)(d,f) 0.17% 0.67%(e) 1.60%(d,e) (0.11%)(d,f) 0.09%(d,f)
Portfolio turnover rate 9% 17% 11% 0% 9% 9%
Average commission rate (g) $0.0205 $0.0226 $0.0216 N/A $0.0205 $0.0205
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 redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
(e) Effective September 5, 1995 through October 31, 1996, LBRC had voluntarily undertaken to limit the Fund's expense ratio
to 1.95% of the average daily net assets of the Fund. Had LBRC not undertaken these waivers, 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 fund for the year ended October 31, 1996 and for the period from
September 5, 1995 to October 31, 1995.
(f) Effective November 1, 1997, LBRC voluntarily agreed to permanently waive a portion of its advisory fee equal to 0.25% of
the average daily net assets of the Fund. Had LBRC not undertaken these waivers, the ratio of expenses to average net
assets would have been 2.09%, 2.86%, and 1.84%, and the ratio of net investment income to average net assets would have
been -0.04%, -0.36%, and -0.16% respectively, for Class A, Class B and Institutional Class shares for the six month period
ended April 30, 1998.
(g) 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.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD FUND
Financial Highlights
Institutional
Class B Class
Class A Shares Shares Shares
---------------------------------------------------------------------------- ---------- ------------
Six Months Six Months Six Months
For a share outstanding Ended Year Year Year Year Nine Months Ended Ended
throughout 4/30/98 Ended Ended Ended Ended Ended 4/30/98 4/30/98
each period (a) (unaudited) 10/31/97 10/31/96 10/31/95 10/31/94 10/31/93 (unaudited) (unaudited)
---------- -------- -------- -------- -------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $26.98 $23.07 $21.19 $17.67 $18.85 $18.53 $26.98 $26.98
-------- -------- -------- -------- -------- -------- -------- --------
Income From
Investment Operations:
- ----------------------
Net investment income 0.06 0.19 0.20 0.22 0.19 0.29 0.01 0.10
Net realized and
unrealized gain
(loss) on investments (b) 5.06 5.68 3.33 3.52 (0.20) 1.04 5.01 5.05
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations 5.12 5.87 3.53 3.74 (0.01) 1.33 5.02 5.15
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
- -------------------
Dividends from net
investment income (0.07) (0.20) (0.20) (0.22) (0.20) (0.28) (0.03) (0.09)
Distributions from
net realized
gain on investments (2.62) (1.76) (1.45) -- (0.97) (0.73) (2.62) (2.62)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions (2.69) (1.96) (1.65) (0.22) (1.17) (1.01) (2.65) (2.71)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period $29.41 $26.98 $23.07 $21.19 $17.67 $18.85 $29.35 $29.42
======== ======== ======== ======== ======== ======== ======== ========
Total investment
return at
net asset value (c) 20.90% 26.99% 17.61% 21.34% (0.11%) 7.41% 20.51% 21.06%
Net assets, end of
period ($ millions) $1,185.3 $989.8 $768.8 $645.5 $548.6 $527.3 $13.6 $18.2
Ratio of expenses
to average net assets 0.84%(d,f) 0.88%(e) 0.97% 1.02% 1.04% 1.01%(d) 1.59%(d,f) 0.59%(d,f)
Ratio of net
investment income to
average net assets 0.45%(d,f) 0.76%(e) 0.94% 1.15% 1.10% 2.15%(d) (0.38%)(d,f) 0.70%(d,f)
Portfolio turnover
rate 24% 54% 91% 127% 234% 237% 24% 24%
Average commission
rate (g) $0.0602 $0.0599 $0.0664 N/A N/A N/A $0.0602 $0.0602
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 redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
(e) Effective January 1, 1997, LBRC has voluntarily agreed to waive a portion of its advisory fee equal to 0.05% of the
average daily net assets of the Fund. This voluntary partial waiver may be discontinued at any time. Had LBRC not
undertaken this waiver, the ratio of expenses to average net assets would have been 0.92% and the ratio of net investment
income to average net assets would have been 0.72% for the Fund for the year ended October 31, 1997.
(f) In addition to the aforementioned waiver, effective November 1, 1997, LBRC voluntarily agreed to permanently waive a
portion of its advisory fee equal to 0.25% of the average daily net assets of the Fund. Had LBRC not undertaken these
waivers, the ratio of expenses to average net assets would have been 1.14%, 1.89% and 0.89% and the ratio of net
investment income to average net assets would have been 0.15%, -0.68% and 0.4% respectively, for Class A, Class B and
Institutional Class shares for the six month period ended April 30, 1998.
(g) 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.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD HIGH YIELD FUND
Financial Highlights
Institutional
Class B Class
Class A Shares Shares Shares
---------------------------------------------------------------------------- ---------- ------------
Six Months Six Months
For a share outstanding Ended Year Year Year Year Nine Months Ended Ended
throughout 4/30/98 Ended Ended Ended Ended Ended 4/30/98 4/30/98
each period (a) (unaudited) 10/31/97 10/31/96 10/31/95 10/31/94 10/31/93 (unaudited) (unaudited)
---------- -------- -------- -------- -------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $9.58 $9.21 $9.03 $8.86 $9.73 $9.12 $9.58 $9.58
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
- ----------------------
Net investment income 0.40 0.85 0.84 0.83 0.83 0.61 0.41 0.44
Net realized and
unrealized gain
(loss) on investments
(b) 0.10 0.41 0.17 0.24 (0.86) 0.60 0.07 0.08
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations 0.50 1.26 1.01 1.07 (0.03) 1.21 0.48 0.52
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
- -------------------
Dividends from net
investment income (0.43) (0.86) (0.83) (0.85) (0.82) (0.60) (0.41) (0.44)
Distributions from
net realized
gain on investments (0.18) (0.03) -- (0.05) (0.02) -- (0.18) (0.18)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.61) (0.89) (0.83) (0.90) (0.84) (0.60) (0.59) (0.62)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period $9.47 $9.58 $9.21 $9.03 $8.86 $9.73 $9.47 $9.48
======== ======== ======== ======== ======== ======== ======== ========
Total investment
return at
net asset value (c) 5.45% 14.43% 11.64% 12.93% (0.47%) 13.72% 5.20% 5.68%
Net assets, end of
period ($ millions) $872.3 $862.9 $703.1 $594.3 $499.6 $440.3 $11.5 $57.9
Ratio of expenses
to average
net assets 0.82%(d,f) 0.84%(e) 0.91% 0.93% 0.95% 0.94%(d) 1.58%(d,f) 0.57%(d,f)
Ratio of net
investment income to
average net assets 9.15%(d,f) 9.14%(e) 9.23% 9.53% 8.92% 8.72%(d) 8.88%(d,f) 9.42%(d,f)
Portfolio turnover
rate 45% 113% 104% 71% 50% 66% 45% 45%
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 redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
(e) Effective January 1, 1997, LBRC has voluntarily agreed to waive a portion of its advisory fee equal to 0.05% of the
average daily net assets of the Fund. This voluntary partial waiver may be discontinued at any time. Had LBRC not
undertaken this waiver, the ratio of expenses to average net assets would have been 0.88% and the ratio of net investment
income to average net assets would have been 9.10% for the Fund for the year ended October 31, 1997.
(f) In addition to the aforementioned waiver, effective November 1, 1997, LBRC voluntarily agreed to permanently waive a
portion of its advisory fee equal to 0.25% of the average daily net assets of the Fund. Had LBRC not undertaken these
waivers, the ratio of expenses to average net assets would have been 1.12%, 1.88% and 0.87% and the ratio of net
investment income to average net assets would have been 8.85%, 8.58% and 9.12% respectively, for Class A, Class B and
Institutional Class shares for the six month period ended April 30, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD INCOME FUND
Financial Highlights
Institutional
Class B Class
Class A Shares Shares Shares
---------------------------------------------------------------------------- ---------- ------------
Six Months Six Months Six Months
For a share outstanding Ended Year Year Year Year Nine Months Ended Ended
throughout 4/30/98 Ended Ended Ended Ended Ended 4/30/98 4/30/98
each period (a) (unaudited) 10/31/97 10/31/96 10/31/95 10/31/94 10/31/93 (unaudited) (unaudited)
---------- -------- -------- -------- -------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.61 $8.50 $8.72 $8.01 $9.43 $9.10 $8.61 $8.61
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
- ----------------------
Net investment income 0.27 0.55 0.57 0.59 0.58 0.47 0.25 0.28
Net realized and
unrealized gain
(loss) on investments
(b) 0.04 0.11 (0.19) 0.69 (1.19) 0.33 0.03 0.04
-------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations 0.31 0.66 0.38 1.28 (0.61) 0.80 0.28 0.32
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
- ----------------------
Dividends from net
investment income (0.28) (0.55) (0.60) (0.57) (0.56) (0.47) (0.26) (0.29)
Distributions from net
realized
gain on investments -- -- -- -- (0.25) -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.28) (0.55) (0.60) (0.57) (0.81) (0.47) (0.26) (0.29)
-------- -------- -------- -------- -------- -------- -------- --------
Net assets, end of
period $8.64 $8.61 $8.50 $8.72 $8.01 $9.43 $8.63 $8.64
======== ======== ======== ======== ======== ======== ======== ========
Total return
investment return
at net asset value
(c) 3.63% 8.05% 4.56% 16.53% (6.81%) 8.97% 3.25% 3.75%
Net assets, end of
period ($ millions) $738.7 $778.0 $871.0 $942.1 $907.2 $1,042.2 $3.2 $18.4
Ratio of expenses to
average
net assets 0.79%(d,g) 0.80%(f) 0.83% 0.83% 0.82% 0.80%(d,e) 1.56%(d,g) 0.54%(d,g)
Ratio of net
investment income to
average net assets 6.30%(d,g) 6.44%(f) 6.61% 7.01% 6.77% 6.87%(d,e) 5.68%(d,g) 6.55%(d,g)
Portfolio turnover
rate 45% 97% 142% 131% 155% 84% 45% 45%
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 redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
(e) During the nine month period ended October 31, 1993, LBRC undertook a voluntary reduction of the Fund's investment
advisory fee equal to 0.10% of average daily net assets. Had LBRC not undertaken this waiver, 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% for the nine month period ended October 31, 1993.
(f) Effective January 1, 1997, LBRC has voluntarily agreed to waive a portion of its advisory fee equal to 0.05% of the
average daily net assets of the Fund. This voluntary partial waiver may be discontinued at any time. Had LBRC not
undertaken this waiver, the ratio of expenses to average net assets would have been 0.84% and the ratio of net investment
income to average net assets would have been 6.40% for the Fund for the year ended October 31, 1997.
(g) In addition to the aforementioned waiver, effective November 1, 1997, LBRC voluntarily agreed to permanently waive a
portion of its advisory fee equal to 0.25% of the average daily net assets of the Fund. Had LBRC not undertaken these
waivers, the ratio of expenses to average net assets would have been 1.09%, 1.86% and 0.84% and the ratio of net
investment income to average net assets would have been 6.00%, 5.38% and 6.25% respectively, for Class A, Class B and
Institutional Class shares for the six month period ended April 30, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
Financial Highlights
Institutional
Class B Class
Class A Shares Shares Shares
---------------------------------------------------------------------------- ---------- ------------
Six Months Six Months Six Months
For a share outstanding Ended Year Year Year Year Nine Months Ended Ended
throughout 4/30/98 Ended Ended Ended Ended Ended 4/30/98 4/30/98
each period (a) (unaudited) 10/31/97 10/31/96 10/31/95 10/31/94 10/31/93 (unaudited) (unaudited)
---------- -------- -------- -------- -------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.85 $8.60 $8.58 $7.88 $9.00 $8.52 $8.85 $8.85
-------- -------- -------- -------- -------- -------- -------- --------
Income From Investment
Operations:
- ------------------------
Net investment income 0.19 0.45 0.44 0.45 0.46 0.37 0.20 0.24
Net realized and
unrealized gain (loss)
on investments (b) 0.06 0.24 0.01 0.70 (0.96) 0.51 0.01 0.02
-------- -------- -------- -------- -------- -------- -------- --------
Total from
investment operations 0.25 0.69 0.45 1.15 (0.50) 0.88 0.21 0.26
-------- -------- -------- -------- -------- -------- -------- --------
Less Distributions:
- ------------------------
Dividends from net
investment income (0.23) (0.44) (0.43) (0.45) (0.46) (0.37) (0.20) (0.24)
Distributions from
net realized gain
on investments -- -- -- -- (0.16) (0.03) -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.23) (0.44) (0.43) (0.45) (0.62) (0.40) (0.20) (0.24)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period $8.87 $8.85 $8.60 $8.58 $7.88 $9.00 $8.86 $8.87
======== ======== ======== ======== ======== ======== ======== ========
Total investment return
at net asset value (c) 2.78% 8.28% 5.33% 14.97% (5.93%) 10.73% 0.024 2.91%
Net assets, end of
period ($ millions) $585.6 $591.9 $609.5 $628.7 $595.2 $629.7 $1.9 $3.9
Ratio of expenses
to average
net assets 0.69%(d,g) 0.70%(f) 0.74% 0.74% 0.75% 0.74%(d,e) 1.45%(d,g) 0.44%(d,g)
Ratio of net investment
income to average
net assets 4.97%(d,g) 5.13%(f) 5.14% 5.43% 5.44% 5.69%(d,e) 4.32%(d,g) 5.22%(d,g)
Portfolio turnover rate 7% 18% 33% 36% 38% 46% 7% 7%
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 redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of a sales charge.
(d) Computed on an annualized basis.
(e) During the nine month period ended October 31, 1993, LBRC undertook a voluntary reduction of the Fund's investment
advisory fee equal to 0.05% of average daily net assets. Had LBRC not undertaken this waiver, 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% for the nine month period ended October 31, 1993.
(f) Effective January 1, 1997, LBRC has voluntarily agreed to waive a portion of its advisory fee equal to 0.05% of the
average daily net assets of the Fund. This voluntary partial waiver may be discontinued at any time. Had LBRC not
undertaken this waiver, the ratio of expenses to average net assets would have been 0.74% and the ratio of net investment
income to average net assets would have been 5.09% for the Fund for the year ended October 31, 1997.
(g) In addition to the aforementioned waiver, effective November 1, 1997, LBRC voluntarily agreed to permanently waive a
portion of its advisory fee equal to 0.25% of the average daily net assets of the Fund. Had LBRC not undertaken these
waivers, the ratio of expenses to average net assets would have been 0.99%, 1.75% and 0.74% and the ratio of net
investment income to average net assets would have been 4.67%, 4.02% and 4.92%, respectively, for Class A, Class B and
Institutional Class shares for the six month period ended April 30, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MONEY MARKET FUND
Financial Highlights
Institutional
Class B Class
Class A Shares Shares Shares
---------------------------------------------------------------------------- ---------- ------------
Six Months Six Months Six Months
For a share outstanding Ended Year Year Year Year Nine Months Ended Ended
throughout 4/30/98 Ended Ended Ended Ended Ended 4/30/98 4/30/98
each period (a) (unaudited) 10/31/97 10/31/96 10/31/95 10/31/94 10/31/93 (unaudited) (unaudited)
---------- -------- -------- -------- -------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- -------- -------- --------
Net investment
income from
investment operations 0.02 0.05 0.05 0.05 0.03 0.02 0.02 0.03
Less: Dividends from net
investment income (0.02) (0.05) (0.05) (0.05) (0.03) (0.02) (0.02) (0.03)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ======== ======== ========
Total investment
return at net
asset value (b) 2.41% 4.74% 4.63% 4.95% 2.89% 1.63% 2.41% 2.54%
Net assets, end of
period ($ millions) $455.9 $469.2 $417.6 $341.1 $276.9 $275.1 $0.03 $49.9
Ratio of expenses
to average
net assets 0.95%(c,e) 0.95%(d) 1.01%(d) 1.10%(d) 1.10%(d) 1.10%(c,d) 0.95%(c,e) 0.70%(c,e)
Ratio of net
investment income to
average net assets 4.81%(c,e) 4.64%(d) 4.53%(d) 4.85%(d) 2.85%(d) 2.16%(c,d) 4.81%(c,e) 5.06%(c,e)
NOTES TO FINANCIAL HIGHLIGHTS:
- ------------------------------
(a) All per share amounts have been rounded to the nearest cent.
(b) Total return is based on the change in net asset value during the period and assumes reinvestment of all distributions.
(c) Computed on an annualized basis.
(d) Effective February 1, 1992 through March 31, 1996, Lutheran Brotherhood Research Corp. (LBRC) had voluntarily undertaken to
limit the Fund's expense ratio to 1.10% of annual average daily net assets. Effective April 1, 1996 through October 31, 1997,
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 4.35%, 4.47%, 4.77%, 2.59%, 1.82% and 2.63%,
respectively, for the years ended October 31, 1997, 1996, 1995 and 1994, the nine month period ended October 31, 1993 and the
year ended January 31, 1993.
(e) Effective November 1, 1997 through October 31, 1998, and thereafter until further notice, LBRC has voluntarily undertaken to
waive its advisory fee and, if necessary, to bear certain expenses associated with operating the Fund in order to limit the
Fund's total operating expenses for Class A shares, Class B shares and Institutional Class shares to an annual rate of 0.95%,
0.95% and 0.70%, respectively, of the average daily net assets of the relevant class. In addition to the aforementioned waiver,
effective November 1, 1997, LBRC voluntarily agreed to permanently waive a portion of its advisory fee equal to 0.25% of the
average daily net assets of the Fund. Had LBRC not undertaken these waivers, the ratio of expenses to average net assets would
have been 1.28%, 1.28% and 1.03% and the ratio of net investment income to average net assets would have been 4.48%, 4.48% and
4.73%, respectively, for Class A, Class B and Institutional Class shares for the six month period ended April 30, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
Notes to Financial Statements
April 30, 1998
(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
eight series (the "Fund(s)"), each with its own investment objective and
policies. The eight Funds of the Trust are: Lutheran Brotherhood
Opportunity Growth Fund, Lutheran Brotherhood Mid Cap Growth Fund,
Lutheran Brotherhood World Growth Fund, Lutheran Brotherhood Fund,
Lutheran Brotherhood High Yield Fund, Lutheran Brotherhood Income Fund,
Lutheran Brotherhood Municipal Bond Fund and Lutheran Brotherhood Money
Market Fund. The Lutheran Brotherhood Mid Cap Growth Fund's registration
was declared effective by the Securities and Exchange Commission and
began operations as a series of The Lutheran Brotherhood Family of Funds
on May 30, 1997.
Effective October 31, 1997, the Funds implemented a multiple class
structure whereby each Fund is authorized to offer three classes of
shares: Class A, Class B and Institutional Class. The shares outstanding
prior to October 31, 1997 were designated as Class A shares. The three
classes of shares differ principally in their respective shareholder
servicing and distribution expenses and arrangements. All three classes
of shares have identical rights to earnings, assets and voting
privileges, except for class specific expenses and exclusive rights to
vote on matters affecting only individual classes.
(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. Over-the-counter securities 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 Fund does
not separately report the effect of changes in foreign exchange rates
from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
Federal Income Taxes
No provision has been made for income taxes because the Fund's policy is
to qualify as a regulated investment company under the Internal Revenue
Code and distribute substantially all of its taxable income on a timely
basis. It is also the intention of the Funds to distribute an amount
sufficient to avoid imposition of any federal excise tax. Each Fund is
treated as a separate taxable entity for federal income tax purposes.
Securities Transactions, Investment Income and Expenses
Securities transactions are accounted for on trade date. 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.
Interest income is accrued daily and is determined on the basis of
interest or discount earned on any short-term investments and interest
earned on all other debt securities, including accrual of original issue
discount. Interest earned on debt securities also includes amortization
of premium for the Opportunity Growth, World Growth Fund, LB Fund, High
Yield and Municipal Bond Funds and the accrual of market discount for
the Opportunity Growth, World Growth, LB Fund and High Yield Funds.
Market discount, if any, is recognized for tax purposes when bonds are
sold for the Income and Municipal Bond Funds. Dividend income is
recorded on the ex-dividend date. For payment-in-kind securities, income
is recorded on the ex-dividend date in the amount of the value received.
Estimated expenses are accrued daily. Each Fund is charged for the
operating expenses that are directly attributable to it. Common expenses
of the Trust are either shared equally or allocated among the Funds
based on the relative net assets of each Fund to the combined net
assets, or via other allocation methodologies.
Realized and unrealized gains and losses and net investment income,
other than class specific expenses, are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
Operating expenses directly attributable to a specific class are charged
against the operations of that class.
Distributions to Shareholders
Dividends from net investment income, if available, are declared and
paid annually for the Opportunity Growth, Mid Cap 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.
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.
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 $151,250, from such fees for the six
month period ended April 30, 1998.
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.
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.
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.
Accounting Estimates
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. (LB Research), 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 , 0.65% for the next $150 million, 0.60% for
the next $250 million, 0.55% for the next $500 million, and 0.50% for
net assets over $1 billion; Mid Cap Growth Fund, 0.70% for the first
$100 million, 0.65% for the next $150 million, 0.60% for the next $250
million, 0.55% for the next $500 million, and 0.50% for net assets over
$1 billion; World Growth Fund, 1.25% for the first $20 million, 1.10%
for the next $30 million, and 1.0% of net assets over $50 million; LB
Fund and High Yield Fund, 0.65% for the first $500 million, 0.60% for
the next $500 million, and 0.55% for net assets over $1 billion; Income
Fund, 0.60% for the first $500 million, 0.575% for the next $500
million, and 0.55% for net assets over $1 billion; Municipal Bond Fund,
0.575% for the first $500 million, 0.5625% for the next $500 million,
and 0.55% for net assets over $1 billion; Money Market Fund, 0.50% for
the first $500 million, 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 net
assets over $2 billion.
Effective October 31, 1997, LB Research voluntarily agreed to
permanently waive a portion of its advisory fee for each of the Funds
equal to 0.25% of the average daily net assets of the Fund. This 0.25%
waiver applies to the contractual rates of compensation in the previous
paragraph at each level of average daily net assets.
Effective January 1, 1997, LB Research has also 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. These voluntary partial waivers of advisory fees
may be discontinued at any time.
LB Research has further undertaken, until October 31, 1998 and
thereafter until further notice, to LB Mid Cap Growth Fund to waive its
advisory fee and if necessary, to bear certain expenses associated with
operating the Fund in order to limit the Fund's total operating expenses
for Class A shares, Class B shares and Institutional Class shares to an
annual rate of 1.95%, 2.70% and 1.70%, respectively, of the average
daily net assets of the relevant class. LB Research has further
undertaken, until October 31, 1998 and thereafter until further notice
to LB Money Market Fund, to waive its advisory fees in order to limit LB
Money Market Fund's total operating expenses for the Class A, Class B
and Institutional class shares to 0.95%, 0.95%, and 0.70%, respectively
of the average net assets of the relevant class.
LB Research pays Rowe Price - Fleming International, Inc. an annual
sub-advisory fee for the performance of sub-advisory services for the LB
World Growth Fund. LB Research 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. The total dollar amount paid by
LB Research to Rowe Price Fleming under the investment sub-advisory
contract for LB World Growth Fund for the six months ended April 30,
1998 was $198,747.
Effective May 15, 1998, LB Research will commence to pay T. Rowe Price
an annual sub-advisory fee for the performance of sub-advisory services
for the LB Opportunity Growth Fund. The fee payable will be equal to
0.30% of that Fund's average daily net assets up to $500 million, 0.25%
for the next $500 million and 0.20% for net assets over $1 billion.
Distribution and Shareholder Servicing Plans
The Trust has adopted a Distribution Plan (the "12b-1 Plan") under Rule
12b-1 of the 1940 Act with respect to the Class B shares of each Fund
except for the LB Money Market Fund. Under the 12b-1 Plan, the Funds
each pay Lutheran Brotherhood Securities Corp. (LB Securities) at an
annual rate of 0.75% of the average daily net assets of its Class B
shares. The fees collected under the 12b-1 Plan are used by LB
Securities to finance activities primarily intended to result in the
sale of Class B shares of the Fund.
In addition, the Trust has adopted shareholder servicing plans for Class
A and Class B shares of each of the Funds (the "Shareholder Servicing
Plans"). Pursuant to the Shareholder Servicing Plans, each Fund pays LB
Securities an annual fee of 0.25% of the average daily net assets of the
Class A and Class B shares for financing various shareholder servicing
activities.
Sales Charges and Other Fees
For the six months ended April 30, 1998, LB Securities, the Trust's
distributor, received sales charges paid by shareholders on sales of
Class A Fund shares of: Opportunity Growth Fund, $472,182; Mid Cap
Growth Fund, $226,445; World Growth Fund, $162,841; LB Fund, $1,351,771;
High Yield Fund, $1,907,663; Income Fund, $537,553; and Municipal Bond
Fund, $400,196. Sales charges advanced to broker/dealers by LB
Securities on sales of the Fund's Class B shares for the six months
ended April 30, 1998 were: Opportunity Growth Fund, $99,701; Mid Cap
Growth Fund, $122,821; World Growth Fund, $57,509; LB Fund, $417,735;
High Yield Fund, $365,936; Income Fund, $102,847, and Municipal Bond
Fund, $61,499. During the six months ended April 30, 1998, LB Securities
also received aggregate contingent deferred sales charges of $2,740 paid
by shareholders of the Trust upon redemption of Class B shares. Sales
charges are not an expense of the Trust and are not reflected in the
financial statements of any of the Funds.
LB Securities also received fees pursuant to an agreement to provides
certain administrative personnel and services to the Funds and received
the following compensation for the six months ended April 30,1998:
Opportunity Growth Fund, $28,870; Mid Cap Growth Fund, $2,176; World
Growth Fund, $7,950; LB Fund, $108,133; High Yield Fund, $89,483; Income
Fund, $76,453; Municipal Bond Fund, $59,313; and Money Market Fund,
$48,509.
In addition, LB Securities provides the Funds with transfer agent
services pursuant to an agreement and received the following
compensation: Opportunity Growth Fund, $620,322; Mid Cap Growth Fund,
$80,326; World Growth Fund, $192,833; LB Fund, $988,339; High Yield
Fund, $661,492; Income Fund, $603,742; Municipal Bond Fund, $237,913;
and Money Market Fund, $747,942.
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) DISTRIBUTIONS FROM CAPITAL GAINS
During the six months ended April 30, 1998, distributions from net
realized capital gains of $10,519,014, $425,326, $1,209,872, $96,194,374
and $16,591,227, were paid by the LB Opportunity Growth Fund, LB Mid Cap
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, 1997.
(5) CAPITAL LOSS CARRYOVER
At October 31, 1997, 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 $37,081,944 $3,461,322
2003 -- 134,719
2004 8,472,280 --
-------------- --------------
Total $45,554,224 $3,596,041
============== ==============
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 $1,001,322, $13,233, $184,189, $323,286,
$1,061,368, $267,574, and $2,233,555 existed between net realized
capital gains or losses for financial statement and tax purposes as of
October 31, 1997 for the Opportunity Growth, Mid Cap 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.
(6) INVESTMENT TRANSACTIONS
Purchases and Sales of Investment Securities
For the six months ended April 30, 1998, 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 $218,889 $231,071
Mid Cap Growth Fund 89,915 74,252
World Growth Fund 10,073 7,077
LB Fund 251,403 250,700
High Yield 444,450 389,237
Income 211,027 287,545
Municipal Bond 43,404 46,026
Purchases and sales of U.S. Government securities were:
$thousands
----------------------------------
Fund Purchases Sales
- ------------------------------------------------------------------------
LB Fund $ 909 $ 2,581
Income 126,766 52,975
Investments in Restricted Securities
The High Yield Fund owns restricted securities that were purchased in
private placement transactions without registration under the Securities
Act of 1933. Unless such securities subsequently become registered, they
generally may be resold only in privately negotiated transactions with a
limited number of purchasers. The aggregate value of restricted
securities was $53,500 at April 30, 1998, which represented .0001% of
net assets of the High Yield Fund.
Investments in High Yielding Securities
The High Yield Fund invests primarily in high yielding fixed income
securities. These securities will typically be in the lower rating
categories or will be non-rated and generally will involve more risk
than securities in the higher rating categories. Lower rated or unrated
securities are more likely to react to developments affecting market
risk and credit risk than are more highly rated securities, which react
primarily to movements in the general level of interest rates.
Investments in Options and Futures Contracts
The movement in the price of the instrument underlying an option or
futures contract may not correlate perfectly with the movement in the
prices of the portfolio securities being hedged. A lack of correlation
could render the Fund's hedging strategy unsuccessful and could result
in a loss to the Fund. In the event that a liquid secondary market would
not exist, the Fund could be prevented from entering into a closing
transaction which could result in additional losses to the Fund.
Open Option Contracts
The number of contracts and premium amounts associated with call option
contracts written during the six months ended April 30, 1998 were as
follows:
Opportunity Growth
-------------------------------------
Number of Premium
Contracts Amount
-------------- --------------
Balance at October 31, 1997 1,791 $751,131
Opened -- --
Closed (179) (96,429)
Expired (136) (55,052)
Exercised (1,476) (599,650)
------------ ------------
Balance at April 30, 1998 -- $ --
============ ============
Income Fund
-------------------------------------
Number of Premium
Contracts Amount
-------------- --------------
Balance at October 31, 1997 400 $133,272
Opened 2,650 970,369
Closed (2,750) (983,382)
Expired -- --
Exercised -- --
------------ ------------
Balance at April 30, 1998 300 $120,259
============ ============
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.
(7) SHARES OF BENEFICIAL INTEREST
The Master Trust Agreement permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest ($0.001 par
value) of all of the Funds. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
LB OPPORTUNITY GROWTH FUND:
Class A Class B (*) Institutional Class (*)
---------------------------- ---------------------------- ---------------------------
Year Ended October 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 5,905,439 $69,165,678 1,928 $25,000 268,205 $3,478,617
Dividends and
distributions reinvested 2,555,559 29,593,578 -- -- -- --
Redeemed (4,240,983) (50,512,106) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change 4,220,015 $48,247,150 1,928 $25,000 268,205 $3,478,617
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1998
- ---------------------------------
Sold 1,872,168 $22,246,825 246,379 $2,912,330 16 $200
Dividends and
distributions reinvested 946,015 10,312,714 1,587 17,289 7,970 86,876
Redeemed (3,016,213) (35,671,368) (3,108) (37,264) (3,099) (37,873)
------------ ------------ ------------ ------------ ------------ ------------
Net Change (198,030) ($3,111,829) 244,858 $2,892,355 4,877 $49,203
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB MID CAP GROWTH FUND:
Class A Class B (*) Institutional Class (*)
For the period from May 30, 1997 ---------------------------- ---------------------------- ---------------------------
(effective date)
through October 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 1,450,459 $14,716,873 2,420 $25,000 51,634 $533,378
Dividends and
distributions reinvested -- -- -- -- -- --
Redeemed (91,390) (950,501) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change 1,359,069 $13,766,372 2,420 $25,000 51,634 $533,378
============ ============ ============ ============ ============ ============
Six Months Ended April 30, 1998
- ---------------------------------
Sold 1,348,754 $14,075,293 360,872 $3,752,519 13,135 $135,709
Dividends and
distributions reinvested 103,705 976,905 3,674 34,580 4,202 39,582
Redeemed (251,834) (2,690,486) (2,022) (20,461) -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change 1,200,625 $12,361,712 362,524 $3,766,638 17,337 $175,291
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB World Growth Fund:
Class A Class B (*) Institutional Class (*)
---------------------------- ---------------------------- ---------------------------
Year Ended October 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 2,771,231 $28,247,203 2,478 $25,000 723,689 $7,302,027
Dividends and
distributions reinvested 45,757 442,919 -- -- -- --
Redeemed (1,679,423) (17,088,602) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change 1,137,565 $11,601,520 2,478 $25,000 723,689 $7,302,027
============ ============ ============ ============ ============ ============
Six Months Ended April 30, 1998
- ---------------------------------
Sold 809,769 $8,537,415 168,420 $1,806,900 13,451 $134,060
Dividends and
distributions reinvested 124,865 1,213,726 477 4,625 625 6,083
Redeemed (744,097) (7,813,750) (608) (7,104) -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change 190,537 $1,937,391 168,289 $1,804,421 14,076 $140,143
============ ============ ============ ============ ============ ============
LB Fund:
Class A Class B (*) Institutional Class (*)
---------------------------- ---------------------------- ---------------------------
Year Ended October 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 4,207,081 $105,635,206 927 $25,000 542,163 $14,627,549
Dividends and
distributions reinvested 2,796,737 64,235,302 -- -- -- --
Redeemed (4,178,880) (106,385,820) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change 2,824,938 $63,484,688 927 $25,000 542,163 $14,627,549
============ ============ ============ ============ ============ ============
Six Months Ended April 30, 1998
- ---------------------------------
Sold 2,447,067 $67,404,844 458,538 $12,681,655 55,853 $1,534,864
Dividends and
distributions reinvested 3,875,434 95,334,975 6,446 158,266 36,915 909,122
Redeemed (2,163,736) (59,762,699) (3,868) (111,728) (14,651) (417,458)
------------ ------------ ------------ ------------ ------------ ------------
Net Change 4,158,765 $102,977,120 461,116 $12,728,193 78,117 $2,026,528
============ ============ ============ ============ ============ ============
LB High Yield Fund:
Class A Class B (*) Institutional Class (*)
---------------------------- ---------------------------- ---------------------------
Year Ended October 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 19,214,316 $178,869,458 2,610 $25,000 5,314,802 $50,915,801
Dividends and
distributions reinvested 5,475,615 50,814,451 -- -- -- --
Redeemed (16,218,071) (152,343,508) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change 8,471,860 $77,340,401 2,610 $25,000 5,314,802 $50,915,801
============ ============ ============ ============ ============ ============
Six Months Ended April 30, 1998
- ---------------------------------
Sold 9,374,058 $89,409,302 1,197,605 $11,417,994 738,463 $7,029,131
Dividends and
distributions reinvested 4,095,509 38,600,620 19,782 187,579 113,289 1,068,025
Redeemed (6,196,042) (59,074,016) (10,658) (104,207) (56,730) (542,506)
------------ ------------ ------------ ------------ ------------ ------------
Net Change 7,273,525 $68,935,906 1,206,729 $11,501,366 795,022 $7,554,650
============ ============ ============ ============ ============ ============
LB Income Fund:
Class A Class B (*) Institutional Class (*)
---------------------------- ---------------------------- ---------------------------
Year Ended October 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 4,334,735 $36,746,239 2,904 $25,000 2,110,937 $18,175,170
Dividends and
distributions reinvested 4,686,641 39,615,137 -- -- -- --
Redeemed (23,296,755) (197,623,659) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change (14,275,379) ($121,262,283) 2,904 $25,000 2,110,937 $18,175,170
============ ============ ============ ============ ============ ============
Six Months Ended April 30, 1998
- ---------------------------------
Sold 2,831,881 $24,504,561 369,128 $3,191,290 134,390 $1,158,398
Dividends and
distributions reinvested 2,147,597 18,509,285 4,145 35,762 44,065 379,757
Redeemed (7,729,423) (66,855,158) (4,515) (40,123) (164,444) (1,418,386)
------------ ------------ ------------ ------------ ------------ ------------
Net Change (2,749,945) ($23,841,312) 368,758 $3,186,929 14,011 $119,769
============ ============ ============ ============ ============ ============
LB Municipal Bond Fund:
Class A Class B (*) Institutional Class (*)
---------------------------- ---------------------------- ---------------------------
Year Ended October 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 3,478,212 $30,173,502 2,825 $25,000 472,666 $4,183,098
Dividends and
distributions reinvested 2,700,258 23,380,685 -- -- -- --
Redeemed (10,686,508) (92,813,344) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change (4,508,038) ($39,259,157) 2,825 $25,000 472,666 $4,183,098
============ ============ ============ ============ ============ ============
Six Months Ended April 30, 1998
- ---------------------------------
Sold 2,314,456 $20,746,173 212,709 $1,905,937 8,533 $76,331
Dividends and
distributions reinvested 1,277,779 11,429,779 1,754 15,673 11,597 103,698
Redeemed (3,980,419) (35,673,443) (8) (360) (49,558) (444,793)
------------ ------------ ------------ ------------ ------------ ------------
Net Change (388,184) ($3,497,491) 214,455 $1,921,250 (29,428) ($264,764)
============ ============ ============ ============ ============ ============
LB Money Market Fund:
Class A Class B (*) Institutional Class (*)
---------------------------- ---------------------------- ---------------------------
Year Ended October 31, 1997 Shares Amount Shares Amount Shares Amount
- --------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 754,520,380 $754,520,379 25,000 $25,000 52,919,980 $52,919,980
Dividends and
distributions reinvested 19,916,469 19,916,469 -- -- -- --
Redeemed (775,766,605) (775,766,604) -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Net Change (1,329,756) ($1,329,756) 25,000 $25,000 52,919,980 $52,919,980
============ ============ ============ ============ ============ ============
Six Months Ended April 30, 1998
- --------------------------------------------
Sold 427,278,373 $427,278,373 200 $200 28,234,321 $28,234,321
Dividends and
distributions reinvested 10,303,041 10,303,041 1 1 1,222,568 $1,222,568
Redeemed (397,955,268) (397,955,268) -- -- (32,438,330) (32,438,330)
------------ ------------ ------------ ------------ ------------ ------------
Net Change 39,626,146 $39,626,146 201 $201 (2,981,441) ($2,981,441)
============ ============ ============ ============ ============ ============
*Transactions in Class B and Institutional Class Shares recorded by
the Fund on October 31, 1997, the inception date of the new offerings.
</TABLE>
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
LUTHERAN BROTHERHOOD MID CAP 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.
Noel K. Estenson
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]
