LUTHERAN BROTHERHOOD FAMILY OF FUNDS, 497, 1999-11-01

LUTHERAN BROTHERHOOD FAMILY OF FUNDS
497, 1999-11-01

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THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS

LUTHERAN BROTHERHOOD GROWTH FUND
LUTHERAN BROTHERHOOD VALUE FUND
LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND

CLASS A AND CLASS B SHARES

PROSPECTUS October 29, 1999

The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.

<PAGE>
TABLE OF CONTENTS

PAGE

The Funds

Investment Objectives, Principal Strategies and Risks,
Volatility and Performance, Fees and Expenses
LB Growth Fund
LB Value Fund
LB Limited Maturity Bond Fund

Management

Your Investment
Choosing a Class of Shares
Class A Shares
Class B Shares
Buying Shares
Net Asset Value of Your Shares
Exchanging Between Funds
Redeeming Shares

Distributions

Taxes

Other Securities and Investment Practices

The Lutheran Brotherhood Family of Funds are offered to members of
Lutheran Brotherhood and to Lutheran institutions, Lutheran church
organizations, trusts, and employee benefit plans. Lutheran Brotherhood
membership is open to any person who (1) is baptized in the Christian faith
or affiliated with a Lutheran church organization and (2) professes to be a
Lutheran, or to any non-Lutheran who is a spouse, dependent child, sibling,
or grandchild of a member or qualified proposed member.

LUTHERAN BROTHERHOOD GROWTH FUND

INVESTMENT OBJECTIVE. The investment objective of the Lutheran
Brotherhood Growth Fund ("LB Growth Fund") is to achieve long-term growth of
capital.

PRINCIPAL STRATEGIES. The principal strategy for achieving this
objective is to invest primarily in the common stocks of growth companies
with large market capitalizations. The Fund invests primarily in stocks of
companies that Lutheran Brotherhood Research Corp. ("LB Research"), the
Fund's investment adviser, believes have demonstrated and will sustain
above-average earnings growth over time, or which are expected to develop
rapid sales and earnings growth in the future when compared to the economy
and stock market as a whole. LB Research defines companies with large
market capitalizations according to the market capitalization
classifications published by Lipper, Inc. Based on Lipper's guidelines as
of July 31, 1999, companies with large market capitalizations are those with
market capitalizations of at least $8.7 billion. The Fund will invest
primarily in U.S. companies, although it may also invest in foreign
companies.

LB Research uses both fundamental and technical investment research
techniques to determine what stocks to buy and sell. (Fundamental investment
analysis generally involves assessing a company's or security's value based
on factors such as a company's sales, assets, markets, management, products
and services, earnings, and financial structure. Technical analysis
generally involves studying trends and movements in a security's price,
trading volume, and other market-related factors in an attempt to discern
patterns.) Under normal market conditions, the LB Growth Fund maintains
industry sector weightings similar to the aggregate holdings of other funds
which are classified as Large Cap Growth Funds by Lipper, Inc.

PRINCIPAL RISKS. The LB Growth Fund's principal risks are the risks
generally of stock investing. They include the risk of sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster performance.

Growth stocks can have greater price volatility than other stocks in a
declining market or when a company's earnings are less than expected. In
addition, the prices of larger company stocks may not rise as quickly or as
significantly as prices of stocks of well-managed smaller companies when
stocks of larger companies are out of favor. For these and other reasons,
the LB Growth Fund may underperform other stock funds.

The success of the Fund's investment strategy depends significantly on
LB Research's skill in assessing the potential of the securities in which
the Fund invests. Shares of the LB Growth Fund will rise and fall in value
and there is a risk that you could lose money by investing in the Fund. The
LB Growth Fund cannot be certain that it will achieve its objective.

No bar chart or performance table has been included for the LB Growth
Fund. The LB Growth Fund commenced operations on October 31, 1999.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the LB Growth Fund.

SHAREHOLDER FEES (fees paid directly from your investment)

CLASS A SHARES CLASS B SHARES
-------------- --------------
Maximum Sales Charge (Load) Imposed On Purchases
(as a percentage of offering price)(1) 4% None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value at time of
purchase or redemption, whichever is lower) None 5%

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)

CLASS A CLASS B
------- -------
Management Fees 0.43% 0.43%
Distribution (12b-1) Fees -- 0.75%
Other Expenses (including a 0.25% 1.39% 1.39%
shareholder servicing fee) (2)
Total Annual Fund Operating Expenses (3) 1.82% 2.57%

(1) The maximum sales charges for the Fund depends upon the amount of your
investment and whether you buy Class A shares or Class B shares. For a
complete description of the sales charges, see "Choosing a Class of Shares."

(2) Because the LB Growth Fund has been newly organized, the percentage
expense levels shown in the table as "Other Expenses" are based on
estimates.

(3) LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee and, if necessary, to bear certain expenses associated with
operating LB Growth Fund in order to limit the Total Fund Operating Expenses
for the Class A shares and Class B shares to an annual rate of 1.30% and
2.05%, respectively, of the average net assets at the relevant class. This
temporary waiver and expense provision may be discontinued at any time.

EXAMPLE

THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

THE EXAMPLE ASSUMES THAT YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS
INDICATED AND THEN REDEEM ALL OF YOUR SHARES AT THE END OF THOSE PERIODS.
THE EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT HAS A 5% RETURN EACH YEAR AND
THAT THE FUND'S OPERATING EXPENSES REMAIN THE SAME. ALTHOUGH YOUR ACTUAL
COSTS MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS YOUR COSTS WOULD
BE:

1 Year 3 Years
------ -------
Class A shares $577 $950
Class B shares $760 $1099

YOU WOULD PAY THE FOLLOWING EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:

1 Year 3 Years
------ -------
Class A shares $577 $950
Class B shares $260 $799

LUTHERAN BROTHERHOOD VALUE FUND

INVESTMENT OBJECTIVE. The investment objective of the Lutheran
Brotherhood Value Fund ("LB Value Fund") is to achieve long-term growth of
capital.

PRINCIPAL STRATEGIES. The principal strategy for achieving this
objective is to invest primarily in the common stocks of undervalued
companies with large market capitalizations. LB Research, the Fund's
investment adviser, uses both fundamental and technical investment research
techniques to identify stocks of companies that it believes are undervalued
in relation to their long-term earnings power or asset value. These stocks
typically, but not always, have below average price-to-earnings and price-
to-book value ratios. (The price-to-earnings [P/E] ratio represents the
price of a stock divided by its earnings per share. In general, the higher
the P/E, the greater the expectations are for earnings growth. The price-
to-book ratio represents the price of a stock divided by its net asset
value. The price/book ratio can be a guide in determining the value of a
stock.)

The Fund will invest primarily in U.S. companies, although it may also
invest in foreign companies. Under normal market conditions, the LB Value
Fund maintains industry sector weightings similar to the aggregate holdings
of other funds which are classified as Large Cap Value Funds by Lipper, Inc.

PRINCIPAL RISKS. The LB Value Fund's principal risks are the risks
generally of stock investing. They include the risk of sudden and
unpredictable drops in the value of the market as a whole and periods of
lackluster performance.

There is also a risk that stocks of undervalued companies may not rise
as quickly as anticipated if the market doesn't recognize their intrinsic
value or if value stocks are out of favor. In addition, the prices of
larger company stocks may not rise as quickly or as significantly as prices
of stocks of well-managed smaller companies. For these and other reasons,
the LB Value Fund may underperform other stock funds.

The success of the Fund's investment strategy depends significantly on
LB Research's skill in assessing the potential of the securities in which
the Fund invests. Shares of the LB Value Fund will rise and fall in value
and there is a risk that you could lose money by investing in the Fund. The
LB Value Fund cannot be certain that it will achieve its objective.

No bar chart or performance table has been included for the LB Value
Fund. The LB Value Fund commenced operations on October 31, 1999.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the LB Value Fund.

SHAREHOLDER FEES (fees paid directly from your investment)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)

CLASS A CLASS B
------- -------
Management Fees 0.40% 0.40%
Distribution (12b-1) Fees -- 0.75%
Other Expenses (including a 0.25% 1.39% 1.39%
shareholder servicing fee) (2)
Total Annual Fund Operating Expenses (3) 1.79% 2.54%

(2) Because the LB Value Fund has been newly organized, the percentage
expense levels shown in the table as "Other Expenses" are based on
estimates.

(3) LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee and, if necessary, to bear certain expenses associated with
operating LB Value Fund in order to limit the Total Fund Operating Expenses
for the Class A shares and Class B shares to an annual rate of 1.30% and
2.05%, respectively, of the average net assets at the relevant class. This
temporary waiver and expense provision may be discontinued at any time.

EXAMPLE

THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

1 Year 3 Years
------ -------
Class A shares $575 $941
Class B shares $757 $1091

YOU WOULD PAY THE FOLLOWING EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:

1 Year 3 Years
------ -------
Class A shares $575 $941
Class B shares $257 $791

LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND

INVESTMENT OBJECTIVE. The investment objective of the Lutheran
Brotherhood Limited Maturity Bond Fund ("LB Limited Maturity Bond Fund") is
to seek a high level of current income consistent with stability of
principal.

PRINCIPAL STRATEGIES. The LB Limited Maturity Bond Fund invests
primarily in investment-grade corporate bonds, government bonds, municipal
bonds, asset-backed securities, and mortgage-backed securities. The average
dollar-weighted portfolio maturity for the LB Limited Maturity Bond Fund is
expected to be between one and five years. Under normal market conditions,
the LB Limited Maturity Bond Fund invests at least 65% of its assets in debt
securities or preferred stock in at least the "Baa" major rating category by
Moody's or at least in the "BBB" major rating category by Standard & Poor's
Corporation or unrated securities considered to be of comparable quality by
LB Research, the Fund's investment adviser. The Fund may also invest in
high-yield, high risk bonds, notes, debentures and other debt obligations or
preferred stock commonly known as "junk bonds."

LB Research uses both fundamental and technical investment research
techniques to determine what debt obligations to buy and sell. LB Research
focuses on companies that it believes are financially sound and have strong
cash flow, asset values and interest or dividend earnings.

PRINCIPAL RISKS. The LB Limited Maturity Bond Fund's principal risks
are those of debt investing, including increases in interest rates and loss
of principal. Generally, when interest rates rise, bond prices fall, which
may cause the price of shares of the LB Limited Maturity Bond Fund to fall
as well. Bond prices fall because bonds issued after rates rise will offer
higher yields, making older bonds with lower rates less attractive. To
raise the effective yield on older bonds, holders of the older bonds must
discount their prices. Bonds with longer durations and maturities tend to
be more sensitive to changes in interest rates than bonds with shorter
durations or maturities. Effective yield on a bond is determined by the
purchase price, the stated rate of interest on the bond, the time between
interest payments, and the time until maturity. Duration is a measure of
the effective, as opposed to the actual, maturity of a fixed-income
security. Duration considers the bond's cash flows and the time value of
money.

In addition, both mortgage-backed and asset-backed securities are
sensitive to changes in the redemption patterns of the underlying
securities. If the principal payment on the underlying asset is repaid
faster or slower than the holder of the asset-backed or mortgage-backed
security anticipates, the price of the security may fall, especially if the
holder must reinvest the repaid principal at lower rates or must continue to
hold the securities when interest rates rise.

For all bonds there is a risk that an issuer will default. Lower rated
bonds generally are more susceptible to risk of default than higher rated
bonds, and to the LB Limited Maturity Bond Fund, this risk increases as LB
Research increases the percentage of the Fund's portfolio in lower rated
investment-grade bonds or in high-yield bonds.

The success of the Fund's investment strategy depends significantly on
LB Research's skill in assessing the potential of the securities in which
the Fund invests. Shares of the LB Limited Maturity Bond Fund will rise and
fall in value and there is a risk that you could lose money by investing in
the Fund. The LB Limited Maturity Bond Fund cannot be certain that it will
achieve its objective.

No bar chart or performance table has been included for the LB Limited
Maturity Bond Fund. The LB Limited Maturity Bond Fund commenced operations
on October 31, 1999.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of LB Limited Maturity Bond Fund.

SHAREHOLDER FEES (fees paid directly from your investment)

CLASS A SHARES CLASS B SHARES
-------------- --------------
Maximum Sales Charge (Load) Imposed On Purchases
(as a percentage of offering price)(1) None None
Maximum Deferred Sales Charge (Load)
(as a percentage of net asset value at time of
purchase or redemption, whichever is lower) None None(1)

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)

CLASS A CLASS B
------- -------
Management Fees 0.30% 0.30%
Distribution (12b-1) Fees -- --
Other Expenses (including a 0.25% 1.09% 1.09%
shareholder servicing fee)(2)

Total Annual Fund Operating Expenses (3) 1.39% 1.39%

(1) Class B shares of the LB Limited Maturity Bond Fund are offered solely
in exchange for Class B shares of other Funds of the Lutheran Brotherhood
Family of Funds. Class B shareholders of the LB Limited Maturity Bond Fund
will be responsible for any Contingent Deferred Sales Charge that may be
payable at the time of redemption as a result of an investment in another
Fund.

(2) Because the LB Limited Maturity Bond Fund has been newly organized, the
percentage expense levels shown in the table as "Other Expenses" are based
on estimates.

(3) LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee and, if necessary, to bear certain expenses associated with
operating LB Limited Maturity Bond Fund in order to limit the Total Fund
Operating Expenses for the Class A shares and Class B shares to an annual
rate of 0.95% of the average net assets of each class. This temporary
waiver and expense provision may be discontinued at any time.

EXAMPLE

THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

1 Year 3 Years
------ -------
Class A shares $142 $440
Class B shares $142 $440

YOU WOULD PAY THE FOLLOWING EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:

1 Year 3 Years
------ -------
Class A shares $142 $440
Class B shares $142 $440

MANAGEMENT

LB Research, 625 Fourth Avenue South, Minneapolis, Minnesota 55415,
serves as investment adviser for each of the Funds. LB Research is owned by
Lutheran Brotherhood Financial Corporation, which in turn is owned by
Lutheran Brotherhood. Lutheran Brotherhood and LB Research have been in the
investment advisory business since 1970 and managed over $24.5 billion in
assets as of June 30, 1999, including $11.9 billion in mutual fund assets.
LB Research provides investment research and supervision of the Funds'
investments. The following individuals are responsible for the day-to-day
management of the Funds.

LB GROWTH FUND

James M. Walline, vice president of LB Research, serves as the
portfolio manager of LB Growth Fund. Mr. Walline has been with Lutheran
Brotherhood and LB Research since 1968, and has served as the portfolio
manager of Lutheran Brotherhood Fund since 1994.

LB VALUE FUND

Harold R. Goldstein, assistant vice president of LB Research, serves as
the portfolio manager of LB Value Fund. Mr. Goldstein has been with
Lutheran Brotherhood and LB Research since 1993, and has previously served
as the associate portfolio manager of Lutheran Brotherhood Fund and the
portfolio manager of the equities portfolio for Lutheran Brotherhood.

LB LIMITED MATURITY BOND FUND

Michael G. Landreville, assistant vice president of LB Research, serves
as portfolio manager of LB Limited Maturity Bond Fund. Mr. Landreville also
has served as portfolio manager of Lutheran Brotherhood Income Fund since
September 1, 1999. He was portfolio co-manager of Lutheran Brotherhood
Income Fund from January 1, 1998, through August 31, 1999, and associate
portfolio manager from 1987 through 1997. Mr. Landreville has been with
Lutheran Brotherhood and LB Research since 1983.

Each Fund pays an annual investment advisory fee to LB Research. The
advisory contract between LB Research and The Lutheran Brotherhood Family of
Funds provides for the following advisory fees:

Limited
Growth Value Maturity
Fund Fund Bond Fund

$500 million or less 0.425% 0.40% 0.30%

Over $500 million but not over
$1 billion 0.375% 0.35% 0.275%

Over $1 billion 0.325% 0.30% 0.25%

LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee for the LB Growth Fund, LB Value Fund, and the LB Limited
Maturity Bond Fund and, if necessary, to bear certain expenses associated
with operating each Fund in order to limit the Total Fund Operating Expenses
of the Class A and Class B shares of each Fund. (See the footnotes to the
Fees and Expenses Table for each Fund.)

YOUR INVESTMENT

CHOOSING A CLASS OF SHARES

This Prospectus offers two classes of shares, each with its own sales
charges and fees. You should choose the class of shares that you believe is
the most appropriate for you, given the amount of your purchase, the length
of time you anticipate holding the shares, and other factors.

<PAGE>
<TABLE>
<CAPTION>
Class A Shares Class B Shares
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales Charges Initial sales charge at time of investment Contingent Deferred Sales Charge ("CDSC")
of up to 4% depending on amount of of 5% to 1%, depending on how
investment long you hold your shares before you
redeem them. There is no CDSC after
five years
- - --------------------------------------------------------------------------------------------------------------------
Rule 12b-1 Distribution Fee None 0.75%. Class B shares convert
automatically to Class A shares after
five years
- - --------------------------------------------------------------------------------------------------------------------
Shareholder Servicing Fee 0.25% each year of average daily net assets 0.25% each year of average daily net
assets
- - --------------------------------------------------------------------------------------------------------------------
Class B shares of the LB Growth Fund and the LB Value Fund have an annual distribution fee. This is also
called a 12b-1 fee, based on the SEC rule that permits this type of fee. Under its 12b-1 plan, the LB
Growth Fund and the LB Value Fund pay Lutheran Brotherhood Securities Corp. ("LBSC") distribution fees
for the sale and distribution of Class B shares. Those fees are paid out of a Fund's assets attributable
to the Class B shares on an on-going basis, and as a result, these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. There is no 12b-1 fee for
the LB Limited Maturity Bond Fund.
</TABLE>

CLASS A SHARES

The table below shows the sales charges you will pay if you purchase
Class A shares of the LB Growth Fund or the LB Value Fund. The LB Limited
Maturity Bond Fund has no Class A sales charge.

WHEN YOU THIS % IS WHICH EQUALS THIS
INVEST THIS DEDUCTED FOR % OF YOUR
AMOUNT SALES CHARGES INVESTMENT
- - ----------------- -------------- ---------------
$500,000 or more 0% 0%
$250,000 and above but less than $500,000 1% 1.01%
$100,000 and above but less than $250,000 2% 2.04%
$50,000 and above but less than $100,000 3% 3.09%
$25,000 and above but less than $50,000 3.75% 3.90%
Less than $25,000 4% 4.17%

Ways to Eliminate or Reduce the Initial Sales Charges

o Cumulative Discount: All of your current holdings of Class A and Class B
shares of all Funds in the Lutheran Brotherhood Family of Funds, except
the Lutheran Brotherhood Money Market Fund ("LB Money Market Fund")and
the LB Limited Maturity Bond Fund, will be aggregated to permit you to
enjoy any initial sales charge reduction allowed for larger sales of
Class A shares. The Funds will combine purchases (including the value of
existing investments) made by you, your spouse and your children under
age 21 of both Class A and Class B shares when calculating your initial
sales charge. You must inform us that you qualify for this discount.

o Automatic Reinvestments: Class A shares that you purchase by
automatically reinvesting dividends or capital gains distributions
will not be subject to any initial sales charge.

o Thirteen-month Letter of Intent: If you intend to accumulate $25,000 or
more, including the value of existing investments, in Class A or Class B
shares of one or more of the Funds (except the LB Money Market Fund and
the LB Limited Maturity Bond Fund) within the next 13 months, you may
sign a Letter of Intent and receive a reduced sales charge on purchases
of any Class A shares.

o Reinvestment upon Redemption: If you redeem any or all of your Class A or
Class B shares of the Lutheran Brotherhood Opportunity Growth Fund ("LB
Opportunity Growth Fund"), Lutheran Brotherhood Mid Cap Growth Fund ("LB
Mid Cap Growth Fund"), Lutheran Brotherhood World Growth Fund ("LB World
Growth Fund"), LB Growth Fund, Lutheran Brotherhood Fund ("LB Fund"), LB
Value Fund, Lutheran Brotherhood High Yield Fund ("LB High Yield Fund"),
Lutheran Brotherhood Income Fund ("LB Income Fund"), or Lutheran
Brotherhood Municipal Bond Fund ("LB Municipal Bond Fund"), or redeem any
or all of your Class B shares of the LB Money Market Fund or LB Limited
Maturity Bond Fund, or receive cash dividends from one of these Funds,
you may reinvest the amount in Class A shares of any of the Funds without
paying a sales charge on the purchase of Class A shares. You must make
your reinvestment within 90 days after redeeming your Class A shares or
Class B shares and inform us that you qualify for this discount.

o Loan, Surrender, or Dividend Withdrawal: If you request a loan,
surrender, or dividend withdrawal from a life insurance or annuity
contract issued by Lutheran Brotherhood or Lutheran Brotherhood Variable
Insurance Products Company and direct that the money should be used to
purchase Class A shares of a Fund, the sales charge will be waived.

o Purchases by Tax-exempt Organizations: Class A shares of any Fund are
available at one-half of the regular sales charge, if any, if purchased
by organizations qualifying for tax-exemption under Sections 501(c)(3)
and 501(c)(13) of the Internal Revenue Code.

CLASS B SHARES

If you buy Class B shares, you will not be charged an initial sales
charge. The entire purchase amount is immediately invested, but a CDSC of up
to 5% will apply to shares redeemed within five years of purchase.

When you sell shares in This % of net asset value
this year after you at the time of purchase
bought them (or of sale, if lower) is
deducted from your proceeds
- - ------------------------ -----------------------------
1st Year . . . . . . . . . . . . . . . . . . . . . 5%
2nd Year . . . . . . . . . . . . . . . . . . . . . 4
3rd Year . . . . . . . . . . . . . . . . . . . . . 3
4th Year . . . . . . . . . . . . . . . . . . . . . 2
5th Year . . . . . . . . . . . . . . . . . . . . . 1

In order to ensure that you pay the lowest CDSC possible, the Fund will
first redeem Class B shares that are not subject to the CDSC and then Class
B shares held for the longest period of time. There is no CDSC on exchanges
into the other Funds. The date of your initial investment will continue to
be used as the basis for CDSC calculations when you exchange. However, if
you exchange Class A shares of LB Money Market Fund or LB Limited Maturity
Bond Fund for Class B shares of any other Fund, the date of the exchange
will be used for purposes of calculating the CDSC. If you exchange Class B
shares of any other Fund for Class B shares of the LB Money Market Fund or
the LB Limited Maturity Bond Fund, the CDSC will stop declining during the
period your investment is in the Class B shares of the LB Money Market Fund
or the LB Limited Maturity Bond Fund. The amount of any CDSC will be paid to
LBSC, the broker-dealer for the Funds.

Contingent Deferred Sales Charge Waivers

No CDSC will apply on:

o increases in the net asset value of Class B shares above the purchase
price

o Class B shares purchased through reinvestment of dividends and
distributions

o Class B shares purchased more than five years prior to redemption

o shares redeemed due to the death or disability (caused by injury or
the sudden onset of a life threatening illness) of a sole individual
shareholder (but not for shares held in joint accounts or "family,"
"living" or other trusts) and for mandatory retirement distributions
from an IRA or a tax-sheltered custodial account (403(b) plan).

Conversion of Class B Shares to Class A Shares

Your Class B shares will automatically convert into Class A shares of
the same Fund after five years and consequently will no longer be subject to
the higher expenses borne by Class B shares. The Fund will not include the
period that you held Class B shares of the LB Money Market Fund or the LB
Limited Maturity Bond Fund in calculating the five-year period.

BUYING SHARES

INITIAL PURCHASES

To make your first purchase of Class A or Class B shares of the Funds:

o Complete and sign the application
o Enclose a check made payable to the Lutheran Brotherhood Family of
Funds
o Mail your application and check to Lutheran Brotherhood Securities
Corp., P.O. Box 310, Minneapolis, MN 55440-0310

Initial investments in Class B shares of $100,000 or more per purchase
will not be accepted. Because of the reduced sales charges available on such
purchases, Class A shares (or Institutional Class shares if the investor is
eligible) must be purchased instead. Class B shares of the LB Limited
Maturity Bond Fund are offered solely in exchange for Class B shares of
other Funds of The Lutheran Brotherhood Family of Funds.

REQUIRED MINIMUM INVESTMENTS

First Additional
Purchase Purchases
--------- -----------

LB Growth Fund and
LB Value Fund $500 $50

LB Limited Maturity Bond Fund $2,500 $100

These are the minimum investment requirements for a regular account.
However, you may establish a systematic investment plan by agreeing to
invest an amount equal to $50 per month for LB Growth Fund or LB Value Fund
and $100 per month for LB Limited Maturity Bond Fund.

Shares of the Funds are issued on days on which the New York Stock
Exchange ("NYSE") is open, which generally are weekdays other than national
holidays. Your order will be considered received when your check or other
payment is received in good order by LBSC. Orders that are received before
the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time)
will be processed at the net asset value calculated that day. Orders
received after the close of regular trading on the NYSE will be processed at
the net asset value calculated on the following business day. The Funds
reserve the right to reject any purchase request.

CERTIFICATES AND STATEMENTS

LBSC will maintain a share account for you. Share certificates will not
be issued. Systematic Investment Plan, Systematic Withdrawal Plan and
Systematic Exchange Plan transactions, as well as dividend transactions,
will be confirmed on the quarterly consolidated statement. All other
transactions will be confirmed as they occur. For more information on any
of our investment plans, talk with your LBSC registered representative or
call 1-800-990-6290.

ADDITIONAL PURCHASES

You may purchase additional shares of any of the Funds by sending a
check payable to the "Lutheran Brotherhood Family of Funds" together with a
completed investment ticket to:

Lutheran Brotherhood Securities Corp.
PO Box 59025
Minneapolis, MN 55459-0025

You may also buy additional shares through:

o your LBSC registered representative
o the Systematic Investment Plan
o the automatic Payroll Deduction Plan
o Invest-by-Phone
o the Internet
o Federal Reserve or bank wire

NET ASSET VALUE

Each Fund determines its net asset value (NAV) for a particular class
by adding the value of Fund assets attributable to such class, subtracting
the Fund's liabilities attributable to such class, and dividing the result
by the number of outstanding shares of that class. The NAV for the Funds
varies with the value of their investments. The Funds value their securities
using market quotations, other than short-term debt securities maturing in
less than 60 days, which are valued using amortized costs, and securities
for which market quotations are not readily available, which are valued at
fair value.

The Funds determine their NAVs on each day the NYSE is open for
business, or any other day as required under the rules of the Securities and
Exchange Commission. The NYSE is currently closed on New Year's Day, Martin
Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The
calculation is made as of the close of regular trading on the NYSE
(currently 4:00 p.m. Eastern time) after the Fund has declared any
applicable dividends. Because foreign securities markets are open on
different days from U.S. markets, there may be instances when the value of a
Fund's portfolio that invests in foreign securities changes on days when you
are not able to buy or sell the Fund's shares.

INVEST-BY-PHONE

When you sign up for our Invest-by-Phone service, you can purchase
additional shares by telephone. We will draw your funds directly from your
preauthorized bank or credit union account. Your bank or credit union must
be a member of the Automated Clearing House system. To use this service,
call 1-800-328-4552 for the Automated Service Line or 1-800-990-6290 to
speak with a customer service associate. You may also redeem shares by
telephone. See "Redeeming Shares."

INVESTOR ACCESS ONLINE

You may buy or sell shares of your Lutheran Brotherhood Family of Funds
by using Investor Access OnLine at www.luthbro.com.

FEDERAL RESERVE OR BANK WIRE

You may purchase shares by a Federal Reserve or bank wire directly to
Norwest Bank Minnesota, N.A. This method will result in a more rapid
investment in Fund shares. To wire funds:

Notify LBSC of a pending wire, call: 1-800-990-6290

Wire to: Norwest Bank of Minneapolis, NA
Norwest Bank
6th Street and Marquette Avenue
Minneapolis, MN 55479

ABA Routing #: 091000019

Account #: 00-003-156

Account Name: Lutheran Brotherhood Securities Corp.

Use text message to indicate:

Transfer for--shareholder name(s), fund number and account number, and LBSC
registered representative name and number.

IRAS AND OTHER TAX-DEFERRED PLANS

Shares of the Funds offered by this Prospectus may be selected as
investments for Individual Retirement Accounts, qualified Lutheran
Brotherhood prototype plans for the self-employed, qualified pension and
profit-sharing plans and tax-sheltered custodial accounts. There are
additional fees and procedural requirements for such plans. See your LBSC
registered representative for more details.

EXCHANGING SHARES BETWEEN FUNDS

o You may exchange some or all of your shares of one Fund for shares of
the same class of any of the other Funds. If you exchange Class A
shares of a Fund for which you have previously paid an initial sales
charge for Class A shares of another Fund, you will not be charged an
initial sales charge for the exchange. If you exchange Class B shares
of one Fund for Class B shares of another Fund, you will not be
charged a CDSC at the time of the exchange.

o If you own Class A shares of LB Limited Maturity Bond Fund which you did
not obtain through an exchange, you may exchange any or all of those
shares for Class B shares of another Fund. The Class B shares which you
acquire from the exchange will be subject to a CDSC from the date of the
exchange.

o Shareholders who are eligible to purchase Institutional Class shares may
exchange some or all of their Class A or Class B shares for Institutional
Class shares.

All exchanges will be based on the NAV of the shares you are exchanging
and acquiring and will be subject to the minimum investment requirements.
Except as described above, shares of one class may not be exchanged for
shares of another class.

You may obtain an exchange form or receive more information about
making exchanges between Funds by contacting your LBSC registered
representative. We may modify or terminate our policies on exchanges in the
future. If the exchange policies are materially modified or terminated, we
will give you at least 60 days prior notice.

TELEPHONE EXCHANGES

You may make the type of exchanges between Funds described above by
telephone unless otherwise indicated on the account application. You may
make an unlimited number of telephone exchanges. Telephone exchanges must be
for a minimum amount of $500. Telephone exchanges may be made into new or
existing Fund accounts, and all accounts involved in telephone exchanges
must have the same ownership registration. You may request a telephone
exchange by calling toll-free 1-800-328-4552 (using the Automated Service
Line) or 1-800-990-6290 to speak with a customer service associate.

The Funds reserve the right to refuse a wire or telephone redemption or
exchange if it is reasonably believed to be unauthorized. Procedures for
redeeming or exchanging Fund shares by wire or telephone may be modified or
terminated at any time by the Funds. When requesting a redemption or
exchange by telephone, you must have available the correct account
registration and account number or tax identification number. All telephone
redemptions and exchanges are recorded and written confirmations are
subsequently mailed to the address of record. Neither the Funds nor LBSC
will be liable for following redemption or exchange instructions received by
telephone, which are reasonably believed to be genuine, and the shareholder
will bear the risk of loss in the event of unauthorized or fraudulent
telephone instructions. The Funds and LBSC will employ reasonable procedures
to confirm that instructions communicated by telephone are genuine. The
Funds and/or LBSC may be liable for any losses due to unauthorized or
fraudulent instructions in the absence of following these procedures.

REDEEMING SHARES

One of the advantages of owning shares in the Lutheran Brotherhood
Family of Funds is the rapid access you have to your investment. Once we
receive your request for redemption, we will redeem your shares at the next
NAV on any day on which the NYSE is open for business, or any other day as
required under the rules of the Securities and Exchange Commission.

WAYS TO REDEEM

You may redeem your shares:

o in writing

o through Redeem-by-Phone

o on the Internet

o through the Systematic Withdrawal Plan

WRITTEN REQUESTS

To redeem all or some of your shares, send a written request to:

Lutheran Brotherhood Securities Corp.
P.O. Box 9491
Minneapolis, Minnesota 55440-9491

We may require your signature to be guaranteed if you are redeeming
your shares in an amount of $50,000 or more, if you are requesting the
payment to be made to another party or sent to another address, or if you
are a beneficiary of an account. Your signature may be guaranteed by:

o a trust company or commercial bank

o a savings association

o a credit union

o a securities broker, dealer, exchange, association, or clearing
agency

We will not accept signatures that are notarized by a notary public.

Once your redemption request is received in good order, the Fund
normally will send the proceeds of such redemption within one business day.
However, if making payment could adversely affect a Fund, the Fund may defer
payment for up to seven days or a longer period if permitted. Please note
that a Fund will hold payment of redemption proceeds until your purchase
check clears, which may take up to 15 days.

REDEEM-BY-PHONE

If you complete an Account Features Request, you may redeem any amount
of at least $1,000 by calling 1-800-328-4552 to use our Automated Service
Line or 1-800-990-6290 to speak with a customer service associate. Based on
your instructions, we will send you a check or send the funds electronically
to your commercial bank, savings bank or credit union by the third business
day after your redemption request. This feature is NOT available on IRA or
other tax-deferred plans.

INVESTOR ACCESS ONLINE

You may redeem some or all of your shares by using Investor Access
OnLine at www.luthbro.com.

SYSTEMATIC WITHDRAWAL PLAN

If you own shares with a value of at least $5,000, you may request
automatic monthly, quarterly, semiannual or annual redemptions in any
amount. The proceeds will be sent to you, your designated payee, or your
commercial bank, savings bank or credit union.

Income dividends and capital gains distributions will continue to be
reinvested in additional Fund shares. Shares will be redeemed as necessary
to make the automatic payments you requested.

DIVIDENDS ON REDEMPTION

If you redeem all your shares, the redemption proceeds will include all
dividends to which you have become entitled since they were last paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the
Funds may redeem shares in any account if the value of shares in the account
falls below a certain minimum. The required minimum amount for Class A and
Class B share accounts is $500 for LB Growth Fund and LB Value Fund and
$2,500 for LB Limited Maturity Bond Fund.

Before shares are redeemed to close an account, you will be notified in
writing and allowed 60 days to purchase additional shares. Shares will not
be redeemed if the account's value drops below the minimum only because of
market fluctuations.

DISTRIBUTIONS

Dividends. Dividends are declared and paid as follows:

- declared daily and paid monthly LB Limited Maturity Bond Fund

- declared and paid annually LB Growth Fund
LB Value Fund

Income dividends are derived from investment income, including
dividends, interest, and certain foreign currency gains received by a Fund.

Capital Gains. Capital gains distributions, if any, usually will be
declared in December.

Distribution Options. When completing your application, you must select
one of the following four options for dividends and capital gains
distributions:

o Full Reinvestment. Both dividends and capital gains distributions
from a Fund will be reinvested in additional shares of the same
class of that Fund. This option will be selected automatically
unless one of the other options is specified.

o Full Reinvestment in a Different Fund. You may also choose to have
your dividends reinvested into an existing account in another Fund
within the Lutheran Brotherhood Family of Funds.

o All Cash. Dividends and capital gains distributions will be paid in
cash. Your request to receive all or a portion of your dividends
and other distributions in cash must be received by LBSC at least
10 days before the record date of the dividend or other
distribution.

o Part Cash and Part Reinvestment. You may request to have part of
your dividends paid in cash and part of your dividends reinvested
in additional shares of the same class of that Fund.

Distributions paid in shares will be credited to your account at the
next determined NAV per share.

TAXES

In general, any dividends and short-term capital gains distributions
you receive from a Fund are taxable as ordinary income. Distributions of
other net capital gains by a Fund are generally taxable as capital gains -
in most cases, at different rates from those that apply to ordinary income.
We expect that dividends from the LB Growth Fund and LB Value Fund will
consist primarily of capital gains and that dividends from the LB Limited
Maturity Bond Fund will consist primarily of ordinary income.

The tax you pay on a given capital gains distribution generally depends
on how long a Fund has held the portfolio securities it sold. It does not
depend on how long you have owned your Fund shares or whether you reinvest
your distributions or take them in cash.

Every year, the Funds will send you information detailing the amount of
ordinary income and capital gains distributed to you for the previous year.
The sale of shares in your account may produce a gain or loss, and is a
taxable event. For tax purposes, an exchange between Funds is the same as a
sale. You will not be required to pay federal income tax on (i) the
automatic conversion of Class B shares to Class A shares or (ii) exchanges
of Class A or Class B shares of a Fund for Institutional Class Shares of the
same fund.

Your investment in the Funds could have additional tax consequences.
Please consult your tax professional for assistance.

By law, the Funds must withhold 31% of your distributions and proceeds
if you have not provided complete, correct taxpayer information.

OTHER SECURITIES AND INVESTMENT PRACTICES

The principal investment strategies and risk factors of each Fund
offered by this Prospectus are outlined beginning on page __. The Funds may
also invest in other securities and engage in other practices. This section
provides additional information about some of the securities and other
practices in which certain Funds offered by this Prospectus may engage,
along with their associated risks.

REPURCHASE AGREEMENTS. Each of the Funds may buy securities with the
understanding that the seller will buy them back with interest at a later
date. If the seller is unable to honor its commitment to repurchase the
securities, the Fund could lose money.

WHEN-ISSUED SECURITIES. Each Fund may invest in securities prior to
their date of issue. These securities could fall in value by the time they
are actually issued, which may be any time from a few days to over a year.
In addition, no income will be earned on these securities until they are
actually delivered.

MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. LB Limited Maturity Bond
Fund may invest in mortgage-backed and asset-backed securities. Mortgage-
backed securities are securities that are backed by pools of mortgages and
which pay income based on the payments of principal and income they receive
from the underlying mortgages. Asset-backed securities are similar but are
backed by other assets, such as pools of consumer loans. Both are sensitive
to interest rate changes as well as to changes in the redemption patterns of
the underlying securities. If the principal payment on the underlying asset
is repaid faster or slower than the holder of the mortgage-backed or asset-
backed security anticipates, the price of the security may fall, especially
if the holder must reinvest the repaid principal at lower rates or must
continue to hold the securities when interest rates rise.

GOVERNMENT BONDS AND MUNICIPAL BONDS. LB Limited Maturity Bond Fund
may also invest in government bonds and municipal bonds. As a result, the
Fund's performance may be affected by political and economic conditions at
the state, regional or Federal level. These may include budgetary problems,
declines in the tax base and other factors that may cause rating agencies to
downgrade the credit ratings on certain issues.

ZERO COUPONS. Each of the Funds may invest in zero coupon securities.
A zero coupon security is a debt security that is purchased and traded at
discount to its face value because it pays no interest for some or all of
its life. Interest, however, is reported as income to the Fund that has
purchased the security and the Fund is required to distribute to
shareholders an amount equal to the amount reported. Those distributions
may require the Fund to liquidate portfolio securities at a disadvantageous
time.

FOREIGN SECURITIES. Each of the Funds may invest in foreign
securities. Foreign securities are generally more volatile than their
domestic counterparts, in part because of higher political and economic
risks, lack of reliable information and fluctuations in currency exchange
rates. These risks are usually higher in less developed countries. Each of
the Funds may use foreign currencies and related instruments to hedge its
foreign investments.

In addition, foreign securities may be more difficult to resell than
comparable U.S. securities because the markets for foreign securities are
less efficient. Even where a foreign security increases in price in its
local currency, the appreciation may be diluted by the negative effect of
exchange rates when the security's value is converted to U.S. dollars.
Foreign withholding taxes also may apply and errors and delays may occur in
the settlement process for foreign securities.

RESTRICTED AND ILLIQUID SECURITIES. Each of the Funds may invest in
restricted or illiquid securities. Any securities that are thinly traded or
whose resale is restricted can be difficult to sell at a desired time and
price. Some of these securities are new and complex, and trade only among
institutions. The markets for these securities are still developing and may
not function as efficiently as established markets. Owning a large
percentage of restricted or illiquid securities could hamper a Fund's
ability to raise cash to meet redemptions. Also, because there may not be
an established market price for these securities, the Fund may have to
estimate their value, which means that their valuation (and, to a much
smaller extent, the valuation of the Fund) may have a subjective element.

SECURIITES LENDING. Each of the Funds may seek additional income by
lending portfolio securities to qualified institutions. By reinvesting any
cash collateral it receives in these transactions, a Fund could realize
additional gains or losses. If the borrower fails to return the securities
and the invested collateral has declined in value, the Fund could lose
money.

DERIVATIVES. Each of the Funds may invest in derivatives.
Derivatives, a category that includes options and futures, are financial
instruments whose value derives from another security, an index or a
currency. Each Fund may use derivatives for hedging (attempting to offset a
potential loss in one position by establishing an interest in an opposite
position). This includes the use of currency-based derivatives for hedging
its positions in foreign securities. Each Fund may also use derivatives for
speculation (investing for potential income or capital gain).

While hedging can guard against potential risks, it adds to the Fund's
expenses and can eliminate some opportunities for gains. There is also a
risk that a derivative intended as a hedge may not perform as expected.

The main risk with derivatives is that some types can amplify a gain or
loss, potentially earning or losing substantially more money than the actual
cost of the derivative.

With some derivatives, whether used for hedging or speculation, there
is also the risk that the counterpart may fail to honor its contract terms,
causing a loss for the Fund. In addition, suitable derivative investments
for hedging or speculation may not be available.

HIGH-YIELD BONDS. Each of the Funds may invest in high-yield bonds.
High-yield bonds are debt securities rated below BBB by S&P or Baa by
Moody's. To the extent that a Fund invests in high-yield bonds, it takes on
certain risks:

o The risk of a bond's issuer defaulting on principal or interest
payments is greater than on higher quality bonds
o Issuers of high-yield bonds are less secure financially and are more
likely to be hurt by interest rate increases and declines in the
health of the issuer or the economy.

SHORT-TERM TRADING. The investment strategy for each of the Funds at
times may include short-term trading. While a Fund ordinarily does not
trade securities for short-term profits, it will sell any security at any
time it believes best, which may result in short-term trading. Short-term
trading can increase a Fund's transaction costs and may increase your tax
liability.

INTERNATIONAL EXPOSURE. Many U.S. companies in which the Funds may
invest generate significant revenues and earnings from abroad. As a result,
these companies and the prices of their securities may be affected by
weaknesses in global and regional economies and the relative value of
foreign currencies to the U.S. dollar. These factors, taken as a whole,
could adversely affect the price of Fund shares.

BONDS. The value of any bonds held by a Fund is likely to decline when
interest rates rise; this risk is greater for bonds with longer maturities.
A less significant risk is that a bond issuer could default on principal or
interest payments, possibly causing a loss for the Fund.

COMPUTER RISKS. LB Research does not currently anticipate that
computer problems related to the year 2000 will have a material effect on
any Fund. However, there can be no assurances in this area, including the
possibility that year 2000 computer problems could negatively affect
communications systems, the investment markets or the economy in general.
Additionally, we have incorporated the Year 2000 issue into investment
research, reviewing the Year 2000 compliance efforts of securities issuers
and weighing the risks on non-compliance with the other risks of investing.

SECURITIES RATINGS. When fixed-income securities are rated by one or
more independent rating agencies, a Fund uses these ratings to determine
bond quality. Investment grade bonds are those that are rated within or
above the BBB major rating category by S&P or the Baa major rating category
by Moody's, or unrated but considered of equivalent quality by the Fund's
adviser. High-yield bonds are below investment grade bonds in terms of
quality.

In cases where a bond is rated in conflicting categories by different
rating agencies, a Fund may choose to follow the higher rating. If a bond
is unrated, the Fund may assign it to a given category based on its own
credit research. If a rating agency downgrades a security, the Fund will
determine whether to hold or sell the security, depending on all of the
facts and circumstances at that time.

DEFENSIVE INVESTING During unusual market conditions, each Fund may
temporarily place up to 100% of its total assets in cash or quality short-
term debt securities. To the extent that the Fund does this, it is not
pursuing its investment objective.

<PAGE>
- - --------------------------------------------------------------------------

[Back cover page]

THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS

1-800-328-4552 Automated Service Line

1-800-990-6290 to speak with a customer service associate

www.luthbro.com

o Lutheran Brotherhood Securities Corp.
P.O. Box 9491
Minneapolis, Minnesota 55440-9491

The Statement of Additional Information which is incorporated by
reference into this Prospectus contains additional information about the
Funds. You may request a free copy of the Statement of Additional
Information, or you may make additional requests or inquiries by calling 1-
800-990-6290. You may also review and copy information about the Funds
(including the Statement of Additional Information) at the Public Reference
Room of the Securities and Exchange Commission in Washington, DC. You may
get more information about the Public Reference Room by calling 1-800-SEC-
0330. You may also get information about the Funds at the SEC Web site
(www.sec.gov) or by mail, upon payment of a duplicating fee, by writing the
Public Reference Section of the SEC, Washington, DC 20549-6009.

1940 Act File No. 811-1467

<PAGE>
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS

LUTHERAN BROTHERHOOD GROWTH FUND
LUTHERAN BROTHERHOOD VALUE FUND
LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND

NO LOAD
INSTITUTIONAL CLASS SHARES

PROSPECTUS October 29, 1999

The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

<PAGE>
TABLE OF CONTENTS

PAGE

The Funds

Investment Objectives, Principal Strategies and Risks,
Volatility and Performance, Fees and Expenses
LB Growth Fund
LB Value Fund
LB Limited Maturity Bond Fund

Management

Your Investment
Buying Shares of The Lutheran Brotherhood Family of Funds
Additional Purchases
Net Asset Value of Your Shares
Exchanging Between Funds
Redeeming Shares

Distributions

Taxes

Other Securities and Investment Practices

The Lutheran Brotherhood Family of Funds are offered to members of
Lutheran Brotherhood and to qualifying Lutheran institutional investors.
This is the Prospectus for the Institutional Class Shares which are only
offered to Lutheran institutions, Lutheran church organizations, retirement
plans sponsored by Lutheran institutions, and Lutheran participants in the
Allocation Advantage(sm) mutual fund asset allocation program offered by
Lutheran Brotherhood Securities Corp.

<PAGE>
LUTHERAN BROTHERHOOD GROWTH FUND

INVESTMENT OBJECTIVE. The investment objective of the Lutheran
Brotherhood Growth Fund ("LB Growth Fund") is to achieve long-term growth of
capital.

No bar chart or performance table has been included for the LB Growth
Fund. The LB Growth Fund commenced operations on October 31, 1999.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy
and hold shares of the LB Growth Fund. The Institutional Class shares of
the Fund have no sales charge (load) and no 12b-1 distribution fees.

SHAREHOLDER FEES (fees paid directly from
your investment)
Maximum Sales Charge (Load) None
Maximum Deferred Sales Charge (Load) None

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)
Management Fees 0.43%
Other Expenses(including a 0.15% shareholder servicing fee)(1) 0.72%
Total Annual Fund Operating Expenses(2) 1.15%

(1) Because the LB Growth Fund has been newly organized, the percentage
expense levels shown in the table as "Other Expenses" are based on
estimates.

(2) LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee and, if necessary, to bear certain expenses associated with
operating LB Growth Fund in order to limit the Total Fund Operating Expenses
for the Institutional Class to an annual rate of 1.05% of the average net
assets. This temporary waiver and expense provision may be discontinued at
any time.

EXAMPLE

THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

1 Year 3 Years
------ -------

LB Growth Fund $117 $365

YOU WOULD PAY THE FOLLOWING EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:

1 Year 3 Years
------ -------

LB Growth Fund $117 $365

LUTHERAN BROTHERHOOD VALUE FUND

INVESTMENT OBJECTIVE. The investment objective of the Lutheran
Brotherhood Value Fund ("LB Value Fund") is to achieve long-term growth of
capital.

The success of the Fund's investment strategy depends significantly on
LB Research's skill in assessing the potential of the securities in which
the Fund invests. Shares of the LB Value Fund will rise and fall in value
and there is a risk that you could lose money by investing in the Fund. The
LB Value Fund cannot be certain that it will achieve its objective.

No bar chart or performance table has been included for the LB Value
Fund. The LB Value Fund commenced operations on October 31, 1999.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy
and hold shares of the LB Value Fund. The Institutional Class shares of the
Fund have no sales charge (load) and no 12b-1 distribution fees.

SHAREHOLDER FEES (fees paid directly from
your investment)
Maximum Sales Charge (Load) None
Maximum Deferred Sales Charge (Load) None

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)
Management Fees 0.40%
Other Expenses(including a 0.15% shareholder servicing fee)(1) 0.72%
Total Annual Fund Operating Expenses(2) 1.12%

(1) Because the LB Value Fund has been newly organized, the percentage
expense levels shown in the table as "Other Expenses" are based on
estimates.

(2) LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee and, if necessary, to bear certain expenses associated with
operating LB Value Fund in order to limit the Total Fund Operating Expenses
for the Institutional Class to an annual rate of 1.05% of the average net
assets. This temporary waiver and expense provision may be discontinued at
any time.

EXAMPLE

THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

1 Year 3 Years
------ -------

LB Value Fund $114 $356

YOU WOULD PAY THE FOLLOWING EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:

1 Year 3 Years
------ -------

LB Value Fund $114 $356

LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND

The success of the Fund's investment strategy depends significantly on
LB Research's skill in assessing the potential of the securities in which
the Fund invests. Shares of the LB Limited Maturity Bond Fund will rise and
fall in value and there is a risk that you could lose money by investing in
the Fund. The LB Limited Maturity Bond Fund cannot be certain that it will
achieve its objective.

No bar chart or performance table has been included for the LB Limited
Maturity Bond Fund. The LB Limited Maturity Bond Fund commenced operations
on October 31, 1999.

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and
hold shares of the LB Limited Maturity Bond Fund. The Institutional Class
shares of the Fund have no sales charge (load) and no 12b-1 distribution
fees.

SHAREHOLDER FEES (fees paid directly from
your investment)
Maximum Sales Charge (Load) None
Maximum Deferred Sales Charge (Load) None

ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
assets)
Management Fees 0.30%
Other Expenses(including a 0.15% shareholder servicing fee)(1) 0.72%
Total Annual Fund Operating Expenses(2) 1.02%

(1) Because the LB Limited Maturity Bond Fund has been newly organized, the
percentage expense levels shown in the table as "Other Expenses" are based
on estimates.

(2) LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee and, if necessary, to bear certain expenses associated with
operating LB Limited Maturity Bond Fund in order to limit the Total Fund
Operating Expenses for the Institutional Class to an annual rate of 0.70% of
the average net assets. This temporary waiver and expense provision may be
discontinued at any time.

EXAMPLE

THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE
FUND WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.

1 Year 3 Years
------ -------

LB Limited Maturity Bond Fund $104 $325

YOU WOULD PAY THE FOLLOWING EXPENSES IF YOU DID NOT REDEEM YOUR SHARES:

1 Year 3 Years
------ -------

LB Limited Maturity Bond Fund $104 $325

MANAGEMENT

LB GROWTH FUND

LB VALUE FUND

LB LIMITED MATURITY BOND FUND

Each Fund pays an annual investment advisory fee to LB Research. The
advisory contract between LB Research and The Lutheran Brotherhood Family of
Funds provides for the following advisory fees:

Limited
Growth Value Maturity
Fund Fund Bond Fund

$500 million or less 0.425% 0.40% 0.30%

Over $500 million but not over
$1 billion 0.375% 0.35% 0.275%

Over $1 billion 0.325% 0.30% 0.25%

LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee for the LB Growth Fund, LB Value Fund, and the LB Limited
Maturity Bond Fund and, if necessary, to bear certain expenses associated
with operating each Fund in order to limit the Total Fund Operating Expenses
of each Fund. See the footnotes to the Fees and Expenses Table for each
Fund.

YOUR INVESTMENT

INSTITUTIONAL CLASS SHARES

The Lutheran Brotherhood Family of Funds has adopted a system of
multiple classes of shares for each of the Funds. There is no sales load
imposed in connection with the purchase of Institutional Class shares and
such shares are not subject to any Rule 12b-1 fee. There is a shareholder
servicing fee of 0.15% each year on the average daily net assets of
Institutional Class shares. Institutional Class shares are offered to
Lutheran institutions, Lutheran church organizations, retirement plans
sponsored by Lutheran institutions and Lutheran participants in the
Allocation Advantage(sm) mutual fund asset allocation program offered by
Lutheran Brotherhood Securities Corp. ("LBSC") Because the sales charges and
expenses vary between the Class A shares, Class B shares and Institutional
Class shares, performance will vary with respect to each class. A copy of
the Class A and Class B prospectus may be obtained by writing us, calling
toll free 1-800-990-6290, or downloading it from our Web site
(www.luthbro.com).

BUYING SHARES

INITIAL PURCHASES

To make your first purchase of the Institutional Class shares of the
Funds:

REQUIRED MINIMUM INVESTMENTS

The minimum aggregate investment in the Lutheran Brotherhood Family of
Funds for retirement plans sponsored by Lutheran institutions is $100,000,
which can be allocated among any number of the Funds. The minimum investment
in a Fund for other Lutheran institutions is $100,000.

The Allocation Advantage program is a fee-based investment advisory
service which LBSC offers to persons who make an initial investment of
$100,000. Lutheran participants in the Allocation Advantage program may
purchase Institutional Class shares of any Fund by making an initial minimum
investment of $5,000 for a non-IRA account and $1,000 for an IRA account.
LBSC will charge participants in the Allocation Advantage program a fee of
$50.00 for any redemption of shares of a mutual fund that have been held in
the participant's account for less than six months. However, if the
redemption of shares is made through our Systematic Withdrawal Plan, LBSC
will charge the participant a fee of $5.00 for each such redemption. In
addition, LBSC will also charge a fee of $15.00 for any redemption from a
participant's account of shares of a mutual fund that is not available
through the Allocation Advantage program.

The minimum investment required for additional purchases is $100 for
Allocation Advantage clients and $1,000 for retirement plans sponsored by
Lutheran institutions or other Lutheran institutional investors.

CERTIFICATES AND STATEMENTS

ADDITIONAL PURCHASES

You may purchase additional shares of any of the Funds by sending a
check payable to the "Lutheran Brotherhood Family of Funds" together with a
completed investment ticket to:

Lutheran Brotherhood Securities Corp.
PO Box 59025
Minneapolis, MN 55459-0025

You may also buy additional shares through:

o your LBSC representative
o the Systematic Investment Plan
o Invest-by-Phone
o the Internet
o Federal Reserve or bank wire

NET ASSET VALUE

INVEST-BY-PHONE

INVESTOR ACCESS ONLINE

You may buy or sell shares of your Lutheran Brotherhood Family of Funds
by using Investor Access OnLine at www.luthbro.com.

FEDERAL RESERVE OR BANK WIRE

You may purchase shares by a Federal Reserve or bank wire directly to
Norwest Bank Minnesota, N.A. This method will result in a more rapid
investment in Fund shares. To wire funds:

Notify LBSC of a pending wire, call: 1-800-990-6290

Wire to: Norwest Bank of Minneapolis, NA
Norwest Bank
6th Street and Marquette Avenue
Minneapolis, MN 55479

ABA Routing #: 091000019

Account #: 00-003-156

Account Name: Lutheran Brotherhood Securities Corp.

Use text message to indicate:

Transfer for--shareholder name(s), fund number and account number, and LBSC
registered representative name and number.

EXCHANGING SHARES BETWEEN FUNDS

You may exchange some or all of your shares of one Fund for shares of
the same class of any of the other Funds. In addition, shareholders who are
eligible to purchase Institutional Class shares may exchange some or all of
their Class A or Class B shares for Institutional Class shares. All
exchanges will be based on the NAV of the shares you are exchanging and the
shares you are acquiring and will be subject to the minimum investment
requirements. You may obtain an exchange form or receive more information
about making exchanges between Funds by contacting your LBSC registered
representative. We may modify or terminate our policies on exchanges in the
future. If the exchange policies are materially modified or terminated, we
will give you at least 60 days prior notice.

TELEPHONE EXCHANGES

You may make the type of exchanges between Funds described above by
telephone unless otherwise indicated on the account application. You may
make an unlimited number of telephone exchanges. Telephone exchanges must be
for a minimum amount of $1,000. Telephone exchanges may be made into new or
existing Fund accounts, and all accounts involved in telephone exchanges
must have the same ownership registration. You may request a telephone
exchange by calling toll-free 1-800-328-4552 (using the Automated Service
Line) or 1-800-990-6290 to speak with a customer service associate.

REDEEMING SHARES

WAYS TO REDEEM

You may redeem your shares:

o in writing

o through Redeem-by-Phone

o on the Internet

o through the Systematic Withdrawal Plan

WRITTEN REQUESTS

To redeem all or some of your shares, send a written request to:

Lutheran Brotherhood Securities Corp.
P.O. Box 9491
Minneapolis, Minnesota 55440-9491

The signature of an authorized representative of your institution must
be guaranteed by:

o a trust company or commercial bank

o a savings association

o a credit union

o a securities broker, dealer, exchange, association, or clearing
agency

We will not accept signatures that are notarized by a notary public.

REDEEM-BY-PHONE

INVESTOR ACCESS ONLINE

You may redeem some or all of your shares by using Investor Access
OnLine at www.luthbro.com.

SYSTEMATIC WITHDRAWAL PLAN

If you own shares with a value of at least $150,000, you may order
automatic monthly, quarterly, semiannual or annual redemptions in any
amount. The proceeds will be sent to you, your designated payee, or your
commercial bank, savings bank or credit union.

Income dividends and capital gains distributions will continue to be
reinvested in additional Fund shares. Shares will be redeemed as necessary
to make the automatic payments you requested.

DIVIDENDS ON REDEMPTION

If you redeem all your shares, the redemption proceeds will include all
dividends to which you have become entitled since they were last paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the
Funds may redeem shares in any account if the value of Institutional Class
shares in the account falls below the required minimum amount for your type
of account.

DISTRIBUTIONS

Dividends. Dividends are declared and paid as follows:

- declared daily and paid monthly LB Limited Maturity Bond Fund

- declared and paid annually LB Growth Fund

LB Value Fund

Income dividends are derived from investment income, including dividends,
interest and certain foreign currency gains received by a Fund.

Capital Gains. Capital gains distributions, if any, usually will be
declared in December.

Distribution Options. When completing your application, you must select
one of the following three options for dividends and capital gains
distributions:

o Full Reinvestment in a Different Fund. You may also choose to have
your dividends reinvested into an existing account in another Fund
within The Lutheran Brotherhood Family of Funds.

o Part Cash and Part Reinvestment. You may request to have part of
your dividends part in cash and part of your dividends reinvested in
additional shares of the same class of that Fund.

Distributions paid in shares will be credited to your account at the
next determined NAV per share.

TAXES

Every year, the Funds will send you information detailing the amount of
ordinary income and capital gains distributed to you for the previous year.
The sale of shares in your account may produce a gain or loss, and is a
taxable event. For tax purposes, an exchange between Funds is the same as a
sale. You will not be required to pay federal income tax on exchanges of
Class A or Class B shares of a Fund for Institutional Class Shares of the
same Fund.

Your investment in the Funds could have additional tax consequences.
Please consult your tax professional for assistance.

By law, the Funds must withhold 31% of your distributions and proceeds
if you have not provided complete, correct taxpayer information.

OTHER SECURITIES AND INVESTMENT PRACTICES

The principal investment strategies and risk factors of each Fund
offered by this Prospectus are outlined beginning on page __. The Funds may
also invest in other securities and engage in other practices. This section
provides additional information about some of the securities and other
practices in which certain of the Funds offered by this Prospectus may
engage, along with their associated risks.

FOREIGN SECURITIES. Each of the Funds may invest in foreign
securities. Foreign securities are generally more volatile than their
domestic counterparts, in part because of higher political and economic
risks, lack of reliable information and fluctuations in currency exchange
rates. These risks are usually higher in less developed countries. Each of
these Funds may use foreign currencies and related instruments to hedge its
foreign investments.

While hedging can guard against potential risks, it adds to the fund's
expenses and can eliminate some opportunities for gains. There is also a
risk that a derivative intended as a hedge may not perform as expected.

The main risk with derivatives is that some types can amplify a gain or
loss, potentially earning or losing substantially more money than the actual
cost of the derivative.

o The risk of a bond's issuer defaulting on principal or interest
payments is greater than on higher quality bonds.
o Issuers of high-yield bonds are less secure financially and are more
likely to be hurt by interest rate increases and declines in the
health of the issuer or the economy.

SHORT-TERM TRADING. The investment strategy for each of the Funds at
times may include short-term trading. While each other Fund ordinarily does
not trade securities for short-term profits, it will sell any security at
any time it believes best, which may result in short-term trading. Short-
term trading can increase a Fund's transaction costs and may increase your
tax liability.

DEFENSIVE INVESTING. During unusual market conditions, each Fund may
temporarily place up to 100% of its total assets in cash or quality short-
term debt securities. To the extent that the Fund does this, it is not
pursuing its investment objective.

<PAGE>
- - ----------------------------------------------------------------------------
[Back cover page]

THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS

1-800-328-4552 Automated Service Line

1-800-990-6290 to speak with a customer service associate

www.luthbro.com

o Lutheran Brotherhood Securities Corp.
P.O. Box 9491
Minneapolis, Minnesota 55440-9491

The Statement of Additional Information which is incorporated by
reference into this Prospectus) contains additional information about the
Funds. You may request a free copy of the Statement of Additional
Information, or you may make additional requests or inquiries by calling 1-
800-990-6290. You may also review and copy information about the Funds
(including the Statement of Additional Information) at the Public Reference
Room of the Securities and Exchange Commission in Washington, DC. You may
get more information about the Public Reference Room by calling 1-800-SEC-
0330. You may also get information about the Funds at the SEC Web site
(www.sec.gov) or by mail, upon payment of a duplicating fee, by writing the
Public Reference Section of the SEC, Washington, DC 20549-6009.

1940 Act File No. 811-1467

<PAGE>

LUTHERAN BROTHERHOOD GROWTH FUND
LUTHERAN BROTHERHOOD VALUE FUND
LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND

SERIES OF
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
STATEMENT OF ADDITIONAL INFORMATION

October 29, 1999

This Statement of Additional Information should be read in conjunction with
the prospectus dated October 29, 1999 for the applicable class of the
Lutheran Brotherhood Growth Fund ("LB Growth Fund"), Lutheran Brotherhood
Value Fund ("LB Value Fund"), and Lutheran Brotherhood Limited Maturity Bond
Fund ("LB Limited Maturity Bond Fund"), each a series of the Lutheran
Brotherhood Family of Funds (the "Trust"). Class A and B shares are offered
through a combined prospectus and Institutional Class shares are offered
through a separate prospectus. Each such prospectus is referred to
hereinafter as a "prospectus". This Statement of Additional Information is
not a prospectus itself. To receive a copy of either prospectus, write to
Lutheran Brotherhood Securities Corp., 625 Fourth Avenue South, Minneapolis,
Minnesota 55415 or call toll-free 1-800-328-4552 for Automated Service Line
or 1-800-990-6290 to speak with a customer service associate.

<PAGE>
TABLE OF CONTENTS

Page

History of the Lutheran Brotherhood Family of Funds......................
Investment Policies and Restrictions.....................................
Fund Management..........................................................
Investment Advisory Services.............................................
Administrative Services..................................................
Distribution and Shareholder Services....................................
Brokerage Transactions...................................................
Code of Ethics...........................................................
Purchasing Shares........................................................
Sales Charges............................................................
Net Asset Value..........................................................
Redeeming Shares.........................................................
Tax Status...............................................................
General Information......................................................
Calculation of Performance Data..........................................
Description of Debt Ratings..............................................

<PAGE>
HISTORY OF THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS

Each Fund in The Lutheran Brotherhood Family of Funds is a diversified
series of The Lutheran Brotherhood Family of Funds (the "Trust"), an open-
end management investment company. LB Opportunity Growth Fund, LB Fund, LB
High Yield Fund, LB Income Fund, LB Municipal Bond Fund and LB Money Market
Fund were organized in 1993 as series of The Lutheran Brotherhood Family of
Funds, a Delaware business trust. Each of those Funds is the successor to a
fund of the same name that previously operated as a separate corporation or
trust pursuant to a reorganization that was effective as of November 1,
1993. The LB World Growth Fund and LB Mid Cap Growth Fund began operating as
a series of the LB Family of Funds on September 5, 1995 and May 30, 1997,
respectively. LB Growth Fund, LB Value Fund, and LB Limited Maturity Bond
Fund began operating as a series of the LB Family of Funds on October 29,
1999. The fiscal year end of the Trust and each Fund is October 31. Prior
to October 31, 1997, the shares of the Funds had no specific class
designations. As of that date, Class A, Class B and Institutional Class
shares were authorized by the Board of Trustees of the Trust. The Trust has
reserved the right to create other classes of shares in the future.

INVESTMENT POLICIES AND RESTRICTIONS

ADDITIONAL INVESTMENT PRACTICES

In addition to those practices stated in the Prospectus, various of the
Funds may purchase the following securities or may engage in the following
transactions.

OTHER SECURITIES

LB Growth Fund and LB Value Fund may each invest in other types of
securities, including bonds, preferred stocks, convertible bonds,
convertible preferred stocks, warrants, American Depository Receipts
(ADR's), and other debt or equity securities. In addition, each of these
Funds may invest in U.S. Government securities or cash.

LB Growth Fund and LB Value Fund will not use any minimum level of
credit quality. Debt obligations may be rated less than investment grade,
which is defined as having a quality rating below "Baa", as rated by Moody's
Investors Service, Inc. ("Moody's"), or below "BBB", as rated by Standard &
Poor's Corporation ("S&P"). For a description of Moody's and S&P's ratings,
see "Description of Debt Ratings". Securities rated below investment grade
(sometimes referred to as "high yield" or "junk bonds") are considered to be
speculative and involve certain risks, including a higher risk of default
and greater sensitivity to interest rate and economic changes.

LB Limited Maturity Bond Fund may also invest in common stocks,
warrants to purchase stocks, bonds or preferred stocks convertible into
common stock, and other equity securities.

REPURCHASE AGREEMENTS

Each of the Funds may engage in repurchase agreement transactions in
pursuit of its investment objective. A repurchase agreement consists of a
purchase and a simultaneous agreement to resell for later delivery at an
agreed upon price and rate of interest U.S. Government obligations. The Fund
or its custodian will take possession of the obligations subject to a
repurchase agreement. If the original seller of a security subject to a
repurchase agreement fails to repurchase the security at the agreed upon
time, the Fund could incur a loss due to a drop in the market value of the
security during the time it takes the Fund to either sell the security or
take action to enforce the original seller's agreement to repurchase the
security. Also, if a defaulting original seller filed for bankruptcy or
became insolvent, disposition of such security might be delayed by pending
court action. The Fund may only enter into repurchase agreements with banks
and other recognized financial institutions such as broker/dealers which are
found by LB Research to be creditworthy.

RESTRICTED SECURITIES

The Funds may buy or sell restricted securities, including securities
that meet the requirements of Rule 144A under the Securities Act of 1933
("Rule 144A Securities"). Securities may be resold pursuant to Rule 144A
under certain circumstances only to qualified institutional buyers as
defined in the rule, and the markets and trading practices for such
securities are relatively new and still developing; depending on the
development of such markets, such Rule 144A Securities may be deemed to be
liquid as determined by or in accordance with methods adopted by the
Trustees. Under such methods the following factors are considered, among
others: the frequency of trades and quotes for the security, the number of
dealers and potential purchasers in the market, market making activity, and
the nature of the security and marketplace trades. Investments in Rule 144A
Securities could have the effect of increasing the level of a Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing such securities. Also, a Fund may be
adversely impacted by the subjective valuation of such securities in the
absence of an active market for them. Restricted securities that are not
resalable under Rule 144A may be subject to risks of illiquidity and
subjective valuations to a greater degree than Rule 144A securities.

REVERSE REPURCHASE AGREEMENTS

Each of the Funds also may enter into reverse repurchase agreements,
which are similar to borrowing cash. A reverse repurchase agreement is a
transaction in which the Fund transfers possession of a portfolio instrument
to another person, such as a financial institution, broker or dealer, in
return for a percentage of the instrument's market value in cash, with an
agreement that at a stipulated date in the future the Fund will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate. The use of reverse repurchase agreements
may enable the Fund to avoid selling portfolio instruments at a time when a
sale may be deemed to be disadvantageous, but the ability to enter into
reverse repurchase agreements does not assure that the Fund will be able to
avoid selling portfolio instruments at a disadvantageous time. The Fund will
engage in reverse repurchase agreements which are not in excess of 60 days
to maturity and will do so to avoid borrowing cash and not for the purpose
of investment leverage or to speculate on interest rate changes. When
effecting reverse repurchase agreements, assets of the Fund in a dollar
amount sufficient to make payment of the obligations to be purchased are
segregated on the Fund's records at the trade date and maintained until the
transaction is settled.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

Each of the Funds may purchase securities on a when-issued and delayed
delivery basis. When-issued and delayed delivery transactions arise when
U.S. Government obligations and other types of securities are bought by the
Fund with payment and delivery taking place in the future. The settlement
dates of these transactions, which may be a month or more after entering
into the transaction, are determined by mutual agreement of the parties.
There are no fees or other expenses associated with these types of
transactions other than normal transaction costs. To the extent a Fund
engages in when-issued and delayed delivery transactions, it will do so for
the purpose of acquiring portfolio instruments consistent with its
investment objective and policies and not for the purpose of investment
leverage or to speculate on interest rate changes. On the settlement date,
the value of such instruments may be less than the cost thereof. When
effecting when-issued and delayed delivery transactions, cash, cash
equivalents or high grade debt obligations of a dollar amount sufficient to
make payment for the obligations to be purchased will be segregated at the
trade date and maintained until the transaction has been settled.

LENDING SECURITIES

Consistent with applicable regulatory requirements, each of the Funds
may from time to time lend the securities it holds to broker-dealers,
provided that such loans are made pursuant to written agreements and are
continuously secured by collateral in the form of cash, U.S. Government
securities, irrevocable standby letters of credit or other liquid securities
in an amount at all times equal to at least the market value of the loaned
securities plus the accrued interest and dividends. For the period during
which the securities are on loan, the lending Fund will be entitled to
receive the interest and dividends, or amounts equivalent thereto, on the
loaned securities and a fee from the borrower or interest on the investment
of the cash collateral. The right to terminate the loan will be given to
either party subject to appropriate notice. Upon termination of the loan,
the borrower will return to the Fund securities identical to the loaned
securities.

The primary risk in lending securities is that the borrower may become
insolvent on a day on which the loaned security is rapidly increasing in
value. In such event, if the borrower fails to return the loaned security,
the existing collateral might be insufficient to purchase back the full
amount of the security loaned, and the borrower would be unable to furnish
additional collateral. The borrower would be liable for any shortage, but
the lending Fund would be an unsecured creditor with respect to such
shortage and might not be able to recover all or any thereof. However, this
risk may be minimized by a careful selection of borrowers and securities to
be lent and by monitoring collateral.

No Fund will lend securities to broker-dealers affiliated with LB
Research. LB Research believes that this will not affect the Fund's ability
to maximize its securities lending opportunities. No Fund may lend any
security or make any other loan if, as a result, more than one-third of its
total assets would be lent to other parties.

PUT AND CALL OPTIONS

Selling ("Writing") Covered Call Options: The Funds may from time to
time sell ("write") covered call options on any portion of their portfolios
as a hedge to provide partial protection against adverse movements in prices
of securities in those Funds and, subject to the limitations described
below, for the non-hedging purpose of attempting to create additional
income. A call option gives the buyer of the option, upon payment of a
premium, the right to call upon the writer to deliver a specified amount of
a security on or before a fixed date at a predetermined ("strike") price. As
the writer of a call option, a Fund assumes the obligation to deliver the
underlying security to the holder of the option on demand at the strike
price. This obligation is held by the Fund until either the option expires,
or a closing transaction is made.

If the price of a security hedged by a call option falls below or
remains below the strike price of the option, a Fund will generally not be
called upon to deliver the security. A Fund will, however, retain the
premium received for the option as additional income, offsetting all or part
of any decline in the value of the security. If the price of a hedged
security rises above or remains above the strike price of the option, the
Fund will generally be called upon to deliver the security. In this event, a
Fund limits its potential gain by limiting the value it can receive from the
security to the strike price of the option plus the option premium.

Buying Call Options: The Funds may also from time to time purchase call
options on securities in which those Funds may invest. As the holder of a
call option, a Fund has the right (but not the obligation) to purchase the
underlying security or currency at the exercise price at any time during the
option period (American style) or at the expiration of the option (European
style). A Fund generally will purchase such options as a hedge to provide
protection against adverse movements in the prices of securities which the
Fund intends to purchase. In purchasing a call option, a Fund would realize
a gain if, during the option period, the price of the underlying security
increased by more than the amount of the premium paid. A Fund would realize
a loss equal to all or a portion of the premium paid if the price of the
underlying security decreased, remained the same, or did not increase by
more than the premium paid.

Selling Put Options: The Funds may from time to time sell ("write")
covered put options if the put option is part of a combined position (see
"Combined Position Options" below). As the writer of a put option, the Fund
assumes the obligation to pay a predetermined ("strike") price for the
option's underlying security if the holder of the option chooses to exercise
it. Until the option expires, or a closing transaction is made, the Fund
must continue to be prepared to pay the strike price, regardless of prices
movements in the underlying security.

If the price of the underlying security remains the same or rises above
the strike price, the Fund will generally not be called upon to purchase the
security. The Fund will, however, retain the premium received for the
option as additional income. If the underlying security price falls below
the strike price, the Fund would expect to be called upon to purchase the
security at the strike price.

Buying Put Options: The Funds may from time to time purchase put
options on any portion of their portfolios. A put option gives the buyer of
the option, upon payment of a premium, the right (but not the obligation) to
deliver a specified amount of a security to the writer of the option on or
before a fixed date at a predetermined ("strike") price. A Fund generally
will purchase such options as a hedge to provide protection against adverse
movements in the prices of securities in the Fund. In purchasing a put
option, a Fund would realize a gain if, during the option period, the price
of the security declined by an amount in excess of the premium paid. A Fund
would realize a loss equal to all or a portion of the premium paid if the
price of the security increased, remained the same, or did not decrease by
more than the premium paid.

Options on Foreign Currencies: The Funds may also write covered call
options and purchase put and call options on foreign currencies as a hedge
against changes in prevailing levels of currency exchange rates.

Index Options: As part of its options transactions, certain of the
Funds may also purchase and sell call options and put options on stock and
bond indices. Options on securities indices are similar to options on a
security except that, upon the exercise of an option on a securities index,
settlement is made in cash rather than in specific securities.

Combined Position Options: The Funds may purchase and sell options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Funds may engage in "straddle" and "spread"
transactions in order to enhance return, which is a speculative, non-hedging
purpose. A "straddle" is established by buying both a call and a put option
on the same underlying security, each with the same exercise price and
expiration date. A "spread" is a combination of two or more call options or
put options on the same security with differing exercise prices or times to
maturity. The particular strategies employed by a Fund will depend on LB
Research's perception of anticipated market movements.

Negotiated Transactions: The Funds will generally purchase and sell
options traded on a national securities or options exchange. Where options
are not readily available on such exchanges, a Fund may purchase and sell
options in negotiated transactions. A Fund effects negotiated transactions
only with investment dealers and other financial institutions deemed
creditworthy by its investment adviser. Despite the investment adviser's
best efforts to enter into negotiated options transactions with only
creditworthy parties, there is always a risk that the opposite party to the
transaction may default in its obligation to either purchase or sell the
underlying security at the agreed upon time and price, resulting in a
possible loss by the Fund. This risk is described more completely in the
section of this Statement of Additional Information entitled, "Risks of
Transactions in Options and Futures". Options written or purchased by a Fund
in negotiated transactions are illiquid and there is no assurance that a
Fund will be able to effect a closing purchase or closing sale transaction
at a time when its investment adviser believes it would be advantageous to
do so. In the event the Fund is unable to effect a closing transaction with
the holder of a call option written by the Fund, the Fund may not sell the
security underlying the option until the call written by the Fund expires or
is exercised.

Closing Transactions: The Funds may dispose of options which they have
written by entering into "closing purchase transactions". Those Funds may
dispose of options which they have purchased by entering into "closing sale
transactions". A closing transaction terminates the rights of a holder, or
the obligation of a writer, of an option and does not result in the
ownership of an option.

A Fund realizes a profit from a closing purchase transaction if the
premium paid to close the option is less than the premium received by the
Fund from writing the option. The Fund realizes a loss if the premium paid
is more than the premium received. The Fund may not enter into a closing
purchase transaction with respect to an option it has written after it has
been notified of the exercise of such option.

A Fund realizes a profit from a closing sale transaction if the
premium received to close out the option is more than the premium paid for
the option. A Fund realizes a loss if the premium received is less than the
premium paid.

FINANCIAL FUTURES AND OPTIONS ON FUTURES

Selling Futures Contracts: The Funds may sell financial futures
contracts ("futures contracts") as a hedge against adverse movements in the
prices of securities in those Funds. Such contracts may involve futures on
items such as U.S. Government Treasury bonds, notes and bills, government
mortgage-backed securities; corporate and municipal bond indices; and stock
indices. A futures contract sale creates an obligation for the Fund, as
seller, to deliver the specific type of instrument called for in the
contract at a specified future time for a specified price. In selling a
futures contract, the Fund would realize a gain on the contract if, during
the contract period, the price of the securities underlying the futures
contract decreased. Such a gain would be expected to approximately offset
the decrease in value of the same or similar securities in the Fund. The
Fund would realize a loss if the price of the securities underlying the
contract increased. Such a loss would be expected to approximately offset
the increase in value of the same or similar securities in the Fund.

Futures contracts have been designed by and are traded on boards of
trade which have been designated "contract markets" by the Commodity Futures
Trading Commission ("CFTC"). These boards of trade, through their clearing
corporations, guarantee performance of the contracts. Although the terms of
some financial futures contracts specify actual delivery or receipt of
securities, in most instances these contracts are closed out before the
settlement due date without the making or taking of delivery of the
securities. Other financial futures contracts, such as futures contracts on
a securities index, by their terms call for cash settlements. The closing
out of a futures contract is effected by entering into an offsetting
purchase or sale transaction.

When a Fund sells a futures contract, or a call option on a futures
contract, it is required to make payments to the commodities broker which
are called "margin" by commodities exchanges and brokers.

The payment of "margin" in these transactions is different than
purchasing securities "on margin". In purchasing securities "on margin" an
investor pays part of the purchase price in cash and receives an extension
of credit from the broker, in the form of a loan secured by the securities,
for the unpaid balance. There are two categories of "margin" involved in
these transactions: initial margin and variation margin. Initial margin does
not represent a loan between a Fund and its broker, but rather is a "good
faith deposit" by a Fund to secure its obligations under a futures contract
or an option. Each day during the term of certain futures transactions, a
Fund will receive or pay "variation margin" equal to the daily change in the
value of the position held by the Fund.

Buying Futures Contracts: The Funds may purchase financial futures
contracts as a hedge against adverse movements in the prices of securities
which they intend to purchase. The Funds may buy and sell futures contracts
for a number of reasons, including to manage their exposure to changes in
securities prices and foreign currencies as an efficient means of adjusting
their overall exposure to certain markets in an effort to enhance income;
and to protect the value of portfolio securities. A futures contract
purchase creates an obligation by a Fund, as buyer, to take delivery of the
specific type of instrument called for in the contract at a specified future
time for a specified price. In purchasing a futures contract, a Fund would
realize a gain if, during the contract period, the price of the securities
underlying the futures contract increased. Such a gain would approximately
offset the increase in cost of the same or similar securities which a Fund
intends to purchase. A Fund would realize a loss if the price of the
securities underlying the contract decreased. Such a loss would
approximately offset the decrease in cost of the same or similar securities
which a Fund intends to purchase.

Options on Futures Contracts: The Funds may also sell ("write") and
purchase covered call and put options on futures contracts in connection
with the above strategies. An option on a futures contract gives the buyer
of the option, in return for the premium paid for the option, the right to
assume a position in the underlying futures contract (a long position if the
option is a call and a short position if the option is a put). The writing
of a call option on a futures contract constitutes a partial hedge against
declining prices of securities underlying the futures contract to the extent
of the premium received for the option. The purchase of a put option on a
futures contract constitutes a hedge against price declines below the
exercise price of the option and net of the premium paid for the option. The
purchase of a call option constitutes a hedge, net of the premium, against
an increase in cost of securities which a Fund intends to purchase.

Currency Futures Contracts and Options: The Funds may also sell and
purchase currency futures contracts (or options thereon) as a hedge against
changes in prevailing levels of currency exchange rates. Such contracts may
be traded on U.S. or foreign exchanges. The Fund will not use such contracts
or options for leveraging purposes.

Limitations: The Funds may engage in futures transactions, and
transactions involving options on futures, only on regulated commodity
exchanges or boards of trade. A Fund will not enter into a futures contract
or purchase or sell related options if immediately thereafter the sum of the
amount of initial margin deposits on the Fund's existing futures and related
options positions and premiums paid for options with respect to futures and
options used for non-hedging purposes would exceed 5% of the market value of
the Fund's total assets. In addition, in instances involving the purchase of
futures contracts or call options thereon, a Fund will maintain cash or cash
equivalents, less any related margin deposits, in an amount equal to the
market value of such contracts. "Cash and cash equivalents" may include
cash, government securities, or liquid high quality debt obligations.

HYBRID INVESTMENTS

As part of their investment program and to maintain greater
flexibility, the Funds may invest in hybrid instruments (a potentially high
risk derivative) which have the characteristics of futures, options and
securities. Such instruments may take a variety of forms, such as debt
instruments with interest or principal payments determined by reference to
the value of a currency, security index or commodity at a future point in
time. The risks of such investments would reflect both the risks of
investing in futures, options, currencies and securities, including
volatility and illiquidity. Under certain conditions, the redemption value
of a hybrid instrument could be zero. In addition, because the purchase and
sale of hybrid instruments could take place in an over-the-counter market or
in a private transaction between a Fund and the seller of the hybrid
instrument, the creditworthiness of the contra party to the transaction
would be a risk factor which a Fund would have to consider. Hybrid
instruments also may not be subject to regulation of the Commodities Futures
Trading Commission ("CFTC"), which generally regulates the trading of
commodity futures by U.S. persons, the SEC, which regulates the offer and
sale of securities by and to U.S. persons, or any other governmental
regulatory authority. None of the Funds expect to hold more than 5% of its
total assets in hybrid instruments.

RISKS OF TRANSACTIONS IN OPTIONS AND FUTURES

There are certain risks involved in the use of futures contracts,
options on securities and securities index options, and options on futures
contracts, as hedging devices. There is a risk that the movement in the
prices of the index or instrument underlying an option or futures contract
may not correlate perfectly with the movement in the prices of the assets
being hedged. The lack of correlation could render a Fund's hedging strategy
unsuccessful and could result in losses. The loss from investing in futures
transactions is potentially unlimited.

There is a risk that LB Research could be incorrect in their
expectations about the direction or extent of market factors such as
interest rate movements. In such a case a Fund would have been better off
without the hedge. In addition, while the principal purpose of hedging is to
limit the effects of adverse market movements, the attendant expense may
cause a Fund's return to be less than if hedging had not taken place. The
overall effectiveness of hedging therefore depends on the expense of hedging
and LB Research's or a Fund's accuracy in predicting the future changes in
interest rate levels and securities price movements.

A Fund will generally purchase and sell options traded on a national
securities or options exchange. Where options are not readily available on
such exchanges a Fund may purchase and sell options in negotiated
transactions. When a Fund uses negotiated options transactions it will seek
to enter into such transactions involving only those options and futures
contracts for which there appears to be an active secondary market. There is
nonetheless no assurance that a liquid secondary market such as an exchange
or board of trade will exist for any particular option or futures contract
at any particular time. If a futures market were to become unavailable, in
the event of an adverse movement, a Fund would be required to continue to
make daily cash payments of maintenance margin if it could not close a
futures position. If an options market were to become unavailable and a
closing transaction could not be entered into, an option holder would be
able to realize profits or limit losses only by exercising an option, and an
option writer would remain obligated until exercise or expiration. In
addition, exchanges may establish daily price fluctuation limits for options
and futures contracts, and may halt trading if a contract's price moves
upward or downward more than the limit in a given day. On volatile trading
days when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for a Fund to enter into new positions or
close out existing positions. If the secondary market for a contract is not
liquid because of price fluctuation limits or otherwise, it could prevent
prompt liquidation of unfavorable positions, and potentially could require a
Fund to continue to hold a position until delivery or expiration regardless
of changes in its value. As a result, a Fund's access to other assets held
to cover its options or futures positions could also be impaired.

When conducting negotiated options transactions there is a risk that
the opposite party to the transaction may default in its obligation to
either purchase or sell the underlying security at the agreed upon time and
price. In the event of such a default, a Fund could lose all or part of the
benefit it would otherwise have realized from the transaction, including the
ability to sell securities it holds at a price above the current market
price or to purchase a security from another party at a price below the
current market price.

Finally, if a broker or clearing member of an options or futures
clearing corporation were to become insolvent, a Fund could experience
delays and might not be able to trade or exercise options or futures
purchased through that broker or clearing member. In addition, a Fund could
have some or all of its positions closed out without its consent. If
substantial and widespread, these insolvencies could ultimately impair the
ability of the clearing corporations themselves.

FOREIGN FUTURES AND OPTIONS

Participation in foreign futures and foreign options transactions
involves the execution and clearing of trades on or subject to the rules of
a foreign board of trade. Neither the National Futures Association nor any
domestic exchange regulates activities of any foreign boards of trade,
including the execution, delivery and clearing of transactions, or has the
power to compel enforcement of the rules of a foreign board of trade or any
applicable foreign law. This is true even if the exchange is formally linked
to a domestic market so that a position taken on the market may be
liquidated by a transaction on another market. Moreover, such laws or
regulations will vary depending on the foreign country in which the foreign
futures or foreign options transaction occurs. For these reasons, customers
who trade foreign futures or foreign options contracts may not be afforded
certain of the protective measures provided by the Commodity Exchange Act,
the CFTC's regulations and the rules of the National Futures Association and
any domestic exchange, including the right to use reparations proceedings
before the Commission and arbitration proceedings provided by the National
Futures Association or any domestic futures exchange. In particular, funds
received from customers for foreign futures or foreign options transactions
may not be provided the same protections as funds received in respect of
transactions on United States futures exchanges. In addition, the price of
any foreign futures or foreign options contract and, therefore, the
potential profit and loss thereon may be affected by any variance in the
foreign exchange rate between the time an order is placed and the time it is
liquidated, offset or exercised.

SHORT SALES AGAINST THE BOX

The Funds may effect short sales, but only if such transactions are
short sale transactions known as short sales "against the box". A short sale
is a transaction in which a Fund sells a security it does not own by
borrowing it from a broker, and consequently becomes obligated to replace
that security. A short sale against the box is a short sale where a Fund
owns the security sold short or has an immediate and unconditional right to
acquire that security without additional cash consideration upon conversion,
exercise or exchange of options with respect to securities held in its
portfolio. The effect of selling a security short against the box is to
insulate that security against any future gain or loss.

FOREIGN CURRENCY EXCHANGE-RELATED SECURITIES

Foreign Currency Warrants. Foreign currency warrants are warrants which
entitle the holder to receive from their issuer an amount of cash
(generally, for warrants issued in the United States, in U.S. dollars) which
is calculated pursuant to a predetermined formula and based on the exchange
rate between a specified foreign currency and the U.S. dollar as of the
exercise date of the warrant. Foreign currency warrants generally are
exercisable upon their issuance and expire as of a specified date and time.
Foreign currency warrants have been issued in connection with U.S. dollar-
denominated debt offerings by major corporate issuers in an attempt to
reduce the foreign currency exchange risk which, from the point of view of
prospective purchasers of the securities, is inherent in the international
fixed-income marketplace. Foreign currency warrants may attempt to reduce
the foreign exchange risk assumed by purchasers of a security by, for
example, providing for a supplemental payment in the event that the U.S.
dollar depreciates against the value of a major foreign currency such as the
Japanese Yen or German Deutschmark. The formula used to determine the amount
payable upon exercise of a foreign currency warrant may make the warrant
worthless unless the applicable foreign currency exchange rate moves in a
particular direction (e.g., unless the U.S. dollar appreciates or
depreciates against the particular foreign currency to which the warrant is
linked or indexed). Foreign currency warrants are severable from the debt
obligations with which they may be offered, and may be listed on exchanges.
Foreign currency warrants may be exercisable only in certain minimum
amounts, and an investor wishing to exercise warrants who possesses less
than the minimum number required for exercise may be required either to sell
the warrants or to purchase additional warrants, thereby incurring
additional transaction costs. In the case of any exercise of warrants, there
may be a time delay between the time a holder of warrants gives instructions
to exercise and the time the exchange rate relating to exercise is
determined, during which time the exchange rate could change significantly,
thereby affecting both the market and cash settlement values of the warrants
being exercised. The expiration date of the warrants may be accelerated if
the warrants should be delisted from an exchange or if their trading should
be suspended permanently, which would result in the loss of any remaining
"time value" of the warrants (i.e., the difference between the current
market value and the exercise value of the warrants), and, in the case the
warrants were "out-of-the-money," in a total loss of the purchase price of
the warrants. Warrants are generally unsecured obligations of their issuers
and are not standardized foreign currency options issued by the Options
Clearing Corporation ("OCC"). Unlike foreign currency options issued by OCC,
the terms of foreign exchange warrants generally will not be amended in the
event of governmental or regulatory actions affecting exchange rates or in
the event of the imposition of other regulatory controls affecting the
international currency markets. The initial public offering price of foreign
currency warrants is generally considerably in excess of the price that a
commercial user of foreign currencies might pay in the interbank market for
a comparable option involving significantly larger amounts of foreign
currencies. Foreign currency warrants are subject to significant foreign
exchange risk, including risks arising from complex political or economic
factors.

Principal Exchange Rate Linked Securities. Principal exchange rate
linked securities are debt obligations the principal on which is payable at
maturity in an amount that may vary based on the exchange rate between the
U.S. dollar and a particular foreign currency at or about that time. The
return on "standard" principal exchange rate linked securities is enhanced
if the foreign currency to which the security is linked appreciates against
the U.S. dollar, and is adversely affected by increases in the foreign
exchange value of the U.S. dollar; "reverse" principal exchange rate linked
securities are like the "standard" securities, except that their return is
enhanced by increases in the value of the U.S. dollar and adversely impacted
by increases in the value of foreign currency. Interest payments on the
securities are generally made in U.S. dollars at rates that reflect the
degree of foreign currency risk assumed or given up by the purchaser of the
notes (i.e., at relatively higher interest rates if the purchaser has
assumed some of the foreign exchange risk, or relatively lower interest
rates if the issuer has assumed some of the foreign exchange risk, based on
the expectations of the current market). Principal exchange rate linked
securities may in limited cases be subject to acceleration of maturity
(generally, not without the consent of the holders of the securities), which
may have an adverse impact on the value of the principal payment to be made
at maturity.

Performance Indexed Paper. Performance indexed paper is U.S. dollar-
denominated commercial paper the yield of which is linked to certain foreign
exchange rate movements. The yield to the investor on performance indexed
paper is established at maturity as a function of spot exchange rates
between the U.S. dollar and a designated currency as of or about that time
(generally, the index maturity two days prior to maturity). The yield to the
investor will be within a range stipulated at the time of purchase of the
obligation, generally with a guaranteed minimum rate of return that is
below, and a potential maximum rate of return that is above, market yields
on U.S. dollar-denominated commercial paper, with both the minimum and
maximum rates of return on the investment corresponding to the minimum and
maximum values of the spot exchange rate two business days prior to
maturity.

TEMPORARY DEFENSIVE INVESTMENTS

The Funds may hold up to 100% of their assets in cash or short-term
debt securities for temporary defensive position when, in the opinion of LB
Research such a position is more likely to provide protection against
unfavorable market conditions than adherence to the Funds' other investment
policies. The types of short-term instruments in which the Funds may invest
for such purposes include short-term money market securities such as
repurchase agreements and securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, certificates of deposit,
Eurodollar certificates of deposit, commercial paper and banker's
acceptances issued by domestic and foreign corporations and banks. When
investing in short-term money market obligations for temporary defensive
purposes, a Fund will invest only in securities rated at the time of
purchase Prime-1 or Prime-2 by Moody's, A-1 or A-2 by S&P, F-1 or F-2 by
Fitch Investors Service, Inc., or unrated instruments that are determined by
LB Research to be of a comparable level of quality. When a Fund adopts a
temporary defensive position its investment objective may not be achieved.

COMPUTER RELATED RISKS

Many mutual funds and other companies that issue securities, as well as
government entities upon whom those mutual funds and companies depend, may
be adversely affected by computer systems (whether their own systems or
systems of their service providers) that do not properly process dates
beginning with January 1, 2000 and information related to those dates.

The Investment Manager currently is in the process of reviewing its
internal computer systems as they relate to the Funds, as well as the
computer systems of those service providers upon which the Funds rely, in
order to obtain reasonable assurances that the Funds will not experience a
material adverse impact related to this problem. The Funds do not currently
anticipate that this problem will have a material adverse impact on their
portfolio investments, taken as a whole. There can be no assurances in this
area, however, including the possibility that this problem could negatively
affect the investment markets or the economy generally.

INVESTMENT LIMITATIONS

The fundamental investment restrictions for the Funds are set forth
below. These fundamental investment restrictions may not be changed by a
Fund except by the affirmative vote of a majority of the outstanding voting
securities of that Fund as defined in the Investment Company Act of 1940.
(Under the Investment Company Act of 1940, a "vote of the majority of the
outstanding voting securities" means the vote, at a meeting of security
holders duly called, (i) of 67% or more of the voting securities present at
a meeting if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy or (ii) of more than 50% of
the outstanding voting securities, whichever is less (a "1940 Act Majority
Vote").) Under these restrictions, with respect to each Fund:

(1) The Fund may not borrow money, except that the Fund may
borrow money (through the issuance of debt securities or
otherwise) in an amount not exceeding one-third of the
Fund's total assets immediately after the time of such
borrowing.

(2) The Fund may not purchase or sell commodities or commodity
contracts, except that the Fund may invest in financial
futures contracts, options thereon and similar instruments.

(3) The Fund may not purchase or sell real estate unless acquired
as a result of ownership of securities or other instruments,
except that the Fund may invest in securities or other
instruments backed by real estate or securities of companies
engaged in the real estate business or that invest or deal in
real estate.

(4) The Fund may not engage in underwriting or agency
distribution of securities issued by others; provided,
however, that this restriction shall not be construed to
prevent or limit in any manner the power of the Fund to
purchase and resell restricted securities or securities for
investment.

(5) The Fund may not lend any of its assets except portfolio
securities. The purchase of corporate or U.S. or foreign
governmental bonds, debentures, notes, certificates of
indebtedness, repurchase agreements or other debt securities
of an issuer permitted by the Fund's investment objective and
policies will not be considered a loan for purposes of this
limitation.

(6) The Fund may not with respect to 75% of its total assets,
purchase the securities of any issuer (except Government
Securities, as such term is defined in the Investment Company
Act of 1940) if, as a result, the Fund would own more than
10% of the outstanding voting securities of such issuer or
the Fund would have more than 5% of its total assets invested
in the securities of such issuer.

(7) The Fund may not issue senior securities, except as permitted
under the Investment Company Act of 1940 or any exemptive
order or rule issued by the Securities and Exchange
Commission.

(8) The Fund may, notwithstanding any other fundamental
investment policy or limitation, invest all of its assets in
the securities of a single open-end management investment
company with substantially the same fundamental investment
objectives, policies, and limitations as the Fund.

(9) The Fund may not invest in a security if the transaction
would result in 25% or more of the Fund's total assets being
invested in any one industry.

The following nonfundamental investment restriction may be changed
without shareholder approval. Under this restriction with respect to each
Fund:

(1) The Fund will not purchase any security while borrowings,
including reverse repurchase agreements, representing more
than 5% of the Fund's total assets are outstanding.

Section 18(g) of the 1940 Act defines a "senior security" as any bond,
debenture, note, or similar obligation constituting a security and
evidencing indebtedness. Section 18(F)(1) of the 1940 Act prohibits an
open-end investment company from issuing senior securities but permits
borrowings from a bank if immediately after the borrowing there is asset
coverage of at least 300%. The SEC staff has taken the position that a fund
may engage in certain leveraged transactions, such as short sales and
financial futures contracts, without violating Section 18(F)(1) if it
segregates fund assets.

FUND MANAGEMENT

The Board of Trustees of the Trust is responsible for the management
and supervision of the Funds' business affairs and for exercising all powers
except those reserved to the shareholders.

The officers and Trustees of the Trust and their addresses, positions
with the Trust, and principal occupations are set forth below. As of July
31, 1999, the officers and Trustees own less than 1% of any Fund's
outstanding shares.

NAME AND ADDRESS POSITION WITH THE TRUST PRINCIPAL OCCUPATION DURING THE
PAST 5 YEARS
<S> <C> <C>
Rolf F. Bjelland* Chairman, Trustee and Executive Vice President, Lutheran
625 Fourth Avenue South President Brotherhood; Director, Lutheran
Minneapolis, MN Brotherhood Research Corp.; Director
Age 61 and Executive Vice President, Lutheran
Brotherhood Financial Corp.; Director,
Lutheran Brotherhood Securities Corp.;
Director and Vice President, Lutheran
Brotherhood Variable Insurance Products
Company; Director, Lutheran Brotherhood
Real Estate Products Company; Director,
Chairman and President of LB Series
Fund, Inc.

Herbert F. Eggerding, Jr. Trustee Management consultant to several privately
12587 Glencroft Drive owned companies; formerly Executive Vice
St. Louis, MO President and Chief Financial Officer,
Age 62 Petrolite Corporation; Director, Lutheran
Charities Foundation of St. Louis, MO;
Director of LB Series Fund, Inc.

Noel K. Estenson Trustee President and Chief Executive Officer,
CENEX, Inc. CENEX, Inc.; Vice Chairman, CF
P.O. Box 64089 Industries; Board member, National
St. Paul, MN Cooperative Refinery Association; Board
Age 60 member, Farm Credit Leasing; Board member,
National Council of Farmer Cooperatives;
Director, LB Series Fund, Inc.

Jodi L. Harpstead Trustee Vice President, U.S. Cardiac Rhythm
Medtronic Management for Medtronic, Inc.; Previously,
7000 Central Avenue NE Manager and Vice President, U.S. Pacing
Minneapolis, MN Marketing, Medtronic, Inc.; Board member
Age 42 of Delta Dental Plan of Minnesota;
Director, LB Series Fund, Inc.

Richard A. Hauser Trustee Partner, Baker & Hostetler, LLP; Previously,
1050 Connecticut Avenue NW Chairman of the Pennsylvania Avenue
Suite 1100 Development Corporation, Washington, DC;
Washington, DC Director, The Luther Institute; Director,
Age 56 LB Series Fund, Inc.

Connie M. Levi Trustee Retired President of the Greater
P.O. Box 675325 Minneapolis Chamber of Commerce;
Rancho Santa Fe, CA served in the Minnesota House of
Age 59 Representatives from 1978 to 1986,
including in the capacity as majority
leader; former Director or member of
numerous governmental, public service
and non-profit boards and organizations;
Director, Norstan, Inc.; Director of
LB Series Fund, Inc.

Bruce J. Nicholson* Trustee President and Chief Operating Officer,
625 Fourth Avenue South Lutheran Brotherhood; Director, President
Minneapolis, MN and Chief Operating Officer, Lutheran
Age 52 Brotherhood Financial Corp.; Director and
Chief Operating Officer, Lutheran Brotherhood
Variable Insurance Products Company;
Director, Lutheran Brotherhood Research
Corp; Director, Lutheran Brotherhood
Securities Corp.; Director, Lutheran
Brotherhood Real Estate Products Company;
Director, LB Series Fund, Inc.

Randall L. Boushek Vice President Senior Vice President and Chief Investment
625 Fourth Avenue South Officer, Lutheran Brotherhood; President,
Minneapolis, MN Lutheran Brotherhood Research Corp.; Vice
Age 42 President and Chief Investment Officer,
Lutheran Brotherhood Variable Insurance
Products Company; Portfolio Manager,
Lutheran Brotherhood Securities Corp.

Otis F. Hilbert Secretary and Vice President Vice President, Lutheran Brotherhood;
625 Fourth Avenue South Vice President and Secretary,
Minneapolis, MN Lutheran Brotherhood Securities Corp.;
Age 62 Secretary of Lutheran Brotherhood
Research Corp.; Vice President and
Secretary, Lutheran Brotherhood
Real Estate Products Company; Vice
President and Assistant Secretary,
Lutheran Brotherhood Variable
Insurance Products Company; Secretary and
Vice President of LB Series Fund, Inc.

Frederick P. Johnson Vice President Assistant Vice President, Lutheran
625 Fourth Avenue South Brotherhood; Assistant Vice President,
Minneapolis, MN Lutheran Brotherhood Variable Insurance
Age 36 Products Company; Assistant Vice
President, Lutheran Brotherhood
Securities Corp.; Assistant Vice
President, LB Research; Vice President,
LB Series Fund, Inc.

James R. Olson Vice President Senior Vice President, Lutheran
625 Fourth Avenue South Brotherhood; Vice President, Lutheran
Minneapolis, MN Brotherhood Variable Insurance Products
Age 57 Company; Vice President, Lutheran
Brotherhood Research Corp.; Vice
President, Lutheran Brotherhood Research
Corp.; Vice President, Lutheran
Brotherhood Securities Corp.; Vice
President, Lutheran Brotherhood Real
Estate Products Company; Vice President,
LB Series Fund, Inc.

Brenda J. Pederson Vice President Assistant Vice President, Lutheran
625 Fourth Avenue South Brotherhood
Minneapolis, MN
Age 38

Richard B. Ruckdashel Vice President Vice President, Lutheran Brotherhood;
625 Fourth Avenue South Vice President, Lutheran Brotherhood
Minneapolis, MN Variable Insurance Products Company; Vice
Age 44 President, Lutheran Brotherhood
Securities Corp.; Vice President, LB
Series Fund, Inc.

Wade M. Voigt Treasurer Assistant Vice President, Mutual Fund
625 Fourth Avenue South Accounting, Lutheran Brotherhood;
Minneapolis, MN Treasurer of LB Series Fund, Inc.
Age 43
</TABLE>
- - -----------------------
(*) "Interested person" of the Fund as defined in the Investment Company
Act of 1940 by virtue of his positions with affiliated entities
referred to elsewhere herein.

CONTROL PERSONS AND PRINCIPAL HOLDERS

It is expected that Lutheran Brotherhood (including its wholly-owned
subsidiary companies), 625 Fourth Avenue South, Minneapolis, Minnesota
55415-1624, will be the sole shareholder of each the Fund's shares at the
time of the commencement of the Funds' operations.

COMPENSATION OF TRUSTEES AND OFFICERS

The Funds make no payments to any of its officers for services
performed for the Fund. Trustees of the Trust who are not interested persons
of the Trust are paid an annual retainer fee by the Trust of $23,500 and an
annual fee of $9,000 per year to attend meetings of Board of Trustees.

Trustees who are not interested persons of the Trust are reimbursed by
the Trust for any expenses they may incur by reason of attending Board
meetings or in connection with other services they may perform in connection
with their duties as Trustees of the Trust. The Trustees receive no pension
or retirement benefits in connection with their service to the Fund.

For the fiscal year ended October 31, 1999, the Trustees of the Trust
received the following amounts of compensation either directly or in the
form of payments made into a deferred compensation plan:

PENSION OR
RETIREMENT
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL TOTAL COMPENSATION
NAME AND POSITION COMPENSATION AS PART OF FUND BENEFITS UPON PAID BY FUND
OF PERSON FROM TRUST EXPENSES RETIREMENT AND FUND COMPLEX (1)
<S> <C> <C> <C> <C>
Rolf F. Bjelland(2) $ 0 $ 0 $ 0 $ 0
Chairman and Trustee

Herbert F. Eggerding, Jr. 18,315 0 0 33,124
Trustee

Noel K. Estenson 18,315 0 0 33,124
Trustee

Jodi L. Harpstead 0 0 0 0
Trustee

Richard K. Hauser 4,708 0 0 0
Trustee

Connie M. Levi 18,315 0 0 0
Trustee

Bruce J. Nicholson(2) 0 0 0 0
Trustee
- - -------------------------

(1) The "Fund Complex" includes the eleven series of The Lutheran Brotherhood Family of Funds and
the seven portfolios of LB Series Fund, Inc.
(2) "Interested person" of the Fund as defined in the Investment Company Act of 1940.

</TABLE>

INVESTMENT ADVISORY SERVICES

The Funds' investment adviser, LB Research, was organized as a
Pennsylvania corporation in 1969 and was reincorporated as a Minnesota
corporation in 1987. It has been in the investment advisory business since
1970. LB Research is a wholly-owned subsidiary of Lutheran Brotherhood
Financial Corporation which, in turn, is a wholly-owned subsidiary of
Lutheran Brotherhood, a fraternal benefit society. The officers and
directors of LB Research who are affiliated with the Trust are set forth
under "Fund Management".

Investment decisions for each of the LB Growth Fund, LB Value Fund, and
LB Limited Maturity Fund are made by LB Research, subject to the overall
direction of the Board of Trustees. LB Research provides investment research
and supervision of each Fund's investments and conducts a continuous program
of investment evaluation and appropriate disposition and reinvestment of
each Fund's assets. LB Research assumes the expense of providing the
personnel to perform its advisory functions. The Master Advisory Contract
(the "Advisory Contract") for the Funds provides that Lutheran Brotherhood
has reserved the right to grant the non-exclusive use of the name "Lutheran
Brotherhood" or any derivative thereof to any other investment company,
investment adviser, distributor or other business enterprise, and to
withdraw from each Fund the use of the name "Lutheran Brotherhood". The name
"Lutheran Brotherhood" will continue to be used by each Fund as long as such
use is mutually agreeable to Lutheran Brotherhood and the Funds.

The Advisory Contract provides that it shall continue in effect with
respect to each Fund from year to year as long as it is approved at least
annually both (i) by a vote of a majority of the outstanding voting
securities of such Fund (as defined in the 1940 Act) or by the Trustees of
the Trust, and (ii) in either event by a vote of a majority of the Trustees
who are not parties to the Advisory Contract or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of voting
on such approval. The Advisory Contract may be terminated on 60 days'
written notice by either party and will terminate automatically in the event
of its assignment, as defined under the 1940 Act and regulations thereunder.
Such regulations provide that a transaction which does not result in a
change of actual control or management of an adviser is not deemed an
assignment.

LB Research receives an annual investment advisory fee from each Fund.
The advisory contract between LB Research and the Trust provides for the
following advisory fees:

Lutheran Brotherhood Growth Fund

Rates of Annual Advisory
Fee as a Percentage of
Average Daily Net Assets Average Daily Net Assets

On the portion of the Fund which is:

$500 million or less 0.425%
Over $500 million but not over $1 billion 0.375%
Over $1 billion 0.325%

Lutheran Brotherhood Value Fund

Rates of Annual Advisory
Fee as a Percentage of
Average Daily Net Assets Average Daily Net Assets

On the portion of the Fund which is:

$500 million or less 0.40%
Over $500 million but not over $1 billion 0.35%
Over $1 billion 0.30%

Lutheran Brotherhood Limited Maturity Bond Fund

Rates of Annual Advisory
Fee as a Percentage of
Average Daily Net Assets Average Daily Net Assets

On the portion of the Fund which is:

$500 million or less 0.30%
Over $500 million but not over $1 billion 0.275%
Over $1 billion 0.25%

LB Research has voluntarily agreed to temporarily waive a portion of
its advisory fee for the LB Growth Fund and, if necessary, to bear certain
expenses associated with operating the Fund in order to limit the Fund's
total operating expenses for the Class A shares, Class B shares and
Institutional Class shares to an annual rate of 1.30%, 2.05%, and 1.05%,
respectively, of the average daily net assets of the relevant class. LB
Research has voluntarily agreed to temporarily waive a portion of its
advisory fee for the LB Value Fund and, if necessary, to bear certain
expenses associated with operating the Fund in order to limit the Fund's
total operating expenses for the Class A shares, Class B shares and
Institutional Class shares to an annual rate of 1.30%, 2.05%, and 1.05%,
respectively, of the average daily net assets of the relevant class. LB
Research has voluntarily agreed to temporarily waive a portion of its
advisory fee for the LB Limited Maturity Bond Fund and, if necessary, to
bear certain expenses associated with operating the Fund in order to limit
the Fund's total operating expenses for the 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.

ADMINISTRATIVE SERVICES

Lutheran Brotherhood Securities Corp. ("LB Securities") provides
administrative personnel and services necessary to operate the Funds on a
daily basis for a fee equal to 0.02 percent of the Funds' average daily net
assets.

CUSTODIAN

State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's custodian. As custodian, State Street
Bank and Trust Company is responsible for, among other things, safeguarding
and controlling the Funds' cash and securities, handling the receipt and
delivery of securities and collecting interest and dividends on the Funds'
investments.

TRANSFER AGENT

LB Securities provides transfer agency services necessary to the Funds
on a daily basis for a fee that is based on the number of shareholder
accounts.

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 650 Third Avenue South, Park Building,
Suite 1300, Minneapolis, Minnesota 55402, serves as the Trust's independent
accountants, providing professional services including audits of the Funds'
annual financial statements, assistance and consultation in connection with
Securities and Exchange Commission filings, and review of the annual income
tax returns filed on behalf of the Funds.

DISTRIBUTION AND SHAREHOLDER SERVICES

PLAN OF DISTRIBUTION AND DISTRIBUTION CONTRACT

The Trust has adopted a Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act (the "12b-1 Plan") with respect to the Class B shares of
LB Growth Fund and LB Value Fund. The 12b-1 Plan permits, among other
things, payment by each such Fund for the purpose of (1) making payments to
underwriters, securities dealers and others engaged in the sale of Class B
shares, including payments to LB Securities to be used to compensate or
reimburse the LB Securities and others (including affiliates of LB
Securities) engaged in the distribution and marketing of Class B shares or
furnishing assistance to investors on an ongoing basis, and (2) providing
reimbursement of direct out-of-pocket expenditures incurred by LB Securities
in connection with the distribution and marketing of Class B shares, (3)
providing reimbursements of payments of commissions to LB Securities's field
force and others involved in the distribution of the Class B shares at the
time of purchase, plus interest at a rate not to exceed prime plus 1% on the
amount of unreimbursed commissions and (4) providing payment of expenses
relating to the formulation and implementation of marketing strategies and
promotional activities such as direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising, the preparation,
printing and distribution of sales literature, the preparation, printing and
distribution of prospectuses of the Trust and reports for recipients other
than existing shareholders of the Trust, and obtaining such information,
analyses and reports with respect to marketing and promotional activities
and investor accounts as the Trust may, from time to time, deem advisable.
The Trust and the Funds are authorized to engage in the activities listed
above, and in other activities primarily intended to result in the sale of
Class B shares, either directly or through other persons with which the
Trust has entered into agreements pursuant to the 12b-1 Plan.

The 12b-1 Plan provides that it may not be amended to increase
materially the costs which a Fund may bear pursuant to the 12b-1 Plan
without approval by a 1940 Act Majority Vote of the Class B shareholders and
that other material amendments of the 12b-1 Plan must be approved by the
Trustees, and by the Trustees who are neither "interested persons" (as
defined in the 1940 Act) of the Trust nor have any direct or indirect
financial interest in the operation of the 12b-1 Plan or in any related
agreement (the "Qualified Trustees"), by vote cast in person at a meeting
called for the purpose of considering such amendments. While the 12b-1 Plan
is in effect, the selection and nomination of the Trustees of the Trust who
are not "interested persons" of the Trust has been committed to the
discretion of the Trustees who are not "interested persons" of the Trust.
The 12b-1 Plan was initially approved by the Board of Trustees, including a
majority of the Qualified Trustees, on September 9, 1997, and is subject to
annual approval, by the Board of Trustees and by the Qualified Trustees by
vote cast in person at a meeting called for the purpose of voting on the
12b-1 Plan. The 12b-1 Plan is terminable with respect to the Class B shares
of any Fund at any time by a vote of a majority of the Qualified Trustees or
by 1940 Act Majority Vote of the Class B shareholders of such Fund. A
quarterly report of the amounts expended under the 12b-1 Plan and the
purposes for which such expenditures were incurred must be made to the
Trustees for their review.

The Funds' distributor, LB Securities, is a Pennsylvania corporation
organized in 1969. LB Securities is a wholly-owned subsidiary of LB Research
and is located in Minneapolis, Minnesota. The officers and directors of LB
Securities who are affiliated with the Trust are set forth under "Fund
Management". Under a First Amended and Restated Distribution Contract dated
October 31, 1997 (the "Distribution Contract"), LB Securities is granted the
right to sell Class A, Class B and Institutional Class shares of the Funds
as agent for the Trust. LB Securities agrees to use its best efforts to
secure purchasers for the shares of the Funds. In connection with the
services to be provided by LB Securities under the Distribution Contract, LB
Securities receives from each Fund an amount with respect to Class B shares
determined at an annual rate of .75% of the average daily net asset value
represented by such shares, such amount to be paid in arrears at the end of
each calendar month. The Distribution Contract was initially approved by the
Board of Trustees including a majority of the Qualified Trustees, on
September 9, 1997, and will continue in effect from year to year so long as
its continuance is approved at least annually by the Board of Trustees and
the Qualified Trustees.

SHAREHOLDER SERVICING PLANS

The Trust has adopted shareholder servicing plans (each a "Shareholder
Servicing Plan") for each Fund. The Shareholder Servicing Plans for the
Class A and Class B shares provide that the relevant class may spend
annually, directly or indirectly, up to .25% of the average daily value of
the net assets attributable to the relevant class for shareholder servicing
activities. The Shareholder Servicing Plan for the Institutional Class
shares provides that the Institutional Class may spend annually, directly or
indirectly, up to .15% of the average daily value of the net assets
attributable to the relevant class for shareholder servicing activities.
Under the Distribution Contract, LB Securities has agreed to undertake
certain shareholder servicing activities on behalf of the Funds in exchange
for a fee of .25% of the average daily value of the net assets represented
by Class A and Class B shares and .15% of the average daily value of the net
assets represented by Institutional Class shares. A quarterly report of the
amounts expended under the Shareholder Servicing Plans, and the purposes for
which such expenditures were incurred, must be made to the Trustees for
their review. Each Shareholder Servicing Plans may be amended by a majority
of the Qualified Trustees or by a 1940 Act Majority Vote by shareholders of
the respective class. The Shareholder Servicing Plans have been approved,
and are subject to annual approval, by the Board of Trustees and the
Qualified Trustees.

BROKERAGE TRANSACTIONS

PORTFOLIO TRANSACTIONS

In connection with the management of the investment and reinvestment of
the assets of the Funds, the Advisory Contract authorizes LB Research,
acting by its own officers, directors or employees or by a duly authorized
subcontractor to select the brokers or dealers that will execute purchase
and sale transactions for the Funds. In executing portfolio transactions and
selecting brokers or dealers, if any, LB Research and will use reasonable
efforts to seek on behalf of the Funds the best overall terms available. In
assessing the best overall terms available for any transaction, LB Research
will consider all factors it deems relevant, including the breadth of the
market in and the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any (for the specific transaction and on a continuing basis).
In evaluating the best overall terms available, and in selecting the broker
or dealer, if any, to execute a particular transaction, LB Research may also
consider the brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) provided to any other
accounts over which LB Research or an affiliate of LB Research exercises
investment discretion. LB Research may pay to a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if, but
only if, LB Research determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided.

To the extent that the receipt of the above-described services may
supplant services for which LB Research might otherwise have paid, it would,
of course, tend to reduce the expenses of LB Research.

The investment decisions for a Fund are and will continue to be made
independently from those of other investment companies and accounts managed
by LB Research, or their affiliates. Such other investment companies and
accounts may also invest in the same securities as a Fund. When purchases
and sales of the same security are made at substantially the same time on
behalf of such other investment companies and accounts, transactions may be
averaged as to the price and available investments allocated as to the
amount in a manner which LB Research and its affiliates believe to be
equitable to each investment company or account, including the Fund. In some
instances, this investment procedure may affect the price paid or received
by a Fund or the size of the position obtainable or sold by a Fund.

PORTFOLIO TURNOVER RATE

The rate of portfolio turnover in the Funds will not be a limiting
factor when LB Research deems changes in a Fund's portfolio appropriate in
view of its investment objectives. As a result, while a Fund will not
purchase or sell securities solely to achieve short term trading profits, a
Fund may sell portfolio securities without regard to the length of time held
if consistent with the Fund's investment objective. A higher degree of
equity portfolio activity will increase brokerage costs to a Fund. The
portfolio turnover rate is computed by dividing the dollar amount of
securities purchased or sold (whichever is smaller) by the average value of
securities owned during the year. Short-term investments such as commercial
paper and short-term U.S. Government securities are not considered when
computing the turnover rate. The Funds do not expect their portfolio
turnover rate to exceed 100% during their first year of operation.

CODE OF ETHICS

The Trust has adopted a code of ethics that imposes certain limitations
and restrictions on personal securities transactions by persons having
access to Fund investment information, including portfolio managers. Such
access persons may not purchase any security being offered under an initial
public offering, any security for which one of the Funds has a purchase or
sale order pending, or any security currently under active consideration for
purchase or sale by a Fund. Additionally, portfolio managers of the Funds
may not purchase or sell any security within seven days before or after any
transaction in such security by the Fund that he or she manages. In order
for the Trust to monitor the personal investment transactions, all access
persons must obtain the approval of an officer of the Trust designated by
the Trustees before they may purchase or sell any security and they must
have all such transactions reported to such officer by the broker-dealer
through which the transaction was accomplished.

PURCHASING SHARES

Initial purchases of Fund shares must be made by check and accompanied
by an application. Subsequent purchases may be made by:

- check;
- Federal Reserve or bank wire;
- Invest-by-Phone;
- Systematic Investment Plan (SIP); and
- automatic payroll deduction.

Use of checks, Federal Reserve or bank wire and Invest-by-Phone is
explained in the General Information section of the Fund's prospectus under
"Buying Shares of The Lutheran Brotherhood Family of Funds".

SYSTEMATIC INVESTMENT PLAN

Under the Systematic Investment Plan program, funds may be withdrawn
monthly from the shareholder's checking account and invested in the Funds.
LB Securities representatives will provide shareholders with the necessary
authorization forms.

AUTOMATIC PAYROLL DEDUCTION

Under the Automatic Payroll Deduction program, funds may be withdrawn
monthly from the payroll account of any eligible shareholder of a Fund and
invested in a Fund. To be eligible for this program, the shareholder's
employer must permit and be qualified to conduct automatic payroll
deductions. LB Securities representatives will provide shareholders with the
necessary authorization forms.

SALES CHARGES

Purchases of shares in the LB Growth Fund and the LB Value Fund, other
than the Institutional Class shares, carry either an initial sales charges
(Class A) or contingent deferred sales charge (Class B) as explained in the
section of the Funds' prospectus relating to such shares entitled, "Choosing
Your Class of Shares", which also lists ways to reduce or avoid sales
charges on subsequent purchases.

In addition to the situations described in the prospectus, sales
charges are waived when shares are purchased by:

- directors and regular full-time and regular part-time
employees of Lutheran Brotherhood and its subsidiaries;

- registered representatives of LB Securities; and

- any trust, pension, profit-sharing or other benefit plan
for such persons.

FULL-TIME EMPLOYEES

Regular full-time and regular part-time employees of Lutheran
Brotherhood are persons who are defined as such by the Lutheran Brotherhood
Human Resources Policy Manual.

RESTRICTION ON SALE OF SHARES PURCHASED

Sales to any of the persons or groups mentioned in this section are
made only with the purchaser's written promise that the shares will not be
resold, except through redemption or repurchase by or on behalf of a Fund.

NET ASSET VALUE

The net asset value per share is determined at the close of each day
the New York Stock Exchange is open, or any other day as provided by Rule
22c-1 under the Investment Company Act of 1940. Determination of net asset
value may be suspended when the Exchange is closed or if certain emergencies
have been determined to exist by the Securities and Exchange Commission, as
allowed by the Investment Company Act of 1940.

Net asset value is determined by adding the market or appraised value
of all securities and other assets attributable to each class of shares;
subtracting liabilities attributable to such class; and dividing the result
by the number of shares of such class outstanding.

The market value of each Fund's portfolio securities is determined at
the close of regular trading of the New York Stock Exchange (the "Exchange")
on each day the Exchange is open. The value of portfolio securities is
determined in the following manner:

- - - Equity securities traded on the Exchange or any other national
securities exchange are valued at the last sale price. If there has
been no sale on that day or if the security is unlisted, it is
valued at prices within the range of the current bid and asked
prices considered best to represent value in the circumstances.

- - - Equity securities not traded on a national securities exchange are
valued at prices within the range of the current bid and asked
prices considered best to represent the value in the circumstances,
except that securities for which quotations are furnished through
the nationwide automated quotation system approved by the NASDAQ
will be valued at their last sales prices so furnished on the date
of valuation, if such quotations are available for sales occurring
on that day.

- - - Bonds and other income securities traded on a national securities
exchange will be valued at the last sale price on such national
securities exchange that day. LB Research may value such securities
on the basis of prices provided by an independent pricing service
or within the range of the current bid and asked prices considered
best to represent the value in the circumstances, if those prices
are believed to better reflect the fair market value of such
exchange listed securities.

- - - Bonds and other income securities not traded on a national
securities exchange will be valued within the range of the current
bid and asked prices considered best to represent the value in the
circumstances. Such securities may also be valued on the basis of
prices provided by an independent pricing service if those prices
are believed to reflect the fair market value of such securities.

Short-term 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.

Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may consider institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data
employed in determining valuation for such securities.

All other securities and assets will be appraised at fair value as
determined by the Board of Trustees.

Generally, trading in foreign securities, as well as U.S. Government
securities, money market instruments and repurchase agreements, is
substantially completed each day at various times prior to the close of the
Exchange. The values of such securities used in computing the net asset
value of shares of a Fund are determined as of such times. Foreign currency
exchange rates are also generally determined prior to the close of the
Exchange. Occasionally, events affecting the value of such securities and
exchange rates may occur between the times at which they are determined and
the close of the Exchange, which will not be reflected in the computation of
net asset values. If during such periods events occur which materially
affect the value of such securities, the securities will be valued at their
fair market value as determined in good faith by the Trustees of the Fund.

For purposes of determining the net asset value of shares of a Fund all
assets and liabilities initially expressed in foreign currencies will be
converted into U.S. dollars quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing
service that takes into account the quotes provided by a number of such
major banks.

REDEEMING SHARES

Shares may be redeemed with requests made:

- in writing;
- through Redeem-by-Phone; or
- through the Lutheran Brotherhood systematic withdrawal plan.

All methods of redemption are described in the Funds' prospectus under
"Redeeming Shares".

TAX STATUS

THE FUNDS' TAX STATUS

The Funds expect to pay no federal income tax because they intend to
meet requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, each Fund must,
among other requirements:

- derive at least 90% of its gross income from dividends,
interest, gains from the sale of securities, and certain
other investments;

- invest in securities within certain statutory limits; and

- distribute at least 90% of its ordinary income to
shareholders.

It is each Fund's policy to distribute substantially all of its income
on a timely basis, including any net realized gains on investments each
year.

To avoid payment of a 4% excise tax, each Fund is also generally
required to distribute to shareholders at least 98% of its ordinary income
earned during the calendar year and 98% of its net capital gains realized
during the 12-month period ending October 31.

SHAREHOLDERS' TAX STATUS

Information on a shareholder's tax status is described in the Fund's
prospectus under "Taxes."

CAPITAL GAINS

While the Funds do not intend to engage in short-term trading, they may
dispose of securities held for only a short time if LB Research believes it
to be advisable. Such changes may result in the realization of capital
gains. Each Fund distributes its realized gains in accordance with federal
tax regulations. Distributions from any net realized capital gains will
usually be declared in December.

GENERAL INFORMATION

The Lutheran Brotherhood Family of Funds, a business trust organized
under the laws of the State of Delaware, was established pursuant to a
Master Trust Agreement dated July 15, 1993. The Trust is authorized to issue
shares of beneficial interest, par value $.001 per share, divisible into an
indefinite number of different series and classes and operates as a "series
company" as provided by Rule 18f-2 under the 1940 Act. Currently, eleven
series of the Trust exist and each series is authorized to issue three
classes of shares: Class A, Class B and Institutional Class shares.
Effective October 31, 1997, all of the outstanding shares of the Funds were
redesignated as Class A shares and, immediately thereafter, shares held by
Lutheran institutions and church organizations with accounts of at least
$100,000 were automatically converted to Institutional Class shares. The
attributes of the various classes of shares are more fully described in
their respective prospectus. The interests of investors in the various
series of the Trust will be separate and distinct.

The assets received by the Trust from the issue and sale of shares of a
Fund and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are specially allocated to each class of such Fund
and constitute the underlying assets of such Fund. The underlying assets of
such Fund are required to be segregated on the books of account, and are
charged with the expenses in respect of each class of the Fund and with a
share of the general expenses of the Trust. Under the Trust's Multiple Class
Expense Allocation Plan adopted under Rule 18f-3 of the 1940 Act, (i)
advisory fees, custodial fees and other expenses relating to the management
of the Fund's assets ("Management-Related Expenses") are allocated to each
class on the basis of the net asset value of that class in relation to the
net asset value of the Series, (ii) expenses of the Institutional Class
shares of each Series (other than Management-Related Expenses) and
shareholder servicing fees with respect to Institutional Class shares are
specially allocated to the Institutional Class and (iii) expenses of the
Class A and Class B shares of each series, other than Management-Related
Expenses and Rule 12b-1 and shareholder servicing fees with respect to Class
A and Class B shares, are allocated to each such class based on the net
asset value of such class in relation to the aggregate net asset value of
the Class A and Class B shares. Upon any liquidation of a Fund,
shareholders thereof are entitled to share pro rata in the net assets of
each class available for distribution.

CALCULATION OF PERFORMANCE DATA

The total return and yield of the Class A, Class B and Institutional
Class shares will be calculated as set forth below. Total return and yield
are computed separately for each class of shares of the Funds.

Performance data reflects Rule 12b-1 fees, shareholder servicing fees
and sales charges, where applicable, as follows:

Class Rule 12b-1 Shareholder Sales Charge
Servicing Fee
---------- ------------- -------------

A None .25% of average Maximum 4.0% initial
daily net assets sales charge
reflected(1)

B .75% of .25% of average 1- and 5- year
average daily daily net assets periods reflect a
net assets(1) 5% and 1% CDSD,
respectively(1)

Institutional None .15% None
- - -----------------

(1) Except for LB Limited-term Bond Fund, which is not subject to
initial sales charges, CDSC or Rule 12b-1 fees.

Calculations of performance data for all Funds in this section reflect
the subsidization by Fund affiliates of fees and expenses relating to the
Fund during the subject period. In the absence of such subsidization actual
performance would be lower.

TOTAL RETURN

Average annual total return is computed by determining the average
annual compounded rates of return over the designated periods that, if
applied to the initial amount invested would produce the ending redeemable
value, according to the following formula:

P(1+T)(n) = ERV

[In the above formula "n" is an exponent.]

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years

ERV = ending redeemable value at the end of the
designated period assuming a hypothetical
$1,000 payment made at the beginning of the
designated period

The calculation is based on the further assumptions that the maximum
initial sales charge applicable to the investment is deducted, and that all
dividends and distributions by the Fund are reinvested at net asset value on
the reinvestment dates during the periods. All accrued expenses are also
taken into account as described later herein.

YIELD

Yield is computed by dividing the net investment income per share
earned during a recent month or other specified 30-day period by the
applicable maximum offering price per share on the last day of the period
and annualizing the result, according to the following formula:

[A formula is expressed here that is as follows:

Yield is equal to 2 times the difference between the sixth power of a
number and 1, where that number is equal to the sum of the quotient of a
divided by b and 1.]

Where:

a = dividends and interest earned during the period
minus expenses accrued for the period (net of
voluntary expense reductions by the Investment
Manager)

b = the average daily number of shares outstanding
during the period that were entitled to receive
dividends multiplied by the maximum offering
price per share on the last day of the period

To calculate interest earned (for the purpose of "a" above) on debt
obligations, a Fund computes the yield to maturity of each obligation held
by a Fund based on the market value of the obligation (including actual
accrued interest) at the close of the last business day of the preceding
period, or, with respect to obligations purchased during the period, the
purchase price (plus actual accrued interest). The yield to maturity is then
divided by 360 and the quotient is multiplied by the market value of the
obligation (including actual accrued interest) to determine the interest
income on the obligation for each day of the period that the obligation is
in the portfolio. Dividend income is recognized daily based on published
rates.

In the case of a tax-exempt obligation issued without original issue
discount and having a current market discount, the coupon rate of interest
is used in lieu of the yield to maturity. Where, in the case of a tax-exempt
obligation with original issue discount, the discount based on the current
market value exceeds the then-remaining portion of original issue discount
(market discount), the yield to maturity is the imputed rate based on the
original issue discount calculation. Where, in the case of a tax-exempt
obligation with original issue discount, the discount based on the current
market value is less than the then-remaining portion of original issue
discount (market premium), the yield to maturity is based on the market
value. Dividend income is recognized daily based on published rates.

With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to
monthly payments of principal and interest ("paydowns"), a Fund accounts for
gain or loss attributable to actual monthly paydowns as a realized capital
gain or loss during the period. Each Fund has elected not to amortize
discount or premium on such securities.

Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the
end of the base period, has not been declared as a dividend, but is
reasonably expected to be declared as a dividend shortly thereafter. The
maximum offering price includes, as applicable, a maximum sales charge of
4.0%.

All accrued expenses are taken into account as described later herein.

Yield information is useful in reviewing a Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to
compare an investment in a Fund's shares with bank deposits, savings
accounts and similar investment alternatives which are insured and/or often
provide an agreed or guaranteed fixed yield for a stated period of time.
Shareholders should remember that yield is a function of the kind and
quality of the instruments in the Fund's portfolio, portfolio maturity and
operating expenses and market conditions.

ACCRUED EXPENSES

Accrued expenses include all recurring expenses that are charged to all
shareholder accounts in proportion to the length of the base period. The
average annual total return and yield results take sales charges, if
applicable, into account, although the results do not take into account
recurring and nonrecurring charges for optional services which only certain
shareholders elect and which involve nominal fees.

Accrued expenses include the subsidization by Fund affiliates of fees
or expenses relating to a Fund, during the subject period.

NONSTANDARDIZED TOTAL RETURN

A Fund may provide the above described average annual total return
results for periods which end no earlier than the most recent calendar
quarter end and which begin one, five and ten years before such quarter end
and at the commencement of such Fund's operations. In addition, a Fund may
provide nonstandardized total return results for differing periods, such as
for the most recent six months, and/or without taking sales charges into
account. Such nonstandardized total return is computed as otherwise
described under "Total Return" except that the result may or may not be
annualized, and as noted any applicable sales charge may not be taken into
account and therefore not deducted from the hypothetical initial payment of
$1,000.

DESCRIPTION OF DEBT RATINGS

Moody's Investors Service, Inc. describes grades of corporate debt
securities and "Prime-1" and "Prime-2" commercial paper as follows:

BONDS:

Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged". Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.

A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.

Baa Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact
have speculative characteristics as well.

Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate
and thereby not well safeguarded during both good and bad times
over the future. Uncertainty of position characterizes bonds in
this class.

B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.

Caa Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect
to principal or interest.

Ca Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or
have other marked shortcomings.

C Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.

COMMERCIAL PAPER:

Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of senior short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:

o Leading market positions in well-established industries.

o High rates of return of funds employed.

o Conservative capitalization structures with moderate reliance
on debt and ample asset protection.

o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.

o Well established access to a range of financial markets and
assured sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of senior short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above
but to a lesser degree. Earning trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.

Standard & Poor's Corporation describes grades of corporate debt
securities and "A" commercial paper as follows:

BONDS:

AAA Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.

AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.

A Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher rated categories. However, the obligor's capacity to meet
its financial commitments on the obligation is still strong.

BBB Debt rated BBB exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitments on the obligation in this category than in higher rated
categories.

BB Debt rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity of the obligor to meet its
financial commitments on the obligation. The BB rating category is
also used for debt subordinated to senior debt that is assigned an
actual or implied BBB-rating.

B Debt rated B is more vulnerable to nonpayment but currently has the
capacity to meet its financial commitments on the obligation.
Adverse business, financial, or economic conditions will likely
impair the obligor's capacity or willingness to meet its financial
commitments on the obligation.

The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.

CCC Debt rated CCC is vulnerable to nonpayment, and is dependent upon
favorable business, financial, and economic conditions for the
obligor to meet its financial commitments on the obligation. In the
event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitments on the obligation.

The CCC rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied B or B- rating.

CC The rating CC typically is currently highly vulnerable to
nonpayment.

C The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken but payments on the
obligation are being continued.

D Debt rated D is in payment default. The D rating category is used
when payments are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition or the taking
of similar action if payments on the obligation are jeopardized.

Provisional Ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while addressing
credit quality subsequent to completion of the project, makes no comment on
the likelihood of, or the risk of default upon failure of, such completion.
The investor should exercise judgment with respect to such likelihood and
risk.

Commercial Paper: Commercial paper rated A by Standard & Poor's
Corporation has the following characteristics: liquidity ratios are better
than the industry average; long-term senior debt rating is "A" or better
(however, in some cases a "BBB" long-term rating may be acceptable); the
issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowances made for unusual
circumstances. Also, the issuer's industry typically is well established,
the issuer has a strong position within its industry and the reliability and
quality of management is unquestioned. Issuers rated A are further referred
to by use of numbers 1, 2 and 3 to denote relative strength within this
classification.