Our Message To You
October 31, 1999
Dear Shareholder,
The 12 months ended October 31, 1999, provided strong evidence of
fluctuating market dynamics. Early in the period, the markets were
dominated by industrial cyclical and value stocks, while late in the
period there was a reemergence of large-company growth stocks.
Diversified investors with exposure to all of these sectors were
rewarded not only with solid returns during this time, but endured a
lower level of volatility in their portfolios, as well.
As the past fiscal year clearly shows, the time-honored principle of
risk diversification is still just as important as ever. With this in
mind, we at Lutheran Brotherhood understand the need to provide our
members with competitive products, representing an ever-expanding array
of asset classes. As of November, we have expanded our investment
offerings even further with the addition of three new mutual funds.
[PHOTO OMITTED: ROLF F. BJELLAND]
The Lutheran Brotherhood Growth Fund and Lutheran Brotherhood Value Fund
provide Lutheran Brotherhood members access to both the growth and value
segments of the equities market. Although both funds will aim for long-
term capital appreciation, portfolio managers will emphasize different
types of stocks to meet these goals.
The Lutheran Brotherhood Limited Maturity Bond Fund offers an
alternative to investors with shorter time horizons, but who desire a
higher level of income than money market instruments typically provide.
For investors with longer time frames, it provides added stability and
income within a diversified portfolio. The Fund invests in high-quality,
short- and intermediate-term fixed-income securities.
As always, the degree to which any of these funds are suitable for your
portfolio depends largely on your individual investment profile. Consult
your Lutheran Brotherhood Securities Corp. registered representative to
determine whether your portfolio contains the right mix of assets for
your investment needs, and whether one or more of our new offerings
could provide added value.
We believe the past 10 years have been very rewarding for Lutheran
Brotherhood investors, and we look forward to the years ahead. Thank you
for turning to us for your financial solutions. All of us at Lutheran
Brotherhood take pride in serving our members and wish you continued
success in the coming decade.
Sincerely,
/S/ ROLF F. BJELLAND
Rolf F. Bjelland
Chairman and President
Lutheran Brotherhood Family of Funds
Economic and Market Overview October 31, 1999
Randall L. Boushek
Senior Vice President and Chief Investment Officer
Strong economic growth and a burgeoning market for technology services
set the pace for securities market activity during the 12-month period
ending October 31, 1999. Technology stocks were the clear winners in a
market replete with lofty stock valuations and speculative bidding in
various sectors. However, investor confidence was offset by concerns
about potential inflation and the direction of monetary policy, which
contributed to unsettled trading in the broader securities markets.
U.S. Economy
Amid the second-longest expansion in its history, the U.S. economy saw
joblessness reach its lowest level in nearly 30 years, as the national
unemployment rate dipped to 4.1% in October. But despite tight labor
markets, wage pressures remained contained, reflecting continued
productivity gains throughout the economy.
Strong consumer spending continued to drive economic growth during much
of the period. After expanding at a rate of 3.7% during the first
quarter of 1999, U.S. economic output, as measured by growth in gross
domestic product (GDP), leveled off to 1.9% during the second quarter.
GDP growth shot up again by an estimated 4.8% during the third quarter,
however, surpassing most economists' expectations.
U.S. exports also edged upward during the 3rd Quarter of 1999, as the
economies of America's trading partners continued to recover and the
dollar weakened versus the Japanese yen. This news was particularly
welcome for U.S. farmers suffering from slumping demand and low
commodity prices. However, the rise in exports was offset by even
stronger levels of imports, leading to record deficits in the U.S.
current account.
Inflation & Monetary Policy
In a preemptive strike against possible inflation, the Federal Reserve
Open Markets Committee raised the overnight federal funds rate in June
and August, reversing two of the three reductions it enacted last year
in response to the global credit crisis. The two Federal Reserve rate
hikes signaled a temporary shift toward tighter monetary policy and
contributed to increased volatility in both the stock and bond markets
toward the end of the 12-month reporting period.
Despite inflationary pressures and steadily rising energy costs, overall
prices remained remarkably stable; the major indicators of inflation
showed only modest gains during the period. In addition, the explosive
growth of electronic commerce via the Internet continued to provide an
extra element of price competition, limiting the pricing power of many
businesses.
Equity Performance
The roaring technology sector dominated the equities markets, as
investors continued to pay premiums for stocks in rapid-growth
industries such as wireless communications and the Internet. The
technology-heavy NASDAQ Index finished October with a flourish, just shy
of the 3000 mark. The NASDAQ's trailing 12-month return of 68% eclipsed
the combined total returns of the Dow Jones Industrial Average and the
large-company S&P 500 Index, which returned 26.96% and 25.67%,
respectively, during the reporting period.
Small- and mid-cap stocks received a much-needed boost in the latter
part of 1998 and the first quarter of 1999, as investor bias tilted
toward economically sensitive cyclical stocks and smaller, value-
oriented issues. Largely due to this brief rotation in market
leadership, the S&P 400 MidCap Index gained a healthy 21.07% during the
12-month period, while the small-company Russell 2000 trailed slightly
at 14.94%. During the third quarter of 1999, however, market breadth
narrowed again, and much of the stock market's gains came at the hands
of a relatively small number of large, high-profile growth issues.
During the second half of the period, foreign markets as a whole
generally outperformed those in the United States, rewarding investors
with international exposure. The Morgan Stanley EAFE Index closed out
the period with a total return of 23.37%, buoyed by economic recovery in
the Pacific Rim and generally strong economic fundamentals in Europe.
Fixed Income Performance
Rising interest rates and improving economic conditions overseas
combined to keep investment-grade bond performance flat throughout much
of the period. The yield on the benchmark 30-year U.S. Treasury bond
rose from a low of 4.96% to just over 6%, while the Lehman Brothers
Aggregate Index returned just 0.53% for the 12-month period.
High-yield bonds generally fared better than investment-grade bonds,
particularly during the first seven months of 1999. However, choppy
equity markets contributed to increased high-yield volatility later in
the year, cutting into the performance of the Lehman Brothers High Yield
Index, which returned 4.34% during the 12-month period. In the municipal
bond market, the Lehman Brothers Municipal Bond Index had a return of -
1.77%, despite healthy demand from retail investors and a sharp
reduction in new bond issuance.
Outlook
Because investor expectations are so high, many growth companies,
particularly in the technology sector, will come under heavy pressure to
produce earnings growth commensurate with valuations. If recent trends
are any indication, companies with earnings disappointments could be
punished with sharply falling share prices. If this trend continues or
becomes more common, the result might be greater volatility in the stock
market.
Fortunately, current economic conditions provide a favorable environment
for corporate earnings growth--both inflation and interest rates remain
low from a historical perspective, the U.S. economy is nearing the
longest period of expansion ever recorded, and international market
conditions are steadily improving. Additionally, the lower relative
value of the dollar is providing exporters with a much-needed degree of
pricing power. Widening U.S. trade deficits indicate that this pattern
may not change anytime soon.
Finally, financial managers have the direction they have been waiting
for from the Federal Reserve Board. With the November 1999 hike of 0.25%
in the federal funds rate, the Federal Reserve has now taken back the
rate cuts of 1998. The Fed's recent adoption of a neutral tightening
bias in November could ultimately signal the end of higher short-term
interest rates in the near future. A more stable monetary policy could,
in turn, boost overall bond market performance and help curb volatility
in the equity markets.
Year 2000 Readiness Disclosure Statement
The Year 2000 issue ("Y2K") continues to be an area of focus for
corporations and units of government worldwide. Y2K centers on the
ability of computers and date-sensitive components to accurately
distinguish dates in their program codes for the year 2000 and beyond.
At Lutheran Brotherhood, we remain committed to minimizing the impact of
Y2K on our investment portfolios. In keeping with our commitment, we
have allocated significant resources and have updated and tested our
critical computer systems. Additionally, we have incorporated the Y2K
issue into our investment research, reviewing the Y2K compliance efforts
of securities issuers as part of an overall company value assessment.
LB Opportunity Growth Fund
[PHOTO OMITTED: RICHARD T. WHITNEY]
Richard T. Whitney is portfolio manager of the LB Opportunity Growth
Fund and a managing director of T. Rowe Price Associates, the investment
subadvisor for the Fund. Rich has been with T. Rowe Price since 1985 and
heads the firm's investment advisory committee. Rich is a Chartered
Financial Analyst.
Prices for small-company stocks advanced strongly over the past year, as
the economic outlook improved and investors recognized the significant
investment opportunities in the small-cap sector. However, prices were
volatile during this time, with gains focused on a limited group of
companies with exceptionally high growth rates and greater market
capitalizations. (Market capitalization is calculated by multiplying the
number of stock shares outstanding by the price for those shares.)
Because stocks of extremely fast-growing sectors were so richly priced,
we remained quite selective in our purchases in these areas, instead
diversifying into other groups with more reasonable valuations. Our
greater emphasis on growth helped the Fund outpace the Russell 2000
Index of small-company stocks, which has less of a growth orientation.
However, due to its more conservative approach toward stock valuation,
the Fund lagged the average return for small-company growth funds.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 3.3%
Common Stocks 96.7%
The Fund's portfolio composition and top holdings represent all share
classes.
During the 12 months ended October 31, 1999, the Fund had a total return
(based on Class A Share NAV) of 19.61%, versus 14.94% for the Russell
2000 Index. Over the same time small-company growth funds tracked by
Lipper, Inc.,* had an average return of 28.50%.
[GRAPHIC OMITTED: TOP 10 HOLDINGS % OF PORTFOLIO]
Top 10 Holdings % of Portfolio
- ----------------------------------------------------------------------
Micrel, Inc. 0.9%
QRS Corp. 0.9%
Microchip Technology, Inc. 0.8%
Lattice Semiconductor Corp. 0.8%
Zebra Technologies Corp., Class B 0.8%
Emmis Communications Corp., Class A 0.8%
NCO Group, Inc. 0.8%
CDW Computer Centers, Inc. 0.7%
QLogic Corp. 0.7%
Proxim, Inc. 0.7%
These holdings represent 7.9% of the Fund's total investment portfolio.
Looking for Growth at Attractive Prices
In the final months of 1998, the Fund benefited from increased positions
in stocks of consumer growth, media, telecommunications, and financial
firms that performed well as small-cap stocks rebounded from an earlier
correction. Because economic crises overseas were clouding the domestic
outlook at the end of 1998, we trimmed investments in economically
sensitive sectors like capital goods, energy, and basic materials.
During the first months of 1999, as investors shifted into stocks with
higher growth rates, strong returns from shares of media, financial
services, and technology firms in the Fund helped offset disappointing
performances by health care, business services, and consumer cyclical
shares. At that time, we took advantage of investment opportunities in
reasonably priced stocks of companies with higher growth rates in the
technology, business services, health care, and media sectors. We
continued to de-emphasize sectors with greater economic sensitivity.
[GRAPHIC OMITTED: TOP 10 INDUSTRIES]
TOP 10 INDUSTRIES
Computer Service & Software 19.6%
Electronic Components 9.9%
Business Services 8.0%
Retail 6.9%
Bank & Finance 5.4%
Hospital Supplies & Management 4.9%
Telecommunications Equipment 4.5%
Pharmaceuticals 3.8%
Electronic Systems 3.5%
Miscellaneous Consumer Products 2.3%
These holdings represent 68.8% of the Fund's total investment portfolio.
The additions of technology shares helped to boost returns in mid-1999,
as the technology sector rallied sharply. Investments in
telecommunications stocks also enhanced returns, along with investments
in energy firms, which benefited from increasing oil prices. The Fund's
health care holdings continued to lag, and financial shares also
underperformed as the Federal Reserve raised short-term interest rates.
Selected portfolio changes at this point continued to emphasize
attractive growth rates and reasonable valuations.
In the final months of the period, the Fund benefited from better-than-
average returns from its technology, business services, and
transportation holdings. During that time we added shares in the
electronic components group that offered attractive growth prospects.
Continued Focus on Growth and Diversification
We plan to maintain the Fund's emphasis on growth at a reasonable price
and diversification in months to come. In a sector where most shares are
attractively priced versus large-cap issues, we expect the growth
companies that we have chosen to perform well, especially if recent
hikes in interest rates create a slower-paced economy.
LB Opportunity Growth Fund seeks long-term growth of capital by
investing primarily in common stocks of small companies.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 1/8/93
Shareholder
Accounts: 55,720
Total Net Assets
(in millions): $223.3
[GRAPHIC WORM CHART OMITTED:]
Performance Through October 31, 1999
Growth of a $10,000 Investment
Class A shares (since 1/31/93)
Russell Lipper Median
Month End LB Opportunity 2000 Small Company Consumer
Date Growth Fund Index Growth Stocks Price Index
- ------------------------------------------------------------------------
1/31/93 10,000 10,000 10,000 10,000
2/28/93 9,156 9,769 9,608 10,035
3/31/93 9,512 10,086 9,934 10,070
4/30/93 9,267 9,809 9,619 10,098
5/31/93 9,967 10,243 10,127 10,112
6/30/93 10,122 10,307 10,206 10,126
7/31/93 10,055 10,449 10,263 10,126
8/31/93 10,755 10,900 10,737 10,155
9/30/93 11,443 11,208 11,076 10,175
10/31/93 11,831 11,497 11,232 10,218
11/30/93 11,387 11,122 10,886 10,224
12/31/93 11,687 11,503 11,348 10,224
1/31/94 11,964 11,863 11,650 10,253
2/28/94 11,842 11,820 11,643 10,287
3/31/94 11,043 11,197 11,014 10,323
4/30/94 11,121 11,263 11,016 10,337
5/31/94 10,699 11,137 10,778 10,344
6/30/94 10,078 10,762 10,388 10,379
7/31/94 10,433 10,938 10,451 10,407
8/31/94 11,343 11,547 11,048 10,449
9/30/94 11,509 11,508 11,285 10,477
10/31/94 11,942 11,462 11,275 10,484
11/30/94 11,698 10,999 10,848 10,498
12/31/94 11,998 11,295 11,265 10,498
1/31/95 11,476 11,153 11,229 10,540
2/28/95 12,087 11,617 11,539 10,582
3/31/95 12,531 11,816 11,892 10,617
4/30/95 12,619 12,079 12,050 10,653
5/31/95 12,963 12,286 12,232 10,673
6/30/95 14,140 12,924 12,880 10,694
7/31/95 15,716 13,669 13,823 10,694
8/31/95 15,971 13,962 14,062 10,723
9/30/95 16,315 14,212 14,375 10,743
10/31/95 15,350 13,577 13,864 10,779
11/30/95 16,049 14,147 14,366 10,772
12/31/95 16,523 14,521 14,592 10,765
1/31/96 16,249 14,505 14,520 10,828
2/29/96 17,315 14,957 15,088 10,862
3/31/96 17,698 15,267 15,450 10,919
4/30/96 19,393 16,084 16,600 10,961
5/31/96 20,759 16,717 17,262 10,982
6/30/96 19,338 16,030 16,594 10,988
7/31/96 17,630 14,631 15,222 11,010
8/31/96 18,682 15,481 16,109 11,031
9/30/96 20,158 16,086 16,919 11,066
10/31/96 18,614 15,839 16,601 11,101
11/30/96 17,944 16,491 17,108 11,122
12/31/96 18,532 16,923 17,381 11,122
1/31/97 18,887 17,262 17,769 11,157
2/28/97 17,174 16,844 17,149 11,192
3/31/97 15,261 16,049 16,291 11,221
4/30/97 14,535 16,094 16,238 11,234
5/31/97 16,757 17,883 18,111 11,228
6/30/97 17,683 18,651 19,098 11,241
7/31/97 18,686 19,518 20,250 11,255
8/31/97 19,134 19,965 20,663 11,277
9/30/97 21,340 21,426 22,205 11,304
10/31/97 20,013 20,486 21,239 11,333
11/30/97 19,165 20,352 20,994 11,325
12/31/97 18,457 20,709 21,221 11,311
1/31/98 17,911 20,381 20,843 11,333
2/28/98 19,002 21,888 22,436 11,354
3/31/98 19,725 22,789 23,457 11,374
4/30/98 19,773 22,915 23,616 11,396
5/31/98 18,168 21,680 22,339 11,417
6/30/98 18,296 21,725 22,394 11,430
7/31/98 16,868 19,965 20,789 11,445
8/31/98 13,177 16,092 16,585 11,459
9/30/98 14,188 17,352 17,514 11,473
10/31/98 14,974 18,060 18,227 11,501
11/30/98 15,985 19,006 19,353 11,501
12/31/98 17,670 20,183 20,646 11,493
1/31/99 17,430 20,445 20,972 11,522
2/28/99 15,760 18,797 19,106 11,536
3/31/99 16,049 19,091 19,702 11,571
4/30/99 16,370 20,801 20,561 11,655
5/31/99 17,028 21,109 20,651 11,655
6/30/99 18,120 22,057 22,516 11,655
7/31/99 18,088 21,448 22,458 11,690
8/31/99 17,301 20,659 22,092 11,718
9/30/99 17,783 20,659 22,692 11,774
10/31/99 $17,911 $20,748 $23,925 $11,795
As you compare performance, please note that the LB Opportunity Growth
Fund's performance reflects the maximum 4% sales charge. The
performances of the Russell 2000 Index and the Lipper Median do not
reflect any such charges. If you were to purchase any of the individual
stocks or funds represented in these indexes, any charges you would pay
would reduce your total return as well.
INSET LEGEND READS:
LB Opportunity
Growth Fund
$17,911
Lipper Median
Small Company
Growth Stocks
$23,925
Russell 2000
Index
$20,748
Consumer
Price Index
$11,795
INSET BOX ON CHART READS:
LB Opportunity Growth Fund
Annualized Total Returns*
- ---------------------------------------------------------------------
Since
Inception
Class A shares 1-Year 5-Year 1/8/93
Net Asset Value 19.61% 8.44% 10.00%
Public Offering Price 14.82% 7.56% 9.34%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 18.66% -6.08%
If Redeemed (CDSC) 13.66% -7.97%
Institutional shares
Net Asset Value 19.89% -5.19%
*See accompanying notes to Portfolio Management Reviews.
*Due to changes in Lipper, Inc., definitions, this return is a
combination of average total return from the Lipper Small-Cap Funds
category (10/31/98-9/15/99) and the Lipper Small-Cap Growth Funds
category (9/16/99-10/31/99).
LB Mid Cap Growth Fund
[PHOTO OMITTED: BRIAN L. THORKELSON]
Brian L. Thorkelson is portfolio manager for the Lutheran Brotherhood
Mid Cap Growth Fund. He joined Lutheran Brotherhood in 1987, working for
five years as a bond trader and another five years as an equity analyst
for several Lutheran Brotherhood portfolios.
As investors became more confident in the economy over the last year,
they took advantage of the many attractive opportunities in stocks with
medium market capitalizations. (Market capitalization is calculated by
multiplying the number of stock shares outstanding by the price of those
shares.) Mid-cap stocks with strong growth potential and greater
capitalizations fared particularly well in this environment. By
emphasizing high-growth sectors like technology and telecommunications
during the year, and reducing attention to issues with lesser
capitalizations, we helped the LB Mid Cap Growth Fund outpace its market
benchmarks by significant margins.
For the 12 months ended October 31, 1999, the Fund had a total return
(based on Class A Share NAV) of 40.70%. That compares to an average
return of 31.43% for mid-cap growth funds tracked by Lipper, Inc.,* and
21.07% for the Standard & Poor's 400 MidCap Index.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 6.4%
Common Stocks 93.6%
The Fund's portfolio composition and top holdings represent all share
classes.
Increased Focus on Technology
When the reporting period began, new purchases that we made during the
market correction of 1998's third quarter left the Fund overweighted
versus the S&P 400 MidCap Index in technology, energy, health care, and
biotechnology shares. We continued to add technology shares in the final
months of 1998, while also increasing stocks of capital goods firms.
[GRAPHIC OMITTED: TOP 10 HOLDINGS % OF PORTFOLIO]
Top 10 Holdings % Of Portfolio
- ------------------------------------------------------------------------
VoiceStream Wireless Corp. 1.1%
America Online, Inc. 0.9%
Synopsys, Inc. 0.9%
ADC Telecommunications, Inc. 0.9%
Siebel Systems, Inc. 0.9%
Comverse Technology, Inc. 0.9%
Univision Communications, Inc., Class A 0.8%
Sprint Corp. (FON Group) 0.8%
General Motors Corp., Class H 0.7%
Cox Communications, Inc. 0.7%
These holdings represent 8.6% of the Fund's total investment portfolio.
The Fund's technology holdings, particularly in communications and
Internet firms, enjoyed strong gains in the first months of 1999, as did
shares of financial firms. With increased economic optimism, holdings in
the capital goods sector rose, too. Of further benefit was the Fund's
underweighting in utilities, which lagged as interest rates rose. These
positives offset disappointing returns from health care shares.
After raising the Fund's technology weighting through April, we began to
take profits in some companies that we believed were overpriced--
especially Internet-based firms. We also trimmed holdings of better-
performing capital goods companies. We used the profits from these sales
to add shares of semiconductor manufacturers, communications-services
firms, and energy companies that offered greater potential for growth.
At the end of the second quarter, the Fund had a greater-than-market
weighting in technology, health care, and consumer-services stocks and
was slightly underweighted in consumer cyclical issues.
[GRAPHIC OMITTED: TOP 10 INDUSTRIES]
Top 10 Industries
Electronic Equipment 14.6%
Computer Software 12.7%
Bank & Finance 8.1%
Drugs & Health Care 7.7%
Retail 6.7%
Services 6.0%
Telephone & Telecommunications 5.8%
Computers & Office Equipment 3.9%
Broadcasting 3.6%
Telecommunications Equipment 3.5%
These holdings represent 72.6% of the Fund's total investment portfolio.
We continued to reduce investments in capital goods and consumer-
cyclical stocks in the final months of the period, while also trimming
financial and energy issues. We used most of the proceeds from these
sales to increase holdings in the technology sector. The further strong
performance of technology and telecommunications shares during this time
helped offset disappointing returns from financial stocks hurt by rising
interest rates.
Technology to Remain Large Position
We believe the future performance of mid-cap stocks will be influenced,
in large part, by the direction of interest rates. Further rises in
interest rates could squeeze the profits of many mid-cap firms. If rates
stabilize or head lower, mid-cap shares could become more attractive.
The sector should also benefit as concerns about the potential year 2000
("Y2K") computer problems begin to fade.
With strong growth prospects for Internet stocks and other technology
shares, we plan to maintain our focus on those issues. If a positive
economic outlook improves the earnings picture for smaller companies
within the mid-cap sector, we may take greater advantage of
opportunities in those issues.
LB Mid Cap Growth Fund seeks long-term growth of capital by investing
primarily in common stocks of medium-sized companies.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 5/30/97
Shareholder
Accounts: 24,733
Total Net Assets
(in millions): $76.3
[GRAPHIC WORM CHART OMITTED:]
Performance Through October 31, 1999
Growth of a $10,000 Investment
Class A shares (since 5/30/97)
Lipper Median
Month End LB Mid Cap S&P 400 Mid Cap Consumer
Date Growth Fund MidCap Index Stock Funds Price Index
- ----------------------------------------------------------------------
5/31/97 10,000 10,000 10,000 10,000
6/30/97 9,979 10,285 10,395 10,012
7/31/97 10,622 11,303 11,225 10,025
8/31/97 10,519 11,290 11,193 10,044
9/30/97 11,079 11,939 11,924 10,068
10/31/97 10,716 11,419 11,380 10,094
11/30/97 10,560 11,588 11,378 10,087
12/31/97 10,802 12,038 11,571 10,075
1/31/97 10,647 12,038 11,368 10,094
2/28/97 11,608 13,035 12,382 10,112
3/31/98 12,083 13,623 12,962 10,131
4/30/98 12,171 13,872 13,084 10,150
5/31/98 11,520 13,248 12,484 10,168
6/30/98 11,862 13,331 12,760 10,181
7/31/98 11,299 12,814 12,113 10,194
8/31/98 8,979 10,431 9,763 10,206
9/30/98 9,576 11,434 10,439 10,218
10/31/98 10,150 12,456 11,064 10,244
11/30/98 10,890 13,078 11,720 10,244
12/31/98 12,050 14,658 12,915 10,237
1/31/99 12,502 14,087 13,068 10,262
2/28/99 11,774 13,349 12,204 10,274
3/31/99 12,502 13,723 12,721 10,306
4/30/99 12,944 14,804 13,402 10,381
5/31/99 12,790 14,870 13,457 10,381
6/30/99 13,762 15,667 14,276 10,381
7/31/99 13,596 15,333 14,021 10,412
8/31/99 13,342 14,807 13,718 10,437
9/30/99 13,309 14,349 13,588 10,487
10/31/99 $14,281 $15,081 $14,310 $10,506
As you compare performance, please note that the LB Mid Cap Growth
Fund's performance reflects the maximum 4% sales charge. The
performances of the S&P 400 MidCap Index and the Lipper Median do not
reflect any such charges. If you were to purchase any of the individual
stocks or funds represented in these indexes, any charges you would pay
would reduce your total return as well.
INSET LEGEND READS:
LB Mid Cap
Growth Fund
$14,281
S&P 400
MidCap Index
$15,081
Lipper Median
MidCap
Stock Funds
$14,310
Consumer
Price Index
$10,506
INSET BOX ON CHART READS:
LB Mid Cap Growth Fund
Annualized Total Returns*
- ---------------------------------------------------------------------
Since
Inception
Class A shares 1 Year 5/30/97
Net Asset Value 40.70% 17.84%
Public Offering Price 35.11% 15.85%
Since
Inception
Class B shares 1 Year 10/31/97
If Held (NAV) 39.69% 14.59%
If Redeemed (CDSC) 34.69% 12.83%
Institutional shares
Net Asset Value 41.04% 15.72%
*See accompanying notes to Portfolio Management Reviews.
*Due to changes in Lipper, Inc., definitions, this return is a
combination of average total return from the Lipper Mid-Cap Funds
category (10/31/98-9/15/99) and the Lipper Mid-Cap Core Funds category
(9/16/99-10/31/99).
LB World Growth Fund
[PHOTO OMITTED: DAVID J. L. WARREN]
David J.L. Warren is president of Rowe Price-Fleming International,
investment subadvisor for the LB World Growth Fund. He leads a team of
12 portfolio managers that has managed the Fund's assets since its
inception in September of 1995. David has worked in investment research
and management for over 20 years, and has managed international
portfolios with Rowe Price-Fleming since 1984.
In the past year, foreign economies rebounded from their turmoil of
1998, spurring securities market rallies in many foreign countries.
This, combined with healthy performances from many individual stocks,
helped the LB World Growth Fund earn a total return of 19.21% (based on
Class A Share NAV) for the 12 months ended October 31, 1999.
With large investments from abroad, stock gains in Asia were
particularly robust. Because of the region's earlier problems, however,
we had underweighted Japanese stocks in the Fund versus its market
benchmark, the Morgan Stanley Capital International Europe, Australasia,
and Far East (EAFE) Index. At the same time, the Fund was slightly
overweighted in stocks from Latin America, which underperformed. As a
result of these regional weightings, the Fund underperformed the EAFE
Index, which had a total return of 23.37% for the period. Over the same
time, international stock funds tracked by Lipper, Inc., had an average
return of 25.64%.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Preferred Stocks 0.5%
Short-Term Securities 3.6%
Common Stocks & Warrants 95.9%
The Fund's portfolio composition and top holdings represent all share
classes.
Economies Recover Abroad
With improving economic reports, continued corporate restructuring and
greater stability in neighboring Asian markets, stocks in Japan rose
sharply through July of 1999. After rallying at the end of 1998, stocks
in Europe edged lower through the first half of 1999 on disappointing
economic news and a weakening in the value of the European common
currency ("euro"). Stocks in Latin America rallied moderately during
this time.
Our strategy in such an environment was to trade European stocks that
had performed well for shares with greater potential, including stocks
of insurance, telecommunications, business services, media, and retail
firms. In Asia we added telecommunications, banking, retail, and
electronics shares. In Latin America we sold energy shares from
Argentina.
[GRAPHIC OMITTED: TOP 10 HOLDINGS COUNTRY % OF PORTFOLIO]
% of
Top 10 Holdings Country Portfolio
- ----------------------------------------------------------------------
National Westminster Bank United Kingdom 2.3%
Shell Transport & Trading Co. United Kingdom 1.6%
Nokia (AB) OY Finland 1.6%
Nestle SA Switzerland 1.6%
SmithKline Beecham plc United Kingdom 1.5%
ING Groep NV Netherlands 1.5%
Glaxo Wellcome United Kingdom 1.5%
Murata Manufacturing Japan 1.4%
Sony Corp. Japan 1.4%
Nippon Telegraph & Telecom Corp. Japan 1.3%
These holdings represent 15.7% of the Fund's total investment portfolio.
In the final months of the period, stock prices in Asia ebbed, as demand
from foreign investors weakened. With further economic improvement in
Europe, stocks in that region outperformed while, in Latin America,
weakness in the Brazilian currency offset benefits from that country's
continued economic improvement. At that time, we traded some richly
priced Japanese holdings for issues with brighter prospects, including
some banking firms. Making the most of industry consolidation in Europe,
we made trades within the retail sector and also added technology
shares. Encouraged by economic progress in Southeast Asia, we bought
financial shares in Singapore and India.
[GRAPHIC OMITTED: TOP 10 COUNTRIES % OF PORTFOLIO]
Top 10 Countries % of Portfolio
- ----------------------------------------------------------------------
Japan 22.0%
United Kingdom 16.5%
France 11.7%
Netherlands 8.4%
Switzerland 6.9%
Germany 6.4%
Italy 4.4%
Sweden 3.5%
Spain 3.0%
Hong Kong 2.3%
These holdings represent 85.1% of the Fund's total investment portfolio.
An Optimistic Outlook
Further economic recovery should benefit most foreign stock markets in
coming months. European issues should also benefit from business
restructuring and increased merger and acquisition activity. Additional
gains by stocks in Japan may be limited, however, by a plateau in
foreign investment and reduced exports due to a strong yen. Advances by
Latin American issues could be curbed as higher U.S. interest rates
reduce flows of capital to that region. While higher interest rates may
also decrease U.S. demand for foreign goods, economies overseas appear
sufficiently healthy to withstand such a decline.
LB World Growth Fund seeks long-term growth of capital by investing
primarily in common stocks issued by established non-U.S. companies.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 9/5/95
Shareholder
Accounts: 24,823
Total Net Assets
(in millions): $109.8
[GRAPHIC WORM CHART OMITTED:]
Performance Through October 31, 1999
Growth of a $10,000 Investment
Class A shares (since 9/30/95)
Morgan Stanley Lipper
LB World Capital Median Consumer
Month End Growth International International Price
Date Fund EAFE Index Stock Funds Index
- ------------------------------------------------------------------------
9/30/95 10,000 10,000 10,000 10,000
10/31/95 9,430 9,734 9,790 10,033
11/30/95 9,508 10,008 9,893 10,027
12/31/95 9,817 10,413 10,203 10,020
1/31/96 10,041 10,458 10,413 10,079
2/29/96 10,108 10,495 10,443 10,111
3/31/96 10,265 10,721 10,625 10,163
4/30/96 10,567 11,035 10,957 10,202
5/31/96 10,522 10,834 10,899 10,222
6/30/96 10,634 10,898 10,975 10,228
7/31/96 10,298 10,582 10,581 10,248
8/31/96 10,444 10,607 10,691 10,268
9/30/96 10,679 10,892 10,919 10,301
10/31/96 10,612 10,783 10,829 10,333
11/30/96 11,093 11,214 11,290 10,353
12/31/96 11,135 11,073 11,320 10,353
1/31/97 10,977 10,688 11,247 10,385
2/28/97 11,090 10,865 11,394 10,418
3/31/97 11,068 10,907 11,421 10,444
4/30/97 11,135 10,967 11,449 10,457
5/31/97 11,869 11,683 12,144 10,451
6/30/97 12,378 12,331 12,702 10,464
7/31/97 12,705 12,533 13,039 10,476
8/31/97 11,531 11,599 12,078 10,497
9/30/97 12,299 12,251 12,839 10,522
10/31/97 11,395 11,311 11,862 10,549
11/30/97 11,350 11,198 11,763 10,542
12/31/97 11,377 11,299 11,862 10,529
1/31/98 11,779 11,819 12,158 10,549
2/28/98 12,458 12,580 12,944 10,568
3/31/98 12,883 12,970 13,584 10,587
4/30/98 12,975 13,075 13,772 10,607
5/31/98 12,941 13,015 13,786 10,627
6/30/98 12,941 13,116 13,703 10,640
7/31/98 13,102 13,253 13,891 10,653
8/31/98 11,469 11,613 11,937 10,666
9/30/98 11,192 11,260 11,520 10,679
10/31/98 12,170 12,437 12,411 10,706
11/30/98 12,734 13,078 13,058 10,706
12/31/98 13,165 13,597 13,467 10,698
1/31/99 13,038 13,560 13,512 10,725
2/28/99 12,783 13,240 13,164 10,738
3/31/99 13,293 13,796 13,628 10,771
4/30/99 13,767 14,359 14,206 10,849
5/31/99 13,131 13,622 13,602 10,849
6/30/99 13,628 14,156 14,289 10,849
7/31/99 13,860 14,581 14,667 10,881
8/31/99 13,999 14,638 14,799 10,907
9/30/99 14,068 14,789 14,864 10,959
10/31/99 $14,508 $15,346 $15,432 $10,979
As you compare performance, please note that the LB World Growth Fund's
performance reflects the maximum 4% sales charge. The performances of
the MSCI EAFE Index and the Lipper Median do not reflect any such
charges. If you were to purchase any of the individual stocks or funds
represented in these indexes, any charges you would pay would reduce
your total return as well.
INSET LEGEND READS:
LB World
Growth Fund
$14,508
Lipper Median
International
Stock Funds
$15,432
Morgan Stanley
Capital International
EAFE Index
$15,346
Consumer
Price Index
$10,979
INSET BOX ON CHART READS:
LB World Growth Fund
Annualized Total Returns*
- -----------------------------------------------------------
Since
Inception
Class A shares 1-Year 9/5/95
Net Asset Value 19.21% 10.73%
Public Offering Price 14.45% 9.66%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 18.28% 12.02%
If Redeemed (CDSC) 13.28% 10.22%
Institutional shares
Net Asset Value 19.42% 13.15%
*See accompanying notes to Portfolio Management Reviews.
LB Fund
[PHOTO OMITTED: JAMES M. WALLINE]
James M. Walline is a Chartered Financial Analyst and portfolio manager
of the LB Fund. He is a vice president of Lutheran Brotherhood and has
managed the LB Fund since 1994. He has been with Lutheran Brotherhood
Research Corp. since its inception in 1970.
As economic growth strengthened early in the year, concerns that higher
interest rates and inflation might squelch future growth tended to favor
shares of larger companies with more reliable earnings prospects.
Investor favor then shifted toward medium-sized companies, which rallied
strongly in the last six months of the period. The Lutheran Brotherhood
Fund's continued focus on firms with large market capitalizations that
are also leaders in their industries helped it perform well against its
benchmarks for the reporting period. (Market capitalization is
calculated by multiplying the number of stock shares outstanding by the
price of those shares.)
During the 12 months ended October 31, 1999, the Fund had a total return
(based on Class A Share NAV) of 25.60%. This compared to an average
return of 19.10% for large-cap core funds tracked by Lipper, Inc.* Over
the same time, the S&P 500 Index had a return of 25.67%.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 2.9%
Common Stocks 97.1%
The Fund's portfolio composition and top holdings represent all share
classes.
Greater Emphasis on Growth Sectors
Over the last few decades, the American economy has undergone an
accelerating evolution away from manufacturing-based industry to
knowledge- and service-based industries, such as computer software and
health care services. During this time, the United States has
established its dominance as the world leader in these fastest growing,
science-based industries, such as technology and medicine. In addition,
the record-breaking current economic expansion that began in 1992 has
increased the importance of the "consumer cyclicals" market segment,
which includes businesses like home building supplies, retail,
entertainment, and advertising.
[GRAPHIC OMITTED: TOP 10 HOLDINGS % OF PORTFOLIO]
Top 10 Holdings % of Portfolio
- ------------------------------------------------------------------------
Microsoft Corp. 3.4%
Cisco Systems, Inc. 3.3%
General Electric Co. 3.2%
MCI Worldcom, Inc. 2.7%
Intel Corp. 2.6%
American International Group, Inc. 2.0%
Pfizer, Inc. 1.9%
SBC Communications, Inc. 1.9%
Citigroup, Inc. 1.7%
Merck & Co., Inc. 1.7%
These holdings represent 24.4% of the Fund's total investment portfolio.
This economic evolution has also led to a gradual evolution in the LB
Fund. Since its inception in 1970, the Fund has gradually developed a
greater emphasis on these growing market sectors, investing broadly in
both growth and value shares, but increasingly emphasizing technology,
health care, retail, and consumer cyclicals. This emphasis on growth
sectors has also resulted in a gradual de-emphasis of energy, consumer
staples, utility, financial, and industrial stocks.
[GRAPHIC OMITTED: TOP 10 INDUSTRIES]
TOP 10 INDUSTRIES
- ------------------------------------------------------------------------
Bank & Finance 15.4%
Drugs & Health Care 11.5%
Computers & Office Equipment 10.1%
Retail 9.3%
Telephone & Telecommunications 6.9%
Oil & Oil Service 6.2%
Conglomerates 5.6%
Computer Software 4.6%
Telecommunications Equipment 3.4%
Electronic Equipment 3.1%
These holdings represent 76.1% of the Fund's
total investment portfolio.
As before, we continued to emphasize companies with sound fundamentals
that are leaders in their markets. To keep the portfolio focused on
companies with the strongest prospects for long-term growth, we
periodically traded shares of firms that had performed well for shares
of companies with better growth potential. Among the new positions we
added to the Fund were technology firms like America Online, Sun
Microsystems, EMC Corp. (a manufacturer of computer storage products),
and Yahoo!. Other additions included Home Depot, Illinois Tool Works,
and Omnicom Group (an international advertising agency).
Outlook Promising for Industry Leaders
If higher interest rates produce a slower pace of economic growth, we'll
see improved chances to sustain this record-breaking economic expansion.
With companies very competitive and cost conscious today, corporate
earnings should remain healthy. The outlook is particularly promising
for stocks of market leaders, who should benefit from recent industry
consolidations and global economic recovery.
The LB Fund should thus continue to benefit from its focus on top-tier
companies with strong earnings potential. As before, we may occasionally
trim shares of holdings we consider to be over-valued, redirecting
capital to stocks with greater upside potential in order to manage the
Fund's risk and help it remain competitive with similar funds.
LB Fund seeks long-term growth of capital and income by investing
primarily in common stocks of leading U.S. companies.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 6/2/70
Shareholder
Accounts: 130,090
Total Net Assets
(in millions): $1,531.0
[GRAPHIC WORM CHART OMITTED:]
Performance Through October 31, 1999
Growth of a $10,000 Investment
Class A shares (since 10/31/89)
Lipper
Standard & Poor's Median Consumer
Month End 500 Stock Large-Cap Price
Date LB Fund Index Core Funds Index
- ----------------------------------------------------------------------
10/31/89 10,000 10,000 10,000 10,000
11/30/89 9,920 10,194 10,150 10,024
12/31/89 9,944 10,439 10,290 10,040
1/31/90 9,222 9,748 9,704 10,143
2/28/90 9,303 9,856 9,829 10,191
3/31/90 9,567 10,124 10,038 10,247
4/30/90 9,403 9,881 9,793 10,263
5/31/90 10,414 10,824 10,553 10,287
6/30/90 10,477 10,759 10,540 10,342
7/31/90 10,424 10,733 10,458 10,382
8/31/90 9,572 9,752 9,629 10,478
9/30/90 9,067 9,280 9,159 10,565
10/31/90 9,061 9,250 9,018 10,629
11/30/90 9,537 9,837 9,546 10,653
12/31/90 9,751 10,111 9,823 10,653
1/31/91 10,229 10,562 10,300 10,717
2/28/91 10,887 11,299 10,972 10,732
3/31/91 11,085 11,577 11,227 10,748
4/30/91 11,146 11,615 11,236 10,764
5/31/91 11,656 12,099 11,686 10,796
6/30/91 11,007 11,550 11,192 10,828
7/31/91 11,574 12,103 11,661 10,844
8/31/91 11,924 12,375 11,928 10,876
9/30/91 11,725 12,169 11,821 10,924
10/31/91 11,974 12,348 12,001 10,940
11/30/91 11,537 11,835 11,529 10,971
12/31/91 12,946 13,190 12,669 10,979
1/31/92 12,753 12,959 12,666 10,995
2/28/92 12,886 13,110 12,880 11,035
3/31/92 12,559 12,856 12,657 11,091
4/30/92 12,649 13,249 12,856 11,107
5/31/92 12,766 13,294 12,936 11,123
6/30/92 12,460 13,099 12,676 11,162
7/31/92 12,840 13,652 13,099 11,186
8/31/92 12,605 13,358 12,852 11,218
9/30/92 12,782 13,513 13,005 11,250
10/31/92 13,032 13,576 13,087 11,290
11/30/92 13,587 14,019 13,569 11,306
12/31/92 13,696 14,195 13,774 11,298
1/31/93 13,960 14,326 13,930 11,354
2/28/93 14,005 14,505 14,033 11,393
3/31/93 14,410 14,812 14,395 11,433
4/30/93 14,167 14,471 14,132 11,465
5/31/93 14,520 14,834 14,462 11,481
6/30/93 14,568 14,883 14,507 11,497
7/31/93 14,442 14,839 14,494 11,497
8/31/93 14,868 15,387 15,025 11,529
9/30/93 14,843 15,269 15,016 11,553
10/31/93 14,994 15,600 15,229 11,600
11/30/93 14,605 15,435 15,022 11,608
12/31/93 14,886 15,628 15,349 11,608
1/31/94 15,417 16,170 15,828 11,640
2/28/94 14,996 15,716 15,519 11,680
3/31/94 14,267 15,034 14,869 11,720
4/30/94 14,301 15,240 15,009 11,736
5/31/94 14,461 15,464 15,153 11,744
6/30/94 14,064 15,085 14,808 11,783
7/31/94 14,487 15,596 15,215 11,815
8/31/94 15,011 16,225 15,796 11,863
9/30/94 14,758 15,826 15,445 11,895
10/31/94 14,978 16,194 15,612 11,903
11/30/94 14,368 15,594 15,038 11,919
12/31/94 14,379 15,823 15,197 11,919
1/31/95 14,727 16,245 15,414 11,967
2/28/95 15,144 16,866 15,992 12,014
3/31/95 15,415 17,370 16,403 12,054
4/30/95 15,867 17,889 16,805 12,094
5/31/95 16,388 18,578 17,348 12,118
6/30/95 16,925 19,011 17,712 12,142
7/31/95 17,678 19,656 18,293 12,142
8/31/95 17,482 19,695 18,398 12,174
9/30/95 18,141 20,524 18,966 12,197
10/31/95 18,175 20,465 18,756 12,237
11/30/95 19,016 21,347 19,581 12,229
12/31/95 18,985 21,759 19,923 12,221
1/31/96 19,519 22,514 20,465 12,293
2/28/96 19,758 22,707 20,738 12,333
3/31/96 19,859 22,930 21,003 12,397
4/30/96 20,247 23,278 21,310 12,444
5/31/96 20,597 23,853 21,710 12,468
6/30/96 20,477 23,946 21,680 12,476
7/31/96 19,488 22,897 20,752 12,500
8/31/96 20,015 23,374 21,319 12,524
9/30/96 21,060 24,685 22,299 12,564
10/31/96 21,375 25,381 22,750 12,604
11/30/96 22,932 27,290 24,272 12,627
12/31/96 22,255 26,749 23,971 12,627
1/31/97 23,656 28,437 24,989 12,667
2/28/97 23,616 28,645 25,137 12,707
3/31/97 22,693 27,465 24,227 12,739
4/30/97 24,077 29,115 25,123 12,755
5/31/97 25,279 30,865 26,663 12,747
6/30/97 26,352 32,251 27,700 12,763
7/31/97 28,300 34,818 29,781 12,779
8/31/97 26,713 32,861 28,718 12,803
9/30/97 27,969 34,672 30,168 12,834
10/31/97 27,144 33,528 29,094 12,866
11/30/97 28,060 35,067 29,920 12,858
12/31/97 28,465 35,670 30,429 12,842
1/31/98 28,766 36,080 30,508 12,866
2/28/98 30,784 38,667 32,616 12,890
3/31/98 32,496 40,651 34,093 12,914
4/30/98 32,819 41,065 34,349 12,938
5/31/98 31,949 40,334 33,662 12,962
6/30/98 33,160 41,976 34,191 12,978
7/31/98 32,456 41,539 33,367 12,994
8/31/98 27,073 35,529 28,422 13,010
9/30/98 28,641 37,795 29,974 13,025
10/31/98 31,235 40,891 32,210 13,057
11/30/98 32,999 43,361 33,888 13,057
12/31/98 35,098 45,863 35,355 13,049
1/31/99 36,867 47,780 36,638 13,081
2/28/99 36,089 46,294 35,411 13,097
3/31/99 37,977 48,145 36,863 13,137
4/30/99 38,768 50,023 37,950 13,233
5/31/99 37,387 48,843 37,017 13,233
6/30/99 39,765 51,553 39,167 13,233
7/31/99 38,271 49,945 38,051 13,272
8/31/99 37,969 49,695 37,751 13,304
9/30/99 36,856 48,333 36,833 13,368
10/31/99 $39,231 $51,393 $39,076 $13,392
As you compare performance, please note that the LB Fund's performance
reflects the maximum 4% sales charge. The performances of the S&P 500
Index and the Lipper Median do not reflect any such charges. If you were
to purchase any of the individual stocks or funds represented in these
indexes, any charges you would pay would reduce your total return as
well.
INSET LEGEND READS:
LB Fund
$39,231
Standard & Poor's
500 Stock Index
$51,393
Lipper Median
Large-Cap
Core Funds
$39,076
Consumer
Price Index
$13,392
INSET BOX ON CHART READS:
LB Fund
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value 25.60% 21.22% 15.11%
Public Offering Price 20.59% 20.23% 14.64%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 24.66% 19.35%
If Redeemed (CDSC) 19.66% 17.66%
Institutional shares
Net Asset Value 25.89% 20.54%
*See accompanying notes to Portfolio Management Reviews.
*Due to changes in Lipper, Inc., definitions, this return is a
combination of average total return from the Lipper Growth & Income
Funds category (10/31/98-9/15/99) and the Lipper Large-Cap Core Funds
category (9/16/99-10/31/99).
LB High Yield Fund
[PHOTO OMITTED: PAUL J. OCENASEK]
Paul J. Ocenasek is a Chartered Financial Analyst and portfolio manager
of the LB High Yield Fund. Paul has been with Lutheran Brotherhood's
Investment Division since 1987 and served many roles: analyst,
researcher, associate manager and portfolio manager.
Having underperformed high-quality bonds for much of 1998, high-yield
corporate bonds were an attractive value when the reporting period began
in November 1998. As prospects for the economy and corporate earnings
brightened in the months that followed, high-yield issues outperformed.
During this time the media and telecommunications issues that represent
a large portion of the LB High Yield Fund performed particularly well.
The Fund added some issues with lower credit ratings, which also
performed well, further enhanced returns and helped the Fund outpace its
market benchmarks for the 12 months ended October 31, 1999.
During the reporting period, the Fund had a total return (based on Class
A Share NAV) of 7.69%. That compares with an average return of 6.66% for
high-yield bond funds tracked by Lipper, Inc. Over the same time, the
Lehman Brothers High-Yield Index had a return of 4.34%.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)]
Non-Convertible Preferred Stocks 8.5%
Short-Term Securities 5.2%
Common Stocks & Stock Warrants 3.9%
Convertible Preferred Stocks 2.6%
Foreign Government Bonds 0.4%
Corporate Bonds 79.4%
The Fund's portfolio composition and top holdings represent all share
classes.
Media/Telecommunications Debt Outperforms
In the third quarter of 1998, before the reporting period began, high-
yield bonds from the media/telecommunications group had experienced
sharper price declines than the high-yield market as a whole. As
investors recognized the value in high-yield issues, the rebound for
high-yield debt of media/telecommunications firms was particularly
strong. Earlier additions of these securities and those with lower
credit ratings, which also recovered sharply, helped the LB High Yield
Fund to make the most of these changes in market sentiment.
[GRAPHIC BAR CHART OMITTED: MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
AAA 0.0%
AA 0.0%
A 0.4%
Baa 0.9%
Ba 15.8%
B 61.6%
Caa 14.5%
Ca 1.0%
C 0.0%
D 0.4%
Non Rated 5.4%
[GRAPHIC OMITTED: TOP 10 INDUSTRIES % OF PORTFOLIO]
Top 10 Industries % of Portfolio
- ----------------------------------------------------------------------
Telecommunications -- Wireline 13.8%
Broadcasting 11.3%
Telecommunications -- Wireless 9.1%
Telecommunications -- Data/Internet 4.1%
Bank & Finance 3.6%
Machinery & Equipment 3.3%
Hospital Management 3.2%
Food & Beverage 2.4%
Leisure & Entertainment 2.1%
Publishing & Printing 1.9%
These bond holdings represent 54.8% of the Fund's total investment
portfolio.
[GRAPHIC OMITTED: TOP 10 HOLDINGS BY ISSUER % OF PORTFOLIO]
Top 10 Holdings by Issuer % of Portfolio
- ----------------------------------------------------------------------
Intermedia Communications, Inc. 1.2%
CSC Holdings, Inc. 1.1%
UnitedGlobalCom, Inc. 1.0%
ICG Holdings, Inc. 0.9%
Nextel Communications, Inc. 0.9%
Orion Network Systems, Inc. 0.9%
PRIMEDIA, Inc. 0.8%
Primus Telecommunications Group, Inc. 0.8%
EchoStar DBS Corp. 0.7%
Midland Cogen Venture Fund II 0.7%
These holdings represent 9.0% of the Fund's total investment portfolio.
During the spring of 1999, we took profits in some
media/telecommunications issues that had performed especially well. Due
to concerns about unsustainable consumer spending, we trimmed
investments in consumer-finance firms. We also took some profits in the
energy sector, after higher oil prices had boosted performance there.
Performance for high-yield bonds was weaker in the summer and early
fall, as investors became concerned that rising interest rates would
slow the economy. In addition, as institutional buyers shored-up their
year-end liquidity, demand for longer-term bonds weakened. The Fund
continued to benefit in this environment from strong performances by its
media/telecommunications holdings and from lower weightings in
economically sensitive bonds versus its market benchmarks. Of additional
help was the Fund's sizable weighting in "cushion" bonds that are near
maturity and less sensitive to rising interest rates. Also, as the
media/telecommunications sector became more attractive near the end of
the period, we once again increased the Fund's holdings in that sector.
New Opportunities
Having increased the Fund's cash reserves somewhat during the third
quarter to provide added liquidity, we are now putting some of that cash
back to work. While there could still be increased volatility at the end
of the year due to concerns about potential Y2K computer problems,
investors appear less concerned than they were earlier in 1998. In the
meantime, market fluctuations have provided some attractive investment
opportunities. The high-yield sector should benefit in coming months as
economic worries continue to abate and more investors put their cash to
work in the market.
LB High Yield Fund seeks high current income and, secondarily, growth of
capital by investing primarily in high-yielding ("junk") corporate
bonds.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 4/3/87
Shareholder
Accounts: 71,046
Total Net Assets
(in millions): $910.7
[GRAPHIC WORM CHART OMITTED:]
Performance Through October 31, 1999
Growth of a $10,000 Investment
Class A shares (since 10/31/89)
Lehman Lipper
LB High High Median
Month End Yield Yield High Consumer
Date Fund Index Current Price Index
- --------------------------------------------------------------------
10/31/89 10,000 10,000 10,000 10,000
11/30/89 9,543 9,980 9,951 10,024
12/31/89 9,374 9,996 9,879 10,040
1/31/90 9,087 9,781 9,625 10,143
2/28/90 8,867 9,580 9,391 10,191
3/31/90 8,905 9,831 9,500 10,247
4/30/90 8,907 9,814 9,495 10,263
5/31/90 9,200 10,003 9,703 10,287
6/30/90 9,313 10,245 9,899 10,342
7/31/90 9,478 10,521 10,104 10,382
8/31/90 9,115 9,922 9,691 10,478
9/30/90 8,711 9,198 9,203 10,565
10/31/90 8,404 8,715 8,807 10,629
11/30/90 8,538 8,987 8,842 10,653
12/31/90 8,676 9,037 8,870 10,653
1/31/91 8,725 9,286 8,994 10,717
2/28/91 9,363 10,302 9,640 10,732
3/31/91 9,809 10,908 10,120 10,748
4/30/91 10,166 11,356 10,508 10,764
5/31/91 10,258 11,376 10,574 10,796
6/30/91 10,549 11,713 10,797 10,828
7/31/91 10,843 12,088 11,118 10,844
8/31/91 11,003 12,366 11,327 10,876
9/30/91 11,177 12,538 11,518 10,924
10/31/91 11,579 12,956 11,885 10,940
11/30/91 11,756 13,024 11,996 10,971
12/31/91 11,807 13,211 12,100 10,979
1/31/92 12,354 13,676 12,580 10,995
2/28/92 12,700 14,014 12,881 11,035
3/31/92 12,930 14,188 13,081 11,091
4/30/92 13,042 14,242 13,175 11,107
5/31/92 13,246 14,443 13,367 11,123
6/30/92 13,322 14,578 13,502 11,162
7/31/92 13,553 14,799 13,744 11,186
8/31/92 13,738 14,992 13,919 11,218
9/30/92 13,878 15,145 14,062 11,250
10/31/92 13,627 14,932 13,827 11,290
11/30/92 13,864 15,120 14,032 11,306
12/31/92 14,183 15,292 14,218 11,298
1/31/93 14,765 15,737 14,605 11,354
2/28/93 14,943 16,014 14,887 11,393
3/31/93 15,232 16,221 15,182 11,433
4/30/93 15,292 16,362 15,302 11,465
5/31/93 15,552 16,557 15,543 11,481
6/30/93 16,031 16,904 15,904 11,497
7/31/93 16,159 17,068 16,062 11,497
8/31/93 16,288 17,212 16,180 11,529
9/30/93 16,281 17,256 16,231 11,553
10/31/93 16,791 17,605 16,594 11,600
11/30/93 16,854 17,690 16,700 11,608
12/31/93 17,142 17,909 16,947 11,608
1/31/94 17,647 18,297 17,351 11,640
2/28/94 17,586 18,250 17,318 11,680
3/31/94 16,934 17,560 16,760 11,720
4/30/94 16,675 17,441 16,517 11,736
5/31/94 16,740 17,449 16,555 11,744
6/30/94 16,750 17,503 16,532 11,783
7/31/94 16,615 17,652 16,502 11,815
8/31/94 16,737 17,778 16,512 11,863
9/30/94 16,659 17,779 16,512 11,895
10/31/94 16,712 17,822 16,496 11,903
11/30/94 16,310 17,597 16,275 11,919
12/31/94 16,235 17,728 16,294 11,919
1/31/95 16,309 17,969 16,426 11,967
2/28/95 16,930 18,585 16,873 12,014
3/31/95 17,104 18,786 17,026 12,054
4/30/95 17,517 19,263 17,442 12,094
5/31/95 17,873 19,802 17,829 12,118
6/30/95 17,970 19,935 17,884 12,142
7/31/95 18,535 20,186 18,199 12,142
8/31/95 18,613 20,249 18,248 12,174
9/30/95 18,774 20,498 18,465 12,197
10/31/95 18,873 20,625 18,613 12,237
11/30/95 19,099 20,806 18,738 12,229
12/31/95 19,382 21,133 19,023 12,221
1/31/96 19,847 21,505 19,418 12,293
2/29/96 20,357 21,522 19,583 12,333
3/31/96 20,158 21,507 19,511 12,397
4/30/96 20,263 21,554 19,665 12,444
5/31/96 20,455 21,684 19,818 12,468
6/30/96 20,297 21,864 19,844 12,476
7/31/96 20,137 21,964 19,951 12,500
8/31/96 20,469 22,202 20,269 12,524
9/30/96 21,143 22,737 20,800 12,564
10/31/96 21,071 22,912 20,912 12,604
11/30/96 21,273 23,363 21,299 12,627
12/31/96 21,507 23,531 21,552 12,627
1/31/97 21,762 23,762 21,768 12,667
2/28/97 22,042 24,154 22,157 12,707
3/31/97 21,349 23,794 21,717 12,739
4/30/97 21,347 24,044 21,892 12,755
5/31/97 22,165 24,558 22,455 12,747
6/30/97 22,770 24,900 22,819 12,763
7/31/97 23,552 25,585 23,412 12,779
8/31/97 23,623 25,526 23,459 12,803
9/30/97 24,342 26,031 24,008 12,834
10/31/97 24,112 26,055 23,914 12,866
11/30/97 24,160 26,305 24,106 12,858
12/31/97 24,404 26,536 24,376 12,842
1/31/98 24,901 27,014 24,844 12,866
2/28/98 25,243 27,173 25,030 12,890
3/31/98 25,560 27,429 25,348 12,914
4/30/98 25,426 27,536 25,419 12,938
5/31/98 25,345 27,632 25,424 12,962
6/30/98 25,454 27,731 25,447 12,978
7/31/98 25,590 27,890 25,625 12,994
8/31/98 23,577 26,350 23,890 13,010
9/30/98 23,245 26,469 23,730 13,025
10/31/98 22,772 25,926 23,215 13,057
11/30/98 23,872 27,002 24,501 13,057
12/31/98 23,930 27,032 24,413 13,049
1/31/99 24,305 27,432 24,779 13,081
2/28/99 24,217 27,270 24,695 13,097
3/31/99 24,481 27,529 25,053 13,137
4/30/99 25,265 28,063 25,592 13,233
5/31/99 24,806 27,684 25,118 13,233
6/30/99 24,975 27,626 25,101 13,233
7/31/99 25,112 27,736 25,123 13,272
8/31/99 24,765 27,429 24,879 13,304
9/30/99 24,630 27,231 24,735 13,368
10/31/99 $24,524 $27,051 $24,678 $13,392
As you compare performance, please note that the LB High Yield Fund's
performance reflects the maximum 4% sales charge. The performances of
the Lehman High Yield Index and the Lipper Median do not reflect any
such charges. If you were to purchase any of the individual bonds or
funds represented in these indexes, any charges you would pay would
reduce your total return as well.
INSET LEGEND READS:
LB High Yield
Fund
$24,524
Lehman High
Yield Index
$27,051
Lipper Median
High Current
$24,678
Consumer
Price Index
$13,392
INSET BOX ON CHART READS:
LB High Yield Fund
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value 7.69% 7.97% 9.83%
Public Offering Price 3.35% 7.09% 9.38%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 6.92% 0.13%
If Redeemed (CDSC) 1.92% -1.89%
Institutional shares
Net Asset Value 7.96% 1.10%
*See accompanying notes to Portfolio Management Reviews.
LB Income Fund
[PHOTO OMITTED: MICHAEL G. LANDREVILLE]
Michael G. Landreville, an assistant vice president of Lutheran
Brotherhood, is a Chartered Financial Analyst and portfolio manager of
the LB Income Fund. He has worked in Lutheran Brotherhood's bond
department since 1983 and has managed various fixed-income portfolios.
Mike is also a Certified Public Accountant.
With an end to the Asian crisis and greater confidence domestically in
the first part of the reporting period, investors moved from the safety
of U.S. Treasury issues into corporate bonds. Within the corporate
sector, many investors favored the added return potential in higher-
yielding issues and debt of companies from economically sensitive
industries. The LB Income Fund benefited during this time from increased
investments in these sectors. However, fears of higher inflation,
triggered in part by a surge in oil prices, sent interest rates higher
and put downward pressure on bond market returns.
For the 12 months ended October 31, 1999, the Fund had a total return
(based on Class A Share NAV) of -0.69%, beating an average return of -
0.93% for high-quality corporate bond funds tracked by Lipper, Inc. Over
the same time, the Lehman Brothers Aggregate Bond Index had a return of
0.53%.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
U.S. Government 16.9%
Asset-Backed Securities 8.1%
Mortgage-Backed Securities 7.2%
Short-Term Securities 4.6%
U.S. Government Agency 3.7%
Foreign Government Bonds 3.5%
Preferred Stocks 0.7%
Common Stocks 0.1%
Corporate Bonds 55.2%
The Fund's portfolio composition and top holdings represent all share
classes.
Navigating Changes in Market Rates
We began increasing the Fund's position in corporate bonds during the
fourth quarter of 1998. New investments included issues from the
financial sector, whose prices were attractive after being hit
particularly hard by economic problems overseas. There were also
additions of debt from economically sensitive firms, such as energy
companies, as well as bonds of telecommunications, electric, and utility
companies. Besides providing better price performance as investors
shifted from U.S. Treasuries to corporates, these issues added income to
Fund returns.
[GRAPHIC OMITTED: TOP 10 HOLDINGS SECURITY % OF PORTFOLIO]
% Of
Top 10 Holdings Security Portfolio
- ----------------------------------------------------------------------
U.S. Treasury Bonds (Nov. 2022) U.S. Government 5.7%
U.S. Treasury Bonds (Nov. 2010) U.S. Government 3.6%
U.S. Treasury Bonds (Nov. 2016) U.S. Government 2.6%
Government National Mortgage Assn.
(Apr. 2029) Mortgage-backed 2.5%
Federal National Mortgage Assn.
(Apr. 2003) U.S. Government Agency 2.3%
World Financial Network Credit
Card Master Trust Asset-backed 2.1%
Standard Credit Master Trust 1 Asset-backed 1.8%
General Electric Capital Corp. Corporate 1.6%
Federal National Mortgage Assn.
(Nov. 2029) Mortgage-backed 1.6%
U.S. Treasury Notes (Aug. 2009) U.S. Government 1.6%
These bond holdings represent 25.4% of the Fund's total investment
portfolio.
As the economic picture improved in the first months of 1999, we
continued trimming the Fund's holdings in government issues and added
more corporate positions. In doing so, we emphasized corporates from
economically sensitive sectors and debt with somewhat lower credit
ratings and slightly higher yields. Also, with interest rates rising, we
emphasized investments with shorter maturities, which tend to be less
sensitive to falling prices than bonds with longer maturities.
[GRAPHIC BAR CHART OMITTED: MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
AAA 40.6%
AA 10.6%
A 17.8%
Baa 21.2%
Ba 8.0%
B 1.8%
Caa 0.0%
Ca 0.0%
C 0.0%
D 0.0%
Non Rated 0.0%
In May, when it looked like market interest rates might be peaking, we
added issues with longer maturities, which tend to outperform when
prices rally. However, market rates rose even further, and the overall
maturity structure of the portfolio remained on the long side, which
dampened Fund returns in the summer and fall. This lagging effect was
mitigated, in large part, by good performance from the Fund's increased
weighting in corporate bonds, which outperformed government issues
during that time.
A Defensive Short-Term Strategy
We believe that the recent Fed increases in short-term interest rates
should calm investor fears about inflation. Once that occurs, interest
rates could fall, causing a rally in bond prices. Corporate bonds could
benefit in coming months as a more moderate pace of economic growth
eases concerns about inflation pressures. In the meantime, we plan to
continue emphasizing issues with good credit quality and strong
liquidity.
LB Income Fund seeks high current income while preserving principal and,
secondarily, long-term growh of capital by investing primarily in
investment-grade bonds and other income-producing securities.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 6/1/72
Shareholder
Accounts: 55,723
Total Net Assets
(in millions): $725.9
[GRAPHIC WORM CHART OMITTED:]
Performance Through October 31, 1999
Growth of a $10,000 Investment
Class A shares (since 10/31/89)
Lehman Lipper
Aggregate Median
Month End LB Income Bond Corp. Consumer
Date Fund Index Debt A Price Index
- -----------------------------------------------------------------------
10/31/89 10,000 10,000 10,000 10,000
11/30/89 9,668 10,095 10,070 10,024
12/31/89 9,645 10,122 10,085 10,040
1/31/90 9,520 10,002 9,944 10,143
2/28/90 9,551 10,034 9,953 10,191
3/31/90 9,549 10,041 9,959 10,247
4/30/90 9,432 9,948 9,844 10,263
5/31/90 9,672 10,243 10,122 10,287
6/30/90 9,798 10,408 10,282 10,342
7/31/90 9,902 10,551 10,407 10,382
8/31/90 9,723 10,410 10,228 10,478
9/30/90 9,749 10,496 10,265 10,565
10/31/90 9,836 10,630 10,376 10,629
11/30/90 10,046 10,858 10,607 10,653
12/31/90 10,194 11,028 10,773 10,653
1/31/91 10,318 11,164 10,884 10,717
2/28/91 10,468 11,259 11,001 10,732
3/31/91 10,556 11,337 11,076 10,748
4/30/91 10,707 11,459 11,212 10,764
5/31/91 10,795 11,526 11,267 10,796
6/30/91 10,783 11,520 11,247 10,828
7/31/91 10,912 11,680 11,389 10,844
8/31/91 11,145 11,933 11,661 10,876
9/30/91 11,393 12,175 11,915 10,924
10/31/91 11,472 12,310 12,021 10,940
11/30/91 11,565 12,423 12,127 10,971
12/31/91 11,951 12,792 12,561 10,979
1/31/92 11,813 12,618 12,365 10,995
2/28/92 11,863 12,700 12,427 11,035
3/31/92 11,856 12,629 12,365 11,091
4/30/92 11,904 12,720 12,429 11,107
5/31/92 12,130 12,960 12,680 11,123
6/30/92 12,327 13,139 12,865 11,162
7/31/92 12,622 13,407 13,204 11,186
8/31/92 12,736 13,543 13,309 11,218
9/30/92 12,908 13,704 13,474 11,250
10/31/92 12,698 13,522 13,245 11,290
11/30/92 12,701 13,524 13,243 11,306
12/31/92 12,908 13,739 13,464 11,298
1/31/93 13,171 14,003 13,753 11,354
2/28/93 13,450 14,248 14,064 11,393
3/31/93 13,496 14,308 14,115 11,433
4/30/93 13,588 14,408 14,208 11,465
5/31/93 13,590 14,427 14,212 11,481
6/30/93 13,846 14,688 14,528 11,497
7/31/93 13,969 14,772 14,637 11,497
8/31/93 14,243 15,030 14,973 11,529
9/30/93 14,290 15,071 15,018 11,553
10/31/93 14,354 15,127 15,087 11,600
11/30/93 14,159 14,998 14,896 11,608
12/31/93 14,215 15,079 14,960 11,608
1/31/94 14,398 15,283 15,186 11,640
2/28/94 14,074 15,017 14,852 11,680
3/31/94 13,651 14,646 14,462 11,720
4/30/94 13,532 14,529 14,300 11,736
5/31/94 13,493 14,527 14,256 11,744
6/30/94 13,404 14,495 14,208 11,783
7/31/94 13,693 14,784 14,461 11,815
8/31/94 13,686 14,801 14,463 11,863
9/30/94 13,432 14,584 14,238 11,895
10/31/94 13,376 14,571 14,198 11,903
11/30/94 13,386 14,539 14,170 11,919
12/31/94 13,524 14,639 14,270 11,919
1/31/95 13,789 14,929 14,514 11,967
2/28/95 14,090 15,284 14,844 12,014
3/31/95 14,185 15,377 14,945 12,054
4/30/95 14,402 15,593 15,148 12,094
5/31/95 15,019 16,196 15,783 12,118
6/30/95 15,134 16,314 15,890 12,142
7/31/95 15,022 16,278 15,818 12,142
8/31/95 15,227 16,475 16,018 12,174
9/30/95 15,362 16,635 16,179 12,197
10/31/95 15,586 16,852 16,408 12,237
11/30/95 15,830 17,104 16,662 12,229
12/31/95 16,069 17,344 16,910 12,221
1/31/96 16,153 17,458 16,990 12,293
2/29/96 15,780 17,154 16,638 12,333
3/31/96 15,607 17,034 16,501 12,397
4/30/96 15,507 16,939 16,378 12,444
5/31/96 15,480 16,905 16,345 12,468
6/30/96 15,679 17,132 16,536 12,476
7/31/96 15,710 17,178 16,569 12,500
8/31/96 15,626 17,149 16,530 12,524
9/30/96 15,922 17,447 16,822 12,564
10/31/96 16,297 17,834 17,190 12,604
11/30/96 16,615 18,139 17,509 12,627
12/31/96 16,424 17,971 17,321 12,627
1/31/97 16,476 18,026 17,352 12,667
2/28/97 16,526 18,071 17,403 12,707
3/31/97 16,282 17,871 17,189 12,739
4/30/97 16,492 18,139 17,424 12,755
5/31/97 16,643 18,311 17,572 12,747
6/30/97 16,890 18,529 17,787 12,763
7/31/97 17,379 19,029 18,308 12,779
8/31/97 17,186 18,868 18,103 12,803
9/30/97 17,457 19,147 18,376 12,834
10/31/97 17,608 19,425 18,613 12,866
11/30/97 17,678 19,514 18,688 12,858
12/31/97 17,797 19,711 18,873 12,842
1/31/98 18,055 19,963 19,116 12,866
2/28/98 18,063 19,947 19,082 12,890
3/31/98 18,155 20,015 19,139 12,914
4/30/98 18,247 20,119 19,225 12,938
5/31/98 18,404 20,310 19,415 12,962
6/30/98 18,582 20,483 19,576 12,978
7/31/98 18,591 20,526 19,584 12,994
8/31/98 18,685 20,861 19,853 13,010
9/30/98 19,212 21,349 20,295 13,025
10/31/98 19,091 21,236 20,090 13,057
11/30/98 19,318 21,357 20,235 13,057
12/31/98 19,382 21,421 20,306 13,049
1/31/99 19,558 21,573 20,456 13,081
2/28/99 19,116 21,195 20,008 13,097
3/31/99 19,226 21,312 20,130 13,137
4/30/99 19,271 21,380 20,168 13,233
5/31/99 18,979 21,192 19,936 13,233
6/30/99 18,890 21,124 19,833 13,233
7/31/99 18,821 21,035 19,749 13,272
8/31/99 18,775 21,025 19,700 13,304
9/30/99 18,958 21,269 19,891 13,368
10/31/99 $18,959 $21,347 $19,909 $13,392
As you compare performance, please note that the LB Income Fund's
performance reflects the maximum 4% sales charge. The performances of
the Lehman Aggregate Bond Index and the Lipper Median do not reflect any
such charges. If you were to purchase any of the individual bonds or
funds represented in these indexes, any charges you would pay would
reduce your total return as well.
INSET LEGEND READS:
LB Income Fund
$18,959
Lehman Aggregate
Bond Index
$21,347
Lipper Median
Corp. Debt A
$19,909
Consumer
Price Index
$13,392
INSET BOX ON CHART READS:
LB Income Fund
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value -0.69% 7.22% 7.03%
Public Offering Price -4.71% 6.36% 6.60%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) -1.52% 2.96%
If Redeemed (CDSC) -6.45% 1.00%
Institutional shares
Net Asset Value -0.44% 4.03%
*See accompanying notes to Portfolio Management Reviews.
LB Municipal Bond Fund
[PHOTO OMITTED: JANET I. GRANGAARD]
Janet I. Grangaard, an assistant vice president of Lutheran Brotherhood,
is a Chartered Financial Analyst and portfolio manager for the LB
Municipal Bond Fund. She has managed the Fund since January 1994 and has
been with Lutheran Brotherhood since 1988.
During much of 1998, demand for municipal bonds had waned as global
economic uncertainty drove investors to the greater safety of U.S.
Treasury issues. During that time, municipal bond prices had a less-
dramatic rally because of an historically strong supply of new issues
and heavy refunding of existing municipal debt. However, in the first
part of 1999, as demand picked up and new issue supply decreased,
municipal bond prices underwent a smaller price decrease than
Treasuries. In late July, when demand ebbed, municipals underperformed.
By reacting quickly to these market forces, we helped the LB Municipal
Bond Fund outperform other funds with similar objectives.
For the 12 months ended October 31, 1999, the Fund had a total return
(based on Class A Share NAV) of -2.62%. That compares to an average
return of -4.17% for municipal bond funds tracked by Lipper, Inc. During
the same time the Lehman Brothers Municipal Bond Index had a return of
- -1.77%.
[GRAPHIC OMITTED: pie chart PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Health Care 11.1%
Electric Revenue 9.5%
Water & Sewer 7.5%
Special Tax Revenue 5.2%
Lease Revenue 4.8%
Airport Revenue 4.7%
Housing Finance 3.6%
Education Revenue 3.5%
Surface Transportation 3.5%
Pollution Control-Electric 2.8%
Industrial Revenue 0.6%
Miscellaneous Municipals 0.4%
Escrowed/Pre-refunded 25.6%
General Obligation 17.2%
The Fund's portfolio composition and top holdings represent all share
classes.
[GRAPHIC OMITTED: TOP 10 STATES % OF PORTFOLIO]
Top 10 States % of Portfolio
- ----------------------------------------------------------------------
Texas 9.6%
California 7.9%
Washington 6.5%
Colorado 6.3%
Minnesota 5.7%
Ohio 5.1%
New York 4.6%
Illinois 4.0%
Michigan 3.8%
New Jersey 3.1%
These bond holdings represent 56.6% of the Fund's total investment
portfolio.
Shifting Supply and Demand
In 1998, concerns over a burgeoning global economic crisis drew
investors to the safety and liquidity of high-quality bonds. As waves of
investors poured into the bond markets, demand pushed prices higher and
yields lower. In addition, interest rate cuts enacted by the Federal
Reserve Board in order to help ease global fears put additional downward
pressure on yields and drove prices even higher. By the end of 1998,
when the current reporting period began, yields in the municipal bond
market had been pushed down and prices had been pulled up -- both to
unsustainable levels.
The investor "flight to quality" of 1998 unraveled in 1999 as global
economic worries were replaced with increasing investor confidence. As
foreign economies and markets stabilized, waves of investors left the
bond market almost as quickly as they had flocked to it. This marked
drop in demand with little change in supply resulted in significant
drops in municipal bond prices and corresponding increases in yields. In
addition, the Federal Reserve began to take back the rate reductions of
1998 and, by November of 1999, had erased the previous year's rate
reductions with a series of three rate increases. These Fed moves put
additional upward pressure on market yields and downward pressure on
bond prices.
[GRAPHIC BAR CHART OMITTED: MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
AAA 71.5%
AA 16.0%
A 7.0%
Baa 5.2%
Ba 0.3%
B 0.0%
Caa 0.0%
Ca 0.0%
C 0.0%
D 0.0%
Non Rated 0.0%
Making the Most of a Negative Market
Though the Fund ended the period with negative returns, some strategic
advantages helped it retain value better than similar municipal bond
funds. In the environment of shifting supply and demand, the Fund was
particularly well positioned with its focus on higher-quality issues,
which outperformed lower-quality bonds. In addition, the Fund's shorter
average maturity and its overweighting in pre-refunded municipal bonds
helped it maintain a solid income stream and a competitive edge in a
period of declining bond values.
Anticipating Slower Growth
We have begun to trade some pre-refunded issues (whose value to the Fund
has been fully realized) for high-quality, longer-term debt. If recent
short-term rate hikes by the Federal Reserve slow economic growth, as we
expect, long-term market yields should begin to fall, sparking a rally
in bond prices. With greater sensitivity to changes in interest rates,
longer-maturity bonds would outperform in that environment. In the
meantime, they can enhance Fund returns by adding incremental income.
We're also adding incremental income by buying municipal bonds issued in
states whose low tax rates require issuers to offer higher yields. Given
the prospect for slower economic growth, we are focusing our purchases
on less economically sensitive issues, such as bonds that fund water
projects, sewer projects and educational facilities.
LB Municipal Bond Fund seeks high current income which is exempt from
federal income tax by investing in investment-grade municipal bonds.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 12/3/76
Shareholder
Accounts: 20,774
Total Net Assets
(in millions): $583.4
[GRAPHIC WORM CHART OMITTED:]
Performance Through October 31, 1999
Growth of a $10,000 Investment
Class A shares (since 10/31/89)
Lipper
Median
General
Lehman Municipal
Month End LB Municipal Municipal Debt Consumer Price
Date Bond Fund Bond Index Funds Index
- -----------------------------------------------------------------------
10/31/89 10,000 10,000 10,000 10,000
11/30/89 9,765 10,175 10,157 10,024
12/31/89 9,846 10,258 10,226 10,040
1/31/90 9,714 10,210 10,117 10,143
2/28/90 9,785 10,301 10,217 10,191
3/31/90 9,796 10,304 10,213 10,247
4/30/90 9,685 10,230 10,082 10,263
5/31/90 9,915 10,453 10,344 10,287
6/30/90 10,036 10,545 10,442 10,342
7/31/90 10,192 10,700 10,615 10,382
8/31/90 9,979 10,545 10,384 10,478
9/30/90 10,013 10,551 10,399 10,565
10/31/90 10,172 10,742 10,550 10,629
11/30/90 10,407 10,958 10,795 10,653
12/31/90 10,492 11,002 10,842 10,653
1/31/91 10,641 11,149 10,975 10,717
2/28/91 10,701 11,246 11,039 10,732
3/31/91 10,713 11,251 11,061 10,748
4/30/91 10,865 11,400 11,222 10,764
5/31/91 10,939 11,502 11,323 10,796
6/30/91 10,896 11,490 11,288 10,828
7/31/91 11,064 11,631 11,451 10,844
8/31/91 11,193 11,784 11,598 10,876
9/30/91 11,389 11,937 11,747 10,924
10/31/91 11,478 12,045 11,852 10,940
11/30/91 11,486 12,078 11,868 10,971
12/31/91 11,768 12,338 12,148 10,979
1/31/92 11,774 12,367 12,140 10,995
2/28/92 11,752 12,370 12,157 11,035
3/31/92 11,751 12,375 12,162 11,091
4/30/92 11,884 12,485 12,274 11,107
5/31/92 12,047 12,633 12,445 11,123
6/30/92 12,254 12,845 12,672 11,162
7/31/92 12,678 13,230 13,121 11,186
8/31/92 12,452 13,101 12,911 11,218
9/30/92 12,487 13,186 12,962 11,250
10/31/92 12,347 13,057 12,729 11,290
11/30/92 12,633 13,290 13,053 11,306
12/31/92 12,821 13,426 13,214 11,298
1/31/93 12,946 13,582 13,363 11,354
2/28/93 13,421 14,073 13,887 11,393
3/31/93 13,332 13,924 13,725 11,433
4/30/93 13,458 14,065 13,873 11,465
5/31/93 13,524 14,143 13,952 11,481
6/30/93 13,776 14,380 14,192 11,497
7/31/93 13,780 14,398 14,192 11,497
8/31/93 14,082 14,698 14,507 11,529
9/30/93 14,243 14,865 14,678 11,553
10/31/93 14,335 14,894 14,708 11,600
11/30/93 14,172 14,763 14,553 11,608
12/31/93 14,485 15,074 14,843 11,608
1/31/94 14,645 15,246 15,013 11,640
2/28/94 14,231 14,851 14,614 11,680
3/31/94 13,566 14,247 13,975 11,720
4/30/94 13,629 14,368 14,026 11,736
5/31/94 13,759 14,493 14,152 11,744
6/30/94 13,655 14,404 14,060 11,783
7/31/94 13,904 14,668 14,309 11,815
8/31/94 13,951 14,719 14,345 11,863
9/30/94 13,762 14,503 14,112 11,895
10/31/94 13,485 14,245 13,844 11,903
11/30/94 13,226 13,987 13,558 11,919
12/31/94 13,533 14,295 13,888 11,919
1/31/95 13,945 14,703 14,301 11,967
2/28/95 14,394 15,131 14,726 12,014
3/31/95 14,547 15,305 14,858 12,054
4/30/95 14,560 15,324 14,857 12,094
5/31/95 15,050 15,812 15,320 12,118
6/30/95 14,851 15,675 15,153 12,142
7/31/95 14,955 15,824 15,250 12,142
8/31/95 15,143 16,025 15,418 12,174
9/30/95 15,260 16,126 15,512 12,197
10/31/95 15,503 16,360 15,749 12,237
11/30/95 15,820 16,631 16,052 12,229
12/31/95 15,993 16,791 16,230 12,221
1/31/96 16,111 16,918 16,306 12,293
2/29/96 15,974 16,803 16,177 12,333
3/31/96 15,707 16,588 15,920 12,397
4/30/96 15,624 16,542 15,848 12,444
5/31/96 15,615 16,535 15,852 12,468
6/30/96 15,775 16,715 16,001 12,476
7/31/96 15,918 16,868 16,145 12,500
8/31/96 15,910 16,864 16,132 12,524
9/30/96 16,147 17,100 16,362 12,564
10/31/96 16,329 17,293 16,539 12,604
11/30/96 16,645 17,610 16,830 12,627
12/31/96 16,543 17,536 16,756 12,627
1/31/97 16,574 17,569 16,758 12,667
2/28/97 16,720 17,731 16,904 12,707
3/31/97 16,499 17,495 16,684 12,739
4/30/97 16,608 17,642 16,821 12,755
5/31/97 16,854 17,907 17,061 12,747
6/30/97 17,022 18,098 17,246 12,763
7/31/97 17,526 18,600 17,765 12,779
8/31/97 17,320 18,425 17,553 12,803
9/30/97 17,590 18,644 17,766 12,834
10/31/97 17,682 18,763 17,874 12,866
11/30/97 17,794 18,874 17,974 12,858
12/31/97 18,087 19,150 18,258 12,842
1/31/98 18,281 19,347 18,428 12,866
2/28/98 18,273 19,353 18,417 12,890
3/31/98 18,264 19,370 18,420 12,914
4/30/98 18,175 19,283 18,303 12,938
5/31/98 18,474 19,588 18,605 12,962
6/30/98 18,548 19,664 18,666 12,978
7/31/98 18,581 19,713 18,692 12,994
8/31/98 18,885 20,019 18,982 13,010
9/30/98 19,147 20,269 19,210 13,025
10/31/98 19,118 20,269 19,137 13,057
11/30/98 19,173 20,340 19,194 13,057
12/31/98 19,207 20,391 19,229 13,049
1/31/99 19,432 20,633 19,442 13,081
2/28/99 19,296 20,543 19,314 13,097
3/31/99 19,308 20,571 19,316 13,137
4/30/99 19,342 20,623 19,362 13,233
5/31/99 19,205 20,462 19,250 13,233
6/30/99 18,915 20,116 18,972 13,233
7/31/99 18,993 20,152 19,041 13,272
8/31/99 18,810 19,991 18,814 13,304
9/30/99 18,823 19,999 18,769 13,368
10/31/99 $18,617 $19,783 $18,495 $13,392
As you compare performance, please note that the LB Municipal Bond
Fund's performance reflects the maximum 4% sales charge. The
performances of the Lehman Municipal Bond Index and the Lipper Median do
not reflect any such charges. If you were to purchase any of the
individual bonds or funds represented in these indexes, any charges you
would pay would reduce your total return as well.
INSET LEGEND READS:
LB Municipal
Bond Fund
$18,617
Lehman
Municipal
Bond Index
$19,783
Lipper Median
General Municipal
Debt Funds
$18,495
Consumer
Price Index
$13,392
INSET BOX ON CHART READS:
LB Municipal Bond Fund
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value -2.62% 6.66% 6.84%
Public Offering Price -6.52% 5.79% 6.41%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) -3.44% 1.75%
If Redeemed (CDSC) -8.27% -0.23%
Institutional shares
Net Asset Value -2.49% 2.80%
*See accompanying notes to Portfolio Management Reviews.
LB Money Market Fund
[PHOTO OMITTED: GAIL R. ONAN]
Gail R. Onan, assistant vice president of Lutheran Brotherhood Research
Corp., is portfolio manager for the LB Money Market Fund. She has
managed the Fund since January 1994 and has been with Lutheran
Brotherhood since 1969.
Short-term yields, as measured by two-year U.S. Treasury notes, rose by
1.53% over the past year, as stronger economic growth prompted the
Federal Reserve to raise interest rates as a pre-emptive strike against
future inflation. By using a modified "barbell" maturity structure for
the LB Money Market Fund that emphasized investments with both longer
and very short maturities, we maximized the higher yields that became
available while making the most of new yield opportunities. With such
enhancements in yield, the Fund earned a total return of 4.27% for the
12 months ended October 31, 1999.
Making the Most of Rising Yields
At the start of the reporting period on November 1, 1998, two-year
Treasury notes were yielding 4.25% and the LB Money Market Fund had a
weighted average maturity of 48 days. Following cuts in short-term
interest rates by the Federal Reserve of 0.25% each in September and
October of 1998, investors began to expect additional rate cuts. This
caused the yields for longer-maturity money market instruments to fall
below shorter-term yields--making the longer maturities less attractive.
Emphasizing shorter-term issues at this time made us better prepared to
add higher-yielding instruments if market rates bottomed and began to
rise.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Certificates of Deposit 4.8%
Variable Rate Notes 2.9%
Bank Notes 2.2%
Medium-Term Notes 1.8%
U.S. Government Agency 1.4%
Commercial Paper 86.9%
The Fund's portfolio composition and top holdings represent all share
classes.
As expected, the Fed cut short-term rates another 0.25% on November 17,
1998. Positive economic signals, combined with upward pressure from
year-end technical factors, then helped money market yields move higher.
Having emphasized shorter maturities, we had the necessary liquidity to
move into higher-yielding securities relatively quickly. With additions
of longer-maturity investments that let us lock-in the higher yields for
more time, the Fund had a weighted average maturity of 55 days at the
end of 1998.
We continued adding longer maturities through the summer of 1999, as
short-term yields rose further. Expectations for Fed interest rate
hikes--which came on June 30 and August 24, 1999, for a total increase
of 0.50%--drove the yield for two-year Treasury notes to a high of 5.98%
on October 26th. The Fund's weighted average maturity rose to 68 days
during this time.
While a third rate hike of 0.25% seemed possible, signs that inflation
was under control suggested that the Fed might not act again before the
end of 1999. Short-term yields edged lower in this environment. To give
the Fund added year-end liquidity, we increased investments in shorter-
term issues. By October 31, with two-year Treasury notes yielding 5.79%,
the Fund had a weighted average maturity of 62 days.
[GRAPHIC OMITTED: TOP 10 HOLDINGS BY CREDITOR % OF PORTFOLIO]
Top 10 Holdings % of
by Creditor Portfolio
- --------------------------------------------------------------------
General Electric Capital Corp. 4.8%
USAA Capital Corp. 4.7%
Wells Fargo & Co. 4.5%
DaimlerChrysler NA Holdings 4.4%
Motorola, Inc. 4.4%
Chevron Corp. 4.1%
Delaware Funding Corp. 4.0%
Ford Motor Credit Co. 3.6%
Preferred Receivables Funding 3.6%
Morgan Guaranty Trust Co. 3.5%
These holdings represent 41.6% of the Fund's total investment portfolio.
Throughout this time, we also enhanced the Fund's yield by taking
advantage of investment opportunities that resulted from short-term
market fluctuations. Per our usual investment strategy, we maintained a
very high level of credit quality.
Longer Maturities Still Attractive
We have kept a modified barbell maturity structure, investing in longer-
term issues that will mature next year to balance the shorter-term
issues that will ensure liquidity for the end of 1999. If market yields
remain near the levels they are today, we believe longer maturities will
still be attractive. For now, we expect yields to trade in a narrow
range and be very sensitive to changes in supply of high-quality,
investment-grade securities.
LB Money Market Fund seeks current income with stability of principal by
investing in high-quality, short-term debt securities.**
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 2/1/79
Shareholder
Accounts: 61,618
Total Net Assets
(in millions): $631.5
[GRAPHIC OMITTED: PERFORMANCE AS OF 10/31/99]
Performance as of 10/31/99
LB Money Market Fund
Annualized Total Returns* Seven-Day Yields***
- ------------------------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year Effective Annualized
Net Asset Value 4.27% 4.68% 4.50% 4.69% 4.59%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 4.27% 4.55% 4.69% 4.59%
Institutional shares
If Held (NAV) 4.53% 4.81% 4.96% 4.84%
Footnotes
* Annualized total returns represent past performance and reflect
changes in share prices, the reinvestment of all dividends and
capital gains, and the effects of compounding. Since performance
varies, annualized total returns, which assume a steady rate of
growth, differ from the Fund's actual total return for the years
indicated. Class A POP (public offering price) returns have been
adjusted for the maximum 4% sales charge. NAV (net asset value)
returns do not include sales charges. Class B maximum CDSC returns
have been adjusted for the maximum 5% contingent deferred sales
charge. NAV (net asset value) returns do not include sales charges.
There is an asset based sales charge of 0.75% annually for Class B
shares. Institutional (no-load) shares, which are available to
qualifying Lutheran institutions, Lutheran church organizations, and
certain other institutional investors, do not impose a sales charge.
The value of an investment fluctuates so that shares, when redeemed,
may be worth more or less than the original investment.
Lutheran Brotherhood's LB Fund, High Yield Fund, Income Fund and
Municipal Bond Fund are subject to a partial voluntary waiver of
advisory fees by the funds' investment advisor, which has the effect
of improving the funds' performances. The waiver of fees may be
discontinued at any time.
** An investment in the LB Money Market Fund is not a bank deposit and
is not insured or guaranteed by the FDIC or any other government
agency. Although the Fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by
investing in the Fund.
*** Seven-day yields of the LB Money Market Fund refer to the income
generated by an investment in the Fund over a specified seven-day
period. Effective yields reflect the reinvestment of income. Yields
are subject to daily fluctuation and should not be considered an
indication of future results.
This report must be preceded or accompanied by a prospectus of the
Lutheran Brotherhood Family of Funds.
AssetMatchSM -- A program for personalized investment strategies
Your financial goals are as unique as you are. And because of this, it's
essential to design investment strategies that are specific to your
individual circumstances.
Whether you're developing a new strategy or revisiting an existing one,
proper planning is key.
That's where Lutheran Brotherhood's AssetMatch program comes in.
Your LBSC registered representative is trained in portfolio strategy and
guides you through the program:
* Collecting information on your investment profile
* Exploring various asset mixes and their historical risk and return
characteristics
* Identifying an optimal mix of investments for your circumstances
You can rely on the knowledge and experience of your LBSC registered
representative. He or she can provide solid footing for your
personalized investment strategy.
Based on Proven Principles
AssetMatch is based on the same proven principles that have
guided successful investors for decades: diversification and
asset allocation.
Diversification is the spreading of risk by including a variety of
securities (e.g., small-cap stocks, international stocks, high-yield
bonds, etc.) in your portfolio.
Why Asset Allocation?
Asset allocation is the process of choosing how much to invest among
different asset classes (e.g., stocks, bonds and money market
instruments). Studies have shown that portfolio performance depends
largely on how you allocate your assets.
According to a study titled "Determinants of Portfolio Performance II:
An Update" by Gary Brinson,* 92% of an investment portfolio's
performance is due to asset-class selection, while individual security
selection and timing of purchase account for only about 6%.
With such a large part of performance hinging on asset-class selection,
it's critical to have help from your LBSC registered representative, who
is trained in asset allocation strategies.
Jumpstart Your Strategy
The first step in the AssetMatch program is to assess your needs.
Completing an AssetMatch questionnaire helps your LBSC registered
representative gauge the following:
* Your risk tolerance
* Your investment preferences
* Your time horizon
* Your liquidity needs
The questionnaire is short, yet comprehensive, and you can complete it
on your own or with the help of your LBSC registered representative.
Once completed, forward your confidential questionnaire to your LBSC
registered representative for analysis. He or she enters your answers
into the AssetMatch computer program and determines an optimal mix for
your situation. Your LBSC registered representative can then review your
AssetMatch results and discuss whether further analysis or adjustments
to your strategy are necessary.
Get started today
To obtain an AssetMatch questionnaire, call your LBSC registered
representative, or call our customer service associates at
1-800-990-6290.
* Source: Financial Analysts Journal, May/June 1991. Copyright 1991.
Association for Investment Management & Research, Charlottesville,
Virginia. All rights reserved.
This page does not constitute part of the report.
PricewaterhouseCoopers LLP
650 Third Avenue South
Park Building
Suite 1300
Minneapolis MN 55402-4333
Telephone (612) 596-6000
Facsimile (612) 373-7160
Report of Independent Accountants
To the Trustees and Shareholders of the
Lutheran Brotherhood Family of Funds
In our opinion, the accompanying statement of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Lutheran Brotherhood Opportunity Growth Fund, Lutheran Brotherhood Mid
Cap Growth Fund, Lutheran Brotherhood World Growth Fund, Lutheran
Brotherhood Fund, Lutheran Brotherhood High Yield Fund, Lutheran
Brotherhood Income Fund, Lutheran Brotherhood Municipal Bond Fund and
Lutheran Brotherhood Money Market Fund, (each a series in the Lutheran
Brotherhood Family of Funds) at October 31, 1999, and the results of
their operations for the year then ended, the changes in each of their
net assets and the financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States which
require that we plan and perform our audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of securities at October 31, 1999 by correspondence with the custodian
and brokers provide a reasonable basis for the opinion expressed
above.
/S/PRICEWATERHOUSECOOPERS LLP
December 10, 1999
PricewaterhouseCoopers LLP
650 Third Avenue South
Park Building
Suite 1300
Minneapolis MN 55402-4333
Telephone (612) 596-6000
Facsimile (612) 373-7160
Report of Independent Accountants
To the Trustees and Shareholders of the
Lutheran Brotherhood Family of Funds
In our opinion, the accompanying statement of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets present fairly, in all material
respects, the financial position of Lutheran Brotherhood Growth Fund,
Lutheran Brotherhood Value Fund and Lutheran Brotherhood Limited
Maturity Bond Fund (each a series in the Lutheran Brotherhood Family of
Funds) at October 31, 1999, the results of their operations and the
changes in each of their net assets for the period October 29, 1999
(commencement of operations) to October 31, 1999, in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of management; our
responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these financial
statements in accordance with auditing standards generally accepted in
the United States which require that we plan and perform our audits to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audit, which included confirmation of
securities at October 31, 1999 by correspondence with the custodian and
brokers provide a reasonable basis for the opinion expressed above.
/S/PRICEWATERHOUSECOOPERS LLP
December 10, 1999
<TABLE>
<CAPTION>
Lutheran Brotherhood Opportunity Growth Fund
Portfolio of Investments
October 31, 1999
Shares Value
- -------------- --------------
<S> <C> <C>
COMMON STOCKS - 96.7% (a)
Aerospace & Defense - 0.4%
27,500 Orbital Sciences Corp. $ 405,588(b)
19,000 Triumph Group, Inc. 457,188(b)
------------
862,776
------------
Airlines - 1.0%
13,900 Alaska Air Group, Inc. 552,525(b)
46,500 COMAIR Holdings, Inc. 1,073,133
51,400 Mesaba Holdings, Inc. 591,100(b)
------------
2,216,758
------------
Automotive - 1.4%
52,800 Gentex Corp. 907,500(b)
32,400 Group 1 Automotive, Inc. 542,700(b)
30,200 O'Reilly Automotive, Inc. 1,317,475(b)
23,800 Tower Automotive, Inc. 388,238(b)
------------
3,155,913
------------
Bank & Finance - 5.4%
3,800 Advance Paradigm, Inc. 161,975(b)
42,700 Affiliated Managers Group, Inc. 1,142,225(b)
68,400 AmeriCredit Corp. 1,188,450(b)
30,600 City National Corp. 1,185,750
23,743 Commerce Bancorp, Inc. 1,063,983
44,500 Community First
Bankshares, Inc. 846,891
5,700 Donaldson, Lufkin &
Jenrette, Inc. 80,513(b)
11,700 E.W. Blanch Holdings, Inc. 757,575
3,969 Heller Financial, Inc. 94,264
61,300 Inspire Insurance Solutions, Inc. 390,788(b)
15,000 Legg Mason, Inc. 545,625
17,800 Metris Companies, Inc. 612,988
14,500 Nationwide Financial
Services, Inc., Class A 549,188
14,500 Protective Life Corp. 524,719
20,732 Radian Group, Inc. 1,094,909
16,600 Telebanc Financial Corp. 398,400(b)
55,500 Waddell & Reed
Financial, Inc., Class A 1,332,000
------------
11,970,243
------------
Biotechnology - 1.4%
26,900 Cytyc Corp. 1,069,275(b)
34,800 Inhale Therapeutic
Systems, Inc. 959,175(b)
37,700 Medco Research, Inc. 909,513(b)
68,865 Serologicals Corp. 266,852(b)
------------
3,204,815
------------
Building &
Construction - 1.1%
31,800 Dycom Industries, Inc. 1,035,488(b)
20,300 NCI Building Systems, Inc. 320,994(b)
16,800 Pinnacle Holdings, Inc. 403,200(b)
14,000 Simpson Manufacturing Co., Inc. 567,875(b)
------------
2,327,557
------------
Business Services - 8.0%
27,300 Acxiom Corp. 450,450(b)
34,100 Bright Horizons Family
Solutions, Inc. 500,844(b)
24,000 Carriage Services, Inc.,
Class A 163,500(b)
16,600 CommScope, Inc. 661,925(b)
30,200 Consolidated Graphics, Inc. 604,000(b)
19,100 Cort Business Services Corp. 387,969(b)
6,300 DoubleClick, Inc. 882,000(b)
52,600 First Consulting Group, Inc. 443,813(b)
21,000 G & K Services, Inc., Class A 788,813
14,700 Gartner Group, Inc., Class A 143,325
30,500 Insituform Technologies, Inc.,
Class A 730,094(b)
23,800 Lason, Inc. 884,319(b)
42,000 META Group, Inc. 603,750(b)
30,800 Metamor Worldwide, Inc. 581,350(b)
88,900 Modis Professional
Services, Inc. 994,569(b)
30,360 National Computer
Systems, Inc. 1,147,988
11,600 Navigant Consulting, Inc. 331,325(b)
39,600 NCO Group, Inc. 1,678,050(b)
49,725 NOVA Corp. 1,292,850(b)
22,400 Pre-Paid Legal Services, Inc. 543,200(b)
80,700 Professional Staff plc, ADR 408,544(b)
25,300 Quanta Services, Inc. 705,238(b)
38,000 Rent-Way, Inc. 631,750(b)
48,800 Romac International, Inc. 329,400(b)
32,600 StaffMark, Inc. 234,313(b)
61,975 Tetra Tech, Inc. 983,853(b)
15,700 Visual Networks, Inc. 653,513(b)
------------
17,760,745
------------
Chemicals - 0.6%
24,000 MacDermid, Inc. 813,000
24,900 Sybron Corp. 592,931(b)
------------
1,405,931
------------
Computer Equipment - 1.8%
39,000 Activision, Inc. 550,875(b)
22,700 Kopin Corp. 953,400(b)
46,800 Pinnacle Systems, Inc. 1,298,700(b)
38,600 S3, Inc. 386,000(b)
21,550 Symbol Technologies, Inc. 856,613
------------
4,045,588
------------
Computer Service &
Software - 19.6%
12,500 Actuate Corp. 425,000(b)
25,900 Affiliated Computer
Services, Inc., Class A 984,200(b)
22,100 American Management
Systems, Inc. 571,838(b)
28,500 Ardent Software, Inc. 628,781(b)
29,000 AVT Corp. 971,500(b)
48,600 Beyond.com Corp. 449,550(b)
22,100 Bisys (The) Group, Inc. 1,127,100(b)
38,000 CIBER, Inc. 619,875(b)
9,800 Citrix Systems, Inc. 628,425(b)
17,000 Clarify, Inc. 1,313,250(b)
29,900 Cognos, Inc. 848,413(b)
21,000 Concord Communications, Inc. 1,090,688(b)
14,400 Dendrite International, Inc. 451,800(b)
20,500 Digital River, Inc. 465,094(b)
6,100 Electronic Arts, Inc. 492,956(b)
8,700 Engineering Animation, Inc. 78,300(b)
17,800 FactSet Research Systems, Inc. 1,182,588
26,300 Global Imaging Systems, Inc. 363,269(b)
15,200 Great Plains Software, Inc. 843,600(b)
49,135 Hyperion Solutions Corp. 1,197,666(b)
20,800 InfoCure Corp. 327,600(b)
26,100 Intuit, Inc. 760,163(b)
23,200 ISS Group, Inc. 884,500(b)
24,000 Keane, Inc. 564,000(b)
19,100 Legato Systems, Inc. 1,026,625(b)
14,000 Liberate Technologies, Inc. 953,750(b)
21,600 Macromedia, Inc. 1,391,850(b)
20,400 MAPICS, Inc. 173,400(b)
29,300 Mastech Corp. 501,763(b)
15,300 Mercury Interactive Corp. 1,241,213(b)
5,400 Micromuse, Inc. 577,125(b)
31,700 National Data Corp. 760,800
43,500 National Instruments Corp. 1,307,719(b)
19,500 Network Associates, Inc. 357,094(b)
20,400 Pegasus Systems, Inc. 872,100(b)
22,500 Peregrine Systems, Inc. 987,188(b)
20,400 Preview Travel, Inc. 622,200(b)
9,800 PSINet, Inc. 352,800(b)
34,500 QRS Corp. 1,919,063(b)
12,270 Sterling Commerce, Inc. 287,578(b)
88,700 Summit Design, Inc. 224,522(b)
20,100 SunGard Data Systems, Inc. 491,194(b)
36,000 Sykes Enterprises, Inc. 1,111,500(b)
29,500 Symantec Corp. 1,408,625(b)
12,700 Synopsys, Inc. 791,369(b)
28,400 Transaction Systems
Architects, Inc., Class A 873,300(b)
30,300 USinternetworking, Inc. 1,009,369(b)
40,850 USWeb Corp. 1,582,938(b)
16,700 Visio Corp. 661,216(b)
20,400 WebTrends Corp. 1,259,700(b)
21,000 Whittman-Hart, Inc. 807,188(b)
30,500 Wind River Systems, Inc. 621,438(b)
10,400 Xircom, Inc. 524,550(b)
31,500 Zebra Technologies Corp.,
Class B 1,712,813(b)
------------
43,682,146
------------
Cosmetics - 0.2%
20,900 Chattem, Inc. 368,363
------------
Distribution Services - 1.7%
22,500 AmeriSource Health Corp.,
Class A 337,500(b)
23,000 Henry (Jack) & Associates, Inc. 836,625
34,200 MSC Industrial
Direct Co., Inc., Class A 327,038(b)
10,100 SCP Pool Corp. 229,144(b)
26,400 Tech Data Corp. 496,650(b)
44,600 U.S. Foodservice Co. 855,763(b)
68,800 Watsco, Inc. 696,600
------------
3,779,320
------------
Education - 1.4%
41,360 Apollo Group, Inc., Class A 1,088,285(b)
38,000 ITT Educational Services, Inc. 750,500(b)
43,900 Learning Tree International, Inc. 806,663(b)
40,000 Sylvan Learning Systems, Inc. 517,500(b)
------------
3,162,948
------------
Electrical Equipment - 0.4%
28,000 American Power
Conversion Corp. 628,250(b)
29,000 SLI, Inc. 311,750(b)
------------
940,000
------------
Electronic Components - 9.9%
9,800 Alpha Industries, Inc. 541,450(b)
18,500 American Xtal Technology, Inc. 239,344(b)
6,200 Amphenol Corp., Class A 366,575(b)
16,800 Artesyn Technologies, Inc. 331,800(b)
25,800 ATMI, Inc. 694,988(b)
17,500 Benchmark Electronics, Inc. 280,000(b)
37,550 Burr-Brown Corp. 1,476,184(b)
11,000 CTS Corp. 622,188
38,000 Cybex Computer Products Corp. 1,484,375(b)
25,800 Dallas Semiconductor Corp. 1,518,975
11,800 Electronics for Imaging, Inc. 475,688(b)
21,100 Etec Systems, Inc. 805,756(b)
49,200 Lattice Semiconductor Corp. 1,740,450(b)
9,400 Maxim Integrated Products, Inc. 742,013(b)
35,800 Micrel, Inc. 1,946,625(b)
27,000 Microchip Technology, Inc. 1,798,875(b)
28,000 Plexus Corp. 742,000(b)
6,100 PMC-Sierra, Inc. 574,925(b)
15,700 QLogic Corp. 1,634,763(b)
9,900 Sanmina Corp. 891,619(b)
33,000 Semtech Corp. 1,264,313(b)
20,900 TranSwitch Corp. 983,606(b)
19,600 Vitesse Semiconductor Corp. 899,150(b)
------------
22,055,662
------------
Electronic Systems - 3.5%
21,900 Black Box Corp. 1,111,425(b)
11,800 C-Cube Microsystems, Inc. 525,100(b)
24,400 Cognex Corp. 730,475(b)
24,900 Cohu, Inc. 469,988
12,000 Cymer, Inc. 443,250(b)
18,300 Dionex Corp. 813,206(b)
14,100 MIPS Technologies, Inc. 407,138(b)
18,700 Novellus Systems, Inc. 1,449,250(b)
26,100 Polycom, Inc. 1,305,000(b)
13,800 Teradyne, Inc. 531,300(b,c)
------------
7,786,132
------------
Energy Services - 0.9%
24,200 BJ Services Co. 830,363(b)
10,300 Cal Dive International, Inc. 346,338(b)
35,300 Oceaneering International, Inc. 478,756(b)
7,500 Smith International, Inc. 259,219(b)
------------
1,914,676
------------
Exploration &
Production - 0.5%
15,600 Barrett Resources Corp. 523,575(b)
26,700 Noble Affiliates, Inc. 675,844
------------
1,199,419
------------
Food Processing - 0.7%
12,300 Ben & Jerry's Homemade, Inc. 207,563(b)
32,100 Hain Food Group (The), Inc. 804,506(b)
22,700 Smithfield Foods, Inc. 516,425(b)
------------
1,528,494
------------
Healthcare Services - 0.9%
20,400 Henry Schein, Inc. 265,200(b)
29,800 Novoste Corp. 512,188(b)
40,100 Orthodontic Centers of
America, Inc. 551,375(b)
14,000 ResMed, Inc. 484,750(b)
57,700 US Oncology, Inc. 257,847(b)
------------
2,071,360
------------
Hospital Supplies &
Management - 4.9%
24,100 DENTSPLY International, Inc. 558,819
20,500 First Health Group Corp. 476,625(b)
24,000 Hanger Orthopedic Group, Inc. 295,500(b)
42,400 Lincare Holdings, Inc. 1,192,500(b)
31,800 MedQuist, Inc. 1,017,600(b)
54,500 Mentor Corp. 1,284,156
8,200 Molecular Devices Corp. 303,400(b)
87,200 Omnicare, Inc. 806,600
19,000 Patterson Dental Co. 856,188(b)
30,450 Priority Healthcare Corp.,
Class B 610,903(b)
61,600 PSS World Medical, Inc. 477,400(b)
34,500 Renal Care Group, Inc. 642,563(b)
25,600 STERIS Corp. 340,800(b)
23,200 Universal Health Services, Inc.,
Class B 681,500(b)
10,400 Ventana Medical Systems, Inc. 208,650(b)
23,300 Veterinary Centers of
America, Inc. 273,775(b)
11,300 VISX, Inc. 706,956(b)
4,000 Xomed Surgical Products, Inc. 243,250(b)
------------
10,977,185
------------
Information Processing - 0.7%
16,900 F.Y.I., Inc. 557,700(b)
18,900 SCI Systems, Inc. 933,188(b)
------------
1,490,888
------------
Leisure &
Entertainment - 2.2%
35,700 Brinker International, Inc. 832,256(b)
63,900 Imax Corp. 1,325,925(b)
22,450 SFX Entertainment, Inc. 784,347(b)
21,900 Sonic Corp. 613,200(b)
32,500 Steinway Musical
Instruments, Inc. 576,875(b)
66,450 Sunterra Corp. 664,500(b)
------------
4,797,103
------------
Machinery - 0.8%
17,400 Applied Science & Technology 426,300(b)
13,500 Asyst Technologies, Inc. 523,125(b)
29,000 Terex Corp. 766,688(b)
------------
1,716,113
------------
Media &
Communications - 5.3%
30,300 ACNielsen Corp. 666,600(b)
44,000 American Tower Corp., Class A 838,750(b)
19,600 AT&T Canada, Inc. 632,100(b)
12,700 Catalina Marketing Corp. 1,189,038(b)
20,800 Cox Radio, Inc., Class A 1,456,000(b)
46,000 Crown Castle
International Corp. 885,500(b)
23,300 Emmis Communications Corp.,
Class A 1,680,513(b)
34,000 Harte-Hanks, Inc. 673,625
7,600 Hispanic Broadcasting Corp. 615,600(b)
9,000 Lamar Advertising Co. 486,000(b)
9,700 Media General, Inc., Class A 529,863
6,200 TMP Worldwide, Inc. 387,113(b)
700 TV Guide, Inc., Class A 36,838(b)
2,700 Univision Communications,
Inc., Class A 229,669(b)
5,050 Valassis Communications, Inc. 217,150(b)
16,800 Young Broadcasting, Inc.,
Class A 779,100(b)
21,200 Zomax Optical Media, Inc. 590,950(b)
------------
11,894,409
------------
Miscellaneous Consumer
Products - 2.3%
34,800 Blyth Industries, Inc. 872,175(b)
15,750 Cost Plus, Inc. 574,875(b)
23,500 DeVry, Inc. 494,969(b)
33,750 Fossil, Inc. 932,344(b)
49,300 Mohawk Industries, Inc. 1,130,819(b)
44,850 Quiksilver, Inc. 633,506(b)
21,600 Wesley Jessen VisionCare, Inc. 580,500(b)
------------
5,219,188
------------
Paper & Forest
Products - 0.2%
10,300 Pentair, Inc. 387,538
------------
Pharmaceuticals - 3.8%
9,300 Andrx Corp. 444,075(b)
7,500 Barr Laboratories, Inc. 227,344(b)
5,600 Biogen, Inc. 415,100(b)
41,500 Duane Reade, Inc. 1,115,313(b)
12,900 Express Scripts, Inc., Class A 633,713(b)
11,300 Forest Laboratories, Inc. 518,388(b)
36,450 Jones Pharma, Inc. 1,129,950
14,900 K-V Pharmaceutical Co.,
Class A 258,888(b)
31,900 Liposome Company, Inc. 251,213(b)
35,200 Roberts Pharmaceutical Corp. 1,135,200(b)
18,400 Shire Pharmaceuticals
Group plc, ADR 584,200(b)
62,600 Theragenics Corp. 665,125(b)
32,800 Watson Pharmaceuticals, Inc. 1,041,400(b)
------------
8,419,909
------------
Pollution Control - 0.6%
56,700 Casella Waste Systems, Inc.,
Class A 761,906(b)
48,300 Catalytica, Inc. 606,769(b)
------------
1,368,675
------------
Real Estate Investment Trust - 0.7%
29,170 Apartment Investment &
Management Co., Class A 1,097,521
42,100 Catellus Development Corp. 494,675(b)
------------
1,592,196
------------
Restaurants - 0.7%
27,900 Applebee's International, Inc. 803,869
21,600 Outback Steakhouse, Inc. 496,800(b)
17,100 RARE Hospitality
International, Inc. 340,931(b)
------------
1,641,600
------------
Retail - 6.9%
25,800 1-800-FLOWERS.COM, Inc. 332,175(b)
23,100 Barnes and Noble, Inc. 480,769(b)
15,600 Bed, Bath & Beyond, Inc. 519,675(b)
22,800 Borders Group, Inc. 296,400(b)
30,900 Buckle (The), Inc. 509,850(b)
26,500 CDW Computer Centers, Inc. 1,636,375(b)
34,750 Dollar Tree Stores, Inc. 1,513,797(b)
29,600 Family Dollar Stores, Inc. 610,500
9,200 Insight Enterprise, Inc. 343,850(b)
17,500 Kenneth Cole Productions, Inc.,
Class A 684,688(b)
21,000 Linens 'N Things, Inc. 834,750(b)
37,200 Men's (The) Wearhouse, Inc. 816,075(b)
33,200 Nieman Marcus Group, Inc.,
Class A 794,725(b)
38,925 Pacific Sunwear of California 1,175,048(b)
23,100 Rayovac Corp. 574,613(b)
13,310 Rent-A-Center, Inc. 243,739(b)
28,000 Ross Stores, Inc. 577,500
44,600 RSA Security, Inc. 1,583,300(b)
14,100 Whole Foods Market, Inc. 479,400(b)
13,200 Wild Oats Markets, Inc. 465,300(b)
17,000 Williams-Sonoma, Inc. 913,750(b)
------------
15,386,279
------------
Telecommunications
Equipment - 4.5%
8,878 ADC Telecommunications, Inc. 423,370(b)
19,800 Aeroflex, Inc. 110,138(b)
26,500 Andrew Corp. 341,188(b)
28,200 Gilat Satellite Networks, Ltd. 1,469,925(b)
49,100 Inter-Tel, Inc. 779,463
33,600 ITC DeltaCom, Inc. 806,400(b)
4,700 JDS Uniphase Corp. 784,313(b)
8,500 Powerwave Technologies, Inc. 553,031(b)
52,800 Premisys Communications, Inc. 511,500(b)
33,900 Proxim, Inc. 1,586,944(b)
24,700 Spectrian Corp. 827,450(b)
17,900 Stanford
Telecommunications, Inc. 501,200(b)
27,800 Time Warner Telecom, Inc.,
Class A 700,213(b)
11,600 USA Networks, Inc. 522,725(b)
------------
9,917,860
------------
Telephone Services - 1.5%
5,100 Comverse Technology, Inc. 578,850(b)
34,200 ICG Communications, Inc. 560,025(b)
76,200 InterVoice, Inc. 942,975(b)
13,200 United States Cellular Corp. 1,168,200(b)
------------
3,250,050
------------
Transportation
Services - 0.8%
20,600 Avis Rent A Car, Inc. 368,225(b)
45,450 Swift Transportation Co., Inc. 792,534(b)
13,700 USFreightways Corp. 620,781
------------
1,781,540
------------
Total Common Stocks
(cost $201,248,720) 215,279,379
------------
Principal
Amount
- -------------
SHORT-TERM
SECURITIES - 3.3% (a)
Commercial Paper
$7,400,000 New Center Asset Trust,
5.31%, Due 11/1/1999
(at amortized cost) 7,400,000
------------
Total Investments
(cost $ 208,648,720) $222,679,379(d)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Opportunity Growth Fund.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock
and had no separate value at October 31, 1999.
(d) At October 31, 1999, the aggregate cost of securities for
federal tax purposes was $208,811,546 and the net unrealized
appreciation of investments based on that cost was $13,867,833
which is comprised of $45,287,370 aggregate gross unrealized
appreciation and $31,419,537 aggregate gross unrealized
depreciation.
(e) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Mid Cap Growth Fund
Portfolio of Investments
October 31, 1999
Shares Value
- -------------- --------------
<S> <C> <C>
COMMON STOCKS - 93.6% (a)
Aerospace - 0.3%
3,800 General Dynamics Corp. $ 210,630
------------
Airlines - 0.4%
14,150 COMAIR Holdings, Inc. 326,555
------------
Automotive - 0.7%
7,800 General Motors Corp.,
Class H 567,938
------------
Bank & Finance - 8.1%
2,400 AMBAC Financial Group, Inc. 143,400
6,600 Associated Banc-Corp. 253,894
5,015 Bear Stearns Cos., Inc. 213,764
6,400 Capital One Financial Corp. 339,200
5,685 Charter One Financial, Inc. 139,638
7,950 City National Corp. 308,063
5,600 Dime Bancorp, Inc. 100,100
1,440 Donaldson, Lufkin &
Jenrette, Inc. 74,520
5,320 Finova Group, Inc. 234,413
10,000 Firstar Corp. 293,750
9,100 Legg Mason, Inc. 331,013
4,800 Marshall & Ilsley Corp. 322,200
4,500 Metris Companies, Inc. 154,969
7,400 North Fork Bancorporation, Inc. 153,088
3,600 Northern Trust Corp. 347,625
10,300 Pacific Century Financial Corp. 234,969
5,500 PMI Group 285,313
2,000 Profit Recovery Group
International, Inc. 82,375(b)
1,200 Providian Financial Corp. 130,800
11,200 Roslyn Bancorp, Inc. 217,000
5,100 SLM Holding Corp. 249,581
6,400 SouthTrust Corp. 256,000
4,315 Summit Bancorp 149,407
8,940 TCF Financial Corp. 263,730
12,200 UnionBanCal Corp. 529,938
4,400 Waddell & Reed
Financial, Inc., Class A 105,600
5,290 Zions Bancorporation 311,779
------------
6,226,129
------------
Broadcasting - 3.6%
6,100 AMFM, Inc. 427,000(b)
6,997 Clear Channel
Communications, Inc. 562,384(b)
2,700 Cox Radio, Inc., Class A 189,000(b)
5,200 Echostar Communications
Corp., Class A 321,750(b)
7,100 Infinity Broadcasting Corp.,
Class A 245,394(b)
3,200 Spanish Broadcasting
Systems, Inc., Class A 85,200(b)
7,100 Univision Communications,
Inc., Class A 603,944(b)
7,500 USA Networks, Inc. 337,969(b)
------------
2,772,641
------------
Building Products &
Materials - 0.5%
10,280 Leggett & Platt, Inc. 228,088
2,400 Southdown, Inc. 115,950
------------
344,038
------------
Chemicals - 0.4%
5,800 Cytec Industries, Inc. 149,713(b)
5,900 Millipore Corp. 188,063
------------
337,776
------------
Computer Software - 12.7%
250 Akami Technologies, Inc. 36,297(b)
14,560 American Power
Conversion Corp. 326,690(b)
5,950 BMC Software, Inc. 381,916(b)
5,400 BroadVision, Inc. 397,575(b)
6,800 Business Objects S.A., ADR 489,600(b)
8,400 Citrix Systems, Inc. 538,650(b)
18,000 Cognos, Inc. 510,750(b)
6,180 Compuware Corp. 171,881(b)
5,800 Comverse Technology, Inc. 658,300(b)
200 FactSet Research Systems, Inc. 13,288
10,800 Intuit, Inc. 314,550(b)
10,700 J.D. Edwards & Company 256,131(b)
6,400 Legato Systems, Inc. 344,000(b)
4,400 Micromuse, Inc. 470,250(b)
5,100 Network Associates, Inc. 93,394(b)
4,900 Peregrine Systems, Inc. 214,988(b)
8,100 Progress Software Corp. 271,350(b)
700 Project Software &
Development, Inc. 33,688(b)
12,100 Rational Software Corp. 517,275(b)
6,600 Remedy Corp. 283,800(b)
6,100 Siebel Systems, Inc. 669,856(b)
8,080 SunGard Data Systems, Inc. 197,455(b)
9,300 Symantec Corp. 444,075(b)
11,360 Synopsys, Inc. 707,870(b)
2,900 TIBCO Software, Inc. 113,100(b)
2,600 Unisys Corp. 63,050(b)
2,600 Veritas Software Corp. 280,475(b)
3,300 Vignette Corp. 521,400(b)
6,200 Visual Networks, Inc. 258,075(b)
2,400 VISX, Inc. 150,150(b)
------------
9,729,879
------------
Computers &
Office Equipment - 3.9%
13,600 Cabletron Systems, Inc. 225,250(b)
5,500 EMC Corp. 401,500(b)
6,060 Gateway, Inc. 400,339(b)
12,220 Herman Miller, Inc. 265,021
6,400 Lexmark International
Group, Inc., Class A 499,600(b)
4,500 Lycos, Inc. 240,188(b)
11,100 National Instruments Corp. 333,694(b)
2,600 Sun Microsystems, Inc. 275,113(b)
7,800 Teradyne, Inc. 300,300(b,c)
------------
2,941,005
------------
Conglomerates - 0.2%
3,724 Tyco International, Ltd. 148,727
------------
Construction &
Home Building - 0.1%
2,900 Jacobs Engineering Group, Inc. 102,950
------------
Drugs & Health Care - 7.7%
13,300 Alkermes, Inc. 469,656(b)
3,700 Allergan, Inc. 397,288
5,600 Alpharma, Inc., Class A 197,050
2,400 Amgen, Inc. 191,400(b)
9,600 Bard (C.R.), Inc. 517,800
4,000 Biogen, Inc. 296,500(b)
4,770 Biomet, Inc. 143,696
2,317 Cardinal Health, Inc. 99,921
4,220 Forest Laboratories, Inc. 193,593(b)
6,700 Genzyme Corp. 256,275(b)
1,650 Gilead Sciences, Inc. 104,259(b)
2,600 Guidant Corp. 128,375
2,500 Human Genome Sciences, Inc. 218,438(b)
2,800 Immunex Corp. 176,400(b)
9,200 IVAX Corp. 161,575(b)
2,172 Johnson & Johnson 227,517
5,700 Jones Pharma, Inc. 176,700
2,400 MedImmune, Inc. 268,800(b)
2,502 Medtronic, Inc. 86,632
1,400 Millennium Pharmaceuticals, Inc. 98,175(b)
1,200 MiniMed, Inc. 90,975(b)
8,640 Mylan Laboratories, Inc. 154,980
7,300 Stryker Corp. 450,775
13,100 Sybron Corp. 311,944(b)
5,900 Teva Pharmaceutical
Industries, Ltd., ADR 285,413
5,920 Watson Pharmaceuticals, Inc. 187,960(b)
------------
5,892,097
------------
Electric Utilities - 1.3%
2,680 AES (The) Corp. 151,253(b)
8,200 CMS Energy Corp. 302,375
4,000 Energy East Corp. 100,500
2,600 Florida Progress Corp. 119,113
2,600 FPL Group, Inc. 130,813
7,600 Montana Power Co. 216,125
------------
1,020,179
------------
Electronic Equipment - 14.6%
9,600 Adaptec, Inc. 432,000(b)
8,800 Altera Corp. 427,900(b)
5,000 Analog Devices, Inc. 265,625(b)
1,390 Applied Materials, Inc. 124,839(b)
2,200 Applied Micro Circuits Corp. 171,188(b)
2,400 Broadcom Corp., Class A 306,750(b)
4,900 Burr-Brown Corp. 192,631(b)
7,500 C-Cube Microsystems, Inc. 333,750(b)
5,700 Dallas Semiconductor Corp. 335,588
5,000 Galileo Technology, Ltd. 114,375(b)
7,700 Jabil Circuit, Inc. 402,325(b)
3,080 JDS Uniphase Corp. 513,975(b)
400 JNI Corp. 21,375(b)
2,090 KLA Instruments Corp. 165,502(b)
11,400 Kulicke & Soffa Industries, Inc. 335,588(b)
5,900 LAM Research Corp. 498,181(b)
7,140 Linear Technology Corp. 499,354
5,700 LSI Logic Corp. 303,169(b)
6,880 Maxim Integrated
Products, Inc. 543,090(b)
3,100 Micrel, Inc. 168,563(b)
6,240 Microchip Technology, Inc. 415,740(b)
5,800 National Semiconductor Corp. 173,638(b)
1,810 Novellus Systems, Inc. 140,275(b)
5,800 PerkinElmer, Inc. 236,713
3,200 PMC-Sierra, Inc. 301,600(b)
8,200 PRI Automation, Inc. 329,025(b)
1,700 QLogic Corp. 177,013(b)
5,300 RF Micro Devices, Inc. 273,613(b)
5,400 Sanmina Corp. 486,338(b)
2,400 SCI Systems, Inc. 118,500(b)
2,400 SDL, Inc. 295,950(b)
5,500 Solectron Corp. 413,875(b)
8,700 Symbol Technologies, Inc. 345,825
11,800 Vitesse Semiconductor Corp. 541,325(b)
3,300 Waters Corp. 175,313(b)
7,020 Xilinx, Inc. 551,948(b)
------------
11,132,459
------------
Food & Beverage - 1.6%
6,000 American Italian Pasta Co.,
Class A 150,750(b)
11,400 IBP, Inc. 272,888
11,000 International Home Foods, Inc. 210,375(b)
8,900 Suiza Foods Corp. 320,956(b)
13,780 U.S. Foodservice 264,404(b)
------------
1,219,373
------------
Healthcare
Management - 0.3%
1,200 Express Scripts, Inc., Class A 58,950(b)
3,700 Lincare Holdings, Inc. 104,063(b)
3,000 Trigon Healthcare, Inc. 85,125(b)
------------
248,138
------------
Hospital Management - 0.1%
10,050 Health Management
Associates, Inc., Class A 89,194
------------
Household Products - 0.3%
8,880 Dial Corp. 207,570
------------
Insurance - 1.3%
7,300 AFLAC, Inc. 373,213
1,850 Allmerica Financial Corp. 105,797
5,100 Protective Life Corp.,
Capital Trust II 184,556
5,800 Radian Group, Inc. 306,313
------------
969,879
------------
Internet Service - 0.9%
5,500 America Online, Inc. 713,281
------------
Leisure &
Entertainment - 1.1%
6,970 Harley Davidson, Inc. 413,408(c)
4,300 Premier Parks, Inc. 124,431(b)
5,800 Royal Caribbean Cruises, Ltd. 307,763
------------
845,602
------------
Machinery &
Equipment - 0.4%
3,760 Black & Decker Corp. 161,680
2,400 Danaher Corp. 115,950
------------
277,630
------------
Media - 2.3%
6,500 Lamar Advertising Co.,
Class A 351,000(b)
3,600 MediaOne Group, Inc. 255,825(b)
3,250 Omnicom Group, Inc. 286,000
8,845 Outdoor Systems, Inc. 374,807(b)
2,800 Valassis Communications, Inc. 120,400(b)
8,100 Young & Rubicam, Inc. 370,575
------------
1,758,607
------------
Media &
Communications - 1.0%
6,600 Comcast Corp., Class A 278,025
11,200 Cox Communications, Inc.,
Class A 508,900(b)
------------
786,925
------------
Mining & Metals - 0.5%
5,600 Corus Group plc, ADR 108,150
13,300 Steel Dynamics, Inc. 182,044(b)
4,600 USX-U.S. Steel Group, Inc. 117,588
------------
407,782
------------
Natural Gas - 0.2%
2,500 Consolidated Natural Gas Co. 160,000
------------
Oil & Oil Service - 3.3%
2,900 Anadarko Petroleum Corp. 89,356
4,700 Apache Corp. 183,300
4,560 BJ Services Co. 156,465(b)
4,700 Burlington Resources, Inc. 163,913
2,950 Diamond Offshore Drilling, Inc. 93,663
6,300 El Paso Natural Gas Co. 258,300
8,760 ENSCO International, Inc. 169,725
7,500 EOG Resources, Inc. 156,094
3,252 Schlumberger, Ltd. 196,949
5,310 Smith International, Inc. 183,527(b)
10,830 Tosco Corp. 274,134
6,600 Transocean Offshore, Inc. 179,438
5,250 USX-Marathon Group 152,906
6,900 Weatherford International, Inc. 233,738(b)
------------
2,491,508
------------
Paper & Forest
Products - 0.7%
4,600 Bowater, Inc. 241,500
1,800 Temple Inland, Inc. 104,625
6,900 Westvaco Corp. 204,844
------------
550,969
------------
Pollution Control - 0.2%
10,700 Catalyca, Inc. 134,419
------------
Railroads - 0.2%
3,200 Kansas City Southern
Industries, Inc. 151,800
------------
Restaurants - 0.5%
9,600 Darden Restaurants, Inc. 183,000
2,650 Outback Steakhouse, Inc. 60,950(b)
3,200 Papa John's International, Inc. 119,600(b)
------------
363,550
------------
Retail - 6.7%
5,400 Abercrombie & Fitch Co.,
Class A 147,150(b)
7,080 Bed, Bath & Beyond, Inc. 235,853(b)
5,200 Best Buy Co., Inc. 288,925(b)
14,100 BJ's Wholesale Club, Inc. 434,456(b)
12,925 Dollar General Corp. 340,897
5,720 Dollar Tree Stores, Inc. 249,178(b)
15,600 Ethan Allen Interiors, Inc. 554,775
4,400 EToys, Inc. 262,900(b)
23,700 Family Dollar Stores, Inc. 488,813
5,500 Great Atlantic &
Pacific Tea, Inc. 157,094
7,600 Intimate Brands, Inc., Class A 311,600
1,500 Kohl's Corp. 112,219(b)
9,040 Kroger Co. 188,145(b)
3,125 Limited (The), Inc. 128,516
5,100 Lowe's Companies 280,500
14,700 Ross Stores, Inc. 303,188
6,370 Staples, Inc. 141,334(b)
2,100 Tandy Corp. 132,169
3,210 TJX Companies, Inc. 87,071
6,500 Zale Corp. 272,188(b)
------------
5,116,971
------------
Services - 6.0%
3,500 ACNielsen Corp. 77,000(b)
4,100 Affiliated Computer
Services, Inc., Class A 155,800(b)
3,500 Bisys (The) Group, Inc. 178,500(b)
6,500 Ceridian Corp. 142,594(b)
6,500 Comdisco, Inc. 131,219
5,000 Concord EFS, Inc. 135,313(b)
11,100 CSG System International, Inc. 380,869(b)
2,400 DoubleClick, Inc. 336,000(b)
3,600 DST Systems, Inc. 229,275(b)
3,400 Exodus Communications, Inc. 292,400(b)
2,600 First Data Corp. 118,788
5,500 Fiserv, Inc. 176,000(b)
3,100 Galileo International, Inc. 93,194
9,800 Getty Images, Inc. 301,963(b)
5,060 Interpublic Group of Cos., Inc. 205,563
10,300 Mettler-Toledo International, Inc. 307,069(b)
16,300 Modis Professional Services, Inc. 182,356(b)
9,600 Navigant Consulting, Inc. 274,200(b)
5,220 Paychex, Inc. 205,538
11,500 RSA Security, Inc. 408,250(b)
6,100 US Web Corp. 236,375(b)
------------
4,568,266
------------
Telecommunications
Equipment - 3.5%
14,300 ADC Telecommunications, Inc. 681,931(b)
2,800 Conexant Systems, Inc. 261,450(b)
10,100 DSP Communications, Inc. 355,394(b)
3,300 ECI Telecom, Ltd. 96,113
5,900 General Instrument Corp. 317,494(b)
6,400 Orckit Communications, Ltd. 176,400(b)
1,300 QUALCOMM, Inc. 289,575(b)
6,220 Tellabs, Inc. 393,415(b)
2,900 Terayon Communication
Systems, Inc. 126,875(b)
------------
2,698,647
------------
Telephone &
Telecommunications - 5.8%
3,300 Adelphia Communications
Corp., Class A 180,263(b)
10,500 AT&T Corp./Liberty Media
Group, Class A 416,719(b)
8,735 CenturyTel, Inc. 353,222
7,300 Globalstar
Telecommunications, Ltd. 161,056(b)
6,500 ICG Communications, Inc. 106,438(b)
5,100 Intermedia Communications of
Florida, Inc. 132,600(b)
1,400 MCI Worldcom, Inc. 120,138(b)
9,400 McLeodUSA, Inc. 419,475(b)
3,400 NEXTEL Communications, Inc.,
Class A 293,038(b)
5,700 PanAmSat Corp. 225,150(b)
8,000 Sprint Corp. (FON Group) 594,500
5,900 US LEC Corp., Class A 163,356(b)
8,240 VoiceStream Wireless Corp. 813,700(b)
8,240 Western Wireless Corp., Class A 435,690(b)
------------
4,415,345
------------
Textiles & Apparel - 1.7%
17,500 Jones Apparel Group, Inc. 553,438(b)
8,000 NIKE, Inc., Class B 451,500
7,000 Shaw Industries, Inc. 108,063
5,600 Tommy Hilfiger Corp. 158,200(b)
------------
1,271,201
------------
Transportation - 0.5%
5,100 CNF Transportation, Inc. 168,619
6,560 Expeditors International of
Washington, Inc. 245,180
------------
413,799
------------
Total Common Stocks
(cost $ 60,189,682) 71,613,459
------------
Principal
Amount
- -------------
SHORT-TERM
SECURITIES - 6.4% (a)
U.S. Government Agency
$4,870,000 Federal Home Loan Bank
Discount Note, 5.16%
Due 11/1/1999
(at amortized cost) 4,870,000
------------
Total Investments
(cost $65,059,682) $ 76,483,459(d)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Mid Cap Growth Fund.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock
and had no separate value at October 31, 1999.
(d) At October 31, 1999, the aggregate cost of securities for
federal income tax purposes was $65,382,976 and the net
unrealized appreciation of investments based on that cost was
$11,100,483 which is comprised of $13,877,459 aggregate gross
unrealized appreciation and $2,776,976 aggregate gross
unrealized depreciation.
(e) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood World Growth Fund
Portfolio of Investments
October 31, 1999
Shares Value
- -------------- --------------
<S> <C> <C>
ARGENTINA - 0.3% (a)
COMMON STOCKS
2,564 Banco de Galicia Buenos
Aires 'B' ADR (USD) $ 54,165
2,600 Banco Frances del Rio de la
Plata ADR (USD) 56,875
6,060 Telefonica de Argentina
ADR (USD) 155,288
------------
Total Argentina 266,328
------------
AUSTRALIA - 2.1% (a)
COMMON STOCKS
7,000 Brambles Industries Ltd. 196,858
17,267 Broken Hill Proprietary Co. 178,458
66,419 Colonial Ltd. 244,391
21,256 Commonwealth
Bank of Australia 348,362
10,662 Lend Lease Corp. 122,677
33,109 News Corp. Ltd. 239,428
86,086 Telstra Corporation Ltd. 413,482
47,195 Westpac Banking 302,828
------------
2,046,484
------------
PREFERRED STOCKS
29,890 News Corp. Ltd. 202,369
------------
Total Australia 2,248,853
------------
BELGIUM - 1.1% (a)
COMMON STOCKS
821 Credit Communal
Holding/Dexia 120,295
13,230 Fortis 'B' 446,703
11,380 Kredietbank 586,533
1,580 UCB SA 58,915
------------
Total Belgium 1,212,446
------------
BRAZIL - 1.3% (a)
COMMON STOCKS
470 Brazil Fund (USD) 6,286
5,875 Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar ADS (USD) 128,516
611 Companhia Energetica
Brasilia ADR (USD) 8,707
7,132 Companhia Energetica
Minas Gerais ADR (USD) 101,631
12,810 Telecomunicacoes
Brasilias ADR (USD) 600
13,810 Telecomunicacues
Brasilieras SA ADR (USD) 1,075,454
4,000 Unibanco - Uniao de Bancos
Brasileiros SA GDR (USD) 92,500
------------
Total Brazil 1,413,694
------------
CANADA - 0.3% (a)
COMMON STOCKS
4,980 Alcan Aluminum 163,248
1,870 Royal Bank of Canada 80,611
2,090 Nortel Networks Corp. 128,575
------------
Total Canada 372,434
------------
CHILE - 0.03% (a)
COMMON STOCKS
1,950 Chilectra ADR (USD) 34,125
------------
CHINA - 0.1% (a)
COMMON STOCKS
11,400 Huaneng Power
International 'N' ADR (USD) 138,225
------------
DENMARK - 0.4% (a)
COMMON STOCKS
1,320 Den Danske Bank 150,377
2,680 Teledanmark 162,706
930 Unidanmark 'A' 72,386
------------
Total Denmark 385,469
------------
FINLAND - 1.6% (a)
COMMON STOCKS
15,180 Nokia (AB) OY 1,737,378
------------
FRANCE - 11.7% (a)
COMMON STOCKS
3,230 Alcatel Alsthom 504,525
6,410 AXA 904,150
6,840 Banque Nationale De Paris 600,754
2,180 Cap Gemini SA 330,197
7,072 Carrefour 1,309,208
2,930 Cie de St. Gobain 508,517
1,078 Credit Commercial de France 124,161
880 Dexia France 124,034
400 Groupe Danone 102,029
2,000 Hermes International 218,785
1,321 Lafarge Coppee 127,139
2,159 Legrand 516,640
331 L'Oreal 220,909
2,185 Pinault Printemps Redoute SA 416,680
17,172 Sanofi-Synthelabo 757,716
8,482 Schneider SA 584,377
1,981 Societe Generale 431,329
4,004 Sodexho 657,011
8,071 ST Microelectronics 708,872
2,440 Television Francaise 764,821
11,870 Total 'B' 1,604,381
16,111 Vivendi 1,220,985
------------
Total France 12,737,220
------------
GERMANY - 6.4% (a)
COMMON STOCKS
1,630 Allianz AG 496,352
9,608 Bayer AG 393,130
12,873 Bayerische Vereinsbank AG 844,925
8,987 Deutsche Bank AG 644,693
10,783 Deutsche Telekom AG 495,650
12,202 Gehe AG 426,111
2,640 Hoechst AG 116,213
7,560 Mannesmann AG 1,188,822
4,410 Rhoen Klinikum AG 178,588
1,290 SAP AG 479,252
3,181 Siemens AG 285,576
8,070 Veba AG 436,305
264 Celanese AG 4,165(b)
10,865 Dresdner Bank AG 557,132
------------
6,546,914
------------
PREFERRED STOCKS
610 Fielmann AG 23,099
410 Fresenius AG 67,061
680 SAP AG 299,693
------------
389,853
------------
Total Germany 6,936,767
------------
HONG KONG - 2.3% (a)
COMMON STOCKS
32,000 Cheung Kong Holdings Ltd. 291,433
207,000 China Telecom Ltd. 707,453
23,000 Doa Heng Bank Ltd. 104,512
43,000 Henderson Land
Development Ltd. 195,392
92,000 Hong Kong
Telecommunications Ltd. 210,208
65,000 Hutchison Whampoa 652,636
42,000 New World
Development Co. Ltd. 79,475
23,000 Sun Hung Kai Properties Ltd. 186,522
128,000 Pacific Century Cyberworks Ltd. 97,213
------------
Total Hong Kong 2,524,844
------------
INDIA - 0.2% (a)
COMMON STOCKS
14,097 ICICI Ltd. 155,067
7,000 Mahanager Telephone
Nigam Ltd. GDR (USD) 58,275
------------
Total India 213,342
------------
IRELAND - 0.1% (a)
COMMON STOCKS
7,307 CBT Group plc ADR (USD) 150,707(b)
------------
ITALY - 4.4% (a)
COMMON STOCKS
10,760 Assicurazioni Generali Spa 345,196
58,000 Banca di Roma 78,089
12,000 Banca Popolare di Brescia 508,043
80,302 Credito Italiano Spa 375,872
104,458 Ente Nazionale Idrocarburi 610,900
31,360 Instituto Bancario
San Paolo di Torino 406,388
96,000 Istituto Nazionale
Delle Assicurazioni 291,320
22,000 Italgas Spa 90,943
30,945 Mediolanum Spa 251,608
54,600 Tecnost 105,099
172,896 Telecom Italia Mobile Spa 1,080,252
69,983 Telecom Italia Spa 604,351
------------
Total Italy 4,748,061
------------
JAPAN - 22.0% (a)
COMMON STOCKS
7,000 Bridgestone Corp. 192,673
37,000 Canon 1,046,802
10,000 Citizen Watch Co. 70,682
6,000 Daiichi Pharmaceutical 86,027
23,000 Daiwa House Industry Co. 210,434
49 DDI Corp. 535,725
56 East Japan Railway 343,186
4,200 Fanuc Co. 326,268
24,000 Fujitsu Ltd. 722,739
32,000 Hitachi 345,871
3,000 Honda Motor Co. 126,594
6,000 Ito-Yokado Co. 479,908
20,000 Kao Corp. 609,955
10,000 Kokuyo Co. Ltd. 181,548
10,000 Komori Corp. 217,225
27,000 Kuraray Co. 362,520
10,000 Kyocera 959,049
17,000 Makita Corp. 163,201
27,000 Marui Co. Ltd. 510,118
44,000 Matsushita Electric
Industrial Co. 926,249
25,000 Mitsubishi Corp. 179,822
118,000 Mitsubishi Heavy Industries Ltd. 462,856
56,000 Mitsui Fudosan 418,375
12,000 Murata Manufacturing 1,542,150
61,000 NEC Corp. 1,234,391
30,000 Nippon Denso Corp. 641,604
93 Nippon Telegraph &
Telecom Corp. 1,427,064
45,000 Nomura Securities Co. Ltd. 742,735
45 NTT Mobile Communication
Network, Inc. 1,195,454
30,000 Sankyo Co. 854,512
38,000 Sekisui Chemical Co. Ltd. 186,957
23,000 Sekisui House 249,036
3,200 Seven-Eleven Japan Co. Ltd. 293,085
10,350 Shin-Etsu Chemical Co. Ltd. 426,825
13,000 Shiseido Co. Ltd. 198,235
200 Softbank Corporation 83,054
9,700 Sony Corp. 1,512,631
30,000 Sumitomo Bank Ltd. 482,785
46,000 Sumitomo Corp. 336,166
44,000 Sumitomo Electric
Industries Ltd. 591,196
9,000 TDK Corp. 881,270
11,000 Tokio Marine &
Fire Insurance Co. 144,001
2,300 Tokyo Electronics 191,023
20,000 Toppan Printing 245,325
72,000 Toshiba Corp 452,978
12,000 Uny Co. 155,366
9,000 Yamanouchi Pharmaceutical
Co. Ltd. 408,267
------------
Total Japan 23,953,937
------------
KOREA - 0.2% (a)
COMMON STOCKS
6,000 Korea Telecom 211,500
------------
LUXEMBOURG - 0.1% (a)
COMMON STOCKS
400 Societe Europeenne
des Satellites 50,910
------------
MEXICO - 1.3% (a)
COMMON STOCKS
7,848 Cemex SA 176,580(b)
21,443 Gruma 'B' 28,020(b)
36,760 Grupo Industrial Maseca 'B' 18,357
4,040 Grupo Televisa GDR (USD) 171,700(b)
43,799 Kimberly-Clark Mexico 'A' 140,346
9,920 Telefonos de Mexico 'L'
ADS (USD) 848,160
4,800 TV Azteca SA ADS (USD) 19,500
13,267 Cemex SA de CV 60,041(b)
------------
Total Mexico 1,462,704
------------
NETHERLANDS - 8.4% (a)
COMMON STOCKS
20,566 ABN Amro Holdings NV 497,328
2,188 Akzo Nobel NV 94,221
12,960 ASM Lithography
Holdings NV 914,705(b)
49,000 CLP Holdings Ltd. 225,179
7,399 CSM 341,269
27,544 Elsevier 261,619
2,300 Equant NV 223,781(b)
20,040 Fortis (NL) NV 689,918
3,532 Gucci Group NV (USD) 285,209
27,575 ING Groep NV 1,626,587
2,922 Koninklijke KPN NV 149,956
8,966 Philips Electronics NV 919,511
12,660 Royal Dutch Petroleum Co. 756,772
2,982 TNT Post Groep NV 75,906
4,687 Unilever NV 310,591
7,610 VNU NV 257,347
41,576 Wolters Kluwer 1,389,356
1,564 United Pan-Europe
Communications NV 120,256
------------
Total Netherlands 9,139,511
------------
NEW ZEALAND - 0.2% (a)
COMMON STOCKS
66,000 Telecom Corp. of New Zealand 265,636
------------
NORWAY - 0.5% (a)
COMMON STOCKS
3,150 Norsk Hydro 125,623
32,010 Orkla 'A' ASA 446,594
------------
Total Norway 572,217
------------
PORTUGAL - 0.4% (a)
COMMON STOCKS
16,118 Jeronimo Martins 449,952
------------
SINGAPORE - 0.7% (a)
COMMON STOCKS
12,326 Singapore Press Holdings Ltd. 211,201
44,000 Singapore
Telecommunications Ltd. 83,593
62,000 United Overseas Bank 469,669
------------
Total Singapore 764,463
------------
SOUTH KOREA - 0.2% (a)
COMMON STOCKS
15,643 Korea Equity Fund (USD) 199,448
------------
SPAIN - 3.0% (a)
COMMON STOCKS
11,740 Banco Bilboa Vizcaya SA 157,817
1,710 Banco Popular Espanol SA 115,114
45,830 Banco Santander
Central Hispano 475,796
10,308 Corporacion Bancaria de
Espana SA 228,776
16,310 Endesa SA 326,472
8,517 Gas Natural SDG SA 188,131
23,970 Iberdrola 349,450
16,106 Repsol SA 332,045
65,232 Telefonica SA 1,073,127
------------
Total Spain 3,246,728
------------
SWEDEN - 3.5% (a)
COMMON STOCKS
22,195 Astrazeneca 1,002,607
6,080 Atlas Copco A B 'B' 158,210
30,330 Electrolux AB 'B' 604,830
2,460 Esselte 'B' 16,452
41,760 Hennes & Mauritz AB 1,109,504
81,011 Nordbanken Holding AB 472,827
7,570 Sandvik AB 'B' 196,062
7,110 Securitas AB 105,474
3,510 Telefonaktiebolaget LM
Ericsson (Ericsson AB) 145,965
------------
Total Sweden 3,811,931
------------
SWITZERLAND - 6.9% (a)
COMMON STOCKS
5,122 ABB AG 515,795
2,773 ABB Ltd. 276,154
1,704 Adecco SA 1,032,931
2,570 Credit Suisse Group 494,004
895 Nestle SA 1,726,235
834 Novartis AG 1,247,471
86 Roche Holdings AG 1,032,474
393 Swisscom AG 119,759
3,610 UBS AG 1,050,341
------------
Total Switzerland 7,495,164
------------
TAIWAN PROVINCE OF
CHINA - 0.2% (a)
COMMON STOCKS
11,807 Hon Hai Precision Industry
Co. Ltd. GDR (USD) 191,569
------------
UNITED KINGDOM - 16.5% (a)
COMMON STOCKS
31,000 Abbey National 605,157
29,117 BG plc 161,716
64,100 Cable & Wireless 747,836
117,800 Cadbury Schweppes 766,533
34,400 Caradon plc 80,188
18,900 Centrica 54,892
88,000 Compass Group plc 939,910
26,000 David S. Smith 81,601
21,000 Electrocomponents 188,064
10,000 GKN plc 160,869
53,500 Glaxo Wellcome 1,578,884
20,556 Hays 233,741
32,400 HSBC Holdings plc 389,959
11,000 John Laing 'A' 52,057
122,000 Kingfisher 1,335,132
113,000 National Westminster Bank 2,551,264
23,000 Rank Group plc 71,619
140,000 Reed International plc 821,271
33,800 RTZ 577,062
35,000 Safeway plc 110,423
234,000 Shell Transport & Trading Co. 1,791,810
129,200 SmithKline Beecham plc 1,666,565
177,000 Tesco 525,705
99,612 Tomkins 337,087
62,107 Unilever 576,606
48,500 United News & Media 465,021
106,000 Vodafone AirTouch plc 493,798
56,000 BP Amoco plc (USD) 543,833
------------
Total United Kingdom 17,908,603
------------
Principal
Amount
- -------------
SHORT TERM
SECURITIES - 3.6% (a)
Commercial Paper
$3,900,000 New Center Asset Trust,
5.31%, Due 11/1/1999
(at amortized cost) $ 3,900,000
------------
Total Investments
(cost $84,694,535) $108,744,166(d)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood World Growth Fund.
(b) Currently non-income producing.
(c) Security Classification:
Cost Value % of Portfolio
---- ----- --------------
Common Stocks &
Warrants $80,251,541 $104,251,944 95.9%
Preferred Stocks 542,994 592,222 0.5%
Short-Term 3,900,000 3,900,000 3.6%
----------- ------------ ------
Total Investments $84,694,535 $108,744,166 100.0%
=========== ============ ======
(d) At October 31, 1999, the aggregate cost of securities for
federal income tax purposes was $85,358,575 and the net
unrealized appreciation of investments based on that cost was
$23,385,590 which is comprised of $27,865,030 aggregate gross
unrealized appreciation and $4,479,440 aggregate gross
unrealized depreciation.
(e) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
(ADS) - American Depository Shares
(GDR) - Global Depository Receipts
(USD) - Denominated in U.S. Dollars
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Fund
Portfolio of Investments
October 31, 1999
Shares Value
- -------------- --------------
<S> <C> <C>
COMMON STOCKS - 97.1% (a)
Aerospace - 1.5%
164,900 Boeing Co. $ 7,595,698
265,600 United Technologies Corp. 16,068,800
--------------
23,664,498
--------------
Airlines - 0.7%
650,437 Southwest Airlines Co. 10,935,472
--------------
Appliances &
Furnishings - 0.5%
190,200 Maytag Corp. 7,619,888
--------------
Bank & Finance - 15.4%
70,800 American Express Co. 10,903,200
301,331 American International
Group, Inc. 31,018,260
397,000 Associates First Capital Corp.,
Class A 14,490,500
294,300 Bank of America Corp. 18,945,563
426,800 Bank of New York Co., Inc. 17,872,250
189,000 Chase Manhattan Corp. 16,513,875
104,600 CIGNA Corp. 7,818,850
494,200 Citigroup, Inc. 26,748,575
286,600 Federal Home Loan
Mortgage Corp. 15,494,313
232,700 Federal National
Mortgage Association 16,463,525
589,775 MBNA Corp. 16,292,534
95,200 Merrill Lynch & Co., Inc. 7,473,200
100,400 Morgan Stanley
Dean Witter & Co. 11,075,375
331,700 Schwab, Charles Corp. 12,915,569
454,200 U.S. Bancorporation 16,833,788
--------------
240,859,377
--------------
Broadcasting - 0.5%
92,900 Clear Channel
Communications, Inc. 7,466,838
--------------
Chemicals - 1.7%
254,000 Air Products & Chemicals, Inc. 6,985,000
119,635 E.I. du Pont de Nemours and Co. 7,708,980
100,000 Monsanto Co. 3,850,000
163,100 Praxair, Inc. 7,624,925
--------------
26,168,905
--------------
Computer Software - 4.6%
576,900 Microsoft Corp. 53,399,306(b)
327,650 Oracle Corp. 15,583,853(b)
20,000 Yahoo!, Inc. 3,581,250(b)
--------------
72,564,409
--------------
Computers &
Office Equipment - 10.1%
690,400 Cisco Systems, Inc. 51,089,600(b)
385,300 Dell Computer Corp. 15,460,163(b)
316,300 EMC Corp. 23,089,900(b)
239,400 International Business
Machines Corp. 23,550,975
195,000 Sun Microsystems, Inc. 20,633,438(b)
168,600 Texas Instruments, Inc. 15,131,850
291,600 Xerox Corp. 8,164,800
--------------
157,120,726
--------------
Conglomerates - 5.6%
135,100 AlliedSignal, Inc. 7,692,256
200,000 Dover Corp. 8,512,500
365,700 General Electric Co. 49,575,206
557,300 Tyco International, Ltd. 22,257,169
--------------
88,037,131
--------------
Drugs & Health Care - 11.5%
376,200 Abbott Laboratories 15,189,075
217,600 American Home Products Corp. 11,369,600
259,900 Becton, Dickinson & Co. 6,594,963
240,400 Bristol-Myers Squibb Co. 18,465,725
224,400 Eli Lilly & Co. 15,455,550
213,100 Johnson & Johnson 22,322,225
411,400 Medtronic, Inc. 14,244,725
335,400 Merck & Co., Inc. 26,685,263
758,600 Pfizer, Inc. 29,964,700
387,700 Schering-Plough Corp. 19,191,150
--------------
179,482,976
--------------
Electric Utilities - 0.9%
548,400 Southern Co. 14,566,875
--------------
Electronic Equipment - 3.1%
72,600 Honeywell, Inc. 7,654,763
526,300 Intel Corp. 40,755,356
--------------
48,410,119
--------------
Food & Beverage - 2.6%
256,700 Coca-Cola Co. 15,145,300
130,000 Hershey Foods Corp. 6,565,000
538,200 PepsiCo, Inc. 18,668,813
--------------
40,379,113
--------------
Household Products - 2.2%
145,200 Colgate Palmolive Co. 8,784,600
151,900 Gillette Co. 5,496,881
187,100 Procter & Gamble Co. 19,622,113
--------------
33,903,594
--------------
Internet Service - 2.1%
167,200 America Online, Inc. 21,683,750(b)
289,700 At Home Corp., Series A 10,827,538(b)
--------------
32,511,288
--------------
Leisure &
Entertainment - 2.3%
359,700 Carnival Corp., Inc. 16,006,650
434,200 Disney (Walt) Co. 11,452,025
635,200 Mattel, Inc. 8,495,800
--------------
35,954,475
--------------
Machinery &
Equipment - 1.0%
208,900 Illinois Tool Works, Inc. 15,301,925
--------------
Media - 2.8%
99,900 MediaOne Group, Inc. 7,099,144(b)
224,800 Omnicom Group, Inc. 19,782,400
245,000 Time Warner, Inc. 17,073,438
--------------
43,954,982
--------------
Oil & Oil Service - 6.2%
160,600 Chevron Corp. 14,664,788
251,826 Conoco, Inc., Class B 6,830,780
195,400 Exxon Corp. 14,471,813
398,200 Halliburton Co. 15,007,163
155,000 Mobil Corp. 14,957,500
253,100 Royal Dutch Petroleum Co. 15,170,181
253,500 Schlumberger, Ltd. 15,352,594
--------------
96,454,819
--------------
Paper & Forest
Products - 0.2%
70,000 International Paper Co. 3,683,750
--------------
Restaurants - 1.0%
367,500 McDonald's Corp. 15,159,375
--------------
Retail - 9.3%
139,500 Best Buy Co., Inc. 7,750,969(b)
372,700 CVS Corp. 16,189,156
232,800 Dayton Hudson Corp. 15,044,700
451,425 Gap, Inc. 16,759,153
211,800 Home Depot, Inc. 15,990,900
731,600 Kroger Co. 15,226,425(b)
437,600 Safeway, Inc. 15,452,750(b)
616,000 Walgreen Co. 15,515,500
466,600 Wal-Mart Stores, Inc. 26,450,388
--------------
144,379,941
--------------
Services - 1.0%
311,400 Automatic Data
Processing, Inc. 15,005,588
--------------
Telecommunications
Equipment - 3.4%
357,096 Lucent Technologies, Inc. 22,943,418
158,900 Motorola, Inc. 15,482,819
241,500 Tellabs, Inc. 15,274,875(b)
--------------
53,701,112
--------------
Telephone &
Telecommunications - 6.9%
480,827 AT&T Corp. 22,478,662
229,600 Bell Atlantic Corp. 14,909,650
484,600 MCI Worldcom, Inc. 41,584,738(b)
578,192 SBC Communications, Inc. 29,451,655
--------------
108,424,705
--------------
Total Common Stock
(Cost $1,209,074,770) 1,515,711,881
--------------
Principal
Amount
- -------------
SHORT-TERM
SECURITIES - 2.9% (a)
Commercial Paper
$ 8,500,000 A.I. Credit Corp., 5.3%,
Due 11/1/1999 8,500,000
15,000,000 Great Lakes Chemical Corp.,
5.3%, Due 11/1/1999 15,000,000
15,400,000 Great Lakes Chemical Corp.,
5.31%, Due 11/1/1999 15,400,000
5,800,000 New Center Asset Trust,
5.31%, Due 11/1/1999 5,800,000
--------------
Total Short-Term Securities
(at amortized cost) 44,700,000
--------------
Total Investments
(Cost $1,253,774,770) $1,560,411,881(c)
==============
Notes to Portfolio of Investments:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Fund.
(b) Currently non-income producing.
(c) At October 31, 1999, the aggregate cost of securities for
federal income tax purposes was $1,256,429,803 and the net
unrealized appreciation of investments based on that cost was
$303,982,078 which is comprised of $347,062,652 aggregate gross
unrealized appreciation and $43,080,574 aggregate gross
unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD HIGH YIELD FUND
Portfolio of Investments
October 31, 1999
Principal Maturity
Amount Rate Date Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 79.4% (a)
Aerospace - 0.3%
$3,200,000 Condor Systems, Inc., Notes 11.875% 5/1/2009 $ 2,704,000
-------------
Airlines - 0.7%
2,000,000 Northwest Airlines, Corp., Notes 8.375% 3/15/200 41,948,766
3,000,000 Northwest Airlines, Corp., Sr. Notes 7.625% 3/15/200 52,670,000
2,000,000 U.S. Air, Inc., Sr. Secured Equipment Trust, Series 1993-A-3 10.375% 3/1/2013 1,982,410
-------------
6,601,176
-------------
Automotive - 1.2%
4,000,000 Dura Operating Corp., Sr. Subordinated Notes, Series B 9.0% 5/1/2009 3,710,000
4,000,000 Hayes Lemmerz International, Inc., Sr. Subordinated Notes,
Series B 8.25% 12/15/2008 3,580,000
3,500,000 Venture Holdings Trust, Sr. Subordinated Notes 12.0% 6/1/2009 3,412,500
-------------
10,702,500
-------------
Bank & Finance - 3.6%
5,600,000 Altiva Financial Corp., Subordinated Notes 12.5% 12/1/2001 3,010,000 (c)
2,450,000 Chevy Chase Savings Bank, Subordinated Debentures 9.25% 12/1/2005 2,413,250
4,000,000 Dollar Financial Group, Inc., Sr. Notes, Series A 10.875% 11/15/2006 3,980,000
2,800,000 FC CBO II, Ltd., Subordinated Debentures, Series 1A, Class C 11.05% 9/9/2010 2,415,000
5,000,000 GS Escrow Corp., Sr. Notes 7.125% 8/1/2005 4,590,835
2,598,000 HomeSide, Inc., Sr. Notes, Series B 11.25% 5/15/2003 2,942,235
5,000,000 SIG Capital Trust I, Bond 9.5% 8/15/2027 3,400,000
3,650,000 United Companies Financial Corp., Subordinated Notes 8.375% 7/1/2005 237,250 (c)
2,500,000 Veritas Capital Trust, Trust Preferred Securities 10.0% 1/1/2028 1,875,000
2,880,000 Veritas Holdings GMBH, Sr. Notes 9.625% 12/15/2003 2,779,200
5,000,000 Williams Scotsman, Inc., Sr. Notes 9.875% 6/1/2007 4,675,000
-------------
32,317,770
-------------
Broadcasting - 11.3%
4,200,000 Adelphia Communications Corp., Sr. Debentures 11.875% 9/15/200 44,410,000
2,400,000 Australis Holdings Pty., Ltd., Sr. Discount Notes Zero Coupon 11/1/2002 24,000 (c)
12,155,970 Australis Media, Ltd., Payment-In-Kind Sr. Discount Notes Zero Coupon 5/15/2003 182,340 (c)
8,500,000 Avalon Cable Holdings, Sr. Discount Notes Zero Coupon 12/1/2008 5,440,000
4,400,000 Bresnan Communications, Sr. Discount Notes, Series B Zero Coupon 2/1/2009 3,008,500
1,500,000 Chancellor Media Corp., Sr. Notes 8.0% 11/1/2008 1,488,750
2,400,000 Chancellor Media Corp., Sr. Subordinated Notes 8.125% 12/15/2007 2,364,000
1,400,000 Chancellor Media Corp., Sr. Subordinated Notes, Series B 8.75% 6/15/2007 1,400,000
2,400,000 Charter Communication Holdings, Sr. Notes 8.25% 4/1/2007 2,280,000
3,400,000 Charter Communication Holdings, Sr. Notes 8.625% 4/1/2009 3,230,000
1,400,000 Classic Cable, Inc., Sr. Subordinated Notes, Series B 9.375% 8/1/2009 1,358,000
4,000,000 Classic Communications, Inc., Sr. Disc. Notes Zero Coupon 8/1/2009 2,720,000
2,000,000 CSC Holdings, Inc., Sr. Notes 7.875% 12/15/2007 1,980,000
1,600,000 Diamond Cable Communications plc, Sr. Discount Notes (USD) Zero Coupon 2/15/2007 1,268,000
4,000,000 Diamond Cable Communications plc, Sr. Discount Notes (USD) Zero Coupon 12/15/2005 3,670,000
6,600,000 EchoStar DBS Corp., Sr. Notes 9.375% 2/1/2009 6,575,250
5,800,000 Grupo Televisa S.A., Sr. Notes (USD) 11.875% 5/15/2006 6,148,000
2,000,000 Insight Midwest, Sr. Notes 9.75% 10/1/2009 2,065,000
3,600,000 Jacor Communications, Inc., Convertible Zero Coupon 2/9/2018 2,236,500
3,600,000 NTL Communications Corp., Sr. Notes, Series B 11.5% 10/1/2008 3,861,000
1,200,000 NTL, Inc., Sr. Notes, Series B 10.0% 2/15/2007 1,230,000
2,800,000 NTL, Inc., Sr. Notes, Series B Zero Coupon 4/1/2008 1,869,000
4,000,000 Olympus Communications, LP, Sr. Notes 10.625% 11/15/2006 4,200,000
2,800,000 OnePoint Communications Corp., Sr. Notes, Series B 14.5% 6/1/2008 1,694,000
2,800,000 ONO Finance, plc., Notes (USD) 13.0% 5/1/2009 2,758,000
2,000,000 Optel, Inc., Sr. Notes, Series B 11.5% 7/1/2008 510,000 (c)
5,500,000 Renaissance Media Group, LLC, Sr. Discount Notes Zero Coupon 4/15/2008 3,850,000
2,800,000 Rogers Cablesystems, Ltd., Sr. Secured Second Priority Notes 9.625% 8/1/2002 2,905,000
735,528 Scott Cable Communications, Inc., Payment-In-Kind Jr.
Subordinated Notes 16.0% 7/18/2002 191,237
3,684,000 SFX Broadcasting, Inc., Sr. Subordinated Notes, Series B 10.75% 5/15/2006 4,080,030
4,000,000 Sinclair Broadcast Group, Inc., Sr. Subordinated Notes 9.0% 7/15/2007 3,730,000
3,500,000 Supercanal Holding S.A., Sr. Notes (USD) 11.5% 5/15/2005 1,802,500 (c)
2,800,000 Telewest Communications plc, Sr. Discount Notes (USD) Zero Coupon 4/15/2009 1,736,000
2,500,000 UIH Australia/Pacific, Inc., Sr. Discount Notes, Series B Zero Coupon 5/15/2006 2,037,500
7,200,000 United International Holdings, Inc., Sr. Notes, Series B Zero Coupon 2/15/2008 4,122,000
5,150,000 United Pan-Europe Comm. N.V., Sr. Disc. Notes (USD) Zero Coupon 11/1/2009 2,755,250
5,250,000 Young Broadcasting, Inc., Sr. Subordinated Notes 11.75% 11/15/2004 5,486,250
-------------
100,666,107
-------------
Building Products & Materials - 0.9%
4,000,000 CEMEX S.A. de C.V., Notes (USD) 12.75% 7/15/2006 4,370,000
2,500,000 Formica Corp., Sr. Subordinated Notes, Series B 10.875% 3/1/2009 2,262,500
1,200,000 Nortek, Inc., Sr. Notes, Series B 8.875% 8/1/2008 1,131,000
-------------
7,763,500
-------------
Chemicals - 1.2%
4,500,000 Lyondell Chemical Co., Sr. Secured Notes, Series B 9.875% 5/1/2007 4,500,000
2,000,000 Sterling Chemicals, Inc., Sr. Secured Notes 12.375% 7/15/2006 2,010,000
4,000,000 ZSC Specialty Chemical plc, Sr. Notes (USD) 11.0% 7/1/2009 4,025,000
-------------
10,535,000
-------------
Computers & Office Equipment - 1.4%
3,300,000 Dictaphone Corp., Sr. Subordinated Notes 11.75% 8/1/2005 2,392,500
2,600,000 Integrated Circuit Systems, Sr. Subordinated Notes 11.5% 5/15/2009 2,509,000
800,000 MCMS, Inc., Sr. Subordinated Notes, Series B 9.75% 3/1/2008 324,000
2,800,000 MCMS, Inc., Subordinated Notes, Series B (Variable rate) 10.52% 3/1/2008 1,134,000
3,200,000 Unisys Corp., Sr. Notes 11.75% 10/15/2004 3,552,000
2,400,000 Unisys Corp., Sr. Notes 12.0% 4/15/2003 2,574,000
-------------
12,485,500
-------------
Conglomerates - 0.4%
2,000,000 Eagle-Picher, Inc., Sr. Subordinated Notes 9.375% 3/1/2008 1,710,000
2,000,000 Jordan Industries, Inc., Sr. Notes, Series D 10.375% 8/1/2007 1,880,000
-------------
3,590,000
-------------
Construction & Home Building - 0.8%
3,600,000 Fortress (The) Group, Inc., Sr. Notes 13.75% 5/15/2003 2,178,000
6,400,000 Peters (J.M.) Co., Inc., Sr. Notes 12.75% 5/1/2002 5,408,000
-------------
7,586,000
-------------
Containers & Packaging - 1.7%
2,400,000 Consolidated Container Co., LLC, Sr. Subordinated Notes 10.125% 7/15/2009 2,424,000
3,040,000 Dimac Corp., Sr. Subordinated Notes 12.5% 10/1/2008 1,535,200
2,000,000 Fonda Group, Inc., Sr. Subordinated Notes, Series B 9.5% 3/1/2007 1,720,000
3,350,000 Radnor Holdings Corp., Sr. Notes 10.0% 12/1/2003 3,375,125
3,000,000 SF Holdings Group, Inc., Sr. Discount Notes, Series B Zero Coupon 3/15/2008 1,305,000
2,191,000 Silgan Holdings, Inc., Subordinated Debentures 13.25% 7/15/2006 2,388,190
2,500,000 Vicap, S.A. de C.V., Guaranteed Sr. Notes (USD) 11.375% 5/15/2007 2,225,000
-------------
14,972,515
-------------
Drugs & Health Care - 1.8%
5,600,000 Dade International, Inc., Sr. Subordinated Notes, Series B 11.125% 5/1/2006 5,796,000
6,000,000 Fisher Scientific International, Inc., Sr. Subordinated Notes 9.0% 2/1/2008 5,640,000
3,200,000 ICN Pharmaceuticals, Inc., Sr. Notes 8.75% 11/15/2008 2,928,000
1,200,000 Team Health, Inc., Sr. Subordinated Notes 12.0% 3/15/2009 1,206,000
-------------
15,570,000
-------------
Electric Utilities - 1.8%
2,400,000 AES (The) Corp., Sr. Notes 9.5% 6/1/2009 2,415,000
2,800,000 CMS Energy Corp., Sr. Unsecured Notes 7.0% 1/15/2005 2,644,354
3,200,000 ESI Tractebel Acquisition Corp., Bonds 7.99% 12/30/2011 2,851,392
1,750,000 Midland Cogen Venture Fund II, Secured Lease
Obligation Bonds, Series A 11.75% 7/23/2005 1,935,810
3,550,000 Midland Cogen Venture Fund II, Subordinated Secured Lease
Obligation Bonds 13.25% 7/23/2006 4,220,126
3,000,000 Niagara Mohawk Power Corp., Sr. Discount Notes, Series H Zero Coupon 7/1/2010 2,220,768
-------------
16,287,450
-------------
Electrical Equipment - 0.1%
2,400,000 Protection One Alarm Monitoring, Inc., Convertible
Sr. Subordinated Notes 6.75% 9/15/2003 657,000
2,080,000 Protection One Alarm Monitoring, Inc., Sr. Subordinated
Discount Notes 13.625% 6/30/2005 488,800
-------------
1,145,800
-------------
Food & Beverage - 2.4%
2,000,000 Ameriserve Financial/Capital, Secured Notes 12.0% 9/15/2006 1,770,000
2,600,000 Ameriserve Food Distribution, Inc., Sr. Notes 8.875% 10/15/2006 1,703,000
3,600,000 Grupo Azucarero Mexico S.A. de C, Sr. Notes (USD) 11.5% 1/15/2005 1,584,000
4,700,000 Imperial Holly Corp., Sr. Subordinated Notes 8.75% 12/15/2007 4,159,500
3,200,000 Packaged Ice, Inc., Sr. Notes, Series B 9.75% 2/1/2005 2,648,000
4,000,000 Smithfield Foods, Inc., Sr. Subordinated Notes 7.625% 2/15/2008 3,580,000
2,000,000 Southern Foods Group, LP, Sr. Subordinated Notes 9.875% 9/1/2007 2,080,000
4,000,000 Vlasic Foods International, Inc., Sr. Subordinated Notes,
Series B 10.25% 7/1/2009 3,780,000
-------------
21,304,500
-------------
Hospital Management - 3.2%
4,000,000 Concentra Operating Corp., Sr. Subordinated Notes, Series A 13.0% 8/15/2009 3,620,000
2,800,000 Dynacare, Inc., Sr. Notes 10.75% 1/15/2006 2,758,000
4,000,000 Health Insurance Plan of Greater New York, Bonds, Series C 11.25% 7/1/2010 3,975,480
5,000,000 Insight Health Services Corp., Sr. Subordinated Notes, Series B 9.625% 6/15/2008 4,675,000
1,900,000 Integrated Health Services, Inc., Convertible
Sr. Subordinated Debentures 5.75% 1/1/2001 9,500 (c)
2,500,000 Integrated Health Services, Inc., Sr. Subordinated Notes,
Series A 9.25% 1/15/2008 187,500 (c)
4,000,000 MedPartners, Inc., Sr. Notes 7.375% 10/1/2006 3,320,000
2,000,000 Tenet Healthcare Corp., Sr. Notes, Series B 7.625% 6/1/2008 1,870,000
2,000,000 Tenet Healthcare Corp., Sr. Subordinated Notes, Series B 8.125% 12/1/2008 1,775,000
3,200,000 Triad Hospital Holdings, Inc., Sr. Subordinated Notes 11.0% 5/15/2009 3,152,000
2,000,000 Unilab Finance Corp., Sr. Subordinated Notes 12.75% 10/1/2009 2,012,500
2,000,000 Universal Hospital Services, Inc., Sr. Notes 10.25% 3/1/2008 1,370,000
-------------
28,724,980
-------------
Household Products - 0.7%
2,000,000 AMM Holdings, Inc., Sr. Discount Notes Zero Coupon 7/1/2009 410,000
5,200,000 BPC Holding Corp., Sr. Secured Notes, Series B 12.50% 6/15/2006 4,823,000
2,000,000 Moll Industries, Inc., Sr. Subordinated Notes 10.5% 7/1/2008 1,270,000
-------------
6,503,000
-------------
Leisure & Entertainment - 2.1%
2,777,000 AMF Bowling Worldwide, Inc., Sr. Subordinated
Discount Notes, Series B Zero Coupon 3/15/2006 1,388,500
2,700,000 CapStar Hotel Company, Convertible Subordinated Notes 4.75% 10/15/2004 2,079,000
3,000,000 Carmike Cinemas, Inc., Sr. Subordinated Notes 9.375% 2/1/2009 2,812,500
2,800,000 Holmes Products Corp., Sr. Subordinated Notes, Series D 9.875% 11/15/2007 2,506,000
3,000,000 Production Resource Group, LLC, Sr. Subordinated Notes 11.5% 1/15/2008 2,805,000
3,000,000 Regal Cinemas, Inc., Sr. Subordinated Notes 9.5% 6/1/2008 2,265,000
2,000,000 SFX Entertainment, Inc., Sr. Subordinated Notes 9.125% 12/1/2008 1,830,000
800,000 Signature Resorts, Inc., Sr. Subordinated Notes 9.75% 10/1/2007 708,000
3,400,000 Silverleaf Resorts, Inc., Sr. Subordinated Notes 10.5% 4/1/2008 2,295,000
-------------
18,689,000
-------------
Machinery & Equipment - 3.3%
4,000,000 Anthony Crane Rentals, LP, Debentures, Series B Zero Coupon 8/1/2009 1,770,000
2,800,000 Blount, Inc., Sr. Subordinated Notes 13.0% 8/1/2009 2,877,000
4,100,000 Budget Group, Inc., Sr. Notes 9.125% 4/1/2006 3,567,000
1,600,000 Motors & Gears, Inc., Sr. Notes, Series D 10.75% 11/15/2006 1,512,000
4,800,000 Navistar Financial Corp., Sr. Subordinated Notes, Series B 9.0% 6/1/2002 4,896,000
2,000,000 Navistar International Corp., Sr. Notes, Series B 7.0% 2/1/2003 1,945,000
1,600,000 Navistar International Corp., Sr. Subordinated Notes, Series B 8.0% 2/1/2008 1,540,000
2,000,000 Pentacon, Inc., Sr. Subordinated Notes, Series B 12.25% 4/1/2009 1,830,000
4,000,000 Transportation Manufacturing Operations,
Sr. Subordinated Notes 11.25% 5/1/2009 3,940,000
2,000,000 United Rentals, Inc., Notes, Series B 9.0% 4/1/2009 1,815,000
4,000,000 United Rentals, Inc., Sr. Subordinated Notes, Series B 9.25% 1/15/2009 3,700,000
-------------
29,392,000
-------------
Mining & Metals - 1.0%
1,600,000 Altos Hornos de Mexico, Bonds, Series B (USD) 11.875% 4/30/2004 676,000 (c)
3,000,000 Echo Bay Mines, Bonds Zero Coupon 4/1/2027 1,818,750
2,000,000 Republic Technologies/RTI Capital, Unit Security 13.75% 7/15/2009 1,860,000
4,000,000 UCAR Global Enterprises, Inc., Sr. Subordinated Notes,
Series B 12.0% 1/15/2005 4,180,000
-------------
8,534,750
-------------
Oil & Gas - 1.4%
3,400,000 Belden & Blake Corp., Sr. Subordinated Notes, Series B 9.875% 6/15/2007 1,989,000
2,400,000 Conproca S.A. de C.V., Sr. Secured Bonds (USD) 12.0% 6/16/2010 2,274,000
6,000,000 National Energy Group, Inc., Sr. Notes, Series D 10.75% 11/1/2006 2,730,000 (c)
2,000,000 Pride Petroleum Services, Inc., Sr. Notes 9.375% 5/1/2007 1,975,000
3,000,000 RAM Energy, Inc., Sr. Notes 11.5% 2/15/2008 1,365,000
2,000,000 RBF Finance Co., Sr. Notes 11.375% 3/15/2009 2,115,000
-------------
12,448,000
-------------
Paper & Forest Products - 1.0%
2,400,000 APP Finance (II) Mauritius, Ltd., Guaranteed
Preferred Securities, Series B (USD) 12.0% 2/15/2004 1,446,000
2,000,000 FSW International Finance Co. B.V., Guaranteed
Secured Notes (USD) 12.50% 11/1/2006 520,000 (c)
1,200,000 Indah Kiat Finance Mauritius, Guaranteed Sr. Notes (USD) 10.0% 7/1/2007 777,000
2,400,000 Pindo Deli Finance Mauritius, Sr. Notes (USD) 10.25% 10/1/2002 1,722,000
4,400,000 S.D. Warren Co., Sr. Subordinated Notes 12.0% 12/15/2004 4,642,000
-------------
9,107,000
-------------
Pollution Control - 1.2%
1,200,000 Allied Waste, North America, Sr. Notes, Series B 7.625% 1/1/2006 1,041,000
2,600,000 Allied Waste, North America, Sr. Subordinated Notes 10.0% 8/1/2009 2,213,250
1,800,000 IT Group, Inc., Sr. Subordinated Notes 11.25% 4/1/2009 1,701,000
3,700,000 Norcal Waste Systems, Inc., Sr. Notes, Series B 13.5% 11/15/2005 3,931,250
1,900,000 WMX Technologies, Inc., Cvt Subordinated Notes 2.0% 1/24/2005 1,560,375
-------------
10,446,875
-------------
Publishing & Printing - 1.9%
4,000,000 Mail-Well Corp., Bonds, Series B 8.75% 12/15/2008 3,770,000
5,500,000 MDC Communications Corp., Sr. Subordinated Notes 10.5% 12/1/2006 5,362,500
3,000,000 PRIMEDIA, Inc., Sr. Notes 10.25% 6/1/2004 3,135,000
4,150,000 Sullivan Graphics, Inc., Sr. Subordinated Notes 12.75% 8/1/2005 4,233,000
-------------
16,500,500
-------------
Retail - 1.6%
5,750,000 Corporate Express, Inc., Convertible Notes 4.5% 7/1/2000 5,714,063
2,000,000 County Seat Stores, Inc., Units 12.75% 11/1/2004 72,500 (c)
2,250,000 F & M Distributors, Inc., Sr. Subordinated Notes 11.50% 4/15/2003 28,125 (c)
3,500,000 Hollywood Entertainment Corp., Sr. Subordinated Notes,
Series B 10.625% 8/15/2004 2,992,500
2,000,000 J. Crew Group, Debentures, Series B Zero Coupon 10/15/2008 950,000
2,000,000 TravelCenters of America, Inc., Sr. Subordinated Notes 10.25% 4/1/2007 1,955,000
2,700,000 Winsloew Furniture, Inc., Unit Security 12.75% 8/15/2007 2,619,000
-------------
14,331,188
-------------
Retail - Food - 1.7%
3,200,000 Fleming Companies, Inc., Sr. Subordinated Notes, Series B 10.625% 7/31/2007 2,880,000
5,150,000 Jitney-Jungle Stores of America, Sr. Notes 12.0% 3/1/2006 1,467,750 (c)
2,000,000 SBARRO, Inc., Sr. Notes 11.0% 9/15/2009 1,975,000
5,000,000 Smith's Food & Drug Centers, Pass Through Certificates 8.64% 7/2/2012 5,172,075
3,100,000 Stater Brothers Holdings, Sr. Notes 10.75% 8/15/2006 3,169,750
-------------
14,664,575
-------------
Services - 1.0%
5,200,000 Building One Services Corp., Sr. Subordinated Notes 10.5% 5/1/2009 4,654,000
500,000 Discovery Zone, Inc., Sr. Notes 13.5% 5/1/2002 52,500 (c)
2,000,000 Discovery Zone, Inc., Sr. Notes 13.5% 8/1/2002 30,000 (c)
4,250,000 KinderCare Learning Centers, Inc., Sr. Subordinated Notes 9.5% 2/15/2009 3,995,000
-------------
8,731,500
-------------
Telecommunications - Data/Internet - 4.1%
2,750,000 ASAT Finance, LLC, Unit Security 12.5% 11/1/2006 2,750,000
4,900,000 Covad Communications Group, Inc., Sr. Discount Notes,
Series B Zero Coupon 3/15/2008 2,768,500
2,100,000 Cybernet Internet Services International, Sr. Notes 14.0% 7/1/2009 1,816,500
1,350,000 Exodus Communications, Inc., Sr. Notes 11.25% 7/1/2008 1,387,125
2,650,000 Exodus Communications, Inc., Sr. Notes 11.25% 7/1/2008 2,722,875
3,100,000 Intersil Corp., Unit Security 13.25% 8/15/2009 3,301,500
12,000,000 Network Associates, Inc., Convertible Bond 1.0% 2/13/2018 4,005,000
4,000,000 PSINet, Inc., Sr. Notes 11.0% 8/1/2009 4,130,000
5,000,000 Rhythms NetConnections, Inc., Sr. Discount Notes, Series B Zero Coupon 5/15/2008 2,506,250
3,000,000 Rhythms NetConnections, Inc., Sr. Notes 12.75% 4/15/2009 2,685,000
2,500,000 Splitrock Services, Inc., Notes, Series B 11.75% 7/15/2008 2,318,750
2,000,000 Verio, Inc., Sr. Notes 11.25% 12/1/2008 2,100,000
6,400,000 Wam!Net, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2005 3,872,000
-------------
36,363,500
-------------
Telecommunications - Wireless - 9.1%
4,800,000 Airgate PCS, Inc., Sr. Subordinated Notes Zero Coupon 10/1/2009 2,502,000
3,000,000 American Mobile Satellite Corp., Sr. Notes, Series B 12.25% 4/1/2008 1,695,000
1,200,000 Arch Communications Group, Inc., Sr. Notes 13.75% 4/15/2008 876,000
3,100,000 CenCall Communications Corp., Sr. Redeemable
Discount Notes 10.125% 1/15/2004 3,177,500
3,600,000 Centennial Cellular Operating Co., Sr. Subordinated Notes 10.75% 12/15/2008 3,771,000
4,000,000 Clearnet Communications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 3,805,000
3,500,000 Convergent Communications, Inc., Sr. B Notes 13.0% 4/1/2008 2,747,500
3,600,000 Crown Castle International Corp., Sr. Discount Notes Zero Coupon 5/15/2011 2,151,000
2,000,000 Crown Castle International Corp., Sr. Notes 9.5% 8/1/2011 1,947,500
2,800,000 Dobson/Sygnet Communications, Sr. Notes 12.25% 12/15/2008 2,996,000
5,000,000 Dolphin Telecom plc, Sr. Discount Notes (USD) Zero Coupon 5/15/2009 2,000,000
2,000,000 HighwayMaster Communications, Inc., Sr. Notes, Series B 13.75% 9/15/2005 810,000
1,800,000 ICO Global Communications, Units 15.0% 8/1/2005 405,000 (c)
2,800,000 Iridium LLC/Capital Corp., Sr. Notes, Series A 13.0% 7/15/2005 182,000 (c)
3,150,000 Iridium LLC/Capital Corp., Sr. Notes, Series B 14.0% 7/15/2005 204,750 (c)
800,000 Iridium LLC/Capital Corp., Sr. Notes, Series C 11.25% 7/15/2005 52,000 (c)
6,000,000 McCaw International, Ltd., Sr. Discount Notes Zero Coupon 4/15/2007 3,690,000
3,800,000 Metrocall, Inc., Sr. Subordinated Notes 11.0% 9/15/2008 2,337,000
4,800,000 Microcell Telecommunications, Inc., Sr. Discount Notes Zero Coupon 6/1/2006 3,960,000
8,000,000 Millicom International Cellular, Sr. Discount Notes Zero Coupon 6/1/2006 5,820,000
4,000,000 Mobile Telecommunications Technology, Sr. Notes 13.5% 2/15/2002 4,550,000
1,100,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 9/15/2007 830,500
2,000,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 10/31/2007 1,450,000
750,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 2/15/2008 536,250
7,200,000 Orion Network Systems, Inc., Sr. Discount Notes Zero Coupon 1/15/2007 3,204,000
6,200,000 Orion Network Systems, Inc., Sr. Notes 11.25% 1/15/2007 4,495,000
4,800,000 PageMart Nationwide, Inc., Sr. Discount Exchange Notes Zero Coupon 2/1/2005 4,200,000
4,700,000 PageMart Wireless, Inc., Sr. Discount Notes Zero Coupon 2/1/2008 1,433,500
2,400,000 Pinnacle Holdings, Inc., Sr. Discount Notes Zero Coupon 3/15/2008 1,464,000
1,950,000 Price Communications Wireless, Inc., Sr. Subordinated Notes 11.75% 7/15/2007 2,140,125
4,000,000 SpectraSite Holdings, Inc., Sr. Disc. Notes Zero Coupon 4/15/2009 2,100,000
480,118 Teletrac, Inc., Notes 9.0% 1/1/2004 235,258
113,649 Teletrac, Inc., Sr. Secured Notes 10.0% 9/29/2000 114,217
4,000,000 Tritel PCS, Inc., Sr. Subordinated Discount Notes Zero Coupon 5/15/2009 2,420,000
6,000,000 UNIFI Communications, Inc., Sr. Notes 14.0% 3/1/2004 90,000 (c)
3,850,000 US Unwired, Inc., Sr. Disc. Notes Zero Coupon 11/1/2009 2,079,000
3,100,000 USA Mobile Communications, Inc., Sr. Notes 14.0% 11/1/2004 2,681,500
2,500,000 VIALOG Corp., Sr. Notes 12.75% 11/15/2001 1,887,500
-------------
81,040,100
-------------
Telecommunications - Wireline - 13.8%
2,000,000 Alestra S. de R.L. de C.V., Notes (USD) 12.625% 5/15/2009 1,945,000
2,000,000 Alestra S. de R.L. de C.V., Notes (USD) 12.125% 5/15/2006 1,945,000
6,000,000 Allegiance Telecom, Inc., Sr. Discount Notes, Series B Zero Coupon 2/15/2008 4,110,000
2,000,000 Birch Telecom, Inc., Sr. Notes 14.0% 6/15/2008 1,990,000
3,000,000 CapRock Communications Corp., Sr. Notes 11.5% 5/1/2009 2,902,500
2,900,000 Completel Europe N.V., Sr. Disc. Notes (USD) Zero Coupon 2/15/2009 1,471,750
5,000,000 DTI Holdings, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2008 1,775,000
2,800,000 Energis plc, Sr. Unsubordinated Notes (USD) 9.75% 6/15/2009 2,856,000
5,150,000 Esprit Telecom Group plc, Sr. Notes (USD) 11.5% 12/15/2007 5,175,750
4,000,000 FirstWorld Communications, Inc., Sr. Discount Notes Zero Coupon 4/15/2008 2,160,000
1,200,000 Global TeleSystems Group, Inc., Sr. Notes 9.875% 2/15/2005 1,086,000
3,800,000 GST Equipment Funding, Inc., Sr. Secured Notes 13.25% 5/1/2007 3,781,000
2,000,000 GST Network Funding, Inc., Sr. Disc. Notes Zero Coupon 5/1/2008 930,000
1,000,000 GST Telecommunications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 855,000
1,200,000 Hyperion Telecommunications, Inc., Sr. Discount Notes,
Series B Zero Coupon 4/15/2003 1,035,000
2,000,000 Hyperion Telecommunications, Inc., Sr. Notes, Series B 12.25% 9/1/2004 2,135,000
3,200,000 IntelCom Group Holdings (U.S.A.), Inc., Sr. Discount Notes Zero Coupon 9/15/2005 2,736,000
4,750,000 Intermedia Communications, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2009 2,588,750
1,200,000 Intermedia Communications, Inc., Sr. Notes 8.6% 6/1/2008 1,068,000
3,100,000 Intermedia Communications, Inc., Sr. Notes, Series B 8.5% 1/15/2008 2,751,250
2,800,000 Ionica plc, Sr. Notes (USD) 13.5% 8/15/2006 42,000 (c)
1,900,000 Jazztel plc, Sr. Notes (USD) 14.0% 4/1/2009 1,909,500
8,800,000 Level 3 Communications, Inc., Sr. Discount Notes Zero Coupon 12/1/2008 5,192,000
3,800,000 Logix Communications Ent., Inc., Sr. Notes 12.25% 6/15/2008 3,287,000
2,000,000 Long Distance International, Inc., Sr. Notes 12.25% 4/15/2008 1,010,000
2,000,000 McLeodUSA, Inc., Sr. Notes 8.125% 2/15/2009 1,870,000
2,800,000 Metromedia Fiber Network, Inc., Sr. Notes, Series B 10.0% 11/15/2008 2,765,000
4,000,000 MGC Communications, Inc., Sr. Notes, Series B 13.0% 10/1/2004 3,660,000
4,000,000 MJD Communications, Inc., Notes, Series B (Variable Rate) 9.248% 5/1/2008 3,744,000
3,000,000 Netia Holdings B.V., Sr. Discount Notes, Series B Zero Coupon 11/1/2007 1,867,500
1,600,000 NEXTLINK Communications, Inc., Sr. Notes 9.625% 10/1/2007 1,544,000
3,200,000 NEXTLINK Communications, LLC, Sr. Discount Notes 12.5% 4/15/2006 3,416,000
3,600,000 Pathnet, Inc., Sr. Notes 12.25% 4/15/2000 1,962,000
2,800,000 Phonetel Technologies, Inc., Sr. Notes 12.0% 12/15/2006 490,000 (c)
3,000,000 Poland Telecom Finance B.V., Sr. Notes, Series B (USD) 14.0% 12/1/2007 2,685,000
3,600,000 Primus Telecommunications Group, Inc., Sr. Notes 11.75% 8/1/2004 3,546,000
4,000,000 Primus Telecommunications Group, Sr. Notes 11.25% 11/15/2009 3,740,000
1,200,000 RSL Communications plc, Bonds (USD) 12.0% 11/1/2008 1,206,000
4,600,000 RSL Communications, Ltd., Units 12.25% 11/15/2006 4,600,000
2,000,000 Startec Global Communications, Inc., Sr. Notes 12.0% 5/15/2008 1,630,000
1,900,000 Telegroup, Inc., Sr. Discount Notes Zero Coupon 11/1/2004 807,500 (c)
2,500,000 Teligent, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2008 1,318,750
3,200,000 Teligent, Inc., Sr. Notes 11.5% 12/1/2007 2,956,000
6,000,000 USN Communications, Inc., Sr. Discount Notes, Series B Zero Coupon 8/15/2004 405,000 (c)
2,800,000 VersaTel Telecom B.V., Sr. Notes (USD) 13.25% 5/15/2008 2,828,000
1,200,000 Versatel Telecom International N.V., Sr. Notes (USD) 11.875% 7/15/2009 1,119,397
6,500,000 Viatel, Inc., Sr. Discount Notes Zero Coupon 4/15/2008 3,640,000
5,800,000 Williams Communications Group, Sr. Notes 10.875% 10/1/2009 5,974,000
1,500,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/2005 1,327,500
1,000,000 WinStar Communications, Inc., Sr. Unsecured Notes Zero Coupon 10/15/2005 1,345,000
3,000,000 Worldwide Fiber, Inc., Sr. Notes 12.0% 8/1/2009 3,015,000
2,000,000 Worldwide Fiber, Inc., Sr. Notes 12.5% 12/15/2005 2,055,000
-------------
122,254,147
-------------
Textiles & Apparel - 1.2%
3,150,000 CMI Industries, Inc., Sr. Subordinated Notes 9.5% 10/1/2003 2,409,750
5,890,000 Dan River, Inc., Sr. Subordinated Notes 10.125% 12/15/2003 5,985,713
2,400,000 Perry Ellis International, Inc., Sr. Subordinated Notes, Series B 12.25% 4/1/2006 2,322,000
-------------
10,717,463
-------------
Transportation - 1.5%
4,000,000 Allied Holdings, Inc., Sr. Notes, Series B 8.625% 10/1/2007 3,460,000
2,000,000 Cenargo International plc, Senior Notes (USD) 9.75% 6/15/2008 1,705,000
3,600,000 Equimar Shipholdings, Ltd., First Priority Mtg 9.875% 7/1/2007 2,214,000
2,000,000 Transportacion Maritima, Sr. Notes (USD) 10.0% 11/15/2006 1,460,000
5,000,000 Windsor Petroleum, Notes 7.84% 1/15/2021 4,175,000
-------------
13,014,000
-------------
Total Corporate Bonds (cost $817,642,155) 705,862,396
-------------
FOREIGN GOVERNMENT BONDS - 0.4% (a,e)
4,000,000 Brazil (Federative Republic), Bonds (cost $3,964,415) 11.625% 4/15/2004 3,830,000
-------------
<CAPTION>
Shares
----------
PREFERRED STOCKS - 11.1% (a,b)
<S> <C> <C>
Convertible - 2.6%
10,000 Adelphia Communications Corp., Convertible Preferred Stock, Series D 1,710,000
40,000 CalEnergy Capital Trust III, Convertible Preferred Stock 1,555,000
60,000 Caremark RX Capital Trust I, Convertible Preferred Stock 3,000,000
46,000 Chesapeake Energy Corp., Convertible Preferred Stock 1,529,500
20,000 Emmis Communications Corp., Convertible Preferred Stock, Series A 1,120,000
16,000 Global Crossing Holdings, Ltd., Convertible Preferred Stock 1,600,000
50,000 Host Marriott Financial Trust, Convertible Preferred Stock 1,675,000
30,000 Intermedia Communications, Inc., Convertible Preferred Stock 723,750
40,000 Owens - Illinois, Inc., Convertible Preferred Stock 1,320,000
46,000 PSINet, Inc., Convertible Preferred Stock, Series C 1,857,250
29,500 Sinclair Broadcast Group, Inc., Convertible Preferred Stock 1,003,000
33,500 TIMET Capital Trust I, Convertible Preferred Stock 481,563
58,500 Treev, Inc., Convertible Preferred Stock, Series A 380,250
40,000 UnitedGlobalCom, Inc., Convertible Preferred Stock 2,410,000
60,000 USX Corp. (Marathon Group), Convertible Preferred Stock 600,000
35,000 Verio, Inc., Convertible Preferred Stock 1,680,000
-------------
22,645,313
-------------
Non-Convertible - 8.5%
17,881 CapStar Communications, Inc., Exchangeable Payment-In-Kind Preferred Stock, Series E 2,132,309
18,145 Century Maintenance Supply, Inc., Payment-In-Kind Preferred Stock 1,837,181
65,000 Chevy Chase Capital Corp., Noncumulative Exchangeable Preferred Stock, Series A 3,396,250
22,555 Cluett American Corp., Preferred Stock 1,161,583
48,270 Communications & Power Industries, Inc., Preferred Stock, Series B 3,921,938
50,995 CSC Holdings, Inc., Payment-In-Kind Preferred Stock 5,520,209
22,952 CSC Holdings, Inc., Preferred Stock 2,473,078
2,192 Cumulus Media, Inc., Preferred Stock, Series A 2,416,680
5,539 Dobson Communications Corp., Payment-In-Kind Preferred Stock 5,608,238
40,000 Global Crossing Holdings, Ltd., Payment-In-Kind Preferred Stock 4,230,000
5,620 ICG Holdings, Inc., Preferred Stock 5,128,250
3,441 Intermedia Communications, Inc., Preferred Stock 3,139,913
3,534 IXC Communications, Inc., Preferred Stock 3,816,720
1,200 J Crew Group, Preferred Stock 1,020,000
16,000 Jitney-Jungle Stores of America, Sr. Exchangeable Preferred Stock, Class A 0
45,307 Nebco Evans Holdings Co., Payment-In-Kind, Preferred Stock 1,370,537
1,265 Nextel Communications, Inc., Payment-In-Kind Preferred Stock, Series D 1,356,713
3,479 Nextel Communications, Inc., Payment-In-Kind Preferred Stock, Series E 3,592,068
80,883 NEXTLINK Communications, Inc., Payment-In-Kind Preferred Stock 4,145,254
4,832 Paxson Communications Corp., Payment-In-Kind Preferred Stock 4,892,400
27,500 PRIMEDIA, Inc., Exchangeable Preferred Stock, Series H 2,413,125
36,500 PRIMEDIA, Inc., Preferred Stock, Series D 3,531,375
17,000 PRIMEDIA, Inc., Preferred Stock, Series F 1,555,500
122,500 River Bank Asset, Inc., Preferred Stock, Series A 1,868,125
3,006 R&B Falcon Corp., Payment-In-Kind Preferred Stock 2,968,425
2,000 WinStar Communications, Inc., Payment-In-Kind Preferred Stock, Series C 1,585,000
-------------
75,080,871
-------------
Total Preferred Stocks (cost $112,212,176) 97,726,184
-------------
COMMON STOCKS & STOCK WARRANTS - 3.9% (a,b)
9,200 Adelphia Business Solutions, Stock Warrants 1,611,150
4,000 Airgate PCS, Inc., Stock Warrants 360,000
6,800 Allegiance Telecom, Inc., Stock Warrants 646,850
3,000 American Mobile Satellite Corp., Stock Warrants 54,375
2,400 American Telecasting, Inc., Stock Warrants 24
41,666 Arch Communications Group, Inc., Common Stock 208,330
216,056 Arch Communications Group, Inc., Stock Warrants 118,831
2,400 Australis Holdings Pty., Ltd., Stock Warrants 24 (d)
10,920 Australis Media, Ltd., Stock Warrants 109 (d)
2,000 Birch Telecom, Inc., Stock Warrants 100,000
12,000 Classic Communications, Inc., Common Stock 200,040
23,925 Clearnet Communications, Inc., Stock Warrants 505,786
1,890 Communications & Power Industries, Inc., Common Stock 284,445 (d)
29,000 Completel Holdings, LLC, Common Stock, Class B 29,000
13,009 Consolidated Hydro, Inc., Stock Warrants, Class B 9,757
8,444 Consolidated Hydro, Inc., Stock Warrants, Class C 2,111
18,900 Convergent Communications Corp., Common Stock 189,000
2,233 CS Wireless Systems, Inc., Common Stock 306 (d)
2,100 Cybernet Internet Services International, Stock Warrants 210,000
19,000 Discovery Zone, Inc., Stock Warrants 2,565 (d)
21,000 DTI Holdings, Inc., Stock Warrants 2,520
11,700 E. Spire Communications, Inc., Stock Warrants 733,053
4,000 FirstWorld Communications, Stock Warrants 280,500
112,013 Gaylord Container Corp., Common Stock, Class A 630,073
154,623 Gaylord Container Corp., Stock Warrants 927,738
250,000 Granite Broadcasting Corp., Common Stock 3,218,750
25,274 Harvard Industries, Inc., Stock Warrants 6,775 (d)
2,000 HighwayMaster Communications, Inc., Stock Warrants 750
55,000 IntelCom Group Communications, Inc., Common Stock 900,625
50,335 IntelCom Group (U.S.A.), Inc., Stock Warrants 560,707
4,100 Intermedia Communications of Florida, Stock Warrants 370,025
4,238 Intermedia Communications, Inc., Common Stock 110,188
10,200 Ionica plc, Stock Warrants (USD) 102 (d)
2,000 Iridium World Communications, Stock Warrants 500
9,500 Jazztel plc, Stock Warrants (USD) 384,750
2,000 Long Distance International, Inc., Stock Warrants 20
30,000 Magellan Health Services, Inc., Common Stock 181,875
7,100 McCaw International, Ltd., Stock Warrants 29,288
40,000 MCI Worldcom, Inc., Common Stock 3,432,500
16,976 MGC Communications, Inc., Common Stock 466,840
27,200 Microcell Telecommunications, Inc., Stock Warrants 1,162,800
2,800 OnePoint Communications Corp., Stock Warrants 3,150
2,800 ONO Finance, plc., Cash Rights (USD) 168,000
26,250 PageMart Nationwide, Inc., Common Stock 157,500
112,000 PageMart Wireless, Inc., Common Stock, Class A 623,000
3,600 Pathnet, Inc., Stock Warrants 36,450
3,000 Poland Telecom Finance B.V., Stock Warrants (USD) 121,500
100,645 Price Communications Corp., Common Stock 2,189,029
3,200 Primus Telecommunications Group, Inc., Stock Warrants 80,400
19,360 Protection One Alarm Monitoring, Stock Warrants 79,860
6,000 RSL Communications, Ltd., Stock Warrants 474,750
2,800 R&B Falcon Corp., Stock Warrants 561,400
6,000 SF Holdings Group, Inc., Common Stock 810
3,200 Splitrock Services, Inc., Stock Warrants 394,400
100,663 Star Gas Partners, LP, Common Stock 1,673,522
2,000 Startec Global Communications, Inc., Stock Warrants 5,500
308,649 Teletrac, Inc., Common Stock 154,325
113,649 Teletrac, Inc., Stock Warrants 1,136
4,036 TREEV, Inc., Common Stock 12,360
4,600 UIH Australia/Pacific, Inc., Stock Warrants 138,000
6,000 UNIFI Communications, Inc., Stock Warrants 810 (d)
70,000 UnitedGlobalCom, Inc., Common Stock, Class A 6,090,000
44,000 USN Communications, Inc., Stock Warrants 5,940 (d)
2,800 VersaTel Telecom B.V., Stock Warrants (USD) 419,300
1,100 Vialog Corp., Stock Warrants 49,500
65,000 Viatel, Inc., Common Stock 2,169,375
18,300 Wam!Net, Inc., Stock Warrants 416,325
26,181 Wherehouse Entertainment, Inc., Stock Warrants, Class A 199,630
4,545 Wherehouse Entertainment, Inc., Stock Warrants, Class B 17,612
4,545 Wherehouse Entertainment, Inc., Stock Warrants, Class C 7,386
417,436 Wilshire Financial Services Group, Inc., Common Stock 600,064
13,800 Wireless One, Inc., Stock Warrants 138
-------------
Total Common Stocks & Stock Warrants (cost $32,790,078) 34,784,254
-------------
<CAPTION>
Principal
Amount
--------
SHORT-TERM SECURITIES - 5.2% (a)
<S> <C> <C> <C> <C>
Commercial Paper
$14,600,000 Great Lakes Chemical Corp. 5.31% 11/1/1999 14,600,000
32,000,000 UBS Finance Delaware, Inc. 5.31% 11/1/1999 32,000,000
-------------
Total Short-Term Securities (at amortized cost) 46,600,000
-------------
Total Investments (cost $1,013,208,824) $888,634,834 (f)
=============
Notes to Portfolio of Investments:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood High Yield Fund.
(b) Currently non-income producing.
(c) Currently non-income producing and in default.
(d) Denotes restricted securities. These securities have been valued from the date of acquisition through October 31, 1999,
by obtaining quotations from brokers who are active with the issues. The following table indicates the acquisition date
and cost of restricted securities the Fund owned as of October 31, 1999:
<CAPTION>
Aquisition
Security Date Cost
------------ ------------ ------------
<S> <C> <C>
Australis Holdings Pty., Ltd., Stock Warrants 3/27/97 $ 0
Australis Media, Ltd., Stock Warrants 1/2/97 0
Communications & Power Industries, Inc., Common Stock 8/2/95 172,871
CS Wireless Systems, Inc., Common Stock 12/11/96 15,070
Discovery Zone, Inc., Stock Warrants 3/12/98 222,660
Harvard Industries, Inc., Stock Warrants 5/14/92 6,669,341
Ionica plc, Stock Warrants 8/1/96 664,784
UNIFI Communications, Inc., Stock Warrants 8/13/97 123,449
USN Communications, Inc., Stock Warrants 8/13/97 373
(e) Denominated in U.S. dollars.
(f) At October 31, 1999, the aggregate cost of securities for federal tax purposes was $1,015,596,556
and the net unrealized depreciation of investments based on that cost was $126,961,722 which is
comprised of $34,236,805 aggregate gross unrealized appreciation and $161,198,527 aggregate gross
unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD INCOME FUND
Portfolio of Investments
October 31, 1999
Principal Maturity
Amount Rate Date Value
------------ -------- ----------- -----------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 55.2% (a)
Aerospace - 2.7%
$8,000,000 Lockheed Martin Corp., Notes 7.7% 6/15/2008 $ 7,926,863
3,000,000 Raytheon Co., Notes 6.45% 8/15/2002 2,952,363
2,000,000 Raytheon Co., Notes 6.75% 8/15/2007 1,902,296
4,000,000 United Defense Industries, Inc., Sr. Subordinated Notes 8.75% 11/15/2007 3,800,000
3,500,000 United Technologies Corp., Notes 7.0% 9/15/2006 3,520,192
-------------
20,101,714
-------------
Airlines - 0.5%
4,000,000 American Airlines, Inc., Pass Through Certificates,
Series 1999-1-A2 7.324% 10/15/2009 3,981,300
-------------
Automotive - 2.4%
3,500,000 DaimlerChrysler North America Holdings, Notes 7.2% 9/1/2009 3,509,944
5,000,000 Ford Motor Credit Co., Notes 6.375% 10/6/2000 5,004,475
2,000,000 General Motors Acceptance Corp., Unsecured Notes 7.125% 5/1/2003 2,030,000
7,000,000 Toyota Motor Credit Corp., Notes (USD) 5.625% 11/13/2003 6,726,783
-------------
17,271,202
-------------
Bank & Finance - 11.2%
3,000,000 Abbey National plc, Subordinated Debentures (USD) 7.95% 10/26/2029 3,072,603
7,000,000 Associates Corp. of North America, Bonds 5.8% 4/20/2004 6,731,088
4,000,000 Bank One Corp., Notes 6.875% 8/1/2006 3,945,232
3,000,000 BankAmerica Corp., Sr. Notes 5.875% 2/15/2009 2,741,043
3,500,000 Chase Manhattan Corp., Subordinated Notes 9.375% 7/1/2001 3,656,153
3,000,000 CIT (The) Group, Inc., Notes 5.5% 2/15/2004 2,837,166
1,500,000 Conseco, Inc., Notes 9.0% 10/15/2006 1,511,685
2,500,000 Conseco, Inc., Notes 8.5% 10/15/2002 2,506,740
8,000,000 Equitable Life Assurance Society of the United States,
Surplus Notes 6.95% 12/1/2005 7,866,184
3,000,000 Fidelity Investments, Debentures 7.49% 6/15/2019 2,983,959
4,500,000 FINOVA Capital Corp., Notes 7.25% 7/12/2006 4,470,170
7,000,000 Metropolitan Life Insurance Co., Surplus Notes 7.7% 11/1/2015 7,012,075
3,000,000 National Westminster Bank plc, Subordinated Notes (USD) 7.375% 10/1/2009 2,990,661
9,000,000 New York Life Insurance Co., Surplus Notes 6.4% 12/15/2003 8,845,290
4,000,000 PNC Funding Corp., Subordinated Notes 7.5% 11/1/2009 4,040,680
7,000,000 Prudential Insurance Co. of America, Capital Notes 6.875% 4/15/2003 6,953,009
2,000,000 ReliaStar Financial Corp., Notes 8.0% 10/30/2006 2,035,354
3,500,000 Wachovia Corp., Subordinated Notes 5.625% 12/15/2008 3,139,885
4,500,000 Wells Fargo Capital, Capital Trust Preferred Securities 7.73% 12/1/2026 4,303,256
-------------
81,642,233
-------------
Broadcasting & Media - 2.5%
3,000,000 CBS Corp., Notes 8.875% 6/1/2001 3,093,267
2,000,000 Chancellor Media Corp., Sr. Notes 8.0% 11/1/2008 1,985,000
450,000 Clear Channel Communications, Convertible Sr. Notes 2.625% 4/1/2003 633,375
3,600,000 CSC Holdings, Inc., Sr. Notes 7.25% 7/15/2008 3,397,500
5,000,000 TCI Communications, Inc., Sr. Notes 10.125% 8/1/2001 5,299,100
3,500,000 Time Warner, Inc., Debentures 9.125% 1/15/2013 3,898,125
-------------
18,306,367
-------------
Chemicals - 0.8%
4,000,000 Monsanto Company, Bonds 6.5% 12/01/2018 3,539,708
2,000,000 Union Carbide Corp., Notes 6.7% 4/1/2009 1,921,344
-------------
5,461,052
-------------
Computers & Office Equipment - 0.7%
800,000 Credit Suisse First Boston, Convertible Medium Term Notes
(Cisco Systems, Inc.) 1.0% 4/21/2009 938,000
4,000,000 Texas Instruments, Inc., Sr. Notes 7.0% 8/15/2004 3,984,064
-------------
4,922,064
-------------
Conglomerates - 2.7%
750,000 Credit Suisse First Boston, Convertible Medium Term Notes
(General Electric) 2.25% 5/5/2003 962,813
4,500,000 Dover Corp., Debentures 6.65% 6/1/2028 4,091,544
11,000,000 General Electric Capital Corp., Debentures 8.85% 4/1/2005 11,922,064
3,000,000 Pentair, Inc., Sr. Notes 7.85% 10/15/2009 2,986,041
-------------
19,962,462
-------------
Construction & Home Building - 0.3%
2,000,000 American Standard Co., Inc., Notes 7.375% 4/15/2005 1,865,000
-------------
Containers & Packaging - 0.4%
3,000,000 Owens-Illinois, Inc., Sr. Notes 7.85% 5/15/2004 2,945,712
-------------
Drugs & Health Care - 1.3%
650,000 Athena Neurosciences, Inc., Convertible Notes 4.75% 11/15/2004 643,500
100,000 Athena Neurosciences, Inc., Convertible Notes 4.75% 11/15/2004 99,000
4,000,000 Becton, Dickinson, & Co., Debentures 6.7% 8/1/2028 3,525,884
4,000,000 Bristol Myers Squibb Co., Debentures 7.15% 6/15/2023 3,970,712
1,000,000 Roche Holdings, Inc., Convertible Notes Zero Coupon 4/20/2010 608,750
750,000 Swiss Life Finance, Ltd., Convertible Notes
(Glaxo Wellcome plc) 2.0% 5/20/2003 754,688
-------------
9,602,534
-------------
Electric Utilities - 7.4%
1,500,000 AES (The) Corp., Sr. Subordinated Notes 10.25% 7/15/2006 1,518,750
2,000,000 CalEnergy Company, Inc., Sr. Notes 7.63% 10/15/2007 2,010,030
2,000,000 CalEnergy Company, Inc., Sr. Notes 6.96% 9/15/2003 1,983,958
2,500,000 Calpine Corp., Sr. Notes 7.875% 4/1/2008 2,381,250
5,832,000 Cleveland Electric Illumination Co., First Mortgage Bonds 7.625% 8/1/2002 5,868,328
3,000,000 CMS Energy Corp., Sr. Notes 8.0% 7/1/2001 2,981,937
4,000,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 4,014,860
4,500,000 Commonwealth Edison Co., Notes 7.625% 1/15/2007 4,557,474
2,000,000 Connecticut Light & Power Co., First Refunding
Mortgage Bonds, Series 97C 7.75% 6/1/2002 2,028,736
4,000,000 Consolidated Edison Co. NY, Inc., Debentures 6.45% 12/1/2007 3,845,796
4,000,000 East Coast Power, LLC, Sr. Notes, Series B 7.066% 3/31/2012 3,609,384
945,740 East Coast Power, LLC, Sr. Notes, Series C 6.737% 3/31/2008 898,895
4,000,000 National Rural Utilities, Medium Term Notes 5.75% 12/1/2008 3,646,336
3,780,489 Niagara Mohawk Power Corp., Sr. Notes, Series C 7.125% 7/1/2001 3,785,286
4,000,000 NRG Energy, Inc., Sr. Notes 7.5% 6/15/2007 3,822,756
3,000,000 PSEG Capital Corp., Medium Term Notes 6.25% 5/15/2003 2,907,243
4,500,000 Texas Utilities Electric Co., Debentures 7.17% 8/1/2007 4,460,198
-------------
54,321,217
-------------
Electronics - 0.4%
3,000,000 Corning, Inc., Notes 6.3% 3/1/2009 2,820,855
-------------
Food & Beverage - 2.5%
4,500,000 Archer Daniels Midland Co., Bonds 6.75% 12/15/2027 4,084,092
4,500,000 ConAgra, Inc., Sr. Notes 5.5% 10/15/2002 4,357,661
3,500,000 Fred Meyer, Inc., Notes 7.375% 3/1/2005 3,505,572
3,000,000 Kroger (The) Co., Sr. Notes 8.15% 7/15/2006 3,087,918
3,500,000 Pepsi Bottling Group, Inc., Sr. Notes, Series B 7.0% 3/1/2029 3,246,180
-------------
18,281,423
-------------
Hospital Management - 0.4%
3,000,000 Tenet Healthcare Corp., Sr. Notes 7.875% 1/15/2003 2,883,750
-------------
Household Products - 0.3%
2,500,000 Playtex Products, Inc., Unsecured Sr. Notes, Series B 8.875% 7/15/2004 2,487,500
-------------
Natural Gas - 1.1%
8,000,000 Columbia Gas Systems, Inc., Notes, Series A 6.39% 11/28/2000 8,000,448
-------------
Oil & Gas - 4.7%
3,000,000 Coastal Corp., Sr. Debentures 6.375% 2/1/2009 2,786,997
3,000,000 Conoco, Inc., Notes 5.9% 4/15/2004 2,897,952
2,500,000 Conoco, Inc., Notes 6.95% 4/15/2029 2,335,610
500,000 Diamond Offshore Drilling, Inc., Convertible Subordinated Notes 3.75% 2/15/2007 512,500
3,000,000 Dynegy, Inc., Sr. Notes 7.45% 7/15/2006 2,983,416
3,000,000 El Paso Natural Gas Co., Sr. Notes 6.75% 5/15/2009 2,855,424
2,000,000 Enron Corp., Notes 7.125% 5/15/2007 1,959,040
970,130 Mobil Oil Corp., ESOP Sinking Fund Debentures 9.17% 2/29/2000 980,092
2,000,000 Newfield Exploration Co., Sr. Notes, Series B 7.45% 10/15/2007 1,873,544
2,000,000 Noble Drilling Corp., Sr. Notes 6.95% 3/15/2009 1,936,508
1,000,000 Oryx Energy Co., Notes 8.125% 10/15/2005 1,033,005
3,000,000 Oryx Energy Co., Notes 8.375% 7/15/2004 3,133,596
2,000,000 Pemex Finance, Ltd., Notes 8.45% 2/15/2007 1,950,250
2,500,000 Pemex Finance, Ltd., Notes, Series 1999-2-A5 9.14% 8/15/2004 2,495,188
500,000 Swiss Life Finance, Ltd., Convertible Bonds
(Royal Dutch Petroleum Co.) 2.0% 5/20/2005 495,625
2,000,000 Triton Energy, Ltd., Sr. Notes 8.75% 4/15/2002 1,990,000
2,500,000 Union Pacific Resources Group, Notes 7.3% 4/15/2009 2,442,055
-------------
34,660,802
-------------
Paper & Forest Products - 0.3%
2,000,000 Weyerhaeuser Co., Debentures 6.95% 10/1/2027 1,852,958
-------------
Pollution Control - 0.6%
5,000,000 Waste Management, Inc., Notes 6.625% 7/15/2002 4,594,180
-------------
Publishing & Printing - 0.2%
1,500,000 PRIMEDIA, Inc., Sr. Notes 7.625% 4/1/2008 1,402,500
-------------
Retail - 4.5%
300,000 Costco Companies, Inc., Convertible Subordinated Notes Zero Coupon 8/19/2017 286,500
600,000 Costco Companies, Inc., Subordinated Notes Zero Coupon 8/19/2007 573,000
6,500,000 Dayton Hudson Corp., Notes 6.4% 2/15/2003 6,439,160
2,000,000 Federated Department Stores, Inc., Debentures 6.9% 4/1/2029 1,776,400
4,000,000 Federated Department Stores, Sr. Notes 8.5% 6/15/2003 4,176,812
4,000,000 Penney (J.C.) Co., Inc., Notes 6.95% 4/1/2000 4,013,092
5,500,000 Rite Aid Corp., Notes 6.125% 12/15/2008 3,602,500
8,000,000 Safeway, Inc., Notes 7.0% 9/15/2002 8,018,800
4,000,000 Wal-Mart Stores, Inc., Notes 6.875% 8/10/2009 4,022,544
-------------
32,908,808
-------------
Services - 0.9%
3,000,000 ARAMARK Services, Inc., Notes 7.0% 7/15/2006 2,860,557
4,000,000 Cendant Corp., Notes 7.75% 12/1/2003 3,994,280
-------------
6,854,837
-------------
Telecommunications - 4.6%
1,000,000 Alestra S. de R. L. de C. V., Notes (USD) 12.125% 5/15/2006 972,500
4,000,000 AT&T Corp.-Liberty Media Group, Notes 6.0% 3/15/2009 3,700,000
3,000,000 AT&T Corp.-Liberty Media Group, Notes 6.5% 3/15/2029 2,640,000
750,000 Bell Atlantic Financial Services Corp., Sr. Exchange Notes 5.75% 4/1/2003 744,375
3,000,000 Cable & Wireless Communications Corp., Notes (USD) 6.625% 3/6/2005 3,018,069
3,000,000 Comcast Cable Communications, Notes 8.125% 5/1/2004 3,097,134
2,500,000 GTE Corp., Debentures 6.36% 4/15/2006 2,429,395
3,500,000 LCI International, Inc., Sr. Notes 7.25% 6/15/2007 3,433,042
1,500,000 Qwest Communications International, Inc., Sr. Notes, Series B 7.5% 11/1/2008 1,477,500
4,500,000 U.S. West Capital Funding, Inc., Notes 6.25% 7/15/2005 4,293,954
3,000,000 U.S. West Communications, Inc., Bonds 7.2% 11/1/2004 3,028,146
3,000,000 Williams Communications Group, Sr. Notes 10.875% 10/1/2009 3,090,000
2,000,000 WorldCom, Inc., Sr. Notes 6.4% 8/15/2005 1,945,354
-------------
33,869,469
-------------
Textiles & Apparel - 0.4%
3,000,000 Levi Strauss & Co., Notes 6.8% 11/1/2003 2,639,895
-------------
Transportation - 1.4%
4,000,000 Burlington Northern Santa Fe, Inc., Notes 6.125% 3/15/2009 3,689,060
3,990,010 Federal Express Corp., Series 1998-1-A, Class B 6.75% 1/15/2022 3,732,954
3,000,000 Union Pacific Corp., Medium Term Notes, Series E 6.790% 11/9/2007 2,896,359
-------------
10,318,373
-------------
Total Corporate Bonds (cost $418,299,051) 404,369,530
-------------
ASSET-BACKED SECURITIES - 8.1% (a)
8,000,000 AESOP Funding II L.L.C., Rental Car Notes, Series 1997-1,
Class A-2 6.4% 10/20/2003 7,924,920
948,824 Chase Manhattan Grantor Trust, Series 1996-B-A 6.61% 9/15/2002 950,869
4,000,000 Com-Ed Transitional Funding Trust, Series 1998-1-A6 5.63% 6/25/2009 3,761,460
4,152,749 CS First Boston Mortgage Security Corp., Series 1996-2,
Class A4 6.62% 9/25/2009 4,139,564
10,000,000 Discover Card Master Trust I, Series 1996-3-A 6.05% 8/18/2008 9,637,150
5,000,000 Discover Card Master Trust I, Series 1998-7A 5.6% 5/15/2006 4,805,625
13,000,000 Standard Credit Master Trust 1, Credit Card
Participation Certificates, Series 1995-9-A 6.55% 10/7/2007 12,859,015
15,000,000 World Financial Network Credit Card Master Trust,
Series 1996-B 6.95% 4/15/2006 15,171,675
-------------
Total Asset-Backed Securities (cost $59,959,096) 59,250,278
-------------
FOREIGN GOVERNMENT BONDS - 3.5% (a,b)
2,500,000 British Columbia (Province of), Unsubordinated Notes 5.375% 10/29/2008 2,247,325
3,500,000 Korea Development Bank, Bonds 7.375% 9/17/2004 3,409,182
5,000,000 Korea Development Bank, Unsecured Bonds 6.625% 11/21/2003 4,779,055
1,000,000 Korea (Republic of), Bonds 8.875% 4/15/2008 1,042,293
5,500,000 Ontario (Province of) Canada, Sr. Bonds 7.375% 1/27/2003 5,628,370
5,000,000 Ontario (Province of) Canada, Sr. Notes 5.5% 10/1/2008 4,538,650
4,000,000 Philippines (Republic of), Bonds 9.5% 10/21/2024 4,065,000
-------------
Total Foreign Government Bonds (cost $25,546,109) 25,709,875
-------------
MORTGAGE-BACKED SECURITIES - 7.2% (a)
6,999,794 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 7/1/2013 6,744,932
9,614,604 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 4/1/2011 9,314,052
7,360,280 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 3/1/2011 7,130,198
12,000,000 Federal National Mortgage Association,
Participation Certificates 6.5% 11/15/2029 11,512,500 (c)
19,695,691 Government National Mortgage Association, Modified
Pass Through Certificates 6.0% 4/15/2029 18,292,964
-------------
Total Mortgage-Backed Securities (cost $53,788,154) 52,994,646
-------------
U.S. GOVERNMENT AGENCY - 3.7% (a)
1,000,000 Federal Home Loan Mortgage Corp., Notes 5.125% 10/15/2008 899,304
8,200,000 Federal Home Loan Mortgage Corp., Notes 6.625% 9/15/2009 8,168,348
17,000,000 Federal National Mortgage Association, Notes 5.75% 4/15/2003 16,695,445
1,000,000 Federal National Mortgage Association, Notes 5.75% 2/15/2008 943,867
-------------
Total U.S. Government Agency (cost $27,042,819) 26,706,964
-------------
U.S. GOVERNMENT - 16.9% (a)
91,000,000 U.S. Treasury Bonds 5.25%-12.75% 2010-2028 102,877,827
20,500,000 U.S. Treasury Notes 6.0%-7.0% 2006-2009 20,795,167 (d)
-------------
Total U.S. Government (cost $133,112,891) 123,672,994
-------------
<CAPTION>
Shares
--------
COMMON STOCKS - 0.1% (a)
<S> <C> <C>
10,000 Federal National Mortgage Association, Common Stock (cost $632,787) 707,500
-------------
PREFERRED STOCKS - 0.7% (a)
7,000 CVS Corp., Convertible Preferred Stock 535,500
9,500 El Paso Energy Capital Trust I, Convertible Preferred Stock 503,500
9,500 Georgia-Pacific Corp., Convertible Unit Security 410,875
8,000 Global Crossing Holdings, Ltd., Convertible Preferred Stock 800,000
7,000 Houston Industries, Inc., Convertible Preferred Stock 803,250
35,000 MediaOne Group, Inc., Convertible Preferred Stock 1,599,063
1,000 Newell Financial Trust I, Convertible Preferred Stock 44,375
9,000 Newell Financial Trust I, Convertible Preferred Stock (144A) 399,375
7,500 Unocal Capital Trust, Convertible Preferred Stock 393,750
-------------
Total Preferred Stocks (cost $4,733,580) 5,489,688
-------------
<CAPTION>
Principal
Amount
--------
SHORT-TERM SECURITIES - 4.6% (a)
Commercial Paper
<S> <C> <C> <C> <C>
$17,000,000 American General Corp. 5.32% 11/1/1999 17,000,000
16,800,000 Electronic Data Systems Corp. 5.32% 11/1/1999 16,800,000
-------------
Total Short-Term Securities (at amortized cost) 33,800,000
-------------
Total Investments (cost $756,914,487) $732,290,600 (e)
=============
Notes to Portfolio of Investments:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood Income Fund.
(b) Denominated in U.S. dollars.
(c) Denotes investments purchased on a when-issued basis.
(d) At October 31, 1999, U.S. Treasury Notes valued at $882,406 were pledged as initial margin deposit on the following
financial futures contracts:
<CAPTION>
Notional
Number of Expiration Market Principal Unrealized
Type Contracts Date Position Value Amount Loss
- ------- --------- ---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Bond Futures 260 December 1999 Long $29,534,375 $29,706,875 $172,500
(e) At October 31, 1999, the aggregate cost of securities for federal income tax purposes was $757,369,858 and
the net unrealized depreciation of investments based on that cost was $25,079,258 which is comprised of $4,722,020
aggregate gross unrealized appreciation and $29,801,278 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
Portfolio of Investments
October 31, 1999
Principal Maturity
Amount Rate Date Value
- -------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES - 99.3% (a)
Arizona - 0.8%
$1,700,000 Pima County, Arizona (Catalina Foothills Unified School
District #16), Unlimited Tax General Obligation Bonds,
Insured by MBIA 8.9% 7/1/2005 $2,037,084
1,000,000 Pinal County, Arizona, Unified School District No. 43,
(Apache Junction), School Improvement Bonds, Series 1996-A,
Insured by FGIC 5.8% 7/1/2011 1,031,480
100,000 Sedona, Arizona Wastewater Municipal Property Corp.,
Excise Tax Revenue Bonds, Insured by MBIA 5.375% 7/1/2015 97,158
40,000 Tucson, Arizona, Prerefunded General Obligation Bonds,
Insured by FGIC 6.1% 7/1/2012 42,431 (b)
1,460,000 Tucson, Arizona, Unrefunded General Obligation Unlimited Bonds,
Insured by FGIC 6.1% 7/1/2012 1,523,466
-------------
4,731,619
-------------
Arkansas - 1.1%
1,340,000 Arkansas Development Finance Authority, Correctional Facilities
Construction Revenue Bonds, Insured by MBIA 7.125% 11/15/2010 1,409,077 (b)
1,000,000 Arkansas Housing Development Agency, Single Family
Mortgage Bonds, Series A 8.375% 7/1/2010 1,175,420 (b)
3,000,000 City of Jonesboro, Arkansas, Residential Housing and
Health Care Facilities Board, Hospital Revenue Refunding and
Construction Bonds, (St. Bernard's Regional Medical Center),
Series 1996-B, Insured by AMBAC 5.8% 7/1/2011 3,109,200
875,000 Pope County, Arkansas, Pollution Control Revenue
Refunding Bonds, Series 1994 (Arkansas Power and
Light Company Project), Insured by FSA 6.3% 12/1/2016 915,119
-------------
6,608,816
-------------
California - 7.9%
3,450,000 Anaheim, California, Public Financing Authority,
Lease Revenue Bonds, (Anaheim Public Improvements Project),
1997 Series A, Insured by FSA 6.0% 9/1/2024 3,530,696
1,000,000 Anaheim, California, Public Financing Authority, Senior Lease
Revenue Bonds (Anaheim Public Improvement Project),
Series A, Insured by FSA 5.0% 9/1/2027 863,000
2,500,000 Bakersfield, California, Certificates of Participation
(Convention Center Expansion - Arena Project, 1997),
Insured by MBIA 5.8% 4/1/2017 2,511,400
2,500,000 California Health Facilities Financing Authority Revenue Bonds
(Scripps Memorial Hospital), Insured by MBIA 6.375% 10/1/2022 2,601,600
3,000,000 California State Public Works Board, Department of Corrections,
Lease Revenue Bonds, State Prison, Series A 7.4% 9/1/2010 3,540,900
1,000,000 California State, Unlimited Tax General Obligation Bonds,
Veteran's Series AT 9.5% 2/1/2010 1,338,040
300,000 California State, Unlimited Tax General Obligation,
Insured by MBIA 6.0% 8/1/2016 306,972
2,000,000 California State, Various Purpose General Obligation Bonds,
Insured by AMBAC 6.3% 9/1/2010 2,195,880
1,400,000 Central Valley Financing Authority, California,
Cogeneration Project Revenue Bonds, (Carson Ice-Gen Project),
Series 1993 6.0% 7/1/2009 1,429,442
3,135,000 County of Orange, California, 1996 Recovery Certificates of
Participation, Series A, Insured by MBIA 5.8% 7/1/2016 3,170,864
2,035,000 Palmdale, California, Civic Authority Revenue, Merged
Redevelopment Project Areas, Series A 6.6% 9/1/2034 2,145,419
2,815,000 Riverside County Transportation Commission, California, Sales Tax
Revenue Capital Appreciation Bonds, Insured by MBIA Zero Coupon 6/1/2004 2,286,934
500,000 Sacramento California Cogeneration Authority Project
Revenue Bonds 6.375% 7/1/2010 523,510
500,000 Sacramento California Cogeneration Authority
Project Revenue Bonds - prerefunded 6.375% 7/1/2010 553,600 (b)
1,500,000 San Francisco Bay Area Rapid Transit District, California,
Sales Tax Revenue Refunding Bonds, Series 1990,
Insured by MBIA 6.75% 7/1/2010 1,694,880
15,000,000 San Joaquin Hills Transportation Corridor Agency, California,
Sr. Lien Convertible Toll Revenue Bonds Zero Coupon 1/1/2013 15,234,900 (b)
1,500,000 State of California, General Obligation Bonds 7.0% 8/1/2006 1,690,830
-------------
45,618,867
-------------
Colorado - 6.3%
4,230,000 Colorado Housing Finance Authority, Single Family Program,
1998 Series D-2 Senior Revenue Bonds 6.35% 11/1/2029 4,332,662
1,000,000 Colorado Housing Finance Authority, Single Family Program,
Revenue Bonds 7.0% 11/1/2016 1,075,860
3,100,000 Colorado Springs, Colorado, Utilities System Refunding Bonds,
Series 1991-B 7.0% 11/15/2021 3,323,138 (b)
1,945,000 Colorado State Colleges Board, Western State College,
Housing & Student Fee Revenue Bonds, Series 1992,
Insured by Connie Lee 6.625% 5/1/2015 2,080,119 (b)
1,195,000 Colorado Water Resources Power Development Authority,
Clean Water Revenue Bonds, Series A, Insured by FSA 6.25% 9/1/2013 1,240,709
6,000,000 Denver, Colorado, City & County Refunding Bonds, Board of
Water Commissioners 5.6% 10/1/2029 5,691,780
3,350,000 Douglas County, Colorado, School District No. 1,
General Obligation Bonds, Insured by MBIA 6.5% 12/15/2016 3,652,405 (b)
150,000 Douglas County, Colorado, School District No. 1,
General Obligation Bonds, Insured by MBIA 6.5% 12/15/2016 158,835
1,000,000 Eagle, Garfield, and Routt Counties, Colorado, Eagle County
School District No. RE50J, General Obligation Bonds,
Series 1994, Insured by FGIC 6.3% 12/1/2012 1,088,710
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax General
Obligation Bonds, Insured by MBIA Zero Coupon 6/1/2008 1,201,643
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax General
Obligation Bonds, Insured by MBIA Zero Coupon 6/1/2007 1,277,130
1,885,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax General
Obligation Bonds, Insured by MBIA Zero Coupon 12/1/2008 1,167,249
3,000,000 Larimer County, Colorado, School District No. R-1, Poudre Valley
Unlimited Tax General Obligation Bonds, Insured by MBIA 7.0% 12/15/2016 3,369,660
635,000 Regional Transportation District, Colorado,
Sales Tax Revenue Bonds 6.25% 11/1/2012 667,899 (b)
2,500,000 St. Vrain Valley School District, Boulder, Larimer &
Weld Counties, Colorado, General Obligation Refunding &
Improvement Bonds, Series 1990-A, Insured by MBIA Zero Coupon 12/15/2003 2,055,725
5,000,000 St. Vrain Valley School District, Boulder, Larimer & Weld
Counties, Colorado, General Obligation Refunding &
Improvement Bonds, Series 1990-A, Insured by MBIA Zero Coupon 12/15/2004 3,906,900
-------------
36,290,424
-------------
Connecticut - 0.8%
4,000,000 Connecticut Special Tax Obligation, Transportation Infrastructure
Revenue Bonds, Series B 6.5% 10/1/2010 4,400,600
-------------
Florida - 2.2%
4,155,000 Broward County, Florida, Housing Finance Authority, Home
Mortgage Revenue Bonds, 1983 Series A Zero Coupon 4/1/2014 967,866
3,500,000 Florida State Board of Education, Public Education Capital Outlay,
General Obligation Bonds, Series B 5.875% 6/1/2020 3,506,405
1,520,000 Florida State Refunding Bonds, Jacksonville Transportation
Authority (Senior Lien), Series 1997 5.0% 7/1/2019 1,344,182
3,200,000 Hillsborough County, Florida, Industrial Development Authority
(Weyerhaeuser Company, Inc.), Industrial Development
Revenue Bonds, Series 1983 9.25% 6/1/2008 3,210,976
1,705,000 Hillsborough County, Florida, Industrial Development Authority,
Florida (Tampa Electric Project), Pollution Control
Revenue Bonds, Series 1991 7.875% 8/1/2021 1,850,368
1,500,000 Jacksonville, Florida, Health Facilities, Florida Hospital
Revenue Bonds (Charity Obligated Group), Series 1999C 5.75% 8/15/2015 1,496,775
-------------
12,376,572
-------------
Georgia - 2.8%
1,500,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series A, Insured by MBIA 6.1% 10/1/2019 1,538,040
2,000,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series 1992, Insured by MBIA 6.0% 10/1/2011 2,115,740
5,000,000 Cherokee County, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Insured by MBIA 5.5% 8/1/2018 4,829,450
2,000,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-B 5.65% 3/1/2012 2,055,300
3,500,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-D 5.0% 8/1/2012 3,378,165
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series B 6.3% 3/1/2009 1,088,880
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds, Series B 6.3% 3/1/2010 1,089,460
-------------
16,095,035
-------------
Idaho - 1.1%
1,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2007 689,010
3,115,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2010 1,781,469
2,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding Bonds,
Series 1991, Insured by MBIA Zero Coupon 4/1/2011 1,070,860
2,760,000 Idaho Housing & Finance Association, Single Family
Mortgage Bonds, Series 1998 F-2 5.35% 7/1/2018 2,557,057
-------------
6,098,396
-------------
Illinois - 4.0%
3,000,000 Chicago, Illinois (Lakefront Millennium Project), Series 1999 Zero Coupon 1/1/2029 1,830,300
1,000,000 Chicago, Illinois, Midway Airport Revenue Bonds, Insured by MBIA 5.0% 1/1/2031 835,240
1,000,000 City of Alton, Madison County, Illinois, Hospital Facility
Revenue Refunding Bonds, Series 1996, (Saint Anthony's
Health Center) 6.0% 9/1/2014 962,880
2,500,000 Cook County, Illinois, Unlimited General Obligation Bonds,
Series A, Insured by MBIA 6.25% 11/15/2011 2,661,125
4,500,000 Cook, DuPage, Kane, Lake, McHenry, & Will Counties, Illinois,
Regional Transportation Authority, General Obligation
Refunding Bonds, Series 1999, FSA Insured 5.75% 6/1/2014 4,530,690
2,000,000 Illinois Health Facilities Authority Revenue Refunding Bonds,
Lutheran General Health, Insured by FSA 6.0% 4/1/2018 2,013,200
170,000 Illinois Health Facilities Authority (Community Provider
Pooled Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.9% 8/15/2003 185,013 (b)
718,000 Illinois Health Facilities Authority (Community Provider
Pooled Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.9% 8/15/2003 720,549 (b)
17,505,000 Metropolitan Pier & Exposition Authority, Illinois, Dedicated State
Tax Receipts Capital Appreciation (McCormick Place
Expansion-A), Insured by FGIC Zero Coupon 6/15/2020 4,991,201
10,000,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Expansion, Refunding Bonds, Series 1993-A,
Insured by FGIC Zero Coupon 6/15/2018 3,232,000
1,410,000 Metropolitan Pier & Exposition Authority, Illinois, McCormick
Place Expansion Project Bonds, Series 1999A, FGIC Insured 5.25% 12/15/2028 1,244,114
-------------
23,206,312
-------------
Indiana - 0.6%
2,450,000 Indiana Municipal Power Agency, Power Supply System
Revenue Bonds, Series A, Insured by MBIA 5.5% 1/1/2023 2,498,143 (b)
1,100,000 Indianapolis Airport Authority Refunding Revenue Bonds,
Series 1996-A, Insured by FGIC 5.6% 7/1/2015 1,091,981
-------------
3,590,124
-------------
Iowa - 0.4%
2,000,000 Iowa Finance Authority, Iowa State Revolving Fund
Revenue Bonds, Combined Series 1994 6.25% 5/1/2024 2,078,920
-------------
Kansas - 1.7%
2,605,000 Kansas City, Kansas, Utility System Prerefunded Revenue Bonds,
Series 1994, Insured by FGIC 6.375% 9/1/2023 2,836,480 (b)
5,395,000 Kansas City, Kansas, Utility System Unrefunded Revenue Bonds,
Series 1994, Insured by FGIC 6.375% 9/1/2023 5,570,391
920,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds, Insured by AMBAC Zero Coupon 3/1/2007 635,186
1,255,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds, Insured by AMBAC Zero Coupon 3/1/2007 857,240 (b)
-------------
9,899,297
-------------
Kentucky - 0.7%
750,000 Kentucky Turnpike Authority, Economic Development Road
Revenue and Revenue Refunding Bonds, Series 1993,
Insured by AMBAC 5.5% 7/1/2009 764,010
5,345,000 Kentucky Turnpike Authority, Economic Development
Road Revenue Bonds, Insured by FGIC Zero Coupon 1/1/2010 3,107,262
-------------
3,871,272
-------------
Louisiana - 1.2%
6,500,000 New Orleans, Louisiana, General Obligation Bonds, Series 1991,
Insured by AMBAC Zero Coupon 9/1/2012 3,168,750
3,000,000 Orleans Parish School Board #87, Louisiana, Insured by MBIA 8.95% 2/1/2008 3,764,490 (b)
-------------
6,933,240
-------------
Maine - 0.2%
1,225,000 Maine Health & Higher Education Facilities Authority
Revenue Bonds, Series 1994, Insured by FSA 7.0% 7/1/2024 1,362,972 (b)
25,000 Maine Health & Higher Education Facilities Authority
Revenue Bonds, Series 1994, Insured by FSA 7.0% 7/1/2024 27,816
-------------
1,390,788
-------------
Maryland - 1.4%
2,000,000 Maryland Health & Higher Education Authority, Union Hospital of
Cecil County Revenue Bonds, Series 1992 6.7% 7/1/2022 2,148,760 (b)
4,500,000 Morgan State University, Maryland, Academic Fee and Auxiliary
Facilities Fees Revenue Refunding Bonds, Series 1993,
Insured by MBIA 6.05% 7/1/2015 4,692,150
1,000,000 Prince George's County, Maryland, Dimensions Health Corp.,
Hospital Revenue Bonds, Series 1992 7.0% 7/1/2022 1,083,140 (b)
-------------
7,924,050
-------------
Massachusetts - 1.8%
2,000,000 Commonwealth of Massachusetts, General Obligation
Refunding Bonds, Series B 6.5% 8/1/2008 2,169,960
2,500,000 Massachusetts Health and Education Facilities Authority,
Revenue Bonds, Daughters of Charity National Health System,
The Carney Hospital, Series D 6.1% 7/1/2014 2,680,275
1,500,000 Massachusetts Health & Education Facilities Authority,
Revenue Bonds, (New England Medical Center), Series F,
Insured by FGIC 6.5% 7/1/2012 1,585,065
1,000,000 Massachusetts Health & Education Facilities, Partners
HealthCare System, Series B 5.25% 7/1/2014 923,780
3,000,000 Plymouth County, Massachusetts, Correctional Facility
Certificates of Participation Bonds 7.0% 4/1/2012 3,257,640 (b)
-------------
10,616,720
-------------
Michigan - 3.8%
2,000,000 Economic Development Corporation of the County of St. Clair,
Michigan, Pollution Control Revenue Refunding Bonds,
(Detroit Edison Company Project), Series 1993-AA,
Insured by AMBAC 6.4% 8/1/2024 2,094,740
2,355,000 John Tolfree Health System Corporation, Mortgage Revenue and
Refunding Bonds, Series 1999 5.85% 9/15/2013 2,179,812
1,500,000 Livonia Public Schools, County of Wayne, Michigan, 1992 School
Building and Site Bonds, Series II (Unlimited Tax
General Obligation), Insured by FGIC Zero Coupon 5/1/2009 905,280
2,460,000 Michigan Municipal Bond Authority, Government Loan Revenue
Refunding Bonds, Series A, Insured by FGIC Zero Coupon 12/1/2005 1,828,641
45,000 Michigan State Hospital Finance Authority, Hospital Revenue and
Refunding Bonds, (Detroit Medical Center Obligated Group),
Series 1988-A 8.125% 8/15/2012 45,866
3,000,000 Michigan State Hospital Finance Authority, Revenue
Refunding Bonds, (Sisters of Mercy Health Corp.),
Insured by MBIA 5.375% 8/15/2014 2,938,380
4,500,000 Rochester, Michigan, Community School District Unlimited
Tax General Obligation Bonds, MBIA Insured 5.0% 5/1/2019 4,005,855
3,320,000 Sault St. Marie Chippewa Indians Housing Authority, Health
Facilities Revenue Bonds, (Tribal Health & Human Services
Center Project), Series 1992 7.75% 9/1/2012 3,435,104
3,455,000 West Ottawa, Michigan, Public School District, Unlimited
Tax General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/2004 2,786,768
1,860,000 West Ottawa, Michigan, Public School District, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/2005 1,417,227
-------------
21,637,673
-------------
Minnesota - 5.7%
3,500,000 City of Rochester, MN Health Care Facilities Revenue Bonds
(Mayo Foundation) , Series 1998A 5.5% 11/15/2027 3,259,375
285,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Revenue Bonds, (The Duluth Clinic, Ltd), Series 1992,
Insured by AMBAC 6.3% 11/1/2022 305,483 (b)
715,000 Duluth Economic Development Authority, Minnesota, Health Care
Facilities Revenue Bonds, (The Duluth Clinic, Ltd), Series 1992,
Insured by AMBAC 6.3% 11/1/2022 764,857
2,250,000 Golden Valley, Minnesota, Revenue Bonds (Covenant Retirement
Communities), Series 1999-A 5.5% 12/1/2025 1,989,495
2,000,000 Minneapolis-St. Paul Metropolitan Airports Commission, Airport
Revenue Bonds, Series 1999A, FGIC Insured 5.125% 1/1/2031 1,699,940
7,685,000 Minneapolis, Minnesota, Community Development Agency,
Tax Increment Revenue Appreciation Bonds,
Insured by MBIA Zero Coupon 3/1/2009 4,704,911
5,000,000 Minnesota Agricultural and Economic Development Board,
Health Care System Revenue Bonds, Series 1997-A (Fairview
Hospital and Healthcare Services), Insured by MBIA 5.75% 11/15/26 4,801,450
650,000 Minnesota Agricultural and Economic Development Board,
Healthcare System Revenue Bonds, Series 97A, Fairview
Hospital & Healthcare Services, Insured by MBIA 5.5% 11/15/17 622,057
2,500,000 Minnesota Higher Education Facilities Authority, (Augsburg College),
Mortgage Revenue Bonds, Series Four-F1 Bonds 6.25% 5/1/2023 2,460,700
4,720,000 State of Minnesota Unlimited Tax General Obligation Bonds 5.25% 8/1/2017 4,439,254
1,740,000 Stewartville, MN, Independent School District, Unlimited Tax
General Obligation Bonds, Series A 5.75% 2/1/2014 1,795,349 (b)
3,500,000 St. Louis Park, Minnesota, Health Care Facilities (Park Nicollet
Medical Center Project), Revenue Bonds, Series 1990-A 9.25% 1/1/2020 3,599,435 (b)
1,000,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series C, Insured by AMBAC 7.25% 7/1/2018 1,041,080 (b)
1,400,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital Revenue
Bonds, Series C, Insured by AMBAC 7.25% 7/1/2015 1,457,036 (b)
-------------
32,940,422
-------------
Missouri - 2.5%
1,475,000 Missouri Housing Development Commission, Single Family
Mortgage Revenue Bonds, (Home Ownership Loan Program),
Series C-1 6.55% 9/1/2028 1,557,630
2,000,000 Missouri State Health and Education Facilities Authority
Facilities (Barnes - Jewish, Inc. /Christian Health Services),
Health Refunding & Improvement Revenue Bonds,
Series 1993-A 5.25% 5/15/2014 1,874,260
2,650,000 Missouri State Health and Education Facilities Authority
(Christian Health Services), Health Facilities Refunding &
Improvement Revenue Bonds, Series 1991 A, Insured by FGIC 6.875% 2/15/2021 2,788,701 (b)
750,000 Missouri State Health and Education Facilities Authority, Health
Facilities Revenue Refunding Bonds, Lester E. Cox Medical
Center Project, Series 1993-I, Insured by MBIA 5.35% 6/1/2009 755,558
2,925,000 Missouri State Health and Education Facilities Authority, Heartland
Health System Revenue Bonds, Series 1992, Insured by AMBAC 6.35% 11/15/2017 3,048,581
1,500,000 Missouri State Health and Education Facilities Authority, SSM
Health Care Refunding Revenue Bonds, Series A,
Insured by MBIA 6.25% 6/1/2007 1,570,425
1,345,000 Missouri State Health & Education Facility Authority,
Lake of the Ozarks General Hospital 6.5% 2/15/2021 1,482,203 (b)
655,000 Missouri State Health & Education Facility Authority,
Lake of the Ozarks General Hospital 6.5% 2/15/2021 659,913
700,000 State Environmental Improvement and Energy Resources
Authority, (State of Missouri), Water Pollution Control Revenue
Bonds, (State Revolving Fund Program - Multiple
Participant Series), Series 1995-E 5.625% 7/1/2016 692,118
-------------
14,429,389
-------------
Montana - 0.8%
775,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.875% 6/1/2020 810,356 (b)
2,385,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.875% 6/1/2020 2,493,804 (b)
1,240,000 Montana State Board of Investments, Payroll Tax Revenue Bonds,
Series 1996, Insured by MBIA 6.875% 6/1/2020 1,296,569 (b)
-------------
4,600,729
-------------
Nebraska - 1.2%
3,160,000 Nebraska Investment Finance Authority, Single Family Housing
Revenue Bonds, 1998 Series F, Insured by GNMA 5.6% 9/1/2020 3,006,930
3,455,000 Omaha Public Power District, Nebraska, Electric Revenue
Refunding Bonds, Series B 6.15% 2/1/2012 3,675,049
-------------
6,681,979
-------------
New Hampshire - 0.2%
1,100,000 New Hampshire Turnpike System, Residual Interest Bonds,
1991 Refunding, Series C, Insured by FGIC 9.668% 11/1/2017 1,246,080 (c)
-------------
New Jersey - 3.1%
1,250,000 East Orange, New Jersey, Unlimited Tax General Obligation Bonds,
Insured by FSA 8.4% 8/1/2006 1,501,725
1,000,000 Mercer County, New Jersey, Improvement Authority,
Revenue Bonds, Series 1991 6.6% 11/1/2014 1,044,830 (b)
1,475,000 New Jersey Health Care Facilities Prerefunded Financing
Authority Revenue Bonds, AMBAC Insured 6.1% 7/1/2010 1,586,112 (b)
1,110,000 New Jersey Health Care Facilities, Unrefunded Financing
Authority Revenue, AMBAC Insured 6.1% 7/1/2010 1,169,374
3,000,000 New Jersey Transit Corp., (Raymond Plaza East, Inc.),
Certificates of Participation, Insured by FSA 6.375% 10/1/2006 3,258,450
905,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
1984 Series 10.375% 1/1/2003 997,102 (b)
4,700,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds, Series C,
Insured by AMBAC 6.5% 1/1/2016 5,085,541
2,595,000 West New York, New Jersey, Municipal Utility Authority, Sewer
Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/2009 1,534,683
2,195,000 West New York, New Jersey, Municipal Utility Authority,
Sewer Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/2007 1,459,675
-------------
17,637,492
-------------
New Mexico - 2.5%
3,315,000 City of Alamogordo, New Mexico Hospital Revenue Bonds,
(Gerald Champion Hospital Project), Series 1997 5.3% 1/1/2013 3,077,116
5,000,000 Farmington, New Mexico, Power Revenue Refunding Bonds,
Series 1983 9.875% 1/1/2013 6,118,700 (b)
4,040,000 Farmington, New Mexico, Utility Systems Revenue Bonds,
Insured by AMBAC 9.875% 1/1/2008 4,949,970 (b)
-------------
14,145,786
-------------
New York - 4.6%
5,200,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series C-1, Revenue Bonds,
Series A, Insured by MBIA 6.375% 7/1/2018 5,641,428 (b)
2,650,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series C-1, FGIC Insured 5.125% 7/1/2014 2,472,265
3,000,000 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Bonds, Series O, Insured by MBIA 6.25% 7/1/2014 3,239,100 (b)
4,225,000 Metropolitan Transportation Authority, New York, Transit
Facilities Service Contract Bonds, Series O 5.75% 7/1/2013 4,240,506
2,000,000 New York City, Municipal Water Finance Authority, Water &
Sewer System Revenue Bonds, Series A, Insured by AMBAC 5.875% 6/15/2012 2,074,840
1,000,000 New York City, New York, Water Authority Revenue Bonds
(Water and Sewer Systems), Series B 5.0% 6/15/2029 850,030
2,860,000 New York State Thruway Authority, Highway & Bridge Trust Fund,
Revenue Bonds, Series 1994-B, Insured by FGIC 6.0% 4/1/2014 3,062,517 (b)
1,620,000 New York State Urban Development Corp., Project Revenue Bonds,
(Syracuse University Center for Science and Technology Loan),
1995 Refunding Series 6.0% 1/1/2009 1,694,147
1,720,000 New York State Urban Development Corp., Project Revenue
Bonds, (Syracuse University Center for Science and
Technology Loan), 1995 Refunding Series 6.0% 1/1/2010 1,791,552
1,000,000 Triborough Bridge & Tunnel Authority, New York, General
Purpose Revenue Bonds, Series Q 6.75% 1/1/2009 1,092,900
-------------
26,159,285
-------------
North Carolina - 1.0%
1,500,000 County of Pitt, North Carolina, Pitt County Memorial Hospital
Revenue Bonds, Series 1995 5.5% 12/1/2015 1,492,020 (b)
4,000,000 North Carolina Municipal Power Agency #1, Catawba Electric
Revenue Refunding Bonds, Series 1992, Insured by MBIA 6.0% 1/1/2011 4,216,040
-------------
5,708,060
-------------
North Dakota - 1.0%
2,000,000 Mercer County, North Dakota, Pollution Control Revenue
Refunding Bonds, (Ottertail Power Co. Project) 6.9% 2/1/2019 2,089,400
2,000,000 North Dakota Municipal Bond Bank, State Revolving Fund
Program Bonds, Series 1995-A 6.3% 10/1/2015 2,093,180
1,340,000 North Dakota State Water Commission (Southwest Pipeline),
Revenue Bonds, Series A, Insured by AMBAC 5.75% 7/1/2027 1,287,941
-------------
5,470,521
-------------
Ohio - 5.1%
875,000 Akron Ohio Economic Development, Non-Tax Revenue Bonds,
Insured by MBIA 6.0% 12/1/2012 923,746
1,050,000 Akron, Bath & Copley Joint Township, Ohio, (Children's Hospital
Medical Center), Hospital District Revenue Bonds,
Insured by AMBAC 7.45% 11/15/2020 1,107,005 (b)
2,500,000 Akron, Ohio, Certificates of Participation, Series 1996, Akron
Municipal Baseball Stadium Project Zero Coupon 12/1/2016 2,366,850
3,785,000 City of Cleveland, Ohio, Public Power System, First Mortgage
Revenue Bonds, Series 1994-A, Insured by MBIA 7.0% 11/15/2024 4,236,437 (b)
1,630,000 Cuyahoga County, Ohio, (Deaconess Hospital), Hospital Revenue
Bonds, Series C 7.45% 10/1/2018 1,726,904 (b)
1,470,000 Lorain County, Ohio, (Humility of Mary Health System),
Hospital Revenue Bonds 7.125% 12/15/2006 1,551,071 (b)
2,000,000 Ohio Higher Educational Facility Commission (Case Western
Reserve University Project), Series B 6.5% 10/1/2020 2,145,460
1,500,000 Ohio Higher Educational Facility Commission, Higher Educational
Revenue Bonds, (Ohio Dominican College 1994 Project) 6.625% 12/1/2014 1,532,535
5,000,000 Ohio State Air Quality Development Authority, Cleveland Electric,
Pollution Control Revenue Bonds, Insured by FGIC 8.0% 12/1/2013 5,490,350
2,250,000 Ohio State Air Quality Development Authority, Columbus &
Southern Pollution Control Revenue Bonds, Insured by FGIC 6.375% 12/1/2020 2,355,323
2,000,000 Ohio State Turnpike Commission, Turnpike Revenue Refunding
Bonds, Series A, FGIC Insured 5.5% 2/15/2024 1,902,200
1,795,000 Trumbull County, Ohio (Memorial Hospital), Hospital Revenue
Refunding & Improvement Bonds, Series 1991-B,
Insured by FGIC 6.9% 11/15/2012 1,911,298 (b)
2,115,000 University of Akron, Ohio, General Receipt Bonds, Series 1999,
FGIC Insured 5.5% 1/1/2020 2,001,530
-------------
29,250,709
-------------
Oklahoma - 2.5%
5,220,000 Bass, Oklahoma, Memorial Baptist Hospital 8.35% 5/1/2009 6,069,346(b)
1,500,000 Oklahoma Municipal Power Authority, Electric Revenue
Refunding Bonds, Series B, Insured by MBIA 5.75% 1/1/2024 1,478,685
1,500,000 Oklahoma Municipal Power Authority, Power Supply System
Revenue Bonds, Series 1992-B, Insured by MBIA 5.875% 1/1/2012 1,558,725
5,000,000 Tulsa, Oklahoma, Municipal Airport Trust Revenue
(American Airlines, Inc.) 7.375% 12/1/2020 5,207,950
-------------
14,314,706
-------------
Oregon - 0.8%
2,700,000 Clackamas County, Oregon, Health Facilities Authority, Adventist
Health-West Revenue Refunding Bonds,Series 1992-A,
Insured by MBIA 6.35% 3/1/2009 2,827,062
2,000,000 Hospital Facility Authority of the Western Lane Hospital District,
Oregon, Revenue Refunding Bonds, Series 1994 (Sisters of
St. Joseph of Peace, Health & Hospital Services), 5.875% 8/1/2012 2,064,320
-------------
4,891,382
-------------
Pennsylvania - 2.7%
6,900,000 Allegheny County, Pennsylvania, Airport Revenue Refunding
Bonds, Series 1997B, Insured by MBIA 5.0% 1/1/2019 5,999,412
1,600,000 Allegheny County, Pennsylvania, Hospital Development Authority,
Hospital Revenue Bonds, Series A-1995, (Allegheny General
Hospital Project), Insured by MBIA 6.2% 9/1/2015 1,567,648
2,575,000 Allegheny County, Pennsylvania, Sanitary Authority, Sewer
Revenue Bonds, Series A, Insured by FGIC Zero Coupon 6/1/2008 1,648,155
3,170,000 Millcreek Township, Pennsylvania, School District, General
Obligation Bonds, Insured by FGIC Zero Coupon 8/15/2009 1,887,577
1,425,000 Monroeville, Pennsylvania, Hospital Authority, Forbes Health
System Revenue Bonds, Series 1992 7.0% 10/1/2003 1,397,954
3,000,000 Pennsylvania State, General Obligation Bonds, Second
Series of 1992, Insured by AMBAC Zero Coupon 7/1/2006 2,150,610
1,000,000 York County Pennsylvania Solid Waste and Refuse Authority,
Refunding Revenue Bonds, Series 1997, County Guaranteed,
Insured by FGIC 5.5% 12/1/2012 1,000,880
-------------
15,652,236
-------------
Puerto Rico - 1.9%
4,000,000 Puerto Rico Commonwealth, Aqueduct & Sewer Revenue Bonds,
Series A 9.0% 7/1/2009 4,657,520 (b)
3,000,000 Puerto Rico Commonwealth, Unlimited Tax General
Obligation Bonds 6.45% 7/1/2017 3,290,490 (b)
3,000,000 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series T 6.0% 7/1/2016 3,044,040
-------------
10,992,050
-------------
South Carolina - 1.7%
2,000,000 City of Spartanburg, South Carolina, Junior Lien, Water System
Revenue Bonds, Series 1998 5.25% 6/1/2028 1,806,120
2,000,000 Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, Series 1991, Insured by FGIC 6.25% 1/1/2021 2,081,320
5,000,000 Piedmont Municipal Power Agency, South Carolina,
Electric Revenue Refunding Bonds, Insured by FGIC 5.0% 1/1/2022 4,346,950
1,665,000 Spartanburg, South Carolina, Waterworks Revenue
Refunding Bonds, Insured by FGIC 5.0% 6/1/2017 1,505,709
-------------
9,740,099
-------------
Tennessee - 1.4%
1,750,000 Bristol, Tennessee, Health and Educational Facilities Authority,
Bristol Memorial Hospital Revenue Bonds, Insured by FGIC 7.0% 9/1/2021 1,846,320 (b)
2,000,000 Metropolitan Government of Nashville & Davidson County TN,
Electric System Revenue Bonds, Series 1998A 5.2% 5/15/2023 1,790,380
5,000,000 Shelby County, Tennessee, Health Educational & Housing Facility
Board, (St. Jude Children's Research Hospital), Series 1999 5.375% 7/1/2024 4,487,650
-------------
8,124,350
-------------
Texas - 9.6%
2,165,000 Arlington, Texas, Independent School District, Unlimited Tax
Refunding & Improvement Bonds, Series 1992, Permanent
School Fund Guaranteed Zero Coupon 2/15/2009 1,323,768
8,100,000 Austin, Texas, Utility System Refunding Revenue Bonds, Series A,
Insured by MBIA Zero Coupon 11/15/2009 4,750,407
7,000,000 Austin, Texas, Utility System Refunding Revenue Bonds, Series A,
Insured by MBIA Zero Coupon 11/15/2008 4,383,190
1,000,000 Austin, Texas, Utility System Revenue Refunding Bonds,
Insured by FGIC 6.0% 11/15/2013 1,042,460
1,575,000 Bexar County, Texas, Limited Tax General Obligation Bonds 5.0% 6/15/2015 1,440,558
1,000,000 Cass County, Texas, Industrial Development Corporation,
Pollution Control Revenue Refunding Bonds, International
Paper, Series 1997-B 5.35% 4/1/2012 954,560
2,000,000 Copperas Cove, Texas, Independent School District, Unlimited
Tax General Obligation Bonds, Permanent School
Fund Guaranteed 6.9% 8/15/2014 2,189,020 (b)
4,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds Series 1994-A, Insured by MBIA 6.0% 11/1/2012 4,121,440
2,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds, Insured by FGIC 7.375% 11/1/2010 2,227,120
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds, Insured by FGIC 7.375% 11/1/2008 1,119,150
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds, Insured by FGIC 7.375% 11/1/2009 1,117,860
2,000,000 Del Valle, Texas, Independent School District, Unlimited Tax
General Obligation Refunding Bonds, Permanent School
Fund Guaranteed 5.0% 2/1/2018 1,775,780
2,285,000 Denton, Texas, Independent School District, Unlimited Tax
General Obligation Refunding Bonds, Permanent School
Fund Guarantee 6.25% 2/15/2009 2,459,688
1,000,000 Georgetown, Texas, Higher Education Finance Corp.,
Higher Education Revenue Bonds, Series 1994
(Southwestern University Project) 6.3% 2/15/2014 1,025,840
2,250,000 Harris County, Texas, Toll Road Sr. Lien Bonds,
Series A, Insured by MBIA 6.375% 8/15/2024 2,448,630 (b)
5,000,000 Houston, Texas Water & Sewer System, Revenue Refunding Jr.
Lien Series A, Insured by FGIC 5.250% 12/1/2022 4,460,150
5,315,000 Lewisville, Texas, Independent School District, Capital
Appreciation Refunding Bonds, Permanent School
Fund Guaranteed Zero Coupon 8/15/2019 1,606,565
1,845,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.375% 7/1/2010 2,021,862
1,000,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.375% 7/1/2011 1,095,510
11,615,000 Southeastern Texas Housing Finance Corp., Single Family
Mortgage Revenue Bonds Zero Coupon 9/1/2017 4,041,555 (b)
4,315,000 Texas State, Veterans Land Board General Obligation Bonds 0.05% 7/1/2010 2,419,377
1,000,000 Texas Water Development Board, State Revolving Fund
Revenue Bond, Senior Lien, Series A 5.25% 7/15/2017 921,880
815,000 Travis County, Texas, Housing Finance Corporation,
Single Family Mortgage Revenue Refunding Bonds,
Series 1994-A 6.75% 4/1/2014 844,185
3,210,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guaranteed 6.5% 2/15/2016 3,353,230 (b)
440,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guaranteed 6.5% 2/15/2016 450,886
430,000 Wylie, Texas, Independent School District, Unrefunded General
Obligation Bonds, Permanent School Fund Guaranteed 6.875% 8/15/2014 475,606
745,000 Wylie, Texas, Independent School District, Unrefunded General
Obligation Bonds, Permanent School Fund Guaranteed 6.875% 8/15/2014 844,681 (b)
-------------
54,914,958
-------------
Utah - 2.5%
5,000,000 Intermountain Power Agency, Utah, Power Supply Revenue Bonds,
Series B, Insured by MBIA 5.75% 7/1/2019 4,873,250
3,405,000 Timpanogos Special Service District, Utah County, Utah, Sewer
Revenue Bonds, Series 1996-A, Insured by AMBAC 6.1% 6/1/2019 3,662,963 (b)
3,750,000 Utah Associated Municipal Power Systems, San Juan Project
Revenue Bonds, Series O, Insured by MBIA 6.25% 6/1/2014 4,052,213 (b)
1,580,000 West Valley City, Utah, Municipal Building Authority, Lease
Refunding Bonds, Insured by MBIA 6.0% 1/15/2010 1,616,672
-------------
14,205,098
-------------
Virginia - 2.6%
3,625,000 Fairfax County, Virginia, Water Authority, Water Revenue
Refunding Bonds 5.0% 4/1/2021 3,210,953
3,000,000 Industrial Development Authority of Fairfax County, Virginia,
Health Care Revenue Bonds, (Inova Health System Project),
Series 1996 5.875% 8/15/2016 2,929,380
4,300,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1994 Series H, Subseries H-2 6.5% 1/1/2014 4,403,157
2,115,000 Virginia State Housing Development Authority, Commonwealth
Mortgage Bonds, 1997 Subseries B-1 5.5% 1/1/2022 1,961,705
2,000,000 Virginia State, Unlimited Tax General Obligation Bonds 6.5% 6/1/2015 2,162,080 (b)
-------------
14,667,275
-------------
Washington - 6.5%
1,395,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A 8.75% 9/1/2018 1,668,336 (b)
1,655,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A 8.75% 9/1/2018 2,095,511
2,000,000 Grant County, Washington, Public Utility District No. 2,
Columbia River, Priest Rapids Hydro Electric Development
Project, Second Series Revenue Bonds, Series A,
Insured by AMBAC 5.0% 1/1/2023 1,715,600
4,040,000 State of Washington, Unlimited Tax General Obligation Bonds,
Series E 5.0% 7/1/2022 3,488,944
1,500,000 Tacoma, Washington, Conservation System Project Revenue Bonds,
Tacoma Public Utilities Light Division 6.6% 1/1/2015 1,565,610
2,015,000 Tacoma, Washington, Utilities Refuse Revenue Bonds,
Insured by MBIA 6.625% 12/1/2011 2,128,827 (b)
2,500,000 Vancouver, Washington, Limited Tax General Obligation Bonds,
Series 1999, Insured by MBIA 6.0% 12/1/2019 2,494,075
5,000,000 Washington State Higher Education (Whitman College Project) 5.875% 10/1/2029 4,804,050
2,000,000 Washington State Public Power Supply System, Nuclear
Project No. 1, Revenue Refunding Bonds, Series 1996-A,
Insured by MBIA 5.75% 7/1/2011 2,036,680
3,000,000 Washington State Public Power Supply System, Nuclear Project
No. 1, Revenue Refunding Bonds, Series 1996-A,
Insured by MBIA 5.75% 7/1/2012 3,061,230
2,000,000 Washington State, Unlimited Tax General Obligation Bonds 6.0% 6/1/2012 2,097,240
2,400,000 Washington State, Unlimited Tax General Obligation Bonds 6.7% 6/1/2016 2,491,680 (b)
3,000,000 Washington State, Unlimited Tax General Obligation Bonds,
Series 93A 5.75% 10/1/2012 3,071,310
1,500,000 Washington State, Unlimited Tax General Obligation Bonds,
Series A 6.25% 2/1/2011 1,601,820
2,500,000 Washington State, Various Purpose General Obligation Bonds 6.25% 6/1/2010 2,702,925
-------------
37,023,838
-------------
Wisconsin - 0.2%
1,000,000 Southeast Wisconsin Professional Baseball Park District Sales Tax
Revenue Bonds, Insured by MBIA 5.8% 12/15/2026 1,057,580 (b)
-------------
Wyoming - 0.4%
2,500,000 State of Wyoming, Farm Loan Board, Capital Facilities Revenue
Bonds, Series 1994 6.1% 4/1/2024 2,519,425
-------------
Total Long-Term Municipal Securities (cost $545,473,055) 569,742,174
-------------
SHORT-TERM MUNICIPAL SECURITIES - 0.7% (a,c)
500,000 Berkeley County, South Carolina, (Amoco Chemical Co. Project),
Pollution Control Revenue Refunding Bonds, Series 1994 3.5% 11/01/99 500,000
500,000 Maricopa County, Arizona Pollution Control Corp., Pollution
Control Revenue Refunding Bonds, (Arizona Public Service Co.
Palo Verde Project), 1994 Series E 3.50% 11/01/99 500,000
1,750,000 Massachusetts Health & Educational Facilities Authority,
Variable Rate Demand Notes, Series B 3.45% 11/01/99 1,750,000
1,100,000 Massachusetts Health and Educational Facilities Authority,
Variable Rate Demand Revenue Bonds, Capital Asset
Program Issue, Series C 3.5% 11/01/99 1,100,000
-------------
Total Short-Term Municipal Securities (at amortized cost) 3,850,000
-------------
Total Investments (cost $549,323,055) $573,592,174 (d)
=============
Notes to Portfolio of Investments:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood Municipal
Bond Fund.
(b) Denotes securities that have been pre-refunded or escrowed to maturity. Under such an arrangement, money is deposited
into an irrevocable escrow account and is used to purchase U.S. Treasury securities or Government Agency securities with
maturing principal and interest earnings sufficient to pay all debt service requirements of the pre-refunded bonds.
Because the original bonds assume a quality rating equivalent to the escrowed U.S. Government securities, they are
considered to be U.S. Government securities for purposes of portfolio diversification requirements.
(c) Denotes variable rate obligations for which the current yield and next scheduled interest reset date are shown.
(d) At October 31, 1999, the aggregate cost of securities for federal income tax purposes was $549,352,937 and the net
unrealized appreciation of investments based on that cost was $24,239,237 which is comprised of $30,659,602 aggregate
gross unrealized appreciation and $6,420,365 aggregate gross unrealized depreciation.
(e) Miscellaneous abbreviations:
AMBAC - AMBAC Indemnity Corp.
Connie Lee - Connie Lee Insurance Co.
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Administration
FSA - Federal Security Assurance, Inc.
GNMA - Government National Mortgage Association
MBIA - Municipal Bond Investors Assurance Corp.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MONEY MARKET FUND
Portfolio of Investments
October 31, 1999
Principal Maturity
Amount Rate Date Value
------------- ---------- --------- -------------
<S> <C> <C> <C> <C>
BANK NOTES - 2.2% (a)
$ 7,000,000 First National Bank of Chicago 6.05% 8/11/2000 $ 6,997,392
7,000,000 Wachovia Bank, N.A. 5.03% 11/22/1999 7,000,000
-------------
Total Bank Notes 13,997,392
-------------
COMMERCIAL PAPER - 86.9% (a)
Banking-Domestic - 7.1%
4,170,000 AES Shady Point Inc. (Direct Pay Letter of Credit,
Nationsbank N.A.) 5.41% 11/10/1999 4,164,423
3,500,000 US Bancorp 5.38% 12/2/1999 3,483,936
6,500,000 US Bancorp 5.42% 12/14/1999 6,458,463
5,000,000 US Bancorp 5.39% 12/15/1999 4,967,367
7,000,000 Wells Fargo & Co. 5.92% 3/3/2000 6,862,240
5,000,000 Wells Fargo & Co. 6.00% 3/15/2000 5,000,000
7,000,000 Wells Fargo & Co. 5.60% 3/21/2000 6,852,773
7,000,000 Wells Fargo & Co. 5.65% 4/7/2000 6,833,486
-------------
44,622,688
-------------
Banking-Foreign - 5.5%
7,000,000 Abbey National North America (Guaranteed Abbey National plc) 5.34% 12/20/1999 6,949,789
7,000,000 Abbey National Treasury Service plc (Guaranteed Abbey
National plc) 5.42% 12/31/1999 7,000,116
7,000,000 UBS Finance (Delaware) Inc. (Guaranteed Union
Bank of Switzerland) 5.00% 12/13/1999 6,959,983
7,000,000 UBS Finance (Delaware) Inc. (Guaranteed Union
Bank of Switzerland) 5.04% 12/13/1999 6,960,392
7,000,000 UBS Finance (Delaware) Inc. (Guaranteed Union
Bank of Switzerland) 5.31% 12/23/1999 6,947,523
-------------
34,817,803
-------------
Chemicals - 0.3%
2,170,000 Henkel Corp. 5.45% 12/7/1999 2,158,325
-------------
Computer & Office Equipment - 2.2%
7,000,000 IBM Credit Corp. (Guaranteed IBM) 5.91% 1/27/2000 6,902,222
7,000,000 IBM Credit Corp. (Guaranteed IBM) 6.04% 2/23/2000 6,868,995
-------------
13,771,217
-------------
Consumer Products - 1.1%
7,000,000 Procter & Gamble Co. 5.38% 12/10/1999 6,959,808
-------------
Drugs & Health Care - 0.5%
3,500,000 Pfizer Inc. 6.01% 4/3/2000 3,412,413
-------------
Education - 6.3%
7,000,000 Duke University 5.18% 11/29/1999 6,972,506
4,000,000 Duke University 5.38% 12/3/1999 3,981,049
3,000,000 Duke University 5.44% 12/7/1999 2,983,890
250,000 Leland H. Stanford Junior University 5.53% 11/22/1999 249,198
7,000,000 Leland H. Stanford Junior University 5.98% 3/17/2000 6,844,962
1,900,000 Leland H. Stanford Junior University 5.57% 2/8/2000 1,871,785
3,500,000 Leland H. Stanford Junior University 5.27% 11/1/1999 3,500,000
5,000,000 Yale University 5.46% 11/22/1999 4,984,279
3,000,000 Yale University 5.39% 11/10/1999 2,995,988
5,000,000 Yale University 5.37% 11/10/1999 4,993,300
-------------
39,376,957
-------------
Energy - 0.3%
1,710,000 American Petrofina Holding Co. (Guaranteed Petrofina S.A.) 5.38% 11/23/1999 1,704,430
-------------
Finance-Automotive - 10.4%
7,000,000 DaimlerChrysler North America Holdings 5.35% 11/19/1999 6,981,380
7,000,000 DaimlerChrysler North America Holdings 5.39% 11/22/1999 6,978,277
7,000,000 DaimlerChrysler North America Holdings 6.10% 2/25/2000 6,865,343
7,000,000 DaimlerChrysler North America Holdings 6.12% 4/17/2000 6,805,960
7,000,000 Ford Motor Credit Co. 5.21% 11/4/1999 6,997,008
7,000,000 Ford Motor Credit Co. 5.36% 12/27/1999 6,942,507
3,000,000 Ford Motor Credit Co. of Puerto Rico, Inc. (Guaranteed Ford
Motor Credit Co.) 5.39% 12/22/1999 2,977,348
6,000,000 Ford Motor Credit Co. of Puerto Rico, Inc. (Guaranteed Ford
Motor Credit Co.) 5.39% 12/23/1999 5,953,720
7,000,000 General Motors Acceptance Corp. 5.28% 11/8/1999 6,992,949
8,000,000 General Motors Acceptance Corp. 5.92% 3/13/2000 7,829,760
-------------
65,324,252
-------------
Finance-Commercial - 5.9%
7,000,000 CIT Group Holdings, Inc. 5.23% 11/12/1999 6,989,006
4,500,000 General Electric Capital Corp. 5.35% 2/22/2000 4,427,398
6,000,000 General Electric Capital Corp. 6.10% 3/20/2000 5,861,167
7,962,000 General Electric Capital International Funding, Inc.
(Guaranteed General Electric Capital Corp.) 5.40% 12/8/1999 7,918,384
7,000,000 General Electric Capital International Funding, Inc.
(Guaranteed General Electric Capital Corp.) 5.90% 2/28/2000 6,867,646
5,000,000 General Electric Co. 5.33% 11/1/1999 5,000,000
-------------
37,063,601
-------------
Finance-Consumer - 6.7%
7,000,000 American General Corp. 5.28% 11/2/1999 6,998,987
7,000,000 American General Finance Corp. (Guaranteed American
General Corp.) 5.59% 2/18/2000 6,885,550
7,000,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 5.32% 11/4/1999 6,996,938
2,531,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 5.38% 11/4/1999 2,529,876
2,728,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 6.11% 1/26/2000 2,688,768
6,000,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 6.11% 2/28/2000 5,881,397
3,400,000 Household Finance Corp. 5.32% 11/1/1999 3,400,000
7,000,000 Transamerica Finance Corp. 5.37% 11/1/1999 7,000,000
-------------
42,381,516
-------------
Finance-Structured - 13.2%
7,000,000 Corporate Asset Funding Co. 5.97% 1/31/2000 6,896,488
7,000,000 CXC, Inc. 6.13% 1/31/2000 6,893,479
7,000,000 Delaware Funding Corp. 5.41% 11/8/1999 6,992,677
7,000,000 Delaware Funding Corp. 5.45% 12/9/1999 6,960,248
4,040,000 Delaware Funding Corp. 6.22% 1/20/2000 3,985,056
7,000,000 Delaware Funding Corp. 6.12% 2/4/2000 6,889,167
7,000,000 Preferred Receivables Funding 5.43% 11/19/1999 6,981,205
4,150,000 Preferred Receivables Funding 4.95% 11/29/1999 4,134,474
4,380,000 Preferred Receivables Funding 6.11% 1/27/2000 4,316,490
7,000,000 Preferred Receivables Funding 5.99% 2/7/2000 6,888,525
260,000 Triple-A One Funding Corp. 5.33% 11/4/1999 259,886
7,000,000 Triple-A One Funding Corp. 5.41% 11/9/1999 6,991,647
7,000,000 Triple-A One Funding Corp. 5.42% 12/27/1999 6,941,527
8,000,000 Triple-A One Funding Corp. 5.46% 12/28/1999 7,931,727
-------------
83,062,596
-------------
Financial Services - 1.1%
7,000,000 American Express Credit Corp. 5.31% 11/24/1999 6,976,387
-------------
Food & Beverage - 2.1%
6,000,000 Cargill Global Fund plc (Guaranteed Cargill, Inc.) 5.25% 2/11/2000 5,914,150
7,000,000 General Mills, Inc. 5.37% 12/15/1999 6,954,656
-------------
12,868,806
-------------
Industrial - 1.1%
7,000,000 Alcoa, Inc. 5.34% 12/3/1999 6,967,022
-------------
Insurance - 8.0%
7,000,000 Met-Life Funding Inc. 6.08% 1/26/2000 6,899,834
7,000,000 Prudential Funding Corp. 5.76% 1/28/2000 6,904,178
7,000,000 Prudential Funding Corp. 6.02% 1/31/2000 6,895,603
22,700,000 USAA Capital Corp. 5.32% 11/1/1999 22,700,000
7,000,000 USAA Capital Corp. 5.89% 2/17/2000 6,879,670
-------------
50,279,285
-------------
Petroleum - 7.3%
5,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.25% 11/17/1999 4,988,533
7,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.39% 12/3/1999 6,966,960
7,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.33% 12/9/1999 6,961,356
7,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.91% 2/22/2000 6,873,220
20,000,000 Koch Industries, Inc. 5.32% 11/1/1999 20,000,000
-------------
45,790,069
-------------
Telecommunications - 4.4%
4,975,000 Motorola Credit Corp. (Guaranteed Motorola, Inc.) 5.41% 11/4/1999 4,972,782
3,000,000 Motorola Credit Corp. (Guaranteed Motorola, Inc.) 5.37% 11/19/1999 2,992,035
6,000,000 Motorola Credit Corp. (Guaranteed Motorola, Inc.) 5.37% 12/17/1999 5,959,367
7,000,000 Motorola Credit Corp. (Guaranteed Motorola, Inc.) 5.36% 12/22/1999 6,947,343
7,000,000 Motorola Credit Corp. (Guaranteed Motorola, Inc.) 5.35% 12/29/1999 6,940,228
-------------
27,811,755
-------------
U.S. Municipal - 3.4%
7,000,000 City of Whiting, Indiana; Industrial Sewage & Solid Waste
Disposal; Series 1995 (Guaranteed BP Amoco plc) 5.52% 11/15/1999 7,000,000
7,000,000 City of Whiting, Indiana; Industrial Sewage & Solid Waste
Disposal; Series 1995 (Guaranteed BP Amoco plc) 5.39% 12/3/1999 7,000,000
7,250,000 Metrocrest Hospital Authority (Bank of New York Bank,
Direct Pay Letter of Credit) 5.85% 3/7/2000 7,105,493
-------------
21,105,493
-------------
Total Commercial Paper 546,454,423
-------------
CERTIFICATES OF DEPOSIT - 4.8% (a)
Domestic - 3.5%
8,000,000 Morgan Guaranty Trust Co. of New York 4.95% 12/10/1999 8,000,244
7,000,000 Morgan Guaranty Trust Co. of New York 6.08% 3/20/2000 7,000,000
7,000,000 Morgan Guaranty Trust Co. of New York 5.75% 7/19/2000 6,997,426
-------------
21,997,670
-------------
Euro Dollar-Foreign - 1.3%
7,000,000 Barclays Bank plc (USD) 5.01% 11/15/1999 6,999,693
1,000,000 Barclays Bank plc (USD) 5.13% 11/15/1999 999,909
-------------
7,999,602
-------------
Total Certificates of Deposit 29,997,272
-------------
MEDIUM TERM NOTES - 1.8% (a)
7,000,000 Abbey National Treasury Service plc (Guaranteed Abbey
National plc) 5.25% 12/14/1999 7,000,081
1,120,000 American General Corp. 6.18% 5/15/2000 1,123,526
3,000,000 Wells Fargo & Co. 5.69% 5/12/2000 3,015,979
-------------
Total Medium Term Notes 11,139,586
-------------
VARIABLE RATE NOTES - 2.9% (a,b)
8,000,000 Illinois Student Assistance Commission (Bank of America,
Illinois Direct Pay Letter of Credit) 5.37% 11/3/1999 8,000,000
10,000,000 Illinois Student Assistance Commission (Student Loan
Marketing Assoc., Direct Pay Letter of Credit) 5.32% 11/3/1999 10,000,000
-------------
Total Variable Rate Notes 18,000,000
-------------
U.S. GOVERNMENT AGENCY - 1.4% (a)
1,800,000 Federal Home Loan Bank 5.46% 12/29/1999 1,800,856
7,000,000 Federal Home Loan Mortgage Corp. 5.29% 12/21/1999 6,950,543
-------------
Total U.S. Government Agency 8,751,399
-------------
Total Investments (at amortized cost) $628,340,072 (c)
=============
Notes to Portfolio of Investments:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood Money Market Fund.
(b) Denotes variable rate obligations for which the current yield and the next scheduled interest reset date are shown.
(c) Also represents cost for federal income tax purposes.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Growth Fund
Portfolio of Investments
October 31, 1999
Shares Value
- -------------- --------------
<S> <C> <C>
COMMON STOCKS - 100.0% (a)
Aerospace - 0.8%
270 Boeing Co. $ 12,432
410 United Technologies Corp. 24,805
------------
37,237
------------
Airlines - 0.7%
2,190 Southwest Airlines Co. 36,819
------------
Bank & Finance - 12.3%
160 American Express Co. 24,640
730 American International Group, Inc. 75,144
680 Associates First Capital Corp., Class A 24,820
380 Bank of America Corp. 24,463
290 Bank of New York Co., Inc. 12,144
430 Chase Manhattan Corp. 37,571
1,360 Citigroup, Inc. 73,610
460 Federal Home Loan Mortgage Corp. 24,869
700 Federal National Mortgage Association 49,525
860 Firstar Corp. 25,263
170 Goldman Sachs (The) Group, Inc. 12,070
160 Lehman Brothers Holdings, Inc. 11,790
1,340 MBNA Corp. 37,018
330 Morgan Stanley Dean Witter & Co. 36,403
130 Northern Trust Corp. 12,553
110 Providian Financial Corp. 11,990
650 Schwab, Charles Corp. 25,309
330 State Street Corp. 25,121
660 U.S. Bancorporation 24,461
520 Wells Fargo & Co. 24,895
------------
593,659
------------
Broadcasting - 1.5%
500 CBS Corp. 24,406(b)
610 Clear Channel Communications, Inc. 49,029(b)
------------
73,435
------------
Chemicals - 0.2%
260 Praxair, Inc. 12,155
------------
Computer Software - 7.2%
190 Citrix Systems, Inc. 12,184(b)
2,540 Microsoft Corp. 235,109(b)
800 Oracle Corp. 38,050(b)
350 Veritas Software Corp. 37,756(b)
140 Yahoo!, Inc. 25,069(b)
------------
348,168
------------
Computers & Office Equipment - 15.0%
3,210 Cisco Systems, Inc. 237,540(b)
1,860 Dell Computer Corp. 74,633(b)
1,690 EMC Corp. 123,370(b)
340 Hewlett Packard Co. 25,181
880 International Business Machines Corp. 86,570
830 Sun Microsystems, Inc. 87,824(b)
980 Texas Instruments, Inc. 87,955
------------
723,073
------------
Conglomerates - 5.4%
440 AlliedSignal, Inc. 25,053
1,200 General Electric Co. 162,675
1,850 Tyco International, Ltd. 73,884
------------
261,612
------------
Cosmetics & Toiletries - 0.2%
270 Estee Lauder Companies, Inc., Class A 12,589
------------
Drugs & Health Care - 12.4%
610 Abbott Laboratories 24,629
470 Amgen, Inc. 37,483(b)
170 Biogen, Inc. 12,601(b)
650 Bristol-Myers Squibb Co. 49,928
290 Cardinal Health, Inc. 12,506
540 Eli Lilly & Co. 37,193
500 Guidant Corp. 24,688
590 Johnson & Johnson 61,803
1,420 Medtronic, Inc. 49,168
940 Merck & Co., Inc. 74,789
2,510 Pfizer, Inc. 99,145
1,010 Schering-Plough Corp. 49,995
790 Warner-Lambert Co. 63,052
------------
596,980
------------
Electronic Equipment - 4.7%
420 Applied Materials, Inc. 37,721(b)
100 Broadcom Corp., Class A 12,781(b)
1,610 Intel Corp. 124,674
150 JDS Uniphase Corp. 25,031(b)
330 Solectron Corp. 24,833(b)
------------
225,040
------------
Food & Beverage - 0.8%
630 Coca-Cola Co. 37,170
------------
Household Products - 2.3%
620 Colgate Palmolive Co. 37,510
690 Gillette Co. 24,969
480 Procter & Gamble Co. 50,340
------------
112,819
------------
Internet Service - 2.6%
870 America Online, Inc. 112,828(b)
110 CMGI, Inc. 12,038(b)
------------
124,866
------------
Leisure & Entertainment - 0.8%
570 Carnival Corp., Inc. 25,365
270 Viacom, Inc., Class B 12,083(b)
------------
37,448
------------
Machinery & Equipment - 0.8%
260 Danaher Corp. 12,561
340 Illinois Tool Works, Inc. 24,905
------------
37,466
------------
Media - 2.6%
580 Omnicom Group, Inc. 51,040
1,080 Time Warner, Inc. 75,263
------------
126,303
------------
Media & Communications - 0.8%
900 Comcast Corp., Class A 37,913
------------
Oil & Oil Service - 1.8%
890 Conoco, Inc., Class A 24,419
390 Diamond Offshore Drilling, Inc. 12,383
310 Enron Corp. 12,381
670 Halliburton Co. 25,251
330 Williams Cos., Inc. 12,375
------------
86,809
------------
Restaurants - 0.8%
600 McDonald's Corp. 24,750
460 Starbucks Corp. 12,506(b)
------------
37,256
------------
Retail - 12.0%
360 Amazon.com, Inc. 25,425(b)
440 Best Buy Co., Inc. 24,448(b)
570 Circuit City Stores, Inc. 24,332
310 Costco Wholesale Corp. 24,897(b)
870 CVS Corp. 37,791
570 Dayton Hudson Corp. 36,836
650 Gap, Inc. 24,131
1,440 Home Depot, Inc. 108,720
300 Intimate Brands, Inc., Class A 12,300
670 Kohl's Corp. 50,124(b)
1,190 Kroger Co. 24,767(b)
450 Lowe's Companies 24,750
710 Safeway, Inc. 25,072(b)
1,480 Walgreen Co. 37,278
1,710 Wal-Mart Stores, Inc. 96,936
------------
577,807
------------
Services - 0.8%
90 DoubleClick, Inc. 12,600(b)
150 Exodus Communications, Inc. 12,900(b)
330 US Web Corp. 12,788(b)
------------
38,288
------------
Telecommunications Equipment - 6.4%
1,540 Lucent Technologies, Inc. 98,945
380 Motorola, Inc. 37,026
630 Nokia Corp., ADR 72,804
410 Nortel Networks Corp. 25,394
110 QUALCOMM, Inc. 24,503(b)
790 Tellabs, Inc. 49,968(b)
------------
308,640
------------
Telephone & Telecommunications - 6.6%
1,060 AT&T Corp. 49,555
630 AT&T Corp./Liberty Media Group, Class A 25,003(b)
380 Bell Atlantic Corp. 24,676
350 Level 3 Communications, Inc. 23,931(b)
1,440 MCI Worldcom, Inc. 123,570(b)
290 NEXTEL Communications, Inc., Class A 24,994(b)
690 Qwest Communications International, Inc. 24,840(b)
470 SBC Communications, Inc. 23,941
------------
320,510
------------
Textiles & Apparel - 0.5%
440 NIKE, Inc., Class B 24,833
------------
Total Investments in Common Stocks
(cost $4,833,025) $ 4,828,895(c)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Growth Fund.
(b) Currently non-income producing.
(c) At October 31, 1999, the aggregate cost of securities for federal
income tax purposes was $4,833,025 and the net unrealized
depreciation of investments based on that cost was $4,130 which is
comprised of $274 aggregate gross unrealized appreciation and
$4,404 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Value Fund
Portfolio of Investments
October 31, 1999
Shares Value
- -------------- --------------
<S> <C> <C>
COMMON STOCKS - 100% (a)
Aerospace - 1.0%
260 Boeing Co. $ 11,954
110 General Dynamics Corp. 6,098
350 Lockheed Martin Corp. 7,000
150 Raytheon Co., Class B 4,388
330 United Technologies Corp. 19,965
------------
49,405
------------
Airlines - 0.7%
100 Delta Air Lines, Inc. 5,444
1,550 Southwest Airlines Co. 26,059
------------
31,503
------------
Automotive - 2.1%
70 DaimlerChrysler AG 5,443
150 Dana Corp. 4,434
720 Ford Motor Co. 39,510
490 General Motors Corp. 34,423
100 General Motors Corp., Class H 7,281(b)
180 Goodyear Tire & Rubber Co. (The) 7,436
70 Johnson Controls, Inc. 4,270
------------
102,797
------------
Bank & Finance - 18.5%
670 Allstate Corp. 19,430
210 American Express Co. 32,340
280 American General Corp. 20,773
760 American International Group, Inc. 78,233
380 Associates First Capital Corp., Class A 13,870
890 Bank of America Corp. 57,294
990 Bank of New York Co., Inc. 41,456
810 Bank One Corp. 31,691
640 Chase Manhattan Corp. 55,920
260 CIGNA Corp. 19,435
2,170 Citigroup, Inc. 117,451
100 Comerica, Inc. 5,944
960 Federal Home Loan Mortgage Corp. 51,900
920 Federal National Mortgage Association 65,090
390 First Union Corp. 16,648
870 Firstar Corp. 25,556
450 Fleet Boston Corp. 19,631(b)
400 Household International, Inc. 17,850
260 Keycorp 7,264
940 MBNA Corp. 25,968
260 Mellon Financial Corp. 9,604
120 Merrill Lynch & Co., Inc. 9,420
90 MGIC Investment Corp. 5,378
270 Morgan Stanley Dean Witter & Co. 29,784
140 Morgan (J.P.) and Co., Inc. 18,323
210 National City Corp. 6,195
90 PNC Financial Corp. 5,366
240 The Hartford Financial Services Group, Inc. 12,435
380 U.S. Bancorporation 14,084
450 Washington Mutual, Inc. 16,172
1,020 Wells Fargo & Co. 48,833
------------
899,338
------------
Broadcasting - 0.8%
270 CBS Corp. 13,179(b)
750 Infinity Broadcasting Corp., Class A 25,922(b)
------------
39,101
------------
Building Materials - 0.2%
290 Masco Corp. 8,845
------------
Chemicals - 3.5%
230 Air Products & Chemicals, Inc. 6,325
480 Avery Dennison Corp. 30,000
130 Dow Chemical Co. 15,373
660 E.I. du Pont de Nemours and Co. 42,529
200 Monsanto Co. 7,700
110 PPG Industries, Inc. 6,669
760 Praxair, Inc. 35,530
730 Rohm & Haas Co. 27,923
------------
172,049
------------
Computer Software - 2.3%
210 Computer Associates International, Inc. 11,865
610 Microsoft Corp. 56,463(b)
790 Oracle Corp. 37,574(b)
250 Unisys Corp. 6,063(b)
------------
111,965
------------
Computers & Office Equipment - 7.0%
770 Cisco Systems, Inc. 56,980(b)
560 Compaq Computer Corp. 10,640
190 Dell Computer Corp. 7,624(b)
550 EMC Corp. 40,150(b)
510 Hewlett Packard Co. 37,772
820 International Business Machines Corp. 80,668
160 Pitney Bowes, Inc. 7,290
360 Sun Microsystems, Inc. 38,093(b)
410 Texas Instruments, Inc. 36,798
780 Xerox Corp. 21,840
------------
337,855
------------
Conglomerates - 4.6%
490 AlliedSignal, Inc. 27,899
180 Dover Corp. 7,661
940 General Electric Co. 127,429
260 Minnesota Mining & Manufacturing Co. 24,716
80 Textron, Inc. 6,175
110 TRW, Inc. 4,716
650 Tyco International, Ltd. 25,959
------------
224,555
------------
Drugs & Health Care - 9.2%
620 Abbott Laboratories 25,033
900 American Home Products Corp. 47,025
250 Amgen, Inc. 19,938(b)
280 Baxter International, Inc. 18,165
200 Becton, Dickinson & Co. 5,075
830 Bristol-Myers Squibb Co. 63,754
120 Cardinal Health, Inc. 5,175
140 Eli Lilly & Co. 9,643
720 Johnson & Johnson 75,420
250 Medtronic, Inc. 8,656
720 Merck & Co., Inc. 57,285
500 Pfizer, Inc. 19,750
410 Pharmacia & Upjohn, Inc. 22,114
490 Schering-Plough Corp. 24,255
110 Smithkline Beecham plc, ADR 7,040
460 Warner-Lambert Co. 36,714
------------
445,042
------------
Electric Utilities - 1.6%
290 Duke Energy Corp. 16,403
180 Entergy Corp. 5,389
190 FPL Group, Inc. 9,559
1,280 Southern Co. 34,000
210 Texas Utilities Co. 8,138
150 Unicom Corp. 5,747
------------
79,236
------------
Electronic Equipment - 3.3%
150 Applied Materials, Inc. 13,472(b)
490 Emerson Electric Company 29,431
150 Honeywell, Inc. 15,816
940 Intel Corp. 72,791
120 Koninklijke (Royal) Philips
Electronics N.V., ADR 12,473
130 Rockwell International Corp. 6,297
100 Solectron Corp. 7,525(b)
------------
157,805
------------
Food & Beverage - 3.0%
340 Bestfoods 19,975
230 Coca-Cola Co. 13,570
450 ConAgra, Inc. 11,728
100 General Mills, Inc. 8,719
390 Heinz (H.J.) Co. 18,623
200 Kellogg Co. 7,963
860 PepsiCo, Inc. 29,831
120 Quaker Oats Co. 8,400
240 Ralston-Ralston Purina Group 7,545
680 Sara Lee Corp. 18,403
------------
144,757
------------
Healthcare Management - 0.2%
380 Columbia/HCA Healthcare Corp. 9,168
------------
Household Products - 3.1%
650 Colgate Palmolive Co. 39,325
230 Gillette Co. 8,338
470 Kimberly-Clark Corp. 29,669
260 Newell Rubbermaid, Inc. 9,003
570 Procter & Gamble Co. 59,779
80 Unilever N.V., ADR 5,335
------------
151,449
------------
Insurance - 0.7%
130 Aetna, Inc. 6,533
180 Chubb Corp. 9,900
180 Lincoln National Corp. 8,303
140 Marsh & McLennan Cos., Inc. 11,069
------------
35,805
------------
Internet Service - 0.7%
280 America Online, Inc. 36,313(b)
------------
Leisure & Entertainment - 1.0%
730 Disney (Walt) Co. 19,254
420 Harley Davidson, Inc. 24,911(c)
120 Viacom, Inc., Class B 5,370(b)
------------
49,535
------------
Machinery & Equipment - 2.1%
240 Caterpillar, Inc. 13,275
530 Danaher Corp. 25,606
300 Deere & Co. 10,875
460 Illinois Tool Works, Inc. 33,781
240 Ingersoll-Rand Co. 12,540
100 Parker-Hannifin Corp. 4,581
------------
100,658
------------
Media - 0.6%
90 Omnicom Group, Inc. 7,920
290 Time Warner, Inc. 20,209
------------
28,129
------------
Media & Communications - 0.6%
740 Comcast Corp., Class A 31,173
------------
Mining & Metals - 1.0%
810 Alcoa, Inc. 49,208
------------
Oil & Oil Service - 9.5%
230 Atlantic Richfield Co. 21,433
450 BP Amoco plc, ADR 25,988
450 Chevron Corp. 41,091
830 Coastal Corp. 34,964
110 Columbia Energy Group 7,150
210 Conoco, Inc., Class A 5,762
1,100 Dynegy, Inc. 25,163
70 Elf Aquitaine S.A., ADR 5,189
360 Enron Corp. 14,378
920 Exxon Corp. 68,138
290 Halliburton Co. 10,929
660 Mobil Corp. 63,690
690 Royal Dutch Petroleum Co. 41,357
310 Schlumberger, Ltd. 18,774
480 Texaco, Inc. 29,460
180 Unocal Corp. 6,210
220 USX-Marathon Group 6,408
880 Williams Cos., Inc. 33,000
------------
459,084
------------
Paper & Forest Products - 0.9%
220 Fort James Corp. 5,789
430 International Paper Co. 22,629
210 Weyerhaeuser Co. 12,534
------------
40,952
------------
Photography - 0.4%
290 Eastman Kodak Co. 19,992
------------
Pollution Control - 0.1%
370 Waste Management, Inc. 6,799
------------
Publishing & Printing - 0.9%
260 Gannett Co., Inc. 20,053
80 Knight Ridder, Inc. 5,080
180 McGraw-Hill, Inc. 10,733
100 Tribune Co. 6,000
------------
41,866
------------
Railroads - 0.7%
460 Burlington Northern Santa Fe 14,663
130 CSX Corp. 5,314
220 Norfolk Southern Corp. 5,376
160 Union Pacific Corp. 8,920
------------
34,273
------------
Restaurants - 0.5%
630 McDonald's Corp. 25,988
------------
Retail - 7.7%
320 Albertson's, Inc. 11,520
600 Circuit City Stores, Inc. 25,613
770 CVS Corp. 33,447
780 Dayton Hudson Corp. 50,408
1,210 Family Dollar Stores, Inc. 24,956
1,000 Federated Department Stores 42,688(b)
140 Gap, Inc. 5,198
270 Home Depot, Inc. 20,385
1,440 Kroger Co. 29,970(b)
650 Lowe's Companies 35,750
430 May Department Stores Co. 14,916
150 Penney (J.C.) Co. 3,806
170 Safeway, Inc. 6,003(b)
420 Sears, Roebuck & Co. 11,839
350 Sysco Corp. 13,453
780 Wal-Mart Stores, Inc. 44,216
------------
374,168
------------
Services - 1.1%
280 Automatic Data Processing, Inc. 13,493
260 Electronic Data Systems Corp. 15,210
360 First Data Corp. 16,448
240 Interpublic Group of Cos., Inc. 9,750
------------
54,901
------------
Telecommunications Equipment - 2.6%
120 Corning, Inc. 9,435
380 Lucent Technologies, Inc. 24,415
380 Motorola, Inc. 37,026
310 Nortel Networks Corp. 19,201
40 QUALCOMM, Inc. 8,910(b)
430 Tellabs, Inc. 27,198(b)
------------
126,185
------------
Telephone & Telecommunications - 7.8%
270 ALLTEL Corp. 22,478
1,370 AT&T Corp. 64,048
830 Bell Atlantic Corp. 53,898
440 BellSouth Corp. 19,800
570 GTE Corp. 42,893
570 MCI Worldcom, Inc. 48,913(b)
1,290 SBC Communications, Inc. 65,709
440 Sprint Corp. (FON Group) 32,698
320 US West, Inc. 19,540
180 Vodafone AirTouch plc, ADR 8,629
------------
378,606
------------
Total Common Stocks (cost $4,862,167) $ 4,858,505(d)
============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Value Fund.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock and had
no separate value at October 31, 1999.
(d) At October 31, 1999, the aggregate cost of securities for federal
income tax purposes was $4,862,167 and the net unrealized
depreciation of investments based on that cost was $3,662 which is
comprised of $1,548 aggregate gross unrealized appreciation and
$5,210 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 1999
Principal Maturity
Amount Rate Date Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT AGENCY - 5.3% (a)
$ 1,000,000 Federal National Mortgage Association, Notes (cost $967,070) 5.625% 5/14/2004 $ 969,804
MORTGAGE-BACKED SECURITIES - 22.0% (a)
4,000,000 Federal National Mortgage Association, Participation Certificates
(cost $ 3,990,000) 7.5% 11/1/2029 4,012,500(b)
U.S. GOVERNMENT - 72.7% (a)
5,000,000 U.S. Treasury Notes 7.25% 8/15/2004 5,246,875
8,000,000 U.S. Treasury Notes 6.0% 8/15/2004 8,020,000
-------------
Total U.S. Government (cost $13,245,312) 13,266,875
-------------
Total Investments (cost $18,202,382) $ 18,249,179(c)
=============
Notes to Portfolio of Investments:
- ----------------------------------
(a) The categories of investments are shown as a percentage of total investments of the
Lutheran Brotherhood Limited Maturity Bond Fund.
(b) Denotes investments purchased on a when-issued basis.
(c) At October 31, 1999, the aggregate cost of securities for federal income tax purposes
was $18,202,382 and the net unrealized appreciation of investments based on that cost
was $46,797 which is comprised of $46,797 aggregate gross unrealized appreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<S> <C>
ASSETS
Investments in securities, at value (cost, $4,833,025) $ 4,828,895
Receivable for capital stock sold 5,000,000
------------
Total assets 9,828,895
------------
LIABILITIES:
Payable for investment securities purchased 4,833,025
------------
NET ASSETS $ 4,995,870
============
NET ASSETS CONSIST OF:
Paid-in capital $ 5,000,000
Unrealized net depreciation of investments (4,130)
------------
NET ASSETS $ 4,995,870
============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $999,174 and 60,606 shares
of beneficial interest outstanding) $16.49
============
Maximum public offering price per share
(based on a net asset value per share
of $16.49 divided by 0.96 for a 4% sales charge) $17.18
============
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $999,174 and 60,606 shares
of beneficial interest outstanding) $16.49
============
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $2,997,522 and 181,818 shares
of beneficial interest outstanding) $16.49
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD GROWTH FUND
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
<S> <C>
For the period from
October 29, 1999
(effective date) to
October 31, 1999
-------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net change in unrealized depreciation of investments $ (4,130)
------------
NET TRUST SHARE TRANSACTIONS:
Class A 1,000,000
Class B 1,000,000
Institutional Class 3,000,000
------------
Net increase in net assets from trust share transactions 5,000,000
------------
Net increase in net assets 4,995,870
NET ASSETS
Beginning of period --
------------
End of period $ 4,995,870
============
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at value (cost, $4,862,167) $ 4,858,505
Receivable for capital stock sold 5,000,000
------------
Total assets 9,858,505
------------
LIABILITIES:
Payable for investment securities purchased 4,862,167
------------
NET ASSETS $ 4,996,338
============
NET ASSETS CONSIST OF:
Paid-in capital $ 5,000,000
Unrealized net depreciation of investments (3,662)
------------
NET ASSETS $ 4,996,338
============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $999,267 and 68,966 shares of
beneficial interest outstanding) $14.49
============
Maximum public offering price per share
(based on a net asset value per share
of $14.49 divided by 0.96 for a 4% sales charge) $15.09
============
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $999,268 and 68,966 shares
of beneficial interest outstanding) $14.49
============
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $2,997,803 and 206,897 shares
of beneficial interest outstanding) $14.49
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD VALUE FUND
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
<S> <C>
For the period from
October 29, 1999
(effective date) to
October 31, 1999
-------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net change in unrealized depreciation of investments $ (3,662)
------------
NET TRUST SHARE TRANSACTIONS:
Class A 1,000,000
Class B 1,000,000
Institutional Class 3,000,000
------------
Net increase in net assets from trust share transactions 5,000,000
------------
Net increase in net assets 4,996,338
NET ASSETS:
Beginning of period --
------------
End of period $ 4,996,338
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at value (cost, $18,202,382) $ 18,249,179
Receivable for capital stock sold 20,000,000
Interest receivable 216,959
------------
Total assets 38,466,138
------------
LIABILITIES:
Payable for investment securities purchased 18,419,341
------------
NET ASSETS $ 20,046,797
============
NET ASSETS CONSIST OF:
Paid-in capital $ 20,000,000
Unrealized net appreciation of investments 46,797
------------
NET ASSETS $ 20,046,797
============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $5,011,700 and 400,000 shares
of beneficial interest outstanding) $12.53
============
Maximum public offering price per share
(based on a net asset value per share of $12.53 divided
by 0.96 for a 4% sales charge) $13.05
============
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $5,011,699 and 400,000 shares
of beneficial interest outstanding) $12.53
============
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $10,023,398 and 800,000 shares
of beneficial interest outstanding) $12.53
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
<S> <C>
For the period from
October 29, 1999
(effective date) to
October 31, 1999
-------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net change in unrealized appreciation of investments $ 46,797
------------
TRUST SHARE TRANSACTIONS:
Class A 5,000,000
Class B 5,000,000
Institutional Class 10,000,000
------------
Net increase in net assets from trust share transactions 20,000,000
------------
Net increase in net assets 20,046,797
NET ASSETS:
Beginning of period --
------------
End of period $ 20,046,797
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
Financial Statements
Statement of Assets and Liabilities
October 31, 1999
<S> <C>
Investments in securities, at value (cost,$208,648,720) $222,679,379
Cash 92,028
Receivable for investment securities sold 1,293,686
Dividend receivable 9,399
------------
Total assets 224,074,492
------------
LIABILITIES:
Payable for investment securities purchased 572,493
Accrued expenses 180,361
------------
Total liabilities 752,854
------------
NET ASSETS $223,321,638
============
NET ASSETS CONSIST OF:
Paid-in capital $226,957,641
Accumulated net investment loss (7,430)
Accumulated net realized loss from sale of investments (17,659,232)
Unrealized net appreciation of investments 14,030,659
------------
NET ASSETS $223,321,638
============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $206,049,581 and 18,466,664 shares
of beneficial interest outstanding) $11.16
======
Maximum public offering price per share (based on a net asset
value per share of $11.16 divided by 0.96 for a 4% sales charge) $11.63
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $8,457,985 and 769,045 shares of
beneficial interest outstanding) $11.00
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $8,814,072 and 786,102 shares of
beneficial interest outstanding) $11.21
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1999
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 397,820
Interest income 296,894
--------------
Total income 694,714
--------------
Expenses --
Investment advisory fee 1,049,677
Distribution and service plan fees:
Class A 528,789
Class B 66,597
Transfer agent services 1,262,313
Custodian fee 141,512
Administrative personnel and services 45,091
Printing and postage 276,993
Trust share registration costs 62,467
Auditing fees 5,827
Legal fees 4,686
Trustees' fees 9,335
Miscellaneous 10,846
--------------
Total expenses before expense reimbursement 3,464,133
Expense reimbursement from investment advisor (47,854)
--------------
Net expenses 3,416,279
--------------
Net investment loss (2,721,565)
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 3,498,799
Net change in unrealized appreciation of investments 39,085,693
--------------
Net gain on investments 42,584,492
--------------
Net increase in net assets resulting from operations $ 39,862,927
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1999 and 1998
Year Year
Ended Ended
10/31/99 10/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss $ (2,721,565) $ (1,358,626)
Net realized gain (loss) on investments 3,498,799 (20,273,121)
Net change in unrealized appreciation or depreciation of investments 39,085,693 (53,310,343)
------------ ------------
Net change in net assets resulting from operations 39,862,927 (74,942,090)
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net Realized Gains:
Class A -- (10,383,030)
Class B -- (18,018)
Institutional Class -- (116,629)
------------ ------------
Total distributions -- (10,517,677)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A (37,324,818) (19,142,773)
Class B 3,290,263 5,010,935
Institutional Class 2,182,297 3,478,983
------------ ------------
Net change in net assets resulting from trust share transactions (31,852,258) (10,652,855)
------------ ------------
Net change in net assets 8,010,669 (96,112,622)
NET ASSETS:
Beginning of period 215,310,969 311,423,591
------------ ------------
End of period $223,321,638 $215,310,969
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
Financial Statements
Statement of Assets and Liabilities
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at value (cost, $65,059,682) $ 76,483,459
Cash 135,168
Receivable for investment securities sold 674,676
Dividend receivable 14,704
Unamortized organization costs 14,179
------------
Total assets 77,322,186
------------
LIABILITIES:
Payable for investment securities purchased 978,377
Accrued expenses 91,924
------------
Total liabilities 1,070,301
------------
NET ASSETS $ 76,251,885
============
NET ASSETS CONSIST OF:
Paid-in capital $ 62,292,788
Accumulated net investment loss (3,477)
Accumulated net realized gain from sale of investments 2,538,797
Unrealized net appreciation of investments 11,423,777
------------
NET ASSETS $ 76,251,885
============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$59,243,255 and 4,580,293 shares of beneficial interest outstanding) $12.93
======
Maximum public offering price per share (based on a net asset
value per share of $12.93 divided by 0.96 for a 4% sales charge) $13.47
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $15,769,501 and 1,237,735 shares of
beneficial interest outstanding) $12.74
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $1,239,129 and 95,379 shares of
beneficial interest outstanding) $12.99
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1999
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 227,692
Interest income 121,554
--------------
Total income 349,246
--------------
Expenses --
Investment advisory fee 267,092
Distribution and service plan fees:
Class A 113,321
Class B 111,347
Transfer agent services 453,747
Custodian fee 107,551
Administrative personnel and services 11,478
Printing and postage 124,971
Trust share registration costs 65,211
Auditing fees 4,177
Legal fees 1,515
Trustees' fees 6,547
Amortization of organization costs 5,490
Miscellaneous 5,005
--------------
Total expenses 1,277,452
Expense reimbursement from investment advisor (77,128)
--------------
Net expenses 1,200,324
--------------
Net investment loss (851,078)
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 5,468,431
Net realized gain on closed or expired option contracts written 3,147
--------------
Net realized gain on investments 5,471,578
Net change in unrealized appreciation of investments 13,367,574
--------------
Net gain on investments 18,839,152
--------------
Net increase in net assets resulting from operations $ 17,988,074
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1999 and 1998
Year Year
Ended Ended
10/31/99 10/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ (851,078) $ 538,235
Net realized gain (loss) on investments 5,471,578 (2,238,984)
Net change in unrealized appreciation or depreciation of investments 13,367,574 (1,836,091)
------------ ------------
Net change in net assets resulting from operations 17,988,074 (3,536,840)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A -- (593,837)
Class B -- (20,517)
Institutional Class -- (23,816)
Net Realized Gains:
Class A -- (395,237)
Class B -- (13,872)
Institutional Class -- (15,767)
------------ ------------
Total distributions -- (1,063,046)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 12,960,104 21,626,287
Class B 6,053,517 7,121,404
Institutional Class 273,449 226,296
------------ ------------
Net increase in net assets from trust share transactions 19,287,070 28,973,987
------------ ------------
Net increase in net assets 37,275,144 24,374,101
NET ASSETS:
Beginning of 38,976,741 14,602,640
------------ ------------
End of period $ 76,251,885 $ 38,976,741
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
Financial Statements
Statement of Assets and Liabilities
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at value (cost, $84,694,535) $108,744,166
Cash (including foreign currency holdings of $633,358) 696,828
Receivable for investment securities sold 602,602
Dividend receivable 213,983
Unamortized organization costs 8,476
------------
Total assets 110,266,055
------------
LIABILITIES:
Payable for investment securities purchased 346,622
Accrued expenses 90,874
------------
Total liabilities 437,496
------------
NET ASSETS $109,828,559
============
NET ASSETS CONSIST OF:
Paid-in capital $ 82,995,142
Accumulated net investment loss (5,919)
Accumulated net realized gain from sale of investments
and foreign currency transactions 2,791,186
Unrealized net appreciation of investments and
on translation of assets and liabilities in foreign currencies 24,048,150
------------
NET ASSETS $109,828,559
============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $87,637,277 and 6,982,541 shares of
beneficial interest outstanding) $12.55
======
Maximum public offering price per share (based on a net asset
value per share of $12.55 divided by 0.96 for a 4% sales charge) $13.07
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $8,070,106 and 651,372 shares of
beneficial interest outstanding) $12.39
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $14,121,176 and 1,121,567 shares of
beneficial interest outstanding) $12.59
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1999
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $201,719) $ 1,556,704
Interest income 202,872
--------------
Total income 1,759,576
--------------
Expenses --
Investment advisory fee 753,081
Distribution and service plan fees:
Class A 199,609
Class B 58,303
Transfer agent services 510,661
Custodian fee 97,727
Administrative personnel and services 19,579
Printing and postage 137,738
Trust share registration costs 62,473
Auditing fees 4,827
Legal fees 2,195
Trustees' fees 6,560
Amortization of organization costs 10,220
Miscellaneous 6,445
--------------
Total expenses before expense reimbursement 1,869,418
Expense reimbursement from investment advisor (18,844)
--------------
Net expenses 1,850,574
--------------
Net investment loss (90,998)
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain on investment transactions 4,114,373
Net realized loss on foreign currency transactions (38,666)
--------------
Net realized gain on investments and foreign currency transactions 4,075,707
--------------
Net change in unrealized appreciation of investments 13,189,271
Net change in unrealized depreciation on translation of assets
and liabilities in foreign currencies (7,641)
--------------
Net change in unrealized appreciation of investments and on
translation of assets and liabilities in foreign currencies 13,181,630
--------------
Net gain on investments and foreign currency 17,257,337
--------------
Net increase in net assets resulting from operations $ 17,166,339
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1999 and 1998
Year Year
Ended Ended
10/31/99 10/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ (90,998) $ 56,081
Net realized gain (loss) on investments and
foreign currency transactions 4,075,707 (723,020)
Net change in unrealized appreciation or depreciation of investments and
on translation of assets and liabilities in foreign currencies 13,181,630 5,623,753
------------ ------------
Net increase in net assets resulting from operations 17,166,339 4,956,814
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (509,984) (277,425)
Class B (21,512) (1,167)
Institutional Class (102,827) (30,222)
Net Realized Gains:
Class A -- (946,412)
Class B -- (3,960)
Institutional Class -- (102,770)
------------ ------------
Total distributions (634,323) (1,361,956)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 1,035,539 1,779,490
Class B 3,623,615 3,598,446
Institutional Class 1,704,486 2,827,874
------------ ------------
Net increase in net assets from trust share transactions 6,363,640 8,205,810
------------ ------------
Net increase in net assets 22,895,656 11,800,668
NET ASSETS:
Beginning of period 86,932,903 75,132,235
------------ ------------
End of period (including undistributed net investment income of
$0 and $627,526, respectively) $109,828,559 $ 86,932,903
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD FUND
Financial Statements
Statement of Assets and Liabilities
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at value (cost, $1,253,774,770) $1,560,411,881
Cash 53,280
Receivable for investment securities sold 24,245,421
Dividend receivable 1,207,424
--------------
Total assets 1,585,918,006
--------------
LIABILITIES:
Payable for investment securities purchased 54,443,510
Accrued expenses 498,155
--------------
Total liabilities 54,941,665
--------------
NET ASSETS $1,530,976,341
==============
NET ASSETS CONSIST OF:
Paid-in capital $1,008,853,734
Undistributed net investment income 449,954
Accumulated net realized gain from sale of investments 215,035,542
Unrealized net appreciation of investments 306,637,111
--------------
NET ASSETS $1,530,976,341
==============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $1,424,448,929 and 45,629,942
shares of beneficial interest outstanding) $31.22
======
Maximum public offering price per share (based on a net asset
value per share of $31.22 divided by 0.96 for a 4% sales charge) $32.52
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $63,327,732 and 2,047,436 shares of
beneficial interest outstanding) $30.93
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $43,199,680 and 1,383,041 shares of
beneficial interest outstanding) $31.24
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1999
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 13,612,372
Interest income 1,763,593
--------------
Total income 15,375,965
--------------
Expenses --
Investment advisory fee 5,257,761
Distribution and service plan fees:
Class A 3,331,042
Class B 461,815
Transfer agent services 2,645,215
Custodian fee 239,468
Administrative personnel and services 283,224
Printing and postage 739,806
Trust share registration costs 131,787
Auditing fees 24,892
Legal 33,665
Trustees' fees 20,572
Miscellaneous 30,127
--------------
Total expenses before expense reimbursement 13,199,374
Expense reimbursement from investment advisor (967,463)
--------------
Net expenses 12,231,911
--------------
Net investment income 3,144,054
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 230,150,748
Net realized loss on closed or expired option contracts written (169,201)
--------------
Net realized gain on investments 229,981,547
Net change in unrealized appreciation of investments 69,573,130
--------------
Net gain on investments 299,554,677
--------------
Net increase in net assets resulting from operations $ 302,698,731
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1999 and 1998
Year Year
Ended Ended
10/31/99 10/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 3,144,054 $ 5,259,275
Net realized gain on investments 229,981,547 138,893,681
Net change in unrealized appreciation or depreciation of investments 69,573,130 4,580,680
-------------- ---------------
Net increase in net assets resulting from operations 302,698,731 148,733,636
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (3,484,091) (4,518,250)
Class B -- (964)
Institutional Class (192,254) (138,214)
Net Realized Gains:
Class A (125,371,620) (94,543,249)
Class B (2,922,634) (156,376)
Institutional Class (3,222,146) (1,494,748)
-------------- ---------------
Total distributions (135,192,745) (100,851,801)
-------------- ---------------
NET TRUST SHARE TRANSACTIONS:
Class A 145,838,693 97,627,202
Class B 33,368,795 24,995,614
Institutional Class 10,112,252 13,839,394
-------------- ---------------
Net increase in net assets from trust share transactions 189,319,740 136,462,210
-------------- ---------------
Net increase in net assets 356,825,726 184,344,045
NET ASSETS:
Beginning of period 1,174,150,615 989,806,570
-------------- ---------------
End of period (including undistributed net investment income of
$449,954 and $982,245, respectively) $1,530,976,341 $1,174,150,615
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD HIGH YIELD FUND
Financial Statements
Statement of Assets and Liabilities
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at value (cost, $1,013,208,824) $ 888,634,834
Cash 13,527
Receivable for investment securities sold 7,112,602
Interest and dividend receivable 21,725,688
--------------
Total assets 917,486,651
--------------
LIABILITIES:
Payable for investment securities purchased 6,538,470
Accrued expenses 296,645
--------------
Total liabilities 6,835,115
--------------
NET ASSETS $ 910,651,536
==============
NET ASSETS CONSIST OF:
Paid-in capital $1,054,832,009
Undistributed net investment income 1,780,225
Accumulated net realized loss from sale of investments (21,386,708)
Unrealized net depreciation of investments (124,573,990)
--------------
NET ASSETS $ 910,651,536
==============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $823,227,778 and 104,609,151 shares of
beneficial interest outstanding) $ 7.87
======
Maximum public offering price per share (based on a net asset
value per share of $7.87 divided by 0.96 for a 4% sales charge) $ 8.30
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $34,423,933 and 4,379,042 shares of
beneficial interest outstanding) $ 7.86
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $52,999,825 and 6,731,469 shares of
beneficial interest outstanding) $ 7.87
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1999
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 90,595,329
Dividend income 9,049,689
--------------
Total income 99,645,018
--------------
Expenses --
Investment advisory fee 3,660,910
Distribution and service plan fees:
Class A 2,093,242
Class B 287,667
Transfer agent services 1,605,493
Custodian fee 229,252
Administrative personnel and services 184,197
Printing and postage 417,820
Trust share registration costs 98,349
Auditing fees 19,581
Legal fees 41,528
Trustees' fees 17,729
Miscellaneous 24,422
--------------
Total expenses before expense reimbursement 8,680,190
Expense reimbursement from investment advisor (647,959)
--------------
Net expenses 8,032,231
--------------
Net investment income 91,612,787
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions (20,631,347)
Net change in unrealized depreciation of investments (5,076,255)
--------------
Net loss on investments (25,707,602)
--------------
Net increase in net assets resulting from operations $ 65,905,185
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1999 and 1998
Year Year
Ended Ended
10/31/99 10/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 91,612,787 $ 85,046,889
Net realized gain (loss) on investment transactions (20,631,347) 2,027,575
Net change in unrealized appreciation or depreciation of investments (5,076,255) (139,239,192)
------------ --------------
Net change in net assets resulting from operations 65,905,185 (52,164,728)
------------ --------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income:
Class A (84,935,008) (78,057,192)
Class B (2,709,588) (937,490)
Institutional Class (5,718,827) (5,260,080)
Net Realized Gains:
Class A -- (15,571,878)
Class B -- (30,431)
Institutional Class -- (988,918)
------------ --------------
Total distributions (93,363,423) (100,845,989)
------------ --------------
NET TRUST SHARE TRANSACTIONS:
Class A 62,933,005 113,623,772
Class B 16,538,897 22,079,012
Institutional Class 2,213,497 10,782,605
------------ --------------
Net increase in net assets from trust share transactions 81,685,399 146,485,389
------------ --------------
Net change in net assets 54,227,161 (6,525,328)
NET ASSETS:
Beginning of period 856,424,375 862,949,703
------------ --------------
End of period (including undistributed net investment income of
$1,780,225 and $3,530,861, respectively) $910,651,536 $ 856,424,375
============ =============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD INCOME FUND
Financial Statements
Statement of Assets and Liabilities
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at value (cost, $756,914,487) $732,290,600
Cash 17,642
Receivable for investment securities sold 3,574,042
Interest and dividend receivable 12,153,927
Receivable for variation margin on open futures contracts 341,250
------------
Total assets 748,377,461
------------
LIABILITIES:
Payable for investment securities purchased 22,276,713
Accrued expenses 217,647
------------
Total liabilities 22,494,360
------------
NET ASSETS $725,883,101
============
NET ASSETS CONSIST OF:
Paid-in capital $793,779,991
Undistributed net investment income 2,269,912
Accumulated net realized loss from sale of investments (45,370,415)
Unrealized net depreciation of investments (24,796,387)
------------
NET ASSETS $725,883,101
============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $679,465,100 and 82,644,458 shares of
beneficial interest outstanding) $ 8.22
======
Maximum public offering price per share (based on a net asset
value per share of $8.22 divided by 0.96 for a 4% sales charge) $ 8.56
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $14,652,162 and 1,786,166 shares of
beneficial interest outstanding) $ 8.20
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $31,765,839 and 3,865,488 shares of
beneficial interest outstanding) $ 8.22
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1999
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 50,899,611
Dividend income 298,704
--------------
Total income 51,198,315
--------------
Expenses --
Investment advisory fee 2,754,808
Distribution and service plan fees:
Class A 1,792,233
Class B 116,814
Transfer agent services 1,280,447
Custodian fee 168,916
Administrative personnel and services 151,763
Printing and postage 358,080
Trust share registration costs 75,293
Auditing fees 16,496
Legal fees 18,007
Trustees' fees 17,693
Miscellaneous 20,976
--------------
Total expenses before expense reimbursement 6,771,526
Expense reimbursement from investment advisor (543,063)
--------------
Net expenses 6,228,463
--------------
Net investment income 44,969,852
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions (6,590,104)
Net realized loss on closed or expired option contracts written (509,311)
Net realized loss on closed futures contracts (1,454,392)
--------------
Net realized loss on investments (8,553,807)
Net change in unrealized depreciation of investments (42,047,117)
--------------
Net loss on investments (50,600,924)
--------------
Net change in net assets resulting from operations $ (5,631,072)
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1999 and 1998
Year Year
Ended Ended
10/31/99 10/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 44,969,852 $ 47,328,173
Net realized gain (loss) on investment transactions (8,553,807) 8,963,937
Net change in unrealized appreciation or depreciation of investments (42,047,117) 5,865,596
------------ ------------
Net change in net assets resulting from operations (5,631,072) 62,157,706
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (41,348,175) (46,213,710)
Class B (594,911) (178,145)
Institutional Class (1,832,238) (1,439,594)
------------ ------------
Total distributions (43,775,324) (47,831,449)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A (13,065,882) (34,562,158)
Class B 8,560,100 6,819,434
Institutional Class 7,178,472 8,015,688
------------ ------------
Net change in net assets from trust share transactions 2,672,690 (19,727,036)
------------ ------------
Net change in net assets (46,733,706) (5,400,779)
NET ASSETS:
Beginning of period 772,616,807 778,017,586
------------ ------------
End of period (including undistributed net investment income of
$2,269,912 and $1,118,293, respectively) $725,883,101 $772,616,807
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
Financial Statements
Statement of Assets and Liabilities
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at value (cost, $549,323,055) $573,592,174
Cash 96,781
Receivable for investment securities sold 3,299,014
Interest receivable 9,015,067
------------
Total assets 586,003,036
------------
LIABILITIES:
Payable for investment securities purchased 2,499,050
Accrued expenses 114,125
------------
Total liabilities 2,613,175
------------
NET ASSETS $583,389,861
============
NET ASSETS CONSIST OF:
Paid-in capital $560,851,169
Undistributed net investment income 1,392,820
Accumulated net realized loss from sale of investments (3,123,247)
Unrealized net appreciation of investments 24,269,119
------------
NET ASSETS $583,389,861
============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $570,645,829 and 67,644,123 shares of
beneficial interest outstanding) $ 8.44
======
Maximum public offering price per share (based on a net asset
value per share of $8.44 divided by 0.96 for a 4% sales charge) $ 8.79
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $8,435,819 and 1,002,569 shares of
beneficial interest outstanding) $ 8.41
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $4,308,213 and 510,775 shares of
beneficial interest outstanding) $ 8.43
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1999
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 34,026,096
--------------
Expenses --
Investment advisory fee 2,096,878
Distribution and service plan fees:
Class A 1,496,642
Class B 65,825
Transfer agent services 483,542
Custodian fee 157,702
Administrative personnel and services 121,892
Printing and postage 172,557
Trust share registration costs 74,046
Auditing fees 13,283
Legal fees 14,457
Trustees' fees 17,664
Miscellaneous 17,855
--------------
Total expenses before expense reimbursement 4,732,343
Expense reimbursement from investment advisor (434,545)
--------------
Net expenses 4,297,798
--------------
Net investment income 29,728,298
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 516,433
Net change in unrealized appreciation of investments (46,467,806)
--------------
Net loss on investments (45,951,373)
--------------
Net change in net assets resulting from operations $ (16,223,075)
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1999 and 1998
Year Year
Ended Ended
10/31/99 10/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 29,728,298 $ 29,320,330
Net realized gain on investment transactions 516,433 2,170,541
Net change in unrealized appreciation or depreciation of investments (46,467,806) 15,241,526
------------ ------------
Net change in net assets resulting from operations (16,223,075) 46,732,397
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (29,754,233) (29,169,677)
Class B (284,277) (82,863)
Institutional Class (221,032) (205,936)
------------ -------------
Total distributions (30,259,542) (29,458,476)
------------ -------------
NET TRUST SHARE TRANSACTIONS:
Class A 11,180,633 283,944
Class B 5,049,674 3,880,132
Institutional Class 628,862 (287,112)
------------ -------------
Net increase in net assets from trust share transactions 16,859,169 3,876,964
------------ -------------
Net change in net assets (29,623,448) 21,150,885
NET ASSETS:
Beginning of period 613,013,309 591,862,424
------------ -------------
End of period (including undistributed net investment income of
$1,392,820 and $1,940,344, respectively) $583,389,861 $ 613,013,309
============ =============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MONEY MARKET FUND
Financial Statements
Statement of Assets and Liabilities
October 31, 1999
<S> <C>
ASSETS:
Investments in securities, at amortized cost and value $628,340,072
Cash 2,041,185
Interest receivable 1,585,156
------------
Total assets 631,966,413
------------
LIABILITIES:
Dividends payable 194,168
Accrued expenses 301,572
------------
Total liabilities 495,740
------------
NET ASSETS $631,470,673
============
NET ASSETS CONSIST OF:
Paid-in capital $631,470,673
============
Class A Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $580,137,997 and 580,137,997 shares
of beneficial interest outstanding) $ 1.00
======
Class B Shares:
Net asset value, redemption price and offering price per share
based on net assets of $263,080 and 263,080 shares of
beneficial interest outstanding) $ 1.00
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $51,069,596 and 51,069,596 shares of
beneficial interest outstanding) $ 1.00
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended October 31, 1999
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 30,597,430
--------------
Expenses --
Investment advisory fee 1,579,481
Service plan fees:
Class A 1,368,994
Class B 442
Transfer agent services 1,718,928
Custodian fee 408,130
Administrative personnel and services 118,971
Printing and postage 541,077
Trust share registration costs 149,542
Auditing fees 11,377
Legal fees 14,083
Trustees' fees 11,288
Miscellaneous 15,641
--------------
Total expenses before expense reimbursement 5,937,954
Expense reimbursement from investment advisor (404,526)
--------------
Net expenses 5,533,428
--------------
Net investment income $ 25,064,002
==============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Years Ended October 31, 1999 and 1998
Year Year
Ended Ended
10/31/99 10/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 25,064,002 $ 24,009,045
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (22,960,049) (21,502,662)
Class B (7,477) (1,573)
Institutional Class (2,096,476) (2,504,810)
------------ ------------
Total distributions (25,064,002) (24,009,045)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 86,977,741 76,881,422
Class B 181,681 56,399
Institutional Class 3,739,307 (5,589,690)
------------ ------------
Net increase in net assets from trust share transactions 90,898,729 71,348,131
------------ ------------
Net increase in net assets 90,898,729 71,348,131
NET ASSETS:
Beginning of period 540,571,944 469,223,813
------------ ------------
End of period $631,470,673 $540,571,944
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
Notes to Financial Statements
October 31, 1999
(1) ORGANIZATION
The Lutheran Brotherhood Family of Funds (the "Trust") is a Delaware
business trust and a diversified, open-end investment company
registered under the Investment Company Act of 1940. The Trust is
divided into eleven series (the "Fund(s)"), each with its own
investment objective and policies. The eleven Funds of the Trust that
are included in these financial statements are: Lutheran Brotherhood
Opportunity Growth Fund, Lutheran Brotherhood Mid Cap Growth Fund,
Lutheran Brotherhood World Growth Fund, Lutheran Brotherhood Growth
Fund, Lutheran Brotherhood Fund, Lutheran Brotherhood Value Fund,
Lutheran Brotherhood High Yield Fund, Lutheran Brotherhood Income
Fund, Lutheran Brotherhood Municipal Bond Fund, Lutheran Brotherhood
Limited Maturity Bond Fund, and Lutheran Brotherhood Money Market Fund.
The Lutheran Brotherhood Growth Fund, Value Fund and Limited Maturity
Bond Fund's registration was declared effective by the Securities and
Exchange Commission and each began operation as a separate series of the
Lutheran Brotherhood Family of Funds on October 29, 1999.
Effective October 31, 1997, the Funds implemented a multiple class
structure whereby each Fund is authorized to offer three classes of
shares: Class A, Class B and Institutional Class. The shares
outstanding prior to October 31, 1997 were designated as Class A
shares. The three classes of shares differ principally in their
respective shareholder servicing and distribution expenses and
arrangements. All three classes of shares have identical rights to
earnings, assets and voting privileges, except for class specific
expenses and exclusive rights to vote on matters affecting only
individual classes.
(2) SIGNIFICANT ACCOUNTING POLICIES
Investment Security Valuations
Securities traded on U.S. or foreign securities exchanges or included
in a national market system are valued at the last quoted sales price
at the close of each business day. Over-the-counter securities and
listed securities for which no price is readily available are valued
at prices within the range of the current bid and asked prices
considered best to represent the value in the circumstances, based on
quotes that are obtained from an independent pricing service approved
by the Board of Trustees. The pricing service, in determining values
of securities, takes into consideration such factors as current
quotations by broker/dealers, coupon, maturity, quality, type of
issue, trading characteristics, and other yield and risk factors it
deems relevant in determining valuations. Securities which cannot be
valued by the approved pricing service are valued using valuations
obtained from dealers that make markets in the securities. Exchange
listed options and futures contracts are valued at the last quoted
sales price. For all Funds other than the Money Market Fund, short-
term securities with maturities of 60 days or less are valued at
amortized cost; those with maturities greater than 60 days are valued
at the mean between bid and asked prices. Short-term securities held
by the Money Market Fund are valued on the basis of amortized cost
(which approximates market value), whereby a portfolio security is
valued at its cost initially, and thereafter valued to reflect a
constant amortization to maturity of any discount or premium. The
Money Market Fund follows procedures necessary to maintain a constant
net asset value of $1.00 per share. All other securities for which
market values are not readily available are appraised at fair value as
determined in good faith by or under the direction of the Board of
Trustees.
Foreign Currency Translations
The accounting records of the Fund are maintained in U.S. dollars.
Securities and other assets and liabilities of the LB World Growth
Fund that are denominated in foreign currencies are translated into
U.S. dollars at the daily closing rate of exchange. Foreign currency
amounts related to the purchase or sale of securities and income and
expenses are translated at the exchange rate on the transaction date.
Currency gains and losses are recorded from sales of foreign currency,
exchange gains or losses between the trade date and settlement dates
on securities transactions, and other translation gains or losses on
dividends, interest income and foreign withholding taxes. The Fund
does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes
are included in net realized and unrealized gain or loss from
investments.
Federal Income Taxes
No provision has been made for income taxes because the Fund's policy
is to qualify as a regulated investment company under the Internal
Revenue Code and distribute substantially all of its taxable income on
a timely basis. It is also the intention of the Funds to distribute an
amount sufficient to avoid imposition of any federal excise tax. Each
Fund is treated as a separate taxable entity for federal income tax
purposes.
Securities Transactions, Investment Income and Expenses
Securities transactions are accounted for on trade date. Realized
gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the
same basis used for federal income tax purposes.
Interest income is accrued daily and is determined on the basis of
interest or discount earned on any short-term investments and interest
earned on all other debt securities, including accrual of original
issue discount. Interest earned on debt securities also includes
amortization of premium for the Opportunity Growth, Mid Cap Growth,
World Growth, LB Fund, High Yield and Municipal Bond Funds and the
accrual of market discount for the Opportunity Growth, Mid Cap Growth,
World Growth, LB Fund and High Yield Funds. Market discount, if any,
is recognized for tax purposes when bonds are sold for the Income and
Municipal Bond Funds. Dividend income is recorded on the ex-dividend
date. For payment-in-kind securities, income is recorded on the ex-
dividend date in the amount of the value received.
Estimated expenses are accrued daily. Each Fund is charged for the
operating expenses that are directly attributable to it. Common
expenses of the Trust are either shared equally or allocated among the
Funds based on the relative net assets of each Fund to the combined
net assets, or via other allocation methodologies.
Realized and unrealized gains and losses and net investment income,
other than class specific expenses, are allocated daily to each class
of shares based upon the relative proportion of net assets of each
class. Operating expenses directly attributable to a specific class
are charged against the operations of that class.
Distributions to Shareholders
Dividends from net investment income, if available, are declared and
paid annually for the Opportunity Growth, Mid Cap Growth, World Growth,
Growth and Value Funds, declared and paid quarterly for the LB Fund,
declared and paid monthly for the High Yield, Income and Municipal Bond
Funds, and declared daily (including short-term net realized gains and
losses in the Money Market Fund) and paid monthly for the Limited
Maturity Bond and Money Market Funds. Net realized gains from securities
transactions, if any, are distributed at least annually for all Funds,
after the close of the fiscal year. Dividends and capital gain
distributions to shareholders are recorded on the ex-dividend date.
Net investment income (loss) and net realized gain (loss) may differ
for financial statement and tax purposes. The character of
distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of dividend
distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or net realized gains were
recorded by the Fund.
It is the policy of the Fund to reclassify the net effect of permanent
differences between book and taxable income to trust capital accounts
on the statements of assets and liabilities. As a result of permanent
book-to-tax differences for the year ended October 31, 1999,
accumulated net realized gain or loss from the sale of investments was
increased (decreased) by $84,400, ($950,526), $198,459, ($13,000,000),
$17,629, and $16,280, respectively, for the Opportunity Growth, Mid
Cap Growth, World Growth, LB Fund, Income and Municipal Bond Funds;
undistributed net investment income was increased (decreased) by
$2,720,730, $850,526, $91,878, ($17,629), and ($16,280), respectively,
for the Opportunity Growth, Mid Cap Growth, World Growth, Income and
Municipal Bond Funds; and net increases (decreases) of ($2,805,130),
$100,000, ($290,337), and $13,000,000, respectively, for the
Opportunity Growth, Mid Cap Growth, World Growth, and LB Fund were
reclassified into trust capital. These reclassifications have no
effect on net assets, net asset value per share, the change in net
assets resulting from operations, or on the amount of income available
for distribution to shareholders.
Options, Financial Futures and
Forward Foreign Currency Contracts
All Funds except the Money Market Fund may buy put and call options,
write covered call options and buy and sell futures contracts. The
Funds intend to use such derivative instruments as hedges to
facilitate buying or selling securities or to provide protection
against adverse movements in security prices or interest rates. The
World Growth Fund may also enter into options and futures contracts on
foreign currencies and forward foreign currency contracts to protect
against adverse foreign exchange rate fluctuation.
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sale for a written call option or the cost
of a security for purchased put and call options is adjusted by the
amount of premium received or paid.
Upon entering into a futures contract, the Fund is required to deposit
initial margin, either cash or securities in an amount equal to a
certain percentage of the contract value. Subsequent variation margin
payments are made or received by the Fund each day. The variation
margin payments are equal to the daily changes in the contract value
and are recorded as unrealized gains and losses. The Fund realizes a
gain or loss when the contract is closed or expires.
Foreign currency contracts are valued daily and unrealized
appreciation or depreciation is recorded daily as the difference
between the contract exchange rate and the closing forward rate
applied to the face amount of the contract. A realized gain or loss is
recorded at the time a forward contract is closed.
Dollar Roll Transactions
Certain of the Funds enter into dollar roll transactions, with respect
to mortgage securities issued by GNMA, FNMA and FHLMC, in which the
Fund sells mortgage securities and simultaneously agrees to repurchase
similar (same type, coupon and maturity) securities at a later date at
an agreed upon price. During the period between the sale and
repurchase, the Fund forgoes principal and interest paid on the
mortgage securities sold. The Funds are compensated by the interest
earned on the cash proceeds of the initial sale and from negotiated
fees paid by brokers offered as an inducement to the Fund to "roll
over" its purchase commitments. The Income Fund earned $112,031 from
such fees for the year ended October 31, 1999.
Organization Costs
Organization costs incurred prior to June 30, 1998, in connection with
the start up and initial registration of the Funds are capitalized and
amortized over a period of 60 months from the date of commencement. If
any initial shares are redeemed during the amortization period, the
redemption proceeds will be reduced by a pro-rata portion of the
unamortized balance at the time of redemption, in the same proportion
that the number of initial shares being redeemed bears to the number
of initial shares outstanding at the time of redemption.
When-Issued and Delayed Delivery Transactions
The Funds may engage in when-issued or delayed delivery transactions.
To the extent that a Fund engages in such transactions, it will do so
for the purpose of acquiring securities consistent with its investment
objectives and policies and not for the purpose of investment leverage
or to speculate on interest rate changes. On the trade date, assets of
the Fund are segregated on the Fund's records in a dollar amount
sufficient to make payment for the securities to be purchased. Income
is not accrued until settlement date.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
(3) FEES AND COMPENSATION PAID TO AFFILIATES
Investment Advisory Fees
Each Fund pays Lutheran Brotherhood Research Corp. (LB Research), the
Trust's investment advisor, a fee for its advisory services. The fees
are accrued daily and paid monthly. Prior to December 2, 1998, LB
Research had voluntarily agreed to permanently waive a portion of its
advisory fee equal to 0.25% of the average daily net assets of the
Fund. On December 2, 1998, the advisory contract was amended to
incorporate the current permanent waiver for each of the Funds equal
to 0.25% of the average daily net assets. Under the terms of the
amended advisory contract, LB Research will continue to provide the
same level of management services to the Funds in exchange for the new
advisory fee rates. The old fees and new fees that went into effect on
December 2, 1998 are based on the following rates of average daily net
assets.
Old Fees New Fees
------------ ------------
LB Opportunity Growth Fund
- ----------------------------
First $100 million 0.75% 0.50%
Next $150 million 0.65% 0.40%
Next $250 million 0.60% 0.35%
Next $500 million 0.55% 0.30%
Over $1 billion 0.50% 0.25%
LB Mid Cap Growth Fund
- ----------------------------
First $100 million 0.70% 0.45%
Next $150 million 0.65% 0.40%
Next $250 million 0.60% 0.35%
Next $500 million 0.55% 0.30%
Over $1 billion 0.50% 0.25%
LB World Growth Fund
- ----------------------------
First $20 million 1.25% 1.00%
Next $30 million 1.10% 0.85%
Over $50 million 1.00% 0.75%
LB Growth Fund
- ----------------------------
First $500 million - 0.425%
Next $500 million - 0.375%
Over $1 billion - 0.325%
LB Value Fund
- ----------------------------
First $500 million - 0.40%
Next $500 million - 0.35%
Over $1 billion - 0.30%
LB Fund & LB High Yield Fund
- ----------------------------
First $500 million 0.65% 0.40%
Next $500 million 0.60% 0.35%
Over $1 billion 0.55% 0.30%
LB Income Fund
- ----------------------------
First $500 million 0.60% 0.35%
Next $500 million 0.575% 0.325%
Over $1 billion 0.55% 0.30%
LB Municipal Bond Fund
- ----------------------------
First $500 million 0.575% 0.325%
Next $500 million 0.5625% 0.3125%
Over $1 billion 0.55% 0.30%
LB Limited Maturity Bond Fund
- -----------------------------
First $500 million - 0.30%
Next $500 million - 0.275%
Over $1 billion - 0.25%
LB Money Market Fund
- ----------------------------
First $500 million 0.50% 0.25%
Next $500 million 0.475% 0.225%
Next $500 million 0.45% 0.20%
Next $500 million 0.425% 0.175%
Over $2 billion 0.40% 0.15%
Effective January 1, 1997, LB Research has also voluntarily agreed to
waive 5 basis points (0.05%) on an annual basis from the advisory fees
payable by the LB Fund, LB High Yield Fund, LB Income Fund and LB
Municipal Bond Fund. These voluntary partial waivers of advisory fees
may be discontinued at any time.
LB Research has further undertaken to the LB Mid Cap Growth Fund to
waive its advisory fee and if necessary, to bear certain expenses
associated with operating the Fund in order to limit the Fund's total
operating expenses for Class A shares, Class B shares and
Institutional Class shares to an annual rate of 1.95%, 2.70% and
1.70%, respectively, of the average daily net assets of the relevant
class. LB Research has further undertaken to the LB Money Market Fund,
to waive its advisory fees in order to limit LB Money Market Fund's
total operating expenses for the Class A, Class B and Institutional
class shares to 0.95%, 0.95%, and 0.70%, respectively, of the average
net assets of the relevant class.
LB Research has further undertaken to the LB Growth Fund, LB Value Fund
and LB Limited Maturity Bond Fund to waive its advisory fee and if
necessary, to bear certain expenses associated with operating the Funds in
order to limit each Fund's total operating expenses to an annual rate of
1.30%, 1.30%, and 0.95%, respectively, of the average daily net assets of
Class A shares and to waive the same percentage for Class B and Institutional
Class shares.
LB Research pays Rowe Price - Fleming International, Inc., an annual
sub-advisory fee for the performance of sub-advisory services for the
LB World Growth Fund. LB Research pays a portion of an annual sub-
advisory fee that is based on the following annual rates of combined
average daily net assets of the Lutheran Brotherhood World Growth Fund
and the LB Series Fund, Inc. - World Growth Portfolio: 0.75% for the
first $20 million in assets; 0.60% for the next $30 million, and 0.50%
for assets over $50 million. When combined annual average assets
exceed $200 million, the fee will be equal to 0.50% of all of the
World Growth Fund's annual average daily net assets. Rowe Price
Fleming voluntarily agreed to reduce its subadvisory fee to 0.45% of
average daily net assets when combined average daily net assets exceed
$500 million. Rowe Price Fleming has also agreed to a transitional fee
waiver which will gradually reduce subadvisory fees from 0.50% to
0.45% of combined average daily net assets. The transitional fee
waiver is in effect when combined average daily net assets are between
$450 and $500 million. The total dollar amount paid by LB Research to
Rowe Price Fleming under the investment sub-advisory contract for LB
World Growth Fund for the year ended October 31, 1999 was $449,259.
LB Research pays T. Rowe Price Associates an annual sub-advisory fee
for the performance of sub-advisory services for the LB Opportunity
Growth Fund. The fee payable will be equal to 0.30% of that Fund's
average daily net assets up to $500 million, 0.25% for the next $500
million and 0.20% for net assets over $1 billion. The total dollar
amount paid by LB Research to T. Rowe Price Associates under the
investment sub-advisory contract for LB Opportunity Growth Fund for
the year ended October 31, 1999 was $674,465.
Distribution and Shareholder Servicing Plans
The Trust has adopted a Distribution Plan (the "12b-1 Plan") under
Rule 12b-1 of the 1940 Act with respect to the Class B shares of each
Fund except for the LB Limited Maturity Bond and LB Money Market Funds.
Under the 12b-1 Plan, the Funds each pay Lutheran Brotherhood Securities
Corp. (LB Securities) at an annual rate of 0.75% of the average daily
net assets of its Class B shares. The fees collected under the 12b-1
Plan are used by LB Securities to finance activities primarily intended
to result in the sale of Class B shares of the Fund. For the year ended
October 31, 1999, LB Securities received aggregate 12b-1 fees of $876,276
from the Trust.
In addition, the Trust has adopted shareholder servicing plans for
Class A and Class B shares of each of the Funds (the "Shareholder
Servicing Plans"). Pursuant to the Shareholder Servicing Plans, each
Fund pays LB Securities an annual fee of 0.25% of the average daily
net assets of the Class A and Class B shares for financing various
shareholder servicing activities. For the year ended October 31, 1999,
LB Securities received aggregate shareholder servicing fees of
$11,216,406 from the Trust.
Sales Charges and Other Fees
For the year ended October 31, 1999, LB Securities, the Trust's
distributor, received $640,592 of aggregate underwriting concessions
from sales of Class A shares. LB Securities also received $168,009 of
aggregate contingent deferred sales charges from redemption of Class B
shares for the year ended October 31, 1999. Sales charges are not an
expense of the Trust and are not reflected in the financial statements
of any of the Funds.
LB Securities also received fees pursuant to an agreement to provide
certain administrative personnel and services to the Funds. For the
year ended October 31, 1999, LB Securities received aggregate fees for
administrative personnel and services of $936,195 from the LB Family
of Funds.
In addition, LB Securities provides the Funds with transfer agent
services pursuant to an agreement. For the year ended October 31,
1999, LB Securities received aggregate fees for transfer agent
services of $9,960,346 from the LB Family of Funds.
The Funds have adopted a trustee fee deferral plan which allows the
Trustees to defer the receipt of all or a portion of their Trustee
Fees. The deferred fees remain in the fund and are invested within the
Lutheran Brotherhood Family of Funds until distribution in accordance
with the plan.
Certain officers and non-independent trustees of the Fund are officers
and directors of LB Research and LB Securities; however, they receive
no compensation from the Funds.
(4) DISTRIBUTIONS FROM CAPITAL GAINS
During the year ended October 31, 1999, distributions from net
realized capital gains of $131,516,400 were paid by the LB Fund. These
distributions related to net capital gains realized during the prior
fiscal year ended October 31, 1998.
(5) CAPITAL LOSS CARRYOVER
At October 31, 1999, the LB Opportunity Growth Fund, LB High Yield
Fund, LB Income Fund and the LB Municipal Bond Fund had accumulated
net realized capital loss carryovers expiring as follows:
Municipal
Opportunity High Yield Income Bond
Year Growth Fund Fund Fund
- ----- ----------- ------------ ------------- ------------
2002 -- -- $28,292,105 $1,287,686
2003 -- -- -- 134,719
2004 -- -- 8,472,280 --
2006 $17,496,406 -- -- --
2007 -- $18,998,975 8,150,657 150,559
- ----- ----------- ------------ ------------- ------------
Total $17,496,406 $18,998,975 $44,915,042 $1,572,964
=========== ============ ============= ============
To the extent these Funds realize future net capital gains, taxable
distributions will be reduced by any unused capital loss carryovers.
Temporary timing differences of $162,826, $323,293, $664,040,
$2,746,655, $2,387,732, $455,371, and $1,550,283 existed between net
realized capital gains or losses for financial statement and tax
purposes as of October 31, 1999 for the Opportunity Growth, Mid Cap
Growth, World Growth, LB Fund, LB High Yield Fund, LB Income and
Municipal Bond Funds, respectively. These differences are due
primarily to deferral of capital losses for tax purposes.
(6) SHAREHOLDER NOTIFICATION OF FEDERAL INCOME TAX STATUS
The LB Fund designates 100% of the dividends declared from net
investment income as dividends qualifying for the 70% corporate
dividends received deduction and the Municipal Bond Fund designates
100% of the dividends declared from net investment income as exempt
from federal income tax for the year ended October 31, 1999. The LB
World Growth Fund, and the LB Fund designate $50,000, and $12,000,000,
respectively, as capital gain distributions resulting from earnings
and profits distributed to shareholders on redemption of fund shares
during the year.
(7) INVESTMENT TRANSACTIONS
Purchases and Sales of Investment Securities
For the year ended October 31, 1999, the cost of purchases and the
proceeds from sales of investment securities other than U.S.
Government and short term securities were as follows:
$thousands
----------------------------------
Fund Purchases Sales
- ---------------------------------------------------------------
Opportunity Growth Fund $108,741 $140,864
Mid Cap Growth Fund 95,387 79,984
World Growth Fund 20,579 16,580
LB Growth Fund 4,833 -
LB Fund 831,972 778,919
LB Value Fund 4,862 -
High Yield Fund 544,622 476,612
Income Fund 337,166 231,388
Municipal Bond Fund 129,556 116,601
Purchases and sales of U.S. Government securities were:
$thousands
----------------------------------
Fund Purchases Sales
- ---------------------------------------------------------------
LB Fund $ 11,387 $ 4,053
Income Fund 187,305 297,230
LB Limited Maturity
Bond Fund 18,202 -
Investments in Restricted Securities
The High Yield Fund owns restricted securities that were purchased in
private placement transactions without registration under the
Securities Act of 1933. Unless such securities subsequently become
registered, they generally may be resold only in privately negotiated
transactions with a limited number of purchasers. The aggregate value
of restricted securities was $301,076 at October 31, 1999, which
represented .033% of the net assets of the High Yield Fund.
Investments in High Yielding Securities
The High Yield Fund invests primarily in high yielding fixed income
securities. The Income Fund may from time to time invest up to 25% of
its total assets in high-yielding securities. These securities will
typically be in the lower rating categories or will be non-rated and
generally will involve more risk than securities in the higher rating
categories. Lower rated or unrated securities are more likely to react
to developments affecting market risk and credit risk than are more
highly rated securities, which react primarily to movements in the
general level of interest rates.
Investments in Options and Futures Contracts
The movement in the price of the instrument underlying an option or
futures contract may not correlate perfectly with the movement in the
prices of the portfolio securities being hedged. A lack of correlation
could render the Fund's hedging strategy unsuccessful and could result
in a loss to the Fund. In the event that a liquid secondary market
would not exist, the Fund could be prevented from entering into a
closing transaction which could result in additional losses to the
Fund.
Open Option Contracts
The number of contracts and premium amounts associated with call
option contracts written during the year ended October 31, 1999, were
as follows:
Mid Cap Growth Fund
--------------------------------------
Number of Premium
Contracts Amount
----------------- -----------------
Balance at October 31, 1998 -- --
Opened 40 $ 12,202
Closed (25) (8,404)
Expired -- --
Exercised (15) (3,798)
----------------- -----------------
Balance at October 31, 1999 -- $ --
================= =================
LB Fund
--------------------------------------
Number of Premium
Contracts Amount
----------------- -----------------
Balance at October 31, 1998 -- --
Opened 1,000 $ 315,049
Closed (1,000) (315,049)
Expired -- --
Exercised -- --
----------------- -----------------
Balance at October 31, 1999 -- $ --
================= =================
Income Fund
--------------------------------------
Number of Premium
Contracts Amount
----------------- ------------------
Balance at October 31, 1998 200 $ 85,380
Opened 2,825 1,291,244
Closed (1,775) (952,948)
Expired (1,248) (423,135)
Exercised (2) (541)
----------------- -----------------
Balance at October 31, 1999 -- $ --
================= =================
Foreign Denominated Investments
The LB World Growth Fund invests primarily in foreign denominated
stocks. Foreign denominated assets and currency contracts may involve
more risks than domestic transactions, including: currency risk,
political and economic risk, regulatory risk, and market risk. The
Fund may also invest in securities of companies located in emerging
markets. Future economic or political developments could adversely
affect the liquidity or value, or both, of such securities.
(8) SHARES OF BENEFICIAL INTEREST
The Master Trust Agreement permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest ($0.001
par value) of all of the Funds. Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
LB Opportunity Growth Fund:
Class A Class B Institutional Class
--------------------------- -------------------------- ------------------------------
Year Ended October 31, 1998 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sold 3,336,932 $ 37,152,820 458,678 $ 5,110,228 434,351 $ 4,632,322
Dividends and
distributions reinvested 945,910 10,311,584 1,587 17,289 7,970 86,876
Redeemed (5,968,880) (66,607,177) (10,644) (116,582) (131,340) (1,240,215)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change (1,686,038) $(19,142,773) 449,621 $ 5,010,935 310,981 $ 3,478,983
============== ============ =========== ============ =============== ============
Year Ended October 31, 1999
- ---------------------------
Sold 2,064,370 $ 21,556,635 380,619 $ 3,940,530 247,720 $ 2,628,337
Dividends and
distributions reinvested -- -- -- -- -- --
Redeemed (5,646,343) (58,881,453) (63,123) (650,267) (40,804) (446,040)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change (3,581,973) $(37,324,818) 317,496 $ 3,290,263 206,916 $ 2,182,297
============== ============ =========== ============ =============== ============
LB Mid Cap Growth Fund:
Class A Class B Institutional Class
--------------------------- -------------------------- ------------------------------
Year Ended October 31, 1998 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 2,568,750 $ 26,216,558 712,260 $ 7,245,472 18,123 $ 186,772
Dividends and
distributions reinvested 103,725 977,092 3,674 34,580 4,202 39,582
Redeemed (561,731) (5,567,363) (16,727) (158,648) (7) (58)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 2,110,744 $ 21,626,287 699,207 $ 7,121,404 22,318 $ 226,296
============== ============ =========== ============ =============== ============
Year Ended October 31, 1999
- ---------------------------
Sold 1,781,872 $ 20,551,258 603,410 $ 6,798,004 21,427 $ 273,449
Dividends and
distributions reinvested -- -- -- -- -- --
Redeemed (671,392) (7,591,154) (67,302) (744,487) -- --
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 1,110,480 $ 12,960,104 536,108 $ 6,053,517 21,427 $ 273,449
============== ============ =========== ============ =============== ============
LB World Growth Fund:
Class A Class B Institutional Class
--------------------------- -------------------------- ------------------------------
Year Ended October 31, 1998 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 1,585,145 $ 16,928,917 343,460 $ 3,708,212 254,464 $ 2,856,503
Dividends and
distributions reinvested 124,871 1,213,782 476 4,625 625 6,083
Redeemed (1,529,792) (16,363,209) (11,062) (114,391) (3,083) (34,712)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 180,224 $ 1,779,490 332,874 $ 3,598,446 252,006 $ 2,827,874
============== ============ =========== ============ =============== ============
Year Ended October 31, 1999
- ---------------------------
Sold 1,251,709 $ 14,557,340 354,371 $ 4,062,443 150,305 $ 1,757,782
Dividends and
distributions reinvested 44,575 503,400 1,895 21,242 2,813 31,782
Redeemed (1,216,624) (14,025,201) (40,246) (460,070) (7,247) (85,078)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 79,660 $ 1,035,539 316,020 $ 3,623,615 145,871 $ 1,704,486
============== ============ =========== ============ =============== ============
LB Growth Fund:
For the period from
October 29, 1999 Class A Class B Institutional Class
(effective date) through --------------------------- -------------------------- ------------------------------
October 31, 1999 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 60,606 $ 1,000,000 60,606 $ 1,000,000 181,818 $ 3,000,000
============== ============ =========== ============ =============== ============
LB Fund:
Class A Class B Institutional Class
--------------------------- -------------------------- ------------------------------
Year Ended October 31, 1998 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 4,669,377 $129,880,138 914,210 $ 25,505,223 492,025 $ 14,204,214
Dividends and
distributions reinvested 3,947,144 97,328,572 6,446 158,266 39,190 972,301
Redeemed (4,660,180) (129,581,508) (24,630) (667,875) (47,664) (1,337,121)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 3,956,341 $ 97,627,202 896,026 $ 24,995,614 483,551 $ 13,839,394
============== ============ =========== ============ =============== ============
Year Ended October 31, 1999
- ---------------------------
Sold 5,462,843 $161,392,139 1,127,468 $ 33,105,623 403,008 $ 11,859,241
Dividends and
distributions reinvested 4,892,689 126,685,832 112,817 2,898,269 100,598 2,617,183
Redeemed (4,828,700) (142,239,278) (89,802) (2,635,097) (146,279) (4,364,172)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 5,526,832 $145,838,693 1,150,483 $ 33,368,795 357,327 $ 10,112,252
============== ============ =========== ============ =============== ============
LB Value Fund:
For the period from
October 29, 1999 Class A Class B Institutional Class
(effective date) through --------------------------- -------------------------- ------------------------------
October 31, 1999 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 68,966 $ 1,000,000 68,966 $ 1,000,000 206,897 $ 3,000,000
============== ============ =========== ============ =============== ============
LB High Yield Fund:
Class A Class B Institutional Class
--------------------------- -------------------------- ------------------------------
Year Ended October 31, 1998 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 18,172,832 $168,786,677 2,353,144 $ 21,833,102 1,133,496 $ 10,601,155
Dividends and
distributions reinvested 7,301,475 66,955,002 85,254 761,182 214,572 1,963,594
Redeemed (13,270,623) (122,117,907) (56,523) (515,272) (196,259) (1,782,144)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 12,203,684 $113,623,772 2,381,875 $ 22,079,012 1,151,809 $ 10,782,605
============== ============ =========== ============ =============== ============
Year Ended October 31, 1999
- ---------------------------
Sold 15,800,062 $131,098,404 2,034,532 $ 16,873,840 412,630 $ 3,445,215
Dividends and
distributions reinvested 7,295,683 60,131,985 255,525 2,100,239 238,832 1,969,088
Redeemed (15,486,630) (128,297,384) (295,500) (2,435,182) (386,604) (3,200,806)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 7,609,115 $ 62,933,005 1,994,557 $ 16,538,897 264,858 $ 2,213,497
============== ============ =========== ============ =============== ============
LB Income Fund:
Class A Class B Institutional Class
--------------------------- -------------------------- ------------------------------
Year Ended October 31, 1998 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 6,258,736 $ 54,414,119 789,422 $ 6,853,828 1,263,720 $ 10,956,014
Dividends and
distributions reinvested 4,108,055 35,564,485 18,414 159,786 113,092 979,995
Redeemed (14,352,811) (124,540,762) (22,223) (194,180) (450,950) (3,920,321)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change (3,986,020) $(34,562,158) 785,613 $ 6,819,434 925,862 $ 8,015,688
============== ============ =========== ============ =============== ============
Year Ended October 31, 1999
- ---------------------------
Sold 7,477,866 $ 64,158,371 1,068,587 $ 9,162,226 1,296,579 $ 11,117,559
Dividends and
distributions reinvested 3,780,637 32,147,278 64,221 541,994 165,498 1,403,417
Redeemed (12,838,026) (109,371,531) (135,159) (1,144,120) (633,388) (5,342,504)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change (1,579,523) $(13,065,882) 997,649 $ 8,560,100 828,689 $ 7,178,472
============== ============ =========== ============ =============== ============
LB Municipal Bond Fund:
Class A Class B Institutional Class
--------------------------- -------------------------- ------------------------------
Year Ended October 31, 1998 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 4,760,068 $ 42,825,003 443,559 $ 3,980,577 9,238 $ 82,709
Dividends and
distributions reinvested 2,483,486 22,294,735 8,016 72,063 22,290 200,033
Redeemed (7,215,856) (64,835,794) (18,937) (172,508) (63,522) (569,854)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 27,698 $ 283,944 432,638 $ 3,880,132 (31,994) $ (287,112)
============== ============ =========== ============ =============== ============
Year Ended October 31, 1999
- ---------------------------
Sold 5,569,179 $ 49,666,295 582,310 $ 5,182,413 104,046 $ 926,294
Dividends and
distributions reinvested 2,567,321 22,717,527 28,821 253,026 24,151 213,368
Redeemed (6,907,717) (61,203,189) (44,025) (385,765) (58,094) (510,800)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 1,228,783 $ 11,180,633 567,106 $ 5,049,674 70,103 $ 628,862
============== ============ =========== ============ =============== ============
LB Limited Maturity Bond Fund:
For the period from
October 29, 1999 Class A Class B Institutional Class
(effective date) through --------------------------- -------------------------- ------------------------------
October 31, 1999 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 400,000 $ 5,000,000 400,000 $ 5,000,000 800,000 $ 10,000,000
============== ============ =========== ============ =============== ============
LB Money Market Fund:
Class A Class B Institutional Class
--------------------------- -------------------------- ------------------------------
Year Ended October 31, 1998 Shares Amount Shares Amount Shares Amount
- --------------------------- ------------ ------------ ----------- ------------ --------------- ------------
Sold 847,057,988 $847,057,988 69,710 $ 69,710 58,777,946 $ 58,777,946
Dividends and
distributions reinvested 21,123,289 21,123,289 369 369 2,433,544 2,433,544
Redeemed (791,299,855) (791,299,855) (13,680) (13,680) (66,801,180) (66,801,180)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 76,881,422 $ 76,881,422 56,399 $ 56,399 (5,589,690) $ (5,589,690)
============== ============ =========== ============ =============== ============
Year Ended October 31, 1999
- ---------------------------
Sold 936,619,749 $936,619,749 332,580 $ 332,580 85,365,826 $ 85,365,826
Dividends and
distributions reinvested 22,543,660 22,543,660 6,141 6,141 2,039,823 2,039,823
Redeemed (872,185,668) (872,185,668) (157,040) (157,040) (83,666,342) (83,666,342)
-------------- ------------ ----------- ------------ --------------- ------------
Net Change 86,977,741 $ 86,977,741 181,681 $ 181,681 3,739,307 $ 3,739,307
============== ============ =========== ============ =============== ============
</TABLE>
(9) BANK LOANS
Effective September 18, 1999, the Funds, along with the LB Series
Fund, Inc., entered into an unsecured $50 million bank line of credit
agreement with State Street Bank and Trust Company. Borrowings under
the agreement bear interest at the Federal Funds rate plus 0.50%. The
Funds may borrow money for temporary or emergency purposes to fund
shareholder redemptions. The Funds did not borrow against the line
during the period September 18, 1999, through October 31, 1999.
(10) FINANCIAL HIGHLIGHTS
"Financial Highlights" showing per share data and selected
information is presented in the prospectus.
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
LUTHERAN BROTHERHOOD GROWTH FUND
LUTHERAN BROTHERHOOD FUND
LUTHERAN BROTHERHOOD VALUE FUND
LUTHERAN BROTHERHOOD HIGH YIELD FUND
LUTHERAN BROTHERHOOD INCOME FUND
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
LUTHERAN BROTHERHOOD LIMITED MATURITY BOND FUND
LUTHERAN BROTHERHOOD MONEY MARKET FUND
TRUSTEES
Rolf F. Bjelland
Herbert F. Eggerding, Jr.
Noel K. Estenson
Jodi L. Harpstead
Richard A. Hauser
Connie M. Levi
Bruce J. Nicholson
OFFICERS
Rolf F. Bjelland James R. Olson
Chairman and President Vice President
Wade M. Voigt Brenda J. Pederson
Treasurer Vice President
Otis F. Hilbert Richard B. Ruckdashel
Secretary and Vice President Vice President
Randall L. Boushek John C. Bjork
Vice President Assistant Secretary
Frederick P. Johnson Rand E. Mattsson
Vice President Assistant Treasurer
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the
current prospectuses.
[LUTHERAN BROTHERHOOD LOGO]
LUTHERAN
BROTHERHOOD
SECURITIES CORP.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Bulk Rate
U.S. Postage
PAID
Minneapolis, MN
Permit No.1529
SC 502
[GRAPHIC OF PRINTED WITH SOY INK LOGO OMITTED]
Lutheran Brotherhood
Securities Corp.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
Bulk Rate
U.S. Postage
PAID
Minneapolis, MN
Permit No.1529
LOGO:
PRINTED WITH
SOY INK
SC 502
