Our Message To You
April 30, 1999
Dear Shareholder,
What a difference six months can make. After an extended period of
lopsided returns, investors are finally reaping the benefits of a more
dynamic investment environment -- good news for advocates of long-term
investing and risk diversification.
During the first part of 1999, both smaller-company stocks and high-
yield bonds have improved on their marginal 1998 performance to share in
the spotlight of the United States' long-running bull market. At the
same time, large-company growth stock valuations have come down
somewhat, though hardly in the manner of a bubble bursting, as many had
predicted.
These events come during a period of increasing anxiety stemming from
Year 2000 ("Y2K") issues. "Y2K" refers to the ability of computers to
accurately distinguish dates in their program codes for the year 2000
and beyond. With Year 2000 doomsayers dominating the news media, many
investors have approached me with Y2K concerns; specifically, many
question whether they should reconsider their investment strategies as
the new millenium approaches. I often tell them to use history as their
guide.
[PHOTO OMITTED: ROLF F. BJELLAND]
The past 50 years have put the financial markets through nearly every
imaginable test, including war, recession, oil crises and major
political upheaval. Despite short-term volatility, the securities
markets have not only withstood these tests, but, over time, have
thrived in spite of them. The Y2K issue is unprecedented, to be sure,
but probably no more than other watershed events of history, each with
its own array of momentous challenges.
Realistically, no investment professional can, in good faith, foretell
the effects of Y2K, or offer a single financial solution for navigating
these uncharted waters. Ultimately, the answers to Year 2000 investment
concerns lie in each investor's risk tolerance. Lutheran Brotherhood
members uncomfortable with market fluctuation, regardless of its source,
should consult their LBSC registered representative.
Using AssetMatchSM, Lutheran Brotherhood's program for personalizing
investment strategies, your representative can compare your current mix
of investments with your optimal asset allocation to determine if your
portfolio requires updating. Your representative can also assist you in
determining if your portfolio accurately reflects your risk tolerance,
time frame and long-term investment objectives.
At Lutheran Brotherhood, we are firm in the belief that all investment
decisions should be made in the context of risk diversification and a
long-term investment strategy. Using these principles, we've built a
family of mutual funds that remains an excellent means of achieving your
financial goals. Thank you for choosing Lutheran Brotherhood to serve
your financial needs.
Sincerely,
/S/ ROLF F. BJELLAND
Rolf F. Bjelland
President and Chairman
Lutheran Brotherhood Family of Funds
Economic Overview April 30, 1999
A robust economy and growing technology sector fueled the U.S. stock and
bond markets for the six-month period ending April 30, 1999. Countering
predictions for slower growth, the U.S. economy continued the second-
longest expansion in its history, providing ample rewards to investors
who stayed the course through last summer's market tremors.
Equity Performance
Despite widening market breadth, investors once again favored large-
company stocks over smaller issues throughout much of the period. The
Dow Jones Industrial Average (DJIA) soared to new heights, gaining more
in the first four months of 1999 than in all of 1998. After finishing
above the 10,000-point level on March 29, the DJIA closed the six-month
reporting period with a 26.60% gain. The large-company Standard & Poor's
500 Index advanced 22.28%, aided by frenetic bidding for technology
stocks.
April ushered in a significant shift in market sentiment, however.
Increasingly, investors began trading out of large-company growth stocks
in favor of smaller, value-oriented issues and economically sensitive
"cyclical" stocks. This rotation in market leadership provided a much-
needed boost to small- and medium-company stock prices.
Fixed Income Performance
A sharp worldwide rise in crude oil prices, coupled with continued
strong U.S. economic growth, fostered inflation concerns among many bond
investors, suppressing investment-grade bond prices. Following a global
"flight to quality" in mid-1998, demand for U.S. Treasury bonds weakened
significantly in the early part of 1999, driving Treasury yields upward.
In a turn of fortune from last year's sub-par performance, however,
high-yield bonds flourished late in the period, as investors showed
renewed interest in higher-risk corporate issues. The Lehman Brothers
High Yield Index returned a healthy 8.25% for the six-month reporting
period, reflecting a new stream of money flowing into high-yield bond
funds nationwide.
Continued Economic Growth
Strong consumer spending and technology-driven productivity gains drove
the U.S economy during the six-month period. Annualized U.S. gross
domestic product (GDP) grew an impressive 6% during the fourth quarter
of 1998, followed by a preliminary estimate of 4.1% during the first
quarter of 1999. Consumers benefited further from virtual price
stability nationwide. During the period, the U.S. unemployment rate
remained at just over 4%, as tight labor markets continued to hamper
growth in corporate earnings.
Long-term interest rates rose significantly during the period,
consequent to continued strength in the U.S. economy and improving
economic conditions elsewhere around the world. After dipping below 5%
briefly in late 1998, the 30-year Treasury bond yield rose to 5.68% by
April 30.
Year 2000 Readiness
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 to update and test 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.
Outlook
The U.S. Federal Reserve set a new course for monetary policy by
adopting an interest rate tightening bias in May. The Federal Reserve's
more hawkish posture, together with higher crude oil prices and rising
Treasury bond yields, will most likely mean higher long-term interest
rates over the coming months. Rising interest rates could, in turn, put
the reigns on high-flying stock valuations, suppress bond prices and
dampen economic growth somewhat.
Fortunately, several key regions of the world are showing signs of
emerging from recessionary conditions, which could stimulate U.S.
exports and temper the impact of rising long-term interest rates. The
Japanese government has taken steps to stimulate its flagging economy,
while developing nations like Malaysia and Singapore are beginning to
see modest economic growth. In Latin America, Brazil continues to serve
as a foundation for economic recovery.
The U.S. economy has proven remarkably resistant to economic disruptions
from overseas, but corporate profit growth has stagnated in this same
environment. However, if U.S. trade deficits continue to widen and
global economic conditions improve, the U.S. dollar could come under
pressure later in the year. These conditions could provide domestic
manufacturers with increased pricing power and a chance for profits to
catch up with lofty stock valuations.
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 many small-company stocks rebounded in the final months of
1998, as investors grew more confident about U.S. economic growth.
Beginning in 1999, however, gains in the small-cap sector were limited
to stocks of small companies with exceptionally high growth rates --
particularly stocks of Internet firms. Stocks of small companies with
greater market capitalizations also outperformed smaller issues, as they
had for some time. (Market capitalization is calculated by multiplying
the number of stock shares outstanding by the price for those shares.)
Although we cautiously added investments in firms with higher growth
rates and larger capitalizations, we continued to believe that many of
these stocks were overpriced. This focus on stocks with more reasonable
valuations caused the LB Opportunity Growth Fund to underperform its
market benchmarks for the reporting period, despite strong returns from
a wide range of the Fund's holdings.
[GRAPHIC OMITTED: pie chart PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 1.1%
Common Stocks 98.9%
The Fund's portfolio composition and top holdings represent all share
classes.
For the six months ended April 30, 1999, the Fund had a total return
(based on Class A Share NAV) of 9.32%. That compares to an average
return of 14.64% for small-company growth funds tracked by Lipper, Inc.
and a return of 15.25% for the Russell 2000 Index.
Increasing Growth and Capitalization
At the start of the period, the Fund benefited from increased positions
in stocks of consumer growth, media, telecommunications and financial
firms, all of which performed well during the small-cap rebound of
fourth quarter 1998. With investors still uncertain about future
economic growth, we reduced investments in the economically sensitive
capital goods, energy and basic materials sectors.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
% of
Top 10 Holdings Portfolio
- ----------------------------------------------------------------------
VISX, Inc. 0.9%
Level One Communications, Inc. 0.9%
Proxim, Inc. 0.9%
Sanmina Corp. 0.8%
QLogic Corp. 0.8%
Chancellor Media Corp. 0.8%
Uniphase Corp. 0.8%
Gentex Corp. 0.7%
O'Reilly Automotive, Inc. 0.7%
Outback Steakhouse, Inc. 0.7%
These holdings represent 8.0% of the Fund's total investment portfolio.
When investors shifted into higher-growth stocks in the first months of
1999, strong performances by stocks of media, financial services and
natural resources firms helped offset disappointing returns from health
care, business services and consumer cyclical shares.
During this time, we found attractive opportunities in reasonably priced
stocks with stronger growth rates, particularly in the technology,
business services, health care and media sectors. Because of their
slower growth rates, we continued to de-emphasize the economically
sensitive natural resource and basic materials groups. As of April 30,
1999, stocks in the Fund had a median projected growth rate of 23%,
versus a rate of 24% when the reporting period began. At the end of
April, stocks in the Russell 2000 Index had a median growth rate of 17%.
[GRAPHIC OMITTED: TOP 10 INDUSTRIES]
TOP 10 INDUSTRIES
Computer Service & Software 15.9%
Media & Communications 8.6%
Retail 8.1%
Business Services 7.8%
Bank & Finance 7.0%
Electronic Components 6.6%
Hospital Supplies & Management 5.5%
Pharmaceuticals 3.6%
Telecommunications Equipment 3.3%
Transportation Services 2.9%
These holdings represent 69.3% of the Fund's total investment portfolio.
The 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: 57,305
Total Assets
(in millions): $214.8
Small-Caps Remain Attractive
While some small-cap stocks have become very expensive and increasingly
volatile, many others still represent good value. Valuations for small-
cap stocks as a whole, in fact, are at a 40-year low versus other asset
class valuations. Low valuations, coupled with a tendency for investors
to broaden their horizons in recent weeks, suggest that small-cap stocks
could rebound strongly if the economic outlook remains bright.
Because we have emphasized stocks that can grow strongly even if the
economy slows, we believe the Fund can perform well in a weakened
economic environment. As before, we plan to take advantage of new
opportunities that may occur in stocks offering strong growth potential
at reasonable prices.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1999
Growth of a $10,000 Investment
Class A shares (since 1/31/93)]
Lipper Median
Month End LB Opportunity Russell 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
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
$16,370
Russell 2000
Index
$20,801
Lipper Median
Small Company
Growth Stocks
$20,561
Consumer
Price Index
$11,655
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 -17.21% 8.04% 9.27%
Public Offering Price -20.50% 7.15% 8.57%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) -17.83% -13.20%
If Redeemed (CDSC) -21.94% -15.53%
Institutional shares
Net Asset Value -17.03% -12.40%
*See accompanying notes to Portfolio Management Reviews.
LB Mid Cap Growth Fund
[PHOTO OMITTED: BRIAN L. THORKELSON]
Brian L. Thorkelson, assistant vice president of Lutheran Brotherhood
Research Corp., is portfolio manager for the LB 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.
For much of 1998, stocks with the largest capitalizations outperformed
both small- and medium-capitalization shares. (Market capitalization is
calculated by multiplying the number of stock shares outstanding by the
price of those shares.) These performance gaps have decreased in the
past six months as economic confidence has increased. During this time
an emphasis on stocks with somewhat greater capitalizations, as well as
overweightings in high-growth sectors like technology and
telecommunications, helped the LB Mid Cap Growth Fund outperform its
market benchmarks.
For the six months ended April 30, 1999 the Fund had a total return
(based on Class A Share NAV) of 27.53%. That compares to an average
return of 23.07% for mid-cap growth funds tracked by Lipper, Inc. and
18.85% for the Standard & Poor's 400 MidCap Index.
[GRAPHIC PIE CHART OMITTED: PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 3.1%
Common Stocks 96.9%
The Fund's portfolio composition and top holdings represent all share
classes.
[GRAPHIC OMITTED: TOP 10 HOLDINGS % OF PORTFOLIO]
Top 10 Holdings % Of Portfolio
- ------------------------------------------------------------------------
America Online, Inc. 1.3%
Comverse Technology, Inc. 0.8%
Xilinx, Inc. 0.7%
Abercrombie & Fitch Co., Class A 0.7%
Tyco International, Ltd. 0.7%
Fiserv, Inc. 0.6%
Lexmark International Group, Inc., Class A 0.6%
Ascend Communications, Inc. 0.6%
Uniphase Corp. 0.6%
General Instrument Corp. 0.6%
These holdings represent 7.2% of the Fund's total investment portfolio.
Technology, Communications Stocks Lead Returns
At the start of the reporting period, after finding new investment
opportunities in a sharp market correction, the Fund was overweighted in
technology, energy, health care and biotechnology stocks, and
underweighted in basic materials and capital goods stocks. In the months
that followed, we continued to add attractively priced technology stocks
and also increased the Fund's weighting in capital goods shares.
Technology stocks, particularly those of communications services and
Internet firms, gained strongly in the first quarter of 1999. Among the
top performers were shares of Terayon Communications Systems (a modem
manufacturer), Macromedia, Inc. (an Internet software producer), Verio,
Inc. (an Internet service provider) and Western Wireless Corp. (a
cellular phone carrier). Financial stocks also performed well,
particularly those tied to electronic securities trading. Shares of
capital goods firms gained sharply toward the end of the period, as
investors moved into stocks with greater economic sensitivity.
These performances helped offset disappointing returns from stocks of
some health care companies, such as Total Renal Care and Health
Management Associates, which struggled under government health care
regulations and new Medicare payment policies.
Although we trimmed the Fund's technology holdings slightly as the
sector became more expensive, strong market appreciation helped the
group's weighting increase for the period, along with the weighting for
telecommunications stocks. Shares of consumer growth stocks also
increased -- a reflection of the sustained strength in retail spending.
At the end of the period we remained underweighted in stocks of consumer
staples firms and utility companies.
[GRAPHIC OMITTED: TOP 10 INDUSTRIES]
Top 10 Industries
Electronic Equipment 10.8%
Retail 10.8%
Bank & Finance 10.1%
Services 7.8%
Drugs & Health Care 6.2%
Computer Software 5.8%
Computers & Office Equipment 5.3%
Oil & Oil Service 5.1%
Telecommunications Equipment 4.3%
Telephone & Telecommunications 4.2%
These holdings represent 70.4% of the Fund's total investment portfolio.
The 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: 20,776
Total Assets
(in millions): $58.0
A Greater Emphasis on Value
If the economic outlook remains bright, medium-company stocks should
continue to perform well. We are particularly encouraged by the
broadening of stock gains in recent weeks to include more mid-sized
issues.
As stock prices move ever higher and investors shift from growth-
oriented stocks to those with greater value, we plan to give more
attention to value issues, as well. This may include a shift into stocks
of mid-sized firms with somewhat smaller capitalizations, a decreased
focus on Internet stocks, and a greater focus on shares of semiconductor
firms. We expect to remain overweighted in technology and
telecommunications companies and maintain a neutral-to-underweighted
position in basic industry and capital goods firms.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 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 Mid Cap 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
1/31/98 10,647 12,038 11,368 10,094
2/28/98 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
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
Annualized Total Returns*
- -----------------------------------------------------------
Since
Inception
Class A shares 1 Year 5/30/97
Net Asset Value 6.35% 16.89%
Public Offering Price 2.09% 14.40%
Since
Inception
Class B shares 1 Year 10/31/97
If Held (NAV) 5.56% 12.62%
If Redeemed (CDSC) 0.56% 10.08%
Institutional shares
Net Asset Value 6.62% 13.73%
*See accompanying notes to Portfolio Management Reviews.
LB World Growth Fund
[PHOTO OMITTED: MARTIN G. WADE]
Martin G. Wade is chief executive officer and vice chairman of Rowe
Price-Fleming International, the investment subadvisor for the LB World
Growth Fund. He heads the Fund's portfolio management team and has done
so since the Fund's inception in September of 1995. Martin has been
working in research and investment management since 1968 and has been
with Rowe Price-Fleming since 1979.
As foreign economies stabilized in the last six months and stock markets
strengthened, prices of Japanese stocks outpaced prices of European
shares. The LB World Growth Fund did not fully participate in Japan's
strong economic rebound, having previously underweighted Japanese
holdings versus Morgan Stanley Capital International's Europe,
Australasia, and Far East (EAFE) Index for some time. Meanwhile, the
Fund remained overweighted in European stocks relative to the Index and
benefited from a slight overweighting in stocks of Latin American firms,
which rebounded strongly in the second half of the period.
Although the Fund earned a healthy total return of 13.12% (based on
Class A Share NAV) for the six months ended April 30, 1999, regional
weightings caused the Fund to underperform the EAFE Index, which had a
total return of 15.44%. Over the same time, international stock funds
tracked by Lipper, Inc. had an average total return of 15.08%.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Preferred Stocks 0.5%
Short-Term Securities 4.2%
Common Stocks & Warrants 95.3%
The Fund's portfolio composition and top holdings represent all share
classes.
Changing Economic Outlooks
When the period began, stocks in Europe, Asia and Latin America
represented about 72%, 21% and 4% of Fund assets, respectively, versus
73%, 27% and 0% of the EAFE Index. Stocks in Japan rose sharply in the
months that followed on encouraging economic data, continued corporate
restructuring and further stabilizing in neighboring Asian economies.
Prices for European stocks also strengthened. However, because they had
not previously experienced the sharp declines of Asian stocks, their
increase appeared much less dramatic. Fiscal reforms and restructuring
in Brazil helped the Fund's Latin American holdings improve as well.
With foreign investors further increasing their positions in Asia during
the first four months of 1999, stock prices in that region continued to
rebound, though gains were smaller than in the fourth quarter of 1998.
Meanwhile, despite a brief currency crisis in January, prices for stocks
in Latin America rose sharply as interest rates fell and investor
confidence improved. Stocks in Europe were lackluster as economic news
disappointed investors and Europe's new currency, the "euro" lost value
against the U.S. dollar.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
% of
Top 10 Holdings Country Portfolio
- ----------------------------------------------------------------------
National Westminster Bank United Kingdom 2.8%
SmithKline Beecham plc United Kingdom 1.9%
Wolters Kluwer Netherlands 1.8%
Shell Transport & Trading Co. United Kingdom 1.8%
Kingfisher United Kingdom 1.8%
Nestle SA Switzerland 1.7%
Telecom Italia Spa Italy 1.6%
ING Groep NV Netherlands 1.6%
Glaxo Wellcome United Kingdom 1.4%
Vivendi France 1.3%
These holdings represent 17.7% of the Fund's total investment portfolio.
[GRAPHIC OMITTED: TOP 10 COUNTRIES]
Top 10 Countries
- ----------------------------------------------------------------------
United Kingdom 19.4%
Japan 17.4%
France 10.2%
Netherlands 10.2%
Switzerland 6.8%
Germany 6.3%
Italy 5.7%
Spain 3.1%
Sweden 2.7%
Australia 2.5%
These countries represent 84.3% of the Fund's total investment
portfolio.
The World Growth Fund seeks long-term capital growth by investing
primarily in common stocks issued by established companies outside of
the United States.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 9/5/95
Shareholder
Accounts: 23,495
Total Assets
(in millions): $100.1
During the period, we locked in gains from European stocks that had
performed well and traded for those with greater room for growth. With a
rapid expansion in saving by European consumers, we added investments in
several insurance firms. We increased also holdings in the European
telecommunications sector. In Asia, we added telecommunications shares,
too, as well as shares of a bank in Singapore and a retailer in Japan.
At the end of the period, stocks in Europe, Asia and Latin America
represented about 70%, 24% and 5% of Fund assets, respectively, versus
70%, 30% and 0% of the EAFE Index. Holdings in the United Kingdom
increased also slightly during that time, while those in the Netherlands
decreased modestly.
Further Improvements Ahead
With continued recovery in exports to Asia and Latin America, we believe
the European economy will strengthen in coming months. European stocks
should also benefit from active corporate restructuring and industry
mergers. Stocks in Japan should gain from continued economic support
from the government, as well as from improvements in productivity.
Economic gains in other parts of Asia could be more gradual,
particularly if recent stock market rallies make governments and
businesses complacent in making necessary changes for long-term economic
growth.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1999
Growth of a $10,000 Investment
Class A shares (since 9/30/95)]
Morgan Stanley Lipper Median Consumer
Month End LB World Capital International International Price
Date Growth 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
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
Annualized Total Returns*
- -----------------------------------------------------------
Since
Inception
Class A shares 1-Year 9/5/95
Net Asset Value 6.10% 10.70%
Public Offering Price 1.86% 9.49%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 5.23% 12.65%
If Redeemed (CDSC) 0.23% 10.12%
Institutional shares
Net Asset Value 6.34% 13.78%
*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
since 1968.
As the economic outlook brightened over the last six months of the
period, stock investors continued to favor large companies for their
more reliable earnings growth. With its continuing emphasis on stocks of
large companies that are also market share leaders in their industries,
the Lutheran Brotherhood Fund outperformed its market benchmarks during
this time.
For the six months ended April 30, 1999, the Fund had a total return
(based on Class A Share NAV) of 24.12%. This compares to an average
return of 18.38% for growth and income funds tracked by Lipper, Inc.
Over the same time, the S&P 500 Index, which includes many of the
period's top-performing large-capitalization stocks, had a return of
22.28%. (Market capitalization is calculated by multiplying the number
of stock shares outstanding by the price of those shares.)
Portfolio Adjustments
Since the end of 1996, the Fund has been fully invested in larger firms
that are proven leaders in their industry groups and have strong
potential for continued long-term growth. Under this strategy, we
maintain industry sector weightings similar to those of the Fund's
Lipper group.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Short-Term Securities 2.2%
Common Stocks 97.8%
The Fund's portfolio composition and top holdings represent all share
classes.
Late in 1998, Lipper, Inc. announced new categories by which it will
compare the performances of individual stock funds. Later this year, the
Lutheran Brotherhood Fund will be placed in a newly created category,
tentatively titled "Large Cap Core Funds." In order to maintain
competitiveness in the Fund's new category, we trimmed some holdings in
energy, consumer staples, utility, financial and industrial firms and
increased the Fund's exposure to technology, service, health care and
retail stocks. The net effect of these adjustments was a slight shift in
the Fund's investment style to a greater focus on growth, which added to
performance in a market that was favoring growth stocks. To help manage
risk and volatility, we increased the Fund's number of holdings from 75
to 90 and broadened the size range for individual positions.
[GRAPHIC OMITTED:
TOP 10 INDUSTRIES % OF PORTFOLIO]
Top 10 Industries % of Portfolio
- ------------------------------------------------------------------------
Cisco Systems, Inc. 3.1%
Microsoft Corp. 3.0%
General Electric Co. 2.9%
MCI Worldcom, Inc. 2.4%
AT&T Corp. 2.3%
Intel Corp. 2.0%
Pfizer, Inc. 2.0%
American International Group, Inc. 1.9%
Merck & Co., Inc. 1.5%
Bank of America Corp. 1.5%
These holdings represent 22.6% of the Fund's total investment portfolio.
As in the past, we periodically trimmed shares of companies that had
performed well for holdings with greater room for growth. Among the new
positions we added were America Online, Sun Microsystems, Home Depot,
EMC Corp. (a manufacturer of computer storage products), Illinois Tool
Works, Omnicom Group (an international advertising agency) and At Home
Corp. (a leading cable provider of Internet services).
[GRAPHIC OMITTED: TOP 10 INDUSTRIES]
TOP 10 INDUSTRIES
- ------------------------------------------------------------------------
Bank & Finance 14.8%
Drugs & Health Care 12.1%
Computers & Office Equipment 9.6%
Retail 8.3%
Telephone & Telecommunications 7.9%
Oil & Oil Service 6.2%
Conglomerates 4.8%
Computer Software 4.0%
Chemicals 3.6%
Food & Beverage 3.2%
These holdings represent 74.5% of the Fund's total investment portfolio.
The Lutheran Brotherhood 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: 122,206
Total Assets
(in millions): $1,483.0
Well-Positioned for Stronger Growth
Toward the end of the period, investors expanded their focus to include
stocks of firms with smaller market capitalizations and greater
sensitivity to economic change. If growth remains strong, as we expect,
this trend should continue. Although stocks of small- and medium-sized
firms could start to outpace shares of larger companies in this
environment, a continued emphasis on industry leaders should help the
Fund continue to perform well against other funds with similar
investment objectives. In addition, the Fund holds many economically
sensitive issues that are poised to rebound as investor confidence
improves. If the current "market rotation" continues and larger
companies begin to lag smaller companies, we may look for opportunities
in the smaller end of the large company spectrum and in companies with
stronger ties to the economic cycle.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1999
Growth of a $10,000 Investment
Class A shares (since 4/30/89)]
Standard & Poor's Lipper Median Consumer
Month End 500 Stock Growth & Income Price
Date LB Fund Index Funds Index
- ----------------------------------------------------------------------
4/30/89 10,000 10,000 10,000 10,000
5/31/89 9,931 10,384 10,337 10,057
6/30/89 9,844 10,333 10,284 10,081
7/31/89 10,763 11,277 10,981 10,106
8/31/89 11,127 11,486 11,212 10,122
9/30/89 11,093 11,440 11,161 10,154
10/31/89 10,431 11,184 10,840 10,203
11/30/89 10,779 11,400 11,003 10,227
12/31/89 10,806 11,675 11,155 10,244
1/31/90 10,021 10,902 10,519 10,349
2/28/90 10,109 11,022 10,655 10,398
3/31/90 10,396 11,322 10,882 10,455
4/30/90 10,217 11,050 10,616 10,471
5/31/90 11,316 12,105 11,440 10,496
6/30/90 11,385 12,033 11,426 10,552
7/31/90 11,327 12,003 11,337 10,593
8/31/90 10,402 10,907 10,438 10,690
9/30/90 9,852 10,378 9,929 10,780
10/31/90 9,846 10,345 9,776 10,845
11/30/90 10,363 11,001 10,349 10,869
12/31/90 10,595 11,308 10,649 10,869
1/31/91 11,115 11,812 11,165 10,934
2/28/91 11,830 12,636 11,894 10,950
3/31/91 12,046 12,947 12,170 10,967
4/30/91 12,111 12,990 12,180 10,983
5/31/91 12,666 13,531 12,668 11,015
6/30/91 11,961 12,918 12,132 11,048
7/31/91 12,577 13,535 12,641 11,064
8/31/91 12,957 13,840 12,930 11,097
9/30/91 12,741 13,609 12,814 11,145
10/31/91 13,011 13,810 13,010 11,162
11/30/91 12,537 13,236 12,497 11,194
12/31/91 14,068 14,751 13,733 11,202
1/31/92 13,858 14,493 13,731 11,219
2/28/92 14,003 14,662 13,963 11,259
3/31/92 13,647 14,377 13,721 11,316
4/30/92 13,745 14,817 13,937 11,332
5/31/92 13,872 14,868 14,023 11,348
6/30/92 13,540 14,650 13,741 11,389
7/31/92 13,953 15,267 14,200 11,413
8/31/92 13,698 14,939 13,932 11,446
9/30/92 13,890 15,113 14,097 11,478
10/31/92 14,161 15,183 14,186 11,519
11/30/92 14,764 15,678 14,710 11,535
12/31/92 14,883 15,875 14,932 11,527
1/31/93 15,169 16,021 15,101 11,584
2/28/93 15,219 16,222 15,212 11,625
3/31/93 15,659 16,566 15,605 11,665
4/30/93 15,394 16,184 15,319 11,698
5/31/93 15,778 16,590 15,678 11,714
6/30/93 15,830 16,645 15,726 11,730
7/31/93 15,693 16,595 15,712 11,730
8/31/93 16,156 17,209 16,287 11,763
9/30/93 16,129 17,076 16,277 11,787
10/31/93 16,293 17,447 16,509 11,836
11/30/93 15,870 17,262 16,284 11,844
12/31/93 16,176 17,478 16,639 11,844
1/31/94 16,752 18,084 17,158 11,877
2/28/94 16,295 17,576 16,824 11,917
3/31/94 15,503 16,813 16,119 11,958
4/30/94 15,540 17,044 16,270 11,974
5/31/94 15,714 17,294 16,426 11,982
6/30/94 15,283 16,870 16,052 12,023
7/31/94 15,742 17,442 16,493 12,055
8/31/94 16,312 18,145 17,123 12,104
9/30/94 16,036 17,699 16,743 12,136
10/31/94 16,276 18,111 16,924 12,145
11/30/94 15,613 17,439 16,301 12,161
12/31/94 15,624 17,696 16,474 12,161
1/31/95 16,003 18,168 16,710 12,210
2/28/95 16,456 18,862 17,336 12,258
3/31/95 16,751 19,426 17,782 12,299
4/30/95 17,242 20,007 18,217 12,340
5/31/95 17,807 20,777 18,806 12,364
6/30/95 18,392 21,261 19,201 12,388
7/31/95 19,210 21,982 19,831 12,388
8/31/95 18,996 22,026 19,944 12,421
9/30/95 19,712 22,953 20,560 12,445
10/31/95 19,750 22,887 20,332 12,486
11/30/95 20,663 23,873 21,226 12,478
12/31/95 20,630 24,334 21,598 12,470
1/31/96 21,210 25,178 22,185 12,543
2/29/96 21,470 25,395 22,480 12,583
3/31/96 21,580 25,644 22,768 12,648
4/30/96 22,001 26,034 23,100 12,697
5/31/96 22,382 26,677 23,535 12,721
6/30/96 22,251 26,781 23,502 12,729
7/31/96 21,177 25,608 22,496 12,754
8/31/96 21,749 26,140 23,110 12,778
9/30/96 22,885 27,607 24,173 12,819
10/31/96 23,227 28,385 24,661 12,859
11/30/96 24,918 30,520 26,311 12,884
12/31/96 24,183 29,916 25,985 12,884
1/31/97 25,705 31,803 27,089 12,924
2/28/97 25,661 32,036 27,249 12,965
3/31/97 24,659 30,716 26,263 12,998
4/30/97 26,162 32,562 27,234 13,014
5/31/97 27,469 34,519 28,904 13,006
6/30/97 28,635 36,069 30,028 13,022
7/31/97 30,752 38,940 32,283 13,038
8/31/97 29,028 36,751 31,131 13,063
9/30/97 30,392 38,776 32,703 13,095
10/31/97 29,496 37,497 31,539 13,128
11/30/97 30,491 39,218 32,434 13,119
12/31/97 30,931 39,892 32,986 13,103
1/31/98 31,258 40,351 33,072 13,128
2/28/98 33,451 43,244 35,357 13,152
3/31/98 35,311 45,463 36,958 13,176
4/30/98 35,662 45,926 37,236 13,201
5/31/98 34,717 45,109 36,491 13,225
6/30/98 36,032 46,945 37,064 13,241
7/31/98 35,268 46,456 36,171 13,258
8/31/98 29,418 39,734 30,810 13,274
9/30/98 31,123 42,269 32,492 13,290
10/31/98 33,941 45,731 34,916 13,323
11/30/98 35,858 48,493 36,735 13,323
12/31/98 38,139 51,291 38,326 13,314
1/31/99 40,061 53,435 39,717 13,347
2/28/99 39,216 51,773 38,387 13,363
3/31/99 41,267 53,844 39,961 13,404
4/30/99 $42,127 $55,944 $41,139 $13,501
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
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value 18.13% 22.06% 15.93%
Public Offering Price 13.38% 21.06% 15.46%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 17.25% 25.99%
If Redeemed (CDSC) 12.25% 23.60%
Institutional shares
Net Asset Value 18.45% 27.24%
*See accompanying notes to Portfolio Management Reviews.
LB High Yield Fund
[PHOTO OMITTED: PAUL J. OCENASEK]
Paul J. Ocenasek, an assistant vice president of Lutheran Brotherhood,
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 has served many roles: analyst, researcher,
associate manager and portfolio manager.
After languishing for much of 1998, prices for high-yield corporate
bonds rebounded late in the year and in the first months of 1999.
Although greater economic optimism pushed interest rates higher,
dampening the prices of Treasury and investment-grade bonds, high-yield
issues experienced price gains as the outlook for corporate earnings
improved. With particularly strong returns from positions in media and
telecommunications firms, which represent a sizable portion of the LB
High Yield Fund, the Fund outpaced its market benchmarks for the six
months ended April 30, 1999.
During the reporting period, the Fund had a total return (based on Class
A Share NAV) of 10.95%. That compares with an average total return of
10.67% for high-yield bond funds tracked by Lipper, Inc. Over the same
time, the Lehman Brothers High-Yield Index had a return of 8.25%.
Maximizing the Rebound
High-yield bonds from the fast-growing media/telecommunications group
tend to fluctuate more in price than bonds in the high-yield sector as a
whole. When the high-yield market fell sharply in the third quarter of
1998, these issues were hit particularly hard. As investors later looked
for value from the high-yield sector, the recovery in
media/telecommunications debt was especially strong. Having added to the
group when prices were beaten down and had become quite attractive, we
were able to maximize the effects of this rebound. The Fund also
benefited from added holdings in issues with lower credit ratings, which
have also recovered strongly in recent months.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)]
Non-Convertible Preferred Stocks 8.5%
Common Stocks & Stock Warrants 3.1%
Short-Term Securities 2.3%
Convertible Preferred Stocks 2.3%
Foreign Government Bonds 0.4%
Corporate Bonds 83.4%
The Fund's portfolio composition and top holdings represent all share
classes.
Later in the period we took profits by trimming some
media/telecommunications issues that had performed well and invested the
proceeds in issues with greater potential for gains. We also increased
investments tied to economically sensitive sectors, such as capital
goods. Because bonds of consumer finance firms have underperformed due
to concerns about excessive consumer spending, we have trimmed the
Fund's investments in that sector slightly. Our move into lower-rated
issues also necessitated a decrease in holdings in the transportation
sector.
[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 0.0%
Ba 20.7%
B 56.4%
Caa 12.2%
Ca 1.5%
C 0.0%
D 0.1%
Non Rated 8.7%
[GRAPHIC OMITTED: TOP 10 INDUSTRIES % OF PORTFOLIO]
Top 10 Industries % of Portfolio
- ----------------------------------------------------------------------
Broadcasting 13.6%
Telecommunications - Wireline 11.7%
Telecommunications - Wireless 9.4%
Bank & Finance 4.3%
Leisure & Entertainment 3.6%
Drugs & Health Care 3.1%
Hospital Management 3.0%
Machinery & Equipment 2.6%
Telecommunications - Data/Internet 2.5%
Oil & Gas 2.4%
These bond holdings represent 56.2% of the Fund's total investment
portfolio.
[GRAPHIC OMITTED: TOP 10 HOLDINGS BY ISSUER % OF PORTFOLIO]
Top 10 Holdings by Issuer % of Portfolio
- ----------------------------------------------------------------------
NTL, Inc. 1.4%
Intermedia Capital Partners 1.2%
Intermedia Communications Inc. 1.2%
Primedia, Inc. 1.2%
Orion Network Systems, Inc. 1.1%
CSC Holdings Inc. 1.1%
United International Holdings, Inc. 1.0%
NETLINK Communications, Inc. 1.0%
Nextel Communications, Inc. 1.0%
CMS Energy Corp. 0.9%
These holdings represent 11.1% of the Fund's total investment portfolio.
The 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: 70,311
Total Assets
(in millions): $949.9
Adjusting to a Brighter Outlook
If economic growth remains positive and inflation remains in check,
high-yield bonds could continue to perform well. As a result, we expect
to maintain our current emphasis on bonds with slightly lower credit
ratings, which tend to outperform in a high-yield bull market. However,
with foreign economies still vulnerable to further weakness, we do not
plan to increase investments in the lowest tiers of quality ratings.
Should the media/telecommunications area make further gains, we may take
additional profits in this area. If the outlook for growth remains
bright, we could use the proceeds from such sales to further increase
positions in economically sensitive issues. In addition, with more gains
in oil prices possible, we may look for additional opportunities in the
energy sector.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1999
Growth of a $10,000 Investment
Class A shares (since 4/30/89)]
Lehman Lipper
LB High High Median
Month End Yield Yield High Consumer
Date Fund Index Current Price Index
- --------------------------------------------------------------------
4/30/89 10,000 10,000 10,000 10,000
5/31/89 9,814 10,194 10,144 10,057
6/30/89 10,061 10,320 10,313 10,081
7/31/89 10,026 10,307 10,328 10,106
8/31/89 10,086 10,342 10,334 10,122
9/30/89 9,878 10,168 10,172 10,154
10/31/89 9,470 9,927 9,871 10,203
11/30/89 9,413 9,907 9,822 10,227
12/31/89 9,246 9,923 9,752 10,244
1/31/90 8,963 9,710 9,501 10,349
2/28/90 8,746 9,510 9,269 10,398
3/31/90 8,783 9,759 9,378 10,455
4/30/90 8,785 9,742 9,372 10,471
5/31/90 9,074 9,931 9,577 10,496
6/30/90 9,186 10,171 9,771 10,552
7/31/90 9,349 10,444 9,973 10,593
8/31/90 8,991 9,850 9,566 10,690
9/30/90 8,592 9,131 9,084 10,780
10/31/90 8,289 8,652 8,693 10,845
11/30/90 8,422 8,922 8,728 10,869
12/31/90 8,558 8,972 8,755 10,869
1/31/91 8,606 9,218 8,878 10,934
2/28/91 9,235 10,227 9,515 10,950
3/31/91 9,675 10,829 9,989 10,967
4/30/91 10,027 11,273 10,373 10,983
5/31/91 10,118 11,293 10,437 11,015
6/30/91 10,405 11,628 10,657 11,048
7/31/91 10,695 12,000 10,975 11,064
8/31/91 10,853 12,276 11,181 11,097
9/30/91 11,025 12,446 11,369 11,145
10/31/91 11,421 12,862 11,732 11,162
11/30/91 11,596 12,929 11,841 11,194
12/31/91 11,646 13,115 11,944 11,202
1/31/92 12,185 13,577 12,418 11,219
2/28/92 12,526 13,912 12,715 11,259
3/31/92 12,753 14,085 12,912 11,316
4/30/92 12,864 14,138 13,005 11,332
5/31/92 13,065 14,338 13,195 11,348
6/30/92 13,140 14,472 13,328 11,389
7/31/92 13,368 14,691 13,566 11,413
8/31/92 13,551 14,883 13,739 11,446
9/30/92 13,689 15,035 13,880 11,478
10/31/92 13,441 14,823 13,648 11,519
11/30/92 13,675 15,010 13,850 11,535
12/31/92 13,989 15,181 14,035 11,527
1/31/93 14,564 15,623 14,416 11,584
2/28/93 14,740 15,898 14,695 11,625
3/31/93 15,024 16,103 14,985 11,665
4/30/93 15,084 16,243 15,104 11,698
5/31/93 15,339 16,436 15,342 11,714
6/30/93 15,812 16,781 15,698 11,730
7/31/93 15,938 16,944 15,854 11,730
8/31/93 16,066 17,087 15,971 11,763
9/30/93 16,059 17,131 16,021 11,787
10/31/93 16,562 17,477 16,380 11,836
11/30/93 16,624 17,561 16,484 11,844
12/31/93 16,908 17,779 16,728 11,844
1/31/94 17,406 18,164 17,126 11,877
2/28/94 17,346 18,117 17,094 11,917
3/31/94 16,703 17,432 16,544 11,958
4/30/94 16,448 17,314 16,304 11,974
5/31/94 16,512 17,323 16,341 11,982
6/30/94 16,522 17,376 16,318 12,023
7/31/94 16,388 17,524 16,289 12,055
8/31/94 16,509 17,648 16,299 12,104
9/30/94 16,431 17,650 16,299 12,136
10/31/94 16,484 17,692 16,282 12,145
11/30/94 16,088 17,470 16,064 12,161
12/31/94 16,014 17,599 16,083 12,161
1/31/95 16,086 17,838 16,214 12,210
2/28/95 16,699 18,450 16,655 12,258
3/31/95 16,871 18,649 16,806 12,299
4/30/95 17,278 19,123 17,216 12,340
5/31/95 17,629 19,658 17,599 12,364
6/30/95 17,724 19,790 17,653 12,388
7/31/95 18,282 20,039 17,964 12,388
8/31/95 18,359 20,102 18,012 12,421
9/30/95 18,518 20,349 18,227 12,445
10/31/95 18,616 20,475 18,372 12,486
11/30/95 18,839 20,655 18,496 12,478
12/31/95 19,118 20,979 18,777 12,470
1/31/96 19,576 21,349 19,167 12,543
2/29/96 20,079 21,366 19,330 12,583
3/31/96 19,883 21,351 19,259 12,648
4/30/96 19,986 21,398 19,411 12,697
5/31/96 20,176 21,526 19,562 12,721
6/30/96 20,020 21,705 19,588 12,729
7/31/96 19,863 21,805 19,693 12,754
8/31/96 20,190 22,040 20,007 12,778
9/30/96 20,855 22,571 20,531 12,819
10/31/96 20,783 22,745 20,642 12,859
11/30/96 20,982 23,193 21,023 12,884
12/31/96 21,213 23,360 21,274 12,884
1/31/97 21,465 23,589 21,486 12,924
2/28/97 21,741 23,978 21,871 12,965
3/31/97 21,057 23,621 21,436 12,998
4/30/97 21,056 23,869 21,609 13,014
5/31/97 21,863 24,380 22,165 13,006
6/30/97 22,459 24,719 22,524 13,022
7/31/97 23,231 25,399 23,109 13,038
8/31/97 23,301 25,340 23,156 13,063
9/30/97 24,010 25,842 23,697 13,095
10/31/97 23,783 25,865 23,605 13,128
11/30/97 23,830 26,113 23,794 13,119
12/31/97 24,072 26,343 24,060 13,103
1/31/98 24,561 26,817 24,522 13,128
2/28/98 24,898 26,976 24,706 13,152
3/31/98 25,212 27,229 25,020 13,176
4/30/98 25,079 27,335 25,090 13,201
5/31/98 24,999 27,431 25,095 13,225
6/30/98 25,107 27,530 25,118 13,241
7/31/98 25,241 27,687 25,294 13,258
8/31/98 23,256 26,158 23,581 13,274
9/30/98 22,928 26,276 23,423 13,290
10/31/98 22,462 25,737 22,915 13,323
11/30/98 23,546 26,806 24,184 13,323
12/31/98 23,604 26,835 24,097 13,314
1/31/99 23,974 27,232 24,459 13,347
2/28/99 23,887 27,072 24,376 13,363
3/31/99 24,147 27,329 24,729 13,404
4/30/99 $24,920 $27,859 $25,261 $13,501
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
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value -0.63% 8.66% 10.00%
Public Offering Price -4.56% 7.77% 9.56%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) -1.45% 2.44%
If Redeemed (CDSC) -6.38% -0.22%
Institutional shares
Net Asset Value -0.38% 3.50%
*See accompanying notes to Portfolio Management Reviews.
[PHOTO OMITTED: CHARLES E. HEEREN AND MICHAEL G. LANDREVILLE]
LB Income Fund
Charles E. Heeren (on right), a vice president of Lutheran Brotherhood,
is a Chartered Financial Analyst and co-portfolio manager for the LB
Income Fund. He has managed the Fund since January 1986, and has been
with Lutheran Brotherhood since 1976.
Michael G. Landreville, an assistant vice president of Lutheran
Brotherhood, is a Chartered Financial Analyst and co-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.
As investors became more confident about economic growth over the last
six months, demand shifted from U.S. Treasury bonds and other government
issues to corporate bonds. Looking for value in the corporate sector,
investors gave particular attention to higher-yielding issues from
economically sensitive industries. By anticipating this shift and
increasing investments in these "cyclical" corporate bonds with greater
yields, we helped support returns for the LB Income Fund.
For the six months ended April 30, 1999, the Fund earned a total return
(based on Class A Share NAV) of 0.94%, versus an average total return of
0.38% for the high-quality corporate bond funds tracked by Lipper, Inc.
Over the same time, the Lehman Aggregate Bond Index, which has a larger
representation of government securities, returned 0.69%.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
U.S. Government 14.7%
Asset-Backed Securities 8.5%
Mortgage-Backed Securities 7.4%
Short-Term Securities 4.5%
U.S. Government agency 3.4%
Foreign Government Bonds 3.3%
Preferred Stocks 0.7%
Common Stocks 0.1%
Corporate Bonds 57.4%
The Fund's portfolio composition and top holdings represent all share
classes.
The "Flight to Quality" Ends
In the second and third quarters of 1998, with investors uncertain where
the economy would head, we had increased positions in U.S. Treasuries
and trimmed investments in higher-yielding corporate debt with lower
credit quality. However, during the fourth quarter of 1998, we traded
Treasuries for high-quality corporates and issues of U.S. government
agencies. The corporates we bought included issues from the financial
sector, whose prices had been hit particularly hard by economic problems
abroad. We also added issues of economically "defensive" firms, as well
as those of telecommunications, electric and utility companies.
Besides supporting the Fund's income, these issues performed well when
investors shifted their focus from Treasuries to corporates in the first
months of 1999. As the economic outlook brightened, we further reduced
investments in government issues and added corporate debt with slightly
higher yields and somewhat lower credit ratings, including corporates
from "cyclical" sectors that are more sensitive to economic change. For
example, we increased the Fund's weighting in the energy sector, which
benefited from rising oil prices during the period. With rising bond
yields putting downward pressure on prices, we also gave somewhat
greater attention to issues with shorter maturities. When prices fall,
bonds with shorter maturities tend to experience less price erosion than
longer-term issues.
[GRAPHIC OMITTED:
TOP 10 HOLDINGS SECURITY % OF PORTFOLIO]
% Of
Top 10 Holdings Security Portfolio
- ----------------------------------------------------------------------
U.S. Treasury Bonds (Nov. 2022) U.S. Government 3.8%
U.S. Treasury Bonds (Nov. 2010) U.S. Government 3.6%
U.S. Treasury Bonds (Nov. 2016) U.S. Government 3.0%
Government National Mortgage
Association Mortgage-backed 2.5%
World Financial Network Credit
Card Master Trust Asset-backed 2.0%
Federal National Mortgage
Association U.S. Government Agency 1.8%
Standard Credit Master Trust 1 Asset-backed 1.7%
General Electric Capital Corp. Corporate 1.6%
Federal National Mortgage
Association (May 2029) Mortgage-backed 1.5%
U.S. Treasury Notes (July 2006) U.S. Government 1.5%
These holdings represent 23.0% of the Fund's total investment portfolio.
[GRAPHIC BAR CHART OMITTED:
MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 38.9%
Aa 9.8%
A 19.5%
Baa 21.0%
Ba 10.0%
B 0.8%
Caa 0.0%
Ca 0.0%
C 0.0%
D 0.0%
Non Rated 0.0%
The Income Fund seeks high current income while preserving principal
and, secondarily, long-term growth 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: 56,364
Total Assets
(in millions): $770.5
Positioned for Further Growth
We believe the Fund is well-positioned for an environment of continued
economic growth and low inflation. If growth should slow or inflation
should pick up, we may once again trade some corporate bonds for Treasuries
and increase investments in higher-quality corporates from economically
defensive sectors. In the meantime, the Fund should benefit from the
increased income and value these issues provide.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1999
Growth of a $10,000 Investment
Class A shares (since 4/30/89)]
Lehman Lipper
Aggregate Median
Month End LB Income Bond Corp. Consumer
Date Fund Index Debt A Price Index
- -----------------------------------------------------------------------
4/30/89 10,000 10,000 10,000 10,000
5/31/89 9,839 10,263 10,235 10,057
6/30/89 10,192 10,575 10,535 10,081
7/31/89 10,352 10,800 10,713 10,106
8/31/89 10,219 10,640 10,573 10,122
9/30/89 10,263 10,695 10,610 10,154
10/31/89 10,437 10,958 10,830 10,203
11/30/89 10,506 11,062 10,906 10,227
12/31/89 10,481 11,092 10,922 10,244
1/31/90 10,345 10,960 10,770 10,349
2/28/90 10,379 10,995 10,779 10,398
3/31/90 10,377 11,002 10,786 10,455
4/30/90 10,249 10,901 10,662 10,471
5/31/90 10,511 11,224 10,962 10,496
6/30/90 10,647 11,405 11,136 10,552
7/31/90 10,760 11,562 11,271 10,593
8/31/90 10,565 11,407 11,077 10,690
9/30/90 10,594 11,502 11,117 10,780
10/31/90 10,689 11,648 11,237 10,845
11/30/90 10,917 11,898 11,488 10,869
12/31/90 11,077 12,084 11,667 10,869
1/31/91 11,213 12,234 11,787 10,934
2/28/91 11,375 12,338 11,915 10,950
3/31/91 11,471 12,423 11,996 10,967
4/30/91 11,635 12,557 12,143 10,983
5/31/91 11,731 12,630 12,203 11,015
6/30/91 11,718 12,624 12,181 11,048
7/31/91 11,858 12,799 12,334 11,064
8/31/91 12,111 13,075 12,629 11,097
9/30/91 12,381 13,341 12,904 11,145
10/31/91 12,467 13,489 13,019 11,162
11/30/91 12,567 13,613 13,134 11,194
12/31/91 12,987 14,017 13,604 11,202
1/31/92 12,837 13,827 13,392 11,219
2/28/92 12,891 13,917 13,459 11,259
3/31/92 12,884 13,839 13,391 11,316
4/30/92 12,936 13,938 13,461 11,332
5/31/92 13,182 14,202 13,733 11,348
6/30/92 13,396 14,398 13,934 11,389
7/31/92 13,716 14,691 14,300 11,413
8/31/92 13,841 14,840 14,414 11,446
9/30/92 14,026 15,016 14,593 11,478
10/31/92 13,798 14,817 14,345 11,519
11/30/92 13,802 14,820 14,342 11,535
12/31/92 14,027 15,055 14,582 11,527
1/31/93 14,313 15,344 14,895 11,584
2/28/93 14,616 15,613 15,232 11,625
3/31/93 14,666 15,678 15,287 11,665
4/30/93 14,766 15,788 15,388 11,698
5/31/93 14,768 15,809 15,392 11,714
6/30/93 15,046 16,095 15,734 11,730
7/31/93 15,180 16,187 15,852 11,730
8/31/93 15,477 16,470 16,216 11,763
9/30/93 15,529 16,514 16,265 11,787
10/31/93 15,598 16,575 16,340 11,836
11/30/93 15,386 16,435 16,132 11,844
12/31/93 15,447 16,523 16,202 11,844
1/31/94 15,647 16,746 16,446 11,877
2/28/94 15,294 16,455 16,085 11,917
3/31/94 14,834 16,049 15,663 11,958
4/30/94 14,705 15,920 15,488 11,974
5/31/94 14,663 15,919 15,440 11,982
6/30/94 14,566 15,884 15,387 12,023
7/31/94 14,879 16,200 15,661 12,055
8/31/94 14,873 16,219 15,664 12,104
9/30/94 14,596 15,981 15,420 12,136
10/31/94 14,535 15,966 15,377 12,145
11/30/94 14,546 15,931 15,346 12,161
12/31/94 14,696 16,041 15,455 12,161
1/31/95 14,985 16,359 15,719 12,210
2/28/95 15,311 16,748 16,076 12,258
3/31/95 15,415 16,850 16,185 12,299
4/30/95 15,651 17,086 16,405 12,340
5/31/95 16,321 17,747 17,093 12,364
6/30/95 16,446 17,877 17,209 12,388
7/31/95 16,324 17,838 17,132 12,388
8/31/95 16,547 18,053 17,348 12,421
9/30/95 16,694 18,229 17,523 12,445
10/31/95 16,937 18,465 17,770 12,486
11/30/95 17,202 18,742 18,045 12,478
12/31/95 17,462 19,005 18,314 12,470
1/31/96 17,553 19,130 18,400 12,543
2/29/96 17,148 18,797 18,019 12,583
3/31/96 16,960 18,666 17,872 12,648
4/30/96 16,851 18,561 17,738 12,697
5/31/96 16,822 18,524 17,702 12,721
6/30/96 17,038 18,772 17,909 12,729
7/31/96 17,071 18,823 17,945 12,754
8/31/96 16,980 18,791 17,902 12,778
9/30/96 17,302 19,118 18,219 12,819
10/31/96 17,710 19,542 18,618 12,859
11/30/96 18,056 19,877 18,962 12,884
12/31/96 17,848 19,692 18,759 12,884
1/31/97 17,904 19,753 18,793 12,924
2/28/97 17,958 19,802 18,848 12,965
3/31/97 17,693 19,582 18,616 12,998
4/30/97 17,921 19,876 18,871 13,014
5/31/97 18,085 20,065 19,031 13,006
6/30/97 18,354 20,304 19,263 13,022
7/31/97 18,886 20,852 19,828 13,038
8/31/97 18,676 20,675 19,606 13,063
9/30/97 18,971 20,981 19,902 13,095
10/31/97 19,135 21,285 20,158 13,128
11/30/97 19,210 21,383 20,239 13,119
12/31/97 19,340 21,599 20,439 13,103
1/31/98 19,620 21,875 20,703 13,128
2/28/98 19,629 21,858 20,666 13,152
3/31/98 19,728 21,932 20,728 13,176
4/30/98 19,829 22,046 20,821 13,201
5/31/98 19,999 22,256 21,027 13,225
6/30/98 20,193 22,445 21,202 13,241
7/31/98 20,202 22,492 21,210 13,258
8/31/98 20,305 22,859 21,501 13,274
9/30/98 20,877 23,393 21,980 13,290
10/31/98 20,746 23,269 21,758 13,323
11/30/98 20,993 23,402 21,915 13,323
12/31/98 21,062 23,472 21,992 13,314
1/31/99 21,254 23,639 22,154 13,347
2/28/99 20,773 23,225 21,669 13,363
3/31/99 20,893 23,353 21,801 13,404
4/30/99 $20,941 $23,428 $21,843 $13,501
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
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value 5.61% 7.32% 8.11%
Public Offering Price 1.38% 6.45% 7.67%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 4.75% 5.38%
If Redeemed (CDSC) -0.25% 2.76%
Institutional shares
Net Asset Value 5.88% 6.48%
*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.
As investors became more optimistic about economic growth in the last
six months and the earlier flight to Treasury bonds subsided, gains in
municipal bond prices outpaced those of Treasuries. Many investors
turned to the municipal sector because of the substantial value it
offered. By emphasizing issues with particularly strong value, we helped
the LB Municipal Bond Fund take better advantage of this environment.
For the six months ended April 30, 1999, the Fund earned a total return
(based on Class A Share NAV) of 1.17%. That compares to a return of
1.75% for the Lehman Municipal Bond Index and an average return of 1.20%
for municipal bond funds tracked by Lipper, Inc.
Staying Focused on Value
For much of 1998, falling interest rates had encouraged a historically
strong supply of new municipal issues, as local governments and agencies
took advantage of lower-cost financing of projects. However, lower
municipal bond yields simultaneously discouraged investor demand. As a
result, municipal bonds had underperformed U.S. Treasuries, primarily
because economic uncertainty had drawn global investors to the safety of
Treasuries.
[GRAPHIC OMITTED: pie chart PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Electric Revenue 11.6%
Health Care 10.3%
Lease Revenue 5.5%
Water & Sewer 5.5%
Airport Revenue 4.6%
Housing Finance 4.4%
Special Tax Revenue 3.9%
Pollution Control-Electric 3.2%
Surface Transportation 2.8%
Education Revenue 2.4%
Industrial Revenue 0.5%
Miscellaneous Municipals 0.4%
Escrowed/Pre-refunded 29.2%
General Obligation 15.7%
The Fund's portfolio composition and top holdings represent all share
classes.
As interest rates rose from the end of 1998 through the first months of
1999 and issuers finished the refunding of existing securities,
municipal bond supplies declined. With an increase in yields and a shift
away from Treasury bonds, the demand for municipal bonds began to
improve. Although issues with lower credit ratings tended to outperform
higher-quality issues (where the Fund concentrates its investments), the
Fund benefited from securities acquired when prices were particularly
attractive.
With strong value in the portfolio, we made few changes in the
investment mix. The primary addition was an airport-issued security that
enhanced value without extra interest rate risk. Where possible, we took
advantage of investment opportunities as the spreads between yields of
different maturities changed. During the period, the portfolio
experienced a slight increase in credit quality, due to the pre-
refunding of certain issues. Additionally, we decreased our emphasis on
investments from California somewhat as we acquired holdings from other
states.
New Opportunities
Because the global "flight to quality" of late 1998 largely reversed
course during the six-month period, prices of municipal bonds finished
April more in line with prices of U.S. Treasuries. With yields higher
than they were at the start of the period and many state and local
governments flush with cash, we expect municipal supplies to remain
lower than they were in 1998. This, combined with continued optimism
about the economy, should help municipal bond returns remain strong
versus Treasuries.
[GRAPHIC BAR CHART OMITTED:
MOODY'S BOND QUALITY RATING DISTRIBUTION]
Moody's Bond Quality
Rating Distribution
Aaa 72.7%
Aa 16.3%
A 5.9%
Baa 4.8%
Ba 0.3%
B 0.0%
Caa 0.0%
Ca 0.0%
C 0.0%
D 0.0%
Non Rated 0.0%
The Municipal Bond Fund seeks a high level of current income which is
exempt from federal income tax by investing primarily in investment-
grade municipal bonds.
[GRAPHIC OMITTED: FUND FACTS]
Fund Facts
Inception Date: 12/3/76
Shareholder
Accounts: 21,232
Total Assets
(in millions): $619.7
If inflation worries cause bond yields to rise further, we may find new
opportunities to invest in municipals at attractive prices. With prices
for hospital bonds on the weak side, we may look for buying
opportunities in that sector. We could finance future purchases with
sales of pre-refunded issues, many of which have achieved most of their
expected price gains.
However, we will be very judicious in our trading of these pre-refunded
issues, as we balance the implications of their income and total return
potentials on the Fund.
[GRAPHIC WORM CHART OMITTED:
Performance Through April 30, 1999
Growth of $10,000 Investement
Class A shares (since 4/30/89)
Lipper
Median
General
Lehman Municipal
Month End LB Municipal Municipal Debt Consumer Price
Date Bond Fund Bond Index Funds Index
- -----------------------------------------------------------------------
4/30/89 10,000 10,000 10,000 10,000
5/31/89 9,776 10,208 10,186 10,057
6/30/89 9,869 10,347 10,318 10,081
7/31/89 9,987 10,488 10,425 10,106
8/31/89 9,890 10,385 10,313 10,122
9/30/89 9,841 10,354 10,279 10,154
10/31/89 9,973 10,480 10,403 10,203
11/30/89 10,142 10,663 10,567 10,227
12/31/89 10,227 10,751 10,639 10,244
1/31/90 10,090 10,700 10,525 10,349
2/28/90 10,163 10,795 10,629 10,398
3/31/90 10,174 10,799 10,625 10,455
4/30/90 10,060 10,721 10,489 10,471
5/31/90 10,298 10,955 10,762 10,496
6/30/90 10,424 11,051 10,864 10,552
7/31/90 10,586 11,214 11,043 10,593
8/31/90 10,365 11,051 10,803 10,690
9/30/90 10,399 11,058 10,818 10,780
10/31/90 10,565 11,258 10,975 10,845
11/30/90 10,809 11,484 11,231 10,869
12/31/90 10,897 11,530 11,279 10,869
1/31/91 11,052 11,684 11,418 10,934
2/28/91 11,114 11,786 11,484 10,950
3/31/91 11,127 11,791 11,507 10,967
4/30/91 11,285 11,948 11,675 10,983
5/31/91 11,362 12,054 11,780 11,015
6/30/91 11,317 12,042 11,744 11,048
7/31/91 11,492 12,189 11,913 11,064
8/31/91 11,625 12,350 12,065 11,097
9/30/91 11,829 12,510 12,221 11,145
10/31/91 11,921 12,623 12,330 11,162
11/30/91 11,930 12,658 12,347 11,194
12/31/91 12,223 12,930 12,639 11,202
1/31/92 12,228 12,960 12,630 11,219
2/28/92 12,206 12,964 12,647 11,259
3/31/92 12,205 12,969 12,652 11,316
4/30/92 12,344 13,085 12,769 11,332
5/31/92 12,513 13,239 12,948 11,348
6/30/92 12,728 13,461 13,183 11,389
7/31/92 13,168 13,865 13,650 11,413
8/31/92 12,933 13,729 13,432 11,446
9/30/92 12,970 13,819 13,485 11,478
10/31/92 12,824 13,683 13,243 11,519
11/30/92 13,121 13,928 13,580 11,535
12/31/92 13,317 14,070 13,747 11,527
1/31/93 13,446 14,233 13,903 11,584
2/28/93 13,940 14,749 14,448 11,625
3/31/93 13,847 14,592 14,279 11,665
4/30/93 13,978 14,740 14,433 11,698
5/31/93 14,046 14,822 14,515 11,714
6/30/93 14,308 15,070 14,765 11,730
7/31/93 14,312 15,089 14,765 11,730
8/31/93 14,626 15,403 15,092 11,763
9/30/93 14,793 15,579 15,271 11,787
10/31/93 14,888 15,608 15,301 11,836
11/30/93 14,720 15,471 15,140 11,844
12/31/93 15,044 15,797 15,442 11,844
1/31/94 15,211 15,978 15,619 11,877
2/28/94 14,781 15,564 15,204 11,917
3/31/94 14,090 14,930 14,539 11,958
4/30/94 14,156 15,057 14,592 11,974
5/31/94 14,291 15,188 14,723 11,982
6/30/94 14,182 15,096 14,627 12,023
7/31/94 14,441 15,372 14,886 12,055
8/31/94 14,490 15,426 14,923 12,104
9/30/94 14,293 15,199 14,682 12,136
10/31/94 14,006 14,928 14,403 12,145
11/30/94 13,737 14,658 14,105 12,161
12/31/94 14,055 14,981 14,449 12,161
1/31/95 14,484 15,409 14,878 12,210
2/28/95 14,950 15,857 15,320 12,258
3/31/95 15,109 16,040 15,458 12,299
4/30/95 15,123 16,059 15,456 12,340
5/31/95 15,632 16,571 15,938 12,364
6/30/95 15,425 16,427 15,765 12,388
7/31/95 15,532 16,583 15,866 12,388
8/31/95 15,728 16,794 16,040 12,421
9/30/95 15,849 16,900 16,138 12,445
10/31/95 16,102 17,145 16,385 12,486
11/30/95 16,431 17,429 16,699 12,478
12/31/95 16,611 17,597 16,885 12,470
1/31/96 16,734 17,730 16,964 12,543
2/29/96 16,591 17,610 16,830 12,583
3/31/96 16,314 17,384 16,562 12,648
4/30/96 16,228 17,336 16,488 12,697
5/31/96 16,218 17,329 16,491 12,721
6/30/96 16,385 17,518 16,646 12,729
7/31/96 16,533 17,677 16,796 12,754
8/31/96 16,524 17,673 16,783 12,778
9/30/96 16,771 17,921 17,023 12,819
10/31/96 16,960 18,123 17,206 12,859
11/30/96 17,288 18,455 17,509 12,884
12/31/96 17,182 18,378 17,432 12,884
1/31/97 17,214 18,412 17,434 12,924
2/28/97 17,366 18,582 17,586 12,965
3/31/97 17,136 18,335 17,357 12,998
4/30/97 17,250 18,489 17,499 13,014
5/31/97 17,505 18,766 17,750 13,006
6/30/97 17,680 18,967 17,941 13,022
7/31/97 18,203 19,492 18,481 13,038
8/31/97 17,990 19,309 18,261 13,063
9/30/97 18,270 19,539 18,482 13,095
10/31/97 18,365 19,664 18,595 13,128
11/30/97 18,482 19,780 18,699 13,119
12/31/97 18,786 20,069 18,995 13,103
1/31/98 18,987 20,275 19,171 13,128
2/28/98 18,979 20,281 19,160 13,152
3/31/98 18,970 20,300 19,164 13,176
4/30/98 18,877 20,208 19,041 13,201
5/31/98 19,188 20,528 19,355 13,225
6/30/98 19,265 20,608 19,419 13,241
7/31/98 19,299 20,659 19,446 13,258
8/31/98 19,614 20,979 19,748 13,274
9/30/98 19,887 21,242 19,985 13,290
10/31/98 19,857 21,242 19,909 13,323
11/30/98 19,914 21,316 19,968 13,323
12/31/98 19,949 21,369 20,004 13,314
1/31/99 20,183 21,624 20,226 13,347
2/28/99 20,041 21,528 20,093 13,363
3/31/99 20,054 21,559 20,095 13,404
4/30/99 $20,090 $21,613 $20,143 $13,501
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
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value 6.43% 7.25% 7.66%
Public Offering Price 2.16% 6.38% 7.22%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 5.57% 5.35%
If Redeemed (CDSC) 0.57% 2.73%
Institutional shares
Net Asset Value 6.69% 6.45%
*See accompanying notes to Portfolio Management Reviews.
LB Money Market Fund
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.
Yields in money market funds remained in a relatively narrow range
during the six months ended April 30, 1999. On November 17, 1998, the
Federal Open Market Committee enacted the third short-term rate decrease
in a series of moves aimed at easing world economic concerns. The 0.25%
November rate cut reduced the Fed Funds rate to 4.75%. Throughout the
final quarter of 1998, the LB Money Market Fund maintained its weighted
average maturity, adding longer-maturity investments only when upticks
in market volatility provided additional yield opportunities. By taking
advantage of these opportunities, which surfaced more frequently at
year-end, we helped the Fund earn a total return of 2.09% for the six-
month period.
Emphasizing Longer Maturities
On November 1, 1998, when the reporting period began, money market funds
in the IBC Donoghueis Index had an average yield of 4.72%. The LB Money
Market Fund had a weighted average maturity of 48 days at that time,
compared to 58 days for the Index. In September and October, the Federal
Reserve had made two 0.25% cuts to short-term interest rates to preserve
U.S. economic growth and restore liquidity to world financial markets.
With investors expecting additional cuts, the yields for longer-maturity
money market instruments had fallen below those of shorter-term
instruments, making longer maturities less attractive. This, plus the
likelihood that short-term yields were bottoming, encouraged us to
emphasize shorter-term issues.
[GRAPHIC PIE CHART OMITTED:
PORTFOLIO COMPOSITION (% OF PORTFOLIO)]
Portfolio Composition (% of Portfolio)
Variable Rate Notes 10.4%
Certificates of Deposit 8.1%
U.S. Government Agency 1.5%
Medium-Term Notes 0.5%
Commercial Paper 79.6%
The Fund's portfolio composition and top holdings represent all share
classes.
On November 17, the Fed cut short-term rates by another 0.25% and
indicated that additional evidence of economic deterioration would be
necessary before any further cuts were made. With positive economic
signals and upward pressure especially from year-end technical factors,
money market yields began to move higher. After reaching a low of 4.50%,
the average yield for money market funds in the Donoghue Index stood at
4.53% when 1998 ended. Because of our earlier emphasis on shorter
maturities, the Fund had the cash needed to move into higher-yielding
instruments relatively quickly. By the end of 1998, with the purchase of
longer-maturity investments that let us lock in the higher yields for a
longer time, the Fund had a weighted average maturity of 55 days.
During the first months of 1999 we sought to maintain a strong yield and
longer maturity structure in the face of large cash inflows. As strong
economic data sparked concerns that the Fed might raise short-term rates
to curb inflation, which put upward pressure on yields, we further
increased investments in longer maturities. By the end of April, the
Fund had an average weighted maturity of 66 days, versus 61 days for the
Index.
During the period we continued to seize special yield opportunities that
market fluctuations created. This included additions of instruments
issued by industrial firms and debt issued in the U.S. by foreign
companies. For the most part, however, the list of issuers represented
in the Fund remained relatively stable. As always, we maintained a very
high level of credit quality.
[GRAPHIC OMITTED: TOP 10 HOLDINGS INDUSTRY % OF PORTFOLIO]
% of
Top 10 Holdings Industry Portfolio
- --------------------------------------------------------------------
CIT Group Inc. Finance-Commercial 4.8%
General Electric Capital Corp. Finance-Commercial 4.8%
Morgan Guaranty Trust Co. New York Finance-Commercial 4.4%
Yale University Education 4.3%
Chevron Transport Corp. Industrial 4.2%
Corporate Asset Funding Co. Finance-Structured 4.1%
DaimlerChrysler NA Holdings Finance-Automotive 3.8%
Prudential Funding Corp. Insurance 3.8%
Transamerica Finance Corp. Finance-Consumer 3.6%
Duke University Education 3.2%
These holdings represent 41.0% of the Fund's total investment portfolio.
The 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: 60,976
Total Assets
(in millions): $598.5
Anticipating a Further Rise in Yields
In the weeks since the end of the reporting period, the short-term yield
curve has steepened, reflecting increasing investor sentiment that the
Fed will raise short-term rates. Given this environment, the Fund has
increased its position in shorter-maturity securities in anticipation of
bouts of temporary market weakness, and the higher yields available
during those periods.
[GRAPHIC OMITTED: PERFORMANCE AS OF 4/30/99]
Performance as of 4/30/99
LB Money Market Fund
Annualized Total Returns*
- -----------------------------------------------------------
Class A shares 1-Year 5-Year 10-Year
Net Asset Value 4.49% 4.60% 4.72%
Since
Inception
Class B shares 1-Year 10/31/97
If Held (NAV) 4.49% 4.63%
Seven-Day Yields ***
- -----------------------------------------------------------
Effective 4.00%
Annualized Current Net 4.08%
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.
<TABLE>
<CAPTION>
Results of Special Shareholder Meeting -- 12/2/98 (unaudited)
A special meeting of the shareholders of each series of the Lutheran Brotherhood Family of Funds (LB Opportunity Growth Fund, LB
Mid Cap Growth Fund, LB World Growth Fund, LB Fund, LB High Yield Fund, LB Income Fund, LB Municipal Bond Fund and LB Money Market
Fund) was held on December 2, 1998. The matters voted upon at the meeting and the shares cast for, against, withholding and
abstaining are detailed below.
LB Opportunity LB Mid Cap LB World LB High LB Municipal LB Money
Growth Growth Growth LB Yield LB Income Bond Market
Fund Fund Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Election of Trustees
Rolf F. Bjelland
For 11,575,465 2,152,953 4,661,132 22,407,746 56,301,017 51,283,249 42,236,027 303,269,646
Withhold 321,460 78,674 78,959 514,920 1,115,887 912,394 684,570 6,097,067
Abstain 0 0 0 0 0 0 0 0
Herbert F. Eggerding, Jr.
For 11,577,370 2,155,247 4,664,045 22,409,331 56,351,673 51,276,848 42,211,910 303,204,616
Withhold 319,556 76,379 76,046 513,334 1,065,230 918,795 708,687 6,162,098
Abstain 0 0 0 0 0 0 0 0
Noel K. Estenson
For 11,579,683 2,154,838 4,667,426 22,417,819 56,310,823 51,302,008 42,197,509 303,332,520
Withhold 317,242 76,789 72,666 504,847 1,106,080 893,635 723,089 6,034,193
Abstain 0 0 0 0 0 0 0 0
Jodi L. Harpstead
For 11,566,201 2,155,824 4,665,817 22,386,425 56,288,778 51,281,408 42,159,888 303,201,656
Withhold 330,724 75,802 74,274 536,241 1,128,126 914,235 760,709 6,165,057
Abstain 0 0 0 0 0 0 0 0
Richard A. Hauser
For 11,573,404 2,155,384 4,667,993 22,399,649 56,280,087 51,308,271 42,181,516 303,391,932
Withhold 323,521 76,242 72,098 523,016 1,136,817 887,372 739,081 5,974,781
Abstain 0 0 0 0 0 0 0 0
Connie M. Levi
For 11,561,943 2,154,234 4,663,343 22,386,590 56,242,649 51,192,562 42,157,039 302,798,122
Withhold 334,983 77,393 76,748 536,076 1,174,254 1,003,081 763,558 6,568,591
Abstain 0 0 0 0 0 0 0 0
Bruce J. Nicholson
For 11,558,468 2,153,844 4,663,366 22,411,553 56,279,764 51,297,524 42,235,716 303,123,296
Withhold 338,463 77,783 76,725 511,113 1,137,140 898,119 684,881 6,243,417
Abstain 0 0 0 0 0 0 0 0
Ruth E. Randall
For 11,552,687 2,151,525 4,660,043 22,360,548 56,215,125 51,230,227 42,212,951 302,733,060
Withhold 344,238 80,101 80,048 562,117 1,201,779 965,416 707,646 6,633,653
Abstain 0 0 0 0 0 0 0 0
Amend Master Advisory Contract to authorize Trustees to reduce advisory fees without shareholder approval
For 11,417,062 2,119,604 4,607,851 21,996,713 54,094,209 49,071,341 40,661,380 294,225,888
Against 58,747 8,694 19,411 87,169 197,559 177,707 193,403 1,178,483
Abstain 421,116 103,329 112,829 838,784 3,125,136 2,946,595 2,065,814 13,962,333
Ratification of PricewaterhouseCoopers LLP as Independent Accountants
For 11,295,974 2,094,860 4,565,601 21,723,870 53,391,672 48,676,520 40,296,748 290,399,885
Against 88,379 14,105 32,485 197,747 303,342 254,392 220,637 2,073,352
Abstain 512,571 122,662 142,005 996,205 3,721,889 3,264,732 2,403,213 16,893,467
Amend Investment Restriction on Industry Concentration (LB Money Market Fund only)
For N/A N/A N/A N/A N/A N/A N/A 284,302,172
Against N/A N/A N/A N/A N/A N/A N/A 3,898,225
Abstain N/A N/A N/A N/A N/A N/A N/A 21,166,308
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
Portfolio of Investments
April 30, 1999
(unaudited)
Shares Value
-------------- --------------
<S> <C> <C>
COMMON STOCKS - 98.9% (a)
Aerospace & Defense - 1.5%
37,910 Aar Corp. $ 720,262
30,000 Avondale Industries, Inc. 924,375 (b)
45,500 Orbital Sciences Corp. 958,344 (b)
22,000 Triumph Group, Inc. 596,750 (b)
----------------
3,199,731
----------------
Airlines - 1.1%
15,300 Alaska Air Group, Inc. 674,156 (b)
46,500 COMAIR Holdings, Inc. 1,025,906
38,400 Mesaba Holdings, Inc. 559,200 (b)
----------------
2,259,262
----------------
Automotive - 2.2%
10,900 Central Parking Corp. 345,394
52,800 Gentex Corp. 1,587,300 (b)
27,600 Group 1 Automotive, Inc. 710,700 (b)
34,200 O'Reilly Automotive, Inc. 1,564,650 (b)
23,800 Tower Automotive, Inc. 547,400 (b)
----------------
4,755,444
----------------
Bank & Finance - 7.0%
21,500 Affiliated Managers
Group, Inc. 624,844 (b)
59,400 Americredit Corp. 983,813 (b)
37,000 Amerin Corp. 867,188 (b)
30,600 City National Corp. 1,181,925
19,400 CMAC Investment Corp. 889,975
16,143 Commerce Bankcorp, Inc. 712,310
43,500 Community First
Bankshares, Inc. 889,031
9,800 E.W. Blanch Holdings, Inc. 576,975
29,200 Fremont General Corp. 584,000
21,700 HealthCare Financial
Partners, Inc. 732,375 (b)
9,900 Imperial Credit Commercial
Mortgage Investment Corp. 97,144
36,800 Legg Mason, Inc. 1,283,400
43,000 North Fork
Bancorporation, Inc. 967,500
31,800 Protective Life Corp. 1,246,163
38,300 Silicon Valley Bancshares 672,644 (b)
45,100 Waddell & Reed Financial,
Inc., Class A 1,017,569
24,400 Webster Financial Corp. 750,300
12,700 Zions Bancorporation 846,931
----------------
14,924,087
----------------
Biotechnology - 1.9%
36,400 Covance, Inc. 798,525 (b)
8,500 Curative Health Services, Inc. 47,813 (b)
36,900 Cytyc Corp. 721,856 (b)
34,800 Inhale Therapeutic
Systems, Inc. 1,000,500 (b)
37,700 Medco Research, Inc. 834,113 (b)
14,300 PathoGenesis Corp. 187,688 (b)
48,865 Serologicals Corp. 366,488 (b)
----------------
3,956,983
----------------
Building & Construction - 1.3%
25,700 Dycom Industries, Inc. 1,174,169 (b)
36,200 NCI Building Systems, Inc. 871,063 (b)
14,000 Simpson Manufacturing
Co., Inc. 647,500 (b)
----------------
2,692,732
----------------
Business Services - 7.8%
23,800 ABR Information Services, Inc. 416,500 (b)
24,000 Carriage Services, Inc., Class A 460,500 (b)
29,250 Concord EFS, Inc. 976,219 (b)
16,100 Consolidated Graphics, Inc. 686,263 (b)
19,100 Cort Business Services Corp. 440,494 (b)
14,700 G & K Services, Inc., Class A 687,225
33,400 Gartner Group, Inc., Class A 636,688 (b)
29,500 Insituform Technologies, Inc.,
Class A 562,344 (b)
24,000 Knoll, Inc. 576,000 (b)
8,500 Lason, Inc. 336,281 (b)
5,300 Merrill Corp. 78,838
42,000 META Group, Inc. 383,250 (b)
51,400 Metamor Worldwide, Inc. 1,005,513 (b)
11,400 Metzler Group, Inc. 317,775 (b)
76,900 Modis Professional
Services, Inc. 889,156 (b)
30,360 National Computer
Systems, Inc. 850,080
36,300 NCO Group, Inc. 1,184,288 (b)
56,725 NOVA Corp. 1,474,850 (b)
18,500 Pre-Paid Legal Services, Inc. 527,250 (b)
80,700 Professional Staff plc,
ADR (USD) 504,375 (b)
29,600 Rent-Way, Inc. 806,600 (b)
48,800 Romac International, Inc. 549,000 (b)
12,600 StaffMark, Inc. 127,575 (b)
14,900 Strayer Education, Inc. 515,913
32,600 Superior Services, Inc. 599,025 (b)
40,000 Tetra Tech, Inc. 967,500 (b)
----------------
16,559,502
----------------
Chemicals - 0.6%
47,000 Sybron Corp. 1,301,313 (b)
----------------
Computer Equipment - 1.8%
23,400 Pinnacle Systems, Inc. 1,272,375 (b)
53,800 Security Dynamics
Technologies, Inc. 1,170,150 (b)
29,900 Symbol Technologies, Inc. 1,427,725
----------------
3,870,250
----------------
Computer Service &
Software - 15.9%
24,400 Affiliated Computer Services,
Inc., Class A 933,300 (b)
6,100 American Management
Systems, Inc. 209,688 (b)
1,000 Analysts International Corp. 13,000
9,900 AVT Corp. 269,156 (b)
28,600 AXENT Technologies, Inc. 268,125 (b)
19,500 Bisys (The) Group, Inc. 989,625 (b)
28,300 Cadence Design Systems, Inc. 383,819 (b)
600 Cambridge Technology
Partners, Inc. 8,663 (b)
25,500 CIBER, Inc. 481,313 (b)
26,400 Citrix Systems, Inc. 1,122,000 (b)
9,100 Clarify, Inc. 213,850 (b)
29,900 Cognos, Inc. 719,469 (b)
36,500 Cotelligent Group, Inc. 426,594 (b)
18,000 DST Systems, Inc. 1,048,500 (b)
23,600 Electronic Arts, Inc. 1,199,175 (b)
18,000 Engineering Animation, Inc. 267,750 (b)
5,900 E*TRADE Group, Inc. 681,450 (b)
7,600 FactSet Research Systems, Inc. 354,350
12,200 Great Plains Software, Inc. 372,863 (b)
39,135 Hyperion Solutions Corp. 591,917 (b)
25,000 IMR Global Corp. 431,250 (b)
25,800 International Network
Services Co. 980,400 (b)
12,900 Intuit, Inc. 1,111,013 (b)
24,000 Keane, Inc. 595,500 (b)
20,800 Legato Systems, Inc. 841,100 (b)
6,600 Lexmark International Group,
Inc., Class A 815,100 (b)
11,300 Macromedia, Inc. 468,244 (b)
20,400 MAPICS, Inc. 114,113 (b)
34,800 Mastech Corp. 511,125 (b)
19,000 Mercury Interactive Corp. 535,563 (b)
27,700 National Data Corp. 1,277,663
29,000 National Instruments Corp. 986,000 (b)
12,500 NetGravity, Inc. 505,469 (b)
19,500 Network Associates, Inc. 258,375 (b)
7,400 Pegasus Systems, Inc. 345,950 (b)
7,400 Peregrine Systems, Inc. 166,500 (b)
22,300 Platinum Technology, Inc. 568,650 (b)
18,000 Preview Travel, Inc. 468,000 (b)
23,000 QRS Corp. 1,265,000 (b)
40,700 Saville Systems Ireland plc,
ADR (USD) 490,944 (b)
37,600 Secure Computing Corp. 152,750 (b)
15,870 Sterling Commerce, Inc. 496,929 (b)
88,700 Summit Design, Inc. 302,134 (b)
29,900 SunGard Data Systems, Inc. 954,931 (b)
36,000 Sykes Enterprises, Inc. 738,000 (b)
29,500 Symantec Corp. 586,313 (b)
20,000 Synopsys, Inc. 942,500 (b)
24,700 Transaction Systems
Architects, Inc., Class A 801,206 (b)
10,100 USinternetworking, Inc. 516,363 (b)
45,750 USWeb Corp. 1,026,516 (b)
17,300 Veritas Software Corp. 1,228,300 (b)
25,400 Visio Corp. 685,800 (b)
10,500 WebTrends Corp. 557,813 (b)
30,600 Wind River Systems, Inc. 459,000 (b)
31,500 Zebra Technologies Corp.,
Class B 1,047,375 (b)
----------------
33,786,496
----------------
Cosmetics - 0.1%
7,700 Chattem, Inc. 300,781 (b)
----------------
Distribution Services - 2.4%
31,600 AmeriSource Health Corp.,
Class A 874,925 (b)
4,900 Aviation Sales Co. 196,000 (b)
9,300 Henry (Jack) & Associates, Inc. 306,900
34,200 MSC Industrial Direct Co.,
Inc., Class A 737,438 (b)
32,700 Richfood Holdings, Inc. 408,750
26,400 Tech Data Corp. 617,100 (b)
22,300 U.S. Foodservice Co. 937,994 (b)
52,300 Watsco, Inc. 1,026,388
----------------
5,105,495
----------------
Education - 1.3%
36,360 Apollo Group, Inc., Class A 899,910 (b)
25,600 ITT Educational Services, Inc. 628,800 (b)
31,300 Learning Tree
International, Inc. 305,175 (b)
36,000 Sylvan Learning Systems, Inc. 904,500 (b)
----------------
2,738,385
----------------
Electronic Components - 6.6%
14,000 American Power
Conversion Corp. 462,000 (b)
11,100 Analog Devices, Inc. 389,888 (b)
37,550 Burr-Brown Corp. 995,075 (b)
31,200 Cybex Computer
Products Corp. 592,800 (b)
25,800 Dallas Semiconductor Corp. 1,096,500
10,900 Electronics for Imaging, Inc. 515,706 (b)
14,500 Etec Systems, Inc. 447,688 (b)
25,100 Lattice Semiconductor Corp. 1,025,963 (b)
15,500 Maxim Integrated Products, Inc. 868,000 (b)
18,900 Micrel, Inc. 1,112,738 (b)
27,000 Microchip Technology, Inc. 945,000 (b)
22,500 Plexus Corp. 750,938 (b)
7,100 PMC-Sierra, Inc. 680,713 (b)
24,200 QLogic Corp. 1,692,488 (b)
26,600 Sanmina Corp. 1,765,575 (b)
16,100 Vitesse Semiconductor Corp. 745,631 (b)
----------------
14,086,703
----------------
Electronic Systems - 2.4%
18,500 Black Box Corp. 633,625 (b)
2,100 Dionex Corp. 86,100 (b)
18,700 Novellus Systems, Inc. 883,575 (b)
11,600 Polycom Inc. 283,475 (b)
15,500 Sawtek, Inc. 546,375 (b)
18,600 Teradyne, Inc. 877,688 (b,c)
5,400 Tollgrade Communications, Inc. 78,975 (b)
13,200 Uniphase Corp. 1,602,150 (b)
----------------
4,991,963
----------------
Energy Services - 1.0%
31,400 BJ Services Co. 839,950 (b)
41,400 Oceaneering International, Inc. 683,100 (b)
15,300 Smith International, Inc. 686,588 (b)
----------------
2,209,638
----------------
Exploration &
Production - 0.3%
21,300 Noble Affliates, Inc. 682,931
----------------
Food Processing - 0.4%
31,600 Smithfield Foods, Inc. 746,550 (b)
----------------
Healthcare Services - 1.6%
38,800 Concentra Managed Care, Inc. 526,225 (b)
20,400 Henry Schein, Inc. 534,225 (b)
29,800 Novoste Corp. 663,050 (b)
52,800 Orthodontic Centers of
America, Inc. 653,400 (b)
13,100 PacifiCare Health Systems,
Inc., Class B 1,045,134 (b)
----------------
3,422,034
----------------
Hospital Supplies &
Management - 5.5%
33,400 American Oncology
Resources, Inc. 298,513 (b)
24,100 DENTSPLY International, Inc. 631,119
28,900 First Health Group Corp. 471,431 (b)
35,000 Lincare Holdings, Inc. 1,036,875 (b)
22,100 MedQuist Inc. 756,925 (b)
54,500 Mentor Corp. 790,250
25,000 Omnicare, Inc. 601,563
16,500 Patterson Dental Co. 595,031 (b)
22,100 Priority Healthcare Corp.,
Class B 1,120,194 (b)
61,600 PSS World Medical, Inc. 600,600 (b)
13,100 Quorum Health Group, Inc. 162,113 (b)
25,800 Renal Care Group, Inc. 538,575 (b)
25,600 STERIS Corp. 454,400 (b)
23,200 Universal Health
Services, Inc., Class B 1,202,050 (b)
13,000 Ventana Medical Systems, Inc. 316,875 (b)
14,300 Veterinary Centers of
America, Inc. 187,688 (b)
15,300 VISX, Inc. 1,969,875 (b)
----------------
11,734,077
----------------
Information Processing - 0.9%
11,900 Data Processing
Resources Corp. 150,238 (b)
30,700 Paymentech, Inc. 732,963 (b)
26,200 SCI Systems, Inc. 997,238 (b)
----------------
1,880,439
----------------
Leisure &
Entertainment - 2.6%
26,600 Brinker International, Inc. 734,825 (b)
63,900 Imax Corp. 1,210,106 (b)
36,200 J & J Snack Foods Corp. 787,350 (b)
18,300 SFX Entertainment, Inc. 1,130,025 (b)
13,500 Sonic Corp. 379,688 (b)
29,400 Steinway Musical
Instruments, Inc. 692,738 (b)
61,450 Sunterra Corp. 660,588 (b)
----------------
5,595,320
----------------
Machinery - 0.8%
55,300 JLG Industries, Inc. 888,256
25,600 Terex Corp. 809,600 (b)
----------------
1,697,856
----------------
Media & Communications - 8.6%
30,300 ACNielsen Corp. 844,613 (b)
14,700 Catalina Marketing Corp. 1,255,931 (b)
29,000 Century Communications
Corp., Class A 1,422,813 (b)
30,200 Chancellor Media Corp. 1,657,225 (b)
8,600 Cox Radio, Inc., Class A 419,250 (b)
26,600 Emmis Communications
Corp., Class A 1,197,000 (b)
25,000 Harte-Hanks, Inc. 631,250
13,900 Heftel Broadcasting
Corp., Class A 755,813 (b)
15,900 Jacor Communications, Inc. 1,275,975 (b)
38,100 Level One Communications, Inc. 1,957,388 (b)
9,700 Media General, Inc., Class A 504,400
42,925 Outdoor Systems, Inc. 1,081,173 (b)
27,400 TCA Cable TV, Inc. 1,364,863
28,800 TV Guide, Inc., Class A 1,213,200 (b)
15,700 Univision Communications,
Inc., Class A 908,638 (b)
13,900 Valassis Communications, Inc. 778,400 (b)
12,000 World Color Press, Inc. 306,750 (b)
16,800 Young Broadcasting Inc.,
Class A 711,900 (b)
----------------
18,286,582
----------------
Miscellaneous Consumer
Products - 2.4%
32,800 Blyth Industries, Inc. 746,200 (b)
22,500 Fossil, Inc. 691,875 (b)
45,435 HA LO Industries, Inc. 533,861 (b)
34,200 Jones Apparel Group, Inc. 1,128,600 (b)
11,400 Mohawk Industries, Inc. 367,650 (b)
13,300 North (The) Face, Inc. 156,275 (b)
29,250 Quiksilver, Inc. 776,953 (b)
21,600 Wesley Jessen
VisionCare, Inc. 661,500 (b)
----------------
5,062,914
----------------
Pharmaceuticals - 3.6%
18,500 Barr Laboratories, Inc. 556,156 (b)
8,200 Biogen, Inc. 779,513 (b)
19,300 Duane Reade, Inc. 517,481 (b)
19,600 Express Scripts, Inc.,
Class A 1,443,050 (b)
11,300 Forest Laboratories, Inc. 502,850 (b)
22,000 Jones Pharma, Inc. 706,750
12,600 K-V Pharmaceutical Co.,
Class A 195,300 (b)
18,700 Liposome Company, Inc. 233,750 (b)
29,500 PAREXEL International Corp. 709,844 (b)
47,000 Roberts Pharmaceutical Corp. 799,000 (b)
62,600 Theragenics Corp. 453,850 (b)
19,600 Watson Pharmaceuticals, Inc. 793,800 (b)
----------------
7,691,344
----------------
Pollution Control - 0.2%
12,800 Allied Waste Industries, Inc. 226,400 (b)
10,400 Casella Waste Systems, Inc.,
Class A 260,000 (b)
----------------
486,400
----------------
Real Estate
Investment Trust - 0.5%
29,170 Apartment Investment &
Management Co., Class A 1,168,623
----------------
Restaurants - 1.4%
27,900 Applebee's International, Inc. 720,169
37,300 Dave & Busters, Inc. 764,650 (b)
41,400 Outback Steakhouse, Inc. 1,482,638 (b)
----------------
2,967,457
----------------
Retail - 8.1%
23,100 Barnes and Noble, Inc. 802,725 (b)
15,600 Bed, Bath & Beyond, Inc. 556,725 (b)
32,800 Borders Group, Inc. 473,550 (b)
21,400 Buckle (The), Inc. 500,225 (b)
13,600 CDW Computer Centers, Inc. 1,217,200 (b)
24,150 Dollar Tree Stores, Inc. 881,475 (b)
29,600 Family Dollar Stores, Inc. 714,100
19,610 Fred Meyer, Inc. 1,061,391 (b)
25,100 Guitar Center, Inc. 392,188 (b)
51,600 Insight Enterprise, Inc. 1,393,200 (b)
17,300 Kenneth Cole Productions,
Inc., Class A 477,913 (b)
14,200 Linens 'N Things, Inc. 649,650 (b)
26,100 Men's (The) Wearhouse, Inc. 714,488 (b)
33,200 Neiman Marcus Group, Inc. 798,875 (b)
36,450 Office Depot, Inc. 801,900 (b)
25,950 Pacific Sunwear of California 962,583 (b)
26,900 Polo Ralph Lauren Corp.,
Class A 598,525 (b)
37,410 Rent-A-Center, Inc. 1,159,710 (b)
18,000 Ross Stores, Inc. 826,875
14,400 SLI, Inc. 395,100 (b)
19,100 Whole Foods Market, Inc. 744,900 (b)
34,500 Williams-Sonoma, Inc. 1,000,500 (b)
----------------
17,123,798
----------------
Telecommunications
Equipment - 3.3%
6,800 Dialogic Corp. 189,975 (b)
17,800 GeoTel Communications Corp. 1,001,250 (b)
28,200 Gilat Satellite Networks, Ltd. 1,466,400 (b)
22,600 Inter-Tel, Inc. 313,575
15,100 Pacific Gateway Exchange, Inc. 604,000 (b)
29,600 Premisys Communications, Inc. 251,600 (b)
47,900 Proxim, Inc. 1,844,150 (b)
13,200 Transaction Network
Services, Inc. 353,100 (b)
27,900 USA Networks, Inc. 1,042,763 (b)
----------------
7,066,813
----------------
Telephone Services - 0.9%
22,200 Comverse Technology, Inc. 1,423,575 (b)
42,400 InterVoice, Inc. 422,675 (b)
----------------
1,846,250
----------------
Transportation Services - 2.9%
20,600 Avis Rent A Car, Inc. 646,325 (b)
44,500 BE Aerospace, Inc. 759,281 (b)
31,300 Coach USA, Inc. 743,375 (b)
23,440 Expeditors International of
Washington, Inc. 1,421,050
72,450 Swift Transportation Co., Inc. 1,331,269 (b)
30,800 USFreightways Corp. 1,155,000
----------------
6,056,300
----------------
Total Common Stocks
(cost $198,885,878) 210,254,453
----------------
Principal
Amount
--------------
SHORT-TERM
SECURITIES - 1.1% (a)
Commercial Paper
$ 2,300,000 New Center Asset Trust, 4.94%,
Due 5/3/1999 $ 2,299,369
----------------
Total Investments
(cost $201,185,247) $212,553,822 (d)
================
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Opportunity Growth Fund.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock and had
no separate value at April 30, 1999.
(d) At April 30, 1999, the aggregate cost of securities for federal tax
purposes was $201,185,247 and the net unrealized appreciation of
investments based on that cost was $11,368,575 which is comprised of
$40,651,960 aggregate gross unrealized appreciation and $29,283,385
aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
Portfolio of Investments
April 30, 1999
(unaudited)
Shares Value
-------------- --------------
<S> <C> <C>
COMMON STOCKS - 96.9% (a)
Aerospace - 1.1%
2,600 Alliant Techsystems, Inc. $ 212,851 (b)
2,100 Gulfstream Aerospace Corp. 102,375 (b)
3,800 Precision Castparts Corp. 162,450 (c)
2,400 Sunstrand Corp. 172,200
----------------
649,876
----------------
Airlines - 0.9%
9,150 Comair Holdings, Inc. 201,872
2,200 Delta Air Lines, Inc. 139,563
4,630 Southwest Airlines Co. 150,764
----------------
492,199
----------------
Appliances &
Furnishings - 0.4%
3,700 Maytag Corp. 252,988
----------------
Automotive - 1.4%
4,850 AutoZone, Inc. 145,500 (b)
3,420 Borg-Warner Automotive, Inc. 194,085
3,600 Dana Corp. 169,650
1,900 General Motors Corp., Class H 105,213 (b)
7,790 Tower Automotive, Inc. 179,170 (b)
----------------
793,618
----------------
Automotive Parts - 0.2%
2,800 Federal-Mogul Corp. 122,850
----------------
Bank & Finance - 10.1%
2,400 AMBAC Financial Group, Inc. 144,900
5,200 AmSouth Bancorporation 247,325
3,800 Associates First Capital Corp.,
Class A 168,388
2,415 Bear Stearns Cos., Inc. 112,599
900 Capital One Financial Corp. 156,319
5,415 Charter One Financial, Inc. 169,219
4,850 City National Corp. 187,331
5,600 Dime Bancorp, Inc. 129,150
1,440 Donaldson, Lufkin &
Jenrette, Inc. 100,710
3,020 Finova Group, Inc. 145,904
4,000 First Tennessee National Corp. 172,500
7,500 Firstar Corp. 225,469
1,500 Knight/Trimark Group, Inc.,
Class A 229,781 (b)
2,300 Marshall & Ilsley Corp. 161,000
5,490 Mutual Risk Management, Ltd. 213,424
7,400 North Fork Bancorporation, Inc. 166,500
2,600 Northern Trust Corp. 242,125
3,800 PaineWebber Group, Inc. 178,363
5,400 Profit Recovery Group
International, Inc. 197,100 (b)
6,390 Provident Companies, Inc. 251,606
1,800 Providian Financial Corp. 232,313
2,500 Schwab, Charles Corp. 274,375
6,400 SouthTrust Corp. 255,000
1,680 State Street Corp. 147,000
4,315 Summit Bancorp 182,848
1,526 SunTrust Banks, Inc. 109,109
7,040 TCF Financial Corp. 204,160
1,600 TeleBanc Financial Corp. 165,800 (b)
4,000 The CIT Group, Inc., Class A 130,000
5,500 T. Rowe Price Associates, Inc. 207,281
3,500 Washington Mutual, Inc. 143,938
3,190 Zions Bancorp. 212,733
----------------
5,864,270
----------------
Broadcasting - 2.0%
4,300 Comcast Corp., Class A 282,456
3,100 Infinity Broadcasting Corp.,
Class A 85,831 (b)
3,800 Jacor Communications, Inc. 304,950 (b)
5,200 Univision Communications,
Inc., Class A 300,950 (b)
4,400 USA Networks, Inc. 164,450 (b)
----------------
1,138,637
----------------
Building Products &
Materials - 0.7%
10,280 Leggett & Platt, Inc. 237,083
2,400 Southdown, Inc. 153,750
----------------
390,833
----------------
Chemicals - 0.5%
4,890 Crompton & Knowles Corp. 99,023
5,900 Millipore Corp. 181,056
----------------
280,079
----------------
Computer Software - 5.8%
4,080 American Power
Conversion Corp. 134,640 (b)
4,050 BMC Software, Inc. 174,403 (b)
3,000 Business Objects S.A.,
ADR (USD) 70,313 (b)
5,790 Cadence Design Systems, Inc. 78,527 (b)
7,500 C-Cube Microsystems, Inc. 169,688 (b)
3,300 Citrix Systems, Inc. 140,250 (b)
11,280 Compuware Corp. 274,950 (b)
4,300 Electronic Arts, Inc. 218,494 (b)
4,000 Keane, Inc. 99,250 (b)
3,300 Learning (The) Company, Inc. 102,300 (b)
2,200 Macromedia, Inc. 91,163 (b)
2,900 Plantronics, Inc. 195,750 (b)
3,260 Platinum Technology, Inc. 83,130 (b)
11,300 Rational Software Corp. 334,763 (b)
7,800 Security Dynamics
Technologies, Inc. 169,650 (b)
4,500 Siebel Systems, Inc. 172,969 (b)
4,500 Sterling Commerce, Inc. 140,906 (b)
8,080 SunGard Data Systems, Inc. 258,055 (b)
4,160 Synopsys, Inc. 196,040 (b)
1,300 Veritas Software Corp 92,300 (b)
1,200 VISX, Inc. 154,500 (b)
----------------
3,352,041
----------------
Computers &
Office Equipment - 5.3%
3,470 3Com Corp. 90,654 (b)
1,600 Cisco Systems, Inc. 182,500 (b)
500 CNet, Inc. 64,250 (b)
7,200 Comverse Technology, Inc. 461,700 (b)
3,100 EMC Corp. 337,706 (b)
1,600 Excite, Inc. 233,600 (b)
1,730 Gateway 2000, Inc. 114,504 (b)
3,720 Herman Miller, Inc. 74,168
2,720 Hon Industries, Inc. 73,440
1,300 Intuit, Inc. 111,963 (b)
2,600 Legato Systems, Inc. 105,138 (b)
2,990 Lexmark International
Group, Inc., Class A 369,265 (b)
11,600 Novell, Inc. 258,100 (b)
6,200 PRI Automation, Inc. 153,838 (b)
2,800 Sun Microsystems, Inc. 167,475 (b)
5,200 Teradyne, Inc. 245,375 (b,c)
----------------
3,043,676
----------------
Conglomerates - 1.0%
4,700 ITT Industries, Inc. 169,200
4,862 Tyco International, Ltd. 395,038
----------------
564,238
----------------
Construction &
Home Building - 0.5%
4,600 Centex Corp. 168,188
2,900 Jacobs Engineering Group, Inc. 114,369 (b)
----------------
282,557
----------------
Containers &
Packaging - 0.2%
5,030 Owens-Illinois, Inc. 145,870 (b)
----------------
Drugs & Health Care - 6.2%
8,400 Alexion Pharmaceuticals, Inc. 94,500 (b)
2,400 Amgen, Inc. 147,450
3,100 Biochem Pharma, Inc. 64,325 (b)
2,950 Biogen, Inc. 280,434 (b)
4,770 Biomet, Inc. 195,570
2,317 Cardinal Health, Inc. 138,586
3,100 Centocor, Inc. 137,563 (b)
1,340 Elan Corp. plc, ADR (USD) 69,010 (b)
2,820 Forest Laboratories, Inc. 125,490 (b)
2,600 Genzyme Corp. 98,150 (b)
4,450 Gilead Sciences, Inc. 204,978 (b)
4,500 Guidant Corporation 241,594
3,900 HCR Manor Care, Inc. 108,225 (b)
2,600 IMS Health, Inc. 78,000
1,319 McKesson HBOC, Inc. 46,165
2,000 MedImmune, Inc. 110,250 (b)
1,801 Medtronic, Inc. 129,559
8,140 Mylan Laboratories, Inc. 184,676
4,400 Rite Aid Corp. 102,575
5,660 STERIS Corp. 100,465 (b)
3,400 Stryker Corp. 208,038
5,800 St. Jude Medical, Inc. 161,675 (b)
5,300 Sybron Corp. 146,744 (b)
8,100 Vertex Pharmaceuticals, Inc. 171,113 (b)
5,920 Watson Pharmaceuticals, Inc. 239,760 (b)
----------------
3,584,895
----------------
Electric Utilities - 0.2%
2,680 AES (The) Corp. 134,000 (b)
----------------
Electronic Equipment - 10.8%
9,600 Adaptec, Inc. 231,000 (b)
2,500 Altera Corp. 180,625 (b)
7,300 Analog Devices, Inc. 256,413 (b)
1,390 Applied Materials, Inc. 74,539 (b)
9,800 Atmel Corp. 178,850 (b)
2,000 BroadVision, Inc. 116,125 (b)
1,200 DoubleClick, Inc. 167,775 (b)
4,800 Excel Switching Corp. 99,600 (b)
2,300 Gemstar International
Group, Ltd. 242,363 (b)
5,300 Jabil Circuit, Inc. 246,781 (b)
3,890 KLA Instruments Corp. 193,041 (b)
5,900 LAM Research Corp. 185,850 (b)
5,240 Linear Technology Corp. 298,025
3,700 LSI Logic Corp. 125,800 (b)
6,180 Maxim Integrated
Products, Inc. 346,080 (b)
7,800 Mentor Graphics Corp. 94,575 (b)
6,500 Mettler-Toledo
International, Inc. 169,813 (b)
7,540 Microchip Technology, Inc. 263,900 (b)
1,110 Novellus Systems, Inc. 52,448 (b)
5,070 Oak Industries, Inc. 211,673 (b)
3,210 PMC-Sierra, Inc. 307,759 (b)
3,900 Sanmina Corp. 258,863 (b)
2,700 SCI Systems, Inc. 102,769 (b)
2,300 Solectron Corp. 111,550 (b)
3,400 Symbol Technologies, Inc. 162,350
2,940 Uniphase Corp. 356,843 (b)
9,100 Unisys Corp. 286,081 (b)
6,700 Vitesse Semiconductor Corp. 310,294 (b)
2,100 Waters Corp. 220,763 (b)
9,020 Xilinx, Inc. 411,538 (b)
----------------
6,264,086
----------------
Food & Beverage - 1.4%
6,000 American Italian Pasta Co.,
Class A 161,250 (b)
9,040 Flowers Industries, Inc. 192,100
3,300 Nabisco Holdings, Inc.,
Class A 124,781
2,400 Suiza Foods Corp. 90,150 (b)
5,490 U.S. Foodservice 230,923 (b)
----------------
799,204
----------------
Healthcare
Management - 2.2%
6,700 Columbia/HCA
Healthcare Corp. 165,406
2,100 Express Scripts, Inc., Class A 154,613 (b)
6,760 HEALTHSOUTH
Rehabilitation Corp. 90,838 (b)
3,740 Henry Schein, Inc. 97,941 (b)
2,500 Lincare Holdings, Inc. 74,063 (b)
6,900 Omnicare, Inc. 166,031
5,900 Orthodontic Centers of
America, Inc. 73,013 (b)
10,300 Oxford Health Plans, Inc. 205,356 (b)
3,100 Quintiles Transnational Corp. 125,744 (b)
3,800 Trigon Healthcare, Inc. 120,650 (b)
----------------
1,273,655
----------------
Hospital Management - 0.8%
10,050 Health Management
Associates, Inc., Class A 157,031 (b)
2,600 Universal Health
Services, Inc., Class B 134,713 (b)
2,590 WeLLPoint Health Networks,
Inc., Class A 181,948 (b)
----------------
473,692
----------------
Household Products - 0.5%
8,880 Dial Corp. 301,920
----------------
Insurance - 1.6%
5,700 AFLAC, Inc. 309,225
2,750 Allmerica Financial Corp. 157,609
4,250 Nationwide Financial
Services, Inc., Class A 197,094
4,425 Old Republic
International Corp. 86,564
4,300 Protective Life Corp.
Capital Trust II 168,506
----------------
918,998
----------------
Internet Service - 1.3%
5,100 America Online, Inc. 728,025
----------------
Leisure & Entertainment - 1.0%
3,370 Harley Davidson, Inc. 200,936 (c)
3,700 Premier Parks, Inc. 127,881 (b)
4,600 Promus Hotel Corp. 165,600 (b)
2,700 Royal Caribbean Cruises, Ltd. 99,731
----------------
594,148
----------------
Machinery &
Equipment - 1.4%
4,900 Applied Power, Inc., Class A 154,656
3,760 Black & Decker Corp. 213,380
4,395 Crane Co. 127,180
2,400 Danaher Corp. 159,450
6,440 MSC Industrial Direct Co.,
Inc., Class A 138,863 (b)
----------------
793,529
----------------
Media - 1.1%
2,200 Cox Communications, Inc.,
Class A 174,625 (b)
8,845 Outdoor Systems, Inc. 222,783 (b)
3,540 Time Warner, Inc. 247,800
----------------
645,208
----------------
Media &
Communications - 0.3%
3,000 Valassis Communications, Inc. 168,000 (b)
----------------
Mining & Metals - 0.9%
12,800 Bethlehem Steel Corp. 116,800 (b)
5,600 British Steel plc, ADR (USD) 129,500
9,200 Steel Dynamics, Inc. 155,250 (b)
4,600 USX-U.S. Steel Group, Inc. 139,150
----------------
540,700
----------------
Natural Gas - 0.3%
2,500 Consolidated Natural Gas Co. 148,750
----------------
Oil & Oil Service - 5.1%
4,700 Apache Corp. 144,231
8,760 BJ Services Co. 234,330 (b)
3,800 Burlington Resources, Inc. 175,038
3,010 Cooper Cameron Corp. 116,261 (b)
3,300 Devon Energy Corp. 109,725
5,850 Diamond Offshore Drilling, Inc. 193,416
8,960 ENSCO International, Inc. 166,320
5,940 Global Marine, Inc. 88,358 (b)
10,000 Noble Drilling Corp. 196,250 (b)
7,738 R&B Falcon Corp. 77,380 (b)
3,052 Schlumberger, Ltd. 194,947
4,910 Smith International, Inc. 220,336 (b)
4,780 Sunoco, Inc. 170,885
6,230 Tosco Corp. 166,653
7,490 Transocean Offshore, Inc. 222,359
5,250 USX-Marathon Group 164,063
2,500 Weatherford International, Inc. 84,688 (b)
5,300 Young & Rubicam, Inc. 211,006 (b)
----------------
2,936,246
----------------
Paper & Forest Products - 0.3%
3,400 Bowater, Inc. 182,325
----------------
Pollution Control - 1.0%
9,400 Allied Waste Industries, Inc. 166,263 (b)
9,700 Catalyca, Inc. 132,769 (b)
5,170 Waste Management, Inc. 292,105
----------------
591,137
----------------
Railroads - 0.3%
3,200 Kansas City Southern
Industries, Inc. 190,600
----------------
Restaurants - 1.1%
9,600 Darden Restaurants, Inc. 214,200
4,350 Outback Steakhouse, Inc. 155,784 (b)
3,200 Papa John's International, Inc. 128,600 (b)
3,100 Starbucks Corp. 114,506 (b)
----------------
613,090
----------------
Retail - 10.8%
4,300 Abercrombie & Fitch Co.,
Class A 409,038 (b)
2,200 Albertson's, Inc. 113,300
800 Amazon.com, Inc. 137,650 (b)
3,100 AnnTaylor Stores, Inc. 147,250 (b)
7,080 Bed, Bath & Beyond, Inc. 252,668 (b)
6,400 Best Buy Co., Inc. 305,600 (b)
9,400 BJ's Wholesale Club, Inc. 249,688 (b)
4,000 Circuit City Stores, Inc. 246,000
3,800 Consolidated Stores Corp. 130,625 (b)
1,600 Costco Companies, Inc. 129,500 (b)
4,700 CVS Corp. 223,838
3,300 Dayton Hudson Corp. 222,131
4,100 Dollar General Corp. 143,756
3,120 Dollar Tree Stores, Inc. 113,880 (b)
4,200 Ethan Allen Interiors, Inc. 212,888
12,800 Family Dollar Stores, Inc. 308,800
4,120 Fred Meyer, Inc. 222,995 (b)
2,000 Gap, Inc. 133,125
4,700 Great Atlantic &
Pacific Tea, Inc. 144,525
2,700 Kohl's Corp. 179,381 (b)
1,600 Kroger Co. 86,900 (b)
5,400 Limited (The), Inc. 236,250
5,200 Linens 'N Things, Inc. 237,900 (b)
4,775 Men's (The) Wearhouse, Inc. 130,716 (b)
9,795 Office Depot, Inc. 215,490 (b)
4,800 Rent-A-Center, Inc. 148,800 (b)
4,970 Ross Stores, Inc. 228,309
4,400 Safeway, Inc. 237,325 (b)
2,630 Saks, Inc. 74,462 (b)
7,670 Staples, Inc. 230,100 (b)
8,410 TJX Companies, Inc. 280,158
2,700 Williams-Sonoma, Inc. 78,300 (b)
----------------
6,211,348
----------------
Services - 7.8%
9,000 Acxiom Corp. 227,250 (b)
4,600 Affiliated Computer
Services, Inc., Class A 175,950 (b)
5,000 Automatic Data
Processing, Inc. 222,500
7,800 Ceridian Corp. 285,675 (b)
2,600 CheckFree Holdings Corp. 124,800 (b)
1,500 Cintas Corp. 103,125
6,500 Comdisco, Inc. 171,031
1,500 Computer Sciences Corp. 89,344 (b)
4,200 Concord EFS, Inc. 140,175 (b)
2,600 Covance, Inc. 57,038 (b)
3,900 CSG Systems International, Inc. 150,638 (b)
3,600 DST Systems, Inc. 209,700 (b)
3,580 Equifax, Inc. 128,656
3,280 Expeditors International of
Washington, Inc. 198,850
1,100 E*TRADE Group, Inc. 127,050 (b)
2,600 First Data Corp. 110,338
6,400 Fiserv, Inc. 374,800 (b)
5,600 Galileo International, Inc. 274,400
5,300 Getty Images, Inc. 137,800 (b)
9,500 IDEXX Laboratories, Inc. 214,938 (b)
1,730 Interpublic Group of Cos., Inc. 134,183
5,250 ITT Educational Services, Inc. 128,953 (b)
6,200 Metzler Group, Inc. 172,825 (b)
1,750 Omnicom Group, Inc. 126,875
5,980 Paychex, Inc. 305,354
3,100 SportsLine USA, Inc. 124,000 (b)
----------------
4,516,248
----------------
Telecommunications
Equipment - 4.3%
5,600 ADC Telecommunications, Inc. 267,750 (b)
3,700 Ascend Communications, Inc. 357,513 (b)
3,500 Bisys (The) Group, Inc. 177,625 (b)
9,700 General Instrument Corp. 354,050 (b)
3,600 Global TeleSystems Group, Inc. 238,050 (b)
4,700 McLeodUSA, Inc. 263,494 (b)
2,200 Motorola, Inc. 176,275
6,600 Newbridge Networks Corp. 245,850 (b)
2,000 Nokia Corp. ADR (USD) 148,375
1,460 Tellabs, Inc. 159,961 (b)
2,900 Terayon Communication
Systems, Inc. 117,088 (b)
----------------
2,506,031
----------------
Telephone &
Telecommunications - 4.2%
4,350 AT&T Corp./Liberty Media
Group, Class A 277,856 (b)
7,135 Century Telephone Enterprises 287,184
4,550 Cincinnati Bell, Inc. 102,944
3,200 Frontier Corp. 176,600 (b)
8,100 Intermedia Communications of
Florida, Inc. 260,719 (b)
3,100 Level 3 Communications
Holdings Corp. 151,319 (b)
1,400 MCI Worldcom, Inc. 115,063 (b)
6,500 NEXTEL Communications,
Inc., Class A 266,094 (b)
1,700 Qwest Communications
International, Inc. 145,244 (b)
4,800 RSL Communications, Ltd.,
Class A 157,200 (b)
5,900 US LEC Corp., Class A 136,438 (b)
8,240 Western Wireless Corp.,
Class A 338,355 (b)
----------------
2,415,016
----------------
Textiles & Apparel - 1.2%
5,500 Jones Apparel Group, Inc. 181,500 (b)
5,000 Shaw Industries, Inc. 90,625 (b)
1,700 Tommy Hilfiger Corp. 118,788 (b)
4,270 Warnaco Group, Inc., Class A 113,956
5,200 WestPoint Stevens, Inc. 178,100
----------------
682,969
----------------
Transportation - 0.3%
3,400 CNF Transportation, Inc. 148,538
----------------
Trucking - 0.4%
5,540 USFreightways Corp. 207,750
----------------
Total Common Stocks
(cost $49,397,944) 55,943,840
----------------
Principal
Amount
------------
SHORT-TERM
SECURITIES - 3.1%
U.S. Government Agency
$ 1,810,000 Federal Home Loan Bank
Discount Note, 4.8%,
Due 5/3/1999
(at amortized cost) $ 1,809,517
----------------
Total Investments
(cost $51,207,461) $ 57,753,357 (d)
================
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Mid Cap Growth Fund.
(b) Currently non-income producing.
(c) Includes stock rights that automatically traded with the stock and had
no separate value at April 30, 1999.
(d) At April 30, 1999, the aggregate cost of securities for federal income
tax purposes was $51,207,461 and the net unrealized appreciation of
investments based on that cost was $6,545,896 which is comprised of
$8,992,713 aggregate gross unrealized appreciation and $2,446,817
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
April 30, 1999
(unaudited)
Shares Value
-------------- --------------
<S> <C> <C>
ARGENTINA - 0.8% (a)
COMMON STOCKS
2,564 Banco de Galicia Buenos
Aires 'B' ADR (USD) $ 59,132
2,600 Banco Frances del Rio de
la Plata ADR (USD) 66,950
6,060 Telefonica de Argentina
ADR (USD) 226,493
11,507 YPF Sociedad Anonima 'D'
ADR (USD) 483,294
----------------
Total Argentina 835,869
----------------
AUSTRALIA - 2.5% (a)
COMMON STOCKS
18,063 Australia Gas & Light 127,899
7,000 Brambles Industries Ltd. 205,695
17,000 Broken Hill Proprietary Co. 192,191
66,419 Colonial Ltd. 250,091
18,256 Commonwealth Bank
of Australia 332,406
85,000 Goodman Fielder Wattie Ltd. 82,123
10,662 Lend Lease Corp. 143,743
27,109 News Corp. Ltd. 227,184
61,086 Telstra Corporation Ltd. 331,474
47,195 Westpac Banking 360,284
----------------
2,253,090
----------------
PREFERRED STOCKS
22,890 News Corp. Ltd 178,922
----------------
Total Australia 2,432,012
----------------
BELGIUM - 1.5% (a)
COMMON STOCKS
821 Credit Communal
Holding/Dexia 126,280
13,230 Fortis 'B' 443,744
12,890 Kredietbank 799,318
2,500 UCB SA 116,204 (b)
----------------
Total Belgium 1,485,546
----------------
BRAZIL - 1.6% (a)
COMMON STOCKS
470 Brazil Fund (USD) 7,138
5,875 Companhia Brasileira de
Distribuicao Grupo Pao
de Acucar ADS (USD) 102,445
611 Companhia Energetica
Brasilia ADR (USD) 14,817
7,132 Companhia Energetica
Minas Gerais ADR (USD) 172,951
12,810 Telecomunicacoes Brasilias
ADR (USD) 1,001
12,810 Telecomunicacues Brasilieras
SA ADR (USD) 1,168,112
4,000 Unibanco - Uniao de Bancos
Brasileiros SA GDR (USD) 99,250
----------------
Total Brazil 1,565,714
----------------
CANADA - 0.2% (a)
COMMON STOCKS
4,980 Alcan Aluminum 157,109
1,870 Royal Bank of Canada 91,185
----------------
Total Canada 248,294
----------------
CHILE - 0.2% (a)
COMMON STOCKS
1,950 Chilectra ADR (USD) 43,144
11,400 Huaneng Power International
'N' ADR (USD) 153,188
----------------
Total Chile 196,332
----------------
DENMARK - 0.4% (a)
COMMON STOCKS
1,320 Den Danske Bank 151,979
1,340 Tele Danmark 'B' 138,091
930 Unidanmark 'A' 63,849
----------------
Total Denmark 353,919
----------------
FINLAND - 0.9% (a)
COMMON STOCKS
12,100 Nokia AB OY 932,479
----------------
FRANCE - 10.2% (a)
COMMON STOCKS
3,230 Alcatel Alsthom 396,494
5,730 AXA 739,698
807 Carrefour 639,386
2,930 Cie de St. Gobain 502,979
3,708 Credit Commercial de France 391,713
457 Credit Local de France 63,968
880 Dexia France 123,176
1,320 Groupe Danone 352,795
1,321 Lafarge Coppee 128,386
1,740 Lapeyre 132,346
1,119 Legrand 267,157
331 L'Oreal 211,899
5,065 Pinault Printemps
Redoute SA 840,055
4,293 Sanofi 672,559
8,482 Schneider SA 553,304
1,986 Societe Generale 355,403
2,780 Societe Nationale
Elf Aquitaine 431,708
4,004 Sodexho 656,892
2,040 Television Francaise 398,685
7,443 Total 'B' 1,019,017
5,470 Vivendi 1,277,628
----------------
Total France 10,155,248
----------------
GERMANY - 6.3% (a)
COMMON STOCKS
1,630 Allianz AG 519,163
7,788 Bayer AG 330,735
11,313 Bayerische Vereinsbank AG 737,380
8,247 Deutsche Bank AG 479,167
9,785 Deutsche Telekom AG 385,565
10,865 Dresdner Bank AG 468,294
12,202 Gehe AG 560,723
2,640 Hoechst AG 125,082
7,360 Mannesmann AG 968,778
1,470 Rhoen Klinikum AG 147,526
1,290 SAP AG 412,915
3,181 Siemens AG 235,229
7,120 Veba AG 390,369
1,920 Volkswagon AG 136,098
----------------
5,897,024
----------------
PREFERRED STOCKS
610 Fielmann AG 23,843
410 Fresenius AG 71,465
680 SAP AG 255,015
----------------
350,323
----------------
Total Germany 6,247,347
----------------
HONG KONG - 1.9% (a)
COMMON STOCKS
13,000 Cheung Kong Holdings Ltd. 118,243
110,000 China Telecom Ltd. 251,193
49,000 CLP Holdings Ltd. 262,985
43,000 Henderson Land
Development Ltd. 260,186
60,000 Hong Kong
Telecommunications Ltd. 161,399
75,000 Hutchison Whampoa 672,494
20,000 Sun Hung Kai Properties Ltd. 175,461
----------------
Total Hong Kong 1,901,961
----------------
INDIA - 0.1% (a)
COMMON STOCKS
7,000 Mahanager Telephone
Nigam Ltd. GDR (USD) 72,800
----------------
IRELAND - 0.1% (a)
COMMON STOCKS
7,307 CBT Group plc ADR (USD) 113,259 (b)
----------------
ITALY - 5.7% (a)
COMMON STOCKS
10,760 Assicurazioni Generali Spa 418,869
22,000 Banca Commerciale Italiana 181,046
116,000 Banca di Roma 191,166 (b)
6,000 Banca Popolare di Brescia 206,315
105,302 Credito Italiano Spa 533,957
88,458 Ente Nazionale Idrocarburi 582,175
31,360 Instituto Bancario San Paolo
di Torino 470,428
166,000 Istituto Nazionale
Delle Assicurazioni 438,406
22,000 Italgas Spa 97,844
30,945 Mediolanum Spa 204,314
112,896 Telecom Italia Mobile Spa 672,645
152,983 Telecom Italia Spa 1,627,425
----------------
Total Italy 5,624,590
----------------
JAPAN - 17.4% (a)
COMMON STOCKS
8,000 Alps Electric 135,656
17,000 Amada Co. Ltd. 106,766
37,000 Canon Inc. 904,706
10,000 Citizen Watch Co. 82,901
16,000 Daiichi Pharmaceutical 259,923
23,000 Daiwa House Industry Co. 274,452
49 DDI Corp. 243,318
48 East Japan Railway 283,370
4,200 Fanuc Co. 182,884
12,000 Fujitsu Ltd. 205,493
45,000 Hitachi 328,588
3,000 Honda Motor Co. 132,139
6,000 Ito-Yokado Co. 368,280
20,000 Kao Corp. 507,453
10,000 Kokuyo Co. Ltd. 150,310
10,000 Komori Corp. 185,061
27,000 Kuraray Co. 307,486
10,000 Kyocera 593,703
17,000 Makita Corp. 182,499
27,000 Marui Co. Ltd. 447,890
40,000 Matsushita Electric
Industrial Co. 760,342
25,000 Mitsubishi Corp. 165,383
118,000 Mitsubishi Heavy
Industries Ltd. 516,781
56,000 Mitsui Fudosan 515,827
12,000 Murata Manufacturing 686,317
64,000 NEC Corp. 764,227
33,000 Nippon Denso Corp. 670,114
80 Nippon Telegraph &
Telecom Corp. 870,876
41,000 Nomura Securities Co. Ltd. 442,204
9 NTT Mobile Communication
Network, Inc. 527,550
5,000 Pioneer Electronic Corp. 95,043
27,000 Sankyo Co. 566,362
38,000 Sekisui Chemical Co. Ltd. 253,927
23,000 Sekisui House 257,503
3,100 Seven-Eleven Japan Co. Ltd. 264,520
13,350 Shin-Etsu Chemical Co. Ltd. 424,803
13,000 Shiseido Co. Ltd. 204,656
9,700 Sony Corp. 905,669
46,000 Sumitomo Corp. 339,742
52,000 Sumitomo Electric
Industries Ltd. 629,208
9,000 TDK Corp. 680,539
11,000 Tokio Marine &
Fire Insurance Co. 128,128
5,300 Tokyo Electronics 301,792
20,000 Toppan Printing 240,496
12,000 Uny Co. 190,923
----------------
Total Japan 17,285,810
----------------
KOREA - 0.2% (a)
COMMON STOCKS
15,643 Korea Equity Fund (USD) 195,538
----------------
LUXEMBOURG - 0.1% (a)
COMMON STOCKS
400 Societe Europeenne
des Satellites 59,158
----------------
MEXICO - 1.3% (a)
COMMON STOCKS
15,620 Cementos de Mexico
ADS (USD) 147,414
13,267 Cemex 'B' 61,597
398 Cemex SA de C.V. 1,852
21,091 Gruma 'B' 40,447 (b)
3,620 Gruma SA ADR (USD) 28,055
36,760 Grupo Industrial Maseca 'B' 25,461
4,040 Grupo Televisa GDR (USD) 165,640 (b)
30,799 Kimberly-Clark Mexico 'A' 119,996
8,920 Telefonos de Mexico 'L'
ADS (USD) 675,690
4,800 TV Azteca SA ADS (USD) 33,600
----------------
Total Mexico 1,299,752
----------------
NETHERLANDS - 10.2% (a)
COMMON STOCKS
20,566 ABN Amro Holdings NV 489,920
2,188 Akzo Nobel NV 98,813
11,030 ASM Lithography
Holdings NV 464,919 (b)
7,399 CSM 395,505
49,554 Elsevier 740,736
1,760 Equant NV 159,711 (b)
20,040 Fortis (NL) NV 713,438
2,408 Gucci Group NV (USD) 181,654
25,075 ING Groep NV 1,544,322
18,951 Koninklijke Ahold NV 703,697
2,922 Koninklijke KPN NV 121,929
5,860 Koninklijke Numico NV 220,382
12,660 Royal Dutch Petroleum Co. 736,909
8,040 Royal Phillips Electronics NV 692,217
2,620 ST Microelectronics 272,902
2,982 TNT Post Groep NV 80,330
7,020 Unilever NV 480,552
4,970 VNU NV 201,087
41,576 Wolters Kluwer 1,809,541
----------------
Total Netherlands 10,108,564
----------------
NEW ZEALAND - 0.3% (a)
COMMON STOCKS
54,000 Telecom Corp. of New Zealand 281,282
----------------
NORWAY - 1.1% (a)
COMMON STOCKS
1,200 Bergesen 'A' 17,976
11,990 Norsk Hydro 536,522
32,010 Orkla 'A' ASA 536,881
1,460 Saga Petroleum ASA 16,169
----------------
Total Norway 1,107,548
----------------
PORTUGAL - 0.4% (a)
COMMON STOCKS
9,726 Jeronimo Martins 320,052
3,242 Jeronimo Martins, SGPS, SA 103,773
----------------
Total Portugal 423,825
----------------
RUSSIA (c)
COMMON STOCKS
3,470 Gazprom ADS (USD) 36,869
----------------
SINGAPORE - 0.4% (a)
COMMON STOCKS
10,326 Singapore Press Holdings Ltd. 152,184
27,000 United Overseas Bank 208,513
----------------
Total Singapore 360,697
----------------
SPAIN - 3.1% (a)
COMMON STOCKS
11,740 Banco Bilboa Vizcaya, SA 175,614
1,710 Banco Popular ESpanol SA 121,032
22,915 Banco Santander SA 497,704
10,308 Corporacion Bancaria de
Espana SA 242,397
14,340 Endesa SA 318,730
2,839 Gas Natural SDG, SA 228,983
23,970 Iberdrola 335,515
11,682 Repsol SA 190,049 (b)
20,318 Telefonica de Espana 951,926
20,318 Telefonica SA, Rights
Expiring 5/20/1999 18,888 (b)
----------------
Total Spain 3,080,838
----------------
SWEDEN - 2.7% (a)
COMMON STOCKS
17,340 ABB AB 'A' 241,490
9,010 Atlas Copco AB 'B' 237,077
27,520 Electrolux AB 'B' 557,772
2,460 Esselte 'B' 38,342
2,010 Granges AB 34,068
9,610 Hennes & Mauritz AB 'B' 828,075
81,011 Nordbanken Holding AB 508,899
7,570 Sandvik AB 'B' 170,924
7,110 Securitas AB 'B' 105,340
----------------
Total Sweden 2,721,987
----------------
SWITZERLAND - 6.8% (a)
COMMON STOCKS
316 ABB AG 460,838
1,254 Adecco SA 632,055
2,570 Credit Suisse Group 509,553
895 Nestle SA 1,656,017
834 Novartis AG 1,220,634
86 Roche Holdings AG 1,011,234
393 Swisscom AG 144,249 (b)
3,380 UBS AG 1,147,565
----------------
Total Switzerland 6,782,145
----------------
UNITED KINGDOM - 19.4% (a)
COMMON STOCKS
28,000 Abbey National 630,610
101,000 ASDA Group 336,331
22,195 Astrazeneca 865,492
29,117 BG plc 163,942
28,000 BP Amoco (USD) 531,514
64,100 Cable & Wireless 918,263
44,400 Cadbury Schweppes 592,124
72,400 Caradon plc 184,022
21,000 Centrica plc 42,566
52,000 Compass Group plc 535,375
26,000 David S. Smith 56,047
21,000 Electrocomponents 179,048
10,000 GKN plc 170,683
48,500 Glaxo Wellcome 1,437,164
3,556 Hays 39,472
5,000 Heywood Williams Group 22,120
6,000 Hong Kong Shanghai
Bank Holdings 222,939
11,000 John Laing 'A' 56,449
117,000 Kingfisher 1,746,662
116,000 National Westminster Bank 2,789,807
23,000 Rank Group plc 95,645
117,000 Reed International plc 1,064,372
22,000 Rolls Royce 101,927
33,800 RTZ 589,958
57,000 Safeway plc 237,492
234,000 Shell Transport & Trading Co. 1,754,191
140,200 SmithKline Beecham plc 1,853,936
156,000 Tesco 463,643
126,612 Tomkins 537,717
55,000 Unilever plc 488,844
48,500 United News & Media 589,846
----------------
Total United Kingdom 19,298,201
----------------
Principal
Amount
------------
SHORT-TERM
SECURITIES - 4.2% (a)
Commercial Paper
$4,200,000 New Center Asset Trust,
4.94%, due 5/3/1999
(at amortized cost) 4,198,847
----------------
Total Investments $ 99,406,431
================
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) The market value of the denoted categories on investments represents
less than 0.1% of the total investments of the World Growth Portfolio.
(d) Security Classification:
<CAPTION>
Cost Value % of Portfolio
------------ ---------- ---------------
<S> <C> <C> <C>
Common Stocks &
Warrants $73,704,408 $94,678,339 95.3%
Preferred Stocks 484,267 529,245 0.5%
Short-Term 4,198,847 4,198,847 4.2%
---------------- ---------------- ------
Total Investments $78,387,522 $99,406,431 100.0%
================ ================ ======
(e) April 30, 1999, the aggregate cost of securities for federal income
tax purposes was $78,387,522 and the net unrealized appreciation of
investments based on that cost was $21,018,909 which is comprised of
$24,197,827 aggregate gross unrealized appreciation and $3,178,918
aggregate gross unrealized depreciation.
(f) Miscellaneous Footnotes:
(ADR) - American Depository Receipts
(GDR) - Global Depository Receipts
(USD) - Denominated in U.S. Dollars
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD FUND
Portfolio of Investments
April 30, 1999
(unaudited)
Shares Value
-------------- --------------
<S> <C> <C>
COMMON STOCKS - 97.8% (a)
Aerospace - 1.5%
182,000 Boeing Co. $ 7,393,741
107,900 United Technologies Corp. 15,632,013
----------------
23,025,754
----------------
Airlines - 1.0%
446,225 Southwest Airlines Co. 14,530,202
----------------
Appliances &
Furnishings - 0.5%
120,000 Maytag Corp. 8,205,000
----------------
Bank & Finance - 14.8%
91,600 American Express Co. 11,970,975
244,625 American International
Group, Inc. 28,728,148
325,100 Associates First Capital Corp.,
Class A 14,405,994
311,500 Bank of America Corp. 22,428,000
371,100 Bank of New York Co., Inc. 14,844,000
177,300 Chase Manhattan Corp. 14,671,575
85,000 CIGNA Corp. 7,410,938
196,400 Citigroup, Inc. 14,779,100
238,000 Federal Home Loan
Mortgage Corp. 14,934,500
208,100 Federal National Mortgage
Association 14,762,094
642,175 MBNA Corp. 18,101,308
79,200 Merrill Lynch & Co., Inc. 6,647,850
80,000 Morgan Stanley Dean
Witter & Co. 7,935,000
136,500 Schwab, Charles Corp. 14,980,875
428,500 U.S. Bancorp 15,881,281
----------------
222,481,638
----------------
Broadcasting - 0.5%
110,000 Clear Channel
Communications, Inc. 7,645,000 (b)
----------------
Chemicals - 3.6%
207,200 Air Products &
Chemicals, Inc. 9,738,400
260,200 E.I. du Pont de Nemours
and Co. 18,376,625
335,000 Monsanto Co. 15,158,750
200,000 Praxair, Inc. 10,350,000
----------------
53,623,775
----------------
Computer Software - 4.0%
549,000 Microsoft Corp. 44,640,563 (b)
574,650 Oracle Corp. 15,551,466 (b)
----------------
60,192,029
----------------
Computers &
Office Equipment - 9.6%
405,600 Cisco Systems, Inc. 46,263,750 (b)
434,600 Compaq Computer Corp. 9,697,013
366,400 Dell Computer Corp. 15,091,100 (b)
123,000 EMC Corp. 13,399,313 (b)
95,000 Hewlett Packard Co. 7,493,125
73,200 International Business
Machines Corp. 15,312,525
254,600 Sun Microsystems, Inc. 15,228,263 (b)
70,000 Texas Instruments, Inc. 7,148,750
251,100 Xerox Corp. 14,752,125
----------------
144,385,964
----------------
Conglomerates - 4.8%
127,400 AlliedSignal, Inc. 7,484,750
200,000 Dover Corp. 7,387,500
405,900 General Electric Co. 42,822,450
178,500 Tyco International, Ltd. 14,503,125
----------------
72,197,825
----------------
Drugs & Health Care - 12.1%
297,800 Abbott Laboratories 14,424,688
222,000 American Home Products Corp. 13,542,000
367,500 Becton, Dickinson & Co. 13,666,406
225,600 Bristol-Myers Squibb Co. 14,339,700
198,400 Eli Lilly & Co. 14,607,200
226,200 Johnson & Johnson 22,054,500
204,000 Medtronic, Inc. 14,675,250
320,800 Merck & Co., Inc. 22,536,200
254,700 Pfizer, Inc. 29,306,419
461,400 Schering-Plough Corp. 22,291,388
----------------
181,443,751
----------------
Electric Utilities - 1.0%
552,400 Southern Co. 14,949,325
----------------
Electronic Equipment - 2.5%
83,900 Honeywell, Inc. 7,949,525
491,500 Intel Corp. 30,073,656
----------------
38,023,181
----------------
Food & Beverage - 3.2%
210,500 Coca-Cola Co. 14,314,000
285,000 Pepsi Bottling Group, Inc. 6,002,813 (b)
590,100 PepsiCo, Inc. 21,796,819
290,000 Sara Lee Corp. 6,452,500
----------------
48,566,132
----------------
Household Products - 2.5%
82,000 Colgate Palmolive Co. 8,399,875
291,900 Gillette Co. 15,233,531
152,000 Procter & Gamble Co. 14,259,500
----------------
37,892,906
----------------
Internet Service - 2.3%
130,000 America Online, Inc. 18,557,500
107,500 At Home Corporation, Series A 15,473,281 (b)
----------------
34,030,781
----------------
Leisure &
Entertainment - 2.8%
294,100 Carnival Corp., Inc. 12,131,625
476,000 Disney (Walt) Co. 15,113,000
551,500 Mattel, Inc. 14,270,063
----------------
41,514,688
----------------
Machinery &
Equipment - 1.0%
194,200 Illinois Tool Works, Inc. 14,953,400
----------------
Media - 1.6%
120,000 MediaOne Group, Inc. 9,787,500 (b)
211,300 Time Warner, Inc. 14,791,000
----------------
24,578,500
----------------
Oil & Oil Service - 6.2%
147,500 Chevron Corp. 14,713,125
185,000 Exxon Corp. 15,366,563
361,800 Halliburton Co. 15,421,725
146,300 Mobil Corp. 15,324,925
290,000 Royal Dutch Petroleum Co. 17,019,375
236,300 Schlumberger, Ltd. 15,093,663
----------------
92,939,376
----------------
Restaurants - 1.0%
353,700 McDonald's Corp. 14,988,038
----------------
Retail - 8.3%
298,900 CVS Corp. 14,235,113
217,400 Dayton Hudson Corp. 14,633,738
224,850 Gap, Inc. 14,966,578
245,500 Home Depot, Inc. 14,714,656
271,200 Kroger Co. 14,729,550 (b)
278,900 Safeway, Inc. 15,043,169 (b)
552,400 Walgreen Co. 14,845,750
461,400 Wal-Mart Stores, Inc. 21,224,400
----------------
124,392,954
----------------
Services - 2.0%
345,000 Automatic Data
Processing, Inc. 15,352,500
197,400 Omnicom Group, Inc. 14,311,500
----------------
29,664,000
----------------
Telecommunications
Equipment - 3.1%
261,296 Lucent Technologies, Inc. 15,710,422
194,600 Motorola, Inc. 15,592,325
134,700 Tellabs, Inc. 14,758,069 (b)
------------------
46,060,816
------------------
Telephone &
Telecommunications - 7.9%
256,900 Ameritech Corp. 17,581,594
681,627 AT&T Corp. 34,422,164
278,800 Bell Atlantic Corp. 16,065,850
434,100 MCI Worldcom, Inc. 35,677,594 (b)
254,000 SBC Communications, Inc. 14,224,000
------------------
117,971,202
------------------
Total Common Stock
(Cost $1,109,990,539) 1,468,256,237
------------------
Principal
Amount
------------
SHORT-TERM
SECURITIES - 2.2%
Commercial Paper
$4,900,000 Associates Corp. of North
America, 4.93%,
Due 5/3/99 4,898,658
7,800,000 New Center Asset Trust,
4.94%, Due 5/3/99 7,797,859
19,800,000 USAA Capital Corp., 4.91%,
Due 5/3/99 19,794,599
------------------
Total Short-Term Securities
(at amortized cost) 32,491,116
------------------
Total Investments
(Cost $1,142,481,655) $1,500,747,353 (c)
==================
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total
investments of the Lutheran Brotherhood Fund.
(b) Currently non-income producing.
(c) At April 30, 1999, the aggregate cost of securities for federal income
tax purposes was $1,142,481,655 and the net unrealized appreciation of
investments based on that cost was $358,265,698 which is comprised of
$371,656,067 aggregate gross unrealized appreciation and $13,390,369
aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD HIGH YIELD FUND
Portfolio of Investments
April 30, 1999
(unaudited)
Principal Maturity
Amount Rate Date Value
- ---------------- ------ ------------------ --------------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 83.4% (a)
Aerospace - 1.1%
$ 2,000,000 BE Aerospace, Inc., Sr. Subordinated Notes, Series B 8.0% 3/1/2008 $ 2,004,991
3,200,000 Condor Systems, Inc., Notes 11.875% 5/1/2009 3,184,000
2,400,000 Sabreliner Corp., Sr. Notes 11.0% 6/15/2008 2,112,000
2,400,000 Sequa Corp., Sr. Subordinated Notes 9.375% 12/15/2003 2,472,000
--------------
9,772,991
--------------
Airlines - 0.7%
2,000,000 Northwest Airlines, Corp., Notes 8.375% 3/15/2004 1,980,590
3,000,000 Northwest Airlines, Corp., Sr. Notes 7.625% 3/15/2005 2,842,500
2,000,000 U.S. Air, Inc., Sr. Secured Equipment Trust,
Series 1993-A-3 10.375% 3/1/2013 2,131,626
--------------
6,954,716
--------------
Automotive - 0.9%
4,000,000 Dura Operating Corp., Sr. Subordinated Notes 9.0% 5/1/2009 4,070,000
4,000,000 Hayes Lemmerz International, Inc., Sr. Subordinated Notes 8.25% 12/15/2008 4,050,000
--------------
8,120,000
--------------
Bank & Finance - 4.3%
2,450,000 Chevy Chase Savings Bank, Subordinated Debentures 9.25% 12/1/2005 2,477,563
4,000,000 Dollar Financial Group, Inc., Sr. Notes, Series A 10.875% 11/15/2006 4,140,000
2,800,000 FC CBO II, Ltd., Subordinated Debentures, Series 1A,
Class C 11.05% 9/9/2010 2,702,000
6,500,000 GS Escrow Corp., Sr. Notes 7.125% 8/1/2005 6,500,345
2,598,000 HomeSide, Inc., Sr. Notes, Series B 11.25% 5/15/2003 2,984,453
5,600,000 Mego Mortgage Corp., Sr. Subordinated Notes 12.5% 12/1/2001 2,996,000
2,750,000 Metris Companies, Inc., Sr. Notes 10.0% 11/1/2004 2,832,500
5,000,000 SIG Capital Trust I, Bond 9.5% 8/15/2027 3,750,000
3,650,000 United Companies Financial Corp., Subordinated Notes 8.375% 7/1/2005 328,500 (c)
2,000,000 Veritas Capital Trust, Trust Preferred Securities 10.0% 1/1/2028 1,800,000
3,380,000 Veritas Holdings GMBH, Sr. Notes 9.625% 12/15/2003 3,447,600
5,000,000 Williams Scotsman, Inc., Sr. Notes 9.875% 6/1/2007 5,225,000
3,500,000 Wilshire Financial Services Group, Inc., Notes 13.0% 1/1/2004 1,032,500 (c)
500,000 Wilshire Financial Services Group, Notes, Series B 13.0% 8/15/2004 147,500 (c)
--------------
40,363,961
--------------
Broadcasting - 13.6%
4,200,000 Adelphia Communications Corp., Sr. Debentures 11.875% 9/15/2004 4,473,000
1,130,285 American Telecasting, Inc., Sr. Discount Notes Zero Coupon 6/15/2004 1,169,845
1,977,585 American Telecasting, Inc., Sr. Discount Notes,
Series B Zero Coupon 8/15/2005 1,888,594
2,400,000 Australis Holdings Pty., Ltd., Sr. Discount Notes Zero Coupon 11/1/2002 30,000
12,155,970 Australis Media, Ltd., Payment-In-Kind Sr. Discount
Notes Zero Coupon 5/15/2003 182,340
8,500,000 Avalon Cable Holdings, LLP, Sr. Discount Notes Zero Coupon 12/1/2008 5,822,500
4,400,000 Bresnan Communications Group, Sr. Discount Notes Zero Coupon 2/1/2009 3,036,000
1,800,000 Chancellor Media Corp., Sr. Notes 8.0% 11/1/2008 1,863,000
2,400,000 Chancellor Media Corp., Sr. Subordinated Notes 8.125% 12/15/2007 2,436,000
1,600,000 Chancellor Media Corp., Sr. Subordinated Notes 9.0% 10/1/2008 1,716,000
5,800,000 Charter Communications Holdings, Inc., Sr. Notes 9.625% 4/1/2009 5,966,750
1,650,000 Classic Cable, Inc., Sr. Subordinated Notes 9.875% 8/1/2008 1,773,750
4,000,000 Classic Communications, Inc., Units Zero Coupon 8/1/2009 2,880,000
2,000,000 CSC Holdings, Inc., Sr. Notes 7.875% 12/15/2007 2,125,000
1,600,000 Diamond Cable Communications plc, Sr. Discount Notes Zero Coupon 2/15/2007 1,272,000
6,600,000 EchoStar DBS Corp., Sr. Notes 9.375% 2/1/2009 6,921,750
1,600,000 Emmis Communications Corp., Sr. Subordinated Notes 8.125% 3/15/2009 1,608,000
5,000,000 Grupo Televisa S.A., Sr. Notes 11.875% 5/15/2006 5,312,500
2,000,000 Grupo Televisa S.A., Sr. Notes, Series A 11.375% 5/15/2003 2,095,000
10,200,000 Intermedia Capital Partners, Sr. Notes 11.25% 8/1/2006 11,538,750
4,000,000 Jacor Communications, Inc., Convertible Zero Coupon 2/9/2018 2,245,000
2,800,000 Jones Intercable, Inc., Sr. Notes 9.625% 3/15/2002 3,003,000
1,000,000 NTL, Inc., Convertible Subordinated Notes 7.0% 12/15/2008 1,451,250
6,000,000 NTL, Inc., Sr. Notes Zero Coupon 10/1/2008 4,260,000
4,600,000 NTL, Inc., Sr. Notes, Series A Zero Coupon 4/15/2005 4,393,000
2,800,000 NTL, Inc., Sr. Notes, Series B 10.0% 2/15/2007 3,024,000
4,000,000 Olympus Communications, L.P., Sr. Notes 10.625% 11/15/2006 4,490,000
4,000,000 OnePoint Communications Corp., Sr. Notes 14.5% 6/1/2008 2,060,000
2,800,000 ONO Finance plc, Units 13.0% 5/1/2009 2,870,000
5,500,000 Renaissance Media Group, LLC, Sr. Discount Notes Zero Coupon 4/15/2008 3,987,500
5,200,000 Rogers Cablesystems, Ltd., Sr. Secured Second
Priority Notes 9.625% 8/1/2002 5,642,000
735,528 Scott Cable Communications, Inc., Payment-In-Kind
Jr. Subordinated Notes 16.0% 7/18/2002 158,139
3,684,000 SFX Broadcasting, Inc., Sr. Subordinated Notes, Series B 10.75% 5/15/2006 4,135,290
4,000,000 Sinclair Broadcast Group, Inc., Sr. Subordinated Notes 9.0% 7/15/2007 4,075,000
3,500,000 Supercanal Holding S.A., Sr. Notes 11.5% 5/15/2005 1,662,500 (c)
2,800,000 Telewest Communications plc, Sr. Discount Notes Zero Coupon 4/15/2009 1,911,000
2,500,000 UIH Australia/Pacific, Inc., Sr. Discount Notes,
Series B Zero Coupon 5/15/2006 1,800,000
7,200,000 United International Holdings, Inc., Sr. Notes,
Series B Zero Coupon 2/15/2008 4,968,000
1,600,000 Wireless One, Inc., Sr. Notes 13.0% 10/15/2003 1,488,000 (c)
5,250,000 Young Broadcasting, Inc., Sr. Subordinated Notes 11.75% 11/15/2004 5,663,437
--------------
127,397,895
--------------
Building Products & Materials - 0.9%
4,000,000 CEMEX S.A. de C.V., Notes (USD) 12.75% 7/15/2006 4,590,000
2,800,000 Formica Corp., Sr. Subordinated Notes 10.875% 3/1/2009 2,845,500
1,200,000 Nortek, Inc., Sr. Notes 8.875% 8/1/2008 1,248,000
--------------
8,683,500
--------------
Chemicals - 0.2%
2,000,000 Scotts Co., Sr. Subordinated Notes 8.625% 1/15/2009 2,082,500
--------------
Computers & Office Equipment - 1.2%
3,300,000 Dictaphone Corp., Sr. Subordinated Notes 11.75% 8/1/2005 1,930,500
800,000 MCMS, Inc., Sr. Subordinated Notes, Series B 9.75% 3/1/2008 524,000
2,800,000 MCMS, Inc., Subordinated Notes, Series B (Variable rate) 9.75% 3/1/2008 1,834,000
4,000,000 Unisys Corp., Sr. Notes 11.75% 10/15/2004 4,550,000
2,400,000 Unisys Corp., Sr. Notes 12.0% 4/15/2003 2,658,000
--------------
11,496,500
--------------
Conglomerates - 0.5%
2,750,000 Eagle-Picher, Inc., Sr. Subordinated Notes 9.375% 3/1/2008 2,677,813
2,000,000 Jordan Industries, Inc., Sr. Notes, Series C 10.375% 8/1/2007 2,050,000
--------------
4,727,813
--------------
Construction & Home Building - 1.0%
6,400,000 Peters (J.M.) Co., Inc., Sr. Notes 12.75% 5/1/2002 5,728,000
3,600,000 The Fortress Group, Inc., Sr. Notes 13.75% 5/15/2003 3,478,500
--------------
9,206,500
--------------
Containers & Packaging - 1.7%
3,200,000 Dimac Corp., Sr. Subordinated Notes 12.5% 10/1/2008 2,560,000
2,000,000 Fonda Group, Inc., Sr. Subordinated Notes, Series B 9.5% 3/1/2007 1,667,500
2,400,000 Graham Packaging Co., Sr. Subordinated Notes
(Variable Rate) 8.66% 1/15/2008 2,361,000
3,350,000 Radnor Holdings Corp., Sr. Notes 10.0% 12/1/2003 3,484,000
3,000,000 SF Holdings Group, Inc., Sr. Discount Notes, Series B Zero Coupon 3/15/2008 945,000
2,191,000 Silgan Holdings, Inc., Subordinated Debentures 13.25% 7/15/2006 2,497,740
2,500,000 Vicap, S.A. de C.V., Guaranteed Sr. Notes (USD) 11.375% 5/15/2007 2,475,000
--------------
15,990,240
--------------
Cosmetics & Toiletries - 0.4%
1,200,000 Revlon Consumer Products Corp., Sr. Notes 8.125% 2/1/2006 1,182,000
3,000,000 Revlon Consumer Products Corp., Sr. Subordinated Notes 8.625% 2/1/2008 2,865,000
--------------
4,047,000
--------------
Drugs & Health Care - 3.1%
1,200,000 Biovale Corp. International, Sr. Notes 10.875% 11/15/2005 1,234,500
5,600,000 Dade International, Inc., Sr. Subordinated Notes,
Series B 11.125% 5/1/2006 6,258,000
5,500,000 Dynacare, Inc., Sr. Notes 10.75% 1/15/2006 5,637,500
6,000,000 Fisher Scientific International, Inc., Sr. Subordinated
Notes 9.0% 2/1/2008 6,082,500
3,200,000 ICN Pharmaceuticals, Inc., Sr. Notes 8.75% 11/15/2008 3,260,000
3,200,000 Team Health, Inc., Sr. Subordinated Notes 12.0% 3/15/2009 3,264,000
3,800,000 Total Renal Care Holdings, Inc., Convertible Subordinated
Notes 7.0% 5/15/2009 3,097,000
--------------
28,833,500
--------------
Electric Utilities - 2.2%
2,000,000 CMS Energy Corp., Sr. Notes 7.625% 11/15/2004 2,027,620
4,000,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 4,095,224
2,800,000 CMS Energy Corp., Sr. Unsecured Notes 7.0% 1/15/2005 2,726,704
3,200,000 ESI Tractebel Acquisition Corp., Bonds 7.99% 12/30/2011 3,153,062
1,750,000 Midland Cogen Venture Fund II, Secured Lease Obligation
Bonds, Series A 11.75% 7/23/2005 2,015,725
3,550,000 Midland Cogen Venture Fund II, Subordinated Secured
Lease Obligation Bonds 13.25% 7/23/2006 4,416,786
3,000,000 Niagara Mohawk Power Corp., Sr. Discount Notes,
Series H Zero Coupon 7/1/2010 2,322,036
--------------
20,757,157
--------------
Electrical Equipment - 0.7%
2,000,000 Jordan Telecommunication Products, Sr. Notes, Series B 9.875% 8/1/2007 2,020,000
2,400,000 Protection One Alarm Monitoring, Inc., Convertible Sr.
Subordinated Notes 6.75% 9/15/2003 2,115,000
2,080,000 Protection One Alarm Monitoring, Inc., Sr. Subordinated
Discount Notes 13.625% 6/30/2005 2,345,200
--------------
6,480,200
--------------
Food & Beverage - 2.0%
3,000,000 Ameriserve Food Distribution, Inc., Sr. Notes 8.875% 10/15/2006 2,775,000
5,000,000 Grupo Azucarero Mexico S.A. DE C, Sr. Notes (USD) 11.5% 1/15/2005 2,162,500
4,700,000 Imperial Holly Corp., Sr. Subordinated Notes 8.75% 12/15/2007 4,799,875
3,200,000 Packaged Ice, Inc., Sr. Notes, Series B 9.75% 2/1/2005 3,264,000
4,000,000 Smithfield Foods, Inc., Sr. Subordinated Notes 7.625% 2/15/2008 3,860,000
2,000,000 Southern Foods Group, L.P., Sr. Subordinated Notes 9.875% 9/1/2007 2,120,000
--------------
18,981,375
--------------
Hospital Management - 3.0%
3,500,000 Health Insurance Plan, Bonds, Series C 11.25% 7/1/2010 3,608,721
4,400,000 Integrated Health Services, Inc., Convertible Sr.
Subordinated Debentures 5.75% 1/1/2001 2,728,000
5,000,000 Insight Health Services Corp., Sr. Subordinated Notes,
Series B 9.625% 6/15/2008 5,150,000
4,000,000 MedPartners, Inc., Sr. Notes 7.375% 10/1/2006 3,460,000
3,000,000 MedPartners, Inc., Sr. Subordinated Notes 6.875% 9/1/2000 2,820,000
2,400,000 PhyMatrix Corp., Convertible Subordinated Debentures 6.75% 6/15/2003 1,152,000
2,000,000 Tenet Healthcare Corp., Sr. Notes 7.625% 6/1/2008 1,955,000
2,000,000 Tenet Healthcare Corp., Sr. Subordinated Notes 8.125% 12/1/2008 1,980,000
3,200,000 Triad Hospital Holdings, Inc., Sr. Subordinated Notes 11.0% 5/15/2005 3,206,000
2,000,000 Universal Hospital Services, Inc., Sr. Notes 10.25% 3/1/2008 1,810,000
--------------
27,869,721
--------------
Household Products - 1.2%
2,000,000 AMM Holdings, Inc., Sr. Discount Notes Zero Coupon 7/1/2009 650,000
5,200,000 BPC Holding Corp., Sr. Secured Notes, Series B 12.5% 6/15/2006 5,538,000
3,000,000 Holmes Products Corp., Sr. Subordinated Notes 9.75% 11/15/2007 2,985,000
2,000,000 Moll Industries, Inc., Sr. Subordinated Notes 10.5% 7/1/2008 1,780,000
--------------
10,953,000
--------------
Leisure & Entertainment - 3.6%
4,777,000 AMF Bowling Worldwide, Inc., Sr. Subordinated Discount
Notes, Series B Zero Coupon 3/15/2006 2,746,775
2,700,000 CapStar Hotel Company, Convertible Subordinated Notes 4.75% 10/15/2004 2,072,250
3,000,000 Carmike Cinemas, Inc., Sr. Subordinated Notes 9.375% 2/1/2009 3,022,500
4,000,000 Florida Panthers Holdings, Sr. Subordinated Notes 9.875% 4/15/2009 4,030,000
2,000,000 HMH Properties, Inc., Sr. Notes, Series A 7.875% 8/1/2005 1,980,000
1,600,000 HMH Properties, Inc., Sr. Notes, Series B 7.875% 8/1/2008 1,558,000
4,000,000 HMH Properties, Inc., Sr. Notes, Series C 8.45% 12/1/2008 4,045,000
3,000,000 Production Resource Group, LLC, Sr. Subordinated Notes 11.5% 1/15/2008 3,060,000
5,000,000 Regal Cinemas, Inc., Sr. Subordinated Notes 8.875% 12/15/2010 5,012,500
2,400,000 SFX Entertainment, Inc., Sr. Subordinated Notes 9.125% 12/1/2008 2,502,000
1,200,000 Signature Resorts, Inc., Sr. Subordinated Notes 9.75% 10/1/2007 1,098,000
2,600,000 Silverleaf Resorts, Inc., Sr. Subordinated Notes 10.5% 4/1/2008 2,223,000
--------------
33,350,025
--------------
Machinery & Equipment - 2.6%
4,000,000 Anthony Crane Rentals, LP, Debentures, Series B Zero Coupon 8/1/2009 2,015,000
1,800,000 Applied Power, Inc., Sr. Subordinated Notes 8.75% 4/1/2009 1,854,000
1,600,000 Motors & Gears, Inc., Sr. Notes, Series D 10.75% 11/15/2006 1,656,000
4,800,000 Navistar Financial Corp., Sr. Subordinated Notes,
Series B 9.0% 6/1/2002 5,016,000
2,000,000 Navistar International Corp., Sr. Notes, Series B 7.0% 2/1/2003 2,000,000
1,600,000 Navistar International Corp., Sr. Subordinated Notes,
Series B 8.0% 2/1/2008 1,664,000
2,000,000 Pentacon, Inc., Sr. Subordiated Notes 12.25% 4/1/2009 2,000,000
2,000,000 Scotsman Group, Inc., Sr. Subordinated Notes 8.625% 12/15/2007 2,040,000
2,000,000 United Rentals, Inc., Notes 9.0% 4/1/2009 2,000,000
4,000,000 United Rentals, Inc., Sr. Subordinated Notes 9.25% 1/15/2009 4,155,000
--------------
24,400,000
--------------
Mining & Metals - 0.5%
1,600,000 Altos Hornos de Mexico, Bonds, Series B (USD) 11.875% 4/30/2004 564,000 (c)
4,000,000 UCAR Global Enterprises, Inc., Sr. Subordinated Notes,
Series B 12.0% 1/15/2005 4,310,000
--------------
4,874,000
--------------
Oil & Gas - 2.4%
3,400,000 Belden & Blake Corp., Sr. Subordinated Notes, Series B 9.875% 6/15/2007 2,601,000
2,400,000 Conproca S.A. de C.V., Sr. Secured Bonds (USD) 12.0% 6/16/2010 2,379,000
1,950,000 Dailey International, Inc., Sr. Notes, Series B 9.5% 2/15/2008 614,250 (c)
5,000,000 Gulf Canada Resources, Ltd., Sr. Subordinated Debentures 9.625% 7/1/2005 5,150,000
6,000,000 National Energy Group, Inc., Sr. Notes, Series D 10.75% 11/1/2006 2,115,000 (c)
3,500,000 Northern Offshore ASA, Sr. Notes 10.0% 5/15/2005 1,592,500
2,400,000 Pride International, Inc., Convertible Subordinated
Debentures Zero Coupon 4/24/2018 714,000
2,000,000 Pride Petroleum Services, Inc., Sr. Notes 9.375% 5/1/2007 2,050,000
3,000,000 RAM Energy, Inc., Sr. Notes 11.5% 2/15/2008 1,695,000
2,000,000 RBF Finance Co., Sr. Notes 11.375% 3/15/2009 2,120,000
2,000,000 Trico Marine Services, Inc., Sr. Unsecured Notes,
Series G 8.5% 8/1/2005 1,830,000
--------------
22,860,750
--------------
Paper & Forest Products - 1.9%
2,400,000 APP Finance (II) Mauritius, Ltd., Guaranteed Preferred
Securities, Series B 12.0% 2/15/2004 1,209,000
2,000,000 FSW International Finance Co. B.V., Guaranteed Secured
Notes 12.5% 11/1/2006 325,000 (c)
1,200,000 Indah Kiat Finance Mauritius, Guaranteed Sr. Notes 10.0% 7/1/2007 813,000
5,200,000 Malette, Inc., Sr. Secured Notes 12.25% 7/15/2004 5,642,000
3,200,000 Packaging Corp. of America, Sr. Subordinated Notes 9.0% 4/1/2009 3,336,000
2,400,000 Pindo Deli Finance Mauritius, Sr. Notes 10.25% 10/1/2002 1,590,000
4,400,000 S.D. Warren Co., Sr. Subordinated Notes 12.0% 12/15/2004 4,774,000
--------------
17,689,000
--------------
Pollution Control - 1.2%
5,000,000 Allied Waste North America, Sr. Notes, Series B 7.625% 1/1/2006 4,900,000
1,800,000 IT Group, Inc., Sr. Subordinated Notes 11.25% 4/1/2009 1,833,750
3,700,000 Norcal Waste Systems, Inc., Sr. Notes, Series B 13.5% 11/15/2005 4,134,750
--------------
10,868,500
--------------
Publishing & Printing - 1.9%
4,000,000 Mail-Well Corp., Bonds 8.75% 12/15/2008 4,120,000
5,500,000 MDC Communications Corp., Sr. Subordinated Notes 10.5% 12/1/2006 5,692,500
3,000,000 PRIMEDIA, Inc., Sr. Notes 10.25% 6/1/2004 3,157,500
4,150,000 Sullivan Graphics, Inc., Sr. Subordinated Notes 12.75% 8/1/2005 4,471,625
--------------
17,441,625
--------------
Retail - 1.1%
2,500,000 Corporate Express, Inc., Convertible Notes 4.5% 7/1/2000 2,243,750
2,000,000 County Seat Stores, Inc., Units 12.75% 11/1/2004 130,000 (c)
2,250,000 F & M Distributors, Inc., Sr. Subordinated Notes 11.50% 4/15/2003 28,125 (c)
4,600,000 Hollywood Entertainment Corp., Sr. Subordinated Notes,
Series B 10.625% 8/15/2004 4,646,000
2,000,000 J. Crew Group, Debentures, Series B Zero Coupon 10/15/2008 1,130,000
2,000,000 TravelCenters of America, Inc., Sr. Subordinated Notes 10.25% 4/1/2007 2,120,000
--------------
10,297,875
--------------
Retail Food - 1.5%
3,200,000 Fleming Companies, Inc., Sr. Subordinated Notes,
Series B 10.625% 7/31/2007 3,112,000
5,500,000 Jitney-Jungle Stores of America, Sr. Notes 12.0% 3/1/2006 5,926,250
5,000,000 Smith's Food & Drug Centers, Pass Through Certificates 8.64% 7/2/2012 5,294,775
--------------
14,333,025
--------------
Services - 1.5%
6,000,000 Building One Services Corp., Sr. Subordinated Notes 10.5% 5/1/2009 5,880,000
500,000 Discovery Zone, Inc., Sr. Notes 13.5% 5/1/2002 100,000 (c)
2,000,000 Discovery Zone, Inc., Sr. Notes 13.5% 8/1/2002 127,140 (c)
1,500,000 Integrated Electric Services, Inc., Sr. Subordinated
Notes 9.375% 2/1/2009 1,533,750
5,900,000 KinderCare Learning Centers, Inc., Sr. Subordinated Notes 9.5% 2/15/2009 6,254,000
--------------
13,894,890
--------------
Telecommunications: Data/Internet - 2.5%
4,000,000 Covad Communications Group, Inc., Sr. Notes 12.5% 2/15/2009 4,070,000
2,650,000 Exodus Communications, Inc., Sr. Notes 11.25% 7/1/2008 2,901,750
12,000,000 Network Associates, Inc., Convertible Bond 1.0% 2/13/2018 3,525,000
4,000,000 Rhythms NetConnections, Inc., Sr. Notes 12.75% 4/15/2009 4,010,000
2,500,000 Splitrock Services, Inc., Notes, Series B 11.75% 7/15/2008 2,756,250
2,000,000 Verio, Inc., Sr. Notes 11.25% 12/1/2008 2,240,000
6,400,000 Wam!Net, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2005 4,032,000
--------------
23,535,000
--------------
Telecommunications: Wireless - 9.4%
3,000,000 American Mobile Satellite Corp., Sr. Notes, Series B 12.25% 4/1/2008 2,235,000
1,200,000 Arch Escrow Corp., Sr. Notes 13.75% 4/15/2008 1,170,000
3,100,000 CenCall Communications Corp., Sr. Redeemable Discount
Notes Zero Coupon 1/15/2004 3,255,000
4,000,000 Centennial Cellular Operating Co., Sr. Subordinated
Notes 10.75% 12/15/2008 4,355,000
4,000,000 Clearnet Communications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 3,740,000
2,000,000 Convergent Communications, Inc., Sr. B Notes 13.0% 4/1/2008 1,710,000
2,800,000 Dobson/Sygnet Communications Corp., Sr. Notes 12.25% 12/15/2008 3,129,000
2,000,000 HighwayMaster Communications, Inc., Sr. Notes, Series B 13.75% 9/15/2005 862,500
2,800,000 ICO Global Communications, Units 15.0% 8/1/2005 1,806,000
2,800,000 Iridium LLC/Capital Corp., Sr. Notes, Series A 13.0% 7/15/2005 966,000
3,150,000 Iridium LLC/Capital Corp., Sr. Notes, Series B 14.0% 7/15/2005 1,118,250
800,000 Iridium LLC/Capital Corp., Sr. Notes, Series C 11.25% 7/15/2005 252,000
3,800,000 Logix Communications Ent., Inc., Sr. Notes 12.25% 6/15/2008 3,866,500
6,000,000 McCaw International, Ltd., Sr. Discount Notes Zero Coupon 4/15/2007 3,990,000
3,800,000 Metrocall, Inc., Sr. Subordinated Notes 11.0% 9/15/2008 3,439,000
4,800,000 Microcell Telecommunications, Inc., Sr. Discount
Notes Zero Coupon 6/1/2006 4,056,000
8,000,000 Millicom International Cellular, Sr. Discount Notes Zero Coupon 6/1/2006 6,180,000
4,000,000 Mobile Telecommunications Technology, Sr. Notes 13.5% 2/15/2002 4,560,000
1,900,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 9/15/2007 1,482,000
2,000,000 Nextel Communications, Inc., Sr. Discount Notes Zero Coupon 10/31/2007 1,545,000
1,550,000 Nextel Communications, Inc., Sr. Discount Notes 9.95% 2/15/2008 1,185,750
6,000,000 Orion Network Systems, Inc., Sr. Discount Notes Zero Coupon 1/15/2007 3,690,000
7,000,000 Orion Network Systems, Inc., Sr. Notes 11.25% 1/15/2007 6,790,000
4,800,000 PageMart Nationwide, Inc., Sr. Discount Exchange
Notes Zero Coupon 2/1/2005 4,104,000
4,700,000 PageMart Wireless, Inc., Sr. Discount Notes 10.00% 2/1/2008 1,715,500
1,273,125 Price Communication Cellular, Payment-In-Kind Sr. Notes 11.25% 8/15/2008 1,295,405
1,950,000 Price Communications Wireless, Sr. Subordinated Notes 11.75% 7/15/2007 2,174,250
2,000,000 Rogers Cantel, Inc., Debentures 9.375% 6/1/2008 2,205,000
6,900,000 SpectraSite Holdings, Inc., Sr. Discount Notes Zero Coupon 4/15/2009 4,071,000
4,000,000 Teletrac, Inc., Sr. Notes, Series B 14.0% 8/1/2007 1,460,000
6,000,000 UNIFI Communications, Inc., Sr. Notes 14.0% 3/1/2004 450,000 (c)
3,100,000 USA Mobile Communications, Inc., Sr. Notes 14.0% 11/1/2004 3,239,500
2,500,000 VIALOG Corp., Sr. Notes 12.75% 11/15/2001 2,112,500
--------------
88,210,155
--------------
Telecommunications: Wireline - 11.7%
6,000,000 Allegiance Telecom, Inc., Sr. Discount Notes,
Series B Zero Coupon 2/15/2008 4,072,500
2,000,000 Birch Telecom, Inc, Sr. Notes 14.0% 6/15/2008 1,890,000
2,200,000 Call-Net Enterprises, Inc., Sr. Discount Notes Zero Coupon 12/1/2004 2,274,250
2,900,000 Completel Europe N.V., Units Zero Coupon 2/15/2009 1,540,625
3,000,000 DTI Holdings, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2008 1,215,000
3,200,000 Esprit Telecom Group, plc, Sr. Notes 11.5% 12/15/2007 3,520,000
4,300,000 FirstWorld Communications, Inc., Sr. Discount Notes Zero Coupon 4/15/2008 2,386,500
3,800,000 GST Equipment Funding, Inc., Sr. Secured Notes 13.25% 5/1/2007 4,161,000
2,000,000 GST Telecommunications, Inc., Sr. Discount Notes Zero Coupon 5/1/2008 1,225,000
1,000,000 GST Telecommunications, Inc., Sr. Discount Notes Zero Coupon 12/15/2005 1,268,750
2,750,000 Hermes Europe Railtel B.V., Sr. Notes 11.5% 8/15/2007 2,997,500
2,400,000 Hyperion Telecommunications, Inc., Sr. Discount Notes,
Series B Zero Coupon 4/15/2003 2,028,000
1,200,000 Hyperion Telecommunications, Inc., Sr. Notes,
Series B 12.25% 9/1/2004 1,311,000
3,200,000 IntelCom Group Holdings (U.S.A.), Inc., Sr. Discount
Notes Zero Coupon 9/15/2005 2,928,000
1,200,000 Intermedia Communications, Inc., Sr. Notes 8.6% 6/1/2008 1,206,000
3,100,000 Intermedia Communications, Inc., Sr. Notes, Series B 8.5% 1/15/2008 3,107,750
4,750,000 Intermedia Communications, Inc., Sr. Subordinated
Notes Zero Coupon 3/1/2009 3,063,750
2,800,000 Ionica plc, Sr. Notes 13.5% 8/15/2006 1,057,000 (c)
1,900,000 Jazztel plc, Units 14.0% 4/1/2009 1,957,000
8,800,000 Level 3 Communications, Inc., Sr. Discount Notes Zero Coupon 12/1/2008 5,742,000
2,000,000 McLeodUSA, Inc., Sr. Notes 8.125% 2/15/2009 1,995,000
2,800,000 Metromedia Fiber Network, Inc., Sr. Notes 10.0% 11/15/2008 3,038,000
4,000,000 MGC Communications, Inc., Sr. Notes, Series B 13.0% 10/1/2004 3,820,000
4,000,000 MJD Communications, Inc., Notes, Series B (Variable Rate) 9.16% 5/1/2008 4,020,000
3,000,000 Netia Holdings B.V., Sr. Discount Notes, Series B Zero Coupon 11/1/2007 2,062,500
3,200,000 NEXTLINK Communications, LLC, Sr. Discount Notes 12.5% 4/15/2006 3,456,000
800,000 NEXTLINK Communications, Inc., Sr. Notes 9.625% 10/1/2007 814,000
800,000 NEXTLINK Communications, Inc., Sr. Notes 10.75% 11/15/2008 864,000
3,000,000 Pathnet, Inc., Sr. Notes 12.25% 4/15/2000 1,710,000
2,800,000 Phonetel Technologies, Inc., Sr. Notes 12.0% 12/15/2006 826,000 (c)
3,000,000 Poland Telecom Finance BV, Sr. Notes, Series B 14.0% 12/1/2007 2,820,000
4,000,000 Primus Telecom Group, Inc., Sr. Notes 11.25% 1/15/2009 4,240,000
3,600,000 Primus Telecommunications Group, Inc., Sr. Notes 11.75% 8/1/2004 3,807,000
1,200,000 RSL Communications plc, Bonds 12.0% 11/1/2008 1,320,000
4,600,000 RSL Communications, Ltd., Units 12.25% 11/15/2006 5,083,000
2,000,000 Startec Global Communications, Inc., Sr. Notes 12.0% 5/15/2008 1,790,000
1,400,000 Telegroup, Inc., Sr. Discount Notes Zero Coupon 11/1/2004 441,000 (c)
3,200,000 Teligent, Inc., Sr. Discount Notes, Series B Zero Coupon 3/1/2008 1,872,000
3,200,000 Teligent, Inc., Sr. Notes 11.5% 12/1/2007 3,200,000
6,000,000 USN Communications, Inc., Sr. Discount Notes,
Series B Zero Coupon 8/15/2004 630,000 (c)
2,800,000 VersaTel Telecom B.V., Sr. Notes 13.25% 5/15/2008 3,038,000
2,500,000 Viatel, Inc., Sr. Discount Notes Zero Coupon 4/15/2008 1,643,750
2,500,000 Viatel, Inc., Sr. Notes 11.5% 3/15/2009 2,675,000
1,700,000 WinStar Communications, Inc., Sr. Discount Notes Zero Coupon 10/15/2005 1,470,500
800,000 WinStar Communications, Inc., Sr. Subordinated Notes 15.0% 3/1/2007 860,000
1,200,000 WinStar Communications, Inc., Sr. Unsecured Notes Zero Coupon 10/15/2005 1,650,000
2,000,000 Worldwide Fiber, Inc., Sr. Notes 12.5% 12/15/2005 2,155,000
--------------
110,252,375
--------------
Textiles & Apparel - 1.4%
3,950,000 CMI Industries, Inc., Sr. Subordinated Notes 9.5% 10/1/2003 3,831,500
5,890,000 Dan River, Inc., Sr. Subordinated Notes 10.125% 12/15/2003 6,125,600
1,200,000 Norton McNaughton, Inc., Sr. Notes 12.5% 6/1/2005 990,000
2,400,000 Supreme International Corp., Sr. Subordinated Notes 12.25% 4/1/2006 2,430,000
--------------
13,377,100
--------------
Transportation - 1.5%
4,700,000 Allied Holdings, Inc., Sr. Notes, Series B 8.625% 10/1/2007 4,582,500
2,000,000 Cenargo International plc, Senior Notes 9.75% 6/15/2008 1,835,000
3,600,000 Equimar Shipholdings, Ltd., First Priority Mtg 9.875% 7/1/2007 2,569,500
2,000,000 Transportacion Maritima, Sr. Notes (USD) 10.0% 11/15/2006 1,685,000
5,000,000 Windsor Petroleum, Notes 7.84% 1/15/2021 3,725,000
--------------
14,397,000
--------------
Total Corporate Bonds (cost $837,400,298) 782,499,889
--------------
FOREIGN GOVERNMENT BONDS - 0.4% (a,e)
4,000,000 Brazil (Federative Republic), Bonds 11.625% 4/15/2004 3,880,000
--------------
Total Foreign Government Bonds (cost $6,264,625) 3,880,000
--------------
Shares
- ----------------
PREFERRED STOCKS (a,b)
Convertible - 2.3%
14,000 Adelphia Communications Corp., Convertible Preferred Stock, Series D 2,866,500
40,000 CalEnergy Capital Trust III, Convertible Preferred Stock 1,900,000
46,000 Chesapeake Energy Corp., Convertible Preferred Stock 1,069,500
53,000 Granite Broadcasting Corp., Convertible Preferred Stock 2,093,500
60,000 Host Marriott Financial Trust, Convertible Preferred Stock 2,692,500
30,000 Intermedia Communication, Convertible Preferred Stock 896,250
40,000 Owens - Illinois, Inc., Convertible Preferred Stock 1,620,000
68,000 PSINet, Inc., Convertible Preferred Stock, Series C 3,502,000
29,500 Sinclair Broadcast Group, Inc., Convertible Preferred Stock 1,180,000
33,500 TIMET Capital Trust I, Convertible Preferred Stock 716,063
58,500 Treev, Inc., Convertible Preferred Stock, Series A 489,938
40,000 TWR Automotive Capital Trust, Convertible Preferred Stock 1,970,000
60,000 USX Corp. (Marathon Group), Convertible Preferred Stock 810,000
--------------
21,806,251
--------------
Non-Convertible - 8.5%
16,820 CapStar Communications, Inc., Exchangeable Payment-In-Kind Preferred Stock, Series E 2,077,270
17,018 Century Maintenance Supply, Inc., Payment-In-Kind Preferred Stock 1,876,235
65,000 Chevy Chase Capital Corp., Noncumulative Exchangeable Preferred Stock, Series A 3,493,750
21,229 Cluett American Corp., Preferred Stock 1,873,459
45,061 Communications & Power Industries, Inc., Preferred Stock, Series B 4,877,853
48,127 CSC Holdings, Inc., Payment-In-Kind Preferred Stock 5,600,780
21,712 CSC Holdings, Inc., Preferred Stock 2,534,876
2,932 Cumulus Media, Inc., Preferred Stock, Series A 3,335,150
5,200 Dobson Communications Corp., Payment-In-Kind Preferred Stock 5,265,000
40,000 Global Crossing Holdings, Ltd., Payment-In-Kind Preferred Stock 4,650,000
5,241 ICG Holdings, Inc., Preferred Stock 5,568,563
2,447 Intermedia Communications, Inc., Preferred Stock 2,648,878
3,324 IXC Communications, Inc., Preferred Stock 3,465,270
1,200 J Crew Group, Preferred Stock 924,000
16,000 Jitney-Jungle Stores of America, Sr. Exchangeable Preferred Stock, Class A 2,000,000
42,863 Nebco Evans Holdings Co., Payment-In-Kind, Preferred Stock 1,596,647
800 Nextel Communications, Inc., Payment-In-Kind Preferred Stock, Series D 918,000
3,294 Nextel Communications, Inc., Payment-In-Kind Preferred Stock, Series E 3,664,575
75,506 NEXTLINK Communications, Inc., Payment-In-Kind Preferred Stock 4,096,201
4,532 Paxson Communications Corp., Payment-In-Kind Preferred Stock 4,090,130
27,500 PRIMEDIA, Inc., Exchangeable Preferred Stock, Series H 2,674,375
36,500 PRIMEDIA, Inc., Preferred Stock, Series D 3,878,125
17,000 PRIMEDIA, Inc., Preferred Stock, Series F 1,721,250
122,500 River Bank Asset, Inc., Preferred Stock, Series A 1,960,000
2,800 R&B Falcon Corp., Preferred Stock Units 2,933,000
2,000 WinStar Communications, Inc., Payment-In-Kind Preferred Stock, Series C 1,645,000
--------------
79,368,387
--------------
Total Preferred Stocks (cost $105,426,073) 101,174,638
--------------
COMMON STOCKS & STOCK WARRANTS - 3.1% (a,b)
6,800 Allegiance Telecom, Inc., Stock Warrants 259,250
3,000 American Mobile Satellite Corp., Stock Warrants 90,375
26,000 American Telecasting, Inc., Stock Warrants 260
2,400 American Telecasting, Inc., Stock Warrants 24
125,000 Arch Communications Group, Inc., Common Stock 265,625
2,400 Australis Holdings Pty., Ltd., Stock Warrants 24 (d)
10,920 Australis Media, Ltd., Stock Warrants 0 (d)
2,000 Birch Telecom, Inc., Stock Warrants 10,000
23,925 Clearnet Communications, Inc., Stock Warrants 152,522
1,890 Communications & Power Industries, Inc., Common Stock 284,445 (d)
13,009 Consolidated Hydro, Inc., Stock Warrants, Class B 813 (d)
8,444 Consolidated Hydro, Inc., Stock Warrants, Class C 1,056 (d)
8,000 Convergent Communications, Inc., Stock Warrants 240
2,233 CS Wireless Systems, Inc., Common Stock 301 (d)
19,000 Discovery Zone, Inc., Stock Warrants 19 (d)
15,000 DTI Holdings, Inc., Stock Warrants 1,800
11,700 E. Spire Communications, Stock Warrants 1,028,194
4,300 FirstWorld Communications, Stock Warrants 215,000
112,013 Gaylord Container Corp., Common Stock, Class A 938,109
154,623 Gaylord Container Corp., Stock Warrants 1,294,968
25,274 Harvard Industries, Inc., Stock Warrants 11,213 (d)
2,000 HighwayMaster Communications, Inc., Stock Warrants 1,010
9,200 Hyperion Telecommunications, Inc., Stock Warrants 640,550
55,000 IntelCom Group Communications, Inc., Common Stock 1,213,438
50,335 IntelCom Group (U.S.A.), Inc., Stock Warrants 798,942
4,100 Intermedia Communications of Florida, Stock Warrants 438,700
3,367 Intermedia Communications, Inc., Common Stock 108,375
10,200 Ionica plc, Stock Warrants 102 (d)
2,000 Iridium World Communications, Stock Warrants 40,250
35,000 Magellan Health Services, Inc., Common Stock 190,313
7,100 McCaw International, Ltd., Stock Warrants 25,738
60,000 MCI Worldcom, Inc., Common Stock 4,931,250
3,150 MGC Communications, Inc., Stock Warrants 478,800
27,200 Microcell Telecommunications, Inc., Stock Warrants 466,888
3,541 Nextel Communications, Inc., Class A 144,960
4,000 OnePoint Communications Corp., Stock Warrants 40,000
26,250 PageMart Nationwide, Inc., Common Stock 85,313
112,000 PageMart Wireless, Inc., Common Stock, Class A 511,000
3,000 Pathnet, Inc., Stock Warrants 30,375
3,000 Poland Telecom Finance BV, Stock Warrants 120,000
75,000 Powertel, Inc., Common Stock 1,631,250
3,200 Primus Telecommunications Group, Inc., Stock Warrants 48,400
19,360 Protection One Alarm Monitoring, Stock Warrants 82,280
6,000 RSL Communications, Ltd., Stock Warrants 660,750
6,000 SF Holdings Group, Inc., Common Stock 12,000
3,200 Splitrock Services, Inc., Stock Warrants 272,000
128,664 Star Gas Partners, L.P., Common Stock 1,954,080
2,000 Startec Global Communications, Inc., Stock Warrants 2,500
4,000 Teletrac Holdings, Inc., Stock Warrants 0
3,119 TREEV, Inc., Common Stock 5,848
4,600 UIH Australia/Pacific, Inc., Stock Warrants 5,175
6,000 UNIFI Communications, Inc., Stock Warrants 810 (d)
25,000 United International Holdings, Inc., Common Stock, Class A 1,493,750
20,100 United International Holdings, Inc., Stock Warrants 3,218,513
44,000 USN Communications, Inc., Stock Warrants 25,300 (d)
2,800 VersaTel Telecom B.V., Stock Warrants 196,350
1,100 Vialog Corp., Stock Warrants 55,000
80,000 Viatel, Inc., Common Stock 3,680,000
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 18,748
4,545 Wherehouse Entertainment, Inc., Stock Warrants, Class C 7,386
13,800 Wireless One, Inc., Stock Warrants 138
--------------
Total Common Stock & Stock Warrants (cost $25,472,907) 28,806,475
--------------
<CAPTION>
Principal Maturity
Amount Rate Date
- ---------------- ------ ------------------
<S> <C> <C> <C> <C>
SHORT-TERM SECURITIES - 2.3% (a)
Commercial Paper
$22,000,000 Associates Corp. of North America (at amortized cost) 4.93% 5/3/1999 21,993,974
--------------
Total Investments (cost $996,557,877) $938,354,976 (f)
==============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood High Yield Fund.
(b) Currently non-income producing.
(c) Currently non-income producing and in default.
(d) Denotes restricted securities. These securities have been valued from the date of acquisition through April 30, 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 April 30, 1999:
<CAPTION>
Acquisition
Security Date Cost
-------------------------------------------------------------------------- ------------ ------------
<S> <C> <C> <C>
Australis Holdings Pty., Ltd., Stock Warrants 3/27/1997 $ --
Australis Media, Ltd., Stock Warrants 1/2/1997 --
Communications & Power Industries, Inc., Common Stock 8/2/1995 172,871
Consolidated Hydro, Inc., Stock Warrants, Class B 11/18/1997 2,440,822
Consolidated Hydro, Inc., Stock Warrants, Class C 11/18/1997 --
CS Wireless Systems, Inc., Common Stock 12/11/1996 15,070
Discovery Zone, Inc., Stock Warrants 7/15/1997 222,829
Harvard Industries, Inc., Stock Warrants 5/14/1992 6,669,341
Ionica plc, Stock Warrants 8/1/1996 664,784
UNIFI Communications, Inc., Stock Warrants 2/14/1997 123,449
USN Communications, Inc., Stock Warrants 8/13/1997 373
(e) Denominated in U.S. dollars.
(f) At April 30, 1999, the aggregate cost of securities for federal tax purposes was $996,557,877 and the net unrealized
depreciation of investments based on that cost was $58,202,901 which is comprised of $51,599,772 aggregate gross unrealized
appreciation and $109,802,673 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD INCOME FUND
Portfolio of Investments
April 30, 1999
(unaudited)
Principal Maturity
Amount Rate Date Value
- ---------------- ------ ------------------ --------------
<S> <C> <C> <C> <C>
CORPORATE BONDS - 57.4% (a)
Aerospace - 1.4%
$ 4,000,000 Lockheed Martin Corp., Notes 7.45% 6/15/2004 $ 4,220,859
3,000,000 Raytheon Co., Notes 6.45% 8/15/2002 3,048,555
2,000,000 Raytheon Co., Notes 6.75% 8/15/2007 2,054,172
1,500,000 United Defense Industries, Inc., Sr. Subordinated Notes 8.75% 11/15/2007 1,518,750
--------------
10,842,336
--------------
Automotive - 1.8%
2,000,000 Ford Motor Credit Co., Notes 6.125% 4/25/2003 2,011,550
5,000,000 Ford Motor Credit Co., Notes 6.375% 10/6/2000 5,062,795
7,000,000 Toyota Motor Credit Corp., Notes (USD) 5.625% 11/13/2003 6,944,378
--------------
14,018,723
--------------
Bank & Finance - 12.2%
7,000,000 Associates Corp. of North America, Bonds 5.8% 4/20/2004 6,929,069
4,000,000 Bank One Corp., Medium Term Notes 6.0% 2/17/2009 3,874,436
3,000,000 BankAmerica Corp., Sr. Notes 5.875% 2/15/2009 2,886,906
3,500,000 Chase Manhattan Corp., Subordinated Notes 9.375% 7/1/2001 3,746,288
7,000,000 Chemical New York Corp., Debentures 9.75% 6/15/1999 7,032,186
3,000,000 CIT (The) Group, Inc., Notes 5.5% 2/15/2004 2,938,200
10,000,000 Equitable Life Assurance Society of the
United States, Surplus Notes 6.95% 12/1/2005 10,320,100
2,500,000 First Union Corp., Subordinated Notes 6.875% 9/15/2005 2,574,788
11,000,000 General Electric Capital Corp., Debentures 8.85% 4/1/2005 12,480,160
1,500,000 GS Escrow Corp., Sr. Notes 6.75% 8/1/2001 1,502,220
7,000,000 Metropolitan Life Insurance Co., Surplus Notes 7.7% 11/1/2015 7,503,993
3,000,000 Morgan Stanley Dean Witter, Notes 5.625% 1/20/2004 2,953,383
9,000,000 New York Life Insurance Co., Surplus Notes 6.4% 12/15/2003 9,055,683
1,500,000 PNC Funding Corp., Subordinated Notes 6.125% 2/15/2009 1,462,118
7,000,000 Prudential Insurance Co. of America, Capital Notes 6.875% 4/15/2003 7,144,641
3,000,000 The Prudential Insurance Co. of America, Surplus Notes 8.3% 7/1/2025 3,456,930
4,000,000 Wachovia Corp., Subordinated Notes 5.625% 12/15/2008 3,791,960
4,500,000 Wells Fargo Capital, Capital Trust Preferred Securities 7.73% 12/1/2026 4,562,028
--------------
94,215,089
--------------
Broadcasting - 1.4%
3,000,000 CBS Corp., Notes 8.875% 6/1/2001 3,161,787
2,000,000 Chancellor Media Corp., Sr. Notes 8.0% 11/1/2008 2,070,000
5,000,000 TCI Communications, Inc., Sr. Notes 10.125% 8/1/2001 5,461,515
--------------
10,693,302
--------------
Chemicals - 1.0%
4,000,000 Monsanto Company, Bonds 6.5% 12/01/2018 3,837,740
4,000,000 Union Carbide Corp., Notes 6.7% 4/1/2009 3,975,884
--------------
7,813,624
--------------
Computers & Office Equipment - 0.2%
800,000 Credit Suisse First Boston, Convertible Medium Term Notes
(Cisco Systems, Inc.) 1.0% 4/21/2009 808,000
150,000 Xerox Corp., Convertible Subordinated Debentures 0.57% 4/21/2018 95,062
600,000 Xerox Corp., Convertible Subordinated Notes 0.57% 4/21/2018 380,250
--------------
1,283,312
--------------
Conglomerates - 0.6%
4,500,000 Dover Corp., Debentures 6.65% 6/1/2028 4,395,200
--------------
Construction & Home Building - 0.5%
2,000,000 American Standard Co., Inc., Notes 7.375% 4/15/2005 1,985,000
2,000,000 Owens Corning, Notes 7.0% 3/15/2009 1,960,764
--------------
3,945,764
--------------
Containers & Packaging - 0.4%
3,000,000 Owens-Illinois, Inc., Sr. Notes 7.85% 5/15/2004 3,072,834
--------------
Drugs & Health Care - 2.6%
4,000,000 Allegiance Corp., Debentures 7.8% 10/15/2016 4,317,448
750,000 Athena Neurosciences, Inc., Convertible Notes 4.75% 11/15/2004 781,875
4,000,000 Becton, Dickinson, & Co., Debentures 6.7% 8/1/2028 3,964,372
4,000,000 Bristol Myers Squibb Co., Debentures 7.15% 6/15/2023 4,283,852
3,000,000 Merck & Co., Inc., Debentures 6.3% 1/1/2026 2,901,408
750,000 Roche Holdings, Inc., Convertible Notes Zero Coupon 4/20/2010 461,250
500,000 Swiss Life Finance, Ltd., Convertible Notes
(Glaxo Wellcome plc) 2.0% 5/20/2003 530,625
3,000,000 Tenet Healthcare Corp., Sr. Notes 7.875% 1/15/2003 3,015,000
--------------
20,255,830
--------------
Electric Utilities - 8.4%
1,500,000 AES Corp., Sr. Subordinated Notes 10.25% 7/15/2006 1,597,500
2,000,000 CalEnergy Company, Inc., Sr. Notes 6.96% 9/15/2003 2,035,568
4,000,000 CalEnergy Company, Inc., Sr. Notes 7.63% 10/15/2007 4,218,288
2,500,000 Calpine Corp., Sr. Notes 7.875% 4/1/2008 2,537,500
5,832,000 Cleveland Electric Illumination Co., First Mortgage Bonds 7.625% 8/1/2002 6,048,735
4,000,000 CMS Energy Corp., Sr. Unsecured Notes 8.125% 5/15/2002 4,095,224
4,500,000 Commonwealth Edison Co., Notes 7.625% 1/15/2007 4,845,573
4,000,000 Connecticut Light & Power Co., First Refunding
Mortgage Bonds, Series 97C 7.75% 6/1/2002 4,092,308
4,000,000 Consolidated Edison Co. NY, Inc., Debentures 6.45% 12/1/2007 4,099,452
4,000,000 East Coast Power, LLC, Sr. Notes, Series B 7.066% 3/31/2012 3,954,684
1,000,000 East Coast Power, LLC, Sr. Notes, Series C 6.737% 3/31/2008 996,967
3,500,000 Empresa Electrica Pehuienche S.A., Notes (USD) 7.3% 5/1/2003 3,439,765
4,000,000 National Rural Utilities, Medium Term Notes 5.75% 12/1/2008 3,893,180
5,000,000 Niagara Mohawk Power Corp., Sr. Notes, Series C 7.125% 7/1/2001 5,067,715
4,000,000 NRG Energy, Inc., Sr. Notes 7.5% 6/15/2007 4,124,336
3,000,000 PSEG Capital Corp., Medium Term Notes 6.25% 5/15/2003 2,969,841
7,000,000 Texas Utilities Electric Co., Debentures 7.17% 8/1/2007 7,387,842
--------------
65,404,478
--------------
Electronics - 1.0%
3,000,000 Corning, Inc., Notes 6.3% 3/1/2009 2,991,297
550,000 Credit Suisse First Boston - NY, Convertible Medium
Term Notes (General Electric) 2.25% 5/5/2003 598,125
400,000 Hewlett-Packard Co., Convertible Subordinated Notes 0.01% 10/14/2017 220,000
4,000,000 Lucent Technologies, Inc., Bonds 6.45% 3/15/2029 3,873,152
--------------
7,682,574
--------------
Food & Beverage - 2.2%
4,500,000 Archer Daniels Midland Co., Bonds 6.75% 12/15/2027 4,468,847
4,500,000 ConAgra, Inc., Sr. Notes 5.5% 10/15/2002 4,449,011
5,500,000 Pepsi Bottling Group, Inc., Sr. Notes 7.0% 3/1/2029 5,480,503
3,000,000 Safeway, Inc., Notes 5.875% 11/15/2001 2,996,241
--------------
17,394,602
--------------
Household Products - 1.6%
2,500,000 Playtex Products, Inc., Unsecured Sr. Notes, Series B 8.875% 7/15/2004 2,606,250
7,500,000 Procter & Gamble, Guaranteed ESOP Debentures 9.36% 1/1/2021 9,433,485
--------------
12,039,735
--------------
Media - 1.9%
3,600,000 CSC Holdings, Inc., Sr. Notes 7.25% 7/15/2008 3,690,000
4,000,000 Rogers Cablesystems, Inc., Sr. Secured Second Priority
Notes 9.625% 8/1/2002 4,340,000
5,500,000 Time Warner, Inc., Debentures 9.125% 1/15/2013 6,751,250
--------------
14,781,250
--------------
Natural Gas - 1.0%
8,000,000 Columbia Gas Systems, Inc., Series A Notes 6.39% 11/28/2000 8,076,152
--------------
Oil & Gas - 4.4%
3,000,000 Coastal Corp., Sr. Debentures 6.375% 2/1/2009 2,955,687
3,000,000 Conoco, Inc., Notes 5.9% 4/15/2004 2,983,974
2,500,000 Conoco, Inc., Notes 6.95% 4/15/2029 2,471,800
500,000 Diamond Offshore Drilling, Inc., Convertible Subordinated
Notes 3.75% 2/15/2007 541,250
2,000,000 Enron Corp., Notes 7.125% 5/15/2007 2,081,166
2,500,000 Gulf Canada Resources, Ltd., Sr. Notes 8.375% 11/15/2005 2,568,750
2,124,361 Mobil Oil Corp., ESOP Sinking Fund Debentures 9.17% 2/29/2000 2,151,207
2,000,000 Newfield Exploration Co., Sr. Notes, Series B 7.45% 10/15/2007 1,912,570
2,000,000 Noble Drilling Corp., Sr. Notes 6.95% 3/15/2009 2,013,104
3,000,000 Oryx Energy Co., Notes 8.375% 7/15/2004 3,226,950
1,000,000 Oryx Energy Co., Notes 8.125% 10/15/2005 1,068,725
2,000,000 Pamex Finance, Ltd., Notes 8.45% 2/15/2007 2,001,690
3,000,000 Phillips Petroleum Co., Debentures 7.0% 3/30/2029 2,986,575
500,000 Swiss Life Finance, Ltd., Convertible Bonds
(Royal Dutch Petroleum Co.) 2.0% 5/20/2005 512,500
2,000,000 Triton Energy, Ltd., Sr. Notes 8.75% 4/15/2002 1,985,000
500,000 Union Pacific Resources Group, Debentures 7.95% 4/15/2029 501,765
2,500,000 Union Pacific Resources Group, Notes 7.3% 4/15/2009 2,488,588
--------------
34,451,301
--------------
Paper & Forest Products - 0.6%
2,000,000 Weyerhaeuser Co., Debentures 6.95% 10/1/2027 1,980,418
2,500,000 Willamette Industries, Inc. 6.45% 2/1/2005 2,497,035
--------------
4,477,453
--------------
Pollution Control - 1.0%
2,000,000 Allied Waste North America, Inc., Sr. Notes, Series B 7.625% 1/1/2006 1,960,000
600,000 Waste Management, Inc., Convertible Subordinated Notes 4.0% 2/1/2002 811,500
5,000,000 Waste Management, Inc., Notes 6.625% 7/15/2002 5,083,660
--------------
7,855,160
--------------
Publishing & Printing - 0.2%
1,500,000 PRIMEDIA, Inc., Sr. Notes 7.625% 4/1/2008 1,503,750
--------------
Retail - 5.2%
300,000 Costco Companies, Inc., Convertible Subordinated Notes Zero Coupon 8/19/2017 288,375
600,000 Costco Companies, Inc., Subordinated Notes Zero Coupon 8/19/2007 576,750
6,500,000 Dayton Hudson Corp., Notes 6.4% 2/15/2003 6,587,575
2,000,000 Dillards, Inc., Notes 6.43% 8/1/2004 1,985,948
2,000,000 Federated Department Stores, Inc., Sr. Debentures 6.9% 4/1/2029 1,934,474
4,000,000 Federated Department Stores, Sr. Notes 8.5% 6/15/2003 4,342,620
3,500,000 Fred Meyer, Inc., Notes 7.375% 3/1/2005 3,633,179
100,000 Home Depot, Inc., Convertible Subordinated Notes 3.25% 10/1/2001 260,000
2,000,000 Kroger Co. (The), Sr. Notes 8.15% 7/15/2006 2,187,058
4,000,000 Penney (J.C.) Co., Inc., Notes 6.95% 4/1/2000 4,029,388
600,000 Rite Aid Corp., Convertible Subordinated Notes 5.25% 9/15/2002 600,750
4,000,000 Rite Aid Corp., Notes 6.125% 12/15/2008 3,761,788
10,000,000 Sears Roebuck Acceptance Corp., Medium Term Notes,
Series II 6.86% 7/3/2001 10,187,810
--------------
40,375,715
--------------
Services - 0.9%
3,000,000 ARAMARK Services, Inc., Notes 7.0% 7/15/2006 3,015,102
3,000,000 Cendant Corp., Notes 7.75% 12/1/2003 3,096,948
850,000 CUC International, Inc., Convertible Subordinated Notes 3.0% 2/15/2002 806,438
--------------
6,918,488
--------------
Telecommunications - 4.0%
3,000,000 AT&T-Liberty Media Group, Notes 6.5% 3/15/2029 2,906,250
500,000 Bell Atlantic Financial Services Corp., Sr. Exchange Notes 5.75% 4/1/2003 538,750
6,000,000 Bell South Telecommunications, Bonds 6.375% 6/1/2028 5,728,602
3,000,000 Cable & Wireless Communications Corp., Notes (USD) 6.625% 3/6/2005 2,991,726
2,500,000 GTE Corp., Debentures 6.36% 4/15/2006 2,502,948
3,500,000 LCI International, Inc., Sr. Notes 7.25% 6/15/2007 3,598,644
1,500,000 Qwest Communications International, Inc., Sr. Notes 7.5% 11/1/2008 1,576,875
4,500,000 U.S. West Capital Funding, Inc., Notes 6.25% 7/15/2005 4,514,364
4,000,000 WorldCom, Inc., Sr. Notes 7.75% 4/1/2007 4,337,696
2,000,000 WorldCom, Inc., Sr. Notes 6.4% 8/15/2005 2,011,228
--------------
30,707,083
--------------
Textiles & Apparel - 0.7%
6,000,000 Levi Strauss & Co., Notes 6.8% 11/1/2003 5,746,176
--------------
Transportation - 2.2%
4,000,000 Burlington Northern Santa Fe, Inc., Notes 6.125% 3/15/2009 3,937,048
3,998,850 Federal Express Corp., Series 1998-1-A, Class B 6.75% 1/15/2022 4,032,420
4,000,000 Norfolk Southern Corp., Notes 6.2% 4/15/2009 3,926,192
5,000,000 Union Pacific Corp., Medium Term Notes, Series E 6.79% 11/9/2007 5,092,190
--------------
16,987,850
--------------
Total Corporate Bonds (cost $441,835,380) 444,937,781
--------------
ASSET-BACKED SECURITIES - 8.5% (a)
8,000,000 AESOP Funding II L.L.C., Rental Car Notes,
Series 1997-1, Class A-2 6.4% 10/20/2003 8,100,360
1,471,286 Chase Manhattan Grantor Trust, Series 1996-B-A 6.61% 9/15/2002 1,487,684
4,000,000 Com-Ed Transitional Funding Trust, Series 1998-1-A6 5.63% 6/25/2009 3,896,700
5,000,000 CS First Boston Mortgage Security Corp., 1996-2 Class A4 6.62% 9/25/2009 5,031,375
3,799,440 CS First Boston Mortgage Security Corp., Series 1997-1-A3 6.91% 5/25/2007 3,795,622
10,000,000 Discover Card Master Trust I, Series 1996-3-A 6.05% 8/18/2008 10,026,850
5,000,000 Discover Card Master Trust I, Series 1998-7A 5.6% 5/15/2006 4,943,625
13,000,000 Standard Credit Master Trust 1, Credit Card Participation
Certificates, Series 1995-9-A 6.55% 10/7/2007 13,388,245
15,000,000 World Financial Network Credit Card Master Trust, Series
1996-B 6.95% 4/15/2006 15,599,552
--------------
Total Asset-Backed Securities (cost $65,111,509) 66,270,013
--------------
FOREIGN GOVERNMENT BONDS - 3.3% (a,b)
2,500,000 British Columbia (Providence of), Unsubordinated Notes 5.375% 10/29/2008 2,382,848
3,500,000 Korea Development Bank, Bonds 7.375% 9/17/2004 3,483,536
5,000,000 Korea Development Bank, Unsecured Bonds 6.625% 11/21/2003 4,846,895
2,000,000 Korea (Republic of), Bonds 8.875% 4/15/2008 2,176,722
5,500,000 Ontario (Province of) Canada, Sr. Bonds 7.375% 1/27/2003 5,857,995
5,000,000 Ontario (Province of) Canada, Sr. Notes 5.5% 10/1/2008 4,818,150
2,000,000 Philippines (Republic of), Bonds 8.875% 4/15/2008 2,057,500
--------------
Total Foreign Government Bonds (cost $24,447,188) 25,623,646
--------------
MORTGAGE-BACKED SECURITIES - 7.4% (a)
8,276,184 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 3/1/2011 8,242,582
10,554,870 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 4/1/2011 10,512,017
7,430,617 Federal Home Loan Mortgage Corp., Participation Certificates 6.0% 7/1/2013 7,388,114
12,000,000 Federal National Mortgage Association, Participation
Certificates 6.5% 5/1/2029 11,940,000 (c)
20,000,000 Government National Mortgage Association, Modified Pass
Through Certificates 6.0% 4/15/2029 19,406,600
--------------
Total Mortgage-Backed Securities (cost $56,804,468) 57,489,313
--------------
U.S. GOVERNMENT AGENCY - 3.4% (a)
1,000,000 Federal Home Loan Mortgage Corp., Notes 5.125% 10/15/2008 946,081
14,000,000 Federal National Mortgage Association, Notes 5.75% 4/15/2003 14,083,356
11,000,000 Federal National Mortgage Association, Notes 5.75% 2/15/2008 10,935,606
--------------
Total U.S. Government Agency (cost $26,032,935) 25,965,043
--------------
U.S. GOVERNMENT - 14.7% (a)
71,500,000 U.S. Treasury Bonds 5.25%-12.75% 2010-2028 88,705,313
23,500,000 U.S. Treasury Notes 6.125%-7.875% 2004-2007 25,598,125 (d)
--------------
Total U.S. Government (cost $119,126,796) 114,303,438
--------------
<CAPTION>
Shares
- ----------------
COMMON STOCKS - 0.1% (a)
10,000 Federal National Mortgage Association, Common Stock (cost $632,788) 709,375
--------------
PREFERRED STOCKS - 0.7% (a)
7,000 CVS Corp., Convertible Preferred Stock 595,438
9,500 El Paso Energy Capital Trust I, Convertible Preferred Stock 489,250
6,500 Estee Lauder Co., Convertible Preferred Stock 630,500
7,000 Houston Industries, Inc., Convertible Preferred Stock 826,000
12,500 Lincoln National Corp., Convertible Preferred Stock 331,250
8,000 McKesson Financing Trust, Convertible Preferred Stock 425,000
2,000 MediaOne Group, Inc., Convertible Premium Income Exchange Security 160,250
8,500 Monsanto Company, Convertible Preferred Stock 391,531
12,500 Newell Financial Trust I, Convertible Preferred Stock 717,188
35,000 Philadelphia Consolidated Holding, Convertible Preferred Stock 372,969
2,500 Unocal Capital Trust, Convertible Preferred Stock 145,625
--------------
Total Preferred Stocks (cost $4,694,173) 5,085,001
--------------
OPTIONS ON U.S. TREASURY BOND FUTURES (e)
U.S. Treasury Bond Futures, 100 call option contracts,
Exercise price of $121, expires May 21, 1999 (Cost $124,498) 71,875
--------------
<CAPTION>
Principal Maturity
Amount Rate Date
- ---------------- ------ ------------------
<S> <C> <C> <C> <C>
SHORT-TERM SECURITIES - 4.5% (a)
Commercial Paper
$24,900,000 Koch Industries, Inc. 4.91% 5/3/1999 24,893,208
5,000,000 Pfizer, Inc. 4.75% 5/15/1999 4,991,424
5,000,000 Triple-A One Funding Corp. 4.83% 5/17/1999 4,989,267
--------------
Total Commercial Paper (at amortized cost) 34,873,899
--------------
Total Investments (cost $773,683,634) $775,329,384 (f)
==============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood Income Fund.
(b) Denominated in U.S. dollars.
(c) Denotes investments purchased on a when-issued basis.
(d) At April 30, 1999, U.S. Treasury Notes valued at $771,750 were held in escrow to cover open call options written as follows;
<CAPTION>
Number of Exercise Expiration
Type Contracts Price Date Value
---------- ---------------- -------------- -------------- ------------
<S> <C> <C> <C> <C>
US Treasury Bond Futures 100 $122 5/21/1999 $40,625
US Treasury Bond Futures 200 126 5/21/1999 21,875
------ ------------
300 $62,500
====== ============
(e) The market value of the denoted category of investments represents less than 0.1% of the total investments of the
Lutheran Brotherhood Income Fund.
(f) At April 30, 1999, the aggregate cost of securities for federal income tax purposes was $773,683,634 and the net unrealized
appreciation of investments based on that cost was $1,645,750 which is comprised of $12,612,081 aggregate gross unrealized
appreciation and $10,966,331 aggregate gross unrealized depreciation.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
Portfolio of Investments
April 30, 1999
(unaudited)
Principal Maturity
Amount Rate Date Value
- ---------------- ------ ------------------ --------------
<S> <C> <C> <C> <C>
LONG-TERM MUNICIPAL SECURITIES - 98.5% (a)
Alabama - 0.6%
$ 4,000,000 Jefferson County, Alabama, Sewer Revenue Capital
Improvements Warrants, Series 1999-A, Insured by FGIC 5.0% 2/1/2033 $ 3,848,472
--------------
Arizona - 1.4%
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 2,133,483
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 1,087,270
2,500,000 Salt River Project, Arizona, Electric System, Revenue Bonds,
1992-C 6.0% 1/1/2016 2,659,175
1,000,000 Sedona, Arizona Wastewater Municipal Property Corp.,
Excise Tax Revenue Bonds, Insured by MBIA 5.375% 7/1/2015 1,038,380
40,000 Tucson, Arizona General Obligation Bonds, Insured by FGIC 6.1% 7/1/2012 43,595 (b)
1,460,000 Tucson, Arizona General Obligation Unlimited Bonds, Insured
by FGIC 6.1% 7/1/2012 1,565,354
--------------
8,527,257
--------------
Arkansas - 1.3%
1,340,000 Arkansas Development Finance Authority, Correctional
Facilities Construction Revenue Bonds, Insured by MBIA 7.125% 11/15/2010 1,440,178 (b)
1,000,000 Arkansas Housing Development Agency, Single Family Mortgage
Bonds, Series A 8.375% 7/1/2010 1,249,630 (b)
3,000,000 City of Jonesboro, Arkansas, Residential Housing and Health
Care Facilities Board, Hospital Revenue Refunding and
Construction Bonds, (St. Bernards Regional Medical Center),
Series 1996-B, Insured by AMBAC 5.8% 7/1/2011 3,283,650
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 966,368
750,000 Sebastian County, Arkansas, Junior College, Unlimited General
Obligation Refunding and Improvement Bonds, Insured by AMBAC 5.6% 4/1/2017 798,788
--------------
7,738,614
--------------
California - 9.1%
2,500,000 Alameda, California, Unified School District, Alameda County,
Crossover Refunding Bonds, Series A, Insured by AMBAC 6.1% 7/1/2013 2,705,150
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 3,936,726
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 979,160
2,500,000 Bakersfield, California, Certificates of Participation
(Convention Center Expansion - Arena Project, 1997), Insured
by MBIA 5.8% 4/1/2017 2,717,750
3,000,000 California State Public Works Board, Department of Corrections,
Lease Revenue Bonds, State Prison, Series A 7.4% 9/1/2010 3,767,970
1,000,000 California State, Unlimited Tax General Obligation Bonds,
Veteran's Series AT 9.5% 2/1/2010 1,423,050
5,985,000 California State, Unlimited Tax General Obligation, Insured
by MBIA 6.0% 8/1/2016 6,709,125 (b)
300,000 California State, Unlimited Tax General Obligation, Insured
by MBIA 6.0% 8/1/2016 329,514
2,000,000 California State, Various Purpose General Obligation Bonds,
Insured by AMBAC 6.3% 9/1/2010 2,333,920
1,400,000 Central Valley Financing Authority, California, Cogeneration
Project Revenue Bonds, (Carson Ice-Gen Project), Series 1993 6.0% 7/1/2009 1,491,504
3,135,000 County of Orange, California, 1996 Recovery Certificates of
Participation, Series A, Insured by MBIA 5.8% 7/1/2016 3,421,320
2,035,000 Palmdale, California, Civic Authority Revenue Bonds, Merged
Redevelopment Project Areas, Series A 6.6% 9/1/2034 2,260,051
1,000,000 Rio Linda, California, Union School District, Series 1992-A,
Insured by AMBAC 7.4% 8/1/2010 1,135,910 (b)
2,815,000 Riverside County Transportation Commission, California,
Sales Tax Revenue Capital Appreciation Bonds, Insured by
MBIA Zero Coupon 6/1/2004 2,308,413
500,000 Sacramento California Cogeneration Authority Project
Revenue Bonds 6.375% 7/1/2010 547,005 (b)
500,000 Sacramento California Cogeneration Authority Project
Revenue Bonds 6.375% 7/1/2010 575,590
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 1,813,920
15,000,000 San Joaquin Hills Transportation Corridor Agency, California,
Sr. Lien Convertible Toll Revenue Bonds Zero Coupon 1/1/2013 15,944,550 (b)
1,500,000 State of California, General Obligation Bonds 7.0% 8/1/2006 1,773,045
--------------
56,173,673
--------------
Colorado - 6.8%
4,365,000 City & County of Denver, Colorado School District #1, General
Obligation Bonds 5.25% 12/1/2017 4,482,200
2,000,000 City & County of Denver, Colorado, Department of Aviation
(Airport System Revenue Refunding Bonds), Series D 5.5% 11/15/2025 2,064,320
3,000,000 Colorado Housing Finance Authority, Single Family Program,
1998 Series D-2 Senior Revenue Bonds 6.35% 11/1/2029 3,290,910
1,000,000 Colorado Housing Finance Authority, Single Family Program,
Revenue Bonds 7.0% 11/1/2016 1,112,820
3,100,000 Colorado Springs, Colorado, Utilities System Refunding Bonds,
Series 1991-B 7.0% 11/15/2021 3,410,682 (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 2,141,776 (b)
1,195,000 Colorado Water Resources Power Development Authority,
Clean Water Revenue Bonds, Series A, Insured by FSA 6.25% 9/1/2013 1,285,940
150,000 Douglas County, Colorado, School District No. 1, General
Obligation Bonds, Insured by MBIA 6.5% 12/15/2016 167,630
3,350,000 Douglas County, Colorado, School District No. 1, General
Obligation Bonds, Insured by MBIA 6.5% 12/15/2016 3,815,583 (b)
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 1,136,330
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 6/1/2007 1,337,477
1,890,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 6/1/2008 1,275,712
1,885,000 Goldsmith Metropolitan District, Colorado, Unlimited Tax
General Obligation Bonds, Insured by MBIA Zero Coupon 12/1/2008 1,245,061
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 3,782,550
3,850,000 Regional Transportation District, Colorado, Sales Tax Revenue
Bonds, Insured by FGIC 6.25% 11/1/2012 4,207,742
635,000 Regional Transportation District, Colorado, Sales Tax Revenue
Bonds, Insured by FGIC 6.25% 11/1/2012 687,705 (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 2,096,875
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 4,003,650
--------------
41,544,963
--------------
Connecticut - 0.8%
4,000,000 Connecticut Special Tax Obligation, Transportation
Infrastructure Revenue Bonds, Series B 6.5% 10/1/2010 4,683,960
--------------
Florida - 3.1%
5,920,000 Broward County, Florida, Housing Finance Authority, Home
Mortgage Revenue Bonds, 1983 Series A Zero Coupon 4/1/2014 1,311,754
3,500,000 Florida State Board of Education, Public Education Capital
Outlay, General Obligation Bonds, Series B 5.875% 6/1/2020 3,824,660
3,200,000 Hillsborough County, Florida, Industrial Development
Authority (Weyerhaeuser Company, Inc.), Industrial
Development Revenue Bonds, Series 1983 9.25% 6/1/2008 3,212,320
1,705,000 Hillsborough County, Florida, Industrial Development
Authority, Florida (Tampa Electric Project), Pollution
Control Revenue Bonds, Series 1991 7.875% 8/1/2021 1,907,520
8,500,000 Jacksonville, Florida, Electric Authority (St. John's
River Power Project), Electric Revenue Refunding Bonds,
Issue 2-13 5.375% 10/1/2016 8,755,935
--------------
19,012,189
--------------
Georgia - 3.3%
1,500,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series A, Insured by MBIA 6.1% 10/1/2019 1,710,030
2,000,000 Brunswick, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Series 1992, Insured by MBIA 6.0% 10/1/2011 2,272,560
3,000,000 Burke County, Georgia, Developmental Authority Pollution
Control Revenue Bonds, Insured by AMBAC 5.25% 5/1/2034 2,971,500
5,000,000 Cherokee County, Georgia, Water & Sewer Revenue Refunding &
Improvement Bonds, Insured by MBIA 5.5% 8/1/2018 5,319,000
2,000,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-B 5.65% 3/1/2012 2,207,700
3,500,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series 1994-D 5.0% 8/1/2012 3,640,945
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series B 6.3% 3/1/2009 1,155,320
1,000,000 Georgia State, Unlimited Tax General Obligation Bonds,
Series B 6.3% 3/1/2010 1,159,320
--------------
20,436,375
--------------
Idaho - 1.2%
3,115,000 Idaho Falls, Idaho, General Obligation Electric Refunding
Bonds, Series 1991, Insured by MBIA Zero Coupon 4/1/2010 1,907,096
2,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding
Bonds, Series 1991, Insured by MBIA Zero Coupon 4/1/2011 1,143,680
1,000,000 Idaho Falls, Idaho, General Obligation Electric Refunding
Bonds, Series 1991, Insured by MBIA Zero Coupon 4/1/2007 707,230
3,060,000 Idaho Housing & Finance Association, Single Family
Mortgage Bonds, Series 1998 F-2 5.35% 7/1/2018 3,072,118
750,000 Idaho State Building Authority, State Building Revenue Bonds,
Insured by MBIA 5.0% 9/1/2021 741,000
--------------
7,571,124
--------------
Illinois - 2.0%
1,000,000 City of Alton, Madison County, Illinois, Hospital Facility
Revenue Refunding Bonds, Series 1996, (Saint Anthony's
Health Center) 6.0% 9/1/2014 1,045,640
2,500,000 Cook County, Illinois, Unlimited General Obligation Bonds,
Series A, Insured by MBIA 6.25% 11/15/2011 2,881,700
2,000,000 Illinois Health Facilities Authority Revenue Refunding Bonds,
Lutheran General Health, Insured by FSA 6.0% 4/1/2018 2,214,040
170,000 Illinois Health Facilities Authority (Community Provider
Pooled Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.9% 8/15/2003 191,542 (b)
755,000 Illinois Health Facilities Authority (Community Provider
Pooled Loan Program), Revenue Bonds, Series 1988-B,
Insured by MBIA 7.9% 8/15/2003 765,223 (b)
1,250,000 Illinois Housing Development Authority, Section 8 Elderly
Housing Refunding Revenue Bonds, Series 1998, Insured by
FSA 5.25% 1/1/2021 1,258,025
10,000,000 Metropolitan Pier & Expostion Authority, Illinois, McCormick
Place Expansion, Refunding Bonds, Series 1993-A, Insured by
FGIC Zero Coupon 6/5/2018 3,693,600
--------------
12,049,770
--------------
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 2,487,828 (b)
1,100,000 Indianapolis Airport Authority Refunding Revenue Bonds,
Series 1996-A, Insured by FGIC 5.6% 7/1/2015 1,170,367
--------------
3,658,195
--------------
Iowa - 0.4%
2,000,000 Iowa Finance Authority, Iowa State Revolving Fund Revenue
Bonds, Combined Series 1994 6.25% 5/1/2024 2,201,900
--------------
Kansas - 1.7%
2,605,000 Kansas City, Kansas, Utility System Revenue Bonds, Series
1994 Insured by FGIC 6.375% 9/1/2023 2,950,371 (b)
5,395,000 Kansas City, Kansas, Utility System Revenue Bonds, Series
1994 Insured by FGIC 6.375% 9/1/2023 6,060,311
1,255,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds, Insured by AMBAC Zero Coupon 3/1/2007 890,824 (b)
920,000 Kansas City, Kansas, Utility System, Capital Appreciation
Refunding & Improvement Revenue Bonds, Insured by AMBAC Zero Coupon 3/1/2007 653,531
--------------
10,555,037
--------------
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 813,098
5,345,000 Kentucky Turnpike Authority, Economic Development Road
Revenue Bonds, Insured by FGIC Zero Coupon 1/1/2010 3,285,358
--------------
4,098,456
--------------
Louisiana - 1.2%
6,500,000 New Orleans, Louisiana, General Obligation Bonds, Series
1991, Insured by AMBAC Zero Coupon 9/1/2012 3,432,845
3,000,000 Orleans Parish School Board #87, Louisiana, Insured by
MBIA 8.95% 2/1/2008 3,999,180 (b)
--------------
7,432,025
--------------
Maine - 0.2%
1,225,000 Maine Health & Higher Education Facilities Authority
Revenue Bonds, Series 1994, Insured by FSA 7.0% 7/1/2024 1,422,054 (b)
25,000 Maine Health & Higher Education Facilities Authority Revenue
Bonds, Series 1994, Insured by FSA 7.0% 7/1/2024 28,679
--------------
1,450,733
--------------
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 2,212,020 (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 5,121,000
1,000,000 Prince George's County, Maryland, Dimensions Health Corp.,
Hospital Revenue Bonds, Series 1992 7.0% 7/1/2022 1,116,460 (b)
--------------
8,449,480
--------------
Massachusetts - 1.8%
2,000,000 Commonwealth of Massachusetts, General Obligation Refunding
Bonds, Series B 6.5% 8/1/2008 2,300,380
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 2,729,050
1,500,000 Massachusetts Health & Education Facilities Authority,
Revenue Bonds, (New England Medical Center) Series F,
Insured by FGIC 6.5% 7/1/2012 1,631,370
1,000,000 Massachusetts State Health and Educational Facilities
Authority, Revenue Bonds, (Partners Healthcare System)
Series B 5.25% 7/1/2014 1,011,590
3,000,000 Plymouth County, Massachusetts, Correctional Facility
Certificates of Participation Bonds Prerefunded 7.0% 4/1/2012 3,365,850 (b)
--------------
11,038,240
--------------
Michigan - 2.6%
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 2,273,440
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 958,890
2,460,000 Michigan Municipal Bond Authority, Government Loan Revenue
Refunding Bonds, Series A, Insured by FGIC Zero Coupon 12/1/2005 1,875,578
110,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, (Detroit Medical Center Obligated
Group), Series 1988-A 8.125% 8/15/2012 112,404
3,000,000 Michigan State Hospital Finance Authority, Revenue Refunding
Bonds, (Sisters of Mercy Health Corp.), Insured by MBIA 5.375% 8/15/2014 3,208,590
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 3,556,152
3,455,000 West Ottawa, Michigan, Public School District, Unlimited
Tax General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/2004 2,828,609
1,860,000 West Ottawa, Michigan, Public School District, Unlimited
Tax General Obligation Bonds, Insured by MBIA Zero Coupon 5/1/2005 1,451,823
--------------
16,265,486
--------------
Minnesota - 4.6%
5,000,000 City of Rochester, MN Health Care Facilities Revenue Bonds
(Mayo Foundation) , Series 1998A 5.5% 11/15/2027 5,196,950
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 318,801 (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 777,570
7,685,000 Minneapolis, Minnesota, Community Development Agency,
Tax Increment Revenue Appreciation Bonds, Insured by
MBIA Zero Coupon 3/1/2009 4,944,760
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% 11/15/2026 5,337,750
1,000,000 Minnesota Agricultural and Economic Development Board,
Healthcare System Revenue Bonds, Series 97A, (Fairview
Hospital & Healthcare Services), Insured by MBIA 5.5% 11/15/2017 1,045,530
2,500,000 Minnesota Higher Education Facilities Authority, (Augsburg
College), Mortgage Revenue Bonds, Series Four-F1 Bonds 6.25% 5/1/2023 2,647,925
1,740,000 Stewartville, MN, Independent School District, Unlimited
Tax General Obligation Bonds, Series A 5.75% 2/1/2014 1,865,141 (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 3,703,385 (b)
1,000,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital
Revenue Bonds, Series C, Insured by AMBAC 7.25% 7/1/2018 1,063,030 (b)
1,400,000 St. Louis Park, Minnesota, (Methodist Hospital), Hospital
Revenue Bonds, Series C, Insured by AMBAC 7.25% 7/1/2015 1,487,416 (b)
--------------
28,388,258
--------------
Missouri - 3.0%
3,000,000 City of St. Charles, Missouri Public Facilities Authority,
Leasehold Revenue Bonds, Series 1997A, Insured by MBIA 5.45% 2/1/2017 3,128,610
1,475,000 Missouri Housing Development Commission, Single Family
Mortgage Revenue Bonds (Home Ownership Loan Program),
Series C-1 6.55% 9/1/2028 1,616,836
2,000,000 Missouri State Health and Education Facilities Authority
(Barnes - Jewish, Inc. /Christian Health Services), Health
Facilities Refunding & Improvement Revenue Bonds,
Series 1993-A 5.25% 5/15/2014 2,067,340
2,650,000 Missouri State Health and Education Facilities Authority
(Christian Health Services), Health Facilities Refunding &
Improvement Revenue Bonds, Series 1991 A, Insured by FGIC 6.88% 2/15/2021 2,850,102 (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 800,520
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 3,161,633
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 1,613,655
655,000 Missouri State Health & Education Facility Authority,
Lake of the Ozarks General Hospital 6.5% 2/15/2021 709,169
1,345,000 Missouri State Health & Education Facility Authority,
Lake of the Ozarks General Hospital 6.5% 2/15/2021 1,552,063 (b)
1,000,000 State Environmental Improvement and Energy Resources
Authority, (State of Missouri), Water Pollution Control
Revenue Bonds, (State Revolving Fund Program - Multiple
Participant Series), Series 1995-E 5.625% 7/1/2016 1,053,410
--------------
18,553,338
--------------
Montana - 0.8%
775,000 Montana State Board of Investments, Payroll Tax Revenue
Bonds, Series 1996, Insured by MBIA 6.875% 6/1/2020 829,444 (b)
2,385,000 Montana State Board of Investments, Payroll Tax Revenue
Bonds, Series 1996, Insured by MBIA 6.875% 6/1/2020 2,552,546 (b)
1,240,000 Montana State Board of Investments, Payroll Tax Revenue
Bonds, Series 1996, Insured by MBIA 6.875% 6/1/2020 1,327,110 (b)
--------------
4,709,100
--------------
Nebraska - 2.2%
1,000,000 Lancaster County, Nebraska, Hospital Authority No. 1,
Hospital Revenue Bonds (Bryan Memorial Hospital Project),
Series 1997-B, Insured by MBIA 5.375% 6/1/2022 1,019,610
3,920,000 Nebraska Investment Finance Authority, Single Family Housing
Revenue Bonds, 1998 Series F, Insured by GNMA 5.6% 9/1/2020 3,990,795
4,000,000 Nebraska Public Power District, Power Supply System Revenue
Bonds, Insured by MBIA 6.125% 1/1/2015 4,389,880 (b)
3,455,000 Omaha Public Power District, Nebraska, Electric Revenue
Refunding Bonds, Series B 6.15% 2/1/2012 3,927,229
--------------
13,327,514
--------------
New Hampshire - 0.2%
1,100,000 New Hampshire Turnpike System, Residual Interest Bonds,
1991 Refunding, Series C, Insured by FGIC 9.941% 11/1/2017 1,472,504 (c)
--------------
New Jersey - 3.0%
1,250,000 East Orange, New Jersey, Unlimited Tax General Obligation
Bonds, Insured by FSA 8.4% 8/1/2006 1,573,775
1,000,000 Mercer County, New Jersey, Improvement Authority, Revenue
Bonds, Series 1991 6.6% 11/1/2014 1,065,090 (b)
2,585,000 New Jersey Health Care Facilities Financing Authority, Jersey
Shore Medical Center Revenue Bonds, Insured by AMBAC 6.1% 7/1/2010 2,845,775
3,000,000 New Jersey Transit Corp., (Raymond Plaza East, Inc.),
Certificates of Participation, Insured by FSA 6.375% 10/1/2006 3,427,860
905,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
1984 Series 10.375% 1/1/2003 1,031,510 (b)
4,700,000 New Jersey Turnpike Authority, Turnpike Revenue Bonds,
Series C, Insured by AMBAC 6.5% 1/1/2016 5,566,445
2,595,000 West New York, New Jersey, Municipal Utility Authority,
Sewer Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/2009 1,611,599
2,195,000 West New York, New Jersey, Municipal Utility Authority,
Sewer Revenue Refunding Bonds, Insured by FGIC Zero Coupon 12/15/2007 1,512,750
--------------
18,634,804
--------------
New Mexico - 2.4%
3,315,000 City of Alamogordo, New Mexico Hospital Revenue Bonds,
(Gerald Champion Hospital Project), Series 1997 5.3% 1/1/2013 3,323,884
5,000,000 Farmington, New Mexico, Power Revenue Refunding Bonds,
Series 1983 9.875% 1/1/2013 6,483,600 (b)
4,040,000 Farmington, New Mexico, Utility Systems Revenue Bonds,
Insured by AMBAC 9.875% 1/1/2008 5,234,022 (b)
--------------
15,041,506
--------------
New York - 4.4%
5,200,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series A, Insured by MBIA 6.375% 7/1/2018 5,869,812 (b)
2,500,000 Metropolitan Transportation Authority, New York, Commuter
Facilities Revenue Bonds, Series 1996-A, Insured by FGIC 6.1% 7/1/2026 2,842,925 (b)
3,000,000 Metropolitan Transportation Authority, New York, Transit
Facilities Revenue Bonds, Series O, Insured by MBIA 6.25% 7/1/2014 3,369,060 (b)
4,225,000 Metropolitan Transportation Authority, New York, Transit
Facilities Service Contract Bonds, Series O 5.75% 7/1/2013 4,615,390
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 2,257,300
80,000 New York State Medical Care Facilities Finance Agency
(Ellis Hospital), Insured Mortgage Hospital Bonds, Series B,
Insured by FHA 8.0% 2/15/2008 81,815
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 3,178,461 (b)
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 1,901,064
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 1,793,777
1,000,000 Triborough Bridge & Tunnel Authority, New York, General
Purpose Revenue Bonds, Series Q 6.75% 1/1/2009 1,177,480
--------------
27,087,084
--------------
North Carolina - 1.7%
2,500,000 Charlotte, North Carolina, Water and Sewer Unlimited Tax
General Obligation Bonds 5.6% 5/1/2021 2,758,700 (b)
1,500,000 County of Pitt, North Carolina, Pitt County Memorial
Hospital Revenue Bonds, Series 1995 5.5% 12/1/2015 1,646,490 (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 4,523,760
1,250,000 North Carolina Medical Care, Community Hospital Revenue
Bonds, (High Point Regency Health System),
Insured by AMBAC 5.0% 10/1/2029 1,208,250
--------------
10,137,200
--------------
North Dakota - 0.9%
2,000,000 Mercer County, North Dakota, Pollution Control Revenue
Refunding Bonds, (Ottertail Power Co. Project) 6.9% 2/1/2019 2,136,120
2,000,000 North Dakota Municipal Bond Bank, State Revolving Fund
Program Bonds, Series 1995-A 6.3% 10/1/2015 2,239,400
1,340,000 North Dakota State Water Commission (Southwest Pipeline),
Revenue Bonds, Series A, Insured by AMBAC 5.75% 7/1/2027 1,423,120
--------------
5,798,640
--------------
Ohio - 5.0%
875,000 Akron Ohio Economic Development, Non-Tax Revenue Bonds,
Insured by MBIA 6.0% 12/1/2012 995,715
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 1,132,719 (b)
2,500,000 Akron, Ohio, Certificates of Participation, Series 1996,
Akron Municipal Baseball Stadium Project Zero Coupon 12/1/2016 2,452,175
2,620,000 Batavia Local School District, Ohio School Improvement
Refunding Bonds, (Unlimited Tax General Obligation),
Insured by MBIA 5.625% 12/1/2022 2,868,193
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 4,428,639 (b)
1,630,000 Cuyahoga County, Ohio, (Deaconess Hospital), Hospital Revenue
Bonds, Series C 7.45% 10/1/2018 1,766,415 (b)
1,470,000 Lorain County, Ohio, (Humility of Mary Health System),
Hospital Revenue Bonds 7.125% 12/15/2006 1,590,143 (b)
2,000,000 Ohio Higher Educational Facility Commission (Case Western
Reserve University Project), Series B 6.5% 10/1/2020 2,353,380
1,500,000 Ohio Higher Educational Facility Commission, Higher
Educational Revenue Bonds, (Ohio Dominican College 1994
Project) 6.625% 12/1/2014 1,613,385
5,000,000 Ohio State Air Quality Development Authority, Cleveland
Electric, Pollution Control Revenue Bonds, Insured by FGIC 8.0% 12/1/2013 5,708,550
2,250,000 Ohio State Air Quality Development Authority, Columbus &
Southern Pollution Control Revenue Bonds, Insured by FGIC 6.375% 12/1/2020 2,448,698
1,000,000 Ohio State Turnpike Commission; Turnpike Revenue Bonds,
Series 1994A 5.75% 2/5/2024 1,095,120 (b)
1,795,000 Trumbull County, Ohio (Memorial Hospital), Hospital Revenue
Refunding & Improvement Bonds, Series 1991-B,
Insured by FGIC 6.9% 11/15/2012 1,970,138 (b)
--------------
30,423,270
--------------
Oklahoma - 2.5%
5,220,000 Bass, Oklahoma, Memorial Baptist Hospital 8.35% 5/1/2009 6,456,253 (b)
1,500,000 Oklahoma Municipal Power Authority, Electric Revenue
Refunding Bonds, Series B, Insured by MBIA 5.75% 1/1/2024 1,649,265
1,500,000 Oklahoma Municipal Power Authority, Power Supply System
Revenue Bonds, Series 1992-B, Insured by MBIA 5.875% 1/1/2012 1,680,300
5,000,000 Tulsa, Oklahoma, Municipal Airport Trust Revenue
(American Airlines, Inc.) 7.375% 12/1/2020 5,311,200
--------------
15,097,018
--------------
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 2,900,043
2,000,000 Hospital Facility Authority of the Western Lane Hospital
District, Oregon, Revenue Refunding Bonds, Series 1994
(Sisters of St. Joseph of Peace, Health & Hospital
Services), Insured by MBIA 5.875% 8/1/2012 2,185,120
--------------
5,085,163
--------------
Pennsylvania - 2.9%
7,500,000 Allegheny County, Pennsylvania, Airport Revenue Refunding
Bonds, Series 1997B, Insured by MBIA 5.0% 1/1/2019 7,407,075
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 1,626,848
2,575,000 Allegheny County, Pennsylvania, Sanitary Authority, Sewer
Revenue Bonds, Series A, Insured by FGIC Zero Coupon 6/1/2008 1,733,439
3,170,000 Millcreek Township, Pennsylvania, School District, General
Obligation Bonds, Insured by FGIC Zero Coupon 8/15/2009 2,000,397
1,720,000 Monroeville, Pennsylvania, Hospital Authority, Forbes Health
System Revenue Bonds, Series 1992 7.0% 10/1/2003 1,722,408
3,000,000 Pennsylvania State, General Obligation Bonds,
Second Series of 1992, Insured by AMBAC Zero Coupon 7/1/2006 2,217,300
1,000,000 York County Pennsylvania Solid Waste and Refuse Authority,
Refunding Revenue Bonds, Series 1997, County Guaranteed,
Insured by FGIC 5.5% 2/1/2012 1,083,750
--------------
17,791,217
--------------
Puerto Rico - 1.9%
4,000,000 Puerto Rico Commonwealth, Aqueduct & Sewer Revenue Bonds,
Series A 9.0% 7/1/2009 4,909,720 (b)
3,000,000 Puerto Rico Commonwealth, Unlimited Tax General
Obligation Bonds 6.45% 7/1/2017 3,408,930 (b)
3,000,000 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series T 6.0% 7/1/2016 3,236,640
--------------
11,555,290
--------------
South Carolina - 1.5%
2,000,000 City of Spartanburg, South Carolina, Junior Lien, Water System
Revenue Bonds, Series 1998 5.25% 6/1/2028 2,037,540
2,000,000 Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, Series 1991, Insured by FGIC 6.25% 1/1/2021 2,325,320
5,000,000 Piedmont Municipal Power Agency, South Carolina, Electric
Revenue Refunding Bonds, Insured by FGIC 5.0% 1/1/2022 4,880,450
--------------
9,243,310
--------------
Tennessee - 0.8%
1,750,000 Bristol, Tennessee, Health and Educational Facilities
Authority, Bristol Memorial Hospital Revenue Bonds, Insured
by FGIC 7.0% 9/1/2021 1,888,338 (b)
1,000,000 City of Jackson, Tennessee, Hospital Revenue Bonds,
Jackson-Madison County General Hospital Project,
Insured by AMBAC 5.0% 4/1/2018 984,340
2,000,000 Metropolitan Government of Nashville & Davidson County TN,
Electric System Revenue Bonds, Series 1998A 5.2% 5/5/2023 2,009,980
--------------
4,882,658
--------------
Texas - 8.9%
2,165,000 Arlington, Texas, Independent School District, Unlimited
Tax Refunding & Improvement Bonds, Series 1992, Permanent
School Fund Guarantee Zero Coupon 2/15/2009 1,383,846
8,100,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA Zero Coupon 11/15/2009 5,028,561
7,000,000 Austin, Texas, Utility System Refunding Revenue Bonds,
Series A, Insured by MBIA Zero Coupon 11/15/2008 4,593,820
1,000,000 Austin, Texas, Utility System Revenue Refunding Bonds,
Insured by FGIC 6.0% 11/15/2013 1,132,340
1,575,000 Bexar County, Texas, Limited Tax General Obligation Bonds 5.0% 6/15/2015 1,583,143
1,000,000 Cass County, Texas, Industrial Development Corporation,
Pollution Control Revenue Refunding Bonds, International
Paper, Series 1997-B 5.35% 4/1/2012 1,033,900
1,390,000 City of Garland, Dallas County, Texas, Combination Tax and
Revenue Certificates of Obligation, Series 1996 5.25% 2/15/2016 1,407,139
1,310,000 City of Garland, Dallas County, Texas, Combination Tax and
Revenue Certificates of Obligation, Series 1996 5.25% 2/15/2015 1,332,729
2,000,000 Copperas Cove, Texas, Independent School District,
Unlimited Tax General Obligation Bonds, Permanent School
Fund Guarantee 6.9% 8/15/2014 2,285,600 (b)
4,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds Series 1994-A, Insured by MBIA 6.0% 11/1/2012 4,305,040
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds, Insured by FGIC 7.375% 11/1/2009 1,163,720
2,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds, Insured by FGIC 7.375% 11/1/2010 2,321,540
1,000,000 Dallas-Fort Worth, Texas, Airport Joint Revenue Refunding
Bonds, Insured by FGIC 7.375% 11/1/2008 1,166,200
2,285,000 Denton, Texas, Independent School District, Unlimited Tax
General Obligation Refunding Bonds, Permanent School
Fund Guarantee 6.25% 2/15/2009 2,606,088
1,000,000 Georgetown, Texas, Higher Education Finance Corp.,
Higher Education Revenue Bonds, Series 1994
(Southwestern University Project) 6.3% 2/15/2014 1,063,280
2,250,000 Harris County, Texas, Toll Road Sr. Lien Bonds, Series A,
Insured by MBIA 6.375% 8/15/2024 2,552,175 (b)
5,315,000 Lewisville, Texas, Independent School District, Capital
Appreciation Refunding Bonds, Permanent School
Fund Guarantee Zero Coupon 8/15/2019 1,854,669
1,000,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.375% 7/1/2011 1,137,070
1,845,000 San Antonio, Texas, Airport Revenue Refunding Bonds,
Insured by AMBAC 7.375% 7/1/2010 2,097,894
11,615,000 Southeastern Texas Housing Finance Corp., Single Family
Mortgage Revenue Bonds Zero Coupon 9/1/2017 4,502,206 (b)
4,315,000 Texas State, Veterans Land Board General Obligation Bonds 0.05% 7/1/2010 2,605,354
1,000,000 Texas Water Development Board, State Revolving Fund Revenue
Bond, Senior Lien, Series A 5.25% 7/5/2017 1,012,460
1,330,000 Travis County, Texas, Housing Finance Corporation, Single
Family Mortgage Revenue Refunding Bonds, Series 1994-A 6.75% 4/1/2014 1,425,747
3,210,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guarantee 6.5% 2/15/2016 3,448,471 (b)
440,000 Willis, Texas, Independent School District, Government
Obligation Bonds, Permanent School Fund Guarantee 6.5% 2/15/2016 467,069
1,175,000 Wylie, Texas, Independent School District, (Collin County),
Unlimited Tax School Building & Refunding Bonds,
Series 1994, Permanent School Fund Guarantee 6.875% 8/15/2014 1,406,369 (b)
--------------
54,916,430
--------------
Utah - 2.5%
5,000,000 Intermountain Power Agency, Utah, Power Supply Revenue
Bonds, Series B, Insured by MBIA 5.75% 7/1/2019 5,434,600
3,405,000 Timpanogos Special Service District, Utah County, Utah,
Sewer Revenue Bonds, Series 1996-A, Insured by AMBAC 6.1% 6/1/2019 3,838,150 (b)
3,750,000 Utah Associated Municipal Power Systems, San Juan Project
Revenue Bonds, Series O, Insured by MBIA 6.25% 6/1/2014 4,217,250 (b)
1,580,000 West Valley City, Utah, Municipal Building Authority,
Lease Refunding Bonds, Insured by MBIA 6.0% 1/15/2010 1,665,762
--------------
15,155,762
--------------
Virginia - 2.5%
3,000,000 Industrial Development Authority of Fairfax County, Virginia,
Health Care Revenue Bonds, (Inova Health System Project),
Series 1996 5.875% 8/15/2016 3,238,350
4,300,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1994 Series H, Subseries H-2 6.5% 1/1/2014 4,565,353
5,000,000 Virginia State Housing Development Authority, Commonwealth
Mortgage Bonds, 1997 Subseries B-1 5.5% 1/1/2022 5,080,250
2,000,000 Virginia State, Unlimited Tax General Obligation Bonds 6.5% 6/1/2015 2,239,420 (b)
--------------
15,123,373
--------------
Washington - 4.5%
1,655,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A 8.75% 9/1/2018 2,207,356
1,395,000 Douglas County, Washington, Public Utility District #1,
Wells Hydroelectric Revenue Bonds, Series A 8.75% 9/1/2018 1,775,640 (b)
2,000,000 Grant County, Washington, Public Utility District No. 2,
Columbia River, Priest Rapids Hydro Electric Development
Project, Second Series Revenue Bonds, Series A,
Insured by AMBAC 5.0% 1/1/2023 1,943,120
1,500,000 Tacoma, Washington, Conservation System Project Revenue
Bonds, Tacoma Public Utilities Light Division 6.6% 1/1/2015 1,649,355
2,015,000 Tacoma, Washington, Utilities Refuse Revenue Bonds,
Insured by MBIA 6.625% 12/1/2011 2,182,829 (b)
3,000,000 Washington State Public Power Supply System, Nuclear
Project No. 1, Revenue Refunding Bonds, Series 1996-A,
Insured by MBIA 5.75% 7/1/2012 3,236,160
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 2,162,540
2,000,000 Washington State, Unlimited Tax General Obligation Bonds 6.0% 6/1/2012 2,247,540
2,400,000 Washington State, Unlimited Tax General Obligation Bonds 6.7% 6/1/2016 2,549,664 (b)
3,000,000 Washington State, Unlimited Tax General Obligation Bonds,
Series 93A 5.75% 10/1/2012 3,280,590
1,500,000 Washington State, Unlimited Tax General Obligation Bonds,
Series A 6.25% 2/1/2011 1,706,355
2,500,000 Washington State, Various Purpose General Obligation Bonds 6.25% 6/1/2010 2,866,375
--------------
27,807,524
--------------
Wisconsin - 0.9%
1,000,000 Southeast Wisconsin Professional Baseball Park District
Sales Tax Revenue Bonds, Insured by MBIA 5.8% 12/15/2026 1,111,210 (b)
4,315,000 State of Wisconsin, Clean Water Revenue Bonds, 1995 Series 1 5.8% 6/1/2015 4,698,388 (b)
--------------
5,809,598
--------------
Wyoming - 0.4%
2,500,000 State of Wyoming, Farm Loan Board, Capital Facilities Revenue
Bonds, Series 1994 6.1% 4/1/2024 2,644,550
--------------
Total Long-Term Municipal Securities (cost $542,622,018) 605,421,060
--------------
SHORT-TERM MUNICIPAL SECURITIES - 1.5% (a,c)
2,800,000 Berkeley County, South Carolina, (Amoco Chemical Co.
Project), Pollution Control Revenue Refunding Bonds, Series
1994 4.2% 5/3/1999 2,800,000
100,000 City of Hammond, Indiana, (Amoco Chemical Co. Project),
Pollution Control Revenue Refunding Bonds, Series 1994 4.2% 5/3/1999 100,000
2,700,000 Illinois Development Finance Authority, (Amoco Oil Company
Project), Pollution Control Revenue Refunding Bonds,
Series 1994 4.2% 5/3/1999 2,700,000
800,000 Lake Charles, Louisiana, Harbor & Terminal Variable Rate
Demand Note 4.25% 5/3/1999 800,000
900,000 Maricopa County, Arizona Pollution Control Corp., Pollution
Control Revenue Refunding Bonds, (Arizona Public
Service Co. Palo Verde Project), 1994 Series B 3.9% 5/3/1999 900,000
200,000 Maricopa County, Arizona Pollution Control Corp., Pollution
Control Revenue Refunding Bonds, (Arizona Public Service Co.
Palo Verde Project), 1994 Series E 3.95% 5/3/1999 200,000
100,000 Massachusetts Health and Educational Facilities Authority,
Variable Rate Demand Revenue Bonds, Capital Asset
Program Issue, Series C 3.4% 5/3/1999 100,000
1,300,000 Michigan Strategic Fund, Variable Rate Demand Pollution
Control Revenue Refunding Bonds, (Consumers Power Company
Project), Series 1988A 4.2% 5/3/1999 1,300,000
400,000 Peninsula Ports Authority, Virginia, Variable Rates Notes 4.45% 5/3/1999 400,000
--------------
Total Short-Term Municipal Securities (at amortized cost) 9,300,000
--------------
Total Investments (cost $551,922,018) $614,721,060 (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 April 30, 1999, the aggregate cost of securities for federal income tax purposes was $551,922,018 and the net unrealized
appreciation of investments based on that cost was $62,799,042 which is comprised of $62,916,821 aggregate gross unrealized
appreciation and $117,779 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.
MBIA - Municipal Bond Investors Assurance Corp.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
LUTHERAN BROTHERHOOD MONEY MARKET FUND
Portfolio of Investments
April 30, 1999
(unaudited)
Principal Maturity
Amount Yield Date Value
- ---------------- ------ ------------------ ----------------
<S> <C> <C> <C> <C>
COMMERCIAL PAPER - 79.6% (a)
Banking-Domestic - 1.2%
$ 7,000,000 AES Shady Point, Inc. (Direct Pay Letter of Credit,
Nationsbank N.A.) 4.89% 7/21/1999 $ 6,924,872
--------------
Banking-Foreign - 2.6%
6,500,000 UBS Finance (Delaware), Inc. 4.91% 7/12/1999 6,437,470
2,400,000 UBS Finance (Delaware), Inc. 4.96% 8/9/1999 2,367,667
6,000,000 UBS Finance (Delaware), Inc. 4.92% 6/9/1999 5,968,670
852,000 UBS Finance (Delaware), Inc. 4.99% 8/9/1999 840,451
--------------
15,614,258
--------------
Chemicals - 1.1%
2,697,000 Dupont (E.I.) de Nemours and Co. 4.91% 7/19/1999 2,668,414
4,250,000 Henkel Corp. 4.90% 9/8/1999 4,176,180
--------------
6,844,594
--------------
Consumer Products - 1.0%
6,000,000 Colgate-Palmolive Co. 4.89% 6/30/1999 5,951,800
--------------
Education - 9.7%
4,000,000 Duke University 4.97% 6/21/1999 3,972,573
6,000,000 Duke University 4.88% 6/3/1999 5,973,600
3,000,000 Duke University 4.93% 6/7/1999 2,984,984
6,000,000 Duke University 4.95% 10/26/1999 5,856,710
5,000,000 Leland H. Stanford Junior University 4.97% 6/4/1999 4,977,097
5,000,000 Leland H. Stanford Junior University 4.94% 8/17/1999 4,927,700
3,500,000 Leland H. Stanford Junior University 4.94% 10/20/1999 3,419,399
6,000,000 Yale University 4.93% 6/15/1999 5,963,550
6,000,000 Yale University 4.96% 6/28/1999 5,952,633
6,000,000 Yale University 5.02% 5/7/1999 5,995,080
8,000,000 Yale University 4.92% 7/22/1999 7,911,622
--------------
57,934,948
--------------
Energy - 2.5%
6,965,000 Petrofina (Delaware), Inc. (Guaranteed Petrofina S.A.) 4.87% 5/20/1999 6,947,171
6,000,000 American Petrofina Holding Co. (Guaranteed Petrofina S.A.) 4.86% 7/12/1999 5,942,280
2,000,000 American Petrofina Holding Co. (Guaranteed Petrofina S.A.) 4.93% 5/4/1999 1,999,192
--------------
14,888,643
--------------
Finance-Automotive - 8.9%
6,000,000 DaimlerChrysler NA Holdings 4.92% 7/26/1999 5,930,627
6,000,000 DaimlerChrysler NA Holdings 4.91% 9/9/1999 5,894,982
5,000,000 DaimlerChrysler NA Holdings 4.90% 8/3/1999 4,937,072
6,000,000 DaimlerChrysler NA Holdings 4.93% 8/23/1999 5,908,230
6,000,000 Ford Motor Credit Co. 4.87% 5/20/1999 5,984,705
6,000,000 Ford Motor Credit Co. 5.00% 5/4/1999 5,997,500
5,700,000 General Motors Acceptance Corp. 5.08% 6/15/1999 5,724,267
5,000,000 General Motors Acceptance Corp. 5.09% 10/15/1999 5,073,032
6,500,000 General Motors Acceptance Corp. 4.87% 5/6/1999 6,495,667
1,000,000 General Motors Acceptance Corp. 5.04% 6/4/1999 1,001,424
--------------
52,947,506
--------------
Finance-Commercial - 11.1%
19,200,000 CIT Group, Inc. 4.94% 5/3/1999 19,194,731
7,500,000 CIT Group, Inc. 4.90% 6/11/1999 7,459,000
1,000,000 CIT Group, Inc. 5.02% 10/25/1999 1,005,737
5,000,000 General Electric Capital Corp. 4.90% 8/10/1999 4,932,386
1,000,000 General Electric Capital Corp. 4.91% 6/29/1999 992,068
3,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 5.00% 5/3/1999 2,999,167
7,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 4.95% 8/30/1999 6,886,126
5,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 4.86% 6/16/1999 4,969,525
6,000,000 General Electric Credit Capital Services of Puerto Rico, Inc.
(Guaranteed General Electric Capital Corp.) 4.96% 9/20/1999 5,885,453
6,000,000 Norwest Financial, Inc. 4.88% 6/25/1999 5,955,817
6,000,000 Norwest Financial, Inc. 4.86% 7/30/1999 5,928,000
--------------
66,208,010
--------------
Finance-Consumer - 9.8%
7,000,000 American General Corp. 4.89% 8/9/1999 6,906,472
7,500,000 American General Finance Corp. 4.90% 5/5/1999 7,495,975
495,000 Associates Corp of North America 4.89% 5/11/1999 494,336
3,000,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 4.90% 5/25/1999 2,990,300
6,000,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 4.90% 5/18/1999 5,986,230
7,000,000 Associates Financial Services Company of Puerto Rico, Inc.
(Guaranteed Associates Corp. of North America) 4.90% 6/24/1999 6,949,075
6,000,000 Commercial Credit Co. 4.81% 5/27/1999 5,979,243
5,000,000 Transamerica Finance Corp. 4.89% 8/6/1999 4,935,199
2,176,000 Transamerica Finance Corp. 4.94% 10/8/1999 2,129,289
7,500,000 Transamerica Finance Corp. 4.93% 5/11/1999 7,489,896
7,000,000 Transamerica Finance Corp. 4.92% 10/8/1999 6,850,667
--------------
58,206,682
--------------
Finance-Structured - 8.9%
6,000,000 Corporate Asset Funding Co. 4.84% 6/25/1999 5,956,000
6,500,000 Corporate Asset Funding Co. 4.88% 5/7/1999 6,494,778
6,000,000 Corporate Asset Funding Co. 4.93% 5/28/1999 5,978,085
6,000,000 Corporate Asset Funding Co. 4.89% 5/10/1999 5,992,740
3,050,500 Edison Asset Securitization, L.L.C. 4.88% 6/7/1999 3,035,451
6,000,000 Edison Asset Securitization, L.L.C. 4.99% 7/9/1999 5,943,995
6,000,000 Edison Asset Securitization, L.L.C. 5.29% 5/10/1999 5,992,260
4,150,000 Preferred Receivables Funding 4.95% 11/29/1999 4,032,449
3,637,000 Triple-A One Funding Corp. 4.87% 7/9/1999 3,603,400
6,000,000 Triple-A One Funding Corp. 4.94% 5/14/1999 5,989,405
--------------
53,018,563
--------------
Financial Services - 3.2%
6,000,000 American Express Credit Corp. 4.86% 8/27/1999 5,905,993
7,000,000 American Express Credit Corp. 4.86% 5/18/1999 6,984,199
6,000,000 American Express Credit Corp. 4.87% 6/4/1999 5,972,800
--------------
18,862,992
--------------
Food & Beverage - 1.0%
6,000,000 Cargill, Inc. 5.01% 5/20/1999 5,984,515
--------------
Insurance - 5.8%
6,000,000 American Family Financial Services 4.89% 5/10/1999 5,992,725
6,000,000 Prudential Funding Corp. 4.84% 6/10/1999 5,967,933
7,500,000 Prudential Funding Corp. 4.90% 5/25/1999 7,475,950
2,000,000 Prudential Funding Corp. 4.96% 7/16/1999 1,979,480
7,000,000 Prudential Funding Corp. 4.87% 5/13/1999 6,988,660
6,000,000 USAA Capital Corp. 4.94% 7/16/1999 5,939,453
--------------
34,344,201
--------------
Leisure & Entertainment - 1.2%
7,000,000 Disney (Walt) Co. 5.02% 9/15/1999 6,869,736
--------------
Petroleum - 4.2%
4,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.04% 5/19/1999 3,990,120
6,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 4.92% 8/2/1999 5,925,135
1,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 4.91% 6/10/1999 994,633
5,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.01% 7/23/1999 4,943,399
4,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 5.02% 5/25/1999 3,986,933
5,000,000 Chevron Transport Corp. (Guaranteed Chevron Corp.) 4.90% 6/1/1999 4,979,204
--------------
24,819,424
--------------
U.S. Municipal - 7.4%
6,000,000 California Pollution Control Finance Authority;
Environmental Improvement Revenue Bonds;
Series 1996 (Guaranteed Shell Oil Co.) 4.91% 6/14/1999 6,000,000
6,000,000 California Pollution Control Finance Authority; Environmental
Improvement Revenue Bonds; Series 1996
(Guaranteed Shell Oil Co.) 4.91% 6/8/1999 6,000,000
5,520,000 Gulf Coast Waste Disposal Authority; Pollution Control
Revenue Bonds Series 1995 (Guaranteed Amoco Oil Co.) 4.94% 7/8/1999 5,520,000
5,000,000 Gulf Coast Waste Disposal Authority; Pollution Control
Revenue Bonds Series 1995 (Guaranteed Amoco Oil Co.) 4.88% 7/7/1999 5,000,000
7,250,000 Metrocrest Hospital Authority (Bank of New York Bank,
Direct Pay Letter of Credit) 5.04% 6/2/1999 7,217,778
8,400,000 City of New York GO Bonds, Fiscal 1995, Series B
(Guaranteed FGIC, SPI) 4.99% 5/21/1999 8,400,000
6,000,000 City of Whiting, Indiana; Industrial Sewage & Solid
Waste Disposal Series 1995 (Guaranteed Amoco Oil Co.) 4.92% 6/17/1999 6,000,000
--------------
44,137,778
--------------
Total Commercial Paper 473,558,522
--------------
CERTIFICATES OF DEPOSIT - 8.1% (a)
Domestic - 5.6%
8,000,000 Morgan Guaranty Trust Co. New York 4.95% 12/10/1999 8,001,394
6,000,000 Morgan Guaranty Trust Co. New York 4.90% 5/6/1999 6,000,095
5,000,000 Morgan Guaranty Trust Co. New York 5.03% 10/8/1999 5,015,091
7,000,000 Morgan Guaranty Trust Co. New York 5.05% 10/15/1999 6,994,374
7,000,000 Wachovia Bank, N.A. 5.03% 11/22/1999 7,000,000
--------------
33,010,954
--------------
Euro Dollar-Foreign - 2.5%
1,000,000 Barclays Bank plc 5.13% 11/15/1999 998,712
7,000,000 Barclays Bank plc 5.03% 9/7/1999 7,000,176
7,000,000 Barclays Bank plc 5.01% 11/15/1999 6,995,660
--------------
14,994,548
--------------
Total Certificates of Deposit 48,005,502
--------------
MEDIUM TERM NOTES - 0.5% (a)
1,000,000 CIT Group Inc. 5.06% 8/9/1999 1,002,765
1,000,000 IBM Credit Corp. 5.05% 7/7/1999 1,001,139
1,000,000 IBM Credit Corp. 5.07% 5/10/1999 1,000,381
--------------
Total Medium Term Notes 3,004,285
--------------
VARIABLE RATE NOTES - 10.3% (a,b)
12,000,000 Abbey National Treasury Service plc 4.90% 7/20/1999 11,997,911
8,000,000 Beneficial Corp. 4.91% 5/4/1999 8,000,000
8,000,000 Deutsche Bank, New York 4.78% 5/17/1999 7,998,383
10,000,000 First National Bank of Chicago 4.87% 6/2/1999 9,999,395
10,000,000 Illinois Student Assistance Commission (SLMA Direct Pay
Letter of Credit) 4.83% 5/7/1999 10,000,000
8,000,000 Illinois Student Assistance Commission (Bank of America,
Illinois Direct Pay Letter of Credit) 4.88% 5/7/1999 8,000,000
5,000,000 International Business Machines Corp. 4.89% 7/15/1999 4,998,793
--------------
Total Variable Rate Notes 60,994,482
--------------
U.S. GOVERNMENT AGENCY - 1.5% (a)
1,500,000 Federal Home Loan Bank 5.01% 6/30/1999 1,502,629
1,150,000 Federal Home Loan Bank 4.92% 10/22/1999 1,155,018
6,000,000 Federal Home Loan Mortgage Corp. 4.93% 8/19/1999 6,021,378
--------------
Total U.S. Government Agency 8,679,025
--------------
Total Investments (at amortized cost) $594,241,816 (c)
==============
Notes to Portfolio of Investments:
(a) The categories of investments are shown as a percentage of total investments of the Lutheran Brotherhood Money Market
Fund.
(b) Denotes variable rate obligations for which the current yield and the next scheduled interest reset date are shown.
(c) Also represents cost for federal income tax purposes.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Lutheran Brotherhood Opportunity Growth Fund
Financial Statements
Statement of Assets and Liabilities
April 30, 1999
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $201,185,247) $212,553,822
Cash 74,494
Receivable for investment securities sold 3,073,642
Dividend receivable 11,718
------------
Total assets 215,713,676
------------
LIABILITIES:
Payable for investment securities purchased 698,404
Accrued expenses 216,777
------------
Total liabilities 915,181
------------
NET ASSETS $214,798,495
============
NET ASSETS CONSIST OF:
Paid-in capital $241,162,535
Accumulated net investment loss (1,367,792)
Accumulated net realized loss from sale of investments (36,364,823)
Unrealized net appreciation of investments 11,368,575
------------
NET ASSETS $214,798,495
============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$201,057,127 and 19,716,148 shares of beneficial interest outstanding) $10.20
======
Maximum public offering price per share (based on a net asset value per
share of $10.20 divided by 0.96 for a 4% sales charge) $10.63
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $6,577,612 and 651,936 shares of
beneficial interest outstanding) $10.09
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $7,163,756 and 699,957 shares of
beneficial interest outstanding) $10.23
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1999
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 207,493
Interest income 165,766
------------
Total income 373,259
------------
Expenses --
Investment advisory fee 549,198
Distribution and service plan fees:
Class A 267,219
Class B 27,885
Transfer agent services 641,490
Custodian fee 72,768
Administrative personnel and services 22,588
Printing and postage 153,093
Trust share registration costs 32,826
Auditing fees 2,656
Legal fees 2,643
Trustees' fees 4,945
Miscellaneous 4,999
------------
Total expenses before expense reimbursement 1,782,310
Expense reimbursement from investment advisor (47,855)
------------
Net expenses 1,734,455
------------
Net investment loss (1,361,196)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions (15,122,392)
Net change in unrealized appreciation of investments 36,423,609
------------
Net gain on investments 21,301,217
------------
Net increase in net assets resulting from operations $ 19,940,021
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/99 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (1,361,196) $ (1,358,626)
Net realized loss on investments (15,122,392) (20,273,121)
Net change in unrealized appreciation or depreciation
of investments 36,423,609 (53,310,343)
------------ ------------
Net change in net assets resulting from operations 19,940,021 (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 (23,711,648) (19,142,773)
Class B 2,028,681 5,010,935
Institutional Class 1,230,472 3,478,983
------------ ------------
Net change in net assets resulting from trust share transactions (20,452,495) (10,652,855)
------------ ------------
Net change in net assets (512,474) (96,112,622)
NET ASSETS:
Beginning of period 215,310,969 311,423,591
------------ ------------
End of period $214,798,495 $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
April 30, 1999
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $51,207,461) $ 57,753,357
Cash 5,606
Receivable for investment securities sold 222,279
Dividend receivable 9,115
Unamortized organization costs 16,946
------------
Total assets 58,007,303
------------
LIABILITIES:
Payable for investment securities purchased 3,452
Accrued expenses 40,728
------------
Total liabilities 44,180
------------
NET ASSETS $ 57,963,123
============
NET ASSETS CONSIST OF:
Paid-in capital $ 50,559,165
Accumulated net investment loss (356,076)
Accumulated net realized gain from sale of investments 1,214,138
Unrealized net appreciation of investments 6,545,896
------------
NET ASSETS $ 57,963,123
============
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $45,643,976 and 3,895,044 shares of beneficial interest outstanding) $11.72
======
Maximum public offering price per share (based on a net asset value per
share of $11.72 divided by 0.96 for a 4% sales charge) $12.21
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $11,449,839 and 988,132 shares of
beneficial interest outstanding) $11.59
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $869,308 and 73,952 shares of
beneficial interest outstanding) $11.76
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1999
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income $ 102,568
Interest income 51,393
------------
Total income 153,961
------------
Expenses --
Investment advisory fee 118,406
Distribution and service plan fees:
Class A 48,783
Class B 44,409
Transfer agent services 190,154
Custodian fee 36,046
Administrative personnel and services 4,870
Printing and postage 47,488
Trust share registration costs 38,069
Auditing fees 1,991
Legal fees 513
Trustees' fees 3,439
Amortization of organization costs 2,722
Miscellaneous 2,467
------------
Total expenses 539,357
Expense reimbursement from investment advisor (32,245)
------------
Net expenses 507,112
------------
Net investment loss (353,151)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 3,193,246
Net realized gain on closed or expired option contracts written 3,147
------------
Net realized gain on investments 3,196,393
Net change in unrealized appreciation of investments 8,489,693
------------
Net gain on investments 11,686,086
------------
Net increase in net assets resulting from operations $ 11,332,935
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/99 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (353,151) $ 538,235
Net realized gain (loss) on investments 3,196,393 (2,238,984)
Net change in unrealized appreciation or depreciation
of investments 8,489,693 (1,836,091)
------------ ------------
Net change in net assets resulting from operations 11,332,935 (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 4,598,079 21,626,287
Class B 3,055,368 7,121,404
Institutional Class -- 226,296
------------ ------------
Net increase in net assets from trust share transactions 7,653,447 28,973,987
------------ ------------
Net increase in net assets 18,986,382 24,374,101
NET ASSETS:
Beginning of period 38,976,741 14,602,640
------------ ------------
End of period $ 57,963,123 $ 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
April 30, 1999
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $78,387,522) $ 99,406,431
Cash (including foreign currency holdings of $462,331) 470,203
Receivable for investment securities sold 10,592
Dividend receivable 433,518
Unamortized organization costs 13,628
------------
Total assets 100,334,372
------------
LIABILITIES:
Payable for investment securities purchased 113,537
Accrued expenses 77,193
------------
Total liabilities 190,730
------------
NET ASSETS $100,143,642
============
NET ASSETS CONSIST OF:
Paid-in capital $ 79,357,585
Accumulated net investment loss (131,250)
Accumulated net realized loss from sale of investments
and foreign currency transactions (99,467)
Unrealized net appreciation of investments and on translation
of assets and liabilities in foreign currencies 21,016,774
------------
NET ASSETS $100,143,642
============
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $81,542,446 and 6,859,628 shares of beneficial interest outstanding) $11.89
======
Maximum public offering price per share (based on a net asset value per
share of $11.89 divided by 0.96 for a 4% sales charge) $12.39
======
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $6,064,887 and 514,934 shares of beneficial interest outstanding) $11.78
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $12,536,309 and 1,052,630 shares of
beneficial interest outstanding) $11.91
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1999
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Dividend income (net of foreign taxes of $70,280) $ 656,464
Interest income 90,895
------------
Total income 747,359
------------
Expenses --
Investment advisory fee 382,582
Distribution and service plan fees:
Class A 95,431
Class B 23,496
Transfer agent services 239,777
Custodian fee 49,942
Administrative personnel and services 9,244
Printing and postage 62,035
Trust share registration costs 30,423
Auditing fees 1,991
Legal fees 1,060
Trustees' fees 3,439
Amortization of organization costs 5,068
Miscellaneous 3,250
------------
Total expenses before expense reimbursement 907,738
Expense reimbursement from investment advisor (35,921)
------------
Net expenses 871,817
------------
Net investment loss (124,458)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain on investment transactions 1,391,936
Net realized loss on foreign currency transactions (8,423)
------------
Net realized gain on investments and foreign currency transactions 1,383,513
Net change in unrealized appreciation of investments 10,046,428
Net change in unrealized depreciation on translation of assets
and liabilities in foreign currencies 103,826
------------
Net change in unrealized appreciation of investments and on translation
of assets and liabilities in foreign currencies 10,150,254
------------
Net gain on investments and foreign currency 11,533,767
------------
Net increase in net assets resulting from operations $ 11,409,309
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/99 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (124,458) $ 56,081
Net realized gain (loss) on investments and foreign
currency transactions 1,383,513 (723,020)
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and liabilities
in foreign currencies 10,150,254 5,623,753
------------ ------------
Net increase in net assets resulting from operations 11,409,309 4,956,814
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (509,983) (277,425)
Class B (21,506) (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 (634,316) (1,361,956)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A (440,252) 1,779,490
Class B 2,007,614 3,598,446
Institutional Class 868,384 2,827,874
------------ ------------
Net increase in net assets from trust share transactions 2,435,746 8,205,810
------------ ------------
Net increase in net assets 13,210,739 11,800,668
NET ASSETS:
Beginning of period 86,932,903 75,132,235
------------ ------------
End of period (including undistributed net investment
income of ($131,250) and $627,524, respectively) $100,143,642 $ 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
April 30, 1999
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $1,142,481,655) $1,500,747,353
Cash 70,349
Receivable for investment securities sold 26,571,959
Dividend receivable 1,399,709
--------------
Total assets 1,528,789,370
--------------
LIABILITIES:
Payable for investment securities purchased 45,490,322
Accrued expenses 331,974
--------------
Total liabilities 45,822,296
--------------
NET ASSETS $1,482,967,074
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 964,946,169
Undistributed net investment income 827,705
Accumulated net realized gain from sale of investments 158,927,502
Unrealized net appreciation of investments 358,265,698
--------------
NET ASSETS $1,482,967,074
==============
Class A Shares:
Net asset value and redemption price per share
(based on net assets of $1,394,635,934 and 45,168,460
shares of beneficial interest outstanding) $30.88
======
Maximum public offering price per share (based on a net asset value per
share of $30.88 divided by 0.96 for a 4% sales charge) $32.17
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $48,917,712 and 1,594,436 shares
of beneficial interest outstanding) $30.68
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $39,413,428 and 1,275,717 shares
of beneficial interest outstanding) $30.90
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1999
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income ---
Dividend income $ 7,004,018
Interest income 932,743
------------
Total income 7,936,761
------------
Expenses --
Investment advisory fee 2,719,203
Distribution and service plan fees:
Class A 1,587,130
Class B 182,612
Transfer agent services 1,235,528
Custodian fee 109,924
Administrative personnel and services 134,074
Printing and postage 320,151
Trust share registration costs 64,135
Auditing fees 11,191
Legal fees 15,082
Trustees' fees 10,921
Miscellaneous 13,498
------------
Total expenses before expense reimbursement 6,403,449
Expense reimbursement from investment advisor (671,364)
------------
Net expenses 5,732,085
------------
Net investment income 2,204,676
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 161,042,708
Net realized loss on closed or expired option contracts written (169,201)
------------
Net realized gain on investments 160,873,507
Net change in unrealized appreciation of investments 121,201,717
------------
Net gain on investments 282,075,224
------------
Net increase in net assets resulting from operations $284,279,900
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/99 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,204,676 $ 5,259,275
Net realized gain on investments 160,873,507 138,893,681
Net change in unrealized appreciation or depreciation
of investments 121,201,717 4,580,680
-------------- --------------
Net increase in net assets resulting from operations 284,279,900 148,733,636
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (2,254,341) (4,518,250)
Class B -- (964)
Institutional Class (104,875) (138,214)
Net realized gains:
Class A (125,372,268) (94,543,249)
Class B (2,921,986) (156,376)
Institutional Class (3,222,146) (1,494,748)
-------------- --------------
Total distributions (133,875,616) (100,851,801)
-------------- --------------
NET TRUST SHARE TRANSACTIONS:
Class A 131,949,752 97,627,202
Class B 19,653,151 24,995,614
Institutional Class 6,809,272 13,839,394
-------------- --------------
Net increase in net assets from trust share transactions 158,412,175 136,462,210
-------------- --------------
Net increase in net assets 308,816,459 184,344,045
NET ASSETS:
Beginning of period 1,174,150,615 989,806,570
-------------- --------------
End of period (including undistributed net investment income
of $827,705 and $982,245, respectively) $1,482,967,074 $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
April 30, 1999
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $996,557,877) $ 938,354,976
Cash 1,003,162
Receivable for investment securities sold 9,955,504
Interest and dividend receivable 21,685,494
--------------
Total assets 970,999,136
--------------
LIABILITIES:
Payable for investment securities purchased 20,825,534
Accrued expenses 251,559
--------------
Total liabilities 21,077,093
--------------
NET ASSETS $ 949,922,043
==============
NET ASSETS CONSIST OF:
Paid-in capital $1,021,192,796
Undistributed net investment income 347,424
Accumulated net realized loss from sale of investments (13,415,276)
Unrealized net depreciation of investments (58,202,901)
--------------
NET ASSETS $ 949,922,043
==============
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$862,989,356 and 101,394,578 shares of beneficial interest outstanding) $ 8.51
======
Maximum public offering price per share (based on a net asset value
per share of $8.51 divided by 0.96 for a 4% sales charge) $ 8.86
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $30,197,072 and 3,551,369 shares
of beneficial interest outstanding) $ 8.50
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $56,735,615 and 6,662,723 shares
of beneficial interest outstanding) $ 8.52
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1999
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 45,044,758
Dividend income 4,142,220
------------
Total income 49,186,978
------------
Expenses --
Investment advisory fee 1,891,561
Distribution and service plan fees:
Class A 1,029,775
Class B 123,349
Transfer agent services 778,870
Custodian fee 110,520
Administrative personnel and services 90,293
Printing and postage 196,389
Trust share registration costs 55,344
Auditing fees 8,808
Legal fees 9,527
Trustees' fees 9,412
Miscellaneous 11,601
------------
Total expenses before expense reimbursement 4,315,449
Expense reimbursement from investment advisor (413,198)
------------
Net Expenses 3,902,251
------------
Net investment income 45,284,727
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions (12,659,915)
Net change in unrealized depreciation of investments 61,294,834
------------
Net gain on investments 48,634,919
------------
Net increase in net assets resulting from operations $ 93,919,646
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/99 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 45,284,727 $ 85,046,889
Net realized gain (loss) on investment transactions (12,659,915) 2,027,575
Net change in unrealized appreciation or depreciation
of investments 61,294,834 (139,239,192)
------------ ------------
Net change in net assets resulting from operations 93,919,646 (52,164,728)
------------ ------------
DISTRIBUTIONS PAID TO SHAREHOLDERS:
Net investment income:
Class A (44,232,739) (78,057,192)
Class B (1,242,294) (937,490)
Institutional Class (2,993,131) (5,260,080)
Net realized gains:
Class A -- (15,571,878)
Class B -- (30,431)
Institutional Class -- (988,918)
------------ ------------
Total distributions (48,468,164) (100,845,989)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 36,669,642 113,623,772
Class B 9,743,619 22,079,012
Institutional Class 1,632,925 10,782,605
------------ ------------
Net increase in net assets from trust share transactions 48,046,186 146,485,389
------------ ------------
Net change in net assets 93,497,668 (6,525,328)
NET ASSETS:
Beginning of period 856,424,375 862,949,703
------------ ------------
End of period (including undistributed net investment income
of $347,424 and $3,530,861, respectively) $949,922,043 $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
April 30, 1999
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $773,683,634) $775,329,384
Cash 16,669
Receivable for investment securities sold 677,441
Interest and dividend receivable 12,960,878
------------
Total assets 788,984,372
------------
LIABILITIES:
Open options written, at value (premium received $123,384) 62,500
Payable for investment securities purchased 18,244,280
Accrued expenses 192,225
------------
Total liabilities 18,499,005
------------
NET ASSETS $770,485,367
============
NET ASSETS CONSIST OF:
Paid-in capital $804,452,864
Undistributed net investment income 1,251,875
Accumulated net realized loss from sale of investments (36,926,006)
Unrealized net appreciation of investments 1,706,634
------------
NET ASSETS $770,485,367
============
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $726,493,424 and 84,464,167 shares of beneficial interest outstanding) $ 8.60
======
Maximum public offering price per share (based on a net asset value
per share of $8.60 divided by 0.96 for a 4% sales charge) $ 8.96
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $12,318,477 and 1,435,177 shares
of beneficial interest outstanding) $ 8.58
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $31,673,466 and 3,683,913 shares
of beneficial interest outstanding) $ 8.60
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1999
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 25,542,965
Dividend income 187,403
------------
Total income 25,730,368
------------
Expenses --
Investment advisory fee 1,476,548
Distribution and service plan fees:
Class A 913,793
Class B 48,573
Transfer agent services 631,444
Custodian fee 84,927
Administrative personnel and services 76,979
Printing and postage 169,019
Trust share registration costs 40,862
Auditing fees 7,391
Legal fees 8,278
Trustees' fees 9,412
Miscellaneous 11,915
------------
Total expenses before expense reimbursement 3,479,141
Expense reimbursement from investment advisor (356,102)
------------
Net expenses 3,123,039
------------
Net investment income 22,607,329
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 82,826
Net realized gain on closed or expired option contracts written 509,814
Net realized loss on closed futures contracts (684,409)
------------
Net realized loss on investments (91,769)
Net change in unrealized appreciation of investments (15,544,096)
------------
Net loss on investments (15,635,865)
------------
Net increase in net assets resulting from operations $ 6,971,464
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/99 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 22,607,329 $ 47,328,173
Net realized gain (loss) on investment transactions (91,769) 8,963,937
Net change in unrealized appreciation or depreciation
of investments (15,544,096) 5,865,596
------------ ------------
Net increase in net assets resulting from operations 6,971,464 62,157,706
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (21,307,587) (46,213,710)
Class B (250,873) (178,145)
Institutional Class (890,007) (1,439,594)
------------ ------------
Total distributions (22,448,467) (47,831,449)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 2,041,794 (34,562,158)
Class B 5,639,451 6,819,434
Institutional Class 5,664,318 8,015,688
------------ ------------
Net change in net assets from trust share transactions 13,345,563 (19,727,036)
------------ ------------
Net change in net assets (2,131,440) (5,400,779)
NET ASSETS:
Beginning of period 772,616,807 778,017,586
------------ ------------
End of period (including undistributed net investment income
of $1,251,875 and $1,093,013, respectively) $770,485,367 $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
April 30, 1999
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at value (cost, $551,922,018) $614,721,060
Cash 54,785
Interest receivable 9,257,838
------------
Total assets 624,033,683
------------
LIABILITIES:
Payable for investment securities purchased 4,235,507
Accrued expenses 69,526
------------
Total liabilities 4,305,033
------------
NET ASSETS $619,728,650
============
NET ASSETS CONSIST OF:
Paid-in capital $558,686,215
Undistributed net investment income 1,324,863
Accumulated net realized loss from sale of investments (3,081,470)
Unrealized net appreciation of investments 62,799,042
------------
NET ASSETS $619,728,650
============
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $608,874,168 and 67,707,269 shares of beneficial interest outstanding) $ 8.99
======
Maximum public offering price per share (based on a net asset value per
share of $8.99 divided by 0.96 for a 4% sales charge) $ 9.36
======
Class B Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $6,910,883 and 770,388 shares of
beneficial interest outstanding) $ 8.97
======
Institutional Class Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $3,943,599 and 438,617 shares of
beneficial interest outstanding) $ 8.99
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1999
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 16,873,433
------------
Expenses --
Investment advisory fee 1,116,744
Distribution and service plan fees:
Class A 753,141
Class B 26,636
Transfer agent services 240,871
Custodian fee 79,548
Administrative personnel and services 61,180
Printing and postage 77,377
Trust share registration costs 38,942
Auditing fees 5,882
Legal fees 6,580
Trustees' fees 9,412
Miscellaneous 8,314
------------
Total expenses before expense reimbursement 2,424,627
Expense reimbursement from investment advisor (282,764)
------------
Net expenses 2,141,863
------------
Net investment income 14,731,570
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions $ 574,490
Net change in unrealized appreciation of investments (7,937,883)
------------
Net loss on investments (7,363,393)
------------
Net increase in net assets resulting from operations $ 7,368,177
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/99 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,731,570 $ 29,320,330
Net realized gain on investment transactions 574,490 2,170,541
Net change in unrealized appreciation or depreciation
of investments (7,937,883) 15,241,526
------------ ------------
Net increase in net assets resulting from operations 7,368,177 46,732,397
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (15,125,748) (29,169,677)
Class B (117,096) (82,863)
Institutional Class (104,207) (205,936)
------------ ------------
Total distributions (15,347,051) (29,458,476)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 11,684,990 283,944
Class B 3,028,631 3,880,132
Institutional Class (19,406) (287,112)
------------ ------------
Net increase in net assets from trust share transactions 14,694,215 3,876,964
------------ ------------
Net increase in net assets 6,715,341 21,150,885
NET ASSETS:
Beginning of period 613,013,309 591,862,424
------------ ------------
End of period (including undistributed net investment income
of $1,324,863 and $1,940,344, respectively) $619,728,650 $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
April 30, 1999
(unaudited)
<S> <C>
ASSETS:
Investments in securities, at amortized cost and value $594,241,816
Cash 3,060,298
Interest receivable 1,518,595
------------
Total assets 598,820,709
------------
LIABILITIES:
Dividends payable 35,199
Accrued expenses 305,036
------------
Total liabilities 340,235
------------
NET ASSETS $598,480,474
============
NET ASSETS CONSIST OF:
Paid-in capital $598,480,474
============
Class A Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $554,838,486 and 554,838,486 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 $153,551 and 153,551 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 $43,488,437 and 43,488,437 shares
of beneficial interest outstanding) $ 1.00
======
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
Six Months Ended April 30, 1999
(unaudited)
<S> <C>
INVESTMENT INCOME:
Income --
Interest income $ 14,529,237
------------
Expenses --
Investment advisory fee 816,371
Service plan fees:
Class A 650,615
Class B 179
Transfer agent services 837,804
Custodian fee 186,718
Administrative personnel and services 56,740
Printing and postage 259,979
Trust share registration costs 68,125
Auditing fees 5,674
Legal fees 5,660
Trustees' fees 5,674
Miscellaneous 7,590
------------
Total expenses before expense reimbursement 2,901,129
Expense reimbursement from investment advisor (264,424)
------------
Net expenses 2,636,705
------------
Net investment income $ 11,892,532
============
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
Six Months
Ended
4/30/99 Year Ended
INCREASE (DECREASE) IN NET ASSETS: (unaudited) 10/31/98
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 11,892,532 $ 24,009,045
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (10,854,269) (21,502,662)
Class B (3,005) (1,573)
Institutional Class (1,035,258) (2,504,810)
------------ ------------
Total distributions (11,892,532) (24,009,045)
------------ ------------
NET TRUST SHARE TRANSACTIONS:
Class A 61,678,231 76,881,422
Class B 72,152 56,399
Institutional Class (3,841,853) (5,589,690)
------------ ------------
Net increase in net assets from trust share transactions 57,908,530 71,348,131
------------ ------------
Net increase in net assets 57,908,530 71,348,131
NET ASSETS:
Beginning of period 540,571,944 469,223,813
------------ ------------
End of period $598,480,474 $540,571,944
============ ============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
Financial Highlights
For a share outstanding throughout each period (a)
Class A Shares
------------------------------------------------------------------------
Six
Months
Ended Year Year Year Year Year
LUTHERAN BROTHERHOOD 4/30/99 Ended Ended Ended Ended Ended
OPPORTUNITY GROWTH FUND (a) (unaudited) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.33 $12.97 $13.62 $13.83 $10.76 $10.66
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income (0.06) (0.06) (0.07) (0.11) (0.09) (0.06)
Net realized and unrealized gain
(loss) on investments (b) 0.93 (3.14) 0.91 2.63 3.16 0.16
-------- -------- -------- -------- -------- --------
Total from investment operations 0.87 (3.20) 0.84 2.52 3.07 0.10
-------- -------- -------- -------- -------- --------
Less Distributions:
Distributions from net realized
gain on investments -- (0.44) (1.49) (2.73) -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of period $10.20 $9.33 $12.97 $13.62 $13.83 $10.76
======== ======== ======== ======== ======== ========
Total investment return at
net asset value (c) 9.32% (25.18%) 7.52% 21.27% 28.53% 0.94%
Net assets, end of period ($ millions) $201.1 $205.7 $311.4 $265.8 $165.7 $99.6
Ratio of expenses to average
net assets 1.52%(d) 1.40% 1.29% 1.28% 1.43% 1.66%
Ratio of net investment income to
average net assets (1.19%)(d) (0.51%) (0.60%) (0.92%) (0.88%) (0.83%)
Portfolio turnover rate 14% 155% 136% 176% 213% 64%
<CAPTION>
Institutional
Class B Class
Shares Shares
------------------------- --------------------------
Six Six
Months Months
Ended Year Ended Year
LUTHERAN BROTHERHOOD 4/30/99 Ended 4/30/99 Ended
OPPORTUNITY GROWTH FUND (a) (unaudited) 10/31/98 (unaudited) 10/31/98
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.27 $12.97 $9.35 $12.97
-------- -------- -------- --------
Income From Investment Operations:
Net investment income (0.12) (0.08) (0.10) (0.03)
Net realized and unrealized gain
(loss) on investments (b) 0.94 (3.18) 0.98 (3.15)
-------- -------- -------- --------
Total from investment operations 0.82 (3.26) 0.88 (3.18)
-------- -------- -------- --------
Less Distributions:
Distributions from net realized
gain on investments -- (0.44) -- (0.44)
-------- -------- -------- --------
Net asset value, end of period $10.09 $9.27 $10.23 $9.35
======== ======== ======== ========
Total investment return at
net asset value (c) 8.85% (25.66%) 9.41% (25.02%)
Net assets, end of period ($ millions) $6.6 $4.2 $7.2 $5.4
Ratio of expenses to average
net assets 2.27%(d) 2.15% 1.27%(d) 1.15%
Ratio of net investment income to
average net assets (1.94%)(d) (1.26%) (0.94%)(d) (0.26%)
Portfolio turnover rate 14% 155% 14% 155%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in
aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Class B
Class A Shares Shares
------------------------------------------- -------------------------
For the
Six Period Six
Months May 30, 1997 Months
Ended Year (effective Ended Year
LUTHERAN BROTHERHOOD 4/30/99 Ended date) to 4/30/99 Ended
MID CAP GROWTH FUND (a) (unaudited) 10/31/98 Oct. 31, 1997 (unaudited) 10/31/98
------------ -------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.19 $10.33 $9.25 $9.12 $10.33
-------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income (0.06) 0.36 (0.02) (0.10) 0.30
Net realized and unrealized gain
(loss) on investments (b) 2.59 (0.89) 1.10 2.57 (0.90)
-------- -------- -------- -------- --------
Total from investment operations 2.53 (0.53) 1.08 2.47 (0.60)
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income -- (0.37) -- -- (0.37)
Distributions from net realized
gain on investments -- (0.24) -- -- (0.24)
-------- -------- -------- -------- --------
Total distributions -- (0.61) -- -- (0.61)
-------- -------- -------- -------- --------
Net asset value, end of period $11.72 $9.19 $10.33 $11.59 $9.12
======== ======== ======== ======== ========
Total investment return at
net asset value (c) 27.53% (5.28%) 11.68% 27.08% (6.00%)
Net assets, end of period ($ millions) $45.6 $31.9 $14.6 $11.4 $6.4
Ratio of expenses to average
net assets (e) 1.95%(d) 1.95% 1.95%(d) 2.70%(d) 2.70%
Ratio of net investment income to
average net assets (e) (1.32%)(d) 1.93% (0.84%)(d) (2.07%)(d) 1.18%
Portfolio turnover rate 74% 436% 94% 74% 436%
<CAPTION>
Institutional
Class
Shares
-------------------------
Six
Months
Ended Year
LUTHERAN BROTHERHOOD 4/30/99 Ended
MID CAP GROWTH FUND (a) (unaudited) 10/31/98
------------ --------
<S> <C> <C>
Net asset value, beginning of period $9.21 $10.33
-------- --------
Income From Investment Operations:
Net investment income (0.09) 0.39
Net realized and unrealized gain
(loss) on investments (b) 2.64 (0.90)
-------- --------
Total from investment operations 2.55 (0.51)
-------- --------
Less Distributions:
Dividends from net investment income -- (0.37)
Distributions from net realized
gain on investments -- (0.24)
-------- --------
Total distributions -- (0.61)
-------- --------
Net asset value, end of period $11.76 $9.21
======== ========
Total investment return at
net asset value (c) 27.69% (5.06%)
Net assets, end of period ($ millions) $0.9 $0.7
Ratio of expenses to average
net assets (e) 1.70%(d) 1.70%
Ratio of net investment income to
average net assets (e) (1.07%)(d) 2.18%
Portfolio turnover rate 74% 436%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in
aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Computed on an annualized basis.
(e) Effective May 30, 1997, LB Research voluntarily agreed to limit the expenses
prospectively to 1.95% for Class A shares, 2.70% for Class B shares, and 1.70%
for Institutional Class shares. Had LB Research not undertaken such action, for
Class A shares, the ratio of expenses to average net assets would have been
2.05%, 2.22% and 2.19%, and the ratio of net investment income to average net
assets would have been (1.42%), 1.66% and (1.08%), respectively, for the six
month period ended April 30, 1999, the year ended October 31, 1998 and the
period from May 30, 1997, to October 31, 1997. For Class B shares, the ratio of
expenses to average net assets would have been 2.80% and 2.97%, and the ratio of
net investment income to average net assets would have been (2.17%), and 0.91%,
respectively, for the six month period ended April 30, 1999, and the year ended
October 31, 1998. For Institutional Class shares, the ratio of expenses to
average net assets would have been 1.80% and 1.97%, and the ratio of net
investment income to average net assets would have been (1.17%), and 1.91%,
respectively, for the six month period ended April 30, 1999, and the year ended
October 31, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------
For the
Six Period
Months Sept. 5, 1998
Ended Year Year Year (effective
LUTHERAN BROTHERHOOD 4/30/99 Ended Ended Ended date) to
WORLD GROWTH FUND (a) (unaudited) 10/31/98 10/31/97 10/31/96 Oct. 31, 1995
------------ -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.58 $10.09 $9.48 $8.44 $8.50
-------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income (0.01) -- 0.02 0.04 0.01
Net realized and unrealized gain
(loss) on investments (b) 1.39 0.67 0.67 1.02 (0.07)
-------- -------- -------- -------- --------
Total from investment operations 1.38 0.67 0.69 1.06 (0.06)
-------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.07) (0.04) (0.04) (0.02) --
Distributions from net realized
gain on investments -- (0.14) (0.04) -- --
-------- -------- -------- -------- --------
Total distributions (0.07) (0.18) (0.08) (0.02) --
-------- -------- -------- -------- --------
Net asset value, end of period $11.89 $10.58 $10.09 $9.48 $8.44
======== ======== ======== ======== ========
Total investment return at
net asset value (c) 13.12% 6.80% 7.38% 12.53% (0.71%)
Net assets, end of period ($ millions) $81.5 $73.1 $75.1 $52.9 $14.0
Ratio of expenses to average
net assets 1.88%(d) 1.86% 1.82% 1.95%(e) 1.95%(d,e)
Ratio of net investment income to
average net assets (0.26%)(d) 0.06% 0.17% 0.67%(e) 1.60%(d,e)
Portfolio turnover rate 8% 20% 17% 11% 0%
<CAPTION>
Institutional
Class B Class
Shares Shares
------------------------- -------------------------
Six Six
Months Months
Ended Year Ended Year
LUTHERAN BROTHERHOOD 4/30/99 Ended 4/30/99 Ended
WORLD GROWTH FUND (a) (unaudited) 10/31/98 (unaudited) 10/31/98
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.51 $10.09 $10.61 $10.09
-------- -------- -------- --------
Income From Investment Operations:
Net investment income (0.02) 0.01 -- 0.04
Net realized and unrealized gain
(loss) on investments (b) 1.35 0.59 1.40 0.66
-------- -------- -------- --------
Total from investment operations 1.33 0.60 1.40 0.70
-------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.06) (0.04) (0.10) (0.04)
Distributions from net realized
gain on investments -- (0.14) -- (0.14)
-------- -------- -------- --------
Total distributions (0.06) (0.18) (0.10) (0.18)
-------- -------- -------- --------
Net asset value, end of period $11.78 $10.51 $11.91 $10.61
======== ======== ======== ========
Total investment return at
net asset value (c) 12.64% 6.10% 13.15% 7.20%
Net assets, end of period ($ millions) $6.1 $3.5 $12.5 $10.4
Ratio of expenses to average
net assets 2.63%(d) 2.61% 1.63%(d) 1.61%
Ratio of net investment income to
average net assets (1.01%)(d) (0.69%) (0.01%)(d) 0.31%
Portfolio turnover rate 8% 20% 8% 20%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in
aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Computed on an annualized basis.
(e) Effective September 5, 1995 through October 31, 1996, LBRC had voluntarily
undertaken to limit the Fund's expense ratio to 1.95% of the average daily net
assets of the Fund. Had LBRC not undertaken these waivers, the ratio of expenses
to average net assets would have been 2.13% and 2.89%, and the ratio of net
investment income to average net assets would have been 0.49% and 0.66%,
respectively, for the year ended October 31, 1996 and for the period from
September 5, 1995 to October 31, 1995.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------
Six
Months
Ended Year Year Year Year Year
LUTHERAN BROTHERHOOD FUND (a) 4/30/99 Ended Ended Ended Ended Ended
(unaudited) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $27.94 $26.98 $23.07 $21.19 $17.67 $18.85
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.04 0.13 0.19 0.20 0.22 0.19
Net realized and unrealized gain
(loss) on investments (b) 6.08 3.57 5.68 3.33 3.52 (0.20)
-------- -------- -------- -------- -------- --------
Total from investment operations 6.12 3.70 5.87 3.53 3.74 (0.01)
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.05) (0.12) (0.20) (0.20) (0.22) (0.20)
Distributions from net realized
gain on investments (3.13) (2.62) (1.76) (1.45) -- (0.97)
-------- -------- -------- -------- -------- --------
Total distributions (3.18) (2.74) (1.96) (1.65) (0.22) (1.17)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $30.88 $27.94 $26.98 $23.07 $21.19 $17.67
======== ======== ======== ======== ======== ========
Total investment return
at net asset value (c) 24.12% 15.07% 26.99% 17.61% 21.34% (0.11%)
Net assets, end of period ($ millions) $1,394.6 $1,120.5 $989.8 $768.8 $645.5 $548.6
Ratio of expenses to average
net assets 0.84%(d,e) 0.86%(e) 0.88%(e) 0.97% 1.02% 1.04%
Ratio of net investment income to
average net assets 0.34%(d,e) 0.47%(e) 0.76%(e) 0.94% 1.15% 1.10%
Portfolio turnover rate 40% 57% 54% 91% 127% 234%
<CAPTION>
Institutional
Class B Class
Shares Shares
------------------------ ------------------------
Six Six
Months Months
Ended Year Ended Year
LUTHERAN BROTHERHOOD FUND (a) 4/30/99 Ended 4/30/99 Ended
(unaudited) 10/31/98 (unaudited) 10/31/98
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $27.83 $26.98 $27.95 $26.98
-------- -------- -------- --------
Income From Investment Operations:
Net investment income (0.03) (0.01) 0.07 0.20
Net realized and unrealized gain
(loss) on investments (b) 6.01 3.51 6.09 3.57
-------- -------- -------- --------
Total from investment operations 5.98 3.50 6.16 3.77
-------- -------- -------- --------
Less Distributions:
Dividends from net investment income -- (0.03) (0.08) (0.18)
Distributions from net realized
gain on investments (3.13) (2.62) (3.13) (2.62)
-------- -------- -------- --------
Total distributions (3.13) (2.65) (3.21) (2.80)
-------- -------- -------- --------
Net asset value, end of period $30.68 $27.83 $30.90 $27.95
======== ======== ======== ========
Total investment return
at net asset value (c) 23.65% 14.26% 24.24% 15.41%
Net assets, end of period ($ millions) $48.9 $25.0 $39.4 $28.7
Ratio of expenses to average
net assets 1.59%(d,e) 1.61%(e) 0.59%(d,e) 0.61%(e)
Ratio of net investment income to
average net assets (0.41%)(d,e) (0.28%)(e) 0.59%(d,e) 0.72%(e)
Portfolio turnover rate 40% 57% 40% 57%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in
aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Computed on an annualized basis.
(e) Effective January 1, 1997, LBRC has voluntarily agreed to waive a portion of its
advisory fee equal to 0.05% of the average daily net assets of the Fund. This
voluntary partial waiver may be discontinued at any time. Had LBRC not
undertaken this waiver, for Class A shares, the ratio of expenses to average net
assets would have been 0.89%, 0.91%, and 0.92%, and the ratio of net investment
income to average net assets would have been 0.29%, 0.42%, and 0.72%,
respectively, for the six month period ended April 30, 1999, and the years ended
October 31, 1998 and 1997. For Class B shares, the ratio of expenses to average
net assets would have been 1.64% and 1.66%, and the ratio of net investment
income to average net assets would have been (0.46%) and (0.33%), respectively,
for the six month period ended April 30, 1999, and the year ended October 31,
1998. For Institutional Class shares, the ratio of expenses to average net
assets would have been 0.64% and 0.66%, and the ratio of net investment income
to average net assets would have been 0.54% and 0.67%, respectively, for the six
month period ended April 30, 1999, and the year ended October 31, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------
Six
Months
Ended Year Year Year Year Year
LUTHERAN BROTHERHOOD 4/30/99 Ended Ended Ended Ended Ended
HIGH YIELD FUND (a) (unaudited) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.09 $9.58 $9.21 $9.03 $8.86 $9.73
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.42 0.86 0.85 0.84 0.83 0.83
Net realized and unrealized gain
(loss) on investments (b) 0.45 (1.32) 0.41 0.17 0.24 (0.86)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.87 (0.46) 1.26 1.01 1.07 (0.03)
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.45) (0.85) (0.86) (0.83) (0.85) (0.82)
Distributions from net realized
gain on investments -- (0.18) (0.03) -- (0.05) (0.02)
-------- -------- -------- -------- -------- --------
Total distributions (0.45) (1.03) (0.89) (0.83) (0.90) (0.84)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $8.51 $8.09 $9.58 $9.21 $9.03 $8.86
======== ======== ======== ======== ======== ========
Total investment return at
net asset value (c) 10.95% (5.55%) 14.43% 11.64% 12.93% (0.47%)
Net assets, end of period ($ millions) $863.0 $784.8 $862.9 $703.1 $594.3 $499.6
Ratio of expenses to average
net assets 0.86%(d,e) 0.84%(e) 0.84%(e) 0.91% 0.93% 0.95%
Ratio of net investment income
to average net assets 10.04%(d,e) 9.32%(e) 9.14%(e) 9.23% 9.53% 8.92%
Portfolio turnover rate 27% 73% 113% 104% 71% 50%
<CAPTION>
Institutional
Class B Class
Shares Shares
------------------------ ------------------------
Six Six
Months Months
Ended Year Ended Year
LUTHERAN BROTHERHOOD 4/30/99 Ended 4/30/99 Ended
HIGH YIELD FUND (a) (unaudited) 10/31/98 (unaudited) 10/31/98
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $8.08 $9.58 $8.09 $9.58
-------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.39 0.79 0.43 0.88
Net realized and unrealized gain
(loss) on investments (b) 0.45 (1.31) 0.46 (1.31)
-------- -------- -------- --------
Total from investment operations 0.84 (0.52) 0.89 (0.43)
-------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.42) (0.80) (0.46) (0.88)
Distributions from net realized
gain on investments -- (0.18) -- (0.18)
-------- -------- -------- --------
Total distributions (0.42) (0.98) (0.46) (1.06)
-------- -------- -------- --------
Net asset value, end of period $8.50 $8.08 $8.52 $8.09
======== ======== ======== ========
Total investment return at
net asset value (c) 10.56% (6.24%) 11.21% (5.33%)
Net assets, end of period ($ millions) $30.2 $19.3 $56.7 $52.3
Ratio of expenses to average
net assets 1.61%(d,e) 1.59%(e) 0.61%(d,e) 0.59%(e)
Ratio of net investment income
to average net assets 9.29%(d,e) 8.57%(e) 10.29%(d,e) 9.57%(e)
Portfolio turnover rate 27% 73% 27% 73%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in
aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Computed on an annualized basis.
(e) Effective January 1, 1997, LBRC has voluntarily agreed to waive a portion of its
advisory fee equal to 0.05% of the average daily net assets of the Fund. This
voluntary partial waiver may be discontinued at any time. Had LBRC not
undertaken this waiver, for Class A shares, the ratio of expenses to average net
assets would have been 0.91%, 0.89%, and 0.88%, and the ratio of net investment
income to average net assets would have been 9.99%, 9.27%, and 9.10%,
respectively, for the six month period ended April 30, 1999, and the years ended
October 31, 1998 and 1997. For Class B shares, the ratio of expenses to average
net assets would have been 1.66% and 1.64%, and the ratio of net investment
income to average net assets would have been 9.24% and 8.52%, respectively, for
the six month period ended April 30, 1999, and the year ended October 31, 1998.
For Institutional Class shares, the ratio of expenses to average net assets
would have been 0.66% and 0.64%, and the ratio of net investment income to
average net assets would have been 10.24% and 9.52%, respectively, for the six
month period ended April 30, 1999, and the year ended October 31, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------
Six
Months
Ended Year Year Year Year Year
LUTHERAN BROTHERHOOD 4/30/99 Ended Ended Ended Ended Ended
INCOME FUND (a) (unaudited) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.78 $8.61 $8.50 $8.72 $8.01 $9.43
-------- -------- -------- -------- -------- --------
Income From
Investment Operations:
Net investment income 0.25 0.54 0.55 0.57 0.59 0.58
Net realized and unrealized gain
(loss) on investments (b) (0.18) 0.17 0.11 (0.19) 0.69 (1.19)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.07 0.71 0.66 0.38 1.28 (0.61)
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.25) (0.54) (0.55) (0.60) (0.57) (0.56)
Distributions from net realized
gain on investments -- -- -- -- -- (0.25)
-------- -------- -------- -------- -------- --------
Total distributions (0.25) (0.54) (0.55) (0.60) (0.57) (0.81)
-------- -------- -------- -------- -------- --------
Net assets, end of period $8.60 $8.78 $8.61 $8.50 $8.72 $8.01
======== ======== ======== ======== ======== ========
Total investment return at
net asset value (c) 0.94% 8.42% 8.05% 4.56% 16.53% (6.81%)
Net assets, end of period ($ millions) $726.5 $739.1 $778.0 $871.0 $942.1 $907.2
Ratio of expenses to average
net assets 0.81%(d,e) 0.80%(e) 0.80%(e) 0.83% 0.83% 0.82%
Ratio of net investment income to
average net assets 5.87%(d,e) 6.16%(e) 6.44%(e) 6.61% 7.01% 6.77%
Portfolio turnover rate 38% 98% 97% 142% 131% 155%
<CAPTION>
Institutional
Class B Class
Shares Shares
------------------------ ------------------------
Six Six
Months Months
Ended Year Ended Year
LUTHERAN BROTHERHOOD 4/30/99 Ended 4/30/99 Ended
INCOME FUND (a) (unaudited) 10/31/98 (unaudited) 10/31/98
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $8.76 $8.61 $8.77 $8.61
-------- -------- -------- --------
Income From
Investment Operations:
Net investment income 0.23 0.48 0.27 0.56
Net realized and unrealized gain
(loss) on investments (b) (0.19) 0.16 (0.18) 0.16
-------- -------- -------- --------
Total from investment operations 0.04 0.64 0.09 0.72
-------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.22) (0.49) (0.26) (0.56)
Distributions from net realized
gain on investments -- -- -- --
-------- -------- -------- --------
Total distributions (0.22) (0.49) (0.26) (0.56)
-------- -------- -------- --------
Net assets, end of period $8.58 $8.76 $8.60 $8.77
======== ======== ======== ========
Total investment return at
net asset value (c) 0.47% 7.65% 1.07% 8.69%
Net assets, end of period ($ millions) $12.3 $6.9 $31.7 $26.6
Ratio of expenses to average
net assets 1.56%(d,e) 1.55%(e) 0.56%(d,e) 0.55%(e)
Ratio of net investment income to
average net assets 5.12%(d,e) 5.41%(e) 6.12%(d,e) 6.41%(e)
Portfolio turnover rate 38% 98% 38% 98%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in
aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Computed on an annualized basis.
(e) Effective January 1, 1997, LBRC has voluntarily agreed to waive a portion of its
advisory fee equal to 0.05% of the average daily net assets of the Fund. This
voluntary partial waiver may be discontinued at any time. Had LBRC not
undertaken this waiver, for Class A shares, the ratio of expenses to average net
assets would have been 0.86%, 0.85%, and 0.84%, and the ratio of net investment
income to average net assets would have been 5.82%, 6.11%, and 6.40%,
respectively, for the six month period ended April 30, 1999, and the years ended
October 31, 1998 and 1997. For Class B shares, the ratio of expenses to average
net assets would have been 1.61% and 1.60%, and the ratio of net investment
income to average net assets would have been 5.07% and 5.36%, respectively, for
the six month period ended April 30, 1999, and the year ended October 31, 1998.
For Institutional Class shares, the ratio of expenses to average net assets
would have been 0.61% and 0.60%, and the ratio of net investment income to
average net assets would have been 6.07% and 6.36%, respectively, for the six
month period ended April 30, 1999, and the year ended October 31, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------
Six
Months
Ended Year Year Year Year Year
LUTHERAN BROTHERHOOD 4/30/99 Ended Ended Ended Ended Ended
MUNICIPAL BOND FUND (a) (unaudited) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $9.11 $8.85 $8.60 $8.58 $7.88 $9.00
-------- -------- -------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.22 0.41 0.45 0.44 0.45 0.46
Net realized and unrealized gain
(loss) on investments (b) (0.11) 0.29 0.24 0.01 0.70 (0.96)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.11 0.70 0.69 0.45 1.15 (0.50)
-------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.23) (0.44) (0.44) (0.43) (0.45) (0.46)
Distributions from net realized
gain on investments -- -- -- -- -- (0.16)
-------- -------- -------- -------- -------- --------
Total distributions (0.23) (0.44) (0.44) (0.43) (0.45) (0.62)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $8.99 $9.11 $8.85 $8.60 $8.58 $7.88
======== ======== ======== ======== ======== ========
Total investment return at
net asset value (c) 1.17% 8.12% 8.28% 5.33% 14.97% (5.93%)
Net assets, end of period ($ millions) $608.9 $605.0 $591.9 $609.5 $628.7 $595.2
Ratio of expenses to average
net assets 0.70%(d,e) 0.69%(e) 0.70%(e) 0.74% 0.74% 0.75%
Ratio of net investment income to
average net assets 4.82%(d,e) 4.88%(e) 5.13%(e) 5.14% 5.43% 5.44%
Portfolio turnover rate 4% 14% 18% 33% 36% 38%
<CAPTION>
Institutional
Class B Class
Shares Shares
------------------------ ------------------------
Six Six
Months Months
Ended Year Ended Year
LUTHERAN BROTHERHOOD 4/30/99 Ended 4/30/99 Ended
MUNICIPAL BOND FUND (a) (unaudited) 10/31/98 (unaudited) 10/31/98
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $9.09 $8.85 $9.11 $8.85
-------- -------- -------- --------
Income From Investment Operations:
Net investment income 0.19 0.39 0.23 0.46
Net realized and unrealized gain
(loss) on investments (b) (0.12) 0.24 (0.11) 0.26
-------- -------- -------- --------
Total from investment operations 0.07 0.63 0.12 0.72
-------- -------- -------- --------
Less Distributions:
Dividends from net investment income (0.19) (0.39) (0.24) (0.46)
Distributions from net realized
gain on investments -- -- -- --
-------- -------- -------- --------
Total distributions (0.19) (0.39) (0.24) (0.46)
-------- -------- -------- --------
Net asset value, end of period $8.97 $9.09 $8.99 $9.11
======== ======== ======== ========
Total investment return at
net asset value (c) 0.82% 7.23% 1.30% 8.39%
Net assets, end of period ($ millions) $6.9 $4.0 $3.9 $4.0
Ratio of expenses to average
net assets 1.45%(d,e) 1.44%(e) 0.45%(d,e) 0.44%(e)
Ratio of net investment income to
average net assets 4.07%(d,e) 4.13%(e) 5.07%(d,e) 5.13%(e)
Portfolio turnover rate 4% 14% 4% 14%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown is a balancing figure and may not accord with the change in
aggregate gains and losses of portfolio securities due to the timing of sales
and redemptions of fund shares.
(c) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(d) Computed on an annualized basis.
(e) Effective January 1, 1997, LBRC has voluntarily agreed to waive a portion of its
advisory fee equal to 0.05% of the average daily net assets of the Fund. This
voluntary partial waiver may be discontinued at any time. Had LBRC not
undertaken this waiver, for Class A shares, the ratio of expenses to average net
assets would have been 0.75%, 0.74%, and 0.74%, and the ratio of net investment
income to average net assets would have been 4.77%, 4.83%, and 5.09%,
respectively, for the six month period ended April 30, 1999, and the years ended
October 31, 1998 and 1997. For Class B shares, the ratio of expenses to average
net assets would have been 1.50% and 1.49%, and the ratio of net investment
income to average net assets would have been 4.02% and 4.08%, respectively, for
the six month period ended April 30, 1999, and the year ended October 31, 1998.
For Institutional Class shares, the ratio of expenses to average net assets
would have been 0.50% and 0.49%, and the ratio of net investment income to
average net assets would have been 5.02% and 5.08%, respectively, for the six
month period ended April 30, 1999, and the year ended October 31, 1998.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------------
Six
Months
Ended Year Year Year Year Year
LUTHERAN BROTHERHOOD 4/30/99 Ended Ended Ended Ended Ended
MONEY MARKET FUND (a) (unaudited) 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- -------- -------- -------- -------- --------
Net investment income from
investment operations 0.02 0.04 0.05 0.05 0.05 0.03
Less: Dividends from net
investment income (0.02) (0.04) (0.05) (0.05) (0.05) (0.03)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======== ======== ======== ======== ========
Total investment return at
net asset value (b) 2.09% 4.82% 4.74% 4.63% 4.95% 2.89%
Net assets, end of period ($ millions) $554.8 $493.2 $469.2 $417.6 $341.1 $276.9
Ratio of expenses to average
net assets (d) 0.95%(c) 0.95% 0.95% 1.01% 1.10% 1.10%
Ratio of net investment income to
average net assets (d) 4.17%(c) 4.72% 4.64% 4.53% 4.85% 2.85%
<CAPTION>
Institutional
Class B Class
Shares Shares
------------------------ ------------------------
Six Six
Months Months
Ended Year Ended Year
LUTHERAN BROTHERHOOD 4/30/99 Ended 4/30/99 Ended
MONEY MARKET FUND (a) (unaudited) 10/31/98 (unaudited) 10/31/98
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00
-------- -------- -------- --------
Net investment income from
investment operations 0.02 0.04 0.02 0.05
Less: Dividends from net
investment income (0.02) (0.04) (0.02) (0.05)
-------- -------- -------- --------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00
======== ======== ======== ========
Total investment return at
net asset value (b) 2.09% 4.82% 2.21% 5.08%
Net assets, end of period ($ millions) $0.2 $0.1 $43.5 $47.3
Ratio of expenses to average
net assets (d) 0.95%(c) 0.95% 0.70%(c) 0.70%
Ratio of net investment income to
average net assets (d) 4.17%(c) 4.72% 4.42%(c) 4.97%
NOTES TO FINANCIAL HIGHLIGHTS:
(a) All per share amounts have been rounded to the nearest cent.
(b) Total return is based on the change in net asset value during the period and
assumes reinvestment of all distributions.
(c) Computed on an annualized basis.
(d) Effective February 1, 1992 through March 31, 1996, Lutheran Brotherhood Research
Corp. (LBRC) had voluntarily undertaken to limit the Fund's expense ratio to
1.10% of annual average daily net assets. Effective April 1, 1996, LBRC
voluntarily lowered the expense limit prospectively to 0.95% of average daily
net assets. Effective October 31, 1997, LBRC voluntarily lowered the expense
limit to 0.95% of average daily net assets for Class A and B shares, and 0.70%
for Institutional Class shares. Had LBRC not undertaken such action to limit
expenses, for Class A shares, the ratio of expenses to average net assets would
have been 1.00%, 1.04%, 1.05%, 1.07%, 1.18% and 1.36%, and the ratio of net
investment income to average net assets would have been 4.12%, 4.63%, 4.35%,
4.47%, 4.77%, and 2.59%, respectively, the six month period ended April 30,
1999, and the years ended October 31, 1998, 1997, 1996, 1995 and 1994. For Class
B shares, the ratio of expenses to average net assets would have been 1.00% and
1.04%, and the ratio of net investment income to average net assets would have
been 4.12% and 4.63%, respectively for the six month period ended April 30,
1999, and the year ended October 31, 1998. For Institutional Class shares, the
ratio of expenses to average net assets would have been 0.75% and 0.79%, and the
ratio of net investment income to average net assets would have been 4.37% and
4.88%, respectively for the six month period ended April 30, 1999, and the year
ended October 31, 1998.
The accompanying notes are an integral part of the financial statements.
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
Notes to Financial Statements
April 30, 1999
(unaudited)
(1) ORGANIZATION
The Lutheran Brotherhood Family of Funds (the "Trust") is a Delaware
business trust and a diversified, open-end investment company
registered under the Investment Company Act of 1940. The Trust is
divided into eight series (the "Fund(s)"), each with its own
investment objective and policies. The eight Funds of the Trust are:
Lutheran Brotherhood Opportunity Growth Fund, Lutheran Brotherhood Mid
Cap Growth Fund, Lutheran Brotherhood World Growth Fund, Lutheran
Brotherhood Fund, Lutheran Brotherhood High Yield Fund, Lutheran
Brotherhood Income Fund, Lutheran Brotherhood Municipal Bond Fund and
Lutheran Brotherhood Money Market Fund.
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 and World
Growth Funds, declared and paid quarterly for the LB Fund, declared
and paid monthly for the High Yield, Income and Municipal Bond Funds,
and declared daily (including short-term net realized gains and
losses) and paid monthly for the Money Market Fund. Net realized gains
from securities transactions, if any, are distributed at least
annually for all Funds, after the close of the fiscal year. Dividends
and capital gain distributions to shareholders are recorded on the ex-
dividend date.
Net investment income (loss) and net realized gain (loss) may differ
for financial statement and tax purposes. The character of
distributions made during the year from net investment income or net
realized gains may differ from their ultimate characterization for
federal income tax purposes. Also, due to timing of dividend
distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or net realized gains were
recorded by the Fund.
Options, Financial Futures and
Forward Foreign Currency Contracts
All Funds except the Money Market Fund may buy put and call options,
write covered call options and buy and sell futures contracts. The
Funds intend to use such derivative instruments as hedges to
facilitate buying or selling securities or to provide protection
against adverse movements in security prices or interest rates. The
World Growth Fund may also enter into options and futures contracts on
foreign currencies and forward foreign currency contracts to protect
against adverse foreign exchange rate fluctuation.
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon
expiration or closing of the option transaction. When an option is
exercised, the proceeds on sale for a written call option or the cost
of a security for purchased put and call options is adjusted by the
amount of premium received or paid.
Upon entering into a futures contract, the Fund is required to deposit
initial margin, either cash or securities in an amount equal to a
certain percentage of the contract value. Subsequent variation margin
payments are made or received by the Fund each day. The variation
margin payments are equal to the daily changes in the contract value
and are recorded as unrealized gains and losses. The Fund realizes a
gain or loss when the contract is closed or expires.
Foreign currency contracts are valued daily and unrealized
appreciation or depreciation is recorded daily as the difference
between the contract exchange rate and the closing forward rate
applied to the face amount of the contract. A realized gain or loss is
recorded at the time a forward contract is closed.
Dollar Roll Transactions
The Income Fund enters into dollar roll transactions, with respect to
mortgage securities issued by GNMA, FNMA and FHLMC, in which the Fund
sells mortgage securities and simultaneously agrees to repurchase
similar (same type, coupon and maturity) securities at a later date at
an agreed upon price. During the period between the sale and
repurchase, the Fund forgoes principal and interest paid on the
mortgage securities sold. The Fund is compensated by the interest
earned on the cash proceeds of the initial sale and from negotiated
fees paid by brokers offered as an inducement to the Fund to "roll
over" its purchase commitments. The Income Fund earned $18,750 from
such fees for the six months ended April 30, 1999.
Organization Costs
Organization costs incurred in connection with the start up and
initial registration of the Funds are capitalized and amortized over a
period of 60 months from the date of commencement. If any initial
shares are redeemed during the amortization period, the redemption
proceeds will be reduced by a pro-rata portion of the unamortized
balance at the time of redemption, in the same proportion that the
number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of redemption.
When-Issued and Delayed Delivery Transactions
The Funds may engage in when-issued or delayed delivery transactions.
To the extent that a Fund engages in such transactions, it will do so
for the purpose of acquiring securities consistent with its investment
objectives and policies and not for the purpose of investment leverage
or to speculate on interest rate changes. On the trade date, assets of
the Fund are segregated on the Fund's records in a dollar amount
sufficient to make payment for the securities to be purchased. Income
is not accrued until settlement date.
Repurchase Agreements
The Funds may engage in repurchase agreement transactions in pursuit
of their investment objectives. When a fund engages in such
transactions, it is policy to require the custodian bank to take
possession of all securities held as collateral in support of
repurchase agreement investments. In addition, the Fund monitors the
market value of the underlying collateral on a daily basis. If the
seller defaults or if bankruptcy proceedings are initiated with
respect to the seller, the realization or retention of the collateral
may be subject to legal proceedings.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principals requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income
and expenses during the reporting period. Actual results could differ
from those estimates.
(3) FEES AND COMPENSATION PAID TO AFFILIATES
Investment Advisory Fees
Each Fund pays Lutheran Brotherhood Research Corp. (LB Research), the
Trust's investment advisor, a fee for its advisory services. The fees
are accrued daily and paid monthly. 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 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 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 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 six months ended April 30, 1999 was
$224,049.
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 six months ended April 30, 1999 was $338,816.
Distribution and Shareholder Servicing Plans
The Trust has adopted a Distribution Plan (the "12b-1 Plan") under
Rule 12b-1 of the 1940 Act with respect to the Class B shares of each
Fund except for the LB Money Market Fund. Under the 12b-1 Plan, the
Funds each pay Lutheran Brotherhood Securities Corp. (LB Securities)
at an annual rate of 0.75% of the average daily net assets of its
Class B shares. The fees collected under the 12b-1 Plan are used by LB
Securities to finance activities primarily intended to result in the
sale of Class B shares of the Fund. For the six months ended April 30,
1999, LB Securities received aggregate 12b-1 fees of $357,720 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 six months ended April 30,
1999, LB Securities received aggregate shareholder servicing fees of
$5,465,306 from the Trust.
Sales Charges and Other Fees
For the six months ended April 30, 1999, LB Securities, the Trust's
distributor, received $350,720 of aggregate underwriting concessions
from sales of Class A shares. LB Securities also received $71,762 of
aggregate contingent deferred sales charges from redemption of Class B
shares for the six months ended April 30, 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
six months ended April 30, 1999, LB Securities received aggregate fees
for administrative personnel and services of $455,968 from the LB
Family of Funds.
In addition, LB Securities provides the Funds with transfer agent
services pursuant to an agreement. For the six months ended April 30,
1999, LB Securities received aggregate fees for transfer agent
services of $4,795,938 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 six months ended April 30, 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, 1998, the LB Opportunity Growth Fund, LB Mid Cap Growth
Fund, LB World Growth Fund, LB Income Fund and the LB Municipal Bond
Fund had accumulated net realized capital loss carryovers expiring as
follows:
Municipal
Opportunity Mid Cap World Income Bond
Year Growth Growth Growth Fund Fund
- ----- ----------- ---------- -------- ----------- ----------
2002 -- -- -- $28,292,105 $1,287,686
2003 -- -- -- -- 134,719
2004 -- -- -- 8,472,280 --
2006 $21,168,153 $1,667,030 $510,969 -- --
----------- ---------- -------- ----------- ----------
Total $21,168,153 $1,667,030 $510,969 $36,764,385 $1,422,405
=========== ========== ======== =========== ==========
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 $74,279, $315,225, $972,011,
$1,946,006, $755,361, $69,850, and $2,233,555 existed between net
realized capital gains or losses for financial statement and tax
purposes as of October 31, 1998 for the Opportunity Growth, Mid Cap
Growth, World Growth, LB Fund, LB High Yield Fund, LB Income and
Municipal Bond Funds, respectively. These differences are due
primarily to deferral of capital losses for tax purposes.
(6) INVESTMENT TRANSACTIONS
Purchases and Sales of Investment Securities
For the six months ended April 30, 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 $ 31,001 $ 46,866
Mid Cap Growth Fund 41,921 35,035
World Growth Fund 7,034 6,918
LB Fund 548,128 521,055
High Yield 310,860 233,153
Income 186,263 123,172
Municipal Bond 33,985 21,893
Purchases and sales of U.S. Government securities were:
$thousands
----------------------------------
Fund Purchases Sales
- --------------------------------------------------------------------
LB Fund $ 5,360 $ 2,021
Income 113,330 160,604
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 $324,083 at April 30, 1999, which
represented 0.034% 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 six months ended April 30, 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 April 30, 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 April 30, 1999 -- $ --
================= =================
Income Fund
--------------------------------------
Number of Premium
Contracts Amount
----------------- -----------------
Balance at October 31, 1998 200 $ 85,380
Opened 2,025 935,929
Closed (1,275) (697,307)
Expired (648) (200,077)
Exercised (2) (541)
----------------- -----------------
Balance at April 30, 1999 300 $ 123,384
================= =================
Foreign Denominated Investments
The LB World Growth Fund invests primarily in foreign denominated
stocks. Foreign denominated assets and currency contracts may involve
more risks than domestic transactions, including: currency risk,
political and economic risk, regulatory risk, and market risk. The
Fund may also invest in securities of companies located in emerging
markets. Future economic or political developments could adversely
affect the liquidity or value, or both, of such securities.
(7) SHARES OF BENEFICIAL INTEREST
The Master Trust Agreement permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest ($0.001
par value) of all of the Funds. Transactions in Fund shares were as
follows:
</TABLE>
<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
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1999
- ---------------------------------
Sold 1,290,434 $13,104,761 241,176 $2,436,184 127,100 $1,294,802
Dividends and
distributions reinvested -- -- -- -- -- --
Redeemed (3,622,923) (36,816,409) (40,789) (407,503) (6,329) (64,330)
------------ ------------- ------------ ------------ ------------ ------------
Net Change (2,332,489) ($23,711,648) 200,387 $2,028,681 120,771 $1,230,472
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB MID CAP 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 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
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1999
- ---------------------------------
Sold 840,095 $9,072,449 330,035 $3,514,875 -- --
Dividends and
distributions reinvested -- -- -- -- -- --
Redeemed (414,864) (4,474,370) (43,530) (459,507) -- --
------------ ------------- ------------ ------------ ------------ ------------
Net Change 425,231 $4,598,079 286,505 $3,055,368 -- --
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB WORLD 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 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
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1999
- ---------------------------------
Sold 642,193 $7,270,245 200,195 $2,235,557 75,819 $855,614
Dividends and
distributions reinvested 44,402 501,296 1,894 21,236 2,813 31,782
Redeemed (729,848) (8,211,793) (22,507) (249,179) (1,698) (19,012)
------------ ------------- ------------ ------------ ------------ ------------
Net Change (43,253) ($440,252) 179,582 $2,007,614 76,934 $868,384
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB 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 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
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1999
- ---------------------------------
Sold 3,043,428 $87,735,961 635,431 $18,202,325 231,971 $6,602,339
Dividends and
distributions reinvested 4,851,891 125,472,394 112,791 2,897,609 98,178 2,545,223
Redeemed (2,829,969) (81,258,603) (50,739) (1,446,783) (80,146) (2,338,290)
------------ ------------- ------------ ------------ ------------ ------------
Net Change 5,065,350 $131,949,752 697,483 $19,653,151 250,003 $6,809,272
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB HIGH YIELD 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 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
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1999
- ---------------------------------
Sold 8,606,112 $71,960,382 1,181,104 $9,861,975 195,542 $1,635,799
Dividends and
distributions reinvested 3,769,479 31,422,566 116,939 974,159 122,889 1,024,667
Redeemed (7,981,049) (66,713,306) (131,159) (1,092,515) (122,319) (1,027,541)
------------ ------------- ------------ ------------ ------------ ------------
Net Change 4,394,542 $36,669,642 1,166,884 $9,743,619 196,112 $1,632,925
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB INCOME 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 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
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1999
- ---------------------------------
Sold 4,475,407 $39,095,218 673,070 $5,870,827 769,290 $6,732,218
Dividends and
distributions reinvested 1,892,636 16,497,414 26,307 228,683 76,902 669,738
Redeemed (6,127,857) (53,550,838) (52,717) (460,059) (199,078) (1,737,638)
------------ ------------- ------------ ------------ ------------ ------------
Net Change 240,186 $2,041,794 646,660 $5,639,451 647,114 $5,664,318
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB MUNICIPAL BOND 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 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)
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1999
- ---------------------------------
Sold 3,142,086 $28,483,117 337,645 $3,054,151 5,804 $52,586
Dividends and
distributions reinvested 1,277,227 11,559,175 11,495 103,750 11,167 101,046
Redeemed (3,127,384) (28,357,302) (14,215) (129,270) (19,026) (173,038)
------------ ------------- ------------ ------------ ------------ ------------
Net Change 1,291,929 $11,684,990 334,925 $3,028,631 (2,055) ($19,406)
============ ============= ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
LB MONEY MARKET 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 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)
============ ============= ============ ============ ============ ============
Six Months Ended April 30, 1999
- ---------------------------------
Sold 482,519,973 $482,519,973 131,276 $131,276 40,239,915 $40,239,915
Dividends and
distributions reinvested 10,748,537 10,748,537 2,399 2,399 1,016,100 1,016,100
Redeemed (431,590,279) (431,590,279) (61,523) (61,523) (45,097,868) (45,097,868)
------------ ------------- ------------ ------------ ------------ ------------
Net Change 61,678,231 $61,678,231 72,152 $72,152 (3,841,853) ($3,841,853)
============ ============= ============ ============ ============ ============
</TABLE>
THE LUTHERAN BROTHERHOOD FAMILY OF FUNDS
LUTHERAN BROTHERHOOD OPPORTUNITY GROWTH FUND
LUTHERAN BROTHERHOOD MID CAP GROWTH FUND
LUTHERAN BROTHERHOOD WORLD GROWTH FUND
LUTHERAN BROTHERHOOD FUND
LUTHERAN BROTHERHOOD HIGH YIELD FUND
LUTHERAN BROTHERHOOD INCOME FUND
LUTHERAN BROTHERHOOD MUNICIPAL BOND FUND
LUTHERAN BROTHERHOOD MONEY MARKET FUND
TRUSTEES
Rolf F. Bjelland
Herbert F. Eggerding, Jr.
Noel K. Estenson
Jodi L. Harpstead
Richard A. Hauser
Connie M. Levi
Bruce J. Nicholson
OFFICERS
Rolf F. Bjelland Brenda J. Pederson
Chairman and President Vice President
Wade M. Voigt Richard B. Ruckdashel
Treasurer Vice President
Otis F. Hilbert John C. Bjork
Secretary and Vice President Assistant Secretary
Randall L. Boushek James M. Odland
Vice President Assistant Secretary
Frederick P. Johnson Rand E. Mattsson
Vice President Assistant Treasurer
James R. Olson
Vice President
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the
current prospectuses.
