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PART B
FARM BUREAU MUTUAL FUNDS
FBL MONEY MARKET FUND, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
(515) 225-5586
STATEMENT OF ADDITIONAL INFORMATION
December 31, 1995,
as amended JANUARY 31, 1996
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of FBL Money Market Fund, Inc. (the
"Fund") dated December 1, 1995. A copy of the Prospectus may be obtained
without charge by writing or calling the Fund at the address and telephone
number shown above.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . .B-2
OFFICERS AND DIRECTORS . . . . . . . . . . . . . .B-4
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . .B-9
NET ASSET VALUE . . . . . . . . . . . . . . . . . .B-9
CALCULATION OF FUND'S YIELD . . . . . . . . . . . .B-10
RETIREMENT PLANS . . . . . . . . . . . . . . . . . .B-11
REDEMPTIONS . . . . . . . . . . . . . . . . . . . .B-13
INVESTMENT ADVISER . . . . . . . . . . . . . . . . .B-13
UNDERWRITING AND DISTRIBUTION. . . . . . . . . . . .B-16
OTHER INFORMATION . . . . . . . . . . . . . . . . .B-16
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . .B-17
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INVESTMENT RESTRICTIONS
In seeking to achieve its investment objective as stated in the Prospectus, the
Fund has adopted the following investment restrictions. The Fund will not:
1. Purchase securities of any issuer (other than securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Fund's assets (taken at current value
at the time of investment) would be invested in securities of that issuer.
2. Purchase more than 10% of any class of securities of any issuer other
than securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. (For this purpose, all outstanding debt securities of an
issuer are considered one class.)
3. Engage in puts, calls, straddles, spreads or any combination thereof;
nor engage in margin purchases, except for use of short-term credits necessary
for clearance of purchases and sales of portfolio securities.
4. Make short sales of securities or maintain a short position in
securities.
5. Invest in real estate, including interests in real estate investment
trusts (although it may invest in securities secured by real estate or interests
therein or securities issued by companies which invest in real estate or
interests therein) or invest in commodities or commodity contracts, including
futures contracts.
6. Invest more than 5% of the value of the Fund's total assets (taken at
current value at the time of investment) in securities of issuers, other than
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, which have a record of less than three years continuous
operations, including predecessors.
7. Purchase or retain the securities of any issuer if any of the officers
or directors of the Fund or its investment adviser own individually more than
1/2 of 1% of the securities of such issuer and together own more than 5% of the
securities of such issuer.
8. Concentrate its investments in any one industry by investing 25% or
more of the value of the Fund's total assets (taken at current value at the time
of investment) in any one industry, other than securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities, obligations of
banks or savings institutions, or instruments secured by these money market
instruments, such as repurchase agreements for U.S. Government securities.
9. Make loans to others (except through the purchase of debt obligations
or repurchase agreements referred to under "Investment Objective and Policies"
in the Prospectus). In addition, the Fund may not invest more than 10% of its
net assets (taken
B-2
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at current value at the time of investment) in repurchase agreements maturing in
more than seven days.
10. Borrow money, except from banks for temporary or emergency purposes and
in no event in excess of 10% of its gross assets taken at the lesser of cost or
market or other fair value (the Fund will not borrow in order to increase income
(leveraging) but may borrow to facilitate meeting redemption requests which
might otherwise require untimely disposition of portfolio securities; interest
paid on any such borrowings will reduce net investment income); nor will it
pledge or mortgage more than 15% of its gross assets taken at cost, except in
connection with permissible borrowings discussed immediately above; nor purchase
money market instruments while any such permissible borrowings are outstanding.
11. Act as an underwriter in securities. In this connection, the Fund will
not invest more than 10% of the value of its total assets in securities (except
repurchase agreements) which are subject to legal or contractual restrictions on
resale, or are not readily marketable.
12. Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization.
13. Invest in companies for the purpose of exercising management or
control.
14. Purchase any common stocks or other equity securities, or securities
convertible into stock.
15. Issue senior securities.
The investment restrictions described above are fundamental and may not be
changed without the approval of the lesser of (i) 67% of the shares represented
at the meeting of the shareholders at which the holders of 50% or more of the
shares are represented in person or by proxy or (ii) more than 50% of the
outstanding voting securities.
In addition, the Fund may not: (a) purchase securities which are subject
to legal or contractual restrictions on resale in excess of 5% of the value of
the Fund's net assets; (b) invest in interests in oil, gas or other mineral
exploration or development programs or invest in oil, gas, or other mineral
leases; (c) pledge, mortgage or hypothecate its portfolio securities to the
extent that at any time the percentage of pledged securities would exceed 10% of
the Fund's total net assets; or (d) invest in real estate limited partnerships.
These restrictions, (a) through (d), may be changed by the Board of Directors
without shareholder approval.
B-3
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OFFICERS AND DIRECTORS
The officers and directors of the Fund, their age and their principal
occupations for the past five years are set forth below, though corporate
positions may, in some instances, have changed during this period. The address
of the officers of the Fund is 5400 University Avenue, West Des Moines, Iowa
50266. The directors listed with an asterisk are "interested persons" of the
Fund as defined in the Investment Company Act of 1940.
EDWARD M. WIEDERSTEIN*, PRESIDENT AND DIRECTOR (47)
Farmer; President and Director, Iowa Farm Bureau Federation, Farm Bureau
Multi-State Services, Inc., Farm Bureau Life Insurance Company, Universal
Assurors Life Insurance Company, FBL Insurance Brokerage, Inc., Farm Bureau
Mutual Insurance Company, Utah Farm Bureau Insurance Company, FBL Financial
Services, Inc., BIC, Inc. and Farm Bureau Agricultural Business
Corporation; Director, Western Farm Bureau Management Corporation, Western
Farm Bureau Life Insurance Company, Western Agricultural Insurance
Company, American Agricultural Insurance Company and Multi-Pig
Corporation.
EUGENE R. MAAHS*, SENIOR VICE PRESIDENT, SECRETARY-TREASURER AND DIRECTOR (64)
Senior Vice President and Secretary-Treasurer, Farm Bureau Multi-State
Services, Inc., Farm Bureau Life Insurance Company, Universal Assurors Life
Insurance Company, Farm Bureau Mutual Insurance Company, Utah Farm Bureau
Insurance Company, FBL Financial Services, Inc. and FBL Insurance
Brokerage, Inc.; Executive Director and Secretary-Treasurer, Iowa Farm
Bureau Federation; Senior Vice President and Assistant Secretary-Treasurer,
South Dakota Farm Bureau Mutual Insurance Company; Vice President and
Treasurer, Farm Bureau Management Corporation; Former Administrative
Director, Iowa Farm Bureau Federation; Former Executive Vice President and
Director, Communications Providers, Inc.; Co-Owner, Country Gardens.
STEPHEN M. MORAIN*, SENIOR VICE PRESIDENT, GENERAL COUNSEL, ASSISTANT SECRETARY
AND DIRECTOR (50)
General Counsel and Assistant Secretary, Iowa Farm Bureau Federation;
General Counsel, Secretary and Director, Farm Bureau Management
Corporation; Senior Vice President and General Counsel, Farm Bureau Multi-
State Services, Inc., Farm Bureau Life Insurance Company, Universal
Assurors Life Insurance Company, Farm Bureau Mutual Insurance Company, Utah
Farm Bureau Insurance Company, FBL Financial Services, Inc., FBL Insurance
Brokerage, Inc. and South Dakota Farm Bureau Mutual
B-4
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Insurance Company; Senior Vice President, General Counsel and Director, FBL
Investment Advisory Services, Inc. and FBL Marketing Services, Inc.;
Director, Computer Aided Design Software, Inc. and Iowa Business
Development Finance Corporation; Chairman, Edge Technologies, Inc.
THOMAS R. GIBSON, EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER (51)
Executive Vice President and General Manager, Farm Bureau Multi-State
Services, Inc., Farm Bureau Life Insurance Company, Universal Assurors Life
Insurance Company, Western Farm Bureau Life Insurance Company, Farm Bureau
Mutual Insurance Company, Utah Farm Bureau Insurance Company, FBL Insurance
Brokerage, Inc., FBL Financial Services, Inc. and South Dakota Farm Bureau
Mutual Insurance Company ; Executive Vice President, General Manager and
Director, FBL Investment Advisory Services, Inc. and FBL Marketing
Services, Inc.
TIMOTHY J. HOFFMAN, VICE PRESIDENT, CHIEF MARKETING OFFICER (45)
Vice President, Chief Marketing Officer, Farm Bureau Multi-State Services,
Inc., Farm Bureau Life Insurance Company, Universal Assurors Life Insurance
Company, Western Farm Bureau Life Insurance Company, Farm Bureau Mutual
Insurance Company, Utah Farm Bureau Insurance Company, FBL Financial
Services, Inc., South Dakota Farm Bureau Mutual Insurance Company and FBL
Insurance Brokerage, Inc. ; President and Director, FBL Marketing Services,
Inc. and FBL Education Services, Inc.; Vice President, Chief Marketing
Officer and Director, FBL Investment Advisory Services, Inc.
WILLIAM J. ODDY, VICE PRESIDENT, CHIEF OPERATING OFFICER AND ASSISTANT GENERAL
MANAGER (51)
Vice President, Chief Operating Officer and Assistant General Manager, Farm
Bureau Multi-State Services, Inc., Farm Bureau Life Insurance Company,
Universal Assurors Life Insurance Company, Western Farm Bureau Life
Insurance Company, FBL Insurance Brokerage, Inc., Utah Farm Bureau
Insurance Company, Farm Bureau Mutual Insurance Company, South Dakota Farm
Bureau Mutual Insurance Company and FBL Financial Services, Inc.;
President, Treasurer and Director, Communications Providers, Inc.; Vice
President, Chief Operating Officer, Assistant General Manager, Treasurer
and Director, FBL Investment Advisory Services, Inc. and FBL Marketing
Services, Inc.; President and Director, FBL Real Estate Ventures, Ltd. and
RIK, Inc.
B-5
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RICHARD D. WARMING, VICE PRESIDENT, CHIEF INVESTMENT OFFICER (62)
Vice President, Chief Investment Officer and Assistant Treasurer, Farm
Bureau Multi-State Services, Inc., Farm Bureau Life Insurance Company,
Universal Assurors Life Insurance Company, Western Farm Bureau Life
Insurance Company, FBL Insurance Brokerage, Inc., Utah Farm Bureau
Insurance Company, FBL Financial Services, Inc., Farm Bureau Mutual
Insurance Company Western Agricultural Insurance Company, Western Farm
Bureau Mutual Insurance Company and South Dakota Farm Bureau Mutual
Insurance Company, ; President and Director, FBL Leasing Services, Inc. and
FBL Investment Advisory Services, Inc.; Vice President, Chief Investment
Officer and Director, FBL Marketing Services, Inc.; Vice President,
Secretary and Director, RIK, Inc.; Secretary and Director, FBL Real Estate
Ventures, Ltd.
DENNIS M. MARKER, INVESTMENT VICE PRESIDENT, ADMINISTRATION AND ASSISTANT
SECRETARY (44)
Investment Vice President, Administration, Farm Bureau Life Insurance
Company, Universal Assurors Life Insurance Company, Western Farm Bureau
Life Insurance Company, FBL Insurance Brokerage, Inc., Farm Bureau Mutual
Insurance Company, Utah Farm Bureau Insurance Company and South Dakota Farm
Bureau Mutual Insurance Company; Vice President and Director, FBL Leasing
Services, Inc; Investment Vice President, Administration, Secretary and
Director, FBL Investment Advisory Services, Inc. and FBL Marketing
Services, Inc.
SUE A. CORNICK, MARKET CONDUCT AND MUTUAL FUNDS MANAGER AND ASSISTANT SECRETARY
(35)
Market Conduct and Mutual Funds Manager and Assistant Secretary, FBL
Investment Advisory Services, Inc. and FBL Marketing Services, Inc.
KRISTI ROJOHN, ASSISTANT SECRETARY (32)
Senior Compliance Assistant and Assistant Secretary, FBL Investment
Advisory Services, Inc. and FBL Marketing Services, Inc.
B-6
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ELAINE A. FOLLOWWILL, ASSISTANT SECRETARY (25)
Compliance Assistant and Assistant Secretary, FBL Investment Advisory
Services, Inc. and FBL Marketing Services, Inc.
DONALD G. BARTLING, DIRECTOR (68)
Box 104
Herman, Nebraska 68029
Farmer; Partner, Bartling Brothers Partnership (farming business) and BBK
(farming partnership); Director, Papio Missouri River Natural Resources
District.
JOHN R. GRAHAM, DIRECTOR (50)
1512 Country Club Place
Manhattan, Kansas 66502
Executive Vice President, Kansas Farm Bureau, Kansas Farm Bureau Services,
Kansas Agricultural Marketing Association, FB Services Insurance Agency,
Kansas Farm Bureau Life Insurance Company, The Farm Bureau Mutual Insurance
Company, Inc., Kansas Farm Bureau Reinsurance Company, Inc. and KFB
Insurance Company, Inc.; Chairman, Chief Executive Officer and Director, FB
Capital Management, Inc. of Kansas; Director, National Association of
Independent Insurers, Didde Corporation, Farm Bureau Mutual Insurance
Agency of Kansas and Kansas State Travel Agency, Inc.; Partner, Arthur-
Graham Rental Properties, CM Brass and G&H Real Estate Investments;
Trustee, Master Teacher Employee Benefit Pension Trust.
ERWIN H. JOHNSON, DIRECTOR (52)
1841 March Avenue
Charles City, Iowa 50616
Farmer; Owner and Manager, Center View Farms Co.; Director, First Security
Bank and Trust Co., Charles City, Iowa; Farm Associate, Iowa State
University Cooperative Extension Service; Voting Delegate, Former
President and Director, Floyd County Farm Bureau.
ANN JORGENSEN, DIRECTOR (55)
R.R. 1, Box 43
Garrison, Iowa 52229
Private Investor; Farm and Business Management; Partner, Jorg-Anna Farms;
President and Founder, Farm Home Offices; Vice President, Timberlane Hogs
Limited; Director, Iowa Department of Economic Development; Chairperson,
Rural
B-7
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Development Council; Member, Iowa Agriculture Products Advisory
Council; Secretary, Iowa Public Television Foundation, Iowa Freedom
International Foundation, Friends of the U.I.H.C.; Former Director and
Chairperson, Iowa's Alcoholic Beverage Control Commission; Former Regent,
State of Iowa Board of Regents; Former Director, Iowa Public Television and
University of Iowa Hospitals and Clinics.
DALE W. NELSON, DIRECTOR (76)
4216 Patricia Drive
Des Moines, Iowa 50322
Retired; Former Executive Director and Secretary-Treasurer, Iowa Farm
Bureau Federation and affiliated companies; Former Senior Vice President,
Secretary- Treasurer and Director of the Fund and FBL Series Fund, Inc.
CURTIS C. PIETZ, DIRECTOR (64)
R. R. 3, Box 79
Lakefield, Minnesota 65150
Farmer; Director and Part Owner, Storden Seed and Chemical Service, Inc.;
Director, Minnesota Rural Finance Authority; Former Program Evaluator,
Minnesota Department of Vocational Education; Former President, Jackson
County Farm Bureau; Former Chairman and Director, Southwest Farm Management
Association; Director, F.C.S.
The officers and directors of the Fund also serve in similar capacities as
officers and directors of FBL Series Fund, Inc. and as officers and trustees of
FBL Variable Insurance Series Fund. Several of the officers and directors of
the Fund are also officers and directors of the Adviser. The Fund pays no
direct remuneration to any officer of the Fund. Each of the directors who is
not affiliated with the Adviser receives a fee of $115 plus expenses from the
Fund for each directors' meeting attended. For the fiscal year ended July 31,
1995, directors' fees paid by the Fund totalled $2,580.
The following table sets forth the compensation received by all Directors
of the Fund for the fiscal year ended July 31, 1995. The information in the
last column of the table sets forth the total compensation received by all
Directors for calendar year 1994 for service as a Director of the Fund and other
funds in the FBL Family.
<TABLE>
<CAPTION>
Pension and
Retirement
Aggregate Benefits Accrued Total Compensation
Compensation as Part of Fund from all funds in the
Name of Director From the Fund Expenses FBL Family
- ---------------- ------------- ---------------- ---------------------
B-8
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<S> <C> <C> <C>
Donald G. Bartling $ 430 0 $ 1,200
John R. Graham 430 0 1,200
Erwin H. Johnson 430 0 1,200
Ann Jorgensen 430 0 1,200
Eugene R. Maahs 0 0 0
Stephen M. Morain 0 0 0
Dale W. Nelson 430 0 1,200
Curtis C. Pietz 430 0 1,200
Merlin D. Plagge(1) 0 0 0
</TABLE>
(1) Resigned as Director and President of The Fund effective December 31,
1995.
As of October 31, 1995, the directors and officers as a group owned less
than 1% of the then outstanding shares of the Fund, and no shareholder of record
owned 5% or more of the Fund's outstanding shares.
INVESTMENT OBJECTIVE AND POLICIES
The following information supplements the information set forth in the
Prospectus under the caption "INVESTMENT OBJECTIVE AND POLICIES."
It is the Fund's intention, as a general policy, to hold securities to
maturity. Nevertheless, the Fund may sell portfolio securities prior to
maturity in order to realize gains or losses or to shorten the average maturity
and may reduce or withhold dividends if it deems such actions appropriate to
maintain a stable net asset value. In addition, the Fund may attempt, from time
to time, to increase its yield by trading to take advantage of variations in the
markets for short-term money market instruments. Redemptions of Fund shares
could also necessitate the sale of portfolio securities at times when such sales
would not be otherwise desirable. While the Fund intends to invest in high
quality money market instruments, these investments are not entirely without
risk. An increase in interest rates will generally reduce the market value of
the Fund's portfolio investments and a decline in interest rates will generally
increase the value of the Fund's portfolio investments. Securities which are
not issued or guaranteed by the U.S. Government are subject to the possibility
of default by the issuer. Those obligations having the maximum degree of
security tend to have proportionately lower yields. Since the Fund's assets
will be invested in securities with short maturities and the Fund will manage
its portfolio as described above, the Fund's portfolio of money market
instruments may be expected to turn-over several times a year. Since securities
with maturities of less than one year are excluded from required portfolio
turnover calculations, the Fund's portfolio turnover rate for reporting purposes
is zero. Of course, there can be no assurance that the Fund will achieve its
objective.
B-9
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NET ASSET VALUE
The net asset value per share of the Fund is determined as of the earlier
of the close of the New York Stock Exchange or 3:00 p.m. (Central Time), on each
day the Exchange is open for business, except the Tuesday after Christmas and
the day after Thanksgiving, and on each other day on which there is a sufficient
degree of trading in the Fund's investments that it might affect the net asset
value, except that the net asset value will not be computed on a day when no
orders for purchase or redemption of shares are received. If the Fund offices
should be closed because of a weather-related or comparable type of emergency,
and the Fund is unable to segregate orders and redemption requests received on
the emergency closed day, then the Fund will price those orders and redemptions
at the net asset value next determined. The Fund's net asset value is computed
by dividing the total value of the Fund's securities and other assets, less
liabilities (including dividends payable), by the number of Fund shares
outstanding. The net asset value per share is ordinarily $1.00. The Fund's
total assets are determined by valuing the portfolio securities at amortized
cost, pursuant to Rule 2a-7 under the Investment Company Act of 1940. While
this method provides certainty in valuation, it may result in periods during
which the value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold its portfolio securities. Under the
direction of the Board of Directors, certain procedures have been adopted to
monitor and stabilize the price per share. Calculations are made to compare the
value of the Fund's portfolio valued at amortized cost with market values.
Market valuations are obtained by using actual quotations provided by market
makers, estimates of market value, or values obtained from yield data relating
to classes of money market instruments published by reputable sources at the
mean between the bid and asked prices for those instruments. If a deviation of
1/2 of 1% or more were to occur between the Fund's $1.00 per share net asset
value and the net asset value calculated by reference to market valuations, or
if there were any other deviation which the Board of Directors believed would
result in dilution or other unfair results material to shareholders or
purchasers, the Board of Directors would promptly consider what action, if any,
should be initiated. The Fund reserves the right to calculate or estimate the
net asset value more frequently than once a day if deemed desirable.
The market value of debt securities usually reflects yields generally
available on securities of similar quality. When yields decline, the market
value of a portfolio holding higher yielding securities increases; and when
yields increase, the market value of the portfolio invested at lower yields can
be expected to decline. In addition, if the Fund has net redemptions at a time
when interest rates have increased, the Fund may have to sell portfolio
securities prior to maturity at a price below the Fund's carrying value. Also,
because the portfolio generally will be valued at amortized cost rather than
market, any yield quoted may be different if the entire portfolio were valued at
market since amortized cost does not take market fluctuations into
consideration.
B-10
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CALCULATION OF FUND'S YIELD
The Fund's yield is computed in accordance with a standard method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the yield quotation is based on a seven-day period and is computed as
follows: The Fund's net investment income per share (accrued interest on
portfolio securities, plus or minus amortized premium or discount, less accrued
expenses) is divided by the price per share (expected to remain constant at
$1.00) at the beginning of the period ("base period return") and the result is
divided by seven and multiplied by 365. The resulting yield figure is carried
to the nearest one-hundredth of one percent. Realized capital gains or losses
and unrealized appreciation or depreciation of investments are not included in
the calculation. The Fund's yield for the seven-day period ended July 31, 1995
was 4.39%.
The Fund's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of the assumed
compounding. The formula for the effective yield is (base period return
+1)to the power of(365/7) - 1. The Fund's effective yield for the seven-day
period ended July 31, 1995 was 4.49%.
The Fund's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Fund will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in the Fund is held, but also on such matters as any
realized gains and losses, unrealized appreciation and depreciation and changes
in Fund expenses.
RETIREMENT PLANS
The Fund offers a variety of retirement investment programs whereby
contributions are invested in shares of the Fund, and any dividends (and capital
gain distributions, if any) are reinvested in additional full and fractional
shares of the Fund. The Fund has waived the minimum investment requirement for
an account opened under any of these programs and subsequent investments can be
in any amount (subject to plan limitations).
SELF-EMPLOYED INDIVIDUAL RETIREMENT PLANS
The Fund has available for self-employed individuals a form of Paired
Defined Contribution Plan, Trust Agreement and related Custodial Agreement
(Keogh Plan) under IRS approved prototypes. A self-employed individual has
complete discretion to make his or her own fee arrangements with the custodial
bank of his or her selection, instead of using the custodian named herein on the
terms described under "General" below. The maximum annual tax deductible amount
for contributions is generally the lesser of 25% of earned income or $30,000.
For further details, including the right of appointing a successor custodian,
refer to the Plan, Trust Agreement and Custodial Agreement available from the
Fund.
B-11
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INDIVIDUAL RETIREMENT ACCOUNTS
The Fund has available Individual Retirement Accounts (IRAs) under IRS
approved prototypes. A full $2,000 deduction for IRA contributions is
available only to (1) taxpayers who are not active participants in an employer-
sponsored retirement plan and (2) taxpayers who are active participants in an
employer-sponsored plan, but have adjusted gross income below a specified level.
For these purposes, a taxpayer will generally be deemed to be an active
participant in an employer-sponsored retirement plan if for any part of the
taxable year either the employee or his or her spouse is an active participant
under a qualified pension plan, a qualified profit sharing or money purchase
plan, a 403(b) annuity program, a Simplified Employee Pension plan, or a
government plan (other than a plan maintained for state and local employees
under section 457 of the Internal Revenue Code). Married taxpayers filing a
joint return who are active participants in an employer-sponsored plan may make
a tax deductible IRA contribution of up to $2,000 ($2,250 spousal) if their
adjusted gross income is $40,000 or less. Between $40,000 and $50,000 of
adjusted gross income, the IRA deduction is phased-out. For single taxpayers
who are active participants in an employer-sponsored plan, the $2,000 deductible
IRA contribution is similarly phased-out between $25,000 and $35,000 of adjusted
gross income. To the extent the IRA deduction is reduced or eliminated by the
phase-out rule, an individual may elect to make nondeductible IRA contributions
that, when combined with the deductible contributions, may not exceed $2,000
($2,250 for a spousal IRA). The income on the IRA contribution will not be
taxed until withdrawn.
For a period of seven days after establishment of an IRA Account and
receipt of a disclosure statement, the investor may revoke his or her
application and the full payment made to the Account will be returned. Form
5305-A, available from the Distributor, FBL Investment Advisory Services, Inc.,
5400 University Avenue, West Des Moines, Iowa 50266, is to be used to establish
an Account. The form should be consulted for detailed information, including
circumstances under which redemption requests must be accompanied by a
declaration of intent as to the disposition of the amount distributed.
TAX-SHELTERED 403(b) PLANS
The Fund has available Tax-Deferred Plans under section 403(b) of the
Internal Revenue Code. Certain tax-exempt organizations and public schools may
establish such plans under which they will be able to make contributions which
are not currently taxable to their employees. For further details, contact the
Fund.
CORPORATE PENSION AND PROFIT SHARING PLANS
Accounts for corporate pension and profit sharing plans (IRS approved
prototypes as well as other plans) are available. For further details, contact
the Fund.
B-12
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PUBLIC EMPLOYER DEFERRED COMPENSATION PLANS
Employees of state, county and municipal agencies may make investments with
pre-tax dollars through eligible deferred compensation plans authorized under
section 457 of the Internal Revenue Code. Contributions and earnings are tax-
sheltered until the funds are actually paid to the employee. Plans and
Administrative Services are available to states, counties and municipalities to
provide a tax-sheltered program for employees. For further details, contact the
Fund.
GENERAL
Investors Fiduciary Trust Company of Kansas City, Missouri, serves as
custodian and provides the services required for Keogh Plans, Individual
Retirement Plans, section 403(b) Plans and corporate pension and profit sharing
plans. An annual maintenance fee, currently $10, will be collected annually by
redemption of shares or fractions thereof from each participant's account. FBL
Investment Advisory Services, Inc. performs plan services for a portion of the
fee and during the fiscal year ended July 31, 1995 received $1,210 for its
services. Unusual administrative responsibilities will be subject to such
additional charges as will reasonably compensate the custodian for the service
involved.
Since a retirement investment program involves a commitment covering future
years, it is important that the investor consider his or her needs and whether
the investment objective of the Fund as described in the Prospectus is likely to
fulfill them. Premature termination or curtailment of the plan may result in
adverse tax consequences. Consultation with an attorney or other tax adviser
regarding these plans is recommended. For further information regarding these
plans, contact the Fund.
REDEMPTIONS
The Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the New York Stock Exchange is
restricted as determined by the Securities and Exchange Commission or such
Exchange is closed for trading (other than customary weekend and holiday
closings); (b) an emergency exists, as determined by the Securities and Exchange
Commission, as a result of which (i) disposal by the Fund of securities owned by
it is not reasonable or practicable, or (ii) it is not reasonably practicable
for the Fund to determine fairly the value of its net assets; or (c) the
Securities and Exchange Commission by order permits such suspension for the
protection of the Fund's investors. In such event, redemption will be effected
at the net asset value next determined after the suspension has been terminated
unless the shareholder has withdrawn the redemption request in writing and the
request has been received by FBL Investment Advisory Services, Inc., 5400
University Avenue, West Des Moines, Iowa 50266, prior to the day of such
determination of net asset value.
B-13
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INVESTMENT ADVISER
The following information supplements the information set forth in the
Prospectus under the caption "MANAGEMENT OF THE FUND." Pursuant to an
Investment Advisory and Management Services Agreement dated February 23, 1981
(the "Agreement"), FBL Investment Advisory Services, Inc. ("FBL" or "Adviser"),
acts as the Fund's investment adviser and manager subject to the supervision of
the Fund's Board of Directors. FBL has served as investment adviser and manager
since the Fund commenced operations in March, 1981. FBL is a wholly-owned
subsidiary of FBL Financial Services, Inc., which is a wholly-owned subsidiary
of Farm Bureau Life Insurance Company, an Iowa insurance company, which is a
wholly-owned subsidiary of Farm Bureau Multi-State Services, Inc., an Iowa
corporation, 64% of whose outstanding voting shares are in turn owned by Iowa
Farm Bureau Federation, an Iowa not-for-profit corporation. The Adviser also
acts as the investment adviser to individuals, institutions and two other mutual
funds: FBL Series Fund, Inc. and FBL Variable Insurance Series Fund. Personnel
of the Adviser also manage investments for the portfolios of insurance
companies.
The Adviser subscribes to leading bond information services and receives
published reports and statistical compilations from issuers directly, as well as
analyses from brokers and dealers who may execute portfolio transactions for the
Fund or the Adviser's other clients. The Adviser regards this information and
material, however, as an adjunct to its own research activities.
Under the Agreement, the Adviser handles the investment and reinvestment of
the Fund's assets and provides for the Fund, at the Adviser's expense, office
space and facilities, simple business equipment, advisory, research and
statistical facilities, clerical services and personnel as may be necessary to
administer the business affairs of the Fund. The Adviser also has agreed to
arrange for any of its officers and directors to serve without salary as
directors, officers or agents of the Fund if duly elected to such positions.
As compensation for the investment advisory and management services and the
aforementioned facilities and administrative services to be provided by the
Adviser, the Fund has agreed to pay the Adviser an annual management fee,
accrued daily and payable monthly, on a graduated basis of .50% of the first
$200 million of average daily net assets, .40% on the next $200 million of
average daily net assets, .35% on the next $200 million of average daily net
assets and .30% of average daily net assets over $600 million. For the fiscal
years ended July 31, 1995, 1994 and 1993 the Fund's investment advisory and
management fee expense was $96,398, $106,225 and $139,928, respectively.
The Adviser is not required to pay expenses of the Fund other than as set
forth above. The Fund pays such other expenses, which include net asset value
calculations; portfolio transaction costs; interest on Fund obligations; stock
certificates; miscellaneous reports; membership dues; all expenses of
registration of its shares under federal and state
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securities laws; all expenses of Shareholders' and Directors' meetings and of
preparing, printing and mailing proxy statements, reports and notices to
shareholders; investor services (including allocable telephone and personnel
expenses incurred by the Adviser); all taxes and fees payable to federal, state
or other governmental authorities; the fees and expenses of independent
auditors, legal counsel, custodian, transfer and dividend disbursing agent and
any fees of Directors who are not affiliated with the Adviser; insurance
premiums for fidelity bond and other coverage of the Fund's operations.
However, the Adviser has agreed that the management fee will be reduced, or it
will reimburse the Fund, by any amount necessary to prevent the Fund's total
expenses (including the management fee but excluding brokerage, interest, taxes
and extraordinary expenses) from exceeding the most restrictive limit on
expenses prescribed by any state in which Fund shares are offered for sale. The
reduction or reimbursement, however, shall not exceed the amount of the advisory
fee for such period. It is Management's understanding that no state in which
Fund shares are currently offered for sale presently imposes an expense
limitation.
The Agreement continues in effect from year-to-year as long as its
continuation is approved annually by vote of a majority of the Fund's
outstanding shares or by its Board of Directors, including, in either event, a
majority of those directors who are not parties to such agreement or "interested
persons" (as such term is defined in the Investment Company Act of 1940) of any
such party except in their capacity as directors of the Fund. It may be
terminated without penalty at any time upon 60 days' notice by the Adviser, or
by the Fund by vote of the Fund's Board of Directors, or by a majority vote of
the Fund's outstanding shares and would terminate automatically upon assignment.
The Agreement may be amended only with the approval of a majority of the
outstanding voting securities of the Fund.
The Agreement provides that the Adviser shall not be liable for error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which the Agreement relates, except loss resulting from bad
faith, gross negligence or willful misfeasance of the Adviser.
PORTFOLIO TRANSACTIONS: Purchases and sales of portfolio securities are
normally principal transactions. Portfolio securities are normally purchased
directly from the issuer or from an underwriter or market maker for the
securities. There are usually no brokerage commissions paid by the Fund for
such purchases and none were paid during the last three fiscal years. Purchases
from underwriters will include a commission or concession paid by the issuer to
the underwriter, and purchases from dealers serving as market makers include the
spread between the bid and asked prices. The primary consideration in the
allocation of transactions is the most favorable price and execution of orders.
Subject to this primary consideration, while there is no understanding or
arrangement to do so, FBL may place the Fund's portfolio transactions with firms
that furnish research, statistical and other services. FBL regards information
which is customarily available only in return for brokerage as among the many
elements to be considered in determining
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<PAGE>
placement of securities transactions. No specific value can be determined for
most such information and services and they are deemed supplemental to FBL's own
efforts in the performance of its duties under the investment advisory
agreement. Any research benefits derived are available for all clients of FBL.
The investment decisions for the Fund are reached independently from those
for the other mutual funds and other clients whose investments are managed by
FBL. Such other clients may also make investments in money market instruments
at the same time as the Fund. When both the Fund and one or more of such
clients have amounts available for investment in money market instruments,
available investments are allocated as to amount in a manner considered
equitable to each. In some cases, this procedure may affect the size or price
of the position obtainable for the Fund. It is the opinion of the Board of
Directors that the benefits available because of FBL's organization outweigh any
disadvantages that may arise from exposure to simultaneous transactions.
Purchase and sale orders for the Fund may be combined with those of other
clients of the Adviser in the interest of the most favorable net results to the
Fund.
Messrs. Morain, Gibson, Hoffman, Marker, Oddy, Warming and Mses. Cornick,
Rojohn and Followwill, directors and/or officers of the Fund, are also directors
and/or officers of FBL as indicated under "MANAGEMENT OF THE FUND" in the
Prospectus.
UNDERWRITING AND DISTRIBUTION
Pursuant to an underwriting agreement dated December 31, 1983, FBL
Investment Advisory Services, Inc. (the "Distributor") serves as principal
underwriter and sole distributor of the Fund's shares, acting as the exclusive
agent of the Fund in the sale of its shares to securities dealers who in turn
sell the shares to the public. The Distributor has agreed to use its best
efforts to distribute shares of the Fund. The Distributor pays expenses
incident to the sale and distribution of Fund shares, including preparation and
distribution of literature relating to the Fund and its investment performance,
and circulation of advertising and public relations material.
The terms of termination and assignment under the underwriting agreement
are the same as those under the investment advisory agreement except that
termination for reasons other than assignment of the agreement requires six
months' notice.
The Fund bears the expenses of registration of its shares with the
Securities and Exchange Commission and the cost of qualifying and maintaining
the qualification of the Fund's shares under securities laws of the various
states. The Fund also pays expenses incident to the issuance of its shares,
such as the cost of certificates, issue taxes and transfer and dividend
disbursing fees.
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