As filed with the Securities and Exchange Commission on March 5, 2004.
Registration No. 333-111964 and 811-4603
===================================================================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] Pre-Effective Amendment No._2__ [ ] Post-Effective Amendment No.____
(Check appropriate box or boxes)
--------------------------------------------------------------------------------
LB SERIES FUND, INC.
(Exact name of Registrant as Specified in Charter)
625 Fourth Avenue South
Minneapolis, Minnesota 55415
(Address of Principal Executive Offices)
612-340-8492
(Registrant's Telephone Number)
Marlene J. Nogle
625 Fourth Avenue South
Minneapolis, Minnesota 55415
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as possible following the effective date of this Registration Statement.
--------------------------------------------------------------------------------
Title of Securities Being Registered:
Shares of Beneficial Interest
No filing fee is required because of reliance on Section 24(f) under the Investment Company
Act of 1940, as amended.
The Registrant hereby amends this Registration Statement on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
===================================================================================================================================
TECHNOLOGY STOCK PORTFOLIO CAPITAL GROWTH PORTFOLIO
SMALL CAP STOCK PORTFOLIO LARGE COMPANY INDEX PORTFOLIO
SMALL CAP VALUE PORTFOLIO REAL ESTATE SECURITIES PORTFOLIO
SMALL CAP INDEX PORTFOLIO BALANCED PORTFOLIO
MID CAP STOCK PORTFOLIO HIGH YIELD BOND PORTFOLIO
MID CAP INDEX PORTFOLIO BOND INDEX PORTFOLIO
INTERNATIONAL PORTFOLIO MORTGAGE SECURITIES PORTFOLIO
Series of
AAL VARIABLE PRODUCT SERIES FUND, INC.
AAL Variable Product Series Fund, Inc.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
March 3, 2004
Dear Shareholder:
As we previously announced, in January 2002, Aid Association for Lutherans and Lutheran
Brotherhood merged to form Thrivent Financial for Lutherans. Since that time, we have
implemented several changes to combine the best of both organizations. The proposals
described in the accompanying proxy statement are an important step to continue this process
for the organizations' mutual fund families.
Since the merger, we have done considerable planning and preparation to create the
foundation for the new Thrivent family of mutual funds. Our primary goal is to provide
substantial value to shareholders through consistent, competitive performance, enhanced
shareholder services and a growing business with an excellent reputation. Thrivent Financial
expects to build on its many strengths as a money manager while also addressing areas that
need improvement.
Your Board of Directors and Thrivent Financial are working together to develop action steps
that collectively are expected to benefit shareholders. They include:
o The proposed reorganization of the AAL Variable Product Series Fund, Inc. portfolios
into the portfolios of the LB Series Fund, Inc., that is discussed in this proxy
statement, which will place all of the portfolios under a single board of directors;
o Investment of $4-5 million by Thrivent Financial to enhance the quality of its asset
management capabilities, including hiring additional investment professionals and making
infrastructure investments to support investment research;
o New product names using the Thrivent Financial brand. The merged investment company
will be named the Thrivent Series Fund, Inc.;
o Expanded product offerings; and
o Greater investment choice through access to an expanded array of money managers.
Some of these changes require shareholder approval. Other changes have been or are expected
to be implemented by Thrivent Financial working with your Board of Directors.
The Board of Directors of the AAL Variable Product Series Fund, Inc. unanimously recommends
that shareholders of each Portfolio vote FOR the reorganization proposal for each portfolio
in the proxy statement. The Board has determined that these reorganizations will benefit
the portfolios by:
o Consolidating the variable product portfolios sponsored by Thrivent Financial under a
single investment company and board of directors. This will further streamline
governance and oversight of the portfolios.
o Simplifying administrative and regulatory requirements for the portfolios, including
by eliminating duplicative regulatory filings and duplicative fixed costs such as
printing, mailing, accounting and audit fees, legal fees and shareholder meetings.
Related to the reorganization of the International Portfolio into the existing World Growth
Portfolio, the Board considered:
o The similarity of the two portfolios' investment objectives and strategies,
o The benefits of the projected lower total expense ratio,
o The increased asset base of the merged portfolio, and
o That the long-term performance of the World Growth Portfolio has been better than
that of the International Portfolio.
A special shareholder meeting is scheduled for April 7, 2004, to consider each
reorganization. It is very important that you vote on the proposal for each Portfolio
underlying your variable contract or retirement plan. You may vote by telephone, Internet or
mail. Please read this proxy statement and cast your vote using the enclosed voting
instruction form.
To see how the reorganization will affect the portfolio underlying your investment in your
variable contract and/or retirement plan, please review the enclosed information on the
advisory fees, expenses, investment policies and services relating to the corresponding
portfolios of the LB Series Fund, Inc.
In the midst of these important changes, your Board is committed to ensuring that the AAL
Variable Product Series Fund, Inc. operates in a manner that is deserving of your trust.
This is especially important at a time when shareholders' confidence in money managers and
fund families is being shaken. It is a commitment that we, as well as Thrivent Financial,
take very seriously.
Sincerely,
Pamela J. Moret
President
Questions & Answers
For Shareholders of AAL Variable Product Series Fund, Inc.
The Board of Directors of the AAL Variable Product Series Fund, Inc. (the "AAL Series Fund")
has provided the following questions and answers to clarify and summarize the proposals in
this proxy statement. Your vote is very important. The Board unanimously supports these
proposals and encourages you to read the full proxy statement and vote as soon as possible.
Q. What changes are proposed?
A: The Board proposes that each of the portfolios offered by the AAL Series Fund
other than the International Portfolio (each an "AAL Portfolio" and collectively the
"AAL Portfolios") be reorganized and merged into a corresponding newly-formed
portfolio of the LB Series Fund, Inc. (each a "New Thrivent Portfolio" and
collectively the "New Thrivent Portfolios"). The Board also proposes that the
International Portfolio of the AAL Series Fund be reorganized with and into the World
Growth Portfolio, an existing portfolio of LB Series Fund, Inc.
Q: Why is the reorganization proposed?
A: Lutheran Brotherhood and Aid Association for Lutherans merged in January 2002 to form
Thrivent Financial for Lutherans ("Thrivent Financial"). The reorganization is part
of a multi-phase plan to merge and integrate the governance and operations of the
funds sponsored by Thrivent Financial that serve as investments for Thrivent
Financial's and Thrivent Life Insurance Company's ("Thrivent Life") variable annuity
and variable life insurance products and Thrivent Financial's retirement plans.
With respect to each AAL Portfolio that would be reorganized into a corresponding New
Thrivent Portfolio, the Board has determined that the reorganization is in the best
interests of the AAL Portfolios. In reaching this decision, the Board considered the
following factors:
o The reorganizations will consolidate the variable product portfolios sponsored by
Thrivent Financial under a single investment company and board of directors.
This will further streamline governance and oversight of the portfolios.
o The investment objective and strategies of each New Thrivent Portfolio will be
identical to the investment objective and strategies of the corresponding AAL
Portfolio.
o The reorganizations offer the opportunity for operational efficiencies by
simplifying the administrative and regulatory requirements for the Portfolios
and eliminating duplicative regulatory filings. The reorganizations will
eliminate some duplicative fixed costs.
o The reorganizations will not result in the recognition of any gain or loss for
federal income tax purposes by the AAL Portfolios, the Thrivent Portfolios or
their shareholders.
o Thrivent Financial will be responsible for payment of the expenses related to each
reorganization.
In recommending the reorganization of the International Portfolio into the World
Growth Portfolio, the Board considered:
o The investment objectives of the International Portfolio and the World Growth
Portfolio are substantially similar, as are their investment policies and
strategies.
o The potential for benefiting from economies of scale of a larger asset base,
including greater portfolio diversification and the opportunity to conduct
investment transactions on potentially more advantageous terms than two separate
smaller portfolios. The reorganization also offers opportunities to spread fixed
costs over a larger asset base.
o The total expense ratio of the World Growth Portfolio following the reorganization is
projected to be lower than the current total expense ratio for each of the World
Growth Portfolio and International Portfolio.
o The long-term performance of the World Growth Portfolio has been better than that of
the International Portfolio.
Q: How will the AAL Portfolios be merged with the Thrivent Portfolios?
A: The AAL Series Fund consists of 14 separate Portfolios. The Board proposes:
o The International Portfolio be merged into the World Growth Portfolio, an existing
portfolio of LB Series Fund, Inc., which has a substantially similar investment
objective and strategy.
o The remaining 13 AAL Portfolios be reorganized into New Thrivent Portfolios, each of
which has been established solely for the purpose of this reorganization and has
no prior operating history or assets.
In the reorganization, the shares of each AAL Portfolio automatically will be
exchanged for an equal dollar value of shares of the corresponding Thrivent
Portfolio.
Q. Who currently manages the World Growth Portfolio?
A. Price International, an affiliate of T. Rowe Price Associates, Inc., presently
subadvises the World Growth Portfolio.
Q. Who can vote?
A. Owners of the variable contracts funded by an AAL Portfolio and the administrators of
the retirement plans are entitled to vote. Thrivent Financial and Thrivent Life will
cast your votes according to your voting instructions. Trustees of the Thrivent
Savings Plan will vote according to the best interests of the plan participants.
If no timely voting instructions are received, any shares of an AAL Portfolio
attributable to a variable contract will be voted by Thrivent Financial or Thrivent
Life in proportion to the voting instructions received for all variable contracts and
retirement plans participating in the applicable AAL Portfolio. If a voting
instruction form is returned with no voting instructions, the shares of the AAL
Portfolio to which the form relates will be voted FOR all the proposals.
Any shares of an AAL Portfolio held by Thrivent Financial, Thrivent Life or any of
their affiliates for their own account will also be voted in proportion to the voting
instructions received for all variable contracts participating in the AAL Portfolio.
This hypothetical example illustrates how proportionate voting works:
An AAL Portfolio has 1,000 shares outstanding. Shareholders vote 70 of those shares
FOR the proposal, 20 shares AGAINST the proposal and 10 shares are held by
shareholders who abstain from voting. Thrivent Financial or Thrivent Life hold the
other 900 shares.
In this example, using proportionate shadow voting, Thrivent Financial would vote 700
of the 1,000 shares FOR the proposal, 200 shares AGAINST, and would abstain from
voting 100 of those shares.
Q: When will the reorganization be effective?
A: A Special Meeting of Shareholders of each of the AAL Portfolios is scheduled for
April 7, 2004, to consider the reorganization. Subject to shareholder approval, the
reorganization affecting each AAL Portfolio likely will be effective on or about
April 30, 2004.
Q: Can I make additional investments in the AAL Portfolios before the reorganization?
A: Yes. You can continue to make investments in any of the AAL Portfolios until the
effective date of the reorganization.
Q: What do I need to do to exchange my shares?
A: Nothing. If shareholders approve the reorganization, the shares of the AAL Portfolio
that fund benefits under your variable contract or retirement plan automatically will
be exchanged for an equal dollar value of shares of the corresponding Thrivent
Portfolio. Your variable contract or retirement plan participation will not be
affected by the reorganization.
Q: Will I incur taxes as a result of this reorganization?
A: Each reorganization is expected to be tax-free for federal income tax purposes. The
participating Portfolios will seek an opinion from counsel to this effect. Generally,
neither variable contract owners nor retirement plan participants will incur capital
gains or losses on the exchange of AAL Portfolio shares for Thrivent Portfolio shares
having an equal dollar value as a result of this reorganization. The cost basis on
each investment also will remain the same.
Q. How does the Board recommend that I vote?
A. The Board of Directors unanimously recommends that you vote FOR these proposals.
Q: How can I vote?
A: You can vote by:
o Internet - Follow the directions on the enclosed voting instruction form.
o Telephone - Follow the directions on the enclosed voting instruction form. If this
feature is used, you are giving authorization for another person to execute your
proxy and there is no need to mail the voting instruction form.
o By mail - Date and sign the enclosed voting instruction form and return it in the
enclosed postage-paid envelope.
Q. Why should I vote?
A. Every vote is important and the Board encourages you to return your vote as soon as
possible.
Q: When should I vote?
A: Please vote as soon as possible by mail, telephone or the Internet. This will help
avoid additional follow-up costs.
Q: Who is paying the cost of the shareholder meeting and of this proxy solicitation?
A: Thrivent Financial will pay all of the shareholder meeting, proxy preparation and
proxy solicitation expenses. Expenses relating to the reorganization will not be
paid for out of fund or portfolio assets.
Q: Who should I call if I have questions about the proposals in the proxy statement?
A. Call 1-866-270-1532.
Q: How can I get more information about the portfolios?
A: A copy of the prospectus for the World Growth Portfolio accompanies this proxy
statement and prospectus as Appendix B. The prospectus for the New Thrivent
Portfolios is attached as Appendix C. Management's Discussion of Fund Performance
and the Financial Highlights for the World Growth Portfolio is attached as Appendix
D.
For a copy of the prospectus or the Statement of Additional Information for the AAL
Portfolios, write to AAL Variable Products Series Fund, Inc., 625 Fourth Avenue
South, Minneapolis, Minnesota 55415 or call 1-800-847-4836.
For a copy of the Statement of Additional Information for the New Thrivent
Portfolios, the World Growth Portfolio, or for an additional copy of this proxy
statement and prospectus, write to Thrivent Series Fund, Inc., 625 Fourth Avenue
South, Minneapolis, Minnesota 55415 or call 1-800-847-4836.
TECHNOLOGY STOCK PORTFOLIO CAPITAL GROWTH PORTFOLIO
SMALL CAP STOCK PORTFOLIO LARGE COMPANY INDEX PORTFOLIO
SMALL CAP VALUE PORTFOLIO REAL ESTATE SECURITIES PORTFOLIO
SMALL CAP INDEX PORTFOLIO BALANCED PORTFOLIO
MID CAP STOCK PORTFOLIO HIGH YIELD BOND PORTFOLIO
MID CAP INDEX PORTFOLIO BOND INDEX PORTFOLIO
INTERNATIONAL PORTFOLIO MORTGAGE SECURITIES PORTFOLIO
Series of
AAL VARIABLE PRODUCT SERIES FUND, INC.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
To be held on April 7, 2004
___________________________________
A Special Meeting of Shareholders (the "Special Meeting") of each series of AAL Variable
Product Series Fund, Inc. (the "AAL Series Fund") listed above (each an "AAL Portfolio" and
collectively the "AAL Portfolios") will be held at the Thrivent Financial for Lutherans
building, 625 Fourth Avenue South, Minneapolis, Minnesota on April 7, 2004, at 8:30 a.m.
Central Time for the following purposes:
1. For shareholders of the International Portfolio of the AAL Series Fund (the
"International Portfolio") to approve a proposed Reorganization Agreement and Plan of
Reorganization between the AAL Series Fund and LB Series Fund, Inc. (which will
change its name to Thrivent Series Fund, Inc. on or about April 30, 2004, and is
hereinafter referred to as the "Thrivent Series Fund"), whereby (a) all of the assets
of the International Portfolio will be transferred to the World Growth Portfolio of
Thrivent Series Fund (the "World Growth Portfolio") in exchange for the World Growth
Portfolio's shares of equal dollar value; (b) the stated accrued and unpaid
liabilities of the International Portfolio will be assumed by the World Growth
Portfolio; (c) the International Portfolio will distribute pro rata to its
shareholders, in complete liquidation, the shares of the World Growth Portfolio
received in exchange for its net assets; and (d) the International Portfolio will
cease to exist.
2. For shareholders of each AAL Portfolio, other than the International Portfolio,
separately to approve a proposed Reorganization Agreement and Plan of Reorganization
between the AAL Series Fund and Thrivent Series Fund, whereby (a) all of the assets
of each AAL Portfolio will be transferred to a corresponding series of Thrivent
Series Fund (each a "New Thrivent Portfolio" and together with the World Growth
Portfolio, the "Thrivent Portfolios") in exchange for the New Thrivent Portfolio's
shares of equal dollar value; (b) all liabilities of each AAL Portfolio will be
assumed by the corresponding New Thrivent Portfolio; (c) each AAL Portfolio will
distribute pro rata to its shareholders, in complete liquidation, the shares of the
corresponding New Thrivent Portfolio received in exchange for its net assets; and (d)
each AAL Portfolio will cease to exist.
3. To consider and act upon any matter incidental to the foregoing and to transact such
other business as may properly come before the Special Meeting and all adjournments.
The Board of Directors of AAL Series Fund has fixed the close of business on February 13,
2004 as the record date for the determination of shareholders entitled to notice of, and to
vote at, the Special Meeting and all adjournments.
By Order of the Board of Directors,
James E. Nelson, Secretary
Minneapolis, Minnesota
March 3, 2004
- -------------------------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
You can help Thrivent Financial for Lutherans, the adviser to the AAL Portfolios and
the Thrivent Portfolios, avoid the necessity and expense of sending follow-up letters by
promptly returning the enclosed voting instruction form. If you are unable to be present in
person at the Special Meeting, please mark, date, sign and return the enclosed voting
instruction form. The enclosed envelope requires no postage if mailed in the United States.
You also may vote by telephone or the Internet by following the instructions on the enclosed
voting instruction form.
- -------------------------------------------------------------------------------------------------
PROXY STATEMENT AND PROSPECTUS
MARCH 3, 2004
INTERNATIONAL PORTFOLIO WORLD GROWTH PORTFOLIO
TECHNOLOGY STOCK PORTFOLIO THRIVENT TECHNOLOGY PORTFOLIO
SMALL CAP STOCK PORTFOLIO THRIVENT SMALL CAP STOCK PORTFOLIO
SMALL CAP VALUE PORTFOLIO THRIVENT PARTNER SMALL CAP VALUE PORTFOLIO
SMALL CAP INDEX PORTFOLIO THRIVENT SMALL CAP INDEX PORTFOLIO
MID CAP STOCK PORTFOLIO THRIVENT MID CAP STOCK PORTFOLIO
MID CAP INDEX PORTFOLIO THRIVENT MID CAP INDEX PORTFOLIO
CAPITAL GROWTH PORTFOLIO THRIVENT LARGE CAP STOCK PORTFOLIO
LARGE COMPANY INDEX PORTFOLIO THRIVENT LARGE CAP INDEX PORTFOLIO
REAL ESTATE SECURITIES PORTFOLIO THRIVENT REAL ESTATE SECURITIES PORTFOLIO
BALANCED PORTFOLIO THRIVENT BALANCED PORTFOLIO
HIGH YIELD BOND PORTFOLIO THRIVENT PARTNER HIGH YIELD PORTFOLIO
BOND INDEX PORTFOLIO THRIVENT BOND INDEX PORTFOLIO
MORTGAGE SECURITIES PORTFOLIO THRIVENT MORTGAGE SECURITIES PORTFOLIO
Each a series of Each a series of
AAL VARIABLE PRODUCT SERIES FUND, INC. LB SERIES FUND, INC.
625 Fourth Avenue South 625 Fourth Avenue South
Minneapolis, Minnesota 55415 Minneapolis, Minnesota 55415
1-800-847-4836 1-800-847-4836
This proxy statement and prospectus is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of AAL Variable Product Series Fund, Inc.
(the "AAL Series Fund"). Shareholder votes and proxies are being solicited for a Special
Meeting of Shareholders and any adjournments thereof (collectively, the "Special Meeting")
of each series of the AAL Series Fund listed above (each, an "AAL Portfolio" and
collectively, the "AAL Portfolios") to be held at the Thrivent Financial for Lutherans
building, 625 Fourth Avenue South, Minneapolis, Minnesota 55415, on April 7, 2004, at 8:30
a.m. Central time. This proxy statement and prospectus and the accompanying Notice of
Special Meeting of Shareholders and voting instruction form are first being mailed on or
about March 3, 2004.
At the Special Meeting, shareholders will be asked to approve proposed Reorganization
Agreements and Plans of Reorganization (each a "Reorganization Agreement" and collectively
the "Reorganization Agreements") between the AAL Series Fund and LB Series Fund, Inc. (which
will change its name to Thrivent Series Fund, Inc. on or about April 30, 2004, and is
hereinafter referred to as the "Thrivent Series Fund"). In the reorganizations, shares of
each of the AAL Portfolios will be exchanged for shares of a corresponding portfolio of the
Thrivent Series Fund (each a "Thrivent Portfolio" and collectively the "Thrivent
Portfolios") having an equal dollar value. Specifically:
o The International Portfolio of the AAL Series Fund (the "International Portfolio")
will be reorganized into the World Growth Portfolio of the Thrivent Series Fund (the
"World Growth Portfolio") if its Reorganization Agreement is approved; and
o Each other AAL Portfolio will be reorganized into shares of a newly formed Portfolio
of the Thrivent Series Fund (each a "New Thrivent Portfolio" and collectively the
"New Thrivent Portfolios") that was organized solely for the purpose of continuing
the business of its corresponding AAL Portfolio if its Reorganization Agreement is
approved.
The following table shows the Thrivent Portfolio into which each AAL Portfolio will be
reorganized if the Reorganization Agreements are approved.
AAL Portfolio Corresponding Thrivent Portfolio
- ------------- --------------------------------
International Portfolio -> World Growth Portfolio (an existing Thrivent Portfolio)
Technology Stock Portfolio -> Thrivent Technology Portfolio (a New Thrivent Portfolio)
Small Cap Stock Portfolio -> Thrivent Small Cap Stock Portfolio (a New Thrivent Portfolio)
Small Cap Value Portfolio -> Thrivent Partner Small Cap Value Portfolio (a New Thrivent Portfolio)
Small Cap Index Portfolio -> Thrivent Small Cap Index Portfolio (a New Thrivent Portfolio)
Mid Cap Stock Portfolio -> Thrivent Mid Cap Stock Portfolio (a New Thrivent Portfolio)
Mid Cap Index Portfolio -> Thrivent Mid Cap Index Portfolio (a New Thrivent Portfolio)
Capital Growth Portfolio -> Thrivent Large Cap Stock Portfolio (a New Thrivent Portfolio)
Large Company Index Portfolio -> Thrivent Large Cap Index Portfolio (a New Thrivent Portfolio)
Real Estate Securities Portfolio -> Thrivent Real Estate Securities Portfolio (a New Thrivent Portfolio)
Balanced Portfolio -> Thrivent Balanced Portfolio (a New Thrivent Portfolio)
High Yield Bond Portfolio -> Thrivent Partner High Yield Portfolio (a New Thrivent Portfolio)
Bond Index Portfolio -> Thrivent Bond Index Portfolio (a New Thrivent Portfolio)
Mortgage Securities Portfolio -> Thrivent Mortgage Securities Portfolio (a New Thrivent Portfolio)
Both AAL Series Fund and Thrivent Series Fund are open-end investment companies, commonly
called mutual funds. Both AAL Series Fund and Thrivent Series Fund issue and sell their
shares to
o separate accounts of Thrivent Financial for Lutherans ("Thrivent Financial") and
Thrivent Life Insurance Company ("Thrivent Life"), which are used to fund
benefits under variable life insurance and variable annuity contracts (the
"variable contracts") issued by Thrivent Financial and Thrivent Life, and
o retirement plans sponsored by Thrivent Financial (collectively, the "retirement
plans").
Each Reorganization Agreement provides that:
o All of the assets of the AAL Portfolio will be transferred to a corresponding
Thrivent Portfolio in exchange for shares of the Thrivent Portfolio having a
value equal to the value of the assets so transferred, less liabilities
assumed by the Thrivent Portfolio;
o All of the liabilities of an AAL Portfolio being reorganized into a New Thrivent
Portfolio will be assumed by the corresponding New Thrivent Portfolio;
o The stated accrued and unpaid liabilities of the International Portfolio will be
assumed by the World Growth Portfolio; and
o Shares of the corresponding Thrivent Portfolio will be distributed pro rata to the
shareholders of the AAL Portfolio in complete liquidation of the AAL
Portfolio.
If the applicable Reorganization Agreement is approved, the shares of the AAL Portfolio that
funds benefits under your variable contract or retirement plan automatically will be
exchanged for an equal dollar value of shares of a corresponding Thrivent Portfolio. Each
New Thrivent Portfolio has identical investment objectives and strategies and substantially
identical investment policies as its corresponding AAL Portfolio. The World Growth
Portfolio and International Portfolio have substantially similar investment policies and
objectives.
Please retain this proxy statement and prospectus for future reference. It describes
concisely the information that you should know before voting. It is the proxy statement for
the Special Meeting of Shareholders of each of the AAL Portfolios (please see the Notice of
Special Meeting). It is also the prospectus that describes the shares of the World Growth
Portfolio and the New Thrivent Portfolios.
The following documents contain additional information about the AAL Portfolios and are
incorporated into this proxy statement and prospectus by reference. To obtain copies of
these documents without charge, write or call the AAL Series Fund at the address or phone
number above.
o The AAL Series Fund prospectus dated April 30, 2003, as supplemented.
o The AAL Series Fund Statement of Additional Information dated April 30, 2003.
o The AAL Series Fund Annual Report dated December 31, 2003.
The following documents contain additional information about the Thrivent Portfolios and are
incorporated into this proxy statement and prospectus by reference. To obtain copies of
these documents without charge, write or call the Thrivent Series Fund at the address or
phone number above.
o The prospectus of the World Growth Portfolio dated April 30, 2003, as supplemented,
accompanies this proxy statement and prospectus as Appendix B.
o The prospectus of each New Thrivent Portfolio dated February 1, 2004, as supplemented
February 12, 2004, accompanies this proxy statement and prospectus as Appendix C.
o Management's Discussion of Fund Performance and the Financial Highlights of the World
Growth Portfolio from the most recent Annual Report for the Thrivent Series Fund
accompanies this proxy statement and prospectus as Appendix D.
o The Statement of Additional Information relating to this proxy statement and
prospectus dated March 3, 2004.
o The Statement of Additional Information for the World Growth Portfolio dated April 30,
2003.
o The Statement of Additional Information for the New Thrivent Portfolios dated
February 1, 2004, as supplemented February 12, 2004.
The New Thrivent Portfolios have no prior operating history and will not commence operations
or have any assets or liabilities prior to the completion of the Reorganizations.
Each of these documents relating to the AAL Portfolios and the Thrivent Portfolios have been
filed with the Securities and Exchange Commission (the "SEC"), and you may obtain copies by
accessing the SEC's Web site at http://www.sec.gov.
The shares offered by this proxy statement and prospectus are not deposits or obligations of
any bank or financial institution and are not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Investment in these shares involves
investment risks, including the possible loss of principal.
The Securities and Exchange Commission has not approved or disapproved these securities or
determined if this proxy statement and prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
TABLE OF CONTENTS
PAGE
SUMMARY
About the Reorganizations
Comparative Expense Tables
Examples
Comparison on Investment Performance of International Portfolio and
World Growth Portfolio
Comparison of Investment Objectives, Strategies and Risks
Purchase, Redemption and Exchange Procedures
Tax Consequences
COMPARISON OF OPERATIONS
Investment Adviser
Portfolio Management
International Portfolio and World Growth Portfolio Subadvisers
Manager of Managers
The Separate Accounts and Retirement Plans
INFORMATION ABOUT THE REORGANIZATIONS
Background
Information Received by the Board of Directors of the AAL Series Fund
Considerations by the Board of Directors of the AAL Series Fund
Description of the Reorganization Agreements and Plans of Reorganization
Description of Thrivent Portfolio Shares
Federal Income Tax Consequences
Capitalization
ADDITIONAL INFORMATION ABOUT THE AAL PORTFOLIOS AND THE
THRIVENT PORTFOLIOS
VOTING INFORMATION
Quorum and Voting
Outstanding Shares and Voting Requirements
Other Matters
Board Recommendation
FORM OF AGREEMENT AND PLAN OF REORGANIZATION -- APPENDIX A A-1
LB SERIES FUND PROSPECTUS FOR WORLD GROWTH PORTFOLIO -- APPENDIX B B-1
LB SERIES FUND PROSPECTUS FOR NEW THRIVENT PORTFOLIOS -- APPENDIX C C-1
WORLD GROWTH PORTFOLIO MANAGEMENT'S DISCUSSION/FINANCIAL
HIGHLIGHTS -- APPENDIX D D-1
ADDITIONAL POLICIES AND LIMITATIONS -- APPENDIX E E-1
BOARD OF DIRECTORS -- APPENDIX F F-1
SUBADVISER INFORMATION -- APPENDIX G G-1
SHARE OWNERSHIP INFORMATION -- APPENDIX H H-1
SUMMARY
This summary is qualified in its entirety by reference to the additional information
contained elsewhere in this proxy statement and prospectus (including documents incorporated
by reference) and each of the Reorganization Agreements, a form of which is attached to this
proxy statement and prospectus as Appendix A.
About the Reorganizations
The Board of Directors of the AAL Series Fund unanimously recommends that shareholders of
each AAL Portfolio vote to approve the Reorganization Agreements. Under each Reorganization
Agreement, the Thrivent Portfolio would acquire all of the assets and outstanding
liabilities of the corresponding AAL Portfolio in exchange for shares of the Thrivent
Portfolio having an aggregate net asset value equal to the value of the AAL Portfolio's
assets so transferred, less the amount of the liabilities assumed by the Thrivent
Portfolio. The AAL Portfolio would distribute in liquidation pro rata to its shareholders
all of the shares of the Thrivent Portfolio it received in exchange for its assets.
Together these transactions are referred to in this proxy statement and prospectus
individually as a "Reorganization" and collectively as the "Reorganizations".
As a result of the Reorganizations, each shareholder of an AAL Portfolio will become the
owner of a Thrivent Portfolio's shares having a total net asset value equal to the total net
asset value of such shareholder's holdings in the AAL Portfolio on the date of the
Reorganizations. The Reorganizations will not affect your variable contract or retirement
plan, as the case may be.
The following table shows the Thrivent Portfolio into which each AAL Portfolio will be
reorganized if the Reorganizations are approved.
AAL Portfolio Corresponding Thrivent Portfolio
- ------------- --------------------------------
International Portfolio -> World Growth Portfolio (an existing Thrivent Portfolio)
Technology Stock Portfolio -> Thrivent Technology Portfolio (a New Thrivent Portfolio)
Small Cap Stock Portfolio -> Thrivent Small Cap Stock Portfolio (a New Thrivent Portfolio)
Small Cap Value Portfolio -> Thrivent Partner Small Cap Value Portfolio (a New Thrivent Portfolio)
Small Cap Index Portfolio -> Thrivent Small Cap Index Portfolio (a New Thrivent Portfolio)
Mid Cap Stock Portfolio -> Thrivent Mid Cap Stock Portfolio (a New Thrivent Portfolio)
Mid Cap Index Portfolio -> Thrivent Mid Cap Index Portfolio (a New Thrivent Portfolio)
Capital Growth Portfolio -> Thrivent Large Cap Stock Portfolio (a New Thrivent Portfolio)
Large Company Index Portfolio -> Thrivent Large Cap Index Portfolio (a New Thrivent Portfolio)
Real Estate Securities Portfolio -> Thrivent Real Estate Securities Portfolio (a New Thrivent Portfolio)
Balanced Portfolio -> Thrivent Balanced Portfolio (a New Thrivent Portfolio)
High Yield Bond Portfolio -> Thrivent Partner High Yield Portfolio (a New Thrivent Portfolio)
Bond Index Portfolio -> Thrivent Bond Index Portfolio (a New Thrivent Portfolio)
Mortgage Securities Portfolio -> Thrivent Mortgage Securities Portfolio (a New Thrivent Portfolio)
Comparative Expense Tables
Shares of the AAL Portfolios and the Thrivent Portfolios are sold without a sales charge, so
there are no direct shareholder fees. However, like all mutual funds, the AAL Portfolios
and the Thrivent Portfolios incur certain expenses in their operations, including advisory
fees and other expenses. These are indirect expenses.
The following expense tables compare the annual operating expenses of each AAL Portfolio
based on total assets for the fiscal year ended December 31, 2003, as reported in the AAL
Series Fund's most recent annual report, and pro forma expenses showing these same expenses
adjusted for the proposed Reorganizations.
International Portfolio / World Growth Portfolio
Expenses Pro Forma
as of December 31, 2003 Expenses
as of December 31, 2003
International World Growth World Growth
Portfolio Portfolio Portfolio
Annual Portfolio Operating Expenses
(Expenses that are deducted from Fund
assets)
Advisory fees 0.80% 0.85% 0.85%
Other Expenses* 0.31% 0.14% 0.14%
Total Annual Fund Operating Expenses 1.11% 0.99% 0.99%
Technology Stock Portfolio (AAL Portfolio) / Thrivent Technology Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Technology Stock Thrivent Technology
(Expenses that are deducted from Fund Portfolio Stock Portfolio
Assets)
Advisory Fees 0.75% 0.75%
Other Expenses* 0.44% 0.45%
Total Annual Fund Operating Expenses 1.19% 1.20%
Expenses Reimbursement** 0.44% 0.44%
Net Operating Expenses 0.75% 0.76%
Small Cap Stock Portfolio (AAL Portfolio) / Thrivent Small Cap Stock Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses
December 31, 2003 as of December 31, 2003
Annual Portfolio Operating Expenses Small Cap Stock Thrivent Small Cap
(Expenses that are deducted from Fund Assets) Portfolio Stock Portfolio
Advisory Fees 0.70% 0.70%
Other Expenses* 0.14% 0.15%
Total Annual Fund Operating Expenses 0.84% 0.85%
Small Cap Value Portfolio (AAL Portfolio) / Thrivent Partner Small Cap Value Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Small Cap Value Thrivent Partner Small
(Expenses that are deducted from Fund Portfolio Stock Value Portfolio
Assets)
Advisory Fees 0.80% 0.80%
Other Expenses* 0.91% 0.92%
Total Annual Fund Operating Expenses 1.71% 1.72%
Expenses Reimbursement** 0.89% 0.89%
Net Operating Expenses 0.82% 0.83%
Small Cap Index Portfolio (AAL Portfolio) / Thrivent Small Cap Index Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Small Cap Index Thrivent Small Cap
(Expenses that are deducted from Fund Portfolio Index Portfolio
Assets)
Advisory Fees 0.34% 0.34%
Other Expenses* 0.08% 0.09%
Total Annual Fund Operating Expenses 0.42% 0.43%
Mid Cap Stock Portfolio (AAL Portfolio) / Thrivent Mid Cap Stock Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Mid Cap Stock Thrivent Mid Cap Stock
(Expenses that are deducted from Fund Portfolio Portfolio
Assets)
Advisory Fees 0.70% 0.70%
Other Expenses* 0.33% 0.34%
Total Annual Fund Operating Expenses 1.03% 1.04%
Expense Reimbursement** 0.33% 0.33%
Net Operating Expenses 0.70% 0.71%
Mid Cap Index Portfolio (AAL Portfolio) / Thrivent Mid Cap Index Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Mid Cap Index Thrivent Mid Cap Index
(Expenses that are deducted from Fund Portfolio Portfolio
Assets)
Advisory Fees 0.35% 0.35%
Other Expenses* 0.31% 0.32%
Total Annual Fund Operating Expenses 0.66% 0.67%
Capital Growth Portfolio (AAL Portfolio) / Thrivent Large Cap Stock Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Capital Growth Thrivent Large Cap
(Expenses that are deducted from Fund Portfolio Stock Portfolio
Assets)
Advisory Fees 0.65% 0.65%
Other Expenses* 0.14% 0.15%
Total Annual Fund Operating Expenses 0.79% 0.80%
Large Company Index Portfolio (AAL Portfolio) / Thrivent Large Cap Index Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Large Company Index Thrivent Large Cap
(Expenses that are deducted from Fund Portfolio Index Portfolio
Assets)
Advisory Fees 0.32% 0.32%
Other Expenses* 0.06% 0.07%
Total Annual Fund Operating Expenses 0.38% 0.39%
Real Estate Securities Portfolio (AAL Portfolio) / Thrivent Real Estate Securities Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Real Estate Thrivent Real Estate
(Expenses that are deducted from Fund Securities Portfolio Securities Portfolio
Assets)
Advisory Fees 0.80% 0.80%
Other Expenses* 0.33% 0.34%
Total Annual Fund Operating Expenses 1.13% 1.14%
Expenses Reimbursement** 0.31% 0.31%
Net Operating Expenses 0.82% 0.83%
Balanced Portfolio (AAL Portfolio) / Thrivent Balanced Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Balanced Thrivent Balanced
(Expenses that are deducted from Fund Portfolio Portfolio
Assets)
Advisory Fees 0.32% 0.32%
Other Expenses* 0.06% 0.07%
Total Annual Fund Operating Expenses 0.38% 0.39%
High Yield Bond Portfolio (AAL Portfolio) / Thrivent Partner High Yield Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses High Yield Bond Thrivent Partner High
(Expenses that are deducted from Fund Portfolio Yield Portfolio
Assets)
Advisory Fees 0.40% 0.40%
Other Expenses* 0.21% 0.22%
Total Annual Fund Operating Expenses 0.61% 0.62%
Bond Index Portfolio (AAL Portfolio) / Thrivent Bond Index Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Bond Index Thrivent Bond Index
(Expenses that are deducted from Fund Portfolio Portfolio
Assets)
Advisory Fees 0.35% 0.35%
Other Expenses* 0.08% 0.09%
Total Annual Fund Operating Expenses 0.43% 0.44%
Mortgage Securities Portfolio (AAL Portfolio) / Thrivent Mortgage Securities Portfolio (New Thrivent Portfolio)
Expenses as of Proforma Expenses as of
December 31, 2003 December 31, 2003
Annual Portfolio Operating Expenses Mortgage Securities Thrivent Mortgage
(Expenses that are deducted from Fund Portfolio Securities Portfolio
Assets)
Advisory Fees 0.50% 0.50%
Other Expenses* 0.31% 0.32%
Total Annual Fund Operating Expenses 0.81% 0.82%
Expenses Reimbursement** 0.29% 0.29%
Net Operating Expenses 0.52% 0.53%
* The expense tables have been restated to reflect the effects of elimination of
expenses reimbursements for some portfolios and an administrative fee, which went into
effect January 1, 2004, of 0.02% for each AAL Portfolio and 0.03% for each Thrivent
Portfolio.
** Thrivent Financial is contractually obligated to reimburse certain expenses to the
Portfolio through at least December 31, 2004.
Examples
The following examples are intended to help you compare the cost of investing in the AAL
Portfolio whose shares you currently own with the cost of investing in the Thrivent
Portfolio into which your AAL Portfolio will be reorganized if the proposed Reorganization
is approved. The examples are based on the expense tables above, without taking into
account any fee waivers or reimbursements pursuant to arrangements with the investment
adviser.
The examples assume that you invest $10,000 in each Portfolio for the time periods indicated
and then redeem all of your shares at the end of those periods. Each example assumes your
investment has a 5% return each year, the Portfolio's operating expenses remain the same,
and you reinvest all dividends and distributions. If the fees and expenses of your variable
contract were included, the costs shown below would be higher. The examples should not be
considered as representative of past or future expenses or rates of return, and your actual
costs may be higher or lower than those shown.
International Portfolio (AAL Portfolio) /World Growth Portfolio (Existing Thrivent Portfolio)
International World Growth Pro Forma
Portfolio Portfolio World Growth
(AAL Portfolio) (Existing Thrivent Portfolio
Portfolio)
1 Year $ 113 $ 101 $ 101
3 Years $ 353 $ 315 $ 315
5 Years $ 612 $ 547 $ 547
10 Years $ 1,352 $ 1,213 $ 1,213
Technology Stock Portfolio (AAL Portfolio) / Thrivent Technology Portfolio (New Thrivent Portfolio)
Technology Stock Pro Forma Thrivent
Portfolio Technology Portfolio
(AAL Portfolio)
1 Year $ 121 $ 122
3 Years $ 378 $ 381
5 Years $ 654 $ 660
10 Years $ 1,443 $ 1,455
Small Cap Stock Portfolio (AAL Portfolio) / Thrivent Small Cap Stock Portfolio (New Thrivent Portfolio)
Small Cap Stock Pro Forma Thrivent
Portfolio Small Cap Stock
(AAL Portfolio) Portfolio
1 Year $ 86 $ 87
3 Years $ 268 $ 271
5 Years $ 466 $ 471
10 Years $ 1,037 $ 1,049
Small Cap Value Portfolio (AAL Portfolio) / Thrivent Partner Small Cap Value Portfolio (New Thrivent Portfolio)
Small Cap Value Pro Forma Thrivent
Portfolio Partner Small Cap
(AAL Portfolio) Value Portfolio
1 Year $ 174 $ 175
3 Years $ 539 $ 542
5 Years $ 928 $ 933
10 Years $ 2,019 $ 2,030
Small Cap Index Portfolio (AAL Portfolio) / Thrivent Small Cap Index Portfolio (New Thrivent Portfolio)
Small Cap Index Pro Forma Thrivent
Portfolio Small Cap Index
(AAL Portfolio) Portfolio
1 Year $ 43 $ 44
3 Years $135 $138
5 Years $235 $241
10 Years $530 $542
Mid Cap Stock Portfolio (AAL Portfolio) / Thrivent Mid Cap Stock Portfolio (New Thrivent Portfolio)
Mid Cap Stock Pro Forma Thrivent
Portfolio Mid Cap Stock
(AAL Portfolio) Portfolio
1 Year $ 105 $ 106
3 Years $ 328 $ 331
5 Years $ 569 $ 574
10 Years $ 1,259 $ 1,271
Mid Cap Index Portfolio (AAL Portfolio) / Thrivent Mid Cap Index Portfolio (New Thrivent Portfolio)
Mid Cap Index Pro Forma Thrivent
Portfolio Mid Cap Index
(AAL Portfolio) Portfolio
1 Year $ 67 $ 68
3 Years $211 $214
5 Years $368 $373
10 Years $822 $835
Capital Growth Portfolio (AAL Portfolio) / Thrivent Large Cap Stock Portfolio (New Thrivent Portfolio)
Capital Growth Pro Forma Thrivent
Portfolio Large Cap Stock
(AAL Portfolio) Portfolio
1 Year $ 81 $ 82
3 Years $252 $255
5 Years $439 $444
10 Years $978 $990
Large Company Index Portfolio (AAL Portfolio) / Thrivent Large Cap Index Portfolio (New Thrivent Portfolio)
Large Company Pro Forma Thrivent
Index Portfolio Large Company Index
(AAL Portfolio) Portfolio
1 Year $ 39 $ 40
3 Years $122 $125
5 Years $213 $219
10 Years $480 $493
Real Estate Securities Portfolio (AAL Portfolio) / Thrivent Real Estate Securities Portfolio (New Thrivent Portfolio)
Real Estate Pro Forma Thrivent
Securities Real Estate
Portfolio Securities Portfolio
(AAL Portfolio)
1 Year $ 115 $ 116
3 Years $ 359 $ 362
5 Years $ 622 $ 628
10 Years $ 1,375 $ 1,386
Balanced Portfolio (AAL Portfolio) / Thrivent Balanced Portfolio (New Thrivent Portfolio)
Balanced Portfolio Pro Forma Thrivent
(AAL Portfolio) Balanced Portfolio
1 Year $ 39 $ 40
3 Years $122 $125
5 Years $213 $219
10 Years $480 $493
High Yield Bond Portfolio (AAL Portfolio) / Thrivent Partner High Yield Portfolio (New Thrivent Portfolio)
High Yield Bond Pro Forma Thrivent
Portfolio Partner High Yield
(AAL Portfolio) Portfolio
1 Year $ 62 $ 63
3 Years $195 $199
5 Years $340 $346
10 Years $762 $774
Bond Index Portfolio (AAL Portfolio) / Thrivent Bond Index Portfolio (New Thrivent Portfolio)
Bond Index Pro Forma Thrivent
Portfolio Bond Index Portfolio
(AAL Portfolio)
1 Year $ 44 $ 45
3 Years $138 $141
5 Years $241 $246
10 Years $542 $555
Mortgage Securities Portfolio (AAL Portfolio) / Thrivent Mortgage Securities Portfolio (New Thrivent Portfolio)
Mortgage Pro Forma Thrivent
Securities Mortgage Securities
Portfolio Portfolio
(AAL Portfolio)
1 Year $ 83 $ 84
3 Years $ 259 $ 262
5 Years $ 450 $ 455
10 Years $1,002 $1,014
Comparison of Investment Performance of International Portfolio and World Growth Portfolio
The average annual total return for the International Portfolio and the World Growth
Portfolio for certain periods is set forth in the chart below.
Average Annual Total Return
As of December 31, 2003
1 year 5 years Since
Inception
International Portfolio 28.61% -1.88% 0.07%
World Growth Portfolio 31.27% -0.75% 3.11%
No investment information is shown for the New Thrivent Portfolios because they will not
commence operations or have any assets or liabilities prior to the completion of the
Reorganizations.
Comparison of Investment Objectives, Strategies and Risks
The investment objectives and strategies of each of the New Thrivent Portfolios are
identical to those of the corresponding AAL Portfolio. Each New Thrivent Portfolio was
organized in connection with this Reorganization solely for the purpose of continuing the
business of the corresponding AAL Portfolio. The investment objective and strategies of the
International Portfolio are substantially similar to the investment objective and strategies
of the World Growth Portfolio. In addition to the investment objectives and strategies
described below, the AAL Portfolios and the Thrivent Portfolios are subject to certain
additional investment policies and limitations. These policies and limitations are
described in the Prospectuses and Statements of Additional Information of the AAL Portfolios
and the Thrivent Portfolios, which are incorporated into this proxy statement and prospectus
by reference. Additional investment policies and limitations may differ and are described
in the Statements of Additional Information. Please refer to Appendix E for a comparison of
certain investment policies and limitations applicable to the AAL Portfolios and the
Thrivent Portfolios.
The following compares and contrasts the investment objectives and strategies of each AAL
Portfolio and its corresponding Thrivent Portfolio.
International Portfolio and World Growth Portfolio
Investment Objectives
The International Portfolio of the AAL Series Fund seeks long-term capital growth by
investing primarily in foreign stocks.
The World Growth Portfolio of the Thrivent Series Fund seeks to achieve long-term growth of
capital by investing primarily in a professionally managed diversified portfolio of common
stocks of established, non-U.S. companies.
Investment Strategies
The International Portfolio and the World Growth Portfolio use substantially similar
investment strategies. Under normal circumstances, the International Portfolio invests at
least 65% of its total assets in foreign stocks and convertible foreign securities of at
least three different countries. It focuses on stocks primarily trading in the United
Kingdom, Western Europe, Australia, Far East, Latin America and Canada. Under normal
circumstances, the World Growth Portfolio invests at least 80% of its net assets (plus the
amount of any borrowing for investment purposes) in common stocks of established non-U.S.
companies. While stocks may be purchased in the World Growth Portfolio without regard to a
company's market capitalization, the focus typically will be on large and, to a lesser
extent, medium-sized, companies. Each Portfolio may invest in both developed and emerging
markets. Bottom-up stock selection is the focus of decision-making for both Portfolios.
If the proposal to reorganize the International Portfolio into the World Growth Portfolio is
approved, the portfolio will seek to achieve its objective by investing substantially all of
its assets in stocks outside the U.S. and to diversify broadly among developed and emerging
countries throughout the world. Normally, at least 80% of the Portfolio's net assets (plus
the amount of any borrowing for investment purposes) will be invested in stocks. The
Portfolio will primarily invest in securities which are represented in the Morgan Stanley
Capital International Europe Australia Far East Index ("EAFE Index"). The EAFE Index is
comprised of equity securities of companies from various industrial sectors whose primary
trading markets are located outside the United States. Companies included in the EAFE Index
are selected from among the larger capitalization companies in these markets.
Thrivent Financial has selected two subadvisers with differing management styles to
subadvise the Portfolio: T. Rowe Price International, Inc. ("Price International") and
Mercator Asset Management, LP ("Mercator"). Each of the subadvisers acts and invests
independently of the other and uses its own methodology for selecting stocks. The
Portfolio's assets are allocated generally on an equal basis between the two investment
subadvisers.
T. Rowe Price International, Inc.
Stock selection reflects a growth style. While stocks may be purchased without regard to a
company's market capitalization, Price International's focus typically will be on large and,
to a lesser extent, medium-sized, companies. Price International invests primarily in
common stocks, although to a lesser extent it may also purchase other instruments and
securities, including foreign currency and foreign currency exchange contracts, futures and
options, in keeping with the Portfolio's objective.
In determining the appropriate distribution of investments among various countries and
geographic regions, Price International employs in-depth fundamental research in an effort
to identify companies capable of achieving and sustaining above-average, long-term earnings
growth. (Fundamental analysis generally involves assessing a company's or security's value
based on factors such as sales, assets, markets, management, products and services,
earnings, and financial structure.) Price International seeks to purchase such stocks at
reasonable prices in relation to present or anticipated earnings, cash flow, or book value,
and valuation factors often influence its allocations among large-, mid-, or small-cap
shares.
While Price International invests with an awareness of the global economic backdrop and its
outlook for industry sectors and individual countries, bottom-up stock selection is the
focus of its decision-making. Country allocation is driven largely by stock selection,
though the sub-adviser may limit investments in markets that appear to have poor overall
prospects.
In selecting stocks, Price International generally favors companies with one or more of the
following characteristics:
o Leading market position
o Attractive business niche
o Strong franchise or natural monopoly
o Technological leadership or proprietary advantages
o Seasoned management
o Earnings growth and cash flow sufficient to support growing dividends
o Healthy balance sheet with relatively low debt
In addition, Price International may purchase some securities that do not meet its normal
investment criteria, as described above, when it perceives an unusual opportunity for gain.
These special situations might arise when Price International believes a security could
increase in value for a variety of reasons including a change in management, an
extraordinary corporate event, or a temporary imbalance in the supply of or demand for the
securities. Price International may sell securities for a variety of reasons, such as to
secure gains, limit losses, or reposition assets into more promising opportunities.
Mercator Asset Management, LP
Stock selection reflects a value style. Mercator may invest in securities of issuers of any
capitalization size. Although Mercator invests primarily in equity securities, it also may
invest in fixed income securities and derivatives.
Mercator combines a relative value style with bottom-up stock analysis. The goal of the
investment team is to maximize returns on a risk-adjusted basis. Mercator's approach is to
identify attractive, undervalued securities that have good earnings prospects. Using
initial screens based on historical data, Mercator uses its proprietary database to identify
securities which are inexpensive relative to their respective historical prices, industries,
and markets. Mercator subjects the most attractive stocks to fundamental analysis, which
seeks to validate projected financial data and considers company, industry, and macro
factors. (Fundamental analysis generally involves assessing a company's or security's value
based on factors such as sales, assets, markets, management, products and services,
earnings, and financial structure.) Mercator will consider selling a security when
fundamental analysis indicates that the security is less attractive than alternative
investments.
Investment Risks
The International Portfolio and World Growth Portfolio are subject to the following primary
investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of the Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index.
Issuer Risk. Issuer risk is the possibility that a company's performance will affect the
market price of its security and the value of the Portfolio. Some factors affecting the
performance of a company include demand for the company's products or services, the quality
of management of the company, and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment.
Growth style investing includes the risk of investing in securities whose prices
historically have been more volatile than other securities, especially over the short term.
Growth stock prices reflect projections of future earnings or revenues, and if a company's
earnings or revenues fall short of expectations, its stock price may fall dramatically.
Value style of investing includes the risk that stocks of undervalued companies may not rise
as quickly as anticipated if the market doesn't recognize their intrinsic value or if value
stocks are out of favor.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a
price that most closely reflects the actual value of the security. Foreign securities
generally have a less liquid resale market. As a result, the Portfolio may have difficulty
selling or disposing of securities quickly in certain markets or market environments.
Foreign Securities Risk. Stocks of non-U.S. companies in which the Portfolio invests
generally carry more risk than stocks of U.S. companies. One of the most important is
currency risk. This refers to a decline in the value of a foreign currency versus the U.S.
dollar, which reduces the dollar value of securities denominated in that currency. The
overall impact on the Portfolio's holdings can be significant, unpredictable, and
long-lasting, depending on the currencies represented in the Portfolio, how each one
appreciates or depreciates in relation to the U.S. dollar, and whether currency positions
are hedged. Under normal conditions, the Portfolio does not engage in extensive foreign
currency hedging programs. Further, exchange rate movements are volatile, and it is not
possible to effectively hedge the currency risks of many developing countries. Although
foreign currency contracts will be used primarily to protect the Portfolio from adverse
currency movements, they also involve the risk that anticipated currency movements will not
be accurately predicted, and Portfolio returns could be adversely impacted as a result.
The economies and financial markets of certain regions - such as Latin America, Asia, Europe
and the Mediterranean region - can be highly interdependent and may decline all at the same
time. Other risks result from the varying stages of economic and political development of
foreign countries, the differing regulatory environments, trading days, and accounting
standards of non-U.S. markets, and higher transaction costs. The Portfolio's investment in
any country could be subject to governmental actions such as capital or currency controls,
nationalizing a company or industry, expropriating assets, or imposing punitive taxes which
would have an adverse effect on security prices and impair the Portfolio's ability to
repatriate capital or income. These risks are usually greater in emerging markets. To the
extent the Portfolio invests in emerging markets, it is subject to the abrupt and severe
price declines these holdings can experience.
Emerging Markets Risk. The economic and political structure of developing nations, in most
cases, do not compare favorably with the U.S. or other developed countries in terms of
wealth and stability, and their financial markets often lack liquidity. The Portfolio's
performance will likely be negatively affected by its exposure to nations in the midst of
hyperinflation, currency devaluation, trade disagreements, sudden political upheaval or
interventionist government policies. Significant buying or selling actions by a few major
investors may also heighten the volatility of emerging markets. These factors make
investing in such countries significantly riskier than in other countries and any one of
them could cause the Portfolio's share price to decline. To the extent the Portfolio uses
futures and options, it is exposed to additional volatility and potential losses. Although
foreign currency contracts will be used primarily to protect the Portfolio from adverse
currency movements, they also involve the risk that anticipated currency movements will not
be accurately predicted, and Portfolio returns could be adversely impacted as well.
Investment Adviser Risk. The success of the Portfolio's investment strategy depends
significantly on the skills of Price International and Mercator in assessing the potential
of the securities in which the Portfolio invests. The subadvisers' assessment of companies
held in the Portfolio may prove incorrect, resulting in losses or poor performance even in
rising markets. Shares of Thrivent Partner International Stock Portfolio will rise and fall
in value and there is a risk that you could lose money by investing in the Portfolio.
Thrivent Partner International Stock Portfolio cannot be certain that it will achieve its
objective.
Technology Stock Portfolio and Thrivent Technology Portfolio
The investment objectives and strategies of the Thrivent Technology Portfolio are identical
to those of the Technology Stock Portfolio. The Thrivent Technology Portfolio was organized
in connection with this Reorganization solely for the purpose of continuing the business of
the corresponding Technology Stock Portfolio.
Investment Objective
Like the Technology Stock Portfolio, the Thrivent Technology Portfolio seeks long-term
capital appreciation by investing primarily in a diversified portfolio of common stocks and
securities convertible into common stocks.
Investment Strategies
Under normal circumstances, both the Technology Stock Portfolio and the Thrivent Technology
Portfolio invest at least 80% of their respective net assets (plus the amount of any
borrowing for investment purposes) in technology stocks. Technology stocks include stocks
issued by companies in the following industries: information technology, telecommunications
services, computer and electronics retail, internet retail, biotechnology, healthcare
equipment, aerospace and defense, data processing services and media. The Portfolios'
investment adviser, Thrivent Financial, focuses on equity securities of technology companies
that have a strong potential for future growth. These companies typically provide little or
no dividend. Should the investment adviser determine that the Portfolio would benefit from
reducing the percentage of invested assets from 80% to a lesser amount, you will be notified
at least 60 days prior to such a change.
Thrivent Financial uses fundamental and technical investment research techniques to
determine what securities to buy and sell. Fundamental investment analysis generally
involves assessing a company's or security's value based on factors such as sales, assets,
markets, management, products and services, earnings, and financial structure. Technical
analysis generally involves studying trends and movements in a security's price, trading
volume and other market-related factors in an attempt to discern patterns.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to insure promising opportunities.
Investment Risks
Technology Stock Portfolio and Thrivent Technology Portfolio are subject to the following
principal investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of the Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment. The
prices of technology securities historically have been more volatile than other securities,
especially over the short term.
Technology Risk. Technology risk includes the acceptance of new technologies by consumers or
business, rapid obsolescence and short product cycles.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Small Cap Value Portfolio and Thrivent Partner Small Cap Value Portfolio
The investment objectives and strategies of the Thrivent Partner Small Cap Value Portfolio
are identical to those of the Small Cap Value Portfolio. The Thrivent Small Cap Value
Portfolio was organized in connection with this Reorganization solely for the purpose of
continuing the business of the Small Cap Value Portfolio.
Investment Objective
Like the Small Cap Value Portfolio, the Thrivent Partner Small Cap Value Portfolio seeks
long-term capital appreciation by investing primarily in a diversified portfolio of small
company common stocks and securities convertible into small company common stocks.
Investment Strategies
Under normal circumstances, both the Small Cap Value Portfolio and the Thrivent Partner
Small Cap Value Portfolio invest at least 80% of their respective net assets (plus the
amount of any borrowing for investment purposes) in small company common stocks. Thrivent
Financial focuses mainly on the stocks of smaller companies with market capitalizations
similar to those companies included in widely known indices such as the S&P Small Cap
600/Barra Value Index and the Russell 2000 Value Index. Although market capitalizations are
constantly changing, the largest companies included in the Indexes have market
capitalizations of approximately $2.5 billion and $2.1 billion, respectively, as of December
31, 2003. The Portfolio will not sell a stock just because the company has grown to a
market capitalization above the range. Should Thrivent Financial determine that the
Portfolio would benefit from reducing the percentage of invested assets from 80% to a lesser
amount, you will be notified at least 60 days prior to such a change.
Small companies tend to be less recognizable than companies listed in the S&P 500 Index or
the S&P MidCap 400 Index. Due to certain market inefficiencies, Thrivent Financial believes
properly selected small company stocks offer greater opportunities for long term capital
growth.
The Portfolios ordinarily invest in equity securities of companies with prices that are
significantly below their intrinsic value. Intrinsic value is determined by a company's
ability to generate long term cash flow, maintain competitive position and other variables
depending on a specific company's situation. A company's securities may be undervalued
because the company is temporarily overlooked or out of favor due to general economic
conditions, a market decline, or industry conditions or developments affecting the
particular company. In addition to valuation, Thrivent Financial considers these factors,
among others, in choosing companies:
o a stable or improving earnings record;
o sound finances;
o solid competitive position in a competitive industry;
o good management; and
o adequate company returns on investment.
Thrivent Financial considers these factors, among others, in choosing when to sell a stock:
o when the stock price reaches a value through appreciation that is reasonably more
than the intrinsic value of the business; or
o if the fundamentals of the business change, or the investment adviser's analysis of
the business change, and the investment adviser believes the intrinsic value of the
business is less than the stock price.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to more promising opportunities.
Thrivent Financial uses fundamental and technical investment research techniques to
determine what securities to buy and sell. Fundamental investment analysis generally
involves assessing a company's or security's value based on factors such as sales, assets,
markets, management, products and services, earnings, and financial structure. Technical
analysis generally involves studying trends and movements in a security's price, trading
volume, and other market-related factors in an attempt to discern patterns.
If the proposal to reorganize the Small Cap Value Portfolio into the Thrivent Partner Small
Cap Value Portfolio is approved, Thrivent Financial will select T. Rowe Price Associates,
Inc. ("T. Rowe Price") to subadvise the Thrivent Partner Small Cap Value Portfolio. Under
normal circumstances, the Portfolio will invest at least 80% of net assets (plus the amount
of any borrowing for investment purposes) in small company common stocks. T. Rowe Price will
focus mainly on the stocks of smaller companies with market capitalizations at time of
purchase that are within or below the range of companies included in the Russell 2000 Value
Index. Although market capitalizations are constantly changing, the largest companies
included in the Index have market capitalizations between $42 million and $2.1 billion as of
December 31, 2003. The Portfolio will not sell a stock just because the company has grown
to a market capitalization outside the range, and the Portfolio may occasionally purchase
companies with market capitalizations above the range. Should T. Rowe Price determine that
the Portfolio would benefit from reducing the percentage of invested assets from 80% to a
lesser amount, you will be notified at least 60 days prior to such a change.
The Portfolio will ordinarily invest in equity securities of small companies that are
believed to be undervalued. A company's securities may be undervalued because the company
is temporarily overlooked or out of favor due to general economic conditions, a market
decline, or industry conditions or developments affecting the particular company. Using
fundamental research, T. Rowe Price will seek to identify companies that appear to be
undervalued by various measures, and may be temporarily out of favor, but have good
prospects for capital appreciation. T. Rowe Price considers these factors, among others, in
choosing companies:
o low price/earnings, price/book value, or price/cash flow ratios relative to the S&P
500, the company's peers, or its own historic norm;
o low stock price relative to a company's underlying asset values;
o above-average dividend yield relative to a company's peers or its own historic norm;
o a plan to improve the business through restructuring; and
o a sound balance sheet and other positive financial characteristics.
T. Rowe Price may sell securities for a variety of reasons, such as to secure gains, limit
losses, or reposition assets to more promising opportunities.
T. Rowe Price uses fundamental and technical investment research techniques to determine
what securities to buy and sell. Fundamental investment analysis generally involves
assessing a company's or security's value based on factors such as sales, assets, markets,
management, products and services, earnings, and financial structure.
Investment Risks
Small Cap Value Portfolio and Thrivent Partner Small Cap Value Portfolio are subject to the
following principal investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of the Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index. They also may decline
because of factors that affect a particular industry.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment.
Stocks of undervalued companies may not rise as quickly as anticipated if the market doesn't
recognize their intrinsic values or if value stocks are out of favor. In addition,
smaller, less seasoned companies often have greater price volatility than larger, more
established companies and tend to be more dependent on the success of limited product lines
and have less experienced management and financial resources.
Value StyleRrisk. The value approach carries the risk that the market will not recognize a
security's intrinsic value for a long time, or that a stock judged to be undervalued may
actually be appropriately priced.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a
price that most closely reflects the actual value of the security. Small capitalization
stocks often have a less liquid resale market. As a result, the Portfolio may have
difficulty selling or disposing of securities quickly in certain markets.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Small Cap Stock Portfolio and Thrivent Small Cap Stock Portfolio
The investment objectives and strategies of the Thrivent Small Cap Stock Portfolio are
identical to those of the Small Cap Stock Portfolio. The Thrivent Small Cap Stock Portfolio
was organized in connection with this Reorganization solely for the purpose of continuing
the business of the Small Cap Stock Portfolio.
Investment Objective
Like the Small Cap Stock Portfolio, the Thrivent Small Cap Stock Portfolio seeks long-term
capital growth by investing primarily in small company common stocks and securities
convertible into small company common stocks.
Investment Strategies
Under normal circumstances, both the Small Cap Stock Portfolio and the Thrivent Small Cap
Stock Portfolio invest at least 80% of their respective net assets (plus the amount of any
borrowing for investment purposes) in small company common stocks. Thrivent Financial
focuses mainly on the stocks of smaller companies which have market capitalizations similar
to those companies included in widely known indices such as the S&P SmallCap 600 Index and
the Russell 2000 Index. Should Thrivent Financial determine that the Portfolio would
benefit from reducing the percentage of invested assets from 80% to a lesser amount, you
will be notified at least 60 days prior to such a change. Small companies tend to be less
recognizable than companies listed in the S&P 500 Index or the S&P MidCap 400 Index.
Thrivent Financial uses fundamental and technical investment research techniques to
determine what securities to buy and sell. Fundamental investment analysis generally
involves assessing a company's or security's value based on factors such as sales, assets,
markets, management, products and services, earnings, and financial structure. Technical
analysis generally involves studying trends and movements in a security's price, trading
volume, and other market-related factors in an attempt to discern patterns.
Thrivent Financial looks for small companies (including companies initially offering stock
to the public) that, in its opinion:
o are in the early stages of development or positioned in new and emerging industries;
o have an opportunity for rapid growth;
o have capable management; and
o are financially sound.
Due to certain market inefficiencies, Thrivent Financial believes that properly selected
small company stocks offer greater opportunities for long-term capital growth.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to more promising opportunities.
Investment Risks
The Small Cap Stock Portfolio and Thrivent Small Cap Stock Portfolio are subject to the
following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of the Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment.
Smaller, less seasoned companies often have greater price volatility than larger, more
established companies and tend to be more dependent on the success of limited product lines
and may have less experienced management and financial resources.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a
price that most closely reflects the actual value of the security. Small capitalization
stocks often have a less liquid resale market. As a result, the Portfolio may have
difficulty selling or disposing of securities quickly in certain markets or market
environments.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Small Cap Index Portfolio and Thrivent Small Cap Index Portfolio
The investment objectives and strategies of the Thrivent Small Cap Index Portfolio are
identical to those of the Small Cap Index Portfolio. The Thrivent Small Cap Index Portfolio
was organized in connection with this Reorganization solely for the purpose of continuing
the business of the Small Cap Index Portfolio.
Investment Objective
Like the Small Cap Index Portfolio, the Thrivent Small Cap Index Portfolio seeks capital
growth that tracks the performance of the S&P SmallCap 600 Index, by investing primarily in
common stocks of the Index.
Investment Strategies
Under normal circumstances, both the Small Cap Index Portfolio and the Thrivent Small Cap
Index Portfolio invest in all of the small company common stocks included in the S&P
SmallCap 600 Index in the proportions in which they are represented in the Index. These are
passively managed Portfolios, which means that Thrivent Financial does not choose the
securities that make up the Portfolios. When changes to the Index occur, Thrivent Financial
will attempt to replicate these changes within the Portfolio. However, any such changes may
result in slight variations from time to time.
For liquidity reasons, Thrivent Financial may invest, to some degree, in money market
instruments.
Small company stocks are considerably more risky than large company stocks since small
companies are less mature and do not have access to financial resources that a large company
would have. While the risks are greater, so is the potential for reward.
Investment Risks
The Small Cap Index Portfolio and Thrivent Small Cap Index Portfolio are subject to the
following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of the Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index. They also may decline
because of factors that affect a particular industry.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment.
Smaller, less seasoned companies often have greater price volatility than larger, more
established companies and tend to be more dependent on the success of limited product lines
and may have less experienced management and financial resources.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a
price that most closely reflects the actual value of the security. Small capitalization
stocks often have a less liquid resale market. As a result, the Portfolio may have
difficulty selling or disposing of securities quickly in certain markets or market
environments.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Mid Cap Stock Portfolio and Thrivent Mid Cap Stock Portfolio
The investment objectives and strategies of the Thrivent Mid Cap Stock Portfolio are
identical to those of the Mid Cap Stock Portfolio. The Thrivent Mid Cap Stock Portfolio was
organized in connection with this Reorganization solely for the purpose of continuing the
business of the Mid Cap Stock Portfolio.
Investment Objective
Like the Mid Cap Stock Portfolio, the Thrivent Mid Cap Stock Portfolio seeks long-term
capital growth by investing primarily in common stocks and securities convertible into
common stocks, of mid-sized companies.
Investment Strategies
Under normal circumstances, both the Mid Cap Stock Portfolio and the Thrivent Mid Cap Stock
Portfolio invest at least 80% of their respective net assets (plus the amount of any
borrowing for investment purposes) in mid-sized company stocks. Thrivent Financial focuses
mainly on the stocks of mid-sized companies which have market capitalizations similar to
those included in widely known indices such as the S&P MidCap 400 Index and the Russell
MidCap Index. Should Thrivent Financial determine that the Portfolio would benefit from
reducing the percentage of invested assets from 80% to a lesser amount, you will be notified
at least 60 days prior to such a change.
Thrivent Financial uses fundamental and technical investment research techniques to
determine what securities to buy and sell. Fundamental investment analysis generally
involves assessing a company's or security's value based on factors such as sales, assets,
markets, management, products and services, earnings, and financial structure. Technical
analysis generally involves studying trends and movements in a security's price, trading
volume, and other market-related factors in an attempt to discern patterns.
Thrivent Financial looks for mid-sized companies (including companies initially offering
stock to the public) that, in its opinion:
o have prospects for growth in their sales and earnings;
o are in an industry with a good economic outlook;
o have high-quality management; and
o have a strong financial position.
Thrivent Financial usually picks companies in the middle stages of their development. These
companies tend to have established a record of profitability and possess a new technology,
unique product or market niche.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to more promising opportunities.
Investment Risks
The Mid Cap Stock Portfolio and Thrivent Mid Cap Stock Portfolio are subject to the
following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of a Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment.
Medium-sized companies often have greater price volatility, lower trading volume, and less
liquidity than larger, more-established companies. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience, smaller shares of
their product or service markets, fewer financial resources, and less competitive strength
than larger companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Mid Cap Index Portfolio and Thrivent Mid Cap Index Portfolio
The investment objectives and strategies of the Thrivent Mid Cap Index Portfolio are
identical to those of the Mid Cap Index Portfolio. The Thrivent Mid Cap Index Portfolio was
organized in connection with this Reorganization solely for the purpose of continuing the
business of the Mid Cap Index Portfolio.
Investment Objective
Like the Mid Cap Index Portfolio, the Thrivent Mid Cap Index Portfolio seeks total returns
that track the performance of the S&P MidCap 400 Index, by investing primarily in common
stocks comprising the Index.
Investment Strategies
Under normal circumstances, both the Mid Cap Index Portfolio and the Thrivent Mid Cap Index
Portfolio invest in all of the mid-sized company stocks included in the S&P MidCap 400
Index. These are passively managed Portfolios, which means that Thrivent Financial does not
choose the securities that make up the Portfolio. When changes to the Index occur Thrivent
Financial will attempt to replicate these changes within the Portfolio. However, any such
changes may result in slight variations from time to time.
For liquidity reasons, the Portfolio may invest, to some degree, in money market
instruments.
Investment Risks
The Mid Cap Index Portfolio and Thrivent Mid Cap Index Portfolio are subject to the
following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of a Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment.
Medium-sized companies often have greater price volatility, lower trading volume, and less
liquidity than larger, more-established companies. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience, smaller shares of
their product or service markets, fewer financial resources, and less competitive strength
than larger companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Capital Growth Portfolio and Thrivent Large Cap Stock Portfolio
The investment objectives and strategies of the Thrivent Large Cap Stock Portfolio are
identical to those of the Capital Growth Portfolio. The Thrivent Large Cap Stock Portfolio
was organized in connection with this Reorganization solely for the purpose of continuing
the business of the Capital Growth Portfolio.
Investment Objective
Like the Capital Growth Portfolio, the Thrivent Large Cap Stock Portfolio seeks long-term
capital growth by investing primarily in a diversified portfolio of common stocks and
securities convertible into common stocks.
Investment Strategies
Under normal circumstances, the Capital Growth Portfolio invests at least 65% of total
assets in common stocks, not including convertible securities, while the Thrivent Large Cap
Stock Portfolio invests at least 80% of total assets in common stocks, not including
convertible securities. Thrivent Financial, the investment adviser, focuses on
dividend-paying stocks of companies with earnings growth per share that are higher than
stocks included in the S&P 500 Index. Thrivent Financial looks for good corporate
fundamentals by examining a company's quality, operating growth predictability and financial
strength. Each Portfolio focuses on larger companies, although they may invest across all
market capitalizations and across all industries and sectors. The Portfolios do not invest
in bonds for capital growth or for long time periods. Should Thrivent Financial determine
that the Thrivent Large Cap Stock Portfolio would benefit from reducing the percentage of
invested assets from 80% to a lesser amount, you will be notified at least 60 days prior to
such a change.
Thrivent Financial uses fundamental and technical investment research techniques to
determine what securities to buy and sell. Fundamental investment analysis generally
involves assessing a company's or security's value based on factors such as sales, assets,
markets, management, products and services, earnings, and financial structure. Technical
analysis generally involves studying trends and movements in a security's price, trading
volume, and other market-related factors in an attempt to discern patterns. The Portfolios
may sell a security when a company no longer demonstrates its ability to perform according
to the investment adviser's expectations and the investment adviser believes there are
better, alternative investments. This investment strategy may result in short-term gains or
losses for the Portfolios.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to more promising opportunities.
Investment Risks
The Capital Growth Portfolio and Thrivent Large Cap Stock Portfolio are subject to the
following primary investment risks:
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of the Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment.
Growth style investing includes the risk of investing in securities whose prices
historically have been more volatile than other securities, especially over the short term.
Growth stock prices reflect projections of future earnings or revenues, and if a company's
earnings or revenues fall short of expectations, its stock price may fall dramatically. In
addition, the prices of larger company stocks may not rise as quickly or as significantly as
prices of stocks of well-managed smaller companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Large Company Index Portfolio and Thrivent Large Cap Index Portfolio
The investment objectives and strategies of the Thrivent Large Cap Index Portfolio are
identical to those of the Large Cap Index Portfolio. The Thrivent Large Cap Index Portfolio
was organized in connection with this Reorganization solely for the purpose of continuing
the business of the Large Cap Index Portfolio.
Investment Objective
Like the Large Cap Index Portfolio, the Thrivent Large Cap Index Portfolio seeks total
returns that track the performance of the S&P 500 Index, by investing primarily in common
stocks comprising the Index.
Investment Strategies
Under normal circumstances, both the Large Cap Index Portfolio and the Thrivent Large Cap
Index Portfolio strive to invest in all of the large company common stocks included in the
S&P 500 Index in the proportions in which they are represented in the Index. These are
passively managed Portfolios, which means that Thrivent Financial does not choose the
securities that make up the Portfolio. When changes to the Index occur, Thrivent Financial
will attempt to replicate these changes within the Portfolio. However, any such changes may
result in slight variations from time to time.
Investment Risks
The Large Company Index Portfolio and Thrivent Large Cap Index Portfolio are subject to the
following primary investment risks:
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of the Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment. The
prices of larger company stocks may not rise as quickly or as significantly as prices of
stocks of well-managed smaller companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Real Estate Securities Portfolio and Thrivent Real Estate Securities Portfolio
The investment objectives and strategies of the Thrivent Real Estate Securities Portfolio
are identical to those of the Real Estate Securities Portfolio. The Thrivent Real Estate
Securities Portfolio was organized in connection with this Reorganization solely for the
purpose of continuing the business of the Real Estate Securities Portfolio.
Investment Objective
Like the Real Estate Securities Portfolio, the Thrivent Real Estate Securities Portfolio
seeks to provide long-term capital appreciation and high current income by investing
primarily in the equity securities of companies in the real estate industry.
Investment Strategies
Under normal circumstances, both the Real Estate Securities Portfolio and the Thrivent Real
Estate Securities Portfolio invest at least 80% of their respective total assets in income
producing common stocks and other equity securities (which may include convertible
securities) of companies that are primarily engaged in the U.S. real estate industry. This
includes companies such as real estate investment trusts (REITs) and other real estate
related investments. A real estate company generally derives at least 50% of its revenue
from real estate ownership, leasing, management, development, financing or sale of
residential, commercial or industrial real estate - or has at least 50% of its assets in
real estate. Should Thrivent Financial determine that the Portfolio would benefit from
reducing the percentage of invested assets from 80% to a lesser amount, you will be notified
at least 60 days prior to such a change.
Thrivent Financial may sell securities, for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to more promising opportunities.
Investment Risks
The Real Estate Securities Portfolio and Thrivent Real Estate Securities Portfolio are
subject to the following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when
stock prices rise and periods when stock prices decline. The value of the Portfolio's
investments may move with these cycles, and in some instances, increase or decrease more
than its market as measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment. The
prices of larger company stocks may not rise as quickly or as significantly as prices of
stocks of well-managed smaller companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Interest Rate Risk. Interest rate risk is the risk that security prices (equity or fixed
income) decline in value when interest rates rise. This effect of rising interest rates is
generally more pronounced for high dividend paying stock than for stocks that pay little or
no dividends. This may cause the value of real estate securities to decline during periods
of rising interest rates, which would reduce the overall return of the Portfolio.
Real Estate Industry Risk. Real estate industry risk is the risk that changes in real
estate values or economic downturns can have a significant negative affect on issuers in the
real estate industry. Such changes could include, but are not limited to, a decline in the
value of real estate properties, extended vacancies of properties, increased competition,
overbuilding and changes in zoning law and government regulations. Since the Portfolio
concentrates its assets in the real estate industry, your investment in the Portfolio will
be closely ties to the performance of the real estate markets.
Balanced Portfolio and Thrivent Balanced Portfolio
The investment objectives and strategies of the Thrivent Balanced Portfolio are identical to
those of the Balanced Portfolio. The Thrivent Balanced Portfolio was organized in
connection with this Reorganization solely for the purpose of continuing the business of the
Balanced Portfolio.
Investment Objective
Both the Balanced Portfolio and the Thrivent Balanced Portfolio seek long-term total return
through a balance between income and the potential for long-term capital growth by investing
primarily in a diversified portfolio of common stocks, bonds and money market instruments.
Investment Strategy
The Balanced Portfolio incorporates the strategies of the Large Cap Index Portfolio and
the Bond Index Portfolio. The Thrivent Balanced Portfolio incorporates the strategies of
the Thrivent Large Cap Index Portfolio and the Thrivent Bond Index Portfolios. For debt
securities, each Portfolio generally selects securities from the same pool of securities
that make up the respective Bond Portfolio. However, some debt securities may not be the
same. Thrivent Financial, the investment adviser will select them in accordance with Bond
Portfolio's strategy.
Thrivent Financial establishes the Portfolio's asset allocation mix by forecasting the
expected return of each asset class over short-term and long-term time horizons, and
considers the variability of the anticipated returns based on historical results as well as
expected risks and returns. Since stock and bond markets generally tend to fluctuate
independently of each other, the decline in one market may be offset by the rise of the
other. As a result of the asset class mix, the Portfolio is more diversified and is subject
to less risk than investing exclusively in stocks or bonds alone. Overall, the Portfolio
tries to maintain higher weighting in those asset classes the investment adviser expects to
provide the highest returns over a set time horizon. In a general decline in one market, the
investment adviser may increase the Portfolio's weighting in one or both of the other asset
classes. Despite the investment adviser's attempts to ease the effect of any market
downturn, you may still lose money. The Portfolio invests in the following three asset
classes within the ranges given:
Minimum Maximum
Common Stocks 35% 75%
Debt Securities 25% 50%
Money Market Instruments 0% 40%
As of December 31, 2003, the investments in the asset classes were as follows:
Percent of Total
Common Stocks 55%
Debt Securities 32%
Money Market Instruments 13%
Total 100%
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to more promising opportunities.
Investment Risks
The Balanced Portfolio and Thrivent Balanced Portfolio are subject to the following primary
investment risks.
Market Risk. Over time, markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The same sort of cycle may also occur
with bond prices. The value of the Portfolio's investments may move with these cycles, and
in some instances, increase or decrease more than its market as measured by the Portfolio's
benchmark index. They also may decline because of factors that affect a particular industry.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment. The
prices of larger company stocks may not rise as quickly or as significantly as prices of
stocks of well-managed smaller companies. Bonds may also exhibit price fluctuations due to
changes in interest rate or bond yield levels. As a result, the value of the Portfolio's
shares may fluctuate significantly in the short term.
Credit Risk. Credit risk is the risk that an issuer of a bond held by the Portfolio may no
longer be able to pay its debt. As a result of such an event, the bond may decline in price
thereby affecting the value of the Portfolio. High-yield, high-risk bonds are subject to
greater credit risk than investment-grade bonds. To compensate for this risk, high-yield
bonds have higher yields.
Interest Rate Risk. Interest rate risk is the risk that bond prices decline in value when
interest rates rise for bonds that pay a fixed rate of interest. This effect may cause the
value of the Portfolio to decline and reduce the overall return of the Portfolio.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
High Yield Bond Portfolio and Thrivent Partner High Yield Portfolio
The investment objectives and strategies of the Thrivent Partner High Yield Portfolio are
identical to those of the High Yield Bond Portfolio. The Thrivent Partner High Yield
Portfolio was organized in connection with this Reorganization solely for the purpose of
continuing the business of the High Yield Bond Portfolio.
Investment Objective
Like the High Yield Bond Portfolio, the Thrivent Partner High Yield Portfolio seeks high
current income and secondarily capital growth by investing primarily in a diversified
portfolio of high-risk, high-yield bonds commonly referred to as "junk bonds." The
Portfolio actively seeks to achieve the secondary objective of capital growth to the extent
it is consistent with the primary objective of high current income.
Investment Strategies
Under normal circumstances, both the High Yield Bond Portfolio and the Thrivent Partner High
Yield Portfolio invest at least 80% of their respective net assets (plus the amount of any
borrowing for investment purposes) in high-yield fixed income instruments (high-yielding,
higher-risk corporate bonds) with medium- to lower-range credit quality ratings. Should the
Portfolios' investment subadviser, Pacific Investment Management Company LLC ("PIMCO"),
determine that the Portfolio would benefit from reducing the percentage of invested assets
from 80% to a lesser amount, you will be notified at least 60 days prior to such a change.
The Portfolio may invest up to 20% of its net assets in bonds of foreign issuers. A foreign
issuer is a company domiciled in a country other than the U.S.
The Portfolio may invest the remainder of the Portfolio's assets in cash, short-term money
market instruments, and investment-grade fixed-income instruments. PIMCO does not have
restrictions on the credit quality of the securities in the Fund. PIMCO attempts to
identify those issuers of high-yield, high-risk bonds whose financial conditions are
adequate to meet future obligations, have improved or are expected to improve in the future.
However, PIMCO does not have restrictions on the rating level of the securities in the
Portfolio and may purchase and hold securities in default.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to more promising opportunities.
Investment Risks
The High Yield Bond Portfolio and Thrivent Partner High Yield Portfolio are subject to the
following primary investment risks.
Market Risk. Over time, markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The same sort of cycle may also occur
with bond prices. The value of a Portfolio's investments may move with these cycles, and in
some instances, increase or decrease more than its market as measured by the Portfolio's
benchmark index. They also may decline because of factors that affect a particular industry.
Financial Risk. Financial risk is the possibility that a company's performance will affect
the market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or
services, the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and
out of favor depending on market and economic conditions as well as investor sentiment. The
price of the Portfolio's shares may be affected by weak equity markets when issuers of
high-yield, high-risk bonds generally find it difficult to improve their financial condition
by replacing debt with equity. Bonds may also exhibit price fluctuations due to changes in
interest rate or bond yield levels. As a result, the value of the Portfolio's shares may
fluctuate significantly in the short term.
Credit Risk. Credit risk is the risk that an issuer of a bond held by the Portfolio may no
longer be able to pay its debt. As a result of such an event, the bond may decline in price
thereby affecting the value of the Portfolio. High-yield high-risk bonds are subject to
greater credit risk than investment-grade bonds. To compensate for this risk, high-yield
bonds have higher yields.
Interest Rate Risk. Interest rate risk is the risk that bond prices decline in value when
interest rates rise for bonds that pay a fixed rate of interest. This effect may cause the
value of the Portfolio to decline and reduce the overall return of the Portfolio.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a
price that most closely reflects the actual value of the security. High-yield bonds have a
less liquid resale market. As a result, we may have difficulty selling or disposing of
securities quickly in certain markets or market environments.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly
on the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk
that you could lose money by investing in the Portfolio. The Portfolio cannot be certain
that it will achieve its goal.
Bond Index Portfolio and Thrivent Bond Index Portfolio
The investment objectives and strategies of the Thrivent Bond Index Portfolio are identical
to those of the Bond Index Portfolio. The Thrivent Bond Index Portfolio was organized in
connection with this Reorganization solely for the purpose of continuing the business of
the Bond Index Portfolio.
Investment Objective
Like the Bond Index Portfolio, the Thrivent Bond Index Portfolio strives for investment
results similar to the total return of the Lehman Aggregate Bond Index by investing
primarily in bonds and other debt securities included in the index.
Investment Strategies
Under normal circumstances, both the Bond Index Portfolio and the Thrivent Bond Index
Portfolio strive to invest in a representative sample of fixed-income and mortgage-backed
securities included in the Lehman Aggregate Bond Index. Thrivent Financial does not invest
in all of the issues that make up the index but select from issuers within the index.
Therefore, it expects the investment performance of this Portfolio to approximate the
performance of the index over time. Thrivent Financial includes only those issues that:
o are of investment-grade quality;
o have a fixed rate;
o are publicly issued;
o have at least $150 million par outstanding;
o are dollar-denominated and nonconvertible; and
o have a maturity of more than one year.
Should Thrivent Financial determine that the Portfolio would benefit from reducing the
percentage of invested assets from 80% to a lesser amount, it will provide you with at least
60 days notice of such change. For liquidity reasons, we may invest, to some degree, in
money market instruments. Although we try to match the performance of the Lehman Aggregate
Bond Index, many factors can cause the Portfolio not to meet its objective. We invest in
six general classes of investment grade, fixed-income securities including:
o U.S. Treasury securities
o corporate bonds
o commercial mortgage-backed securities
o government agency securities
o mortgage-backed securities, and
o asset-backed securities.
As December 31, 2003, these six classes represented the following proportions of the
Portfolio's long-term market value:
Percent of Total
U.S. Treasury securities 22%
Corporate bonds 28%
Commercial mortgage-backed securities 2%
Government agency securities 12%
Mortgage-backed securities 35%
Asset-backed securities 1%
Total 100%
Investment Risks
The Bond Index Portfolio and Thrivent Bond Index Portfolio are subject to the following
primary investment risks.
Credit Risk. Credit risk is the risk that an issuer of a bond held by the Portfolio may no
longer be able to pay its debt. As a result of such an event, the bond may decline in price
thereby effecting the value of the Portfolio. High-yield, high-risk bonds are subject to
greater credit risk than investment-grade bonds. To compensate for this risk, high-yield
bonds have higher yields.
Interest Rate Risk. Interest rate risk is the risk that bond prices decline in value when
interest rates rise for bonds that pay a fixed rate of interest. In addition, both
mortgage-backed and asset-backed securities are sensitive to changes in the redemption
patterns of the underlying security. If the principal payment on the underlying asset is
repaid faster or slower than the holder of the asset-backed or mortgage-backed security
anticipates, the price of the security may fall, particularly if the holder must reinvest
the repaid principal at lower rates or must continue to hold the security when interest
rates rise. This effect may cause the value of the Portfolio to decline and reduce the
overall return of the Portfolio.
Mortgage Securities Portfolio and Thrivent Mortgage Securities Portfolio
The investment objectives and strategies of the Thrivent Mortgage Securities Portfolio are
identical to those of the Mortgage Securities Portfolio. The Thrivent Mortgage Securities
Portfolio was organized in connection with this Reorganization solely for the purpose of
continuing the business of the Mortgage Securities Portfolio.
Investment Objective
Like the Mortgage Securities Portfolio, the Thrivent Mortgage Securities Portfolio seeks a
combination of current income and long-term capital appreciation by investing primarily in a
diversified Portfolio of debt securities backed by pools of residential and/or commercial
mortgages.
Investment Strategies
Under normal circumstances, both the Mortgage Securities Portfolio and the Thrivent Mortgage
Securities Portfolio invest at least 80% of their respective net assets in mortgage-related
securities. The primary focus is investments in mortgage pass-through securities, which are
securities representing interests in "pools" of mortgage loans. These securities include
mortgage-backed securities issued and guaranteed by the Government National Mortgage
Association (GNMA), the Federal National Mortgage Association (FNMA) and the Federal Home
Loan Mortgage Corporation (FHLMC). The Portfolio may also invest in fixed and floating rate
asset-backed securities, commercial mortgage-backed securities (CMBS) and other mortgage
backed securities including, but not limited to, collateralized mortgage obligations (CMOs)
interest only bonds (IOs) and principal only bonds (POs) and adjustable rate mortgages
(ARMs), as well as in other mortgage-related asset-backed securities. In addition, the
Portfolio may invest in certain non-mortgage related debt securities, including U.S.
Government securities, municipal securities and corporate debt securities. Should Thrivent
Financial determine that the Portfolio would benefit from reducing the percentage of
invested assets from 80% to a lesser amount, it will provide you with at least 60 days
notice of such change.
At least 80% of the Portfolio's assets will be invested in securities rated within the three
highest rating categories assigned by at least one Nationally Recognized Statistical Rating
Organization (NRSRO) at the time of purchase.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains,
limit losses, or reposition assets to more promising opportunities.
Investment Risks
The Mortgage Securities Portfolio and Thrivent Mortgage Securities Portfolio are subject to
the following primary investment risks.
Credit Risk. Credit risk is the risk that an issuer of a bond held by the Portfolio may no
longer be able to pay its debt. As a result of such an event, the bond may decline in price
thereby affecting the value of the Portfolio. High-yield high-risk bonds are subject to
greater credit risk than investment-grade bonds. To compensate for this risk, high-yield
bonds have higher yields.
Interest Rate Risk. Interest rate risk is the risk that bond prices decline in value when
interest rates rise for bonds that pay a fixed rate of interest. This effect may cause the
value of the Portfolio to decline and reduce the overall return of the Portfolio.
Prepayment Risk. Prepayment risk is the risk that an issuer of a debt security may repay
principal prior to the maturity of a security, which can affect the return on investment and
yield of mortgage-backed and asset-backed securities. Falling interest rates prompt
homeowners to refinance their mortgages. The proceeds from these prepayments may have to be
invested at lower interest rates, causing the Portfolio to experience a decline in income,
as well as losing the opportunity for additional price appreciation associated with falling
rates.
Derivative Risk. Derivative risk is the risk that the Portfolio invests in securities that
may be considered to be derivatives. The value of the derivative security is dependent upon
the performance of underlying assets. If the assets do not perform well, the value of the
derivative security, and consequently the Portfolio, may decline.
Purchase, Redemption and Exchange Procedures
The World Growth Portfolio, the New Thrivent Portfolios and the AAL Portfolios have
substantially the same procedures for purchasing, redeeming and exchanging shares. Each of
the Portfolios offers its shares to the separate accounts of Thrivent Financial and Thrivent
Life and to retirement plans sponsored by Thrivent Financial. Shares of Portfolios owned by
a separate account are held within a separate account for each Portfolio offered through the
separate account. A variable contract holder is allowed to allocate the premiums paid
under his or her variable contract to any subaccount within the separate account and
transfer from one or more subaccounts within the separate account.
Each day on which a Portfolio's net asset value is calculated, the separate accounts
transmit to that Portfolio any orders to purchase or redeem shares of the Portfolio, based
upon the purchase payments, redemption (surrender) requests and transfer requests from
variable contract holders that are priced as of that day. Shares are sold and redeemed at
net asset value and do not pay any distribution or shareholder fees, initial or deferred
sales charges or exchange fees.
Tax Consequences
As a condition to each Reorganization, the AAL Series Fund and the Thrivent Series Fund will
receive an opinion of counsel that the Reorganization will be considered a tax-free
"reorganization" under applicable provisions of the Internal Revenue Code of 1986 (the
"Code"). Based on customary assumptions and representations, neither the International
Portfolio nor the World Growth Portfolio nor the shareholders of the International Portfolio
or World Growth Portfolio will recognize any gain or loss for federal income tax purposes.
The tax basis of the Thrivent Portfolio's shares received by shareholders of the
corresponding AAL Portfolio will be the same as the tax basis of their shares in the AAL
Portfolios.
After the Reorganization, the utilization by the World Growth Portfolio of (1) carryovers of
pre-Reorganization capital losses realized by the International Portfolio and (2) capital
losses it realized after the Reorganization that are attributable to the International
Portfolio's built-in unrealized capital losses as of the closing date, will be subject to
the limitation under the Code.
With respect to the Reorganization of AAL Portfolios into New Thrivent Portfolios, such
items will be available to each New Thrivent Portfolio to the same extent those items would
have been available to the corresponding AAL Portfolio had there been no Reorganization.
COMPARISON OF OPERATIONS
Investment Adviser
Thrivent Financial currently serves as investment adviser and provides investment research
and supervision for each of the AAL Portfolios and the Thrivent Portfolios. Following the
completion of the Reorganizations, Thrivent Financial will serve as investment adviser for
each of the Thrivent Portfolios. Thrivent Financial's corporate office is located at 625
Fourth Avenue South, Minneapolis, Minnesota 55415. As of December 31, 2003, Thrivent
Financial and its affiliates had approximately $62.4 billion in assets under management.
Portfolio Management
The individuals who are primarily responsible for the day-to-day management of the following
AAL Portfolios will be responsible for the day-to-day management of the corresponding
Thrivent Portfolios. Their business experience is described below.
Technology Stock Portfolio
Brian J. Flanagan, CFA and James A. Grossman serve as portfolio co-managers of the
Technology Stock Portfolio.
Mr. Flanagan has served as a portfolio manager of the Technology Stock Portfolio since its
inception in 2001. Mr. Flanagan has been with Thrivent Financial since 1996, and he has
served as a portfolio manager since 2000.
Mr. Grossman has served as a portfolio manager of the Technology Stock Portfolio since its
inception in 2001. Mr. Grossman has been with Thrivent Financial since 1996, and he has
served as a portfolio manager since 2000.
Small Cap Stock Portfolio
Christopher J. Serra, CFA serves as portfolio manager of the Small Cap Stock Portfolio. Mr.
Serra has served as the portfolio manager of the Small Cap Stock Portfolio since November
2003. Mr. Serra has been with Thrivent Financial since 1998, and he has served as a
portfolio manager since 1999.
If the proposed Reorganization is approved, Mr. Serra will serve as portfolio manager of the
Thrivent Small Cap Stock Portfolio, the New Thrivent Portfolio organized to continue the
business of the corresponding AAL Portfolio.
Small Cap Value Portfolio
Christopher J. Serra, CFA, has served as portfolio manager of the Small Cap Value Portfolio
since its inception in April 2003. Mr. Serra has been with Thrivent Financial since 1998,
and he has served as a portfolio manager since 1999.
If the proposed Reorganization is approved, T. Rowe Price will serve as subadviser for the
Thrivent Partner Small Cap Value Portfolio, the New Thrivent Portfolio organized to continue
the business of the corresponding AAL Portfolio. T. Rowe Price had approximately $190
billion under management as of December 31, 2003. Preston Athey will serve as portfolio
manager of the Thrivent Partner Small Cap Value Portfolio. Mr. Athey is a Vice President of
T. Rowe Price Group, Inc. and T. Rowe Price, and he is also a small company equity portfolio
manager. Mr. Athey is also a Vice President and Investment Advisory Committee member of the
Small-Cap Stock Fund and a portfolio manager of the firm's Global Clean Future Equity Fund.
Mr. Athey has been with T. Rowe Price since 1978. T. Rowe Price is located at 100 East
Pratt Street, Baltimore, Maryland 21202.
Small Cap Index Portfolio
Kevin R. Brimmer, FSA, has served as portfolio manager of the Small Cap Index Portfolio
since 2002. Previously, he was responsible for overseeing Thrivent Financial's general
account assets. Mr. Brimmer has been with Thrivent Financial since 1985.
If the proposed Reorganization is approved, Mr. Brimmer will serve as portfolio manager of
the Thrivent Small Cap Index Portfolio, the New Thrivent Portfolio organized to continue the
business of the corresponding AAL Portfolio.
Mid Cap Stock Portfolio
Brian J. Flanagan, CFA and John E. Hintz, CFA serve as portfolio co-managers of the Mid Cap
Stock Portfolio.
Mr. Flanagan has served as portfolio manager of the Mid Cap Stock Portfolio since February
2004. Mr. Flanagan has also served in the following capacities to The AAL Mid Cap Stock
Fund, a series of an affiliated mutual fund group: portfolio manager since February 2004
and as assistant portfolio manager from 1999 to 2000. Mr. Flanagan has been with Thrivent
Financial since 1996, and he has served as a portfolio manager since 2000.
Mr. Hintz has served as portfolio manager of the Mid Cap Stock Portfolio since February
2004. Mr. Hintz also serves as portfolio manager of The AAL Mid Cap Stock Fund. Mr. Hintz
has served as Director of Research with Thrivent Financial since 2001, and he served as an
equity analyst from 1997 to 2001.
If the proposed Reorganization is approved, Mr. Flanagan and Mr. Hintz will serve as
portfolio co-managers of the Thrivent Mid Cap Stock Portfolio, the New Thrivent Portfolio
organized to continue the business of the corresponding AAL Portfolio.
Mid Cap Index Portfolio
Kevin R. Brimmer, FSA, has served as portfolio manager of the Mid Cap Index Portfolio since
2002. Previously, he was responsible for overseeing Thrivent Financial's general account
assets. Mr. Brimmer has been with Thrivent Financial since 1985.
If the proposed Reorganization is approved, Mr. Brimmer will serve as portfolio manager of
the Thrivent Mid Cap Index Portfolio, the New Thrivent Portfolio organized to continue the
business of the corresponding AAL Portfolio.
Capital Growth Portfolio
Frederick L. Plautz has served as portfolio manger of the Capital Growth Portfolio since its
inception in 2001. Mr. Plautz has served as portfolio manager at Thrivent Financial since
1995.
If the proposed Reorganization is approved, Mr. Plautz will serve as portfolio manager of
the Thrivent Large Cap Stock Portfolio, the New Thrivent Portfolio organized to continue the
business of the corresponding AAL Portfolio.
Large Company Index Portfolio
Kevin R. Brimmer, FSA, has served as portfolio manager of the Large Company Index Portfolio
since 2002. Previously, he was responsible for overseeing Thrivent Financial's general
account assets. Mr. Brimmer has been with Thrivent Financial since 1985.
If the proposed Reorganization is approved, Mr. Brimmer will serve as portfolio manager of
the Thrivent Large Cap Index Portfolio, the New Thrivent Portfolio organized to continue the
business of the corresponding AAL Portfolio.
Real Estate Securities Portfolio
Reginald L. Pfeifer has served as portfolio manager of the Real Estate Securities Portfolio
since its inception on April 30, 2003. He was previously the Head of Fixed Income
Investment for Thrivent Financial and its sponsored mutual funds. Mr. Pfeifer has been with
Thrivent Financial since 1990.
If the proposed Reorganization is approved, Mr. Pfeifer will serve as portfolio manager of
the Thrivent Real Estate Securities Portfolio, the New Thrivent Portfolio organized to
continue the business of the corresponding AAL Portfolio.
Balanced Portfolio
Kevin R. Brimmer, FSA, and Steven H.C. Lee, FSA, serve as portfolio co-managers of the
Balanced Portfolio.
Mr. Brimmer has served as portfolio manager of the Balanced Portfolio since 2002.
Previously, he was responsible for overseeing Thrivent Financial's general account assets.
Mr. Brimmer has been with Thrivent Financial since 1985.
Mr. Lee has served as portfolio manager of the Balanced Portfolio since 2002. Previously,
Mr. Lee managed the asset-backed securities and investment-grade corporate bond portfolios
in Thrivent Financial's general account. He has been with Thrivent Financial since 1985.
If the proposed Reorganization is approved, Mr. Brimmer and Mr. Lee will serve as portfolio
co-managers of the Thrivent Balanced Portfolio, the New Thrivent Portfolio organized to
continue the business of the corresponding AAL Portfolio.
High Yield Bond Portfolio
Thrivent Financial has engaged Pacific Investment Management Company LLC ("PIMCO"), located
at 800 Newport Center Drive, Newport Beach, California 92660 to manage the assets of the
High Yield Bond Portfolio. With assets under management of approximately $373.8 billion as
of December 31, 2003, the company is one of the world's foremost bond fund managers. PIMCO
oversees more than 120 funds in all. The company is part of Allianz Dresdner Asset
Management of America L.P. (ADAM-LP), which is an indirect unit of Allianz AG, a
European-based, multinational insurance and financial services holding company.
The portfolio manager primarily responsible for overseeing PIMCO's management of the High
Yield Bond Portfolio since 2002 is Raymond G. Kennedy, CFA. Mr. Kennedy is a managing
director, portfolio manager and senior member of the PIMCO investment strategy group. Mr.
Kennedy joined PIMCO in 1996, having previously been associated with Prudential Insurance
Company of America as a private placement asset manager. He has 15 years of investment
experience.
If the proposed Reorganization is approved, PIMCO will serve as sub-adviser of the Thrivent
Partner High Yield Portfolio, the New Thrivent Portfolio organized to continue the business
of the corresponding AAL Portfolio.
Bond Index Portfolio
Steven H.C. Lee, FSA, has served as portfolio manager of the Bond Index Portfolio since
2002. Previously, Mr. Lee managed the asset-backed securities and investment-grade
corporate bond portfolios in Thrivent Financial's general account. He has been with
Thrivent Financial since 1985.
If the proposed Reorganization is approved, Mr. Lee will serve as portfolio manager of the
Thrivent Bond Index Portfolio, the New Thrivent Portfolio organized to continue the business
of the corresponding AAL Portfolio.
Mortgage Securities Portfolio
Gregory R. Anderson, CFA, CPA, and Scott A. Lalim serve as portfolio co-managers of the
Mortgage Securities Portfolio.
Mr. Anderson has served as portfolio manager of the Portfolio since it commenced operations
on April 30, 2003. He also manages the mortgage-backed securities portfolio of Thrivent
Financial's general account. Mr. Anderson has been with Thrivent Financial since 1997.
Mr. Lalim has served as portfolio manager of the Portfolio since it commenced operation on
April 30, 2003. He also manages the commercial mortgage-backed securities portfolio of
Thrivent Financial's general account. Mr. Lalim has been with Thrivent Financial since 1976.
If the proposed Reorganization is approved, Mr. Anderson and Mr. Lalim will serve as
portfolio co-managers of the Thrivent Mortgage Securities Portfolio, the New Thrivent
Portfolio organized to continue the business of the corresponding AAL Portfolio.
International Portfolio and World Growth Portfolio Subadvisers
The assets of the International Portfolio are currently managed by Oechsle International
Advisors, LLC ("Oechsle"), located at One International Place, Boston, Massachusetts 02110.
Oechsle has served as investment subadviser to the International Portfolio since its
inception in 1998. Oechsle is an independent money management organization founded in 1986
that specializes in international and global investments for institutional clients from its
offices located in Boston, London, Frankfurt and Tokyo. It has assets under management of
approximately $14.6 billion as of December 31, 2003. The portfolio manager primarily
responsible for overseeing Oechsle's management of the International Portfolio since its
inception in 1998 is Kathleen Harris. Ms. Harris joined Oechsle as a portfolio manager in
1995 and has been a principal since 1997.
The assets of the World Growth Portfolio are managed by T. Rowe Price International, Inc.
("Price International"), an affiliate of T. Rowe Price Associates, Inc., located at 100 East
Pratt Street, Baltimore, Maryland 21202. Price International has served as investment
subadviser for the World Growth Portfolio since 2000. Price International is one of the
world's largest international mutual fund asset managers with the U.S. equivalent of
approximately $22.9 billion under management as of December 31, 2003 in its offices in
Baltimore, London, Tokyo, Singapore, Paris, Hong Kong and Buenos Aires. Price International
has an investment advisory group that has day-to-day responsibility for managing the World
Growth Portfolio and developing and executing the Portfolio's investment program.
Thrivent Financial has engaged Mercator Asset Management LP ("Mercator"), 5200 Town Center
Circle, Suite 550, Boca Raton, Florida 33486 to subadvise a portion of the World Growth
Portfolio. Founded in 1984, Mercator manages international equity funds for institutional
clients, including corporate and public retirement plans, endowments, and foundations. As
of December 31, 2003, Mercator managed approximately $6.6 billion in assets including
separate accounts, commingled funds and a mutual fund. Mercator has an investment advisory
team that has day-to-day responsibility for managing the World Growth Portfolio and
developing and executing the Portfolio's investment program.
If the proposed Reorganization is approved, Price International and Mercator will serve as
co-subadvisers of the World Growth Portfolio.
Manager of Managers
The shareholders of the Thrivent Portfolios, including the New Thrivent Portfolios, approved
a change in fundamental policy on February 10, 2004, that permits the Board of Directors to
authorize Thrivent Financial, as investment adviser, to enter into and amend subadvisory
agreements without shareholder approval. The policy gives Thrivent Financial the authority,
with approval of the Board of Directors of the Thrivent Series Fund, to hire, fire and
change subadvisers and amend subadvisory agreements accordingly without shareholder
approval. A fund operating under this structure is sometimes referred to as a
"manager-of-managers fund".
The absence of a shareholder approval requirement eliminates the costly and time-consuming
process of calling and conducting a shareholder meeting, preparing and distributing proxy
materials and soliciting votes from shareholders for subadviser changes. The Board of
Directors of the Thrivent Portfolios were persuaded that, in today's rapidly changing
securities markets, it is in shareholders' best interests if the Board represents their
interests in approving or rejecting recommendations made by Thrivent Financial regarding
subadvisers. It will enable the Board to make more timely changes it deems appropriate with
respect to the day-to-day management of a Portfolio's assets.
Thrivent Financial will engage in ongoing subadviser evaluations on both a quantitative and
qualitative basis. Thrivent Financial will periodically gather and analyze performance
information regarding each subadvised Portfolio. Thrivent Financial will also evaluate
whether the subadviser's investment style is appropriate for the Portfolio. Thrivent
Financial will report its findings on these matters to the Boards of Directors and make
recommendations regarding subadvisers based on those findings.
On February 19, 2003, the Securities and Exchange Commission granted Thrivent Series Fund
and Thrivent Financial an order exempting them from the federal securities law requirements
to obtain approval of the appointment of unaffiliated subadvisers (the "Exemptive Order").
Under the Exemptive Order, Thrivent Series Fund and Thrivent Financial are subject to
several conditions imposed by the SEC to ensure that the interests of a Portfolio's
shareholders are adequately protected. For example, within 90 days of a change to a
Portfolio's subadvisory arrangements, the Fund must provide shareholders with an information
statement that contains substantially the same information about the subadviser, the
subadvisory agreement and the subadvisory fee that would have been included in a proxy
statement if shareholder approval had been required.
Thrivent Financial pays all subadvisory fees out of the advisory fees it receives from the
subadvised Portfolio. There is no additional fee to the Portfolio. Thrivent Financial,
directly or through subadvisers, also continues to provide the same level of management and
administrative services to the Portfolio as it has always provided.
The Separate Accounts and Retirement Plans
Shares of the AAL Portfolios and the Thrivent Portfolios have substantially the same
procedures for purchasing shares. Shares are currently sold, without sales charges, to:
o Separate accounts of Thrivent Financial and Thrivent Life that are used to fund
variable contracts issued by Thrivent Financial and Thrivent Life; and
o Retirement plans sponsored by Thrivent Financial
The prospectus for each variable contract describes how the premiums and the assets relating
to the variable contract may be allocated among one or more of the subaccounts that
correspond to the AAL and Thrivent Portfolios. Participants in the retirement plans should
consult retirement plan documents for information on how to invest in the AAL and Thrivent
Portfolios.
The separate accounts and the retirement plans each place an order to buy or sell shares of
a respective Portfolio each business day. The amount of the order is based on the aggregate
instructions from owners of the variable contracts or the participants in the retirement
plans. Orders received before the close of the New York Stock Exchange ("NYSE") on a given
day result in share purchases and redemptions at the net asset value ("NAV") calculated as
of the close of the NYSE that day.
INFORMATION ABOUT THE REORGANIZATIONS
Background
Lutheran Brotherhood ("LB") merged with and into Aid Association for Lutherans ("AAL") on
January 1, 2002, with AAL as the surviving entity (the "Merger"). AAL thereafter changed
its name to Thrivent Financial for Lutherans.
Prior to the Merger, the AAL Series Fund and the LB Series Fund (together, the "Series
Funds") provided the investment vehicle for variable life and annuity contracts issued by AAL
and LB, respectively, and for their respective retirement plans. Following the Merger, all
contracts are issued by Thrivent Financial, making the existence of two Series Funds
unnecessary, more costly and burdensome.
In anticipation of the full consolidation of the Series Funds, the shareholders of the LB
Series Fund approved the following changes at a shareholder meeting held on February 10,
2004:
1. Election of directors to the Thrivent Series Fund, which includes the current
independent directors of the AAL Series Fund. (Please refer to Appendix F to review
information about the directors of Thrivent Series Fund.)
2. Approval to amend the articles of incorporation of LB Series Fund, Inc. to change its
name to Thrivent Series Fund, Inc.
3. Amendment of certain investment restrictions of Thrivent Series Fund to standardize
investment restrictions, promote operational efficiency and enhance the effective
monitoring of compliance with such investment restrictions.
Three portfolios of the AAL Series Fund with similar investment objectives and the same
portfolio managers as three portfolios of the LB Series Fund were previously consolidated in
2003. The International Portfolio was not consolidated with the World Growth Portfolio at
that time because the two portfolios had different sub-advisers.
The balance of the portfolios in the AAL Series Fund do not have a counterpart in the LB
Series Fund. The Board therefore approved the creation of the 13 New Thrivent Portfolios
within LB Series Fund. Each New Thrivent Portfolio has the same investment objective as its
AAL Series Fund corresponding portfolio.
The International Portfolio is subadvised by Oechsle International Advisers, LLC, whereas
the World Growth Portfolio is subadvised by T. Rowe Price International, Inc.
Information Received by the Board of Directors of the AAL Series Fund
In connection with its consideration of the proposed Reorganizations and their anticipated
effects on the AAL Portfolios, the Board of Directors of the AAL Series Fund, including
those directors who are not interested persons of Thrivent Financial or any of its
affiliates (the "Independent Directors"), requested from Thrivent Financial and reviewed
information to assist the Board in its evaluation, including:
o The terms of the proposed Reorganization Agreements;
o Material provisions of Maryland and Minnesota state corporate law affecting the
rights and liabilities of shareholders and/or directors;
o The investment management structure for the AAL Portfolios and the Thrivent
Portfolios;
o The investment objectives, strategies and fundamental investment restrictions of the
AAL Portfolios and the Thrivent Portfolios;
o Information on the scope and cost of other services provided by Thrivent
Financial and its affiliates to the AAL Portfolios, including administrative services
provided by Thrivent Financial for which each Thrivent Portfolio will pay a fee at a
per annum rate of 0.03% of net assets for administrative services beginning on
January 1, 2004;
o Performance of the International Portfolio and the World Growth Portfolio against
each other and against other funds in their Lipper Peer Group and relevant benchmarks;
o Analysis of the impact of the proposed Reorganization of each AAL Portfolio with its
corresponding Thrivent Portfolio, including expense ratios;
o The manager-of-managers structure of the Thrivent Portfolios;
o Information regarding Price International, subadviser to the World Growth Portfolio;
o Information regarding Mercator, which will begin co-subadvising the World Growth
Portfolio on May 1, 2004; and
o In the case of the reorganization of the International Portfolio into the World
Growth Portfolio, the correlation of underlying investments in the Portfolios.
Considerations by the Board of Directors of the AAL Series Fund
The Board of Directors of the AAL Series Fund believes that each proposed Reorganization is
in the best interests of the affected AAL Portfolio and its shareholders. Further, the
Board determined that the interests of the AAL Portfolio shareholders will not be diluted as
a result of its Reorganizations. The Contracts Committee of the Board (consisting of the
Independent Directors of the Board) considered factual matters and structural issues in
connection with the transactions with the Thrivent Portfolios at meetings on August 26, 2003
and October 7 - 8, 2003. At these meetings, representatives of Thrivent Financial discussed
the proposed Reorganizations with the Contracts Committee in general terms and in detail.
In considering the proposed Reorganizations, the Contracts Committee was advised at all
formal meetings by the AAL Series Funds' independent outside legal counsel.
The Contracts Committee met again in person on November 11 - 12, 2003, to receive additional
information concerning the Reorganizations. At this meeting, representatives of Thrivent
Financial reviewed the proposed Reorganizations and the related Reorganization Agreements in
detail. These representatives also presented comparative performance and expense
information for the AAL Portfolios and the Thrivent Portfolios. After reviewing the
proposed Reorganizations and Reorganization Agreements, the Contracts Committee unanimously
approved the Reorganizations. Thereafter, at an in person meeting on November 12, 2003, the
Board (including all of the Independent Directors) unanimously approved the Reorganizations
and Reorganization Agreements and recommended their approval by AAL Portfolio shareholders.
In approving the Reorganization Agreements, the Board considered the following factors:
o The consolidation of the investment options for variable contracts issued by Thrivent
Financial and Thrivent Life into a single investment company incorporating the
Thrivent name offers the opportunity for operational efficiencies by simplifying
administrative and regulatory burdens of the Portfolios, including by eliminating
duplicative regulatory filings and duplicative fixed costs such as printing, mailing,
accounting and audit fees, legal fees and shareholder meetings;
o The consolidation of the variable product portfolios sponsored by Thrivent Financial
under a single investment company and board of directors will further streamline
governance and oversight of the Portfolios;
o The rights of variable contract owners and retirement plan participants with respect
to their investments in the Thrivent Portfolios will be unchanged;
o The Reorganizations will not result in the recognition of any gain or loss for
federal income tax purposes by the AAL Portfolios, the Thrivent Portfolios or their
shareholders;
o AAL Portfolio shareholders will receive shares in a corresponding Thrivent Portfolio
having a total net asset value equal to the total net asset value of their AAL
Portfolio shares as of the closing of the Reorganization;
o Thrivent Financial has committed to invest between $4 and $5 million to enhance the
quality of its asset management capabilities, including hiring additional investment
and administrative support professionals and making infrastructure investments to
support investment research;
o The administrative fee for the Thrivent Portfolios, which is one basis point higher
than the administrative fee for the AAL Portfolios, is fair and reasonable in light
of the fees customarily paid to third parties for comparable services. The
administrative fee for the Thrivent Portfolios is the same as that charged to
Thrivent portfolios not involved in the Reorganizations; and
o Thrivent Financial will be responsible for the payment of the expenses related to
consummating each Reorganization. It will not be paid for out of the assets of the
Portfolios.
In approving the Reorganization Agreement for each AAL Portfolio that will reorganize into a
corresponding New Thrivent Portfolio, the Board considered the following additional factors:
o The investment objective of each AAL Portfolio will be identical to the investment
objective of its corresponding New Thrivent Portfolio; and
o The Reorganizations will enable variable contract holders and retirement plan
participants investing in AAL Portfolios to continue their current investment
programs without disruption.
In approving the Reorganization for the International Portfolio, the Board considered the
following additional factors:
o The investment objective and strategies for the International Portfolio and the
World Growth Portfolio are substantially similar;
o With the exception of the AAL Capital Growth Portfolio and the Thrivent Large Cap
Stock Portfolio, the investment strategy of each AAL Portfolio will be identical to
the investment strategy of its corresponding New Thrivent Portfolio. (The AAL
Capital Growth Portfolio invests at least 65% of total assets in common stock,
whereas the Thrivent Large Cap Stock Portfolio invests 80%.);
o The total expense ratio of the reorganized Portfolio is projected to be lower than
the current total expense ratio of the International Portfolio;
o The reorganization will result in the World Growth Portfolio having a larger asset
base. This is expected to provide the World Growth Portfolio with potential benefits
from greater portfolio diversification and the opportunity to conduct other
investment transactions on potentially more advantageous terms than two separate
smaller Portfolios. The Reorganization also offers opportunities to spread fixed
costs over a larger asset base; and
o The long-term performance of the World Growth Portfolio has been better than that of
the International Portfolio.
The Board did not assign relative weights to the foregoing factors or deem any one or group
of them to be controlling in and of themselves.
Description of the Reorganization Agreements and Plans of Reorganization
Each Reorganization Agreement provides that the AAL Portfolio will transfer all of its
assets to the corresponding Thrivent Portfolio in exchange solely for the Thrivent
Portfolio's shares to be distributed pro rata by the AAL Portfolio to its shareholders in
complete liquidation of the AAL Portfolio, which is expected to occur on or about April 30,
2004. Each New Thrivent Portfolio will assume all of the liabilities of the corresponding
AAL Portfolio as of the closing date. The World Growth Portfolio will assume the stated
accrued and unpaid liabilities of the International Portfolio as of the closing date. The
value of each AAL Portfolio's assets and liabilities to be acquired and assumed by the
Thrivent Portfolio will be the value of those assets computed as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. EST) on the closing date. AAL
Portfolio shareholders will become shareholders of the corresponding Thrivent Portfolio as
of the Closing and will be entitled to the Thrivent Portfolio's next dividend distribution.
AAL Portfolio shareholders will receive shares in the corresponding Thrivent Portfolio
having a total net asset value equal to the total net asset value of their AAL Portfolio
shares as of the closing date.
On or before the closing date, the International Portfolio will declare and pay a dividend
or dividends which, together with all previous dividends, will have the effect of
distributing to its shareholders substantially all of its net investment income and realized
net capital gain, if any, for all taxable years ending on or before the closing date.
Completion of each Reorganization is subject to the conditions set forth in the respective
Reorganization Agreements. This includes receipt of a tax opinion in form and substance
reasonably satisfactory to the AAL Series Fund and the Thrivent Series Fund, as described
under the caption "Federal Income Tax Consequences" below. Each Reorganization Agreement
may be terminated and the Reorganization may be abandoned at any time before or after
approval by the AAL Portfolio shareholders prior to the closing date by either party if its
board of directors determines that consummation of the Reorganization would not be in the
best interests of shareholders of the relevant Portfolio. The completion of a
Reorganization of an AAL Portfolio is not conditioned on the completion of the
Reorganization of any other AAL Portfolio.
Under each Reorganization Agreement, Thrivent Financial will pay the expenses related to
completing each Reorganization. Those expenses include, but are not limited to,
accountants' fees, legal fees, registration fees, transfer taxes (if any), bank and transfer
agent fees and the costs of preparing, printing, copying and mailing proxy solicitation
materials to the AAL Portfolio shareholders and the costs of holding the Special Meeting.
By approving the proposed Reorganization Agreements, contract owners and retirement plan
Trustees will be deemed to have approved a new advisory contract between Thrivent Financial
and the Thrivent Series Fund that will be in place with respect to each New Thrivent
Portfolio. The new advisory agreement will be substantially identical to the existing
advisory agreement between Thrivent Financial and Thrivent Series Fund except as to its term.
If a Reorganization Agreement for an AAL Portfolio is not approved, the AAL Portfolio will
continue to be operated as a portfolio of AAL Series Fund. The closing of each
Reorganization is not conditioned on the closing of any other Reorganization.
This description of the Reorganization Agreements is qualified in its entirety by the terms
and provisions of the Reorganization Agreements, a form of which is attached as Appendix A
and incorporated into this proxy statement and prospectus by reference.
Description of Thrivent Portfolio Shares
Full and fractional shares of the Thrivent Portfolios will be issued in the Reorganizations
without the imposition of a sales charge or other fee to the AAL Portfolio shareholders.
Shares of the Thrivent Portfolios to be issued to AAL Portfolio shareholders under the
Reorganization Agreements will be fully paid and non-assessable when issued and will have no
preemptive or conversion rights.
The Thrivent Series Fund is organized as a Minnesota corporation and the AAL Series Fund is
organized as a Maryland corporation. Except as noted below, the provisions of Minnesota law
and the Articles of Incorporation (the "Thrivent Articles") and Bylaws (the "Thrivent
Bylaws") of Thrivent Series Fund are substantially similar to those of Maryland law and the
Articles of Incorporation (the "AAL Articles") and Bylaws (the "AAL Bylaw") of the AAL
Series Fund. All of the Portfolios are subject to the 1940 Act.
The rights of shareholders of the AAL Portfolios may be diminished as follows:
o A Thrivent Portfolio may be terminated by the affirmative vote of the holders of a
majority of the voting power of all shares entitled to vote. The AAL Portfolios
requires approval by two-thirds of all the votes entitled to be cast on the matter.
o The Thrivent Bylaws may be amended by the Board of Directors. Amendment of the AAL
Bylaws requires the affirmative vote of a majority of the holders of record of the
outstanding shares entitled to vote.
Federal Income Tax Consequences
As a condition to each Reorganization, the AAL Series Fund and the Thrivent Series Fund will
receive an opinion from counsel to the effect that, on the basis of the existing provisions
of the Code, current administrative rules and court decisions, for federal income tax
purposes:
1. The Reorganization will qualify as a "reorganization" under section 368(a)(1) of the
Code, and the participating AAL Portfolio and Thrivent Portfolio involved therein
each will be "a party to a reorganization" within the meaning of section 368(b) of
the Code.
2. The AAL Portfolio will recognize no gain or loss on the transfer of its assets to the
Thrivent Portfolio in exchange for the Thrivent Portfolio's shares and the assumption
by the Thrivent Portfolio of the assumed liabilities of the AAL Portfolio or on the
subsequent distribution of those shares to the AAL Portfolio's shareholders in
exchange for their AAL Portfolio shares.
3. The Thrivent Portfolio will recognize no gain or loss on its receipt of those assets
in exchange for its shares and the assumption by the Thrivent Portfolio of the
assumed liabilities of the AAL Portfolio.
4. The Thrivent Portfolio's basis in those assets will be the same as the AAL
Portfolio's basis therein immediately before the Reorganization, and the Thrivent
Portfolio's holding period for those assets will include the AAL Portfolio's holding
period.
5. An AAL Portfolio shareholder will recognize no gain or loss on the exchange of the
shareholder's AAL Portfolio shares solely for Thrivent Portfolio shares in the
Reorganization.
6. An AAL Portfolio shareholder's aggregate basis in the Thrivent Portfolio shares
received by the shareholder in the Reorganization will be the same as the aggregate
basis in the shareholder's AAL Portfolio shares to be constructively surrendered in
exchange for those AAL Portfolio shares, and the holding period of the Thrivent
Portfolio shares to be received by each AAL Portfolio shareholder will include the
period during which the shares of the AAL Portfolio exchanged therefor or held by
such shareholder (provided that the shares of the AAL Portfolio were held as a
capital asset on the date of the reorganization).
7. After the Reorganization, the utilization by the World Growth Portfolio of (a)
carryovers of pre-Reorganization capital losses realized by the International
Portfolio, and (b) capital losses it realized after the Reorganization that are
attributable to the International Portfolio's built-in unrealized capital losses as
of the closing date, will be subject to limitation under the Code.
8. With respect to the Reorganizations of AAL Portfolios into New Thrivent Portfolios,
such items will be available to each New Thrivent Fund to the same extent those items
would have been available to the corresponding LB Fund had there been no
Reorganization.
You should recognize that an opinion of counsel is not binding on the Internal Revenue
Service or any court. Neither the AAL Portfolios nor the Thrivent Portfolios expect to
obtain a ruling from the IRS regarding the consequences of the Reorganizations. While
problems are not expected, if the IRS sought to challenge the tax treatment of any
Reorganization and was successful, neither of which is anticipated, the Reorganization would
be treated as a taxable sale of assets of the participating AAL Portfolio, followed by the
taxable liquidation thereof.
Because the investment policies and practices of the Thrivent Portfolios are substantially
similar to those of their corresponding AAL Portfolios, the Thrivent Portfolios do not
anticipate that taxable sales involving significant amounts of securities of the combined
portfolios will have to be made after the Reorganizations.
Capitalization
The following tables present as of December 31, 2003:
o The capitalization of each AAL Portfolio; and
o The pro forma capitalization of each corresponding Thrivent Portfolio as adjusted
after the Reorganization.
The capitalization of each AAL Portfolio and the World Growth Portfolio is likely to be
different at the closing date as a result of daily share purchase and redemption activity in
the portfolios as well as the effects of the other ongoing operations of the portfolios
prior to the closing date.
- ------------------------------ ---------------------- ---------------------- -----------------------
Pro Forma
International World Growth World Growth
Portfolio Portfolio Portfolio
Total Net Assets $106,057,860 $420,712,177 $526,770,037
Shares Outstanding 11,588,773 39,601,942 49,585,245
Net Asset Value Per Share $9.15 $10.62 $10.62
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- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Technology Stock Technology
Portfolio Portfolio
Total Net Assets $41,158,991 $41,158,991
Shares Outstanding 5,927,548 5,927,548
Net Asset Value Per Share $6.94 $6.94
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- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Small Cap Stock Small Cap Stock
Portfolio Portfolio
Total Net Assets $156,878,810 $156,878,810
Shares Outstanding 12,708,185 12,708,185
Net Asset Value Per Share $12.34 $12.34
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- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Small Cap Value Partner Small Cap
Portfolio Value Portfolio
Total Net Assets $19,773,255 $19,773,255
Shares Outstanding 1,440,431 1,440,431
Net Asset Value Per Share $13.73 $13.73
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- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Small Cap Index Small Cap Index
Portfolio Portfolio
Total Net Assets $394,846,909 $394,846,909
Shares Outstanding 24,936,147 24,936,147
Net Asset Value Per Share $15.83 $15.83
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Mid Cap Stock Mid Cap Stock
Portfolio Portfolio
Total Net Assets $73,362,784 $73,362,784
Shares Outstanding 7,310,569 7,310,569
Net Asset Value Per Share $10.04 $10.04
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Mid Cap Index Mid Cap Index
Portfolio Portfolio
Total Net Assets $76,187,467 $76,187,467
Shares Outstanding 6,609,172 6,609,172
Net Asset Value Per Share $11.53 $11.53
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Capital Growth Large Cap Stock
Portfolio Portfolio
Total Net Assets $282,412,937 $282,412,937
Shares Outstanding 33,009,098 33,009,098
Net Asset Value Per Share $8.56 $8.56
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Large Company Index Large Cap Index
Portfolio Portfolio
Total Net Assets $724,997,651 $724,997,651
Shares Outstanding 36,641,892 36,641,892
Net Asset Value Per Share $19.79 $19.79
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Real Estate Real Estate
Securities Portfolio Securities Portfolio
Total Net Assets $51,823,322 $51,823,322
Shares Outstanding 4,093,212 4,093,212
Net Asset Value Per Share $12.66 $12.66
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Balanced Balanced
Portfolio Portfolio
Total Net Assets $721,055,859 $721,055,859
Shares Outstanding 49,883,772 49,883,772
Net Asset Value Per Share $14.45 $14.45
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
High Yield Bond Partner High Yield
Portfolio Portfolio
Total Net Assets $75,965,566 $75,965,566
Shares Outstanding 11,270,447 11,270,447
Net Asset Value Per Share $6.74 $6.74
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Bond Index Bond Index
Portfolio Portfolio
Total Net Assets $244,734,167 $244,734,167
Shares Outstanding 23,128,791 23,128,791
Net Asset Value Per Share $10.58 $10.58
- ------------------------------ ---------------------- ----------------------
- ------------------------------ ---------------------- ----------------------
Pro Forma Thrivent
Mortgage Securities Mortgage Securities
Portfolio Portfolio
Total Net Assets $27,871,422 $27,871,422
Shares Outstanding 2,788,626 2,788,626
Net Asset Value Per Share $9.99 $9.99
- ------------------------------ ---------------------- ----------------------
ADDITIONAL INFORMATION ABOUT THE AAL PORTFOLIOS AND THE THRIVENT PORTFOLIOS
Additional information about the AAL Portfolios and the Thrivent Portfolios, including
information about their investment objectives, policies and restrictions and financial
histories, may be found in the current prospectus, Statement of Additional Information, and
annual reports of the AAL Series Fund and Thrivent Series Fund, and in the Statement of
Additional Information relating to this proxy statement and prospectus. You may obtain
copies of these documents free of charge by calling 1-800-847-4836.
The AAL Portfolios and the Thrivent Portfolios are subject to the informational requirements
of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended
and the 1940 Act. Therefore, the AAL Portfolios and the Thrivent Portfolios file proxy
materials, reports and other information with the SEC, which can be inspected and copied at
the SEC's public reference room located at 450 5th Street NW, Room 1200, Washington, D.C.
20549. You may call the SEC at 1-202-942-8090 for information about the operation of the
public reference rooms.
You may also access such information about the AAL Portfolios and the Thrivent Portfolios on
the SEC's Internet site at http://www.sec.gov. For a prescribed fee, you may obtain copies
of this information by sending an email request to publicinfo@sec.gov or writing to: Public
Reference Room, U.S. Securities and Exchange Commission, 450 5th Street, NW, Room 1300,
Washington, D.C. 20549. You may need to refer to the following file numbers:
File No. 811-8662 AAL Variable Product Series Fund, Inc.
File No. 811-4603 Thrivent Series Fund, Inc.
Financial highlights and a discussion about the performance of the World Growth Portfolio
from the Thrivent Series Fund's most recent annual report are included in this proxy
statement and prospectus as Appendix D.
VOTING INFORMATION
This proxy statement and prospectus is furnished in connection with the solicitation of
proxies by the Board of Directors of the AAL Series Fund for use at the Special Meeting of
each of the AAL Portfolios to be held on April 7, 2004, at 8:30 a.m. Central Time at 625
Fourth Avenue South, Minneapolis, Minnesota, and at any adjournments thereof. Thrivent
Financial and Thrivent Life will cast your votes according to your voting instructions. If
you sign and date your voting instruction form, but do not specify instructions, shares of
any AAL Portfolio to which the form relates will be voted IN FAVOR of the Reorganization
Agreement relating to that AAL Portfolio. For shares for which no voting instructions are
received and for any shares held by Thrivent Financial or by any of Thrivent Financial's
subsidiaries or affiliates for their own accounts, Thrivent Financial will cast votes in
proportion to the shares with respect to which they have received instructions from
beneficial owners.
You may vote by mail, telephone or the Internet. Your vote must be received by 6:00 a.m.,
Central Time, on April 7, 2004. Vote by:
o Internet -- Follow the directions on the enclosed voting instruction card.
o Telephone -- Follow the directions on the enclosed voting instruction card. If
this feature is used, you are giving authorization for another person to
execute your proxy and there is no need to mail the voting instruction
form.
o Mail -- Date and sign the enclosed voting instruction form and return it in the
enclosed postage-paid envelope.
Quorum and Voting
Shares of the AAL Portfolios are currently sold, without sales charge, to:
o Separate accounts of Thrivent Financial and Thrivent Life to fund benefits under
variable contracts issued by Thrivent Financial and Thrivent Life; and
o Retirement plans sponsored by Thrivent Financial.
All owners of the variable contracts and the Trustees of the retirement plans are entitled
to vote on the Reorganizations. Thrivent Financial is the investment adviser to the
Portfolios and also provides certain administrative services to the Portfolios. Thrivent
Financial and Thrivent Life will cast your votes according to your voting instructions. If
no timely voting instructions are received, any shares of a Portfolio attributable to a
variable contract will be voted by Thrivent Financial or Thrivent Life in proportion to the
instructions that are received for all variable contracts participating in the AAL
Portfolio. Any shares of an AAL Portfolio held by Thrivent Financial, Thrivent Life or any
of their affiliates for their own account, will be voted by Thrivent Financial or Thrivent
Life in proportion to the voting instructions that are received for all variable contracts
participating in the Portfolio. If the voting instruction form is returned but no
instructions are given, the shares of the Portfolio to which the form relates will be voted
FOR all the proposals.
Each share of an AAL Portfolio is entitled to one vote. A variable contract owner is
entitled to direct that number of votes which is equal to the number of full and fractional
shares of the relevant Portfolio underlying the contract owner's variable contract.
You may revoke your voting instructions at any time prior to their use by:
o giving written notice of revocation to an officer of the AAL Series Fund,
o returning to an officer of the AAL Series Fund a properly executed, later dated
voting instruction form,
o voting later by telephone or Internet, or
o attending the Special Meeting, requesting return of any previously delivered voting
instructions and voting in person.
Attendance and voting at the Special Meeting will not by itself constitute a revocation of
voting instructions. Signed voting instructions received by the Board of Directors in time
for voting that are not revoked will be voted in accordance with the instructions noted on
the form. Unless instructions to the contrary are marked on the voting instruction form,
the shares represented by the form will be voted FOR all the proposals. The voting
instruction form grants discretion to the persons named thereon to take action as they
determine appropriate in connection with any other matter that may properly come before the
Special Meeting or any adjournments. The Board of Directors does not currently know of any
matter to be considered at the Special Meeting other than the matters set forth in the
Notice of Special Meeting of Shareholders.
The shareholders of each AAL Portfolio will vote separately on its reorganization into a
corresponding Thrivent Portfolio. There must be a quorum for each shareholder meeting to
proceed. This means that one-third of that AAL Portfolio's shares must be represented at
the meeting, either in person or by proxy. Abstentions will be counted as present for
purposes of determining a quorum, but will not be counted as votes cast with respect to the
proposal. Because Thrivent Financial and its affiliates are the record owners of a majority
of the shares of the AAL Portfolios and will be represented at the Special Meeting, the
presence of a quorum at each meeting is virtually assured.
Approval of each Reorganization Agreement requires the affirmative vote of "a majority of
the outstanding voting securities" of the relevant AAL Portfolio, as defined under the 1940
Act. For that purpose, a vote of the holders of a "majority of the outstanding voting
securities" of the portfolio means the lesser of:
o The vote of 67% or more of the shares of the AAL Portfolio represented at the Special
Meeting at which the holders of more than 50% or more of the outstanding
shares of the portfolio are present or represented by proxy, or
o The vote of the holders of more than 50% of the outstanding shares of the AAL
Portfolio.
The votes of shareholders of the Thrivent Portfolios are not being solicited since their
approval is not required to effect the Reorganizations.
Outstanding Shares and Voting Requirements
The Board of Directors of the AAL Series Fund has designated the close of business on
February 13, 2004, as the record date for the determination of shareholders of the AAL
Portfolios entitled to notice of and to vote at the Special Meeting and any adjournments
thereof. Each share of an AAL Portfolio is entitled to one vote and fractional shares have
proportionate voting rights. Only shareholders of record as of the record date are entitled
to vote on the proposal. As of the record date, each of the AAL Portfolios had the number
of shares issued and outstanding listed below:
Portfolio Number of Shares
- --------- ----------------
Technology Stock Portfolio 6,772,497.89
Small Cap Stock Portfolio 13,007,013.39
Small Cap Value Portfolio 1,822,005.69
Small Cap Index Portfolio 25,136,829.95
Mid Cap Stock Portfolio 7,722,122.60
Mid Cap Index Portfolio 7,285,449.95
International Portfolio 12,302,970.15
Capital Growth Portfolio 36,256,666.51
Large Company Index Portfolio 37,272,565.39
Real Estate Securities Portfolio 4,936,038.91
Balanced Portfolio 50,080,204.30
High Yield Bond Portfolio 12,120,898.45
Bond Index Portfolio 23,769,295.73
Mortgage Securities Portfolio 3,193,729.04
On the record date, the directors and officers of the AAL Series Fund as a group owned
beneficially (meaning they had the power to vote or direct the voting of) less than 1% of
the outstanding shares of each AAL Portfolio. To the best knowledge of each AAL Portfolio,
as of the record date, no person, except as described in Appendix H, owned beneficially or
of record 5% or more of the outstanding shares of an AAL Portfolio.
Other Matters
Management of the AAL Portfolios knows of no other matters that may properly be, or which
are likely to be, brought before the Special Meeting. However, if any other business shall
properly come before the Special Meeting, the persons named in the proxy intend to vote in
accordance with their best judgment.
Board Recommendation
After considering the issues involved, the Board of Directors of the AAL Series Fund has
unanimously concluded that the proposed Reorganizations are in the best interests of the
shareholders of each of the AAL Portfolios. The Board recommends that you vote FOR each
Reorganization Agreement relating to an AAL Portfolio in which you hold shares through your
variable contract or retirement plan investment. Whether or not you expect to attend the
Special Meeting, we urge you to promptly sign, fill in and return the enclosed voting
instruction form or vote by toll-free telephone or the Internet.
APPENDIX A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of this __th day of __________, 2004, by and between the
AAL Variable Product Series Fund, Inc. ("AAL Fund"), a series of separate mutual fund portfolios within a single Maryland
Corporation acting on behalf of the ______________ Portfolio ("Acquired Portfolio") with its principal place of business at 625
Fourth Avenue South, Minneapolis, MN 55415, and the LB Series Fund, Inc. ("LB Fund"), a series of separate mutual fund portfolios
within a single Minnesota Corporation acting on behalf of the _______________ Portfolio ("Acquiring Portfolio") with its principal
place of business at 625 Fourth Avenue South, Minneapolis, MN 55415.
This Agreement is intended to be and is adopted as a plan of reorganization and liquidation within the meaning of Section 368(a)
of the United States Internal Revenue Code of 1986, as amended (the "Code"), with the Acquiring Fund and the Acquired Fund each
being a "party to a reorganization" within the meaning of Section 368(b) of the Code. The reorganization (the "Reorganization")
will consist of (a) the transfer of all of the assets of the Acquired Portfolio in exchange for shares of the Acquiring Portfolio
(the "Acquiring Portfolio Shares") and (b) the distribution, after the Closing Date herein referred to, of Acquiring Portfolio
Shares to the shareholders of the Acquired Portfolio in liquidation of the Acquired Portfolio and the subsequent dissolution of
the Acquired Portfolio, all upon the terms and conditions hereinafter set forth in this Agreement.
WHEREAS, the Acquiring Portfolio and the Acquired Portfolio are series of registered investment companies of the
management type and the Acquired Portfolio owns securities that generally are assets of the character in which the Acquiring
Portfolio is permitted to invest;
WHEREAS, the Acquiring Portfolio is authorized to issue shares of common stock;
WHEREAS, the Board of Directors of the Acquired Portfolio has determined that the exchange of all of the assets of the
Acquired Portfolio for Acquiring Portfolio Shares is in the best interests of the Acquired Portfolio and its shareholders and that
the shares of the existing shareholders of the Acquired Portfolio would not be diluted as a result of this transaction;
WHEREAS, the Board of Directors of the Acquiring Portfolio has determined that the exchange of all the assets of the
Acquired Portfolio for Acquiring Portfolio Shares is in the best interests of the Acquiring Portfolio and its shareholders and
that the shares of the existing shareholders of the Acquiring Portfolio would not be diluted as a result of this transaction;
NOW, THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties
hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED PORTFOLIO IN EXCHANGE FOR
ACQUIRING PORTFOLIO SHARES AND LIQUIDATION OF THE ACQUIRED PORTFOLIO
1.1 The Acquired Portfolio will transfer all of its assets (consisting, without limitation, of portfolio securities
and instruments, dividends and interest receivables, cash and other assets), as set forth in the statement of assets and
liabilities referred to in Paragraph 7.2 hereof (the "Statement of Assets and Liabilities"), to the Acquiring Portfolio free and
clear of all liens and encumbrances, except as otherwise provided herein, in exchange for (i) the assumption by the Acquiring
Portfolio of only those accrued and unpaid liabilities of the Acquired Portfolio which are reflected in the Statement of Assets
and Liabilities, which liabilities (and no others) shall be assigned and transferred to the Acquiring Portfolio by the Acquired
Portfolio (the "Assumed Liabilities") and assumed by the Acquiring Portfolio, and (ii) delivery by the Acquiring Portfolio to the
Acquired Portfolio, for distribution pro rata by the Acquired Portfolio to its shareholders in proportion to their respective
ownership of shares of common stock of the Acquired Portfolio, as of the close of business on April ___, 2004 (the "Closing
Date"), of a number of the Acquiring Portfolio Shares having an aggregate net asset value equal to the value of the assets, less
such liabilities (herein referred to as the "net value of the assets") assumed, assigned and delivered, all determined as provided
in Paragraph 2.1 hereof and as of a date and time as specified therein. Such transactions shall take place at the closing provided
for in Paragraph 3.1 hereof (the "Closing"). All computations shall be provided by Thrivent Investment Management Inc. (the
"Pricing Agent") for the Acquiring Portfolio and the Acquired Portfolio.
1.2 (a) The assets of the Acquired Portfolio to be acquired by the Acquiring Portfolio shall consist of all property,
including, without limitation, all cash, securities and dividends or interest receivables which are owned by the
Acquired Portfolio and any deferred or prepaid expenses shown as an asset on the books of the Acquired Portfolio
on the Closing Date; and
(b) The Acquired Portfolio has provided the Acquiring Portfolio with a list of the Acquired Portfolio's assets as
of the date of execution of this Agreement. The Acquired Portfolio reserves the right to sell any securities but
will not, without the prior approval of the Acquiring Portfolio, acquire any additional securities other than
securities of the type in which the Acquiring Portfolio is permitted to invest. The Acquiring Portfolio will,
within a reasonable time prior to the Closing Date, furnish the Acquired Portfolio with a statement of the
Acquiring Portfolio's investment objectives, policies and restrictions and a list of the securities, if any, on
the Acquired Portfolio's list referred to in the first sentence of this paragraph which do not conform to the
Acquiring Portfolio's investment objectives, policies and restrictions. In the event that the Acquired Portfolio
holds any investments which the Acquiring Portfolio may not hold, the Acquired Portfolio will dispose of such
securities prior to the Closing Date. In addition, if it is determined that the portfolios of the Acquired
Portfolio and the Acquiring Portfolio, when aggregated, would contain investments exceeding certain percentage
limitations imposed upon the Acquiring Portfolio with respect to such investments, the Acquired Portfolio, if
requested by the Acquiring Portfolio, will dispose of and/or reinvest a sufficient amount of such investments as
may be necessary to avoid violating such limitations as of the Closing Date.
1.3 The Acquired Portfolio will endeavor to discharge all the Acquired Portfolio's known liabilities and obligations
prior to the Closing Date. The Acquiring Portfolio shall assume only the Assumed Liabilities, and shall not assume any other
debts, liabilities or obligations of the Acquired Portfolio.
1.4 The Acquiring Portfolio shall assume the right to assert all legal claims against third parties as would have been
available to the Acquired Portfolio as of the Valuation Date (as defined in Section 2.1).
1.5 As provided in paragraph 3.3, either on or as soon after the Closing Date as is conveniently practicable (the
"Liquidation Date"), the Acquired Portfolio will liquidate by distributing pro rata to the Acquired Portfolio's shareholders of
record determined as of the close of business on the Closing Date (the "Acquired Portfolio Shareholders"), the Acquiring Portfolio
Shares it receives pursuant to paragraph 1.1. Such liquidation and distribution will be accomplished by the transfer of the
Acquiring Portfolio Shares then credited to the account of the Acquired Portfolio on the books of the Acquiring Portfolio to open
accounts on the share records of the Acquiring Portfolio in the name of the Acquired Portfolio Shareholders and representing the
respective pro rata number of the Acquiring Portfolio Shares due such shareholders. All issued and outstanding shares of the
Acquired Portfolio will simultaneously be canceled on the books of the Acquired Portfolio.
1.6 The Acquired Portfolio shareholders holding physical certificates representing their ownership of shares of
beneficial interest of the Acquired Portfolio shall surrender such certificates or deliver an affidavit with respect to lost
certificates in such form and accompanied by such surety bonds as the Acquired Portfolio may require (collectively, an
"Affidavit"), to Thrivent Financial for Lutherans prior to the Closing Date. Any Acquired Portfolio share certificate which remains
outstanding on the Closing Date shall be deemed to be canceled, shall no longer evidence ownership of shares of beneficial
interest of the Acquired Portfolio and shall evidence ownership of Acquiring Portfolio Shares. Unless and until any such
certificate shall be so surrendered or an Affidavit relating thereto shall be delivered, dividends and other distributions payable
by the Acquiring Portfolio subsequent to the Liquidation Date with respect to Acquiring Portfolio Shares shall be paid to the
holder of such certificate(s), but the Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares unless
the Acquired Fund share certificates are first surrendered to the Acquiring Fund or an Affidavit relating thereto shall be
delivered.
1.7 Any transfer taxes payable upon issuance of the Acquiring Portfolio Shares in a name other than the registered
holder of the Acquired Portfolio Shares on the books of the Acquired Portfolio as of that time shall, as a condition of such
issuance and transfer, be paid by the person to whom such Acquiring Portfolio Shares are to be issued and transferred.
1.8 Any reporting responsibility of the Acquired Portfolio is and shall remain the responsibility of the Acquired
Portfolio up to and including the Closing Date and such later date on which the Acquired Portfolio is terminated.
1.9 The Acquired Portfolio shall, following the Closing Date and the making of all distributions pursuant to paragraph
1.4, be dissolved under the laws of the State of Maryland and in accordance with its governing documents.
2. VALUATION
2.1 The net asset values of the Acquiring Portfolio Shares and the net values of the assets and liabilities of the
Acquired Portfolio to be transferred shall, in each case, be determined as of the close of business (4:00 p.m. Eastern time) on
the Closing Date. The net asset values of the Acquiring Portfolio Shares shall be computed by the Pricing Agent in the manner set
forth in the Acquiring Portfolio's Articles of Incorporation as amended and restated (the "Articles"), or By-Laws and the
Acquiring Portfolio's then-current prospectus and statement of additional information and shall be computed in each case to not
fewer than two decimal places. The net values of the assets of the Acquired Portfolio to be transferred shall be computed by the
Pricing Agent by calculating the value of the assets transferred by the Acquired Portfolio and by subtracting therefrom the amount
of the liabilities assigned and transferred to and assumed by the Acquiring Portfolio on the Closing Date, said assets and
liabilities to be valued in the manner set forth in the Acquired Portfolio's then current prospectus and statement of additional
information and shall be computed in each case to not fewer than two decimal places.
2.2 The number of Acquiring Portfolio Shares to be issued (including fractional shares, if any) in exchange for the
Acquired Portfolio's assets shall be determined by dividing the value of the Acquired Portfolio's assets less the liabilities
assumed by the Acquiring Portfolio, by the Acquiring Portfolio's net asset value per share, all as determined in accordance with
Paragraph 2.1 hereof.
2.3 All computations of value shall be made by the Pricing Agent, in accordance with its regular practice as pricing
agent for the Acquired Portfolio and the Acquiring Portfolio, respectively.
3. CLOSING
3.1 The Closing Date shall be April ___, 2004, or such later date as the parties may agree to in writing. All acts
taking place at the Closing shall be deemed to take place simultaneously as of the close of business on the Closing Date unless
otherwise provided. The Closing shall be held as of 5:00 p.m. (Central time) at the offices of Thrivent Financial for Lutherans,
625 Fourth Avenue South, Minneapolis, Minnesota, or at such other time and/or place as the parties may agree.
3.2 In the event that on the Valuation Date (a) the New York Stock Exchange ("NYSE") or another primary trading market
for portfolio securities of the Acquiring Portfolio or the Acquired Portfolio shall be closed to trading or trading thereon shall
be restricted or (b) trading or the reporting of trading on the NYSE or elsewhere shall be disrupted so that accurate appraisal of
the value of the net assets of the Acquiring Portfolio or the Acquired Portfolio is impracticable, the Closing Date shall be
postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been
restored.
3.3 Portfolio securities that are not held in book-entry form in the name of State Street Bank (the "Custodian") as
record holder for the Acquired Portfolio shall be presented by the Acquired Portfolio to the Custodian for examination no later
than three business days preceding the Closing Date. Portfolio securities which are not held in book-entry form shall be delivered
by the Acquired Portfolio to the Custodian for the account of the Acquiring Portfolio on the Closing Date, duly endorsed in proper
form for transfer, in such condition as to constitute good delivery thereof in accordance with the custom of brokers, and shall be
accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price thereof.
Portfolio securities held of record by the Custodian in book-entry form on behalf of the Acquired Portfolio shall be delivered to
the Acquiring Portfolio by the Custodian by recording the transfer of beneficial ownership thereof on its records. The cash
delivered shall be in the form of currency or by the Custodian crediting the Acquiring Portfolio's account maintained with the
Custodian with immediately available funds.
3.4 The Acquired Portfolio shall deliver at the Closing a list of the names, addresses, federal taxpayer
identification numbers and backup withholding and nonresident alien withholding status of the Acquired Portfolio shareholders and
the number of outstanding shares of beneficial interest of the Acquired Portfolio owned by each such shareholder, all as of the
close of business on the Closing Date, certified by its Treasurer, Secretary or other authorized officer (the "Shareholder List").
The Acquiring Portfolio shall issue and deliver to the Acquired Portfolio a confirmation evidencing the Acquiring Portfolio Shares
to be credited on the Closing Date, or provide evidence satisfactory to the Acquired Portfolio that such Acquiring Portfolio
Shares have been credited to the Acquired Portfolio's account on the books of the Acquiring Portfolio. At the Closing, each party
shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts or other documents as such other
party or its counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The AAL Fund and Acquired Portfolio represent and warrant to the LB Fund and Acquiring Portfolio as follows:
(a) The Acquired Portfolio is a series of the AAL Fund, a corporation which is duly organized, validly existing
and in good standing under the laws of the State of Maryland. The AAL Fund is a registered investment company
classified as a management company of the open-end type, and its registration with the Securities and Exchange
Commission (the "Commission") as an investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), is in full force and effect;
(b) The AAL Fund, on behalf of the Acquired Portfolio, has the power and all necessary federal, state and local
qualifications and authorizations to own all its assets, to carry on its business as now being conducted, to
enter into and carry out this Agreement, and to consummate the transactions contemplated herein;
(c) The execution, delivery and performance of this Agreement will not result in a material violation of the
Articles of Incorporation or Bylaws of the AAL Fund or of any agreement, indenture, instrument, contract, lease
or other undertaking to which the Acquired Portfolio is a party or by which the AAL Fund or the Acquired
Portfolio is a party or by which it is bound;
(d) Except as disclosed in writing to the N-14 Registration Statement ("Registration Statement") the Acquired
Portfolio has no material contracts or other commitments (other than this Agreement) which will be terminated
with liability to the Acquired Portfolio prior to the Closing Date;
(e) No litigation or administrative proceeding or investigation of or before any court or governmental body is
presently pending or to the Acquired Portfolio's knowledge threatened against the Acquired Portfolio or any of
the Acquired Portfolio's properties or assets (other than that previously disclosed to the other party to the
Agreement) which, if adversely determined, would materially and adversely affect its financial condition or the
conduct of its business. The Acquired Portfolio knows of no facts which might form the basis for the institution
of such proceedings and is not party to or subject to the provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects the Acquired Portfolio's business or the
ability of the Acquired Portfolio to consummate the transactions herein contemplated;
(f) The Statements of Assets and Liabilities of the Acquired Portfolio for each of the fiscal years in the five
year period ended December 31, 2003, have been audited by PricewaterhouseCoopers LLP, independent auditors, and
are in accordance with generally accepted accounting principles consistently applied, and such statements (copies
of which have been furnished to the Acquiring Portfolio) fairly reflect the financial condition of the Acquired
Portfolio as of such dates, and there are no known contingent liabilities of the Acquired Portfolio as of such
dates not disclosed therein;
(g) The Acquired Portfolio will file its final federal and other tax returns for the period ending on the
Closing Date in accordance with the Code. At the Closing Date, all federal and other tax returns and reports of
the Acquired Portfolio required by law then to have been filed prior to the Closing Date shall have been filed,
and all federal and other taxes shown as due on such returns shall have been paid so far as due, or provision
shall have been made for the payment thereof and, to the best of the Acquired Portfolio's knowledge, no such
return is currently under audit and no assessment has been asserted with respect to such returns;
(h) For the most recent taxable year of its operation and for the taxable year that will end on the Closing
Date the Acquired Portfolio will have met the requirements of Subchapter M of the Code for qualification and
treatment as a regulated investment company;
(i) All issued and outstanding shares of beneficial interest of the Acquired Portfolio are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and nonassessable by the AAL Fund. All of the
issued and outstanding shares of beneficial interest of the Acquired Portfolio will, at the time of Closing, be
held by the persons and in the amounts set forth in the Shareholder List submitted to the Acquiring Portfolio
pursuant to Paragraph 3.4 hereof. The Acquired Portfolio does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of its shares of beneficial interest, nor is there outstanding any
security convertible into any of its shares of beneficial interest;
(j) At the Closing Date, the Acquired Portfolio will have good and marketable title to its assets to be
transferred to the Acquiring Portfolio pursuant to paragraph 1.2 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder and, upon delivery and payment for such assets, the Acquiring
Portfolio will acquire good and marketable title thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the Securities Act of 1933, as amended (the "1933
Act"), other than as disclosed to the Acquiring Portfolio;
(k) The execution, delivery and performance of this Agreement have been duly authorized by all necessary action
on the part of the Acquired Portfolio's Board of Directors, and subject to the approval of the Acquired
Portfolio's shareholders, this Agreement, assuming due authorization, execution and delivery by the Acquiring
Portfolio, will constitute a valid and binding obligation of the Acquired Portfolio, enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity principles;
(l) The information to be furnished by the Acquired Portfolio for use in no-action letters, applications for
exemptive orders, registration statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other laws and regulations thereunder
applicable thereto;
(m) The proxy statement of the Acquired Portfolio (the "Proxy Statement") to be included in the Registration
Statement referred to in paragraph 5.7 (other than information therein that relates to the Acquiring Portfolio)
will, on the effective date of the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such statements are made, not misleading;
(n) Since December 31, 2003, there has not been any material adverse change in the Acquired Portfolio's
financial condition, assets, liabilities, or business other than changes occurring in the ordinary course of
business (including declines in the net asset value of the Acquired Portfolio and/or its shares of common stock),
or any incurrence by the Acquired Portfolio of indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to the Acquiring Portfolio;
(o) The Acquired Portfolio has qualified as a regulated investment company for each taxable year of its
operation and the Acquired Portfolio will qualify as such as of the Closing Date with respect to its taxable year
ending on the Closing Date;
(p) All of the issued and outstanding shares of beneficial interest of the Acquired Portfolio have been offered
for sale and sold in conformity with all applicable federal and state securities laws;
(q) The prospectus of the Acquired Portfolio, dated ______________ (the "Acquired Portfolio Prospectus"),
furnished to the Acquiring Portfolio, does not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
(r) The Acquired Portfolio Tax Representation Certificate to be delivered by the Acquired Portfolio to the
Acquiring Portfolio at Closing pursuant to Section 7.5 (the "Acquired Portfolio Tax Representation Certificate")
will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading; and
(s) The books and records of the Acquired Portfolio made available to the Acquiring Portfolio and/or its
counsel are substantially true and correct and contain no material misstatements or omissions with respect to the
operations of the Acquired Portfolio.
4.2 The LB Fund and Acquiring Portfolio represent and warrant to the AAL Fund and Acquired Portfolio as follows:
(a) The Acquiring Portfolio is a series of the LB Fund, a corporation duly organized, validly existing and in
good standing under the laws of the State of Minnesota. The LB Fund is a registered investment company
classified as a management company of the open-end type and its registration with the Commission as an investment
company under the 1940 Act is in full force and effect;
(b) The LB Fund, on behalf of the Acquiring Fund has the power and all necessary federal, state and local
qualifications and authorizations to own all its assets, to carry on its business as now being conducted, to
enter into and carry out this Agreement, and to consummate the transactions contemplated herein;
(c) The prospectus (the "Acquiring Portfolio Prospectus") and statement of additional information of the
Acquiring Portfolio, each dated ______________, and any amendments or supplements thereto on or prior to the
Closing Date, and the Registration Statement on Form N-14 filed in connection with this Agreement (other than
written information furnished by the Acquired Portfolio for inclusion therein, as covered by the Acquired
Portfolio's warranty in Paragraph 4.1(m) hereof) will conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of the Commission thereunder. The
Acquiring Portfolio Prospectus does not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and the Registration Statement will not include any
untrue statement of material fact or omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they were made, not misleading;
(d) At the Closing Date, the Acquiring Portfolio will have good and marketable title to the Acquiring
Portfolio's assets;
(e) The execution, delivery and performance of this Agreement will not result, in a material violation of the
Articles of Incorporation or Bylaws of the LB Fund or of any agreement, indenture, instrument, contract, lease or
other undertaking to which the LB Fund or the Acquiring Portfolio is a party or by which it is bound;
(f) No litigation or administrative proceeding or investigation of or before any court or governmental body is
presently pending or threatened against the Acquiring Portfolio or any of the Acquiring Portfolio's properties or
assets. The Acquiring Portfolio knows of no facts which might form the basis for the institution of such
proceedings and the Acquiring Portfolio is not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and adversely affects the Acquiring Portfolio's
business or ability to consummate the transactions contemplated herein;
(g) The Statement of Assets and Liabilities of the Acquiring Portfolio for the fiscal year ended December 31,
2003, have been audited by PricewaterhouseCoopers LLP, independent auditors, and are in accordance with generally
accepted accounting principles consistently applied, and such statements (copies of which have been furnished to
the Acquired Portfolio) fairly reflect the financial condition of the Acquiring Portfolio as of such dates, and
there are no known contingent liabilities of the Acquiring Portfolio as of such dates not disclosed therein;
(h) Since December 31, 2003, there has not been any material adverse change in the Acquiring Portfolio's
financial condition, assets, liabilities or business other than changes occurring in the ordinary course of
business, or any incurrence of the Acquiring Portfolio of indebtedness maturing more than one year from the date
such indebtedness was incurred, except as disclosed to and accepted by the Acquired Portfolio;
(i) The Acquiring Portfolio has qualified as a regulated investment company for each taxable year of its
operation and the Acquiring Portfolio will qualify as such as of the Closing Date;
(j) At the Closing Date, all federal and other tax returns and reports of the Acquiring Portfolio required by
law then to have been filed by such date shall have been filed, and all federal and other taxes shown as due on
said returns and reports shall have been paid so far as due, or provision shall have been made for the payment
thereof and, to the best of the Acquiring Portfolio's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(k) For the most recent fiscal year of its operation, the Acquiring Portfolio has met the requirements of
Subchapter M of the Code for qualification and treatment as a regulated investment company and the Acquiring
Portfolio intends to do so in the future;
(l) At the date hereof, all issued and outstanding shares of the Acquiring Portfolio are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and non-assessable. The Acquiring Portfolio
does not have outstanding any options, warrants or other rights to subscribe for or purchase any shares of the
Acquiring Portfolio, nor is there outstanding any security convertible into shares of the Acquiring Portfolio;
(m) The execution, delivery and performance of this Agreement have been duly authorized by all necessary
action, if any, on the part of the Acquiring Portfolio's Board of Directors, and this Agreement, assuming due
authorization, execution and delivery by the Acquired Portfolio, constitutes a valid and binding obligation of
the Acquiring Portfolio, enforceable in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, moratorium and other laws relating to or affecting creditors' rights and to general
equity principles;
(n) The Acquiring Portfolio Shares to be issued and delivered to the Acquired Portfolio, for the accounts of
the Acquired Portfolio Shareholders, pursuant to the terms of this Agreement, will at the Closing Date have been
duly authorized and, when so issued and delivered, will be duly and validly issued Acquiring Portfolio Shares,
and will be fully paid and non-assessable with no personal liability attaching to the ownership thereof;
(o) The information to be furnished by the Acquiring Portfolio for use in no-action letters, applications for
exemptive orders, registration statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other laws and regulations applicable thereto;
(p) The Proxy Statement to be included in the Registration Statement (only insofar as it relates to the
Acquiring Portfolio) will, on the effective date of the Registration Statement and on the Closing Date, not
contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which such statements were made,
not misleading;
(q) The Acquiring Portfolio agrees to use all reasonable efforts to obtain the approvals and authorizations
required by the 1933 Act, the 1940 Act and such of the state Blue Sky or securities laws as it may deem
appropriate in order to continue the Acquiring Portfolio's operations after the Closing Date;
(r) The Acquiring Portfolio Tax Representation Certificate to be delivered by the Acquiring Portfolio to the
Acquired Portfolio at Closing pursuant to Section 6.3 (the "Acquiring Portfolio Tax Representation Certificate")
will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein not misleading; and
(s) All of the issued and outstanding shares of beneficial interest of the Acquired Portfolio have been offered
for sale and sold in conformity with all applicable federal and state securities laws.
5. COVENANTS OF THE ACQUIRED PORTFOLIO AND THE ACQUIRING PORTFOLIO
5.l The Acquiring Portfolio and the Acquired Portfolio each will operate its business in the ordinary course between
the date hereof and the Closing Date. It is understood that such ordinary course of business will include the declaration and
payment of customary dividends and distributions and any other dividends and distributions deemed advisable, in each case payable
either in cash or in additional shares.
5.2 As soon as practicable after the effective date of the Registration Statement, the Acquired Portfolio shall hold
a shareholder meeting to consider and approve this Agreement and such other matters as the Board of Directors of the AAL Fund may
determine. Such approval by the shareholders of the Acquired Portfolio shall, to the extent necessary to permit the consummation
of the transactions contemplated herein without violating any investment objective, policy or restriction of the Acquired fund, be
deemed to constitute approval by the shareholders of a temporary amendment of any investment objective, policy or restriction that
would otherwise be inconsistent with or violate upon the consummation of such transactions solely for the purpose of consummating
such transactions.
5.3 The Acquired Portfolio covenants that the Acquiring Portfolio Shares to be issued hereunder are not being acquired
for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement.
5.4. The Acquired Portfolio will assist the Acquiring Portfolio in obtaining such information as the Acquiring
Portfolio reasonably requests concerning the beneficial ownership of the Acquired Portfolio's shares.
5.5 Subject to the provisions of this Agreement, the Acquiring Portfolio and the Acquired Portfolio each will take, or
cause to be taken, all actions, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
5.6 The Acquired Portfolio shall furnish to the Acquiring Portfolio on the Closing Date the Statement of Assets and
Liabilities of the Acquired Portfolio as of the Closing Date, which statement shall be prepared in accordance with generally
accepted accounting principles consistently applied and shall be certified by the Acquired Portfolio's Treasurer or Assistant
Treasurer. As promptly as practicable but in any case within 60 days after the Closing Date, the Acquired Portfolio shall furnish
to the Acquiring Portfolio, in such form as is reasonably satisfactory to the LB Fund, a statement of the earnings and profits of
the Acquired Portfolio for federal income tax purposes and of any capital loss carryovers and other items that will be carried
over to the Acquiring Portfolio as a result of Section 381 of the Code, and which statement will be certified by the President of
the Acquired Portfolio.
5.7 The LB Fund shall promptly prepare and file the Registration Statement with the SEC, and the LB Fund and the AAL
Fund shall each make any other required or appropriate filings with respect to the actions contemplated hereby.
5.8 The Acquired Portfolio will provide the Acquiring Portfolio with information reasonably necessary for the
preparation of a prospectus (the "Prospectus") which will include the Proxy Statement, referred to in paragraph 4.1(m), all to be
included in a Registration Statement, in compliance with the 1933 Act, the Securities Exchange Act of 1934, as amended (the "1934
Act") and the 1940 Act in connection with the meeting of the Acquired Portfolio's shareholders to consider approval of this
Agreement and the transactions contemplated herein.
5.9 Neither the Acquired Portfolio nor the Acquiring Portfolio shall take any action that is inconsistent with the
representations set forth in, with respect to the Acquired Portfolio, the Acquired Portfolio Tax Representation Certificate, and
with respect to the Acquiring Portfolio, the Acquiring Portfolio Tax Representation Certificate, to the extent such action would
prevent the reorganization from qualifying as a "reorganization" under Section 368(a) of the Code.
5.10 The Acquired Portfolio will pay or cause to be paid to the Acquiring Portfolio any interest or proceeds it
receives on or after the Closing Date with respect to its assets.
5.11 The Acquiring Portfolio agrees, as soon as practicable after the Valuation Date, to open shareholder accounts on
its share ledger records for the shareholders of the Acquired Portfolio in connection with the distribution of shares by the
Acquired Portfolio to such shareholders in accordance with Paragraph 1.5.
5.12 Each party hereto covenants and agrees to provide the other party hereto and its agents and counsel with any and
all documentation, information, assistance and cooperation that may become necessary from time to time with respect to the
transactions contemplated by this Agreement.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED PORTFOLIO
The obligations of the Acquired Portfolio to consummate the transactions provided for herein shall be subject, at its
election, to the performance by the Acquiring Portfolio of all of the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following further conditions:
6.1 All representations and warranties of the Acquiring Portfolio contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date.
6.2 The Acquiring Portfolio shall have delivered to the Acquired Portfolio a certificate executed in its name by its
Chairman of the Board, President or Vice President and its Treasurer or Assistant Treasurer, in a form reasonably satisfactory to
the Acquired Portfolio and dated as of the Closing Date, to the effect that the representations and warranties of the Acquiring
Portfolio made in this Agreement are true and correct in all material respects at and as of the Closing Date, except as they may
be affected by the transactions contemplated by this Agreement.
6.3 The Acquiring Portfolio shall have delivered to the Acquired Portfolio an Acquiring Portfolio Tax Representation
Certificate substantially in the form attached to this Agreement as Annex A concerning certain tax-related matters with respect to
the Acquiring Portfolio.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING PORTFOLIO
The obligations of the Acquiring Portfolio to complete the transactions provided for herein shall be subject, at its
election, to the performance by the Acquired Portfolio of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Acquired Portfolio contained in this Agreement shall be true and correct
in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date.
7.2 The Acquired Portfolio shall have delivered to the Acquiring Portfolio a statement of the Acquired Portfolio's
assets and liabilities, together with a list of the Acquired Portfolio's portfolio securities showing the tax basis of such
securities by lot and the holding periods of such securities, as of the Closing Date, certified by the Treasurer or Assistant
Treasurer of the Acquired Portfolio.
7.3 The Acquired Portfolio shall have delivered to the Acquiring Portfolio on the Closing Date a certificate executed
in its name by its Chairman of the Board, President or Vice President and its Treasurer or Assistant Treasurer, in form and
substance satisfactory to the Acquiring Portfolio and dated as of the Closing Date, to the effect that the representations and
warranties of the Acquired Portfolio made in this Agreement are true and correct in all material respects at and as of the Closing
Date, except as they may be affected by the transactions contemplated by this Agreement.
7.4 At or prior to the Closing Date, the Acquired Portfolio's investment adviser, or an affiliate thereof, shall have
made all payments, or applied all credits, to the Acquired Portfolio required by any applicable contractual expense limitation.
7.5 The Acquired Portfolio shall have delivered to the Acquiring Portfolio an Acquired Portfolio Tax Representation
Certificate substantially in the form attached to this Agreement as Annex B concerning certain tax-related matters with respect to
the Acquired Portfolio.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED PORTFOLIO AND THE ACQUIRING PORTFOLIO
The obligations hereunder of the LB Fund on behalf of the Acquired Portfolio and the AAL Fund on behalf of the Acquiring
Portfolio are each subject to the further conditions that on or before the Closing Date.
8.1 This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the
holders of the outstanding shares of the Acquired Portfolio in accordance with the provisions of the Articles of Incorporation and
Bylaws of the AAL Fund and certified copies of the votes evidencing such approval shall have been delivered to the Acquiring
Portfolio. Notwithstanding anything herein to the contrary, neither the Acquiring Portfolio nor the Acquired Portfolio may waive
the conditions set forth in this Paragraph 8.1.
8.2 On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the
transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders and permits of federal, state and local regulatory
authorities (including those of the Commission and of state Blue Sky and securities authorities, including "no-action" positions
of and exemptive orders from such federal and state authorities) (and including the filing of Articles of Transfer with the
Minnesota State Department of Assessments and Taxation) deemed necessary by the Acquiring Portfolio or the Acquired Portfolio to
permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where
failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or
properties of the Acquiring Portfolio or the Acquired Portfolio, provided that either party hereto may for itself waive any of
such conditions.
8.4 The Registration Statement shall have become effective under the 1933 Act and the 1940 Act and no stop orders
suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act or the 1940
Act.
8.5 The Acquired Portfolio shall have distributed to its shareholders, in a distribution or distributions qualifying
for the deduction for dividends paid under Section 561 of the Code, all of its investment company taxable income (as defined in
Section 852(b)(2) of the Code determined without regard to Section 852(b)(2)(D) of the Code) for its taxable year ending on the
Closing Date, all of the excess of (i) its interest income excludable from gross income under Section 103(a) of the Code over (ii)
its deductions disallowed under Sections 265 and 171(a)(2) of the Code for its taxable year ending on the Closing Date, and all of
its net capital gain (as such term is used in Sections 852(b)(3)(A) and (C) of the Code), after reduction by any available capital
loss carryforward, for its taxable year ending on the Closing Date.
8.6 The parties shall have received a favorable opinion of Quarles & Brady LLP, addressed to the Acquiring Portfolio
and the Acquired Portfolio and satisfactory to Brett L. Agnew and John C. Bjork, as Secretary of the AAL Fund and LB Fund,
respectively, substantially to the effect that for federal income tax purposes:
(a) The transfer of all of the Acquired Portfolio's assets in exchange for Acquiring Portfolio Shares and the
assumption by the Acquiring Portfolio of the Assumed Liabilities of the Acquired Portfolio will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and the Acquiring Portfolio and the Acquired
Portfolio are each a "party to a reorganization" within the meaning of Section 368(b) of the Code;
(b) No gain or loss will be recognized by the Acquiring Portfolio upon the receipt of the assets of the
Acquired Portfolio in exchange for the Acquiring Portfolio Shares and the assumption by the Acquiring Portfolio
of all of the outstanding liabilities of the Acquired Portfolio;
(c) No gain or loss will be recognized by the Acquired Portfolio upon the transfer of the Acquired Portfolio's
assets to the Acquiring Portfolio in exchange for Acquiring Portfolio Shares and the assumption by the Acquiring
Portfolio of all of the outstanding liabilities of the Acquired Portfolio or upon the distribution (whether
actual or constructive) of Acquiring Portfolio Shares to Acquired Portfolio's shareholders;
(d) No gain or loss will be recognized by shareholders of the Acquired Portfolio upon the exchange of their
Acquired Portfolio shares for the Acquiring Portfolio Shares;
(e) The aggregate tax basis for the Acquiring Portfolio Shares received by each of the Acquired Portfolio's
shareholders pursuant to the Reorganization will be the same as the aggregate tax basis of the Acquired Portfolio
shares held by such shareholder immediately prior to the Reorganization, and the holding period of Acquiring
Portfolio Shares to be received by each Acquired Portfolio shareholder will include the period during which the
Acquired Portfolio shares exchanged therefor were held by such shareholder (provided that such Acquired Portfolio
shares were held as capital assets on the date of the Reorganization); and
(f) The tax basis to the Acquiring Portfolio of the Acquired Portfolio's assets acquired by the Acquiring
Portfolio will be the same as the tax basis of such assets to the Acquired Portfolio immediately prior to the
Reorganization, and the holding period of the assets of the Acquired Portfolio in the hands of the Acquiring
Portfolio will include the period during which those assets were held by the Acquired Portfolio.
Notwithstanding anything herein to the contrary, neither the Acquiring Portfolio nor the Acquired Portfolio may waive
the conditions set forth in this paragraph 8.6.
9. BROKERAGE FEES AND EXPENSES
9.1 The Acquiring Portfolio represents and warrants to the Acquired Portfolio, and the Acquired Portfolio represents
and warrants to the Acquiring Portfolio, that there are no brokers or finders entitled to receive any payments in connection with
the transactions provided for herein.
9.2 (a) Except as may be otherwise provided herein, the Acquired Portfolio shall be liable for the expenses (Thrivent
Financial for Lutherans and/or one or more of its affiliates has agreed to assume said expenses by separate
agreement) incurred in connection with entering into and carrying out the provisions of this Agreement, including
the expenses of:
(i) counsel and independent accountants associated with the Reorganization;
(ii) printing and mailing the Prospectus/Proxy Statement and soliciting proxies in connection with the
meeting of shareholders of the Acquired Portfolio referred to in paragraph 5.2 hereof,
(iii) any special pricing fees associated with the valuation of the Acquired Portfolio's or the
Acquiring Portfolio's portfolio on the Closing Date;
(iv) expenses associated with preparing this Agreement and preparing and filing the Registration
Statement under the 1933 Act covering the Acquiring Portfolio Shares to be issued in the Reorganization;
and
(v) registration or qualification fees and expenses of preparing and filing such forms, if any,
necessary under applicable state securities laws to qualify the Acquiring Portfolio Shares to be issued in
connection with the Reorganization. The Acquiring Portfolio and the Acquired Portfolio shall each be
liable solely for its own expenses incurred in connection with entering into and carrying out the
provisions of this Agreement whether or not the transactions contemplated hereby are consummated.
(b) Consistent with the provisions of paragraph 1.1, the Acquired Portfolio, prior to the Closing, shall pay
for or include in the Statement of Assets and Liabilities prepared pursuant to paragraph 4.1(f) all of its known
and reasonably estimated expenses associated with the transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The parties hereto agree that no party has made any representation, warranty or covenant not set forth herein and
that this Agreement constitutes the entire agreement between the parties.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the AAL Fund on behalf of the Acquiring Portfolio and
the LB Fund on behalf of the Acquired Portfolio. In addition, either party may at its option terminate this Agreement at or prior
to the Closing Date:
(a) because of a condition herein expressed to be precedent to the obligations of the terminating party which
has not been met and which reasonably appears will not or cannot be met;
(b) by resolution of the AAL Fund's Board of Directors if circumstances should develop that, in the good faith
opinion of such Board, make proceeding with the Agreement not in the best interests of the Acquired Portfolio's
shareholders; or
(c) by resolution of the LB Fund's Board of Directors if circumstances should develop that, in the good faith
opinion of such Board, make proceeding with the Agreement not in the best interests of the Acquiring Portfolio's
shareholders.
11.2 In the event of any such termination, there shall be no liability for damages on the part of either the Acquired
Portfolio or the Acquiring Portfolio or the respective Directors or officers of the AAL Fund or the LB Fund to the other party,
but each shall bear the expenses incurred by it incidental to the preparation and carrying out of this Agreement as provided in
paragraph 9.
12. AMENDMENTS; WAIVERS
12.1 This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing
by the authorized officers of the Acquired Portfolio and the Acquiring Portfolio; provided, however, that following the meeting of
the Acquired Portfolio shareholders called by the Acquired Portfolio pursuant to paragraph 5.2 of this Agreement, no such
amendment may have the effect of changing the provisions for determining the number of Acquiring Portfolio Shares to be issued to
the Acquired Portfolio's shareholders under this Agreement to the detriment of such shareholders without their further approval.
12.2 At any time prior to the Closing Date either party hereto may by written instrument signed by it (i) waive any
inaccuracies in the representations and warranties made to it contained herein and (ii) waive compliance with any of the covenants
or conditions (other than those contained in any of paragraph 8.1, paragraph 8.4 or paragraph 8.6 of this Agreement) made for its
benefit contained herein.
13. NOTICES
Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing
and shall be given by hand delivery, fax, or certified mail addressed to the AAL Variable Product Series Fund, Inc., 625 Fourth
Avenue South, Minneapolis, Minnesota 55415, Attention: Brett Agnew; or to LB Series Fund, Inc., 625 Fourth Avenue South,
Minneapolis, MN 55415, Attention: John C. Bjork.
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
14.l The article and paragraph headings contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.
14.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and
assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the
written consent of the other party. Nothing herein expressed or implied is intended or shall be construed to confer upon or give
any person, firm, corporation or other entity, other than the parties hereto and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its Chairman of the Board,
President or Vice President and attested by its Secretary or Assistant Secretary.
Attest:
_______________________________ _______________________________
Attest:
_______________________________ _______________________________
APPENDIX B
LB Series Fund, Inc.
Prospectus
April 30, 2003
World Growth Portfolio
The Securities and Exchange Commission has not approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Table of Contents
PAGE
World Growth Portfolio.............................
Fees and Expenses of the Portfolio.................
Management.........................................
Investment Adviser.............................
Investment Subadvisers.........................
Advisory Fees..................................
Personal Securities Investments................
The Separate Accounts And The Retirement Plans.....
Pricing of Fund Shares.............................
Tax Matters........................................
Other Securities And Investment Practices..........
Financial Highlights...............................
World Growth Portfolio
Investment Objective
The investment objective of the World Growth Portfolio is to achieve long-term growth of capital by investing primarily in a professionally managed diversified portfolio of common stocks of established, non-U.S. companies.
Principal Strategies
The World Growth Portfolio seeks to achieve its objective by investing substantially all of its assets in stocks outside the U.S. and to diversify broadly among developed and emerging countries throughout the world. Normally, at least 80% of the Portfolio's net assets (plus the amount of any borrowing for investment purposes) will be invested in stocks.
Stock selection reflects a growth style. While stocks may be purchased without regard to a company's market capitalization, the focus typically will be on large and, to a lesser extent, medium-sized, companies. In determining the appropriate distribution of investments among various countries and geographic regions, T. Rowe Price International, Inc. ("Price International"), the Portfolio's subadviser, employs in-depth fundamental research in an effort to identify companies capable of achieving and sustaining above-average, long-term earnings growth. Price International seeks to purchase such stocks at reasonable prices in relation to present or anticipated earnings, cash flow, or book value, and valuation factors often influence its allocations among large-, mid-, or small-cap shares.
While Price International invests with an awareness of the global economic backdrop and its outlook for industry sectors and individual countries, bottom-up stock selection is the focus of its decision-making. Country allocation is driven largely by stock selection, though the sub-adviser may limit investments in markets that appear to have poor overall prospects.
In selecting stocks, Price International generally favors companies with one or more of the following characteristics:
- Leading market position
- Attractive business niche
- Strong franchise or natural monopoly
- Technological leadership or proprietary advantages
- Seasoned management
- Earnings growth and cash flow sufficient to support growing dividends
- Healthy balance sheet with relatively low debt
In pursuing the Portfolio's investment objective, Price International has the discretion to purchase some securities that do not meet its normal investment criteria, as described above, when it perceives an unusual opportunity for gain. These special situations might arise when Price International believes a security could increase in value for a variety of reasons including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.
While the World Growth Portfolio invests primarily in common stocks, to a lesser extent it may also purchase other instruments and securities, including foreign currency and foreign currency exchange contracts, futures and options, in keeping with the Portfolio's objective.
The World Growth Portfolio may sell securities for a variety of reasons, such as to secure gains, limit losses, or reposition assets into more promising opportunities.
Principal Risks
The World Growth Portfolio's principal risks are the general risks of stock investing. They include the risk of sudden and unpredictable drops in the value of the market as a whole and periods of lackluster performance. Stock markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment.
Growth style investing includes the risk of investing in securities whose prices historically have been more volatile than other securities, especially over the short term. Growth stock prices reflect projections of future earnings or revenues, and if a company's earnings or revenues fall short of expectations, its stock price may fall dramatically.
Stocks of non-U.S. companies in which the World Growth Portfolio invests generally carry more risk than stocks of U.S. companies. One of the most important is currency risk. This refers to a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency. The overall impact on the World Growth Portfolio's holdings can be significant, unpredictable, and long-lasting, depending on the currencies represented in the portfolio, how each one appreciates or depreciates in relation to the U.S. dollar, and whether currency positions are hedged.
The economies and financial markets of certain regions - such as Latin America, Asia, Europe and the Mediterranean region - can be highly interdependent and may decline all at the same time. Other risks result from the varying stages of economic and political development of foreign countries, the differing regulatory environments, trading days, and accounting standards of non-U.S. markets, and higher transaction costs. The World Growth Portfolio's investment in any country could be subject to governmental actions such as capital or currency controls, nationalizing a company or industry, expropriating assets, or imposing punitive taxes which would have an adverse effect on security prices and impair the World Growth Portfolio's ability to repatriate capital or income. These risks are usually greater in emerging markets. To the extent the Portfolio invests in emerging markets, it is subject to the abrupt and severe price declines these holdings can experience.
The economic and political structure of developing nations, in most cases, do not compare favorably with the U.S. or other developed countries in terms of wealth and stability, and their financial markets often lack liquidity. The Portfolio's performance will likely be negatively affected by its exposure to nations in the midst of hyperinflation, currency devaluation, trade disagreements, sudden political upheaval or interventionist government policies. Significant buying or selling actions by a few major investors may also heighten the volatility of emerging markets. These factors make investing in such countries significantly riskier than in other countries and any one of them could cause the Portfolio's share price to decline.
To the extent the Portfolio uses futures and options, it is exposed to additional volatility and potential losses.
For these and other reasons, the World Growth Portfolio may underperform other stock funds (such as U.S. stock funds) when international stocks are out of favor.
The success of the Portfolio's investment strategy depends significantly on Price International's skill in assessing the potential of the securities in which the Portfolio invests. Shares of the World Growth Portfolio will rise and fall in value and there is a risk that you could lose money by investing in the Portfolio. The World Growth Portfolio cannot be certain that it will achieve its objective.
Defining Terms
Fundamental investment analysis
Fundamental investment analysis generally involves assessing a company's or security's value based on factors such as sales, assets, markets, management, products and services, earnings, and financial structure.
Volatility and Performance
The bar chart and table shown below provide an indication of the risks of investing in the World Growth Portfolio by showing changes in the Portfolio's performance from year to year and by showing how the Portfolio's average annual returns for a one-year period, a five-year period and since inception compared to a broad-based securities market index.
The bar chart and table include the effects of Portfolio expenses, but not charges or deductions against your variable contract, and assume that you sold your investment at the end of the period. Because shares of the Portfolio may be purchased only through variable life insurance and variable annuity contracts, you should carefully review the variable contract prospectus for information on applicable charges and expenses. If the charges and deductions against your variable contract were included, returns would be lower than those shown.
How a Portfolio has performed in the past is not necessarily an indication of how it will perform in the future. The World Growth Portfolio commenced operations on January 18, 1996.
[CHART]
YEAR-BY-YEAR TOTAL RETURN
1997 1998 1999 2000 2001 2002
- ----- ------ ------ ------- ------- -------
2.81% 16.75% 34.13% -16.12% -21.03% -17.43%
Best Quarter: Q4 '99 +24.47%
Worst Quarter: Q3 '02 -21.52%
AVERAGE ANNUAL TOTAL RETURNS
(Periods ending December 31, 2002)
Since
Inception
1 Year 5 Years (1/18/96)
World Growth Portfolio -17.43% -3.05% -0.41%
- ----------------------------------------------------
MSCI EAFE Index -15.94% -2.89% 2.06%
- ----------------------------------------------------
The MSCI EAFE Index is an unmanaged market capitalization-weighted equity Index composed of a sample of companies representative of the market structure in 20 countries. Constituent stocks are selected on the basis of industry representation, liquidity and sufficient float.
Fees and Expenses of the Portfolio
Like any investor, you pay certain fees and expenses related to your investments. Annual Portfolio and operating expenses are paid from Portfolio assets so they directly impact the share price. The following tables describe the fees and expenses that you may pay if you buy and hold shares of the Portfolio. Note that the expenses shown in the tables are only at the Portfolio level. If you own a variable annuity or variable life contract, you will incur additional expenses at the variable account level such as a mortality and expense risk charge. Please refer to the appropriate variable account prospectus for more information on fees and expenses associated with variable products.
SHAREHOLDER FEES (fees paid directly from your investment) Maximum Sales Charge (Load) Imposed on Purchases N/A - ----------------------------------------------------- Maximum Deferred Sales Charge (Load) N/A - ----------------------------------------------------- Maximum Sales Charge (Load) Imposed on Reinvested Dividends N/A - ----------------------------------------------------- Redemption Fee N/A - ----------------------------------------------------- Exchange Fee N/A - ----------------------------------------------------- ANNUAL PORTFOLIO OPERATING EXPENSES (expenses that are deducted from Fund assets) Management Fees 0.85% - ----------------------------------------------------- Other Expenses 0.10% - ----------------------------------------------------- Total Portfolio Annual Expenses 0.95% - -----------------------------------------------------
EXPENSE EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Portfolio's operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 3 5 10
Year Years Years Years
- ---------------------------------------------------------
World Growth Portfolio $97 $303 $525 $1,166
- ---------------------------------------------------------
Management
INVESTMENT ADVISER
Thrivent Financial for Lutherans ("Thrivent Financial"), 625 Fourth Avenue South, Minneapolis, Minnesota 55415, serves as investment adviser for each of the Portfolios of LB Series Fund, Inc ("the Fund"). Thrivent Financial and its affiliates have been in the investment advisory business since 1986 and managed approximately $57.2 billion in assets as of December 31, 2002, including approximately $10.7 billion in mutual fund assets.
For the World Growth Portfolio, Thrivent Financial establishes the overall investment strategy and evaluates, selects and recommends, subject to the approval of the Board of Directors of the Fund, one or more subadvisers to manage the investments of the Portfolio. It also allocates assets to the subadviser, monitors the performance, security holdings and investment strategies of the subadviser and, when appropriate, researches any potential new subadviser for the Portfolio. Thrivent Financial has ultimate responsibility to oversee the subadviser and recommend their hiring, termination and replacement.
Thrivent Financial and the Fund have received an exemptive order from the Securities and Exchange Commission ("SEC") that permits Thrivent Financial and the Fund, with the approval of the Fund's Board of Directors, to retain a subadviser for the Portfolio, or subsequently change the subadviser, without submitting the investment subadvisory agreement, or material amendments to the agreement, to a vote of the shareholders of the Portfolio. Thrivent Financial will notify variable contract owners in the event that it adds a subadviser or changes the identity of the subadviser of the Portfolio.
INVESTMENT SUBADVISER
Thrivent Financial has engaged Price International, 100 East Pratt Street, Baltimore, Maryland 21202, as investment subadviser for the World Growth Portfolio. Price International is one of the world's largest international mutual fund asset managers with the U.S. equivalent of about $18.0 billion under management as of December 31, 2002 in its offices in Baltimore, London, Tokyo, Singapore, Paris, Hong Kong, and Buenos Aires. Price International has an investment advisory group that has day-to-day responsibility for managing the Portfolio and developing and executing the Portfolio's investment program.
ADVISORY FEES
Thrivent Financial receives an investment management fee for the World Growth Portfolio. The fee is a daily charge equal to the annual rate of a percentage of average daily net assets of the Portfolio. The advisory fee paid by the World Growth Portfolio for 2002 as an annualized percentage of average net assets was .85%.
PERSONAL SECURITIES INVESTMENTS
Personnel of Thrivent Financial and Price International may invest in securities for their own account pursuant to codes of ethics that establish procedures for personal investing and restrict certain transactions. Transactions in securities that may be held by the Funds are permitted, subject to compliance with applicable provisions under their respective codes of ethics.
The Separate Accounts And The Retirement Plans
Shares in the Fund are currently sold, without sales charges, only to:
- Separate accounts of Thrivent Financial and Thrivent Life Insurance Company ("Thrivent Life"), which are used to fund benefits of variable life insurance and variable annuity contracts (each a "variable contract") issued by Thrivent Financial and Thrivent Life; and
- Retirement plans sponsored by Thrivent Financial.
A Prospectus for the variable contract describes how the premiums and the assets relating to the variable contract may be allocated among one or more of the subaccounts that correspond to the Portfolios of the Fund. Participants in the retirement plans should consult retirement plan documents for information on how to invest.
As a result of differences in tax treatment and other considerations, a conflict could arise between the interests of the variable contract owners and the interest of plan participants with respect to their investments in the Fund. The Fund's Board of Directors will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action if any, should be taken in response to any such conflicts.
Pricing of Fund Shares
The Portfolio determines its net asset value ("NAV") on each day the New York Stock Exchange ("NYSE") is open for business, or any other day as required under the rules of the Securities and Exchange Commission. The NYSE is currently closed on New Year's Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The calculation normally is made as of the close of regular trading of the NYSE (currently 4:00 p.m. Eastern time) after the Portfolio has declared any applicable dividends. Because foreign securities markets are open on different days from U.S. markets, there may be instances when the value of the Portfolio's investment in foreign securities changes on days when you are not able to purchase or redeem shares.
The World Growth Portfolio determines its NAV by adding the value of Portfolio assets, subtracting the Portfolio's liabilities, and dividing the result by the number of outstanding shares. The NAV for the Portfolio varies with the value of its investments. The Portfolio values its securities using market quotations, other than short-term debt securities maturing in less than 60 days, which are valued using amortized costs, and securities for which market quotations are not readily available, which are valued at fair value.
The Fund has authorized Thrivent Financial and one or more other entities to accept orders from participants in the retirement plans. The separate accounts and the retirement plans each place an order to buy or sell shares of the Portfolio each business day. The amount of the order is based on the aggregate instructions from owners of the variable annuity contracts or the participants in the retirement plans. Orders placed before the close of the NYSE on a given day by the separate accounts, the retirement plans, or participants in the retirement plans result in share purchases and redemptions at the NAV calculated as of the close of the NYSE that day.
Tax Matters
Since you do not own shares of the Fund directly, any transaction relating to either your variable contract or retirement plan results in tax consequences at that level. Please refer to the tax discussion the in applicable account prospectus or your retirement plan documents for more information.
Under existing tax law, dividends or capital gains distributions from the Portfolio are not currently taxable to holders of variable annuity contracts when left to accumulate within a variable contract. Depending on the variable contract, withdrawals from the contract may be subject to ordinary income tax and, in addition, to a 10% penalty tax on withdrawals before age 59.
Other Securities And Investment Practices
The principal investment strategies and risk factors of the Portfolio are outlined beginning on page B-3. The Portfolio may also invest in other securities and engage in other practices. Below are brief discussions of some of these securities, other practices in which the Portfolio may engage, and their associated risks.
Repurchase Agreements. The Portfolio may buy securities with the understanding that the seller will buy them back with interest at a later date. If the seller is unable to honor its commitment to repurchase the securities, the Portfolio could lose money.
When-Issued Securities. The Portfolio may invest in securities prior to their date of issue. These securities could fall in value by the time they are actually issued, which may be any time from a few days to over a year. In addition, no income will be earned on these securities until they are actually delivered.
Zero Coupons. The Portfolio may invest in zero coupon securities. A zero coupon security is a debt security that is purchased and traded at discount to its face value because it pays no interest for some or all of its life. Interest, however, is reported as income to the Portfolio that has purchased the security and the Portfolio is required to distribute to shareholders an amount equal to the amount reported. Those distributions may require the Portfolio to liquidate securities at a disadvantageous time.
Industry Exposure. The Portfolio may invest up to (but not more than) 25% of its assets in the securities of a single industry. To the extent that the Portfolio invests in a particular industry, it will be exposed to the unique risks associated with that industry. As of the date of this Prospectus, the Portfolio did not hold securities of any company primarily engaged in the alcohol, gaming, or tobacco industries. The Portfolio is not prohibited from investing in these industries, however, and may hold such securities from time to time in the future.
Foreign Securities. The Portfolio may invest in foreign securities. Foreign securities are generally more volatile than their domestic counterparts, in part because of higher political and economic risks, lack of reliable information and fluctuations in currency exchange rates. These risks are usually higher in less developed countries. The Portfolio may use foreign currencies and related instruments to hedge its foreign investments.
Foreign securities also may be more difficult to resell than comparable U.S. securities because the markets for foreign securities are less efficient. Even where a foreign security increases in price in its local currency, the appreciation may be diluted by the negative effect of exchange rates when the security's value is converted to U.S. dollars. Foreign withholding taxes also may apply and errors and delays may occur in the settlement process for foreign securities.
International Exposure. The Portfolio may have some international exposure in its investments. Many U.S. companies in which the Portfolio may invest generate significant revenues and earnings from abroad. As a result, these companies and the prices of their securities may be affected by weaknesses in global and regional economies and the relative value of foreign currencies to the U.S. dollar. These factors, taken as a whole, could adversely affect the price of Portfolio shares.
Emerging Markets Exposure. The Portfolio may have some emerging markets exposure. Emerging market countries have historically experienced, and may continue to experience, certain economic problems. These may include high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of debt, balance of payments and trade difficulties, and extreme poverty and unemployment.
Restricted And Illiquid Securities. The Portfolio may invest to a limited extent in restricted or illiquid securities. Any securities that are thinly traded or whose resale is restricted can be difficult to sell at a desired time and price. Some of these securities are new and complex, and trade only among institutions. The markets for these securities are still developing and may not function as efficiently as established markets. Owning a large percentage of restricted or illiquid securities could hamper the Portfolio's ability to raise cash to meet redemptions. Also, because there may not be an established market price for these securities, the Portfolio may have to estimate their value, which means that their valuation (and, to a much smaller extent, the valuation of the Portfolio) may have a subjective element.
Securities Lending. The Portfolio may seek additional income by lending securities to qualified institutions. By reinvesting any cash collateral it receives in these transactions, the Portfolio could realize additional gains or losses. If the borrower fails to return the securities and the invested collateral has declined in value, the Portfolio could lose money.
Derivatives. The Portfolio may invest in derivatives. Derivatives, a category that includes options and futures, are financial instruments whose value derives from another security, an index or a currency. The Portfolio may use derivatives for hedging (attempting to offset a potential loss in one position by establishing an interest in an opposite position). This includes the use of currency-based derivatives for hedging its positions in foreign securities. The Portfolio may also use derivatives for speculation (investing for potential income or capital gain).
While hedging can guard against potential risks, it adds to the Portfolio's expenses and can eliminate some opportunities for gains. There is also a risk that a derivative intended as a hedge may not perform as expected.
The main risk with derivatives is that some types can amplify a gain or loss, potentially earning or losing substantially more money than the actual cost of the derivative.
With some derivatives, whether used for hedging or speculation, there is also the risk that the counterparty may fail to honor its contract terms, causing a loss for the Portfolio. In addition, suitable derivative investments for hedging or speculative purposes may not be available.
High-Yield Bonds. The Portfolio may invest in high-yield bonds. High-yield bonds are debt securities rated below BBB by S&P or Baa by Moody's. To the extent that the Portfolio invests in high-yield bonds, it takes on certain risks:
- The risk of a bond's issuer defaulting on principal or interest payments is greater than on higher quality bonds.
- Issuers of high-yield bonds are less secure financially and are more likely to be hurt by interest rate increases and declines in the health of the issuer or the economy.
Bonds. The value of any bonds held by the Portfolio is likely to decline when interest rates rise; this risk is greater for bonds with longer maturities. A less significant risk is that a bond issuer could default on principal or interest payments, possibly causing a loss for the Portfolio.
Short-Term Trading. The investment strategy for the Portfolio at times may include short-term trading. While the Portfolio ordinarily does not trade securities for short-term profits, it will sell any security at any time it believes best, which may result in short-term trading. Short-term trading can increase the Portfolio's transaction costs.
Initial Public Offering. The Portfolio may engage in initial public offerings (IPOs) of securities. IPOs issued by unseasoned companies with little or no operating history are risky and their prices are highly volatile, but they can result in very large gains in their initial trading. Thus, when the Portfolio's size is smaller, any gains from IPOs will have an exaggerated impact on the Portfolio's reported performance than when the Portfolio is larger. Attractive IPOs are often oversubscribed and may not be available to the Portfolio, or only in very limited quantities. There can be no assurance that a Portfolio will have favorable IPO investment opportunities.
Securities Ratings. When fixed-income securities are rated by one or more independent rating agencies, the Portfolio uses these ratings to determine bond quality. Investment grade bonds are those that are rated within or above the BBB major rating category by S&P or the Baa major rating category by Moody's, or unrated but considered of equivalent quality by the Portfolio's adviser. High-yield bonds are below investment grade bonds in terms of quality.
In cases where a bond is rated in conflicting categories by different rating agencies, the Portfolio may choose to follow the higher rating. If a bond is unrated, the Portfolio may assign it to a given category based on its own credit research. If a rating agency downgrades a security, the Portfolio will determine whether to hold or sell the security, depending on all of the facts and circumstances at that time.
Defensive Investing. In response to market, economic, political, or other conditions, the Portfolio may invest without limitation in cash, preferred stocks, or investment-grade debt securities for temporary defensive purposes. If the Portfolio does this, different factors could affect the Portfolio's performance and it may not achieve its investment objective.
Financial Highlights
The financial highlights table for the Portfolio is intended to help you understand the Portfolio's financial performance for the past five years or, if shorter, the period of the Portfolio's operations. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Portfolio (assuming reinvestment of all dividends and distributions). All per share amounts have been rounded to the nearest cent. The returns do not reflect any charges that would normally occur at the separate account level. This information has been audited by PricewaterhouseCoopers LLP, independent accountants, whose report, along with the Portfolio's financial statements, are included in the Annual Report for the fiscal year ended December 31, 2002, which is available upon request.
World Growth Portfolio
- ---------------------------------------------------------------------------------------------------------
Year Year Year Year Year
Ended Ended Ended Ended Ended
For a share outstanding throughout each period (a) 12/31/2002 12/31/2001 12/31/2000 12/31/1999 12/31/1998
- ---------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.02 $13.83 $16.93 $12.67 $11.12
Income from Investment Operations:
Net investment income/(loss) 0.10 0.07 0.06 0.11 0.12
Net realized and unrealized gain/(loss) on
investments (b) (1.85) (2.81) (2.73) 4.21 1.74
Total from Investment Operations (1.75) (2.74) (2.67) 4.32 1.86
Less Distributions from:
Net investment income (0.04) (0.05) - (0.06) (0.21)
Net realized gains on investments - (1.02) (0.43) - (0.10)
Total Distributions (0.04) (1.07) (0.43) (0.06) (0.31)
Net Asset Value, End of period $8.23 $10.02 $13.83 $16.93 $12.67
Total return (c) (17.43)% (21.03)% (16.12)% 34.13% 16.75%
Net assets, end of period (in millions) $323.3 $440.0 $561.3 $550.1 $369.7
Ratio of expenses to average net assets (d) 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income/(loss) to average
net assets (d) 1.08% 0.68% 0.44% 0.89% 1.04%
Portfolio turnover rate 20% 30% 38% 23% 19%
If the adviser had not reimbursed expenses and the Portfolio had not received credits for fees paid
indirectly the ratios would have been:
Ratio of expenses to average net assets (d,e) 0.95%
Ratio of net investment income/(loss) to average
net assets (d,e) 0.98%
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown may not correlate 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
any deduction for sales charges. Not annualized for periods less than one year.
(d) Computed on an annualized basis for periods less than one year.
(e) Prior period ratios not calculated due to a contractual arrangement between
the Portfolios and the Advisor to reimburse all expenses in excess of Advisory
fees.
The Statement of Additional Information which is incorporated by reference into this Prospectus contains additional information about the Fund and its Portfolios. Additional information about the Portfolios' investments is available in the Fund's annual and semi-annual reports for variable products. In the Fund's annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the performance of each of the Portfolios during their last fiscal year. You may request a free copy of the Statement of Additional Information, the annual report, or the semi-annual report, or you may make additional requests or inquiries by calling 1-800-847-4836. You also may review and copy information about the Portfolios (including the Statement of Additional Information) at the Public Reference Room of the Securities and Exchange Commission in Washington, DC. You may get more information about the Public Reference Room by calling 1-202-942-8090. You also may get information about the Portfolios on the EDGAR database at the SEC web site (www.sec.gov) and copies of the information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, Washington, DC 20549-6009, or by sending an e-mail to: publicinfo@sec.gov.
1940 Act File No. 811-4603
APPENDIX C
LB Series Fund, Inc.
Prospectus
February 1, 2004
As Supplemented February 12, 2004
Thrivent Technology Portfolio
Thrivent Partner Small Cap Value Portfolio
Thrivent Small Cap Stock Portfolio
Thrivent Small Cap Index Portfolio
Thrivent Mid Cap Stock Portfolio
Thrivent Mid Cap Index Portfolio
Thrivent Large Cap Stock Portfolio
Thrivent Large Cap Index Portfolio
Thrivent Real Estate Securities Portfolio
Thrivent Balanced Portfolio
Thrivent Partner High Yield Portfolio
Thrivent Bond Index Portfolio
Thrivent Mortgage Securities Portfolio
The Securities and Exchange Commission has not approved or disapproved these securities or
determined if this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Table Of Contents
Page
Thrivent Technology Portfolio
Thrivent Partner Small Cap Value Portfolio
Thrivent Small Cap Stock Portfolio
Thrivent Small Cap Index Portfolio
Thrivent Mid Cap Stock Portfolio
Thrivent Mid Cap Index Portfolio
Thrivent Large Cap Stock Portfolio
Thrivent Large Cap Index Portfolio
Thrivent Real Estate Securities Portfolio
Thrivent Balanced Portfolio
Thrivent Partner High Yield Portfolio
Thrivent Bond Index Portfolio
Thrivent Mortgage Securities Portfolio
Management
Investment Adviser
Investment Subadviser and Portfolio Managers
Advisory Fees
Personal Securities Investments
The Separate Accounts And The Retirement Plans
Pricing of Portfolio Shares
Tax Matters
Other Securities And Investment Practices
THE PORTFOLIOS
THRIVENT TECHNOLOGY PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Technology Portfolio seeks long-term capital appreciation by investing primarily in
a diversified portfolio of common stocks and securities convertible into common stocks.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests at least 80% of net assets (plus the amount of
any borrowing for investment purposes) in technology stocks. Technology stocks include stocks
issued by companies in the following industries: information technology, telecommunications
services, computer and electronics retail, internet retail, biotechnology, healthcare equipment,
aerospace and defense, data processing services and media. The Portfolio's investment adviser,
Thrivent Financial for Lutherans ("Thrivent Financial" or the "investment adviser"), focuses on
equity securities of technology companies that have a strong potential for future growth. These
companies typically provide little or no dividend. Should the investment adviser determine that
the Portfolio would benefit from reducing the percentage of invested assets from 80% to a lesser
amount, you will be notified at least 60 days prior to such a change.
Thrivent Financial uses fundamental and technical investment research techniques to determine
what securities to buy and sell. Fundamental investment analysis generally involves assessing a
company's or security's value based on factors such as sales, assets, markets, management,
products and services, earnings, and financial structure. Technical analysis generally involves
studying trends and movements in a security's price, trading volume and other market-related
factors in an attempt to discern patterns.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains, limit
losses, or reposition assets to insure promising opportunities.
INVESTMENT RISKS
Thrivent Technology Portfolio is subject to the following principal investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of the Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. The prices
of technology securities historically have been more volatile than other securities, especially
over the short term.
Technology Risk. Technology risk includes the acceptance of new technologies by consumers or
business, rapid obsolescence and short product cycles.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Technology Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Technology Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.75%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.45%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 1.20%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Technology Portfolio has been newly organized, the percentage expense
levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the Portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent
Technology $122 $381
- ------------------- ----------------- -----------------
THRIVENT PARTNER SMALL CAP VALUE PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Partner Small Cap Value Portfolio seeks long-term capital appreciation by investing
primarily in a diversified portfolio of small company common stocks and securities convertible
into small company common stocks.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests at least 80% of net assets (plus the amount of
any borrowing for investment purposes) in small company common stocks. T. Rowe Price Associates,
Inc. ("T. Rowe Price"), the Portfolio's subadviser focuses mainly on the stocks of smaller
companies with market capitalizations at time of purchase that are within or below the range of
companies included in the Russell 2000 Value Index. Although market capitalizations are
constantly changing, the largest companies included in the Index have market capitalizations
between $1.72 billion and $16.4 million, as of April 30, 2003. The Portfolio will not sell a
stock just because the company has grown to a market capitalization outside the range, and the
Portfolio may occasionally purchase companies with market capitalizations above the range.
Should T. Rowe Price determine that the Portfolio would benefit from reducing the percentage of
invested assets from 80% to a lesser amount, you will be notified at least 60 days prior to such
a change.
The Portfolio ordinarily invests in equity securities of small companies that are believed to be
undervalued. A company's securities may be undervalued because the company is temporarily
overlooked or out of favor due to general economic conditions, a market decline, or industry
conditions or developments affecting the particular company. Using fundamental research, T.
Rowe Price seeks to identify companies that appear to be undervalued by various measures, and
may be temporarily out of favor, but have good prospects for capital appreciation. T. Rowe
Price considers these factors, among others, in choosing companies:
o low price/earnings, price/book value, or price/cash flow ratios relative to the S&P 500,
the company's peers, or its own historic norm;
o low stock price relative to a company's underlying asset values;
o above-average dividend yield relative to a company's peers or its own historic norm;
o a plan to improve the business through restructuring; and
o a sound balance sheet and other positive financial characteristics.
T. Rowe Price may sell securities for a variety of reasons, such as to secure gains, limit
losses, or reposition assets to more promising opportunities.
T. Rowe Price uses fundamental and technical investment research techniques to determine what
securities to buy and sell. Fundamental investment analysis generally involves assessing a
company's or security's value based on factors such as sales, assets, markets, management,
products and services, earnings, and financial structure.
INVESTMENT RISKS
The Thrivent Partner Small Cap Value Portfolio is subject to the following primary investment
risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of the Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index. They also may decline because of factors that
affect a particular industry.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. Stocks of
undervalued companies may not rise as quickly as anticipated if the market doesn't recognize
their intrinsic values or if value stocks are out of favor. In addition, smaller, less
seasoned companies often have greater price volatility than larger, more established companies
and tend to be more dependent on the success of limited product lines and have less experienced
management and financial resources.
Value Style Risk. The value approach carries the risk that the market will not recognize a
security's intrinsic value for a long time, or that a stock judged to be undervalued may
actually be appropriately priced.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a price
that most closely reflects the actual value of the security. Small capitalization stocks often
have a less liquid resale market. As a result, the Portfolio may have difficulty selling or
disposing of securities quickly in certain markets.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Partner Small Cap Value Portfolio is newly created so no bar chart or performance
table is included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Partner Small Cap Value Portfolio. If you own a variable annuity contract or a
variable life insurance contract, you will have additional expenses, including mortality and
expense risk charges. Please refer to the prospectus for your variable contract for additional
information about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.80%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.92%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 1.72%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Partner Small Cap Value Portfolio has been newly organized, the percentage
expense levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Partner
Small Cap Value $175 $542
- ------------------- ----------------- -----------------
THRIVENT SMALL CAP STOCK PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Small Cap Stock Portfolio seeks long-term capital growth by investing primarily in
small company common stocks and securities convertible into small company common stocks.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests at least 80% of net assets (plus the amount of
any borrowing for investment purposes) in small company common stocks. Thrivent Financial
focuses mainly in the stocks of smaller companies which have market capitalizations similar to
those companies included in widely known indices such as the S&P SmallCap 600 Index and the
Russell 2000 Index. Should Thrivent Financial determine that the Portfolio would benefit
from reducing the percentage of invested assets from 80% to a lesser amount, you will be
notified at least 60 days prior to such a change. Small companies tend to be less
recognizable than companies listed in the S&P 500 Index or the S&P MidCap 400 Index.
Thrivent Financial uses fundamental and technical investment research techniques to determine
what securities to buy and sell. Fundamental investment analysis generally involves assessing a
company's or security's value based on factors such as sales, assets, markets, management,
products and services, earnings, and financial structure. Technical analysis generally involves
studying trends and movements in a security's price, trading volume, and other market-related
factors in an attempt to discern patterns.
Thrivent Financial looks for small companies (including companies initially offering stock to
the public) that, in its opinion:
o are in the early stages of development or positioned in new and emerging industries;
o have an opportunity for rapid growth;
o have capable management; and
o are financially sound.
Due to certain market inefficiencies, Thrivent Financial believes that properly selected small
company stocks offer greater opportunities for long-term capital growth.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains, limit
losses, or reposition assets to more promising opportunities.
INVESTMENT RISKS
The Thrivent Small Cap Stock Portfolio is subject to the following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of the Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. Smaller,
less seasoned companies often have greater price volatility than larger, more established
companies and tend to be more dependent on the success of limited product lines and may have
less experienced management and financial resources.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a price
that most closely reflects the actual value of the security. Small capitalization stocks often
have a less liquid resale market. As a result, the Portfolio may have difficulty selling or
disposing of securities quickly in certain markets or market environments.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Small Cap Stock Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Small Cap Stock Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.70%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.15%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.85%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Small Cap Stock Portfolio has been newly organized, the percentage expense
levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Small
Cap Stock $87 $271
- ------------------- ----------------- -----------------
THRIVENT SMALL CAP INDEX PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Small Cap Index Portfolio seeks capital growth that tracks the performance of the
S&P SmallCap 600 Index by investing primarily in common stocks of the Index.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests in all of the small company common stocks
included in the S&P SmallCap 600 Index in the proportions in which they are represented in the
Index. This is a passively managed Portfolio, which means that Thrivent Financial does not
choose the securities that make up the Portfolio. When changes to the Index occur, Thrivent
Financial will attempt to replicate these changes within the Portfolio. However, any such
changes may result in slight variations from time to time.
For liquidity reasons, Thrivent Financial may invest, to some degree, in money market
instruments.
Small company stocks are considerably more risky than large company stocks since small companies
are less mature and do not have access to financial resources that a large company would have.
While the risks are greater, so is the potential for reward.
INVESTMENT RISKS
The Thrivent Small Cap Index Portfolio is subject to the following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of the Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index. They also may decline because of factors that
affect a particular industry.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. Smaller,
less seasoned companies often have greater price volatility than larger, more established
companies and tend to be more dependent on the success of limited product lines and may have
less experienced management and financial resources.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a price
that most closely reflects the actual value of the security. Small capitalization stocks often
have a less liquid resale market. As a result, the Portfolio may have difficulty selling or
disposing of securities quickly in certain markets or market environments.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Small Cap Index Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Small Cap Index Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.34%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.09%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.43%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Small Cap Index Portfolio has been newly organized, the percentage expense
levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Small
Cap Index $44 $138
- ------------------- ----------------- -----------------
THRIVENT MID CAP STOCK PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Mid Cap Stock Portfolio seeks long-term capital growth by investing primarily in
common stocks and securities convertible into common stocks, of mid-sized companies.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests at least 80% of net assets (plus the amount of
any borrowing for investment purposes) in mid-sized company stocks. Thrivent Financial focuses
mainly on the stocks of mid-sized companies which have market capitalizations similar to those
included in widely known indices such as the S&PMidCap 400 Index and the Russell MidCap Index.
Should Thrivent Financial determine that the Portfolio would benefit from reducing the
percentage of invested assets from 80% to a lesser amount, you will be notified at least 60 days
prior to such a change.
Thrivent Financial uses fundamental and technical investment research techniques to determine
what securities to buy and sell. Fundamental investment analysis generally involves assessing a
company's or security's value based on factors such as sales, assets, markets, management,
products and services, earnings, and financial structure. Technical analysis generally involves
studying trends and movements in a security's price, trading volume, and other market-related
factors in an attempt to discern patterns.
Thrivent Financial looks for mid-sized companies (including companies initially offering stock
to the public) that, in its opinion:
o have prospects for growth in their sales and earnings;
o are in an industry with a good economic outlook;
o have high-quality management; and
o have a strong financial position.
Thrivent Financial usually picks companies in the middle stages of their development. These
companies tend to have established a record of profitability and possess a new technology,
unique product or market niche.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains, limit
losses, or reposition assets to more promising opportunities.
INVESTMENT RISKS
The Thrivent Mid Cap Stock Portfolio is subject to the following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of a Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment.
Medium-sized companies often have greater price volatility, lower trading volume, and less
liquidity than larger, more-established companies. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience, smaller shares of their
product or service markets, fewer financial resources, and less competitive strength than larger
companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Mid Cap Stock Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
The table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Mid Cap Stock Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expenses risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.70%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.34%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 1.04%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Mid Cap Stock Portfolio has been newly organized, the percentage expense
levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the Portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Mid Cap
Stock $106 $331
- ------------------- ----------------- -----------------
THRIVENT MID CAP INDEX PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Mid Cap Index Portfolio seeks total returns that track the performance of the S&P
MidCap 400 Index by investing primarily in common stocks comprising the Index.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests in all of the mid-sized company stocks
included in the S&P MidCap 400 Index. This is a passively managed Portfolio, which means that
Thrivent Financial does not choose the securities that make up the Portfolio. When changes to
the Index occur Thrivent Financial will attempt to replicate these changes within the Portfolio.
However, any such changes may result in slight variations from time to time.
For liquidity reasons, the Portfolio may invest, to some degree, in money market instruments.
INVESTMENT RISKS
The Thrivent Mid Cap Index Portfolio is subject to the following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of a Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. Medium-sized
companies often have greater price volatility, lower trading volume, and less liquidity than
larger, more-established companies. These companies tend to have smaller revenues, narrower
product lines, less management depth and experience, smaller shares of their product or service
markets, fewer financial resources, and less competitive strength than larger companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Mid Cap Index Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Mid Cap Index Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.35%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.32%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.67%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Mid Cap Index Portfolio has been newly organized, the percentage expense
levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the Portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Mid Cap
Index $68 $214
- ------------------- ----------------- -----------------
THRIVENT LARGE CAP STOCK PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Large Cap Stock Portfolio seeks long-term capital growth by investing primarily in
a diversified portfolio of common stocks and securities convertible into common stocks.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests at least 80% of total assets in common stocks,
not including convertible securities. Thrivent Financial, the investment adviser, focuses on
dividend-paying stocks of companies with earnings growth per share that are higher than stocks
included in the S&P 500 Index. Thrivent Financial looks for good corporate fundamentals by
examining a company's quality, operating growth predictability and financial strength. The
Portfolio focuses on larger companies, although it may invest across all market capitalizations
and across all industries and sectors. The Portfolio does not invest in bonds for capital growth
or for long time periods. Should Thrivent Financial determine that the Portfolio would benefit
from reducing the percentage of invested assets from 80% to a lesser amount, you will be
notified at least 60 days prior to such a change.
Thrivent Financial uses fundamental and technical investment research techniques to determine
what securities to buy and sell. Fundamental investment analysis generally involves assessing
a company's or security's value based on factors such as sales, assets, markets, management,
products and services, earnings, and financial structure. Technical analysis generally
involves studying trends and movements in a security's price, trading volume, and other
market-related factors in an attempt to discern patterns. The Portfolio may sell a security
when a company no longer demonstrates its ability to perform according to the investment
advisers expectations and the investment adviser believes there are better, alternative
investments. This investment strategy may result in short-term gains or losses for the
Portfolio.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains, limit
losses, or reposition assets to more promising opportunities.
INVESTMENT RISKS
The Thrivent Large Cap Stock Portfolio is subject to the following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of the Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. Growth style
investing includes the risk of investing in securities whose prices historically have been more
volatile than other securities, especially over the short term. Growth stock prices reflect
projections of future earnings or revenues, and if a company's earnings or revenues fall short
of expectations, its stock price may fall dramatically. In addition, the prices of larger
company stocks may not rise as quickly or as significantly as prices of stocks of well-managed
smaller companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Large Cap Stock Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Large Cap Stock Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.65%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.15%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.80%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Large Cap Stock Portfolio has been newly organized, the percentage expense
levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Large
Cap Stock $82 $255
- ------------------- ----------------- -----------------
THRIVENT LARGE CAP INDEX PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Large Cap Index Portfolio seeks total returns that track the performance of the S&P
500 Index by investing primarily in common stocks comprising the Index.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio strives to invest in all of the large company common
stocks included in the S&P 500 Index in the proportions in which they are represented in the
Index. This is a passively managed Portfolio, which means that Thrivent Financial does not
choose the securities that make up the Portfolio. When changes to the Index occur, Thrivent
Financial will attempt to replicate these changes within the Portfolio. However, any such
changes may result in slight variations from time to time.
INVESTMENT RISKS
The Thrivent Large Cap Index Portfolio is subject to the following primary investment risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of the Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. The prices
of larger company stocks may not rise as quickly or as significantly as prices of stocks of
well-managed smaller companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Large Cap Index Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Large Cap Index Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.32%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.07%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.39%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Large Cap Index Portfolio has been newly organized, the percentage expense
levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the Portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------------ ------------ -----------------
1 Year 3 Years
- ------------------------ ------------ -----------------
- ------------------------ ------------ -----------------
Thrivent Large Cap
Index $40 $125
- ------------------------ ------------ -----------------
THRIVENT REAL ESTATE SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Real Estate Securities Portfolio seeks to provide long-term capital appreciation
and high current income by investing primarily in the equity securities of companies in the real
estate industry.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests at least 80% of its total assets in income
producing common stocks and other equity securities (which may include convertible securities)
of companies that are primarily engaged in the U.S. real estate industry. This includes
companies such as real estate investment trusts (REITs) and other real estate related
investments. A real estate company generally derives at least 50% of its revenue from real
estate ownership, leasing, management, development, financing or sale of residential, commercial
or industrial real estate - or has at least 50% of its assets in real estate. Should Thrivent
Financial determine that the Portfolio would benefit from reducing the percentage of invested
assets from 80% to a lesser amount, you will be notified at least 60 days prior to such a change.
This Portfolio may invest up to 20% in equity and fixed income securities of companies which are
not principally engaged in the real estate industry or which are not income producing equity
securities of companies principally engaged in the U.S. real estate industry.
Thrivent Financial may sell securities, for a variety of reasons, such as to secure gains, limit
losses, or reposition assets to more promising opportunities.
INVESTMENT RISKS
The Thrivent Real Estate Securities Portfolio is subject to the following primary investment
risks.
Market Risk. Over time stock markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The value of the Portfolio's investments may
move with these cycles, and in some instances, increase or decrease more than its market as
measured by the Portfolio's benchmark index.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. The prices
of larger company stocks may not rise as quickly or as significantly as prices of stocks of
well-managed smaller companies.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
Interest Rate Risk. Interest rate risk is the risk that security prices (equity or fixed
income) decline in value when interest rates rise. This effect of rising interest rates is
generally more pronounced for high dividend paying stock than for stocks that pay little or no
dividends. This may cause the value of real estate securities to decline during periods of
rising interest rates, which would reduce the overall return of the Portfolio.
Real Estate Industry Risk. Real estate industry risk is the risk that changes in real estate
values or economic downturns can have a significant negative affect on issuers in the real
estate industry. Such changes could include, but are not limited to, a decline in the value of
real estate properties, extended vacancies of properties, increased competition, overbuilding
and changes in zoning law and government regulations. Since the Portfolio concentrates its
assets in the real estate industry, your investment in the Portfolio will be closely ties to the
performance of the real estate markets.
VOLATILITY AND PERFORMANCE
The Thrivent Real Estate Securities Portfolio is newly created so no bar chart or performance
table is included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Real Estate Securities Portfolio. If you own a variable annuity contract or a variable
life insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.80%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.34%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 1.14%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Real Estate Securities Portfolio has been newly organized, the percentage
expense levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the Portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------------- -------------- ------------------
1 Year 3 Years
- ------------------------- -------------- ------------------
- ------------------------- -------------- ------------------
Thrivent Real Estate
Securities $116 $362
- ------------------------- -------------- ------------------
THRIVENT BALANCED PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Balanced Portfolio seeks long-term total return through a balance between income
and the potential for long-term capital growth by investing primarily in a diversified portfolio
of common stocks, bonds and money market instruments.
INVESTMENT STRATEGY
The Portfolio incorporates the strategies of the Thrivent Large Cap Index and the Thrivent Bond
Index Portfolios. For debt securities, the Portfolio generally selects securities from the same
pool of securities that make up Bond Portfolio. However, some debt securities may not be the
same. Thrivent Financial, the investment adviser will select them in accordance with Bond
Portfolio's strategy.
Thrivent Financial establishes the Portfolio's asset allocation mix by forecasting the expected
return of each asset class over short-term and long-term time horizons, and considers the
variability of the anticipated returns based on historical results as well as expected risks and
returns. Since stock and bond markets tend to fluctuate independently of each other, the decline
in one market may be offset by the rise of the other. As a result of the asset class mix, the
Portfolio is more diversified and is subject to less risk than investing exclusively in stocks
or bonds alone. Overall, the Portfolio tries to maintain higher weighting in those asset classes
the investment adviser expects to provide the highest returns over a set time horizon. In a
general decline in one market, the investment adviser may increase the Portfolio's weighting in
one or both of the other asset classes. Despite the investment adviser's attempts to ease the
effect of any market downturn, you may still lose money. The Portfolio invests in the following
three asset classes within the ranges given:
Minimum Maximum
- -----------------------------------------------------------------
Common Stocks 35% 75%
Debt Securities 25% 50%
Money Market Instruments 0% 40%
CURRENT WEIGHTING OF ASSETS
As of December 31, 2002 the investments in the asset classes were as follows:
Percent Weighted
- -----------------------------------------------------------------
Common Stocks 57.7%
Debt Securities 34.0%
Money Market Instruments 8.3%
-----
Total 100%
INVESTMENT RISKS
The Thrivent Balanced Portfolio is subject to the following primary investment risks.
Market Risk. Over time, markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The same sort of cycle may also occur with
bond prices. The value of the Portfolio's investments may move with these cycles, and in some
instances, increase or decrease more than its market as measured by the Portfolio's benchmark
index. They also may decline because of factors that affect a particular industry.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. The prices
of larger company stocks may not rise as quickly or as significantly as prices of stocks of
well-managed smaller companies. Bonds may also exhibit price fluctuations due to changes in
interest rate or bond yield levels. As a result, the value of the Portfolio's shares may
fluctuate significantly in the short term.
Credit Risk. Credit risk is the risk that an issuer of a bond held by the Portfolio may no
longer be able to pay its debt. As a result of such an event, the bond may decline in price
thereby affecting the value of the Portfolio. High-yield, high-risk bonds are subject to greater
credit risk than investment-grade bonds. To compensate for this risk, high-yield bonds have
higher yields.
Interest Rate Risk. Interest rate risk is the risk that bond prices decline in value when
interest rates rise for bonds that pay a fixed rate of interest. This effect may cause the value
of the Portfolio to decline and reduce the overall return of the Portfolio.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Balanced Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Balanced Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.32%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.07%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.39%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Balanced Portfolio has been newly organized, the percentage expense levels
shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Balanced $40 $125
- ------------------- ----------------- -----------------
THRIVENT PARTNER HIGH YIELD PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Partner High Yield Portfolio seeks high current income and secondarily capital
growth by investing primarily in a diversified portfolio of high-risk, high-yield bonds commonly
referred to as "junk bonds." The Portfolio actively seeks to achieve the secondary objective of
capital growth to the extent it is consistent with the primary objective of high current income.
INVESTMENT STRATEGIES
Under normal circumstances, we invest at least 80% of net assets (plus the amount of any
borrowing for investment purposes) in high-yield fixed income instruments (high-yielding,
higher-risk corporate bonds) with medium- to lower-range credit quality ratings. Should the
Portfolio's investment subadviser, Pacific Investment Management Company LLC ("PIMCO"),
determine that the Portfolio would benefit from reducing the percentage of invested assets from
80% to a lesser amount, you will be notified at least 60 days prior to such a change. The
Portfolio may invest up to 20% of its net assets in bonds of foreign issuers. A foreign issuer
is a company domiciled in a country other than the U.S.
The Portfolio may invest the remainder of the Portfolio's assets in cash, short-term money
market instruments, and investment-grade fixed-income instruments. PIMCO does not have
restrictions on the credit quality of the securities in the Fund. PIMCO attempts to identify
those issuers of high-yield, high-risk bonds whose financial conditions are adequate to meet
future obligations, have improved or are expected to improve in the future. However, PIMCO does
not have restrictions on the rating level of the securities in the Portfolio and may purchase
and hold securities in default.
PIMCO may sell securities for a variety of reasons, such as to secure gains, limit losses, or
reposition assets to more promising opportunities.
INVESTMENT RISKS
The Thrivent Partner High Yield Portfolio is subject to the following primary investment risks.
Market Risk. Over time, markets generally tend to move in cycles with periods when stock
prices rise and periods when stock prices decline. The same sort of cycle may also occur with
bond prices. The value of a Portfolio's investments may move with these cycles, and in some
instances, increase or decrease more than its market as measured by the Portfolio's benchmark
index. They also may decline because of factors that affect a particular industry.
Financial Risk. Financial risk is the possibility that a company's performance will affect the
market price of its security, and consequently the value of the Portfolio. Some factors
affecting the performance of a company include: demand for the company's products or services,
the quality of management of the company and brand recognition and loyalty.
Volatility Risk. Volatility risk is the risk that certain types of securities shift in and out
of favor depending on market and economic conditions as well as investor sentiment. The price
of the Portfolio's shares may be affected by weak equity markets when issuers of high-yield,
high-risk bonds generally find it difficult to improve their financial condition by replacing
debt with equity. Bonds may also exhibit price fluctuations due to changes in interest rate or
bond yield levels. As a result, the value of the Portfolio's shares may fluctuate significantly
in the short term.
Credit Risk. Credit risk is the risk that an issuer of a bond held by the Portfolio may no
longer be able to pay its debt. As a result of such an event, the bond may decline in price
thereby affecting the value of the Portfolio. High-yield high-risk bonds are subject to greater
credit risk than investment-grade bonds. To compensate for this risk, high-yield bonds have
higher yields.
Interest Rate Risk. Interest rate risk is the risk that bond prices decline in value when
interest rates rise for bonds that pay a fixed rate of interest. This effect may cause the value
of the Portfolio to decline and reduce the overall return of the Portfolio.
Liquidity Risk. Liquidity risk is the ability to sell a security relatively quickly for a price
that most closely reflects the actual value of the security. High-yield bonds have a less
liquid resale market. As a result, we may have difficulty selling or disposing of securities
quickly in certain markets or market environments.
Loss of Principal. The success of the Portfolio's investment strategy depends significantly on
the investment adviser's skill in assessing the potential of the securities in which the
Portfolio invests. Shares of the Portfolio will rise and fall in value and there is a risk that
you could lose money by investing in the Portfolio. The Portfolio cannot be certain that it
will achieve its goal.
VOLATILITY AND PERFORMANCE
The Thrivent Partner High Yield Portfolio is newly created so no bar chart or performance table
is included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Partner High Yield Portfolio. If you own a variable annuity contract or a variable
life insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.40%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.22%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.62%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Partner High Yield Portfolio has been newly organized, the percentage
expense levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Partner
High Yield $63 $199
- ------------------- ----------------- -----------------
THRIVENT BOND INDEX PORTFOLIO
INVESTMENT OBJECTIVE
The Portfolio strives for investment results similar to the total return of the Lehman Aggregate
Bond Index by investing primarily in bonds and other debt securities included in the index.
INVESTMENT STRATEGIES
Under normal circumstances, we strive to invest in a representative sample of fixed-income and
mortgage-backed securities included in the Lehman Aggregate Bond Index. We do not invest in all
of the issues that make up the index but select from issuers with the index. Therefore, we
expect the investment performance of this Portfolio to approximate the performance of the index
over time. We include only those issues that:
o are of investment-grade quality;
o have a fixed rate;
o are publicly issued;
o have at least $150 million par outstanding;
o are dollar-denominated and nonconvertible; and
o have a maturity of more than one year.
Should we determine that the Portfolio would benefit from reducing the percentage of invested
assets from 80% to a lesser amount, we will provide you with at least 60 days notice of such
change. For liquidity reasons, we may invest, to some degree, in money market instruments.
Although we try to match the performance of the Lehman Aggregate Bond Index, many factors can
cause the Portfolio not to meet its objective. We invest in six general classes of investment
grade, fixed-income securities including:
o U.S. Treasury securities
o corporate bonds
o commercial mortgage-backed securities
o government agency securities
o mortgage-backed securities, and
o asset-backed securities.
As of December 31, 2002, these four classes represented the following proportions of the
Portfolio's long-term market value:
- ---------------------------------------------- --------------------
Percent of Total
- ---------------------------------------------- --------------------
- ---------------------------------------------- --------------------
U.S. Treasury & Government Agency 75.7%
- ---------------------------------------------- --------------------
- ---------------------------------------------- --------------------
Corporate 19.8%
- ---------------------------------------------- --------------------
- ---------------------------------------------- --------------------
Other Government 2.0%
- ---------------------------------------------- --------------------
- ---------------------------------------------- --------------------
Asset-Backed 2.5%
- ---------------------------------------------- --------------------
- ---------------------------------------------- --------------------
Total 100%
- ---------------------------------------------- --------------------
INVESTMENT RISKS
The Thrivent Bond Index Portfolio is subject to the following primary investment risks.
Credit Risk. Credit risk is the risk that an issuer of a bond held by the Portfolio may no
longer be able to pay its debt. As a result of such an event, the bond may decline in price
thereby effecting the value of the Portfolio. High-yield, high-risk bonds are subject to greater
credit risk than investment-grade bonds. To compensate for this risk, high-yield bonds have
higher yields.
Interest Rate Risk. Interest rate risk is the risk that bond prices decline in value when
interest rates rise for bonds that pay a fixed rate of interest. In addition, both
mortgage-backed and asset-backed securities are sensitive to changes in the redemption patterns
of the underlying security. If the principal payment on the underlying asset is repaid faster
or slower than the holder of the asset-backed or mortgage-backed security anticipates, the price
of the security may fall, particularly if the holder must reinvest the repaid principal at lower
rates or must continue to hold the security when interest rates rise. This effect may cause the
value of the Portfolio to decline and reduce the overall return of the Portfolio.
VOLATILITY AND PERFORMANCE
The Thrivent Bond Index Portfolio is newly created so no bar chart or performance table is
included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Bond Index Portfolio. If you own a variable annuity contract or a variable life
insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.35%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.09%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.44%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Bond Index Portfolio has been newly organized, the percentage expense
levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------- ----------------- -----------------
1 Year 3 Years
- ------------------- ----------------- -----------------
- ------------------- ----------------- -----------------
Thrivent Bond
Index $45 $141
- ------------------- ----------------- -----------------
THRIVENT MORTGAGE SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE
The Thrivent Mortgage Securities Portfolio seeks a combination of current income and long-term
capital appreciation by investing primarily in a diversified Portfolio of debt securities backed
by pools of residential and/or commercial mortgages.
INVESTMENT STRATEGIES
Under normal circumstances, the Portfolio invests at least 80% of its net assets in
mortgage-related securities. The primary focus is investments in mortgage pass-through
securities, which are securities representing interests in "pools" of mortgage loans. These
securities include mortgage-backed securities issued and guaranteed by the Government National
Mortgage Association (GNMA), the Federal National Mortgage Association (FNMA) and the Federal
Home Loan Mortgage Corporation (FHLMC). The Portfolio may also invest in fixed and floating
rate asset-backed securities, commercial mortgage-backed securities (CMBS) and other mortgage
backed securities including, but not limited to, collateralized mortgage obligations (CMOs)
interest only bonds (IOs) and principal only bonds (POs) and adjustable rate mortgages (ARMs),
as well as in other mortgage-related asset-backed securities. In addition, the Portfolio may
invest in certain non-mortgage related debt securities, including U.S. Government securities,
municipal securities and corporate debt securities. Should we determine that the Portfolio
would benefit from reducing the percentage of invested assets from 80% to a lesser amount, we
will provide you with at least 60 days notice of such change.
At least 80% of the Portfolio's assets will be invested in securities rated within the three
highest rating categories assigned by at least one Nationally Recognized Statistical Rating
Organization (NRSRO) at the time of purchase.
Thrivent Financial may sell securities for a variety of reasons, such as to secure gains, limit
losses, or reposition assets to more promising opportunities.
INVESTMENT RISKS
The Thrivent Mortgage Securities Portfolio is subject to the following primary investment risks.
Credit Risk. Credit risk is the risk that an issuer of a bond held by the Portfolio may no
longer be able to pay its debt. As a result of such an event, the bond may decline in price
thereby affecting the value of the Portfolio. High-yield high-risk bonds are subject to greater
credit risk than investment-grade bonds. To compensate for this risk, high-yield bonds have
higher yields.
Interest Rate Risk. Interest rate risk is the risk that bond prices decline in value when
interest rates rise for bonds that pay a fixed rate of interest. This effect may cause the value
of the Portfolio to decline and reduce the overall return of the Portfolio.
Prepayment Risk. Prepayment risk is the risk that an issuer of a debt security may repay
principal prior to the maturity of a security, which can affect the return on investment and
yield of mortgage-backed and asset-backed securities. Falling interest rates prompt homeowners
to refinance their mortgages. The proceeds from these prepayments may have to be invested at
lower interest rates, causing the Portfolio to experience a decline in income, as well as losing
the opportunity for additional price appreciation associated with falling rates.
Derivative Risk. Derivative risk is the risk that the Portfolio invests in securities that may
be considered to be derivatives. The value of the derivative security is dependent upon the
performance of underlying assets. If the assets do not perform well, the value of the
derivative security, and consequently the Portfolio, may decline.
VOLATILITY AND PERFORMANCE
The Thrivent Mortgage Securities Portfolio is newly created so no bar chart or performance table
is included.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold shares of the
Thrivent Mortgage Securities Portfolio. If you own a variable annuity contract or a variable
life insurance contract, you will have additional expenses, including mortality and expense risk
charges. Please refer to the prospectus for your variable contract for additional information
about charges for those contracts.
- ------------------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment)
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- ----------
Maximum Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Maximum Deferred Sales Charge (Load) N/A
- ------------------------------------------------------------------------------- ----------
ANNUAL PORTFOLIO OPERATING EXPENSES
(Expenses that are deducted from Portfolio assets)
- ------------------------------------------------------------------------------- ----------
Management Fees 0.50%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Distribution Fees N/A
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Other Expenses/1/ 0.32%
- ------------------------------------------------------------------------------- ----------
- ------------------------------------------------------------------------------- ----------
Total Annual Portfolio Operating Expenses 0.82%
- ------------------------------------------------------------------------------- ----------
/1/ Because the Thrivent Mortgage Securities Portfolio has been newly organized, the
percentage expense levels shown in the table as "Other Expenses" are based on estimates.
EXAMPLE
This example is intended to help you compare the cost of investing in the Portfolio with the
cost of investing in other mutual funds. The example does not include charges imposed by
variable contracts. The Portfolio is an investment option for variable contracts. If variable
contract charges were imposed, your expenses would be higher than those shown. The example
assumes that you invest $10,000 in the Portfolio for the time periods indicated and then redeem
all of your shares at the end of those periods. The example also assumes that your investment
has a 5% return each year, and that the portfolio's operating expenses remain the same. You
should use the expense example for comparison purposes only. The example does not represent the
Portfolio's actual expenses and returns, either past or future. Although your actual cost may
be higher or lower, based on the foregoing assumptions your cost would be:
- ------------------------- ----------- -----------------
1 Year 3 Years
- ------------------------- ----------- -----------------
- ------------------------- ----------- -----------------
Thrivent Mortgage
Securities $84 $262
- ------------------------- ----------- -----------------
MANAGEMENT
Investment Adviser
- --------------------------------------------------------------------------------------------------
Thrivent Financial, 625 Fourth Avenue South, Minneapolis, Minnesota 55415, serves as investment
adviser for each of the Portfolios of LB Series Fund, Inc ("the Fund"). Thrivent Financial and
its affiliates have been in the investment advisory business since 1986 and managed
approximately $57.2 billion in assets as of December 31, 2002, including approximately $10.7
billion in mutual fund assets.
Thrivent Financial provides investment research and supervision of the assets for each Portfolio
except the Thrivent Partner High Yield Portfolio, and the Thrivent Partner Small Cap Value Portfolio.
For the Thrivent Partner High Yield Portfolio, Thrivent Financial establishes the overall
investment strategy and evaluates, selects and recommends, subject to the approval of the Board of
Directors of the Fund, one or more subadvisers to manage the investments of the High Yield Bond
Portfolio. It also allocates assets to the subadvisers, monitors the performance, security holdings
and investment strategies of the subadvisers and, when appropriate, researches any potential new
subadviser for the Thrivent Partner High Yield Portfolio. Thrivent Financial has ultimate
responsibility to oversee the subadvisers and recommend their hiring, termination and replacement.
Thrivent Financial and the Fund have received an exemptive order from the Securities and
Exchange Commission ("SEC") that permits Thrivent Financial and the Fund, with the approval of
the Fund's Board of Directors, to retain a subadviser for a Portfolio, or subsequently change
the subadviser, without submitting the respective investment subadvisory agreements, or material
amendments to those agreements, to a vote of the shareholders of the applicable Portfolio.
Thrivent Financial will notify variable contract owners in the event that it adds a subadviser
or changes the identity of the subadviser of a Portfolio
ADVISORY FEES
Thrivent Financial receives an investment management fee for each Portfolio. The fee is a daily
charge equal to the annual rate of a percentage of average daily net assets of each Portfolio.
- ------------------------------------ ------------------------------------------------------
Fund Advisory Fees
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Technology Portfolio 0.75%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Partner Small Cap Value 0.80%
Portfolio
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Small Cap Stock Portfolio $0 - $200 million 0.70%
More than $200 million but not over $1 billion 0.65%
More than $1 billion but not over $2.5 billion 0.60%
More than $2.5 billion but not over $5 billion 0.55%
More than $5 billion 0.525%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Small Cap Index Portfolio $0 - $500 million 0.35%
More than $500 million 0.30%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Mid Cap Stock Portfolio $0 - $200 million 0.70%
More than $200 million but not over $1 billion 0.65%
More than $1 billion but not over $2.5 billion 0.60%
More than $2.5 billion but not over $5 billion 0.55%
More than $5 billion 0.525%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Mid Cap Index Portfolio $0 - $250 million 0.35%
More than $250 million 0.30%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Large Cap Stock Portfolio $0 - $500 million 0.65%
More than $500 million but not over $1 billion 0.575%
More than $1 billion but not over $2.5 billion 0.475%
More than $2.5 billion but not over $5 billion 0.45%
Over $5 billion 0.425%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Large Cap Index Portfolio $0 - $250 million 0.35%
More than $250 million 0.30%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Real Estate Securities 0.80%
Portfolio
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Balanced Portfolio $0 - $250 million 0.35%
More than $250 million 0.30%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Partner High Yield 0.40%
Portfolio
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Bond Index Portfolio $0 - $250 million 0.35%
More than $250 million 0.30%
- ------------------------------------ ------------------------------------------------------
- ------------------------------------ ------------------------------------------------------
Thrivent Mortgage Securities 0.50%
Portfolio
- ------------------------------------ ------------------------------------------------------
Investment Subadvisers And Portfolio Managers
- --------------------------------------------------------------------------------------------------
Thrivent Technology Portfolio
Brian J. Flanagan, CFA and James A. Grossman will serve as portfolio co-managers of the Thrivent
Technology Portfolio.
Mr. Flanagan has been the co-portfolio manager of the Technology Stock Portfolio since it
commenced operations on March 1, 2001. He is also the portfolio manager of the Small Cap Index
Portfolio and the Thrivent Mid Cap Stock Portfolio. Mr. Flanagan also serves as portfolio
manager of the Technology Stock Fund, the Thrivent Mid Cap Stock Fund and the Small Cap Index
Fund II, each a series of an affiliated mutual fund group. From 1996 to 1998, he served first
as analyst and later as portfolio manager for the small cap portfolio of the Thrivent Retirement
Plan.
James A. Grossman has been co-portfolio manager for the Technology Stock Portfolio since it
commenced operations on March 1, 2001. Mr. Grossman also serves as the co-portfolio manager of
the Technology Stock Fund, a series of an affiliated mutual fund group. From 1996 through 2000,
Mr. Grossman served as a securities analyst, following selected technology investments for The
AAL Mutual Funds.
Thrivent Small Cap Stock Portfolio
Kevin A. Schmitting will serve as portfolio manager of the Thrivent Small Cap Stock Portfolio.
Mr. Schmitting has been a portfolio manager with Thrivent Financial since 1995.
Thrivent Partner Small Cap Value Portfolio
Thrivent Financial has engagedT. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore,
Maryland 21202, as investment subadviser for the Thrivent Partner Small Cap Value Portfolio. T.
Rowe Price Associates, Inc., had approximately 168.9 billion under management as of September 30,
2003. Preston Athey serves as portfolio manager of the Thrivent Partner Small Cap Value
Portfolio. Mr. Athey is a Vice President of T. Rowe Price Group, Inc., and T. Rowe Price
Associates, Inc., and a small company Equity Portfolio Manager. He is President of the
Small-Cap Value Fund and Chairman of the fund's Investment Advisory Committee. He is also a
Vice President and Investment Advisory Committee member of the Small-Cap Stock Fund and a
Portfolio Manager on the firm's Global Clean Future Equity Fund. Mr. Athey has been with T.
Rowe Price since 1978.
Thrivent Small Cap Index Portfolio
Kevin R. Brimmer will serve as portfolio manager of the Thrivent Small Cap Index Portfolio. Mr.
Brimmer has been with a portfolio manager with Thrivent Financial since 1985.
Thrivent Mid Cap Stock Portfolio
Brian J. Flanagan, CFA will serve as portfolio manager of the Thrivent Mid Cap Stock Portfolio.
Mr. Flanagan has been the co-portfolio manager of the Technology Stock Portfolio since it
commenced operations on March 1, 2001. He is also the portfolio manager of the Small Cap Index
Portfolio and co-portfolio manager of the Thrivent Technology Portfolio. Mr. Flanagan also
serves as portfolio manager of the Technology Stock Fund, the Mid Cap Stock Fund and the Small
Cap Index Fund II, each a series of an affiliated mutual fund group. From 1996 to 1998, he
served first as analyst and later as portfolio manager for the small cap portfolio of the
Thrivent Retirement Plan.
Thrivent Mid Cap Index Portfolio
Kevin R. Brimmer will serve as portfolio manager of the Thrivent Mid Cap Index Portfolio.
Mr. Brimmer has been a portfolio manager with Thrivent Financial since 1985.
Thrivent Large Cap Stock Portfolio
Frederick L. Plautz will serve as portfolio manager of the Thrivent Large Cap Stock Portfolio.
Mr. Plautz has been a portfolio manager with Thrivent Financial since 1995.
Thrivent Large Cap Index Portfolio
Kevin R. Brimmer will serve as portfolio manager of the Thrivent Large Cap Index Portfolio.
Mr. Brimmer has been a portfolio manager with Thrivent Financial since 1985.
Thrivent Real Estate Securities Portfolio
Reginald L. Pfeifer will serve as the portfolio manager of the Thrivent Real Estate Securities
Portfolio. Mr. Pfeifer has been with Thrivent Financial since 1990, and has served as a
portfolio manager since 2003. Previously, he was the Head of Fixed Income for Aid Association
for Lutherans from 1998 to 2002, Head of Fixed Income for Thrivent Financial from 2001 to 2002
and Head of Mortgages and Real Estate from 2002 to 2003.
Thrivent Balanced Portfolio
Kevin R. Brimmer and Steven H.C. Lee will serve as portfolio co-managers of the Thrivent
Balanced Portfolio. Mr. Brimmer has been a portfolio manager with Thrivent Financial since 1985.
Mr. Lee has been with Thrivent Financial since 1985 and has served as a portfolio manager since
1999.
Thrivent Partner High Yield Portfolio
Thrivent Financial has engaged Pacific Investment Management Company LLC ("PIMCO"), located at
800 Newport Center Drive, Newport Beach, California 2660, to serve as investment subadviser for
the Thrivent Partner High Yield Portfolio. With assets under management of approximately $373.8
billion as of December 31, 2003, the company is one of the world's foremost bond fund managers.
PIMCO oversees more than 120 funds in all. The company is part of Allianz Dresdner Asset
Management of America L.P. (ADAM-LP), which is an indirect unit of Allianz AG, a European-based,
multinational insurance and financial services holding company.
The portfolio manager primarily responsible for overseeing PIMCO's management of the Thrivent
Partner High Yield Portfolio is Raymond G. Kennedy, CFA. Mr. Kennedy is a managing director,
portfolio manager and senior member of the PIMCO investment strategy group. Mr. Kennedy joined
PIMCO in 1996, and having previously been associated with Prudential Insurance Company of
America as a private placement asset manager. He has 15 years of investment experience.
Thrivent Bond Index Portfolio
Steven H.C. Lee will serve as portfolio manager of the Thrivent Bond Index Portfolio. Mr. Lee
has been with Thrivent Financial since 1985 and has served as a portfolio manager since 1999.
Thrivent Mortgage Securities Portfolio
Gregory R. Anderson and Scott A. Lalim will serve as portfolio co-managers of the Thrivent
Mortgage Securities Portfolio. Mr. Anderson has been with Thrivent Financial since 1997 and also
manages the mortgage-backed securities portfolio of Thrivent Financial's general account.
Mr. Lalim has been with Thrivent Financial since 1976 and also manages the commercial
mortgage-backed securities portfolio of Thrivent Financial's general account.
Personal Securities Investment
Personnel of Thrivent Financial may invest in securities for their own account pursuant to codes
of ethics that establish procedures for personal investing and restrict certain transactions.
Transactions in securities that may be held by the Portfolios are permitted, subject to
compliance with applicable provisions under their respective codes of ethics.
THE SSPARATE ACCOUNTS AND THE RETIREMENT PLANS
Shares in the Fund are currently sold, without sales charges, only to:
o Separate accounts of Thrivent Financial and Thrivent Life, which are used to fund
benefits of variable life insurance and variable annuity contracts (each a "variable
contract") issued by Thrivent Financial and Thrivent Life; and
o Retirement plans sponsored by Thrivent Financial.
A Prospectus for the variable contract describes how the premiums and the assets relating to the
variable contract may be allocated among one or more of the subaccounts that correspond to the
Portfolios. Participants in the retirement plans should consult retirement plan documents for
information on how to invest.
The Fund serves as the underlying investment vehicle for variable annuity contracts and variable
life insurance policies that are funded through separate accounts established by Thrivent
Financial. It is possible that in the future, it may not be advantageous for variable life
insurance separate accounts and variable annuity separate accounts to invest in the Portfolios
at the same time. Although neither Thrivent Financial not the Fund currently foresees any such
disadvantage, the Fund's Board monitors events in order to identify any material conflicts
between such policy owners and contract owners. Material conflict could result from, for
example, 1) changes in state insurance laws, 2) changes in federal income tax law, 3) changes in
the investment management of a Portfolio, or 4) differences in voting instructions between those
given by policy owners and those given by contract owners. Should it be necessary, the Board
would determine what action if any, should be taken on response to any such conflicts
As a result of differences in tax treatment and other considerations, a conflict could arise
between the interests of the variable contract owners and the interest of plan participants with
respect to their investments in the Fund. The Fund's Board will monitor events in order to
identify the existence of any material irreconcilable conflicts and to determine what action if
any, should be taken in response to any such conflicts.
Pricing of Fund Shares
The Portfolios determine their net asset value ("NAV") on each day the New York Stock Exchange
("NYSE") is open for business, or any other day as required under the rules of the Securities
and Exchange Commission. The NYSE is currently closed on New Year's Day, Martin Luther King, Jr.
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The calculation normally is made as of the close of regular trading of the
NYSE (currently 4:00 p.m. Eastern time) after the Portfolio has declared any applicable
dividends. Because foreign securities markets are open on different days from U.S. markets,
there may be instances when the value of a Portfolio's investment in foreign securities changes
on days when you are not able to purchase or redeem shares.
Each other Portfolio determines its NAV by adding the value of Portfolio assets, subtracting the
Portfolio's liabilities, and dividing the result by the number of outstanding shares. The NAV
for the Portfolios varies with the value of their investments. The Portfolios value their
securities using market quotations, other than short-term debt securities maturing in less than
60 days, which are valued using amortized costs, and securities for which market quotations are
not readily available, which are valued at fair value.
The Fund has authorized Thrivent Financial and one or more other entities to accept orders from
participants in the retirement plans. The separate accounts and the retirement plans each place
an order to buy or sell shares of a respective Portfolio each business day. The amount of the
order is based on the aggregate instructions from owners of the variable annuity contracts or
the participants in the retirement plans. Orders placed before the close of the NYSE on a given
day by the separate accounts, the retirement plans, or participants in the retirement plans
result in share purchases and redemptions at the NAV calculated as of the close of the NYSE that
day.
TAX MATTERS
Since you do not own shares of the Fund directly, any transaction relating to either your
variable contract or retirement plan results in tax consequences at that level. Please refer to
the tax discussion in the applicable variable account prospectus or your retirement plan
documents for more information.
Under existing tax law, dividends or capital gains distributions from a Portfolio are not
currently taxable to holders of variable contracts when left to accumulate within a variable
contract. Depending on the variable contract, withdrawals from the contract may be subject to
ordinary income tax and, in addition, to a 10% penalty tax on withdrawals before age 59.
OTHER SECURITIES AND INVESTMENT PRACTICES
The principal investment strategies and risk factors of each Portfolio are outlined beginning on
page 3. This section provides additional information about some of the securities and other
practices in which certain Portfolios may engage, along with their associated risks.
Repurchase agreements: Each of the Portfolios may buy securities with the understanding that the
seller will buy them back with interest at a later date. If the seller is unable to honor its
commitment to repurchase the securities, the Portfolio could lose money.
When-issued securities: Each Portfolio may invest in securities prior to their date of issue.
These securities could fall in value by the time they are actually issued, which may be any time
from a few days to over a year. In addition, no income will be earned on these securities until
they are actually delivered.
Mortgage-backed and asset-backed securities: Each of the Portfolios may invest in
mortgage-backed and asset-backed securities. Mortgage-backed securities are securities that are
backed by pools of mortgages and which pay income based on the payments of principal and income
they receive from the underlying mortgages. Asset-backed securities are similar but are backed
by other assets, such as pools of consumer loans. Both are sensitive to interest rate changes
as well as to changes in the redemption patterns of the underlying securities. If the principal
payment on the underlying asset is repaid faster or slower than the holder of the
mortgage-backed or asset-backed security anticipates, the price of the security may fall,
especially if the holder must reinvest the repaid principal at lower rates or must continue to
hold the securities when interest rates rise.
Zero coupons: Each of the Portfolios may invest in zero coupon securities. A zero coupon
security is a debt security that is purchased and traded at discount to its face value because
it pays no interest for some or all of its life. Interest, however, is reported as income to
the Portfolio that has purchased the security and the Portfolio is required to distribute to
shareholders an amount equal to the amount reported. Those distributions may require the
Portfolio to liquidate portfolio securities at a disadvantageous time.
Foreign securities: Each of the Portfolios may invest in foreign securities. Foreign
securities are generally more volatile than their domestic counterparts, in part because of
higher political and economic risks, lack of reliable information and fluctuations in currency
exchange rates. These risks are usually higher in less developed countries. Each of these
Portfolios may use foreign currencies and related instruments to hedge its foreign investments.
In addition, foreign securities may be more difficult to resell than comparable U.S. securities
because the markets for foreign securities are less efficient. Even where a foreign security
increases in price in its local currency, the appreciation may be diluted by the negative effect
of exchange rates when the security's value is converted to U.S. dollars. Foreign withholding
taxes also may apply and errors and delays may occur in the settlement process for foreign
securities.
International exposure: Each of the Portfolios may have some international exposure (including
emerging markets) in their investments. Many U.S. companies in which these Portfolios may
invest generate significant revenues and earnings from abroad. As a result, these companies and
the prices of their securities may be affected by weaknesses in global and regional economies
and the relative value of foreign currencies to the U.S. dollar. These factors, taken as a
whole, could adversely affect the price of Portfolio shares.
Restricted and illiquid securities: Each of the Portfolios may invest to a limited extent in
restricted or illiquid securities. Any securities that are thinly traded or whose resale is
restricted can be difficult to sell at a desired time and price. Some of these securities are
new and complex, and trade only among institutions. The markets for these securities are still
developing and may not function as efficiently as established markets. Owning a large
percentage of restricted or illiquid securities could hamper a Portfolio's ability to raise cash
to meet redemptions. Also, because there may not be an established market price for these
securities, the Portfolio may have to estimate their value, which means that their valuation
(and, to a much smaller extent, the valuation of the Portfolio) may have a subjective element.
Securities lending: Each of the Portfolios may seek additional income by lending portfolio
securities to qualified institutions. By reinvesting any cash collateral it receives in these
transactions, a Portfolio could realize additional gains or losses. If the borrower fails to
return the securities and the invested collateral has declined in value, the Portfolio could
lose money.
Derivatives: Each of the Portfolios may invest in derivatives. Derivatives, a category that
includes options and futures, are financial instruments whose value derives from another
security, an index or a currency. Each Portfolio may use derivatives for hedging (attempting to
offset a potential loss in one position by establishing an interest in an opposite position).
This includes the use of currency-based derivatives for hedging its positions in foreign
securities. Each Portfolio may also use derivatives for speculation (investing for potential
income or capital gain).
While hedging can guard against potential risks, it adds to the Portfolio's expenses and can
eliminate some opportunities for gains. There is also a risk that a derivative intended as a
hedge may not perform as expected.
The main risk with derivatives is that some types can amplify a gain or loss, potentially
earning or losing substantially more money than the actual cost of the derivative.
With some derivatives, whether used for hedging or speculation, there is also the risk that the
counterpart may fail to honor its contract terms, causing a loss for the Portfolio. In
addition, suitable derivative investments for hedging or speculative purposes may not be
available.
High-yield bonds: Each of the Portfolios may invest in high-yield bonds. High-yield bonds are
debt securities rated below BBB by S&P or Baa by Moody's. To the extent that a Portfolio
invests in high-yield bonds, it takes on the following risks:
The risk of a bond's issuer defaulting on principal or interest payments is greater than on
higher quality bonds.
Issuers of high-yield bonds are less secure financially and are more likely to be hurt by
interest rate increases and declines in the health of the issuer or the economy.
Government bonds and municipal bonds: The Thrivent Partner High Yield Portfolio may also invest
in government bonds and municipal bonds. As a result, the Portfolio's performance may be
affected by political and economic conditions at the state, regional or Federal level. These
may include budgetary problems, declines in the tax base and other factors that may cause rating
agencies to downgrade the credit ratings on certain issues.
Bonds: The value of any bonds held by a Portfolio is likely to decline when interest rates
rise; this risk is greater for bonds with longer maturities. A less significant risk is that a
bond issuer could default on principal or interest payments, possibly causing a loss for the
Portfolio.
Short-term trading: The investment strategy for each Portfolio at times may include short-term
trading. While a Portfolio ordinarily does not trade securities for short-term profits, it will
sell any security at any time it believes best, which may result in short-term trading.
Short-term trading can increase a Portfolio's transaction costs and may increase your tax
liability.
Initial public offering: Each of the Portfolios may engage in initial public offerings (IPOs)
of securities. IPOs issued by unseasoned companies with little or no operating history are
risky and their prices are highly volatile, but they can result in very large gains in their
initial trading. Thus, when the Portfolio's size is smaller, any gains form IPOs will have an
exaggerated impact on the Portfolio's reported performance than when the Portfolio is larger.
Attractive IPOs are often oversubscribed and may not be available to the Portfolio, or only in
very limited quantities. There can be no assurance that a Portfolio will have favorable IPO
investment opportunities.
Securities ratings: When fixed-income securities are rated by one or more independent rating
agencies, a Portfolio uses these ratings to determine bond quality. Investment grade bonds are
those that are rated within or above the BBB major rating category by S&P or the Baa major
rating category by Moody's, or unrated but considered of equivalent quality by the Portfolio's
adviser. High-yield bonds are below investment grade bonds in terms of quality.
In cases where a bond is rated in conflicting categories by different rating agencies, a
Portfolio may choose to follow the higher rating. If a bond is unrated, the Portfolio may
assign it to a given category based on its own credit research. If a rating agency downgrades a
security, the Portfolio will determine whether to hold or sell the security, depending on all of
the facts and circumstances at that time.
Defensive investing: In response to market, economic, political or other conditions, each
Portfolio may invest without limitation in cash, preferred stocks, or investment-grade debt
securities for temporary defensive purposes. If the Portfolio does this, different factors
could affect the Portfolio's performance and it may not achieve its investment objective.
The Statement of Additional Information, which is incorporated by reference into this
Prospectus, contains additional information about the Fund and its Portfolios. You may request
a free copy of the Statement of Additional Information, or you may make additional requests or
inquiries by calling 1-800-847-4836. You also may review and copy information about the
Portfolios (including the Statement of Additional Information) at the Public Reference Room of
the Securities and Exchange Commission in Washington, DC. You may get more information about
the Public Reference Room by calling 1-202-942-8090. You also may get information about the
Portfolios on the EDGAR database at the SEC web site (www.sec.gov) and copies of the information
may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of
the SEC, Washington, DC 20549-6009, or by sending an e-mail to: publicinfo@sec.gov.
1940 Act File No. 811-4603
APPENDIX D
World Growth Portfolio Management's Discussion and Financial Highlights
From Annual Report Dated December 31, 2003
World Growth Portfolio
[LOGO OMITTED: T. ROWE PRICE]
T. Rowe Price International, Inc., Portfolio Subadviser
The World Growth Portfolio seeks long-term growth of capital by
investing primarily in a diversified portfolio of common stocks
of established, non-U.S. companies.*
International stocks posted strong results over the 12-month period
ended December 31, 2003 as a global economic recovery took place. The
World Growth Portfolio posted a 31.27% total return, lagging its
Lipper, Inc., peer group of similarly managed international stock
portfolios which returned a median of 33.48%. Over the identical
reporting period, Morgan Stanley's EAFE Index, recorded a 39.17% total
return. International stocks ended the year in positive territory for
the first time since 1999 and outperformed most domestic indexes.
Smaller, Lower-Priced Stocks Do Best
The nature of the market recovery worked against the larger
capitalization and higher quality tilt of the Portfolio as the
smallest and least expensive stocks led the charge. The Portfolio's
tilt towards less-speculative and higher-quality growth companies was
largely responsible for its relative underperformance. The strongest
areas for this low-price bias were Japan and the United Kingdom. A
typical example can be illustrated in the Portfolio's overweighted
position in Sony of Japan. This high-quality consumer discretionary
holding lagged smaller, less experienced companies and contributed to
our weaker relative performance.
A similar phenomena was experienced in Europe where the top performing
market was Germany, which was one of the weakest performing countries
over the past several years. We preferred France as it appeared to
offer more in the way of growth opportunities and certainly many
French holdings contributed nicely to the Portfolio's absolute
performance, but lacked the punch that German holdings produced.
From a sector standpoint, our industry focus on media holdings caused
a degree of underperformance in the surging consumer discretionary
sector. Reed Elsevier, one of the Portfolio's largest holdings,
suffered on concerns that it would miss lofty growth targets for 2004.
Utilities holdings provided the most benefit through a combination of
being underweight in this more sluggish sector and positive stock
selection within the sector. Exposure to several emerging market
nations such as India, Turkey, and Brazil also aided performance as
the lower-quality international recovery most benefited these less
stable but rapidly growing nations.
[GRAPHIC OMITTED: TOP INDUSTRIES]
Top Industries
(% of Common Stocks)
Financials 23.6%
Consumer Discretionary 18.1%
Communications Services 10.3%
Health Care 9.6%
Consumer Staples 8.6%
Energy 7.7%
Information Technology 7.2%
Industrials 7.0%
Materials 3.8%
Utilities 1.6%
[GRAPHIC OMITTED: PIE CHART PORTFOLIO COMPOSITION (% OF PORTOFOLIO)]
Portfolio Composition
(% of Portfolio)
Short Term Investments 2.5%
Common Stocks 97.5%
Top 10 Countries
(% of Portfolio)
United Kingdom 24.7%
Japan 18.5%
France 15.5%
Switzerland 6.7%
Italy 5.1%
Netherlands 4.9%
Spain 3.8%
Sweden 2.8%
Germany 2.4%
South Korea 1.7%
These common stocks represent 86.1% of the total investment portfolio.
Footnote reads:
Quoted Top Industries, Portfolio Composition and Top 10 Holdings are
subject to change and percentages shown exclude securities held as
collateral for securities loaned. The list of Top 10 Countries
excludes Short Term Investments.
Portfolio Facts
December 31, 2003
Net Assets $420,712,177 NAV $10.62
NAV -- High+ 12/31/2003-- $10.62
NAV -- Low+ 3/12/2003-- $6.86
Number of Holdings: 201 + For the year ended December 31, 2003
Average Annual Total Returns /1/
December 31, 2003
From
Inception
1 Year 5-Year 1/18/1996
- -----------------------------------------------------------
31.27% -0.75% 3.11%
Outlook
The global recovery seems to be gaining momentum and non-U.S.
companies appear to carry more attractive valuations and possess
better earnings potential than their American counterparts. Emerging
markets exposure and stock prices remain compelling. The Portfolio's
growth orientation has underperformed value stocks for some time,
though those valuations have become more attractive. We anticipate our
particular investing style -- large, proven growth-oriented companies
- -- to gain favor as the lower-quality rally slows. Patient investors
in international growth stocks enjoyed fruitful returns in 2003 and
could see this particular asset class enjoy a solid relative
performance year in 2004 as other asset classes fall from favor.
[GRAPHIC WORM CHART OMITTED: VALUE OF A $10,000 INVESTMENT]
Value of a $10,000 Investment /1/
World MSCI Consumer
Growth EAFE Price
Date Portfolio Index** Index***
- ------------------------------------------------------------------------
January 18, 1996 10,000 10,000 10,000
1996 10,014 10,025 10,059
1996 9,988 10,062 10,091
1996 10,113 10,278 10,143
1996 10,370 10,579 10,182
1996 10,351 10,387 10,202
1996 10,483 10,448 10,208
1996 10,152 10,145 10,228
1996 10,305 10,170 10,248
1996 10,548 10,443 10,280
1996 10,495 10,339 10,313
1996 10,980 10,753 10,332
1997 11,041 10,617 10,332
1997 10,886 10,248 10,365
1997 10,998 10,418 10,397
1997 10,982 10,458 10,423
1997 11,051 10,516 10,436
1997 11,754 11,203 10,430
1997 12,256 11,824 10,443
1997 12,585 12,017 10,456
1997 11,449 11,122 10,476
1997 12,212 11,748 10,502
1997 11,322 10,847 10,528
1997 11,291 10,739 10,521
1998 11,351 10,835 10,508
1998 11,754 11,334 10,528
1998 12,440 12,063 10,547
1998 12,869 12,438 10,567
1998 12,970 12,539 10,586
1998 12,946 12,481 10,606
1998 12,942 12,578 10,619
1998 13,101 12,708 10,632
1998 11,499 11,137 10,645
1998 11,242 10,798 10,658
1998 12,240 11,927 10,684
1998 12,799 12,541 10,684
1999 13,251 13,039 10,678
1999 13,120 13,003 10,704
1999 12,888 12,696 10,717
1999 13,410 13,229 10,749
1999 13,907 13,768 10,827
1999 13,275 13,062 10,827
1999 13,781 13,575 10,827
1999 14,042 13,981 10,860
1999 14,197 14,035 10,886
1999 14,279 14,180 10,938
1999 14,750 14,714 10,958
1999 15,780 15,228 10,964
2000 17,774 16,598 10,964
2000 16,675 15,546 10,990
2000 17,580 15,968 11,055
2000 17,766 16,590 11,147
2000 16,775 15,720 11,153
2000 16,176 15,339 11,160
2000 16,975 15,942 11,225
2000 16,419 15,277 11,244
2000 16,812 15,413 11,257
2000 15,761 14,665 11,316
2000 15,158 14,322 11,336
2000 14,378 13,788 11,342
2001 14,909 14,281 11,336
2001 15,077 14,275 11,407
2001 13,744 13,205 11,453
2001 12,685 12,331 11,479
2001 13,708 13,196 11,524
2001 13,105 12,741 11,577
2001 12,566 12,224 11,596
2001 12,274 12,003 11,564
2001 11,967 11,701 11,564
2001 10,727 10,519 11,616
2001 11,058 10,788 11,577
2001 11,528 11,186 11,557
2002 11,774 11,253 11,511
2002 11,211 10,656 11,538
2002 11,330 10,731 11,583
2002 11,933 11,317 11,648
2002 11,856 11,399 11,713
2002 11,865 11,554 11,713
2002 11,378 11,098 11,720
2002 10,100 10,003 11,733
2002 10,071 9,983 11,772
2002 8,929 8,913 11,792
2002 9,570 9,393 11,821
2002 10,117 9,820 11,821
2003 9,721 9,491 11,795
2003 9,285 9,095 11,847
2003 8,955 8,888 11,938
2003 8,740 8,720 12,010
2003 9,687 9,584 11,984
2003 10,271 10,174 11,964
2003 10,433 10,426 11,977
2003 10,592 10,680 11,991
2003 10,859 10,939 12,036
2003 11,089 11,279 12,075
2003 11,668 11,982 12,062
2003 11,909 12,251 12,030
December 31, 2003 $12,761 $13,208 $12,017
Footnotes read:
* International investing has special risks including currency
fluctuation and political volatility.
** The Morgan Stanley Capital International Europe, Australasia, Far
East Index (MSCI EAFE Index) is a stock index designed
to measure the equity performance of developed
countries outside of North America. It is not possible
to invest directly in the Index. The performance of the
index does not reflect deductions for fees, expenses or
taxes.
*** The Consumer Price Index is an inflationary indicator that
measures the change in the cost of a fixed basket of
products and services, including housing, electricity,
food and transportation. It is not possible to invest
directly in the Index.
/1/ Past performance is not an indication of future results.
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. Investment return and principal value will
fluctuate, and shares, when redeemed, may be worth more
or less than their original cost. At various times, the
Portfolio's adviser reimbursed and/or paid non-advisory
Portfolio expenses. Had the adviser not done so, the
Portfolio's total returns would have been lower. The
returns shown do not reflect charges and expenses
imposed on contract holders by the variable accounts.
Those charges and expenses reduce the returns received
by contract holders as compared to the returns
presented. For additional information, refer to your
variable contract prospectus which can be obtained from
your registered representative or by calling (800)
Thrivent. Please read your prospectus carefully.
Financial Highlights
World Growth Portfolio
- -------------------------------------------------------------------------------------------------------------------------------
Year Year Year Year Year
For a share outstanding Ended Ended Ended Ended Ended
throughout each period (a) 12/31/2003 12/31/2002 12/31/2001 12/31/2000 12/31/1999
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
Beginning of Period $8.23 $10.02 $13.83 $16.93 $12.67
Income from Investment Operations
Net investment income/(loss) 0.11 0.10 0.07 0.06 0.11
Net realized and unrealized gain/(loss)
on investments (b) 2.41 (1.85) (2.81) (2.73) 4.21
Total from Investment Operations 2.52 (1.75) (2.74) (2.67) 4.32
Less Distributions from
Net investment income (0.13) (0.04) (0.05) -- (0.06)
Net realized gain on investments -- -- (1.02) (0.43) --
Total Distributions (0.13) (0.04) (1.07) (0.43) (0.06)
Net Asset Value, End of period $10.62 $8.23 $10.02 $13.83 $16.93
Total return (c) 31.27% (17.43)% (21.03)% (16.12)% 34.13%
Net assets, end of period (in millions) $420.7 $323.3 $440.0 $561.3 $550.1
Ratio of expenses to average net assets (d) 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net investment income/(loss)
to average net assets (d) 1.28% 1.08% 0.68% 0.44% 0.89%
Portfolio turnover rate 26% 20% 30% 38% 23%
If the Adviser had not reimbursed expenses
and the Portfolio had not received credits
for fees paid indirectly the ratios would have been:
Ratio of expenses to average net assets (e) 0.96% 0.95%
Ratio of net investment income/(loss)
to average net assets (e) 1.17% 0.98%
(a) All per share amounts have been rounded to the nearest cent.
(b) The amount shown may not correlate 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
any deduction for sales charges. Not annualized for periods less than one
year.
(d) Computed on an annualized basis for periods less than one year.
(e) Prior to the year ended December 31, 2002, ratios were not calculated due
to a contractual arrangement between the Portfolios and the Adviser to
reimburse all expenses in excess of Advisory fees.
APPENDIX E
Additional Policies and Limitations
As set forth in the table below, each Portfolio is subject to policies and limitations in
addition to those stated in its investment objective. The policies and limitations of the
Thrivent Portfolio into which an AAL Portfolio will be reorganized are substantially the
same, with the following exceptions:
An AAL Portfolio may only borrow from a bank and such borrowings are limited to 10%
of total assets. A Thrivent Portfolio's borrowing source is not specified and its
borrowings are limited to 33 1/3% of assets.
The Thrivent policies allow the Thrivent Portfolios to engage in inter-fund lending.
The Thrivent Portfolios are able to invest a greater percentage of their respective
assets in mutual funds than the AAL Portfolios.
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Thrivent Series Fund AAL Series Fund
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Borrowing None of the Portfolios may borrow money, None of the Portfolios may issue senior
except that a Portfolio may borrow money securities or borrow, except that a portfolio
Issuance of senior securities (through the issuance of debt securities or may borrow in amounts not in excess of 10% of
otherwise) in an amount not exceeding its total assets, taken at current value and
one-third of the Portfolio's total assets then only from banks, as a temporary measure
immediately after the time of such borrowing. for extraordinary or emergency purposes. The
portfolios will not borrow to increase income
None of the Portfolios will purchase any but may borrow, among other things, to meet
security while borrowings, including reverse redemption requests which otherwise might
repurchase agreements, representing more than require untimely dispositions of portfolio
5% of the Portfolio's total assets are securities.
outstanding. The Portfolios intend to limit
borrowings to amounts borrowed from a bank, None of the Portfolios will mortgage, pledge,
repurchase agreements (insofar as they are hypothecate or in any manner transfer, as
considered borrowings), or an interfund security for indebtedness, any securities
lending agreement. owned or held by a Portfolio except as may be
necessary in connection with and subject to
None of the Portfolios may issue senior the limits in restriction above.
securities, except as permitted under the
Investment Company Act of 1940 or any
exemptive order or rule issued by the
Securities and Exchange Commission.
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Investments in Single Issuer None of the Portfolios will, with respect to None of the Portfolios will invest more than
75% of its total assets, purchase securities 5% of its total assets in a single issuer or
of an issuer (other than the U.S. Government, purchase more than 10% of the outstanding
its agencies, instrumentalities or authorities voting securities of a single issuer, except
or repurchase agreements fully collateralized that up to 25% of the portfolio's total assets
by U.S. Government securities and other may be invested without regard to this
investment companies) if (a) such purchase limitation and except that this limitation
would, at the time, cause more than 5% of the does not apply to securities issued or
Portfolio's total assets taken at market value guaranteed by the U.S. government or its
to be invested in the securities of such agencies or instrumentalities.
issuer; or (b) such purchase would, at the
time, result in more than 10% of the None of the Portfolios will make any
outstanding voting securities of such issuer investment if, immediately thereafter, less
being held by the Portfolio. than 75% of its total assets would be
represented by (a) cash, receivables and other
cash items, (b) securities issued by the U.S.
government, its agencies or instrumentalities
and (c) other securities limited in respect of
any one issuer to an amount not greater in
value than 5% of such total assets. For
purposes of this restriction, repurchase
agreements fully collateralized by securities
of the U.S. government, its agencies and
instrumentalities shall be considered to be
securities issued by the governmental entity
in question, rather than by the repurchase
agreement obligor.
None of the Portfolios will purchase more than
10% of the outstanding voting securities of an
issuer or invest for the purpose of exercising
control or management.
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Real Estate None of the Portfolios may buy or sell real None of the Portfolios may purchase or sell
estate, except that any Portfolio may (i) real estate, provided that a portfolio may
Commodities acquire or lease office space for its own use, invest in securities secured by real estate or
(ii) invest in securities of issuers that interests therein or issued by companies which
invest in real estate or interest therein, invest in real estate or interests therein.
(iii) invest in mortgage-related securities
and other securities that are secured by real None of the Portfolios may purchase or sell
estate or interest therein, and (iv) hold and commodities or commodity contracts, except
sell real estate acquired by the Portfolio as that, to the extent consistent with its
a result of the ownership of securities. investment objective and policies, a portfolio
may purchase or sell interest rate and index
None of the Portfolios may purchase or sell futures and options thereon. For purposes of
commodities or commodity contracts, except this restriction, foreign exchange contracts
that any Portfolio may purchase and sell are not considered to be commodities
derivatives (including but not limited to contracts.
options, futures contracts and options on
futures contracts) whose value is tied to the
value of a financial index or a financial
instrument or other asset (including, but not
limited to, securities indexes, interest
rates, securities, currencies and physical
commodities).
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Loans None of the Portfolios may make loans, except No Portfolio may make loans to other persons,
Securities Lending that any Portfolio may (i) lend portfolio except that a portfolio reserves freedom of
Repurchase Agreements securities, (ii) enter into repurchase action, consistent with their other investment
Debt Securities agreements, (iii) purchase all or a portion of policies and restrictions and as described in
Interfund Lending an issue of debt securities, bank loan the prospectus and SAI, to (i) invest in debt
participation interests, bank certificates of obligations, including those which are either
deposit, bankers' acceptances, debentures or publicly offered or of a type customarily
other securities, whether or not the purchase purchased by institutional investors, even
is made upon the original issuance of the though the purchase of such debt obligations
securities, and (iv) participate in an may be deemed the making of loans, (ii) enter
interfund lending program with other into repurchase agreements and (iii) lend
registered investment companies. portfolio securities, provided that no
Portfolio may lend securities if, as a result,
the aggregate value of all securities loaned
would exceed 33% of its total assets (taken at
market value at the time of such loan).
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Underwriting Securities None of the Portfolios will underwrite the None of the Portfolios will underwrite any
securities of other issuers, except where the issue of securities, except to the extent that
Portfolio may be deemed to be an underwriter the purchase of securities directly from an
for purposes of certain federal securities issuer thereof in accord with a Portfolio's
laws in connection with disposition of investment objectives and policies may be
portfolio securities; with investments in deemed to be underwriting or to the extent
other investment companies; and with loans that in connection with the disposition of
that a Portfolio may make pursuant to its portfolio securities a Portfolio may be deemed
fundamental investment restriction on lending. an underwriter under federal securities laws.
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Single Industry None of the Portfolios will purchase a None of the Portfolios may invest more than
security if, after giving effect to the 25% of its total assets (taken at current
purchase, more than 25% of its total assets value at the time of each investment) in
would be invested in the securities of one or securities of issuers whose principal business
more issuers conducting their principal activities are in the same industry. For
business activities in the same industry, purposes of this restriction, telephone,
except that this restriction does not apply to water, gas and electric public utilities are
Government Securities (as such term is defined each regarded as separate industries and
in the Investment Company Act of 1940). In wholly-owned finance subsidiaries are
addition, with respect to the Money Market considered to be in the industry of their
Portfolio, this restriction does not apply to parents if their activities are primarily
instruments issued by domestic banks. related to financing the activities of their
parents. Nor does this restriction apply to
investments by a portfolio in obligations of
the U.S. government or any of its agencies or
instrumentalities
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Illiquid Securities No corresponding restrictions. None of the Portfolios may invest in
repurchase agreements maturing in more than
seven days or in other securities with legal
or contractual restrictions on resale if, as a
result thereof, more than 15% of a portfolio's
total assets, taken at current value at the
time of such investment, would be invested in
such securities.
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Derivatives No corresponding restrictions. None of the Portfolios may purchase securities
Futures on margin, except for use of short-term credit
Options necessary for clearance of purchases and sales
Forward Contracts of portfolio securities, but it may, to the
extent consistent with its investment
Short Sales objectives and policies, make margin deposits
in connection with transactions in options,
futures and options on futures.
None of the Portfolios may make short sales of
securities or maintain a short position or
write, purchase or sell puts, calls,
straddles, spreads, or combinations thereof,
except, to the extent consistent with its
investment objectives and policies,
transactions in options on securities or
indexes, interest rate and index futures and
options on such futures.
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Mutual Funds No corresponding restrictions. Except for the Small Cap Value Portfolio, Real
Estate Securities Portfolio and Mortgage
Securities Portfolio, none of the Portfolios
will purchase securities of other investment
companies, if the purchase would cause more
than 10% of the value of a portfolio's total
assets to be invested in investment company
securities, provided that (a) no investment
will be made in the securities of any one
investment company if, immediately after such
investment, more than 3% of the outstanding
voting securities of such company would be
owned by a portfolio or more than 5% of the
value of a portfolio's total assets would be
invested in such company and (b) no
restrictions shall apply to a purchase of
investment company securities in connection
with a merger, consolidation, acquisition or
reorganization.
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
Misc. None of the Portfolios currently intend to None of the Portfolios will purchase
Margin purchase securities on margin, except that a securities on margin, except for use of
Oil and Gas Portfolio may obtain such short-term credits short-term credit necessary for clearance of
as are necessary for the clearance of purchases and sales of portfolio securities,
transactions, and provided that margin but it may, to the extent consistent with its
payments in connection with futures contracts investment objectives and policies, make
and options on futures contracts shall not margin deposits in connection with
constitute purchasing securities on margin. transactions in options, futures and options
on futures.
None of the Portfolios will invest in oil, gas
or mineral related programs or leases.
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
- ------------------------------------ ------------------------------------------------ ----------------------------------------------
APPENDIX F
Board of Directors
Interested Directors/1/
- ----------------- --------------- --------------- --------------- --------------- ---------------
Number of
Term of Principal Portfolios in Other
Office and Occupation(s) Fund Complex Directorships
Name, Address, Positions Length of During Past Overseen by Held by
and Age Held With Fund Time Served/2/ 5 Years Director/4/ Director
- ----------------- --------------- --------------- --------------- --------------- ---------------
- ----------------- --------------- --------------- --------------- --------------- ---------------
Pamela J. Moret President and President Executive Ms. Moret Lutheran
625 Fourth Director since 2002; Vice oversees 14 World Relief;
Avenue South Director President, of the LB Minnesota
Minneapolis, MN since 2004 Marketing and Series Fund, Public Radio
Age 48 Products, Inc. She is
Thrivent a candidate
Financial for for election
Lutherans as a Trustee
since 2002; of The AAL
Senior Vice Mutual Funds
President, and, upon
Products, election,
American will oversee
Express 20 of The AAL
Financial Mutual Funds.
Advisors from
2001 to 2002;
Vice
President,
Variable
Assets,
American
Express
Financial
Advisors from
1996 to 2000
- ----------------- --------------- --------------- --------------- --------------- ---------------
Independent Directors/3/
- ----------------- -------------- -------------- --------------- -------------------- ------------
Term of Principal Number of Other
Position Office and Occupation(s) Portfolios in Fund Directorships
Name, Address, Held With Length of During Past 5 Complex Overseen Held By
and Age Fund Time Served/2/ Years by Director/4/ Director
- ----------------- -------------- -------------- --------------- -------------------- ------------
- ----------------- -------------- -------------- --------------- -------------------- ------------
Herbert F. Director Director Management 14 of the LB None
Eggerding, Jr. since 1990 consultant to Series Fund,
625 Fourth several Inc., 20 of The
Avenue South privately AAL Mutual Funds,
Minneapolis, MN owned 14 of the AAL
Age 66 companies Variable Product
Series Fund, Inc.,
11 of The Lutheran
Brotherhood Family
of Funds
- ----------------- -------------- -------------- --------------- -------------------- ------------
- ----------------- -------------- -------------- --------------- -------------------- ------------
Noel K. Estenson Director Director Retired; 14 of the LB None
625 Fourth since 1997 previously Series Fund,
Avenue South President and Inc., 11 of The
Minneapolis, MN Chief Lutheran
Age 65 Executive Brotherhood Family
Officer, of Funds; he is
CenexHarvestStates also a candidate
(farm supply for election as a
and marketing Trustee of The AAL
and food Mutual Funds and,
business) upon election,
will oversee 20 of
The AAL Mutual
Funds
- ----------------- -------------- -------------- --------------- -------------------- ------------
- ----------------- -------------- -------------- --------------- -------------------- ------------
Jodi L. Director Director On sabbatical; 14 of the LB Director,
Harpstead since 1998 previously Series Fund, 11 of Delta
625 Fourth Vice President The Lutheran Dental
Avenue South & General Brotherhood Family Plan of
Minneapolis, MN Manager, of Funds; she is Minnesota
Age 47 Cardiac Surgery also a candidate
Technologies for election as a
for Trustee of The AAL
Medtronic, Mutual Funds and,
Inc. (medical upon election,
products and will oversee 20 of
technologies The AAL Mutual
business) Funds
since 2002;
President
Global
Marketing and
U.S. Sales,
Cardiac
Rhythm
Management
for
Medtronic,
Inc. from
2001 to 2002;
Vice
President,
U.S. Pacing
Sales for
Medtronic,
Inc. from
1996 to 2001
- ----------------- -------------- -------------- --------------- -------------------- ------------
- ----------------- -------------- -------------- --------------- -------------------- ------------
Connie M. Levi Director Director Retired; 14 of the LB Director,
625 Fourth since 1993 previously Series Fund, Inc., Norstan,
Avenue South President of 11 of The Lutheran Inc.
Minneapolis, MN the Greater Brotherhood Family
Age 64 Minneapolis of Funds; she is
Chamber of also a candidate
Commerce for election as a
Trustee of The AAL
Mutual Funds and,
upon election,
will oversee 20 of
The AAL Mutual
Funds
- ----------------- -------------- -------------- --------------- -------------------- ------------
- ----------------- -------------- -------------- --------------- -------------------- ------------
F. Gregory Director Director President, 20 of The AAL Director,
Campbell since 2004 Carthage Mutual Funds, 14 National
625 Fourth College of the AAL Association
Avenue South Variable Product of Independent
Minneapolis, MN Series Fund, Inc.; Colleges and
Age 64 14 of the LB Universities;
Series Fund, Inc. Director,
Johnson
Family
Funds,
Inc., an
investment
company
consisting
of four
portfolios;
Kenosha
Hospital
and
Medical
Center
Board;
Prairie
School
Board;
United
Health
Systems
Board
- ----------------- -------------- -------------- --------------- -------------------- ------------
- ----------------- -------------- -------------- --------------- -------------------- ------------
Richard L. Gady Director Director Retired; 20 of The AAL International
625 Fourth since 2004 previously Mutual Funds, 14 Agricultural
Avenue South Vice of the AAL Marketing
Minneapolis, MN President, Variable Product Association
Age 61 Public Series Fund, Inc.; Board
Affairs and 14 of the LB
Chief Series Fund, Inc.
Economist,
Conagra, Inc.
(agribusiness)
- ----------------- -------------- -------------- --------------- -------------------- ------------
- ----------------- -------------- -------------- --------------- -------------------- ------------
Edward W. Smeds Director Director Retired; 20 of The AAL Chairman
625 Fourth since 2004 previously Mutual Funds, 14 of
Avenue South President of of the AAL Carthage
Minneapolis, MN Customer Variable Product College
Age 68 Service and Series Fund, Inc.; Board
Operations, 14 of the LB
Kraft Foods Series Fund, Inc.
- ----------------- -------------- -------------- --------------- -------------------- ------------
/1/ "Interested person" of the Fund as defined in the Investment Company Act of 1940 by virtue
of positions with Thrivent Financial. Ms. Moret is considered an interested person because of
her principal occupation with Thrivent Financial, the adviser and an affiliate of the Fund.
/2/ Each Director serves an indefinite term until his or her successor is duly elected and
qualified. The bylaws of the Fund provide that each Director must retire at the end of the
year in which the Director attains age 70.
/3/ The Directors other than Ms. Moret are not "interested persons" of the Fund and are referred
to as "Independent Directors."
/4/ The "Fund Complex" includes the 11 series of The Lutheran Brotherhood Family of Funds, the 20
series of The AAL Mutual Funds, the 14 series of AAL Variable Product Series Fund, Inc., and
the 14 series of LB Series Fund, Inc.
APPENDIX G
SUBADVISER INFORMATION
for
World Growth Portfolio
Thrivent Partner Small Cap Value Portfolio
At its meeting on February 11, 2004, the Board of Directors (the "Board") of LB Series Fund,
Inc. (the "Fund"), including a majority of the Independent Directors, voted to approve new
subadvisory agreements (each a "Subadvisory Agreement") between the Fund, Thrivent Financial
for Lutherans ("Thrivent Financial") and each of the subadvisers (each a "subadviser") set
forth below, pursuant to which each subadviser will manage all or a portion of the assets of
the World Growth Portfolio or the Thrivent Partner Small Cap Value Portfolio (each, a
"Portfolio").
Portfolio Subadviser
World Growth Portfolio Mercator Asset Management LP ("Mercator")*
Thrivent Partner Small Cap Value Portfolio T. Rowe Price Associates, Inc. ("T. Rowe
Price")
* Mercator will serve as a co-subadviser with T. Rowe Price International, Inc. ("Price
International"), the existing subadviser to the World Growth Portfolio.
The Fund and its Investment Adviser
The Fund has entered into an investment advisory agreement (the "Agreement") with Thrivent
Financial dated April 10, 2002, as amended February 11, 2004. Under the Agreement, each
Portfolio pays Thrivent Financial a fee as follows:
Portfolio Advisory Fee (as a percentage of assets)
World Growth Portfolio 0.80%
Thrivent Partner Small Cap Value Portfolio 0.80%
From this fee, Thrivent Financial will pay each subadviser the following fee as a percentage
of assets that the respective subadviser manages.
--------------------------------------------- --------------------- --------------------------
Portfolio Subadviser Subadvisory Fee
--------------------------------------------- --------------------- --------------------------
--------------------------------------------- --------------------- ----------------- --------
World Growth Portfolio Mercator All Assets 0.47%
Price International First $20 0.75%
million 0.60%
Next $30 million 0.50%
Next $150
million
On all assets 0.45%
exceeding $500
million
--------------------------------------------- --------------------- ----------------- --------
--------------------------------------------- --------------------- ----------------- --------
Thrivent Partner Small Cap Value Portfolio T. Rowe Price All Assets 0.60%
--------------------------------------------- --------------------- ----------------- --------
On February 19, 2003, the Securities and Exchange Commission granted the Fund and Thrivent
Financial an order exempting them from the federal securities law requirements to obtain
approval of the appointment of unaffiliated subadvisers (the "Exemptive Order"), subject to
certain conditions imposed to ensure that the interests of shareholders are adequately
protected. At a shareholders meeting held on February 10, 2004, the shareholders of the
Portfolios approved a fundamental change in investment policy allowing Thrivent Financial to
enter into and amend subadvisory agreements without shareholder approval. Under the terms
of the Agreement and the Exemptive Order Thrivent Financial will (i) select, subject to
review and approval by the Board, the subadvisers based on quantitative and qualitative
evaluation of the subadvisers; (ii) review and monitor the performance of the subadvisers on
an ongoing basis; and (iii) recommend changes in the subadvisers to the Board as
appropriate. Thrivent Financial will also allocate the assets of the World Growth Fund
between Price International and Mercator.
Investment Subadvisory Agreements
Each subadviser will serve pursuant to a separate Subadvisory Agreement (a form of which is
attached as Exhibit A hereto) that will become effective on April 30, 2004. Pursuant to the
terms of the Subadvisory Agreements, the subadvisers will provide continuous investment
management services to the World Growth Portfolio and the Thrivent Partner Small Cap Value
Portfolio, subject to the overall supervision of the Board and Thrivent Financial.
Thrivent Financial intends to initially allocate the World Growth Portfolio's assets
substantially equally between Mercator and Price International. Thrivent Financial will
retain the ability to reallocate the assets of the World Growth Portfolio between Mercator
and Price International in its discretion.
Each Subadvisory Agreement provides that the subadviser will not be liable for any act or
omission in the course of, or connected with, rendering services under the Agreement, except
when such services are rendered in bad faith, negligence or reckless disregard of its duties
under the Agreement. The subadviser will, however, indemnify and hold harmless the Trust,
Thrivent Financial, the Board or shareholders from any and all claims, losses, expenses,
obligations or liabilities (including reasonable attorneys fees) which arise or result from
the subadviser's bad faith, negligence, willful misfeasance or reckless disregard of its
duties under the Subadvisory Agreement.
Each Subadvisory Agreement, unless sooner terminated, will remain in effect continuously for
two years following its effective date. Thereafter, it would continue to be renewed for
successive one-year terms provided that the renewal is specifically approved at least
annually by either the Board or a majority of the outstanding shares of the relevant
Portfolio and, in either case, by a majority of the Directors who are not "interested
persons" (as defined in the 1940 Act) of any party to the Subadvisory Agreement. The Fund
may terminate the Subadvisory Agreement by a vote of a majority of the Independent Directors
or a majority of its outstanding voting securities at any time on 60 days' written notice to
Thrivent Financial and the subadviser. Thrivent Financial may terminate the Subadvisory
Agreement upon 60 days' written notice to the subadviser. The subadviser may terminate the
Subadvisory Agreement at any time upon 60 days' written notice to Thrivent Financial. A
Subadvisory Agreement will automatically terminate without penalty in the event of its
assignment as defined in the 1940 Act.
Matters Considered by the Board in Approving
the New Investment Subadvisory Agreements
Following its review of the performance of the World Growth Portfolio in 2003, Thrivent
Financial determined that the use of a blended growth and value strategy offered the best
opportunity to improve the risk-adjusted returns of the World Growth Portfolio. Price
International, the current subadviser to the World Growth Portfolio, employs a growth
strategy. Thrivent Financial subsequently evaluated potential value subadvisers based on
criteria that included performance, investment strategy, anticipated subadvisory fees, and
other factors. Following this review, Thrivent Financial recommended to the Board, and at a
meeting held on February 10-11, 2004, the Board resolved, that Mercator be engaged to
manage a portion of the assets of the World Growth Portfolio. The Board based its decision
on various factors, including but not limited to the following: the potential for improved
risk-adjusted performance of the World Growth Portfolio based on a blended growth and value
strategy; the investment personnel and portfolio management approach of Mercator; the
historical performance of other portfolios managed by Mercator against relevant benchmarks;
and the potential subadvisory fee structure.
Thrivent Financial recommended to the Board in 2003 that s subadviser be engaged to manage
the Thrivent Partner Small Cap Value Portfolio following the Reorganization. Thrivent
Financial subsequently evaluated potential subadvisers for the Thrivent Small Cap Value
Portfolio based on criteria that included performance, investment strategy, anticipated
subadvisory fees, and other factors. Following this review, Thrivent Financial recommended
to the Board, and at a meeting held on February 10-11, 2004, the Board resolved, that T.
Rowe Price be engaged to manage the assets of the Thrivent Partner Small Cap Value
Portfolio. The Board based its decision on several factors, including the investment
personnel and portfolio management approach of T. Rowe Price; the historical performance of
other portfolios managed by T. Rowe Price against relevant benchmarks; and the potential
subadvisory fee structure.
The Board considered the following criteria utilized by Thrivent Financial in recommending
subadvisers:
Information about Mercator Asset Management LP
Thrivent Financial has engaged Mercator Asset Management LP, 5200 Town Center Circle, Suite
550, Boca Raton, Florida 33486 to subadvise a portion of the World Growth Portfolio.
Founded in 1984, Mercator manages international equity funds for institutional clients,
including corporate and public retirement plans, endowments, and foundations. As of
December 31, 2003, Mercator managed approximately $6.6 billion in assets including separate
accounts, commingled funds and a mutual fund.
Mercator is organized as a limited partnership under the laws of Delaware. Information
about the principal executive officer and investment professionals is provided in the following
table. The address of each person listed below is 5200 Town Center Circle, Suite 550, Boca
Raton, Florida 33486.
- --------------------------------- ------------------------------- ----------------------------------
Name Position with Mercator Principal Occupation
- --------------------------------- ------------------------------- ----------------------------------
- --------------------------------- ------------------------------- ----------------------------------
John G. Thompson, CFA Chief Investment Officer Research Analyst/Portfolio Manager
- --------------------------------- ------------------------------- ----------------------------------
- --------------------------------- ------------------------------- ----------------------------------
Peter F. Spano, CFA Chief Administrative Officer, Research Analyst/Portfolio Manager
Investment Professional
- --------------------------------- ------------------------------- ----------------------------------
- --------------------------------- ------------------------------- ----------------------------------
James E. Chaney Investment Professional Research Analyst/Portfolio Manager
- --------------------------------- ------------------------------- ----------------------------------
- --------------------------------- ------------------------------- ----------------------------------
Kevin J. Shaver, CFA Investment Professional Research Analyst/Portfolio Manager
- --------------------------------- ------------------------------- ----------------------------------
- --------------------------------- ------------------------------- ----------------------------------
Barbara J. Trebbi, CFA Investment Professional Research Analyst/Portfolio Manager
- --------------------------------- ------------------------------- ----------------------------------
- --------------------------------- ------------------------------- ----------------------------------
Gary R. Clemons Investment Professional Research Analyst/Portfolio Manager
- --------------------------------- ------------------------------- ----------------------------------
Information about other mutual funds managed by Mercator with investment objectives and
strategies similar to those of the World Growth Portfolio is provided in the following table.
- -------------------------------- ---------------- ----------------------------------- -----------
Net Assets of Fees
Fund as of Annual Rate of Compensation Waived or
Name of Fund 12/31/03 (% of average net assets) Reduced
- -------------------------------- ---------------- ----------------------------------- -----------
- -------------------------------- ---------------- ----------------------------------- -----------
Preferred International Value $391.2 million First $25 Million 0.75% No
Fund Next $25 Million 0.60%
Next $25 Million 0.55%
Next $225 Million 0.50%
Next $200 Million 0.40%
Next $300 Million 0.20%
- -------------------------------- ---------------- ----------------------------------- -----------
Mercator has no affiliated brokers through whom trades would be executed on behalf of the
Portfolio.
Information about T. Rowe Price International, Inc.
Thrivent Financial has engaged T. Rowe Price International, Inc., an affiliate of T. Rowe
Price Associates, Inc., located at 100 East Pratt Street, Baltimore, Maryland 21202 to
subadvise a portion of the Thrivent Partner International Stock Portfolio. Price
International is one of the world's largest international mutual fund asset managers with
the U.S. equivalent of approximately $22.9 billion as of December 31, 2003 in its offices in
Baltimore, London, Tokyo, Singapore, Paris, Hong Kong and Buenos Aires.
Information about the principal executive officer and each director of Price International
is provided in the following table. The address of each person listed below is 100 East
Pratt Street, Baltimore, Maryland 21202.
- --------------------------------- ------------------------------- -------------------------------
Name Position with Price Principal Occupation
International
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
David J.L. Warren Director, President and Chief Same
Executive Officer
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
John R. Ford Director, Vice President, and Same
Chief Investment Officer
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
James S. Riepe Director Vice Chairman of the Board
and Director of T. Rowe Price
Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
George A. Roche Director Chief Financial Officer,
Chairman of the Board,
Director and President of T.
Rowe Price Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
M. David Testa Chairman of the Board and Vice Chairman of the Board
Director and Director of T. Rowe Price
Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
Information about other mutual funds managed by Price International with investment
objectives and strategies similar to those of the Thrivent Partner International Stock
Portfolio is provided in the following table.
- ---------------------------- ------------------- ------------------------------- ----------------
Net Assets
Investment as of
Investment Company Name Objective Annual Rate of Compensation 12/31/03
- -------------------------------------------------------------------------------------------------
T. Rowe Price Mutual Funds:
- -------------------------------------------------------------------------------------------------
- ---------------------------- ------------------- ------------------------------- ----------------
T. Rowe Price Long-term growth .35% (individual fee) $5,220,282,566
International Funds, Inc.: of capital .32% (group fee)
T. Rowe Price
International Stock Fund
- ---------------------------- ------------------- ------------------------------- ----------------
- ---------------------------- ------------------- ------------------------------- ----------------
Institutional Long-term growth .70% of average daily net $1,046,428,948
International Funds, Inc.: of capital assets
Foreign Equity Fund
- ---------------------------- ------------------- ------------------------------- ----------------
T. Rowe Price Long-term growth 1.05% (Covers both investment $508,875,583
International Series, Inc.: of capital management and operating
T. Rowe Price expenses)
International Stock
Portfolio
- -------------------------------------------------------------------------------------------------
Subadvised Mutual Funds and Variable Annuity Portfolios:
- -------------------------------------------------------------------------------------------------
- ---------------------------- ------------------- ------------------------------- ----------------
.75% of the first $20 million
John Hancock Variable Long-term growth .60% of the next $30 million $126,689,910
Series Trust I of capital .50% above $50 million
International .50% on all assets once
Opportunities Fund assets exceed $200 million*
- ---------------------------- ------------------- ------------------------------- ----------------
- ---------------------------- ------------------- ------------------------------- ----------------
Long-term growth
LB Series Fund, Inc. of capital .75% of the first $20 million
World Growth Portfolio .60% of the next $30 million $419,632,678
.50% above $50 million
Lutheran Brotherhood .50% on all assets once
Family of Funds assets exceed $200 million*
Lutheran Brotherhood World
Growth Fund $86,663,548
- ---------------------------- ------------------- ------------------------------- ----------------
Please note that the net asset figures for subadvised funds are based on internal T. Rowe
Price market value records.
* Price International has agreed to waive its fees so that at $500 million, the
Sub-Advisory fee would be .45% on all assets.
Price International has no affiliated brokers through whom trades would be executed on
behalf of the Portfolios.
Information about T. Rowe Price Associates, Inc.
Thrivent Financial has engaged T. Rowe Price Associates, Inc., 100 East Pratt Street,
Baltimore, Maryland 21202 as investment subadviser for the Thrivent Partner Small Cap Value
Portfolio. T. Rowe Price has over 67 years of investment management experience. T. Rowe
Price had approximately $190.0 billion under management as of December 31, 2003.
Information about the principal executive officer and each director of T. Rowe Price is
provided in the following table. The address of each person listed below is 100 East Pratt
Street, Baltimore, Maryland 21202.
- --------------------------------- ------------------------------- -------------------------------
Name Position with T. Rowe Price Principal Occupation
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
George A. Roche Director and President Chief Financial Officer,
Chairman of the Board,
Director and President of T.
Rowe Price Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
Edward C. Bernard Director Director of t. Rowe Price
Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
James A.C. Kennedy Director Director of T. Rowe Price
Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
William T. Reynolds Director Director of T. Rowe Price
Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
James S. Riepe Vice Chairman of the Board Vice Chairman of the Board
and Director and Director of T. Rowe Price
Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
M. David Testa Vice Chairman of the Board Vice Chairman of the Board
and Director and Director of T. Rowe Price
Group, Inc.
- --------------------------------- ------------------------------- -------------------------------
- --------------------------------- ------------------------------- -------------------------------
Brian C. Rogers Chief Investment Officer Chief Investment Officer and
Director of T. Rowe Price
Group, inc.
- --------------------------------- ------------------------------- -------------------------------
Information about other mutual funds managed by T. Rowe Price with investment objectives and
strategies similar to those of the Thrivent Partner Small Cap Value Portfolio is provided in
the following table.
- -------------------------- ------------------- ------------------------------- -----------------
Investment Company Name Investment Annual Rate of Compensation Net Assets
Objective as of
12/31/03
- ------------------------------------------------------------------------------------------------
T. Rowe Price Mutual Funds:
- -------------------------- ------------------- ------------------------------- -----------------
T. Rowe Price Long-term capital .35% (individual fee) $3,594,803,939
Small-Cap Value Fund, growth .32% (group fee)
Inc.
- -------------------------- ------------------- ------------------------------- -----------------
- ------------------------------------------------------------------------------------------------
Subadvised Mutual Funds and Variable Annuity Portfolios:
- -------------------------- ------------------- ------------------------------- -----------------
John Hancock Variable Long-term capital .60% on first $500 million; $115,506,877
Series Trust I: Small growth .55% on assets over $500
Cap Value Fund million*
- -------------------------- ------------------- ------------------------------- -----------------
- -------------------------- ------------------- ------------------------------- -----------------
LB Series Fund, Inc.: Long-term capital N/A N/A
Thrivent Partner Small growth
Cap Value Portfolio
- -------------------------- ------------------- ------------------------------- -----------------
- -------------------------- ------------------- ------------------------------- -----------------
Manufacturers Investment Long-term capital .60% on first $500 million; $533,241,786
Trust: Small Company growth .55% on assets over $500
Value Trust million**
- -------------------------- ------------------- ------------------------------- -----------------
- -------------------------- ------------------- ------------------------------- -----------------
MassMutual Institutional Long-term capital .60% on first $500 million; $103,983,776
Funds: MassMutual Small growth .55% on assets over $500
Company Value Fund million
- -------------------------- ------------------- ------------------------------- -----------------
- -------------------------- ------------------- ------------------------------- -----------------
Northwestern Mutual Long-term capital .60% on all assets $122,039,696
Series Fund, Inc.: T. growth
Rowe Price Small Cap
Value Portfolio
- -------------------------- ------------------- ------------------------------- -----------------
Please note that the net asset figures for subadvised funds are based on internal T. Rowe
Price market value records.
* T. Rowe Price has proposed to waive a portion of its sub-advisory fees for certain
registered investment companies where it serves as subadviser to John Hancock
Variable Series Trust I. The fee reduction is based on the combined asset level of
the subadvised portfolios, and ranges between 0% - 10% of the total subadvisory fees
paid.
** T. Rowe Price has voluntarily agreed to waive a portion of its sub-advisory fees for
certain registered investment companies where it serves as subadviser to
Manufacturers Securities Services, LLC. The fee reduction is based on the combined
asset level of the subadvised portfolios, and ranges between 0% - 10% of the total
subadvisory fees paid.
T. Rowe Price has no affiliated brokers through whom trades would be executed on behalf of
the Portfolios.
EXHIBIT A
Form of Sub-advisory Agreement
INVESTMENT SUB-ADVISORY AGREEMENT
By and Among
Thrivent Financial for Lutherans
and
LB Series Fund, Inc.
and
[Sub-adviser]
INVESTMENT SUBADVISORY AGREEMENT, made as of the ___ day of ________, 200_, (the "Effective
Date") by and among Thrivent Financial for Lutherans, a fraternal benefit society organized
and existing under the laws of the State of Wisconsin ("Adviser"), LB Series Fund, Inc., a
corporation organized and existing under the laws of the State of Minnesota ("Fund"), and
__________________________, a ______________ organized and existing under the laws of the
State of ____________ ("Sub-adviser").
WHEREAS, Adviser has entered into an Investment Advisory Agreement dated as of the ____ day
of _________, 200_ ("Advisory Agreement") with the Fund, which is engaged in business as an
open-end investment company registered under the Investment Company Act of 1940, as amended
("1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of the _________ Portfolio ("Portfolio"), a
separate series of the Fund; and
WHEREAS, Sub-adviser is engaged principally in the business of rendering investment
supervisory management services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act"); and
WHEREAS, the Fund and Adviser desire to retain Sub-adviser as Sub-adviser to furnish certain
investment advisory services to Adviser and the Portfolio and Sub-adviser is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual promises herein set forth, the
parties hereto agree as follows:
I. Appointment. (A) Adviser hereby appoints Sub-adviser as its investment Sub-adviser
with respect to the Portfolio for the period and on the terms set forth in this
Agreement, and (B) Sub-adviser hereby accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
II Additional Series. In the event that the Fund establishes one or more series of
shares other than the Portfolio with respect to which Adviser desires to retain
Sub-adviser to render investment advisory services hereunder, Adviser shall so notify
Sub-adviser in writing, indicating the advisory fee to be payable with respect to the
additional series of shares. If Sub-adviser is willing to render such services on
the terms provided for herein, it shall so notify Adviser in writing, whereupon such
series shall become a Portfolio hereunder.
III. Duties of Sub-adviser.
A. Sub-adviser is hereby authorized and directed and hereby agrees to (i) furnish
continuously an investment program for the Portfolio, and (ii) determine from
time to time what investments shall be purchased, sold or exchanged and what
portion of the assets of the Portfolio shall be held uninvested. Sub-adviser
shall perform these duties subject always to (1) the overall supervision of
Adviser and the Board of Directors of the Fund (the "Board"), (2) the Fund's
Articles and By-laws (as defined below), as amended from time to time, (3) the
stated investment objectives, policies and restrictions of the Portfolio as
set forth in the Fund's then current Registration Statement (as defined
below), (4) any additional policies or guidelines established by Adviser or
Board that have been furnished in writing to Sub-adviser, (5) applicable
provisions of law, including, without limitation, all applicable provisions of
the 1940 Act and the rules and regulations thereunder, and (6) the provisions
of the Internal Revenue Code of 1986, as amended (the "Code") applicable to
"regulated investment companies" (as defined in Section 851 of the Code), as
amended from time to time. In accordance with Section VII, Sub-Adviser shall
arrange for the execution of all orders for the purchase and sale of
securities and other investments for the Portfolio's account and will exercise
full discretion and act for the Fund in the same manner and with the same
force and effect as the Fund might or could do with respect to such purchases,
sales, or other transactions, as well as with respect to all other things
necessary or incidental to the furtherance or conduct of such purchases,
sales, or other transactions, including without limitation, management of cash
balances in the Portfolio.
B. Sub-adviser shall have no responsibility with respect to maintaining custody
of the Portfolios assets. Sub-adviser shall affirm security transactions with
central depositories and advise the custodian of the Portfolio ("Custodian")
or such depositories or agents as may be designated by Custodian and Adviser
promptly of each purchase and sale of a portfolio security, specifying the
name of the issuer, the description and amount or number of shares of the
security purchased, the market price, the commission and gross or net price,
the trade date and settlement date and the identity of the effecting broker or
dealer. Sub-adviser shall from time to time provide Custodian and Adviser
with evidence of authority of its personnel who are authorized to give
instructions to Custodian.
C. Unless Adviser advises Sub-adviser in writing that the right to vote proxies
has been expressly reserved to Adviser or the Fund or otherwise delegated to
another party, Sub-adviser shall exercise voting rights incident to any
securities held in the Portfolio without consultation with Adviser or Fund,
provided that Sub-adviser will follow any written instructions received from
Adviser or Fund with respect to voting as to particular issues. Sub-adviser
shall further respond to all corporate action matters incident to the
securities held in the Portfolio including, without limitation, proofs of
claim in bankruptcy and class action cases and shelf registrations.
D. Upon request of Custodian and/or Fund, Sub-adviser shall provide assistance in
connection with the determination of the fair value of securities in the
Portfolio for which market quotations are not readily available.
E. In the performance of its duties hereunder, Sub-adviser is and shall be an
independent contractor and except as expressly provided for herein or
otherwise expressly provided or authorized shall have no authority to act for
or represent the Portfolio or the Fund in any way or otherwise be deemed to be
an agent of the Portfolio, the Fund or of Adviser.
IV. Compensation. For the services provided pursuant to this Agreement, Sub-adviser
shall receive an investment management fee as set forth in Schedule 1, attached
hereto and incorporated herein by reference. The management fee shall be payable
monthly in arrears to Sub-adviser on or before the 10th day of the next succeeding
calendar month. If this Agreement becomes effective or terminates before the end of
any month, the investment management fee for the period from the effective date to
the end of such month or from the beginning of such month to the date of termination,
as the case may be, shall be prorated according to the proration which such period
bears to the full month in which such effectiveness or termination occurs.
V. Expenses. During the term of this Agreement, Sub-adviser will bear all expenses
incurred by it in the performance of its duties hereunder, other than those expenses
specifically assumed by the Fund hereunder. The Fund shall assume and shall pay all
brokers' and underwriting commissions chargeable to the Fund in connection with the
securities transactions to which the Portfolio is a party.
VI. Duties of Adviser. Adviser has furnished Sub-adviser with copies of each of the
following documents and will furnish to Sub-adviser at its principal office all
future amendments and supplements to such documents, if any, as soon as practicable
after such documents become available:
(1) The Articles of Incorporation of the Fund, as filed with the State of
Minnesota, as in effect on the date hereof and as amended from time to
time ("Articles");
(2) The by-laws of the Fund as in effect on the date hereof and as amended
from time to time ("By-Laws");
(3) Certified resolutions of the Board authorizing the appointment of
Adviser and Sub-adviser and approving the form of the Advisory
Agreement and this Agreement;
(4) The Fund's Registration Statement under the 1940 Act and the Securities
Act of 1933, as amended (the "1933 Act") on Form N-1A, as filed with
the Securities and Exchange Commission ("SEC") relating to the
Portfolio and its shares and all amendments thereto ("Registration
Statement");
(5) The Notification of Registration of the Fund under the 1940 Act on Form
N-8A as filed with the SEC and any amendments thereto;
(6) The Portfolio's most recent prospectus (the "Prospectus"); and
(7) Copies of reports made by the Fund to its shareholders.
Adviser shall furnish Sub-adviser with any further documents, materials or
information that Sub-adviser may reasonably request to enable it to perform
its duties pursuant to this Agreement.
VII. Portfolio Transactions.
A. Sub-adviser agrees that, in executing portfolio transactions and selecting
brokers or dealers, if any, it shall use its best efforts to seek on behalf of
the Portfolio the best overall terms available. In assessing the best overall
terms available for any transaction, Sub-adviser shall consider all factors it
deems relevant, including the breadth of the market in and the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, with respect to the
specific transaction and on a continuing basis. In evaluating the best
overall terms available, and in selecting the broker or dealer, if any, to
execute a particular transaction, Sub-adviser may also consider the brokerage
and research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934, as amended ("1934 Act")) provided to
Sub-adviser with respect to the Portfolio and/or other accounts over which
Sub-adviser exercises investment discretion. Sub-adviser may, in its
discretion, agree to pay a broker or dealer that furnishes such brokerage or
research services a higher commission than that which might have been charged
by another broker-dealer for effecting the same transactions, if Sub-adviser
determines in good faith that such commission is reasonable in relation to the
brokerage and research services provided by the broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities of
Sub-adviser with respect to the accounts as to which it exercises investment
discretion (as such term is defined under Section 3(a)(35) of the 1934 Act).
Sub-adviser shall, upon request from Adviser, provide such periodic and
special reports describing any such brokerage and research services received
and the incremental commissions, net price or other consideration to which
they relate.
B. In no instance will portfolio securities be purchased from or sold to
Sub-adviser, or any affiliated person thereof, except in accordance with the
federal securities laws and the rules and regulations thereunder.
C. Sub-adviser may buy securities for the Portfolio at the same time it is
selling such securities for another client account and may sell securities for
the Portfolio at the time it is buying such securities for another client
account. In such cases, subject to applicable legal and regulatory
requirements, and in compliance with such procedures of the Fund as may be in
effect from time to time, Sub-adviser may effectuate cross transactions
between the Portfolio and such other account if it deems this to be
advantageous.
D. On occasions when Sub-adviser deems the purchase or sale of a security to be
in the best interest of the Fund as well as other clients of Sub-adviser,
Sub-adviser, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be purchased
or sold to attempt to obtain a more favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by Sub-adviser in the manner Sub-adviser considers
to be the most equitable and consistent with its fiduciary obligations to the
Fund and to its other clients.
VIII. Ownership of Records. Sub-adviser shall maintain all books and records required to
be maintained by Sub-adviser pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions on behalf of the Portfolio. In
compliance with the requirements of Rule 31a-3 under the 1940 Act, Sub-adviser hereby
agrees (A) that all records that it maintains for the Portfolio are the property of
the Fund, (B) to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any records that it maintains for the Fund and that are required to be maintained by
Rule 31a-1 under the 1940 Act, and (C) to surrender promptly to the Fund any records
that it maintains for the Fund upon request by the Fund; provided, however,
Sub-adviser may retain copies of
IX. Reports and Meetings.
A. Sub-adviser shall furnish to the Board or Adviser, or both, as appropriate,
such information, reports, evaluations, analyses and opinions as are required
by law or that the Board or Adviser, as appropriate, may reasonably require,
including, without limitation: compliance reporting and certification with
respect to:
1. Affiliated Brokerage Transactions
2. Affiliated Underwritings
3. Cross Transactions
4. Prospectus Compliance
5. Code of Ethics
6. Soft Dollar Usage
7. Price Overrides/Fair Valuation Determinations
B. Sub-adviser shall make available in person to the Board and to Adviser
personnel of Sub-adviser as the Board or Adviser may reasonably request to
review the investments and the investment program of the Portfolio and the
services provided by Sub-adviser hereunder.
X. Services to Other Clients. Nothing contained in this Agreement shall limit or
restrict (i) the freedom of Sub-adviser, or any affiliated person thereof, to render
investment management and corporate administrative services to other investment
companies, to act as investment manager or investment counselor to other persons,
firms, or corporations, or to engage in any other business activities, or (ii) the
right of any director, officer, or employee of Sub-adviser, who may also be a
director, officer, or employee of the Fund, to engage in any other business or to
devote his or her time and attention in part to the management or other aspects of
any other business, whether of a similar nature or a dissimilar nature.
XI. Sub-adviser's Use of the Services of Others. Sub-adviser may, at its cost, employ,
retain, or otherwise avail itself of the services or facilities of other persons or
organizations for the purpose of providing Sub-adviser or the Fund or Portfolio, as
appropriate, with such statistical and other factual information, such advice
regarding economic factors and trends, such advice as to occasional transactions in
specific securities, or such other information, advice, or assistance as Sub-adviser
may deem necessary, appropriate, or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Fund or the Portfolio, as appropriate, or in
the discharge of Sub-adviser's overall responsibilities with respect to the other
accounts that it serves as investment manager or counselor.
XII. Liability of Sub-adviser; Indemnification. Neither Sub-adviser nor any of its
officers, directors, or employees, nor any person performing executive,
administrative, trading, or other functions for the Fund, the Portfolio (at the
direction or request of Sub-adviser) or Sub-adviser in connection with Sub-adviser's
discharge of its obligations undertaken or reasonably assumed with respect to this
Agreement (collectively, "Related Persons"), shall be liable for (i) any error of
judgment or mistake of law or for any loss suffered by the Fund or Portfolio or (ii)
any error of fact or mistake of law contained in any report or data provided by
Sub-adviser, except for any error, mistake or loss resulting from willful
misfeasance, bad faith, or negligence in the performance by Sub-adviser or such
Related Person of Sub-adviser's duties on behalf of the Fund or Portfolio or from
reckless disregard by Sub-adviser or any such Related Person of the duties of
Sub-adviser pursuant to this Agreement (each of which is referred to as a "Culpable
Act").
Notwithstanding the foregoing, any stated limitations on liability shall not relieve
Sub-adviser from any responsibility or liability Sub-adviser may have under state or
federal statutes or from responsibility or liability for errors in connection with
the execution of trade orders.
Notwithstanding the foregoing, any stated limitations on liability shall not Relieve
Sub-adviser from any responsibility or Liability Sub-adviser may have under state or
federal statutes.
Sub-adviser shall indemnify Adviser and its Related Persons and hold them harmless
from and against any and all losses, damages, costs, charges, reasonable counsel
fees, payments, expenses and liabilities (collectively, "Damages") arising directly
or indirectly out of or in connection with the performance of services by Sub-adviser
or its Related Persons hereunder to the extent such Damages result from any Culpable
Act of Sub-adviser or its Related Persons.
Adviser shall indemnify Sudadviser and its Related Persons from and against any
Damages arising directly or indirectly out of or in connection with the performance
of services by Adviser or its Related Persons under this Agreement or the Advisory
Agreement, in each case, to the extent such Damages result from any willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties by
Adviser or any of its Related Persons.
XIII. Representations of Sub-adviser. Sub-adviser represents, warrants, and agrees as
follows:
A. Sub-adviser (i) is registered as an investment adviser under Advisers Act and
will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and
will continue to meet for so long as this Agreement remains in effect, any
other applicable federal or state requirements, or the applicable requirements
of any regulatory or industry self-regulatory agency, necessary to be met in
order to perform the services contemplated by this Agreement; (iv) has the
authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify Adviser of the occurrence of any
event that would disqualify Sub-adviser from serving as an investment adviser
of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise.
B. Sub-adviser has adopted a written code of ethics (the "Sub-adviser Code")
complying with the requirements of Rule 17j-1 under the 1940 Act, as may be
amended from time to time, and, has provided the Adviser and the Fund with a
copy of the Sub-adviser Code, together with evidence of its adoption. The
Sub-adviser certifies that it has adopted procedures reasonably necessary to
prevent access persons" as defined in Rule 17j-1 ("Access Persons") from
violating the Sub-adviser Code. On a [quarterly] basis, Sub-adviser will
either; (i) certify to Adviser that Sub-adviser and its Access Persons have
complied with Sub-adviser Code with respect to the Portfolio, or (ii) identify
any material violations of the Sub-adviser Code which have occurred with
respect to the Portfolio. In addition, Sub-adviser will furnish at least
annually to Adviser and the Board a written report that (a) describes any
issues arising under the Sub-adviser Code since the last report to the Board,
including, but not limited to, information about material violations of the
Sub-adviser Code with respect to the Portfolio and sanctions imposed in
response to the material violations and (b) certifies that the Sub-adviser has
adopted procedures reasonably necessary to prevent Access Persons from
violating the Sub-adviser Code.
C. Sub-adviser has provided Adviser and the Fund with a copy of its Form ADV as
most recently filed with the SEC and, if not so filed, the its most recent
Part 2 of Form ADV, and will, promptly after filing any amendment to its Form
ADV with the SEC, and, if not so filed, any amendment to Part 2 of its Form
ADV, furnish a copy of such amendment to Adviser.
XIV. Compliance with Applicable Regulations. In performing its duties hereunder,
Sub-adviser shall establish compliance procedures (copies of which shall be provided
to Adviser, and shall be subject to review and approval by Adviser) reasonably
calculated to ensure compliance at all times with all applicable provisions of the
1940 Act and the Advisers Act, and any rules and regulations adopted thereunder;
Subchapter M of the Code; the provisions of the Registration Statement; the
provisions of the Articles and the By-Laws of the Fund, as the same may be amended
from time to time; and any other applicable provisions of state, federal or foreign
law.
XV. Term of Agreement. This Agreement shall become effective with respect to the
______________ Portfolio on the Effective Date and, with respect to any additional
Portfolio, on the date of receipt by the Adviser of notice from the Sub-adviser in
accordance with Section II hereof that the Subscriber is willing to serve as
Sub-adviser with respect to such Portfolio. Unless sooner terminated as provided
herein, this Agreement shall continue in effect for two years from the Effective Date
with respect to the ______________ Portfolio and, with respect to each additional
Portfolio, for two years from the date on which this Agreement becomes effective with
respect to such Portfolio. Thereafter, this Agreement shall continue in effect from
year to year, with respect to the Portfolio, subject to the termination provisions
and all other terms and conditions hereof, so long as (a) such continuation shall be
specifically approved at least annually (i) by either the Board, or by vote of a
majority of the outstanding voting securities of the Portfolio; (ii) in either event,
by the vote, cast in person at a meeting called for the purpose of voting on such
approval, of a majority of the Directors of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the purpose of
voting on such approval; and (b) Sub-adviser shall not have notified the Fund, in
writing, at least 60 days prior to such approval that it does not desire such
continuation. Sub-adviser shall furnish to the Fund, promptly upon its request, such
information as may reasonably be necessary to evaluate the terms of this Agreement or
any extension, renewal, or amendment hereof.
XVI. Termination of Agreement. Notwithstanding the foregoing, this Agreement may be
terminated at any time, without the payment of any penalty, by vote of the Board or
by a vote of a majority of the outstanding voting securities of the Portfolio on at
least 60 days' prior written notice to Sub-adviser. This Agreement may also be
terminated by Adviser: (i) on at least 60 days' prior written notice to Sub-adviser,
without the payment of any penalty; (ii) upon material breach by Sub-adviser of any
of the representations and warranties set forth in Paragraph 11 of this Agreement, if
such breach shall not have been cured within a 20-day period after notice of such
breach; or (iii) if Sub-adviser becomes unable to discharge its duties and
obligations under this Agreement. Sub-adviser may terminate this Agreement at any
time, without the payment of any penalty, on at least 60 days' prior notice to
Adviser. This Agreement shall terminate automatically in the event of its
"assignment, as such term is defined in the 1940 Act, or upon termination of the
Advisory Agreement. Any approval, amendment, or termination of this Agreement by the
holders of a majority of the outstanding voting securities (as defined in the 1940
Act) of any Portfolio shall be effective to continue, amend or terminate this
Agreement with respect to any such Portfolio notwithstanding (i) that such action has
not been approved by the holders of a majority of the outstanding voting securities
of any other Portfolio affected thereby, and/or (ii) that such action has not been
approved by the vote of a majority of the outstanding voting securities of the Fund,
unless such action shall be required by any applicable law or otherwise.
XVII. Amendments, Waivers, etc. Provisions of this Agreement may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination is sought. This
Agreement (including any exhibits hereto) may be amended at any time by written
mutual consent of the parties, subject to the requirements of the 1940 Act and rules
and regulations promulgated and orders granted thereunder.
XVIII. Notification. Sub-adviser will notify Adviser promptly of any change in the
personnel of Sub-adviser with responsibility for making investment decisions in
relation to the Portfolio or who have been authorized to give instructions to
Custodian.
XIX. Miscellaneous.
A. Governing Law. This Agreement shall be construed in accordance with the laws
of the State of Minnesota without giving effect to the conflicts of laws
principles thereof and the 1940 Act. To the extent that the applicable laws
of the State of Minnesota conflict with the applicable provisions of the 1940
Act, the latter shall control.
B. Insurance. Sub-adviser agrees to maintain errors and omissions or
professional liability insurance coverage in an amount that is reasonable in
light of the nature and scope of Sub-adviser's business activities.
C. Captions. The captions contained in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
D. Entire Agreement. This Agreement represents the entire agreement and
understanding of the parties hereto and shall supersede any prior agreements
between the parties relating to the subject matter hereof, and all such prior
agreements shall be deemed terminated upon the effectiveness of this Agreement.
E. Interpretation. Nothing herein contained shall be deemed to require the Fund
to take any action contrary to its Articles or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of its responsibility for and
control of the conduct of the affairs of the Portfolio.
F. Definitions. Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the
United States courts or, in the absence of any controlling decision of any
such court, by rules, regulations, or orders of the SEC validly issued
pursuant to the 1940 Act. As used in this Agreement, the terms "majority of
the outstanding voting securities," "affiliated person," "interested person,"
"assignment," broker," "investment adviser," "net assets," "sale," "sell," and
"security" shall have the same meaning as such terms have in the 1940 Act,
subject to such exemption as may be granted by the SEC by any rule,
regulation, or order. Where the effect of a requirement of the federal
securities laws reflected in any provision of this Agreement is made less
restrictive by a rule, regulation, or order of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation, or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
duly authorized signatories as of the date and year first above written.
THRIVENT FINANCIAL FOR LUTHERANS
Attest: By:
Name: Name:
Title:
LB SERIES FUND, INC.
Attest: By:
Name: Name:
Title:
[SUB-ADVISER]
Attest: By:
Name: Name:
Title:
Schedule I
Dated ____________, 200_
Sub-advisory Fees
_____________ Portfolio
Average Daily Assets Annual Rate
$0 - __million %
$__ to __million %
Above $__million 0%
APPENDIX H
Share Ownership Information
On the record date, the directors and officers of the AAL Series Fund as a group owned beneficially (meaning they
had the power to vote or direct the voting of) less than 1% of the outstanding shares of each AAL Portfolio. To
the best knowledge of each AAL Portfolio, as of the record date, no person, except as described in the table
below, owned beneficially or of record 5% or more of the outstanding shares of an AAL Portfolio.
Name and Address % of
Portfolio of Record Owner Shares Owned Outstanding
- ------------------------------------------------------------------------------------------------------------------------
Technology Stock Portfolio Thrivent Financial for Lutherans 1,696,450.50 25.05%
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 1,429,475.80 21.11%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 40,651.34 .60%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 628,285.94 9.28%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 2,198,364.51 32.46%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 181,512.47 2.68%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 597,757.33 8.82%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Small Cap Stock Portfolio Thrivent Financial for Lutherans 5,642,098.88 43.38%
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 2,983,454.77 22.94%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 101,637.50 .78%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 602,860.77 4.64%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 3,040,019.36 23.37%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 224,858.13 1.73%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 412,083.99 3.16%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Small Cap Value Portfolio Thrivent Financial for Lutherans - AAL 254,742.92 13.98%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 11,790.65 .65%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 277,279.82 15.22%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 1,039,380.71 57.05%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 13,013.68 .71%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 225,797.90 12.39%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Small Cap Index Portfolio Thrivent Financial for Lutherans 524,984.10 2.09%
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 19,882,188.28 79.10%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 265,177.62 1.06%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 956,446.64 3.80%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 2,078,920.29 8.27%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 724,515.40 2.88%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 704,597.63 2.80%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Mid Cap Stock Portfolio Thrivent Financial for Lutherans - AAL 3,253,714.07 42.14%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 84,852.17 1.10%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 408,057.71 5.28%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 3,382,924.47 43.81%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 234,543.32 3.04%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 358,030.88 4.63%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Mid Cap Index Portfolio Thrivent Financial for Lutherans - AAL 2,144,232.88 29.43%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 76,659.25 1.05%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 1,229,770.71 16.88%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 2,758,598.46 37.86%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 119,033.71 1.64%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 957,154.93 13.14%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
International Portfolio Thrivent Financial for Lutherans 1,174,514.46 9.54%
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 5,619,874.16 45.68%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 180.,090.53 1.46%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 443,808.63 3.61%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 4,026,271.16 32.73%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 527,828.38 4.29%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 330,582.82 2.69%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Capital Growth Portfolio Thrivent Financial for Lutherans - AAL 9,838,830.24 27.14%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 609,278.04 1.68%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 3,499,266.36 9.65%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 18,821,276.67 51.91%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 664,062.35 1.83%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 2,823,952.86 7.79%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Large Company Index Portfolio Thrivent Financial for Lutherans - AAL 29,696,234.78 79.67%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 483,600.05 1.30%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 1,424,070.22 3.82%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 3,562,991.96 9.56%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 1,062,366.97 2.85%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 1,043,301.40 2.80%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Real Estate Securities Portfolio Thrivent Financial for Lutherans - AAL 581,961.14 11.79%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 35,243.34 .72%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 1,010,407.09 20.47%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 2,507,719.58 50.80%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 23,119.13 .47%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 777,588.64 15.75%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Balanced Portfolio Thrivent Financial for Lutherans - AAL 41,863,369.59 83.59%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 675,440.96 1.35%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 1,484,964.19 2.97%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 4,438,537.64 8.86%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 460,223.86 .92%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 1,157,668.06 2.31%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
High Yield Bond Portfolio Thrivent Financial for Lutherans 781,470.10 6.44%
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 4,095,037.76 33.79%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 288,940.09 2.38%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 1,443,365.70 11.91%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 4,291,709.43 35.41%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 178,499.45 1.47%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 1,041,875.92 8.60%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Bond Index Portfolio Thrivent Financial for Lutherans - AAL 12,217,351.45 51.40%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 279,112.61 1.17%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 2,419,783.64 10.18%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 7,095,720.21 29.85%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 167,477.69 .71%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 1,589,850.13 6.69%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Mortgage Securities Portfolio Thrivent Financial for Lutherans - AAL 292,191.68 9.15%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 27,950.64 .88%
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 551,346.70 17.26%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 1,977,585.22 61.92%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 13,489.60 .42%
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 331,165.21 10.37%
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
On the record date, no person owned beneficially or of record any shares of the New Thrivent Portfolios, which
were organized solely for the purpose of continuing the business of their corresponding AAL Portfolio. On the
record date, the directors and officers of the Thrivent Series Fund as a group owned beneficially less than 1% of
the outstanding shares of the World Growth Portfolio. As of the record date, no person, except as set forth in
the table below, was know to own beneficially or of record 5% or more of the outstanding shares of the World
Growth Portfolio.
Name and Address % of
Portfolio of Record Owner Shares Owned Outstanding
- -----------------------------------------------------------------------------------------------------------------
World Growth Portfolio Thrivent Financial for Lutherans 960,728.24 2.38
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 242,354.54 .60
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - AAL 19,204.07 .05
Variable Annuity Account II
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - LB 21,453,331.08 53.12
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 1,680,497.61 4.16
Variable Insurance Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 3,264,161.22 8.08
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Financial for Lutherans - Thrivent 23,486.97 .06
Variable Life Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 11,620,129.86 28.77
Variable Annuity Account I
625 Fourth Avenue South
Minneapolis, MN 55415
Thrivent Life Insurance Company - LBVIP 1,121,326.28 2.78
Variable Insurance Account
625 Fourth Avenue South
Minneapolis, MN 55415
[Outside back cover of proxy and prospectus]
The following documents contain additional information about the AAL Portfolios and are
incorporated into this proxy statement and prospectus by reference. To obtain copies of the
documents without charge, write the AAL Series Fund at 625 Fourth Avenue South, Minneapolis,
Minnesota 55415 or call 1-800-847-4836.
o The AAL Series Fund prospectus dated April 30, 2003, as supplemented.
o The AAL Series Fund Statement of Additional Information dated April 30, 2003.
o The AAL Series Fund Annual Report dated December 31, 2003.
The following documents contain additional information about the Thrivent Portfolios and are
incorporated into this proxy statement and prospectus by reference.
o The prospectus of the World Growth Portfolio dated April 30, 2003, as supplemented,
accompanies this proxy statement and prospectus as Appendix B.
o The prospectus of each New Thrivent Portfolio dated February 1, 2004, as supplemented
February 12, 2004, accompanies this proxy statement and prospectus as Appendix C.
o Management's Discussion of Fund Performance and the Financial Highlights of the World
Growth Portfolio from the most recent Annual Report for the Thrivent Series
Fund accompanies this proxy statement and prospectus as Appendix D.
o The Statement of Additional Information relating to this proxy statement and
prospectus dated March 3, 2004.
o The Statement of Additional Information for the World Growth Portfolio dated April
30, 2003.
o The Statement of Additional Information of the New Thrivent Portfolios dated February
1, 2004, as supplemented February 12, 2004.
To obtain copies of the above documents, without charge, write the Thrivent Series Fund at
625 Fourth Avenue South, Minneapolis, Minnesota 55415 or call 1-800-847-4836.
The above documents relating to the AAL Portfolios and the Thrivent Portfolios have been
filed with the Securities and Exchange Commission (the "SEC"). You may obtain copies by
accessing the SEC's Web site at http://www.sec.gov. For a prescribed fee, you may obtain
copies of these documents by sending an email request to publicinfo@sec.gov or writing to:
Public Reference Room, U.S. Securities and Exchange Commission, 450 5th Street, NW, Room
1300, Washington, D.C. 20549.
1940 Act File No. 811-8662 - AAL Variable Product Series Fund, Inc.
1940 Act File No. 811-4603 - Thrivent Series Fund, Inc.
PART B - STATEMENT OF ADDITIONAL INFORMATION
MARCH 3, 2004
AAL VARIABLE PRODUCT SERIES FUND, INC.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
1-800-847-4836
LB SERIES FUND, INC.
625 Fourth Avenue South
Minneapolis, Minnesota 55415
1-800-847-4836
This Statement of Additional Information is not a prospectus but should be read in
conjunction with the Proxy Statement and Prospectus dated March 3, 2004 for the Special
Meeting of Shareholders to be held on April 7, 2004. The Proxy Statement and Prospectus
describes proposed Agreements and Plans of Reorganization between AAL Variable Product
Series Fund, Inc. and LB Series Fund, Inc., which provide that shares of each of the
Technology Stock Portfolio, Small Cap Stock Portfolio, Small Cap Value Portfolio, Small Cap
Index Portfolio, Mid Cap Stock Portfolio, Mid Cap Index Portfolio, International Portfolio,
Capital Growth Portfolio, Large Company Index Portfolio, Real Estate Securities Portfolio,
Balanced Portfolio, High Yield Bond Portfolio, Bond Index Portfolio and Mortgage Securities
Portfolio (each an "AAL Portfolio" and collectively the "AAL Portfolios"), each a series of
AAL Variable Product Series Fund, Inc., will be exchanged for shares of comparable series
of the LB Series Fund (each an "LB Portfolio" and collectively the "LB Portfolios").
Copies of the Proxy Statement and Prospectus may be obtained at no charge by writing to
Thrivent Series Fund, Inc., 625 Fourth Avenue South, Minneapolis, Minnesota 55415 or by
calling 1-800-874-4836. Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Proxy Statement and
Prospectus.
This Statement of Additional Information consists of this cover page and the following
documents:
o The Statement of Additional Information dated April 30, 2003 of LB Series Fund,
Inc., included in Post-Effective Amendment No. 28 to the Registration Statement on Form
N-1A of LB Series Fund, Inc. previously filed via EDGAR on April 28, 2003 (SEC File No.
033-03677), and incorporated by reference herein.
o The audited financial statements of the World Growth Portfolio included in the
Annual Report of LB Series Fund, Inc. for the fiscal year ended December 31, 2003,
previously filed via EDGAR on Form N-CSR on February 24, 2004 (SEC File No. 811-04603),
and incorporated by reference herein.
o The Statement of Additional Information dated April 30, 2003 of AAL Variable
Product Series Fund, Inc., included in Post-Effective Amendment No. 17 to the
Registration Statement on Form N-1A of AAL Variable Product Series Fund, Inc.
previously filed via EDGAR on April 28, 2003 (SEC File No. 033-82056), and incorporated
by reference herein.
o The audited financial statements of the AAL Portfolios included in the Annual
Report of AAL Variable Product Series Fund, Inc. for the fiscal year ended December 31,
2003, previously filed via EDGAR on Form N-CSR on February 24, 2004 (SEC File No.
811-08662), and incorporated by reference herein.
o The pro forma financial statements of the World Growth Portfolio giving effect to
the proposed reorganization. Pro forma financial statements relating to the
reorganization of the following AAL Portfolios into corresponding LB Portfolios have
not been prepared because in each case, the AAL Portfolio is being reorganized into a
newly created LB Portfolio that was created to continue the operations of the
corresponding AAL Portfolio: Technology Stock Portfolio, Small Cap Stock Portfolio,
Small Cap Value Portfolio, Small Cap Index Portfolio, Mid Cap Stock Portfolio, Mid Cap
Index Portfolio, Capital Growth Portfolio, Large Company Index Portfolio, Real Estate
Securities Portfolio, Balanced Portfolio, High Yield Bond Portfolio, Bond Index
Portfolio and Mortgage Securities Portfolio.
Statement of Asset and Liabilities
as of December 31, 2003
World Growth
Portfolio
International World Growth Pro-Forma Pro-Forma
Portfolio Portfolio Adjustments Combined
Assets
Investments in unaffiliated issuers at cost $98,799,267 $415,411,257 $514,210,524
Investments at value 112,955,053 434,154,614 547,109,667
Cash 0 1,494,789 1,494,789
Dividends and Interest Receivable 203,043 765,691 968,734
Receivable for fund shares sold 522,471 182,492 704,963
Receivable for forward contracts 3,794,246 3,794,246
Receivable from affiliate 37,450 37,450
Prepaid expense 2,067 6,639 8,706
- -----------------------------------------------------------------------------------------------------------
Total Assets 117,476,880 436,641,675 554,118,555
===========================================================================================================
Liabilities
Payable for investment purchased 4,245,054 64,330 4,309,384
Accrued expenses 19,186 37,230 56,416
Payable upon return of securities loaned 3,257,827 15,627,225 18,885,052
Payable for fund shares redeemed 55,029 200,713 255,742
Payable for forward contracts 3,780,032 3,780,032
Payable to affiliate 61,892 61,892
- -----------------------------------------------------------------------------------------------------------
Total Liabilities 11,419,020 15,929,498 27,348,518
===========================================================================================================
Net Assets
Capital stock 127,678,732 495,006,651 622,685,383
Undistributed net investment income (189,779) 6,011,110 5,821,331
Undistributed net realized gain (loss) (35,607,384) (97,117,088) (134,724,472)
Net unrealized appreciation/depreciation
on investments 14,155,786 18,743,357 32,899,143
on foreign currency forward contracts 14,214 14,214
on foreign currency transactions 6,291 68,147 74,438
- -----------------------------------------------------------------------------------------------------------
Total Net Assets $106,057,860 $420,712,177 $526,770,037
===========================================================================================================
Capital Shares Outstanding 11,588,773 39,601,942 (1,605,470)/1/ 49,585,245
===========================================================================================================
Net Asset Value Per Share $9.15 $10.62 $10.62
===========================================================================================================
/1/ The adjustment is necessary to reflect capital shares outstanding post-reorganization.
Statement of Operations
For the year ended December 31, 2003
World Growth
Portfolio
International World Growth Pro-Forma Pro-Forma
Portfolio Portfolio Adjustments Combined
Investment Income
Dividends $1,631,501 $8,246,986 $9,878,487
Interest 30,786 126,318 157,104
Income from securities loaned 554 2,424 2,978
Foreign dividend withholding (196,055) (1,043,693) (1,239,748)
- ----------------------------------------------------------------------------------------------------
Total Investment Income 1,466,786 7,332,035 8,798,821
====================================================================================================
Expenses
Advisor fee 259,847 1,204,354 $(3,035) 1,461,166 (1)
Sub advisor fees 327,147 1,720,511 39,722 2,087,380
Administrative Services and Pricing 57,733 64,183 63,327 185,243 (2)
Fees
Audit and Legal Fees 31,207 22,628 (18,835) 35,000 (3)
Custody fees 84,141 232,301 (25,568) 290,874 (4)
Printing and postage 28,746 44,614 (3,360) 70,000 (5)
Director fees and insurance expenses 6,737 12,844 419 20,000 (6)
Other expenses 985 2,586 (71) 3,500 (7)
- ---------------------------------------------------------------------------------------------------
Total Expenses Before 796,543 3,304,021 52,599 4,153,163
Reimbursement
====================================================================================================
Less:
Fees paid indirectly (9) (175) 184 0
Reimbursement from Advisor (195,798) (378,981) 574,779 0
- ----------------------------------------------------------------------------------------------------
Total Net Expenses 600,736 2,924,865 627,562 4,153,163
====================================================================================================
Net Investment Income $866,050 $4,407,170 $(627,562) $4,645,658
====================================================================================================
Average Net Assets 73,374,250 344,101,765 417,476,015
Net Expense Ratio 0.82% 0.85% 0.99%
Gross Expense Ratio 1.09% 0.96% 0.99%
(1) assumes 0.35% advisory fee.
(2) assumes fund accounting fees of $50,000 and $10,000 in pricing fees and 3 basis point admin fee.
(3) assume $25,000 for audit and tax services and $10,000 for legal
(4) assumes 1/20th of a basis point for custody and $15 average trade fee in foreign countries
(5) assumes current printing and postage rate multiplied by number of pages.
(6) assumes combined expenses of existing funds adjusted for slight increase.
(7) assumes combined expenses of existing funds adjusted for slight increase.
LB Series Fund World Growth Portfolio
Schedule of Investments as of December 31, 2003
LB Series Fund LB Series Fund LB Series Fund AAL Variable
World Growth World Growth World Growth Product Series Fund
Portfolio Portfolio Portfolio International Portfolio
Pro-Forma Pro-Forma
Combined Combined
Shares Common Stock - 96.9% Value Shares Value Shares Value
Australia - 1.5%
475,019 BHP Billiton, Ltd. $4,323,847 307,442 $2,798,482 167,577 $1,525,365
145,000 Coles Myer, Ltd. 825,665 145,000 825,665 0 0
327,895 News Corporation, Ltd. 2,479,224 327,895 2,479,224 0 0
Total Australia 7,628,736 6,103,371 1,525,365
Belgium - 0.6%
96,780 Dexia SA 1,673,801 96,780 1,673,801 0 0
32,090 Fortis (Amsterdam Exchange) 648,110 32,090 648,110 0 0
19,899 Fortis 401,411 19,899 401,411 0 0
12,008 UCB SA 452,723 12,008 452,723 0 0
Total Belgium 3,176,045 3,176,045 0
Brazil - 0.9%
12,186 Banco Itau Holding Financeira SA ADR 594,311 0 0 12,186 594,311
15,500 Companhia Brasileira de Distribuicao 389,825 15,500 389,825 0 0
Grupo Pao de Acucar ADR
36,200 Companhia de Bebidas ADR 923,462 36,200 923,462 0 0
37,103 Petroleo Brasileiro ADR 1,084,892 0 0 37,103 1,084,892
74,490 Petroleo Brasileiro
SA - Petrobras ADR 1,985,903 74,490 1,985,903 0 0
Total Brazil 4,978,393 3,299,190 1,679,203
Canada - 0.2%
13,580 Alcan, Inc. 636,494 13,580 636,494 0 0
10,760 Royal Bank of Canada 514,562 10,760 514,562 0 0
Total Canada 1,151,056 1,151,056 0
Denmark - 0.5%
59,483 Novo Nordisk A/S 2,423,374 59,483 2,423,374 0 0
Total Denmark 2,423,374 2,423,374 0
Finland - 1.0%
308,132 Nokia Oyj $5,264,634 308,132 $5,264,634 0 $0
Total Finland 5,264,634 5,264,634 0
France - 14.7%
35,335 Accor SA 1,601,619 0 0 35,335 1,601,619
49,273 Aventis SA 3,266,574 49,273 3,266,574 0 0
124,972 Axa 2,686,078 124,972 2,686,078 0 0
121,208 Banque Nationale de Paris 7,658,930 121,208 7,658,930 0 0
29,935 Bouygues SA 1,048,945 0 0 29,935 1,048,945
27,067 Carrefour SA 1,490,102 0 0 27,067 1,490,102
51,504 Compagnie de Saint-Gobain 2,528,003 51,504 2,528,003 0 0
128,410 Credit Agricole SA 3,067,226 128,410 3,067,226 0 0
193,146 France Telecom SA 5,518,109 138,900 3,968,321 54,246 1,549,788
3,670 Groupe Danone 599,014 3,670 599,014 0 0
15,794 Hermes International 3,063,524 15,794 3,063,524 0 0
39,924 L'Oreal SA 3,279,277 27,017 2,219,122 12,907 1,060,155
17,437 Lafarge SA 1,559,096 5,055 451,983 12,382 1,107,113
41,747 LVMH Moet Hennessy Louis Vuitton SA 3,049,537 41,747 3,049,537 0 0
24,114 Pinault-Printemps-Redoute SA 2,337,479 7,265 704,229 16,849 1,633,250
8,903 Renault SA 615,412 8,903 615,412 0 0
76,935 Sanofi-Synthelabo SA 5,817,239 76,935 5,817,239 0 0
40,255 Schneider Electric SA 2,638,952 40,255 2,638,952 0 0
12,484 Societe Generale 1,105,587 12,484 1,105,587 0 0
134,915 Societe Television Francaise 1 4,723,931 134,915 4,723,931 0 0
72,831 Sodexho Alliance SA 2,206,197 72,831 2,206,197 0 0
48,400 Thomson Multimedia SA 1,036,235 48,400 1,036,235 0 0
82,053 Total SA 15,223,905 68,104 12,635,843 13,949 2,588,062
20,883 Valeo SA 836,914 0 0 20,883 836,914
30,553 Vivendi Universal SA 743,554 30,553 743,554 0 0
Total France 77,701,439 64,785,491 12,915,948
Germany - 3.8%
10,385 Adidas-Salomon AG 1,182,853 0 0 10,385 1,182,853
29,703 Allianz AG 3,770,842 10,861 1,378,821 18,842 2,392,021
19,672 Bayer AG 577,716 19,672 577,716 0 0
32,726 Bayerische Hypo-Und Vereinsbank AG 761,759 32,726 761,759 0 0
24,245 Bayerische Motoren Werke AG 1,123,870 0 0 24,245 1,123,870
16,357 Celesia AG 793,298 16,357 793,298 0 0
31,447 Deutsche Bank AG $2,589,868 31,447 $2,589,868 0 $0
8,190 Deutsche Boerse AG 448,249 0 0 8,190 448,249
14,895 E.ON AG 972,817 14,895 972,817 0 0
8,181 Hypo Real Estate Holding AG 204,215 8,181 204,215 0 0
14,849 Rhoen-Klinikum AG 833,477 14,849 833,477 0 0
6,900 SAP AG 1,142,481 6,900 1,142,481 0 0
43,474 Siemens AG 3,468,746 10,090 805,071 33,384 2,663,675
38,358 Volkswagen AG 2,140,287 0 0 38,358 2,140,287
Total Germany 20,010,478 10,059,523 9,950,955
Hong Kong - 1.8%
138,000 Cheung Kong Holdings, Ltd. 1,099,018 138,000 1,099,018 0 0
1,034,000 China Life Insurance Company 845,729 1,034,000 845,729 0 0
571,500 China Mobile (Hong Kong), Ltd. 1,758,808 571,500 1,758,808 0 0
541,000 Hong Kong & China Gas Company, Ltd. 827,416 541,000 827,416 0 0
141,000 Hutchison Whampoa, Ltd. 1,040,470 0 0 141,000 1,040,470
328,000 Sun Hung Kai Properties, Ltd. 2,720,158 196,000 1,625,460 132,000 1,094,698
165,500 Swire Pacific, Ltd. 1,023,249 0 0 165,500 1,023,249
Total Hong Kong 9,314,848 6,156,431 3,158,417
Israel - 0.1%
19,515 Check Point Software Technologies, Ltd. 328,242 19,515 328,242 0 0
Total Israel 328,242 328,242 0
Italy - 5.6%
211,310 Alleanza Assicurazioni SPA 2,317,960 211,310 2,317,960 0 0
801,224 Banca Intesa SPA 3,141,429 228,087 894,281 573,137 2,247,148
49,700 Banco Popolare di Verona e Novara Scrl 842,361 49,700 842,361 0 0
407,753 Eni SPA 7,727,352 274,955 5,210,689 132,798 2,516,663
118,394 Fiat SPA 907,966 0 0 118,394 907,966
267,859 Mediaset SPA 3,190,049 74,626 888,753 193,233 2,301,296
106,625 Mediolanum SPA 841,259 106,625 841,259 0 0
470,560 Telecom Italia Mobile SPA 2,558,165 470,560 2,558,165 0 0
585,754 Telecom Italia SPA 1,736,279 585,754 1,736,279 0 0
745,666 Telecom Italia SPA 1,518,984 745,666 1,518,984 0 0
864,632 UniCredito Italiano SPA 4,674,117 864,632 4,674,117 0 0
Total Italy 29,455,921 21,482,848 7,973,073
Japan - 18.4%
105,000 Bridgestone Corporation $1,420,693 0 $0 105,000 $1,420,693
66,000 Canon, Inc. 3,138,579 46,000 2,187,494 20,000 951,085
61,000 Credit Saison Company, Ltd. 1,383,231 61,000 1,383,231 0 0
72,000 Dai Nippon Printing Company, Ltd. 1,016,911 72,000 1,016,911 0 0
48,500 Daito Trust Construction Company,
Ltd. 1,444,980 48,500 1,444,980 0 0
147,000 Daiwa House Industry Company, Ltd. 1,576,285 147,000 1,576,285 0 0
311,000 Daiwa Securities Group, Inc. 2,141,586 311,000 2,141,586 0 0
129,300 Denso Corporation 2,557,650 57,600 1,139,371 71,700 1,418,279
14,200 Fanuc, Ltd. 856,304 14,200 856,304 0 0
185 Fuji Television Network, Inc. 1,010,825 185 1,010,825 0 0
65,000 Fujisawa Pharmaceutical Company, Ltd.1,385,882 65,000 1,385,882 0 0
10,300 Funai Electric Company, Ltd. 1,417,957 10,300 1,417,957 0 0
81,700 Honda Motor Company 3,670,011 57,200 2,569,457 24,500 1,100,554
9,500 Hoya Corporation 873,510 9,500 873,510 0 0
36,000 Ito-Yokado Company, Ltd. 1,142,014 0 0 36,000 1,142,014
4,500 Keyence Corporation 950,582 4,500 950,582 0 0
117,000 Kirin Brewery Coompany, Ltd. 1,000,436 117,000 1,000,436 0 0
11,700 Kyocera Corporation 782,259 11,700 782,259 0 0
101,700 MARUI Company, Ltd. 1,290,356 101,700 1,290,356 0 0
176,000 Matsushita Electric Industrial
Company, Ltd. 2,449,191 0 0 176,000 2,449,191
129,000 Mitsubishi Corporation 1,375,114 129,000 1,375,114 0 0
337,000 Mitsubishi Estate Company, Ltd. 3,217,059 189,000 1,804,226 148,000 1,412,833
203,000 Mitsubishi Heavy Industries, Ltd. 565,835 203,000 565,835 0 0
199 Mitsubishi Tokyo Financial Group,
Inc. 1,551,650 0 0 199 1,551,650
370,000 Mitsui Fudosan Company, Ltd. 3,358,939 370,000 3,358,939 0 0
202,000 Mitsui Trust Holdings, Inc. 1,141,069 202,000 1,141,069 0 0
16,800 Murata Manufacturing Company, Ltd. 912,742 0 0 16,800 912,742
50,000 NEC Corporation 370,981 50,000 370,981 0 0
254 Nippon Telegraph & Telephone 1,238,907 254 1,238,907 0 0
Corporation
274,700 Nissan Motor Company, Ltd. 3,098,038 86,900 980,049 187,800 2,117,989
283,000 Nomura Holdings, Inc. 4,802,363 283,000 4,802,363 0 0
1,816 NTT DoCoMo, Inc. 4,152,659 1,459 3,336,305 357 816,354
173,000 OJI Paper Company, Ltd. 1,119,281 173,000 1,119,281 0 0
149,000 Oki Electric Industry Company, Ltd. 586,726 149,000 586,726 0 0
19,800 ORIX Corporation 1,642,186 6,600 547,395 13,200 1,094,791
23,230 Rohm Company, Ltd. 2,735,642 18,600 2,190,398 4,630 545,244
102,000 Secom Company, Ltd. 3,828,018 102,000 3,828,018 0 0
129,000 Sekisui House, Ltd. 1,341,504 129,000 1,341,504 0 0
101,000 Seven-Eleven Japan Company, Ltd. 3,087,467 101,000 3,087,467 0 0
50,100 Shin-Etsu Chemical Company, Ltd. 2,056,846 25,700 1,055,109 24,400 1,001,737
10,600 SMC Corporation $1,320,599 10,600 $1,320,599 0 $0
26,800 Sony Corporation 928,799 26,800 928,799 0 0
66,000 Sumitomo Corporation 494,376 66,000 494,376 0 0
1,035,000 Sumitomo Metal Industries 1,028,246 1,035,000 1,028,246 0 0
474 Sumitomo Mitsui Financial Group,
Inc. 2,562,547 474 2,562,547 0 0
96,000 Suzuki Motor Corporation 1,424,806 96,000 1,424,806 0 0
15,100 Takeda Chemical Industries, Ltd. 600,615 15,100 600,615 0 0
7,400 TDK Corporation 532,230 0 0 7,400 532,230
270,000 Teijin, Ltd. 795,704 270,000 795,704 0 0
26,700 Toyoda Gosei Company, Ltd. 774,412 26,700 774,412 0 0
61,000 Toyota Motor Corporation 2,086,422 61,000 2,086,422 0 0
823 UFJ Holdings, Inc. 4,015,655 594 2,898,298 229 1,117,357
61,000 Uniden Corporation 1,123,905 61,000 1,123,905 0 0
992 Vodafone Holdings K.K. 2,685,130 992 2,685,130 0 0
70,100 Yamanouchi Pharmaceutical Company, 2,186,239 70,100 2,186,239 0 0
Ltd.
71,000 Yamato Transport Company, Ltd. 840,029 71,000 840,029 0 0
Total Japan 97,091,982 77,507,239 19,584,743
Malaysia - 0.2%
88,200 Malayan Banking Berhad 223,996 0 0 88,200 223,996
615,000 Narra Industries Bhd 715,342 615,000 715,342 0 0
89,400 Resorts World Berhad 237,265 0 0 89,400 237,265
Total Malaysia 1,176,603 715,342 461,261
Mexico - 1.5%
62,300 America Movil SA de CV ADR 1,703,282 62,300 1,703,282 0 0
53,216 Cemex SA de CV ADR 1,394,259 0 0 53,216 1,394,259
293,000 Fomento Economico Mexicano SA de CV 1,081,544 293,000 1,081,544 0 0
1,693,700 Grupo Financiero BBVA Bancomer SA de 1,446,924 1,693,700 1,446,924 0 0
CV
11,854 Grupo Televisa SA 472,500 0 0 11,854 472,500
720,108 Wal-Mart de Mexico SA de CV 2,052,544 575,138 1,639,332 144,970 413,212
Total Mexico 8,151,053 5,871,082 2,279,971
Netherlands - 4.4 %
5,080 Akzo Nobel NV 194,612 5,080 194,612 0 0
121,970 ASM Holding NV 2,441,646 121,970 2,441,646 0 0
18,361 Heineken NV 699,191 0 0 18,361 699,191
185,934 ING Groep NV 4,351,531 185,934 4,351,531 0 0
62,200 Koninklijke (Royal) KPN NV 481,281 62,200 481,281 0 0
253,800 Koninklijke (Royal) KPN NV 1,963,813 253,800 1,963,813 0 0
132,262 Koninklijke (Royal) Philips
Electronics NV $3,869,297 132,262 $3,869,297 0 $0
73,050 Koninklijke Numico N.V. 2,018,826 73,050 2,018,826 0 0
103,250 Reed Elsevier NV 1,280,376 103,250 1,280,376 0 0
26,858 Royal Dutch Petroleum Company 1,406,454 26,858 1,406,454 0 0
114,685 VNU NV 3,623,687 44,864 1,417,562 69,821 2,206,125
68,110 Wolters Kluwer NV 1,065,293 68,110 1,065,293 0 0
Total Netherlands 23,396,007 20,490,691 2,905,316
Norway - 0.2%
54,430 Orkla ASA 1,220,487 54,430 1,220,487 0 0
Total Norway 1,220,487 1,220,487 0
Portugal - 0.2%
115,837 Portugal Telecom SGPS SA 1,165,968 0 0 115,837 1,165,968
Total Portugal 1,165,968 0 1,165,968
Russia - 0.5%
10,930 LUKOIL ADR 1,016,490 10,930 1,016,490 0 0
3,300 Mobile Telesystems ADR 273,240 3,300 273,240 0 0
2,300 Oao Gazprom ADR 60,033 2,300 60,033 0 0
31,450 YUKOS Oil Company ADR 1,339,770 31,450 1,339,770 0 0
Total Russia 2,689,533 2,689,533 0
Singapore - 1.2%
121,000 DBS Group Holdings, Ltd. 1,048,011 0 0 121,000 1,048,011
990,000 MobileOne (Asia), Ltd. 874,404 990,000 874,404 0 0
584,112 United Overseas Bank, Ltd. 4,547,496 385,112 2,998,218 199,000 1,549,278
Total Singapore 6,469,911 3,872,622 2,597,289
South Korea - 2.2%
38,430 Daewoo Shipbuilding & Marine 493,478 0 0 38,430 493,478
Engineering Company, Ltd.
12,560 Hyundai Motor Company, Ltd. 531,152 0 0 12,560 531,152
23,619 Kookmin Bank ADR 893,743 0 0 23,619 893,743
28,694 Posco ADR 974,735 28,694 974,735 0 0
15,910 Samsung Electronics Company, Ltd. 6,021,743 10,890 4,121,734 5,020 1,900,009
2,670 Shinsegae Company, Ltd. 648,892 0 0 2,670 648,892
11,310 SK Telecom Company, Ltd. 1,896,718 11,310 1,896,718 0 0
17,912 SK Telecom Company, Ltd. ADR 334,059 0 0 17,912 334,059
Total South Korea 11,794,520 6,993,187 4,801,333
Spain - 3.7%
9,069 Acerinox SA $428,832 0 $0 9,069 $428,832
538 Antena 3 Television 23,701 537 23,666 1 35
331,555 Banco Bilbao Vizcaya Argentaria SA 4,597,900 253,694 3,518,148 77,861 1,079,752
271,574 Banco Santander Central Hispano SA 3,236,006 271,574 3,236,006 0 0
84,936 Endesa SA 1,635,061 84,936 1,635,061 0 0
71,580 Gas Natural SDG SA 1,674,835 71,580 1,674,835 0 0
85,300 Industria de Diseno Textil SA 1,732,253 85,300 1,732,253 0 0
41,200 Repsol YPF SA 803,982 41,200 803,982 0 0
265,236 Telefonica SA 3,907,079 151,685 2,234,407 113,551 1,672,672
27,733 Telefonica SA ADR 1,225,521 27,733 1,225,521 0 0
Total Spain 19,265,170 16,083,879 3,181,291
Sweden - 2.5%
15,567 Autoliv, Inc. 591,170 0 0 15,567 591,170
59,415 Electrolux AB 1,308,437 59,415 1,308,437 0 0
122,730 Hennes & Mauritz AB 2,925,229 122,730 2,925,229 0 0
168,536 Nordea AB 1,266,260 168,536 1,266,260 0 0
13,120 Sandvik AB 452,524 13,120 452,524 0 0
372,160 Securitas AB 5,024,499 372,160 5,024,499 0 0
414,274 Telefonaktiebolaget LM Ericsson 731,234 414,274 731,234 0 0
34,417 Volvo AB 1,055,126 0 0 34,417 1,055,126
Total Sweden 13,354,479 11,708,183 1,646,296
Switzerland - 6.3 %
118,647 Adecco SA 7,661,278 97,770 6,313,208 20,877 1,348,070
44,644 Compagnie Financiere Richemont AG 1,074,903 0 0 44,644 1,074,903
129,392 Credit Suisse Group 4,720,674 87,720 3,200,333 41,672 1,520,341
35,824 Nestle SA 8,945,952 35,824 8,945,952 0 0
34,631 Roche Holding AG 3,500,733 23,600 2,385,646 11,031 1,115,087
55,149 STMicroelectronics 1,497,544 55,149 1,497,544 0 0
85,428 UBS AG 5,846,575 85,428 5,846,575 0 0
Total Switzerland 33,247,659 28,189,258 5,058,401
Taiwan - 1.0%
58,158 Cathay Financial Holding Company, Ltd. 873,655 0 0 58,158 873,655
482,850 Chinatrust Financial Holdings Company $485,429 482,850 $485,429 0 $0
72,001 First Financial Management
Corporation 1,005,256 0 0 72,001 1,005,256
76,550 MediaTek Incorporation 719,277 76,550 719,277 0 0
799,394 Taiwan Semiconductor Manufacturing 1,490,059 799,394 1,490,059 0 0
Company, Ltd.
90,929 Taiwan Semiconductor Manufacturing 931,113 0 0 90,929 931,113
Company, Ltd. ADR
Total Taiwan 5,504,789 2,694,765 2,810,024
Thailand - 0.6%
130,000 Bangkok Bank Public Company, Ltd. 378,201 0 0 130,000 378,201
825,000 Bangkok Bank Public Company, Ltd. 2,275,143 825,000 2,275,143 0 0
227,100 Kasikornbank Public Company, Ltd. 401,211 0 0 227,100 401,211
Total Thailand 3,054,555 2,275,143 779,412
United Kingdom - 23.3%
83,933 Abbey National plc 798,460 83,933 798,460 0 0
134,837 AstraZeneca plc 6,478,910 92,385 4,439,094 42,452 2,039,816
41,168 Autonomy Corporation plc 176,139 41,168 176,139 0 0
330,427 BAE SYSTEMS plc 999,562 0 0 330,427 999,562
163,211 BG Group plc 838,114 163,211 838,114 0 0
277,342 BP Amoco plc 2,255,179 277,342 2,255,179 0 0
66,174 British Sky Broadcasting Group plc 834,212 66,174 834,212 0 0
147,810 Cadbury Schweppes plc 1,086,665 147,810 1,086,665 0 0
92,300 Capita Group plc 403,271 92,300 403,271 0 0
19,076 Carnival plc 769,785 19,076 769,785 0 0
118,018 Celltech Group plc 796,843 118,018 796,843 0 0
385,600 Centrica plc 1,456,527 385,600 1,456,527 0 0
978,150 Compass Group plc 6,670,192 978,150 6,670,192 0 0
208,429 Diageo plc 2,741,256 208,429 2,741,256 0 0
113,010 DS Smith plc 328,753 113,010 328,753 0 0
304,740 Electrocomponents plc 1,775,795 304,740 1,775,795 0 0
154,230 Friends Provident plc 366,165 154,230 366,165 0 0
18,000 GKN plc 86,117 18,000 86,117 0 0
635,104 GlaxoSmithKline plc 14,659,127 635,104 14,659,127 0 0
116,328 Granada plc 255,397 116,328 255,397 0 0
659,665 Hays plc 1,419,354 659,665 1,419,354 0 0
48,681 HBOS plc 632,653 0 0 48,681 632,653
135,000 Hilton Group plc 543,190 135,000 543,190 0 0
68,800 HSBC Holdings plc 1,084,326 68,800 1,084,326 0 0
189,086 HSBC Holdings plc $2,977,543 0 $0 189,086 $2,977,543
85,294 Imperial Tobacco Group plc 1,682,396 0 0 85,294 1,682,396
79,625 InterContinental Hotels Group plc 754,057 0 0 79,625 754,057
122,774 Kesa Electricals plc 565,408 122,774 565,408 0 0
1,339,127 Kingfisher plc 6,702,588 1,041,238 5,211,596 297,889 1,490,992
50,605 Next plc 1,017,635 0 0 50,605 1,017,635
139,588 Pearson plc 1,554,485 0 0 139,588 1,554,485
58,551 Reckitt Benckiser plc 1,325,175 58,551 1,325,175 0 0
599,076 Reed Elsevier plc 5,007,851 472,093 3,946,363 126,983 1,061,488
129,267 Rentokil Initial plc 440,748 0 0 129,267 440,748
221,779 Rio Tinto plc 6,104,124 221,779 6,104,124 0 0
345,550 Royal Bank of Scotland Group plc 10,202,447 345,550 10,202,447 0 0
776,491 Shell Transport & Trading Company
plc 5,785,317 630,507 4,697,650 145,984 1,087,667
119,962 Smith & Nephew plc 1,003,549 0 0 119,962 1,003,549
76,500 Standard Chartered plc 1,266,550 76,500 1,266,550 0 0
885,240 Tesco plc 4,084,687 885,240 4,084,687 0 0
386,568 Tomkins plc 1,851,111 386,568 1,851,111 0 0
310,532 Unilever plc 2,899,299 310,532 2,899,299 0 0
63,529 United Busines Media plc 557,488 63,529 557,488 0 0
6,237,290 Vodafone Group plc 15,497,198 5,115,235 12,709,335 1,122,055 2,787,863
290,000 Woolworths Group plc 229,726 290,000 229,726 0 0
414,890 WPP Group plc 4,071,433 414,890 4,071,433 0 0
Total United Kingdom 123,036,807 103,506,353 19,530,454
Total Common Stock 512,052,689 408,047,969 104,004,720
(cost $479,212,180)
LB Series Fund
World Growth LB Series Fund AAL Variable
Portfolio LB Series Fund World Growth Product Series Fund
Pro-Forma World Growth Portfolio International Portfolio
Combined Portfolio
Shares or Pro-Forma Shares or Shares or
Principal Combined Principal Principal
Amount Short-Term Investments - 3.1% Value Amount Value Amount Value
7,000,000 Euro Time Deposit 1.750% 1/2/200 48,829,465 7,000,000 8,829,465 0 0
5,600,000 Federal Home Loan Mortgage $5,599,907 0 $0 5,600,000 $5,599,907
Corporation 0.600% 1/2/204
1,650,000 Paradigm Funding, LLC 0.980 1/2/2004 1,649,955 1,650,000 1,649,955 0 0
92,599 SSgA Money Market Fund 0.710 N/A 92,599 0 0 92,599 92,599
Total Short-Term Investments 16,171,926 10,479,420 5,692,506
(cost $16,113,292)
LB Series Fund
World Growth LB Series Fund AAL Variable
Portfolio LB Series Fund World Growth Product Series Fund
Pro-Forma World Growth Portfolio International Portfolio
Combined Portfolio
Shares or Pro-Forma Shares or Shares or
Principal Combined Principal Principal
Amount Collateral Held for Securities Loaned Value Amount Value Amount Value
18,885,052 State Street Navigator Securities Lending
Prime Portfolio 1.060 N/A 18,885,052 15,627,225 15,627,225 3,257,827 3,257,827
Total Collateral Held for
Securities Loaned 18,885,052 15,627,225 3,257,827
Total Investments $547,109,667 434,154,614 112,955,053
(cost $514,210,524)
Notes to Pro Forma Financial Statements
December 31, 2003
(Unaudited)
1. Description of the Fund.
The World Growth Portfolio is a series of LB Series Fund, Inc. ("LB Fund"), which is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an open-ended, diversified investment company. The
International Portfolio is a series of AAL Variable Product Series Fund, Inc. ("AAL Fund" and together with
the LB Fund, the "Funds"), which is also registered under the Act as an open-ended, diversified investment
company. Each Fund offers a single class of shares and is one of the investment vehicles to fund benefits for
the variable life insurance and variable annuity contracts issued by Thrivent Financial for Lutherans and
Thrivent Life Insurance Company. The International Portfolio is also offered as an investment choice in the
retirement plan sponsored by Thrivent Financial for Lutherans.
2. Basis of Combination
The accompanying pro forma financial statements are presented to show the effects of the proposed reorganization
of the International Portfolio into the World Growth Portfolio, as if the reorganization had taken place as
of January 1, 2004.
Under the terms of the Agreement and Plan of Reorganization, the combination of the International Portfolio
and the World Growth Portfolio will be accounted for as a tax-free merger of investment companies. The
reorganization would be accomplished by the acquisition of the net assets of International Portfolio in
exchange for shares of World Growth Portfolio at net asset value. The Statement of Assets and Liabilities and
the related Statement of Operations of the International Portfolio and the World Growth Portfolio have been
combined as of and for the twelve months ended December 31, 2003. Following the reorganization, the World Growth
Portfolio will be the accounting survivor. In accordance with accounting principles generally accepted in the
United States of America, the historical cost of investment securities will be carried forward to the surviving
fund and the results of operations for pre-combination periods of the surviving fund will not be restated.
The accompanying pro-forma financial statements should be read in conjunction with the financial statements of
the World Growth Portfolio and the International Portfolio included in their respective annual reports dated
December 31, 2003.
The following notes refer to the accompanying pro forma financial statements as if the above-mentioned
reorganization of the International Portfolio into the World Growth Portfolio had taken place as of
January 1, 2004.
3. Statement of Operation - pro-forma
The expense pro-forma reflects a management fee of 0.85% (the 2003 management fee in effect for the World Growth
Portfolio). The other expenses reflect the discontinuation of the reimbursement plan effective January 1, 2004.
Certain fixed expenses (audit, legal and fund accounting) have been reduced to reflect expense savings as a
result of the proposed reorganization.
4. Portfolio Valuation
Securities traded on U.S. or foreign securities exchanges or included in a national market system are valued at
the official closing 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 the current bid price considered best to represent the
value at that time. Security prices are based on quotes that are obtained from an independent pricing service
approved by the Board of Directors. Securities which cannot be valued by the approved pricing service are valued
using valuations obtained from dealers that make markets in the securities or by fair valuation policies approved
by the Board of Directors. Exchange listed options and futures contracts are valued at the last quoted sales
price.
Fair valuation of international securities - As many foreign markets close before the U.S. markets, events may
occur between the close of the foreign market and the close of the U.S. markets that could have a material impact
on the valuation of foreign securities. The advisor under the supervision of the Board of Directors, evaluates
the impacts of these events and may adjust the valuation of foreign securities to reflect the fair value as of
the close of the U.S. markets.
5. Capital Shares
The pro-forma net asset value per share assumes the issuance of shares of the World Growth Portfolio that would
have been issues at December 31, 2003 in connection with the proposed reorganization. The number of shares
assumed to be issued is equal to the net asset value of shares of the International Portfolio as of December
31, 2003 divided by the net asset value of the shares of the World Growth Portfolio as of December 31, 2003. The
pro-forma number of shares outstanding for the combined fund consists of the following at December 31, 2003.
Shares of World Growth Portfolio Additional Shares Assumed Issued Total Outstanding Shares
Before Reorganization In Reorganization After Reorganization
-------------------------------- -------------------------------- ------------------------
39,601,942 9,983,303 49,585,245
6. Federal Income Taxes
Each Portfolio has elected to be taxed as a "regulated investment company" under the Internal Revenue Code.
After the reorganization, the World Growth Portfolio intends to continue to qualify as a regulated investment
company, if such qualification is in the best interest of its shareholders, by complying with the provisions
available to certain investment companies, as defined in applicable sections of the Internal Revenue Code, and to
make distributions of taxable income sufficient to relieve it from all or substantially all Federal income tax.
The identified cost of investments for the Portfolios is substantially the same for both financial accounting and
Federal income tax purposes. The tax cost of investments will remain unchanged for the combined fund.
7. Accounting Estimates. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as 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.
PART C - OTHER INFORMATION
Item 15. Indemnification.
Reference is hereby made to Section 4.01 of Registrant's First Amended and Restated Bylaws, included as an
exhibit to this Registration Statement, and incorporated by reference herein, which mandates indemnification by
Registrant of its directors, officers and certain others under certain conditions. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 (the "1993 Act") may be permitted to directors, officers
and controlling persons of Registrant, pursuant to the foregoing provisions or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a
director or officer or controlling person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person of Registrant in connection with the
securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the question of whether or not such
indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
Registrant and its officers, employees, and agents are insured under the fidelity bond required by Rule 17g-1 of
the Investment Company Act of 1940.
Item 16. Exhibits.
(1)(a) Articles of Incorporation (a)
(1)(b) Amendment to Articles of Incorporation increasing authorized shares (b)
(2) Bylaws (c)
(3) Not applicable
(4) Form of Reorganization Agreement and Plan of Reorganization (b)
(5) See (1) above
(6)(a) Investment Advisory Agreement between Registrant and Thrivent Financial for Lutherans (d)
(6)(b) Amendment No. 1 effective February 11, 2004 to Investment Advisory Agreement (i)
(6)(c) Form of Investment Subadvisory Agreement among Registrant, Thrivent Financial for Lutherans and (i) T.
Rowe Price Associates, Inc., (ii) T. Rowe Price International, Inc., and (iii) Mercator Asset Management
LP (e)
(7) Not applicable
(8) Not applicable
(9)(a) Custodian Contract between the Registrant and State Street Bank and Trust Company (a)
(9)(b) Amendment to Custodian Contract dated February 1, 1989 (f)
(9)(c) Amendment to Custodian Contract dated January 11, 1990 (f)
(9)(d) Restated Amendment to Custodian Contract dated October 6, 2000 (g)
(10) Not applicable
(11) Opinion and consent of counsel as to the legality of the securities being registered *
(12)(a) Form of Opinion of counsel as to tax matters and consequences to shareholders of AAL Portfolios merging
into New Thrivent Portfolios (i)
(12)(b) Form of Opinion of counsel as to tax matters and consequences to shareholders of the International
Portfolio, which is merging in the World Growth Portfolio (i)
(13)(a) Expense Reimbursement Letter Agreement (b)
(13)(b) Letter Agreement for Line of Credit (h)
(13)(c) Administration Contract effective January 1, 2004 between Registrant and Thrivent Financial for
Lutherans (i)
(13)(d) Letter Amendment dated January 30, 2004 to Administration Contract effective January 1, 2004 (i)
(13)(e) Accounting Services Agreement effective April 1, 2003 (c)
(13)(f) Amendment No. 1 effective February 1, 2004 to Accounting Services Agreement (i)
(13)(g) Participation Agreement among Registrant, Thrivent Financial for Lutherans and separate accounts of
Thrivent Financial for Lutherans effective December 15, 2003 (i)
(13)(h) Participation Agreement among Registrant, Thrivent Life Insurance Company and separate accounts of
Thrivent Life Insurance Company effective December 15, 2003 (i)
(14) Consent of Independent Accountants *
(15) Not applicable
(16) Powers of Attorney for F. Gregory Campbell, Herbert F. Eggerding, Jr., Noel K. Estenson, Richard L.
Gady, Jodi L. Harpstead, Connie M. Levi, Edward W. Smeds, Charles D. Gariboldi and Pamela J. Moret (i)
(17) Voting Instruction Form (i)
- -------------------
* Filed herewith
(a) Incorporated by reference from Post-effective Amendment No. 22 to the registration statement of LB
Series Fund, Inc., file no. 033-03677, filed April 27, 1998.
(b) Incorporated by reference from initial Form N-14 registration statement of LB Series Fund, Inc., file
no. 333-111964, filed January 16, 2004.
(c) Incorporated by reference from Post-effective Amendment No. 29 to the registration statement of LB
Series Fund, Inc., file no. 033-03677, filed November 14, 2003.
(d) Incorporated by reference from Post-effective Amendment No. 27 to the registration statement of LB
Series Fund, Inc., file no. 033-03677, filed April 30, 2002.
(e) Included as Exhibit A to Appendix G of the proxy statement and prospectus included in Part A of this
Pre-Effective Amendment No. 1 to the registration statement of LB Series Fund, Inc., file no. 333-111964.
(f) Incorporated by reference from Post-effective Amendment No. 14 to the registration statement of LB
Series Fund, Inc., file no. 033-03677, filed November 1, 1995.
(g) Incorporated by reference from the Post-effective Amendment No. 25 to the registration statement of LB
Series Fund, Inc., file no. 033-03677, filed April 20, 2001.
(h) Incorporated by reference from Post-effective Amendment No. 24 to the registration statement of LB
Series Fund, Inc., file no. 33-3677, filed February 24, 2000.
(i) Incorporated by reference from Pre-effective Amendment No. 1 to the registration statement of
LB Series Fund, Inc. on Form N-14, file no. 333-111964, filed February 26, 2004.
Item 17. Undertakings.
(1) The undersigned Registrant agrees that prior to any public reoffering of the securities registered
through the use of a prospectus which is a part of this Registration Statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the 1933 Act, the reoffering prospectus will
contain the information called for by the applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be
filed as a part of an amendment to the Registration Statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be
deemed to be a new registration statement for the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering of them.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has been signed on behalf of the
Registrant, in the city of Minneapolis, and the State of Minnesota on the 5th day of March, 2004.
LB SERIES FUND, INC.
By: /s/ Marlene J. Nogle
---------------------------------------------
Marlene J. Nogle, Assistant Secretary
As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons
in the capacities and on the date indicated.
Signature Title
* President
- -----------------------------------
Pamela J. Moret
* Treasurer and Principal Accounting Officer
- -----------------------------------
Charles D. Gariboldi
* Director
- -----------------------------------
F. Gregory Campbell
* Director
- -----------------------------------
Herbert F. Eggerding, Jr.
* Director
- -----------------------------------
Noel K. Estenson
* Director
- -----------------------------------
Richard L. Gady
* Director
- -----------------------------------
Jodi L. Harpstead
* Director
- -----------------------------------
Connie M. Levi
* Director
- -----------------------------------
Edward W. Smeds
*Marlene J. Nogle, by signing her name hereto, does hereby sign this document on behalf of each of the
above-named directors and officers of LB Series Fund, Inc. pursuant to a power of attorney duly executed by such
persons.
Dated: March 5, 2004 *By: /s/ Marlene J. Nogle
------------------------------------------
Attorney-in-Fact
Exhibit Index
EX-99.11 Opinion and Consent of Counsel
EX-99.14 Consent of Independent Accountants