<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 25, 1996
REGISTRATION NOS. 2-38512
811-2125
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
/ / THE SECURITIES ACT OF 1933
------------------------
/ / PRE-EFFECTIVE AMENDMENT NO.
/X/ POST-EFFECTIVE AMENDMENT NO. 31
AND/OR
REGISTRATION STATEMENT
/ / UNDER THE INVESTMENT COMPANY ACT OF 1940
/X/ AMENDMENT NO. 31
FBL SERIES FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
5400 UNIVERSITY AVENUE (515) 225-5586
WEST DES MOINES, IOWA 50266 (Registrant's Telephone Number,
(Address of Principal Executive including Area Code)
Offices) (Zip Code)
STEPHEN M. MORAIN, ESQUIRE COPY TO:
5400 UNIVERSITY AVENUE Charles F. Custer, Esquire
WEST DES MOINES, IOWA 50266 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent 222 North LaSalle Street
for Service) Chicago, IL 60601
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has registered an indefinite amount of shares under the Securities
Act of 1933. The Rule 24f-2 Notice for the year ended July 31, 1996 was filed
with the Securities and Exchange Commission on or about September 13, 1996.
It is proposed that this filing will become effective (check appropriate
box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/X/ on December 1, 1996 pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post- effective amendment
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FBL SERIES FUND, INC.
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(a)
<TABLE>
<CAPTION>
N-1A
ITEM NO. CAPTION
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
PART A INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis Summary; Summary of Expenses
3. Condensed Financial Information Condensed Financial Information; Performance
Information
4. General Description of Registrant Organization of the Fund; Investment Objectives and
Policies of the Portfolios; Description of Certain
Investment Techniques; Principal Risk Factors
5. Management of the Fund Management of the Fund; General Information
5A. Management's Discussion of Fund Performance Not Applicable
6. Capital Stock and Other Securities General Information; Organization of the Fund;
Dividends and Taxes
7. Purchase of Securities Being Offered How to Buy Shares
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Not Applicable
PART B INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Organization of the Fund (Part A)
13. Investment Objectives and Policies Investment Objectives, Policies and Techniques;
Investment Restrictions
14. Management of the Fund Officers and Directors; Investment Adviser;
Underwriting and Distribution Expenses
15. Control Persons and Principal Holders of Securities Other Information
16. Investment Advisory and Other Services Investment Adviser; Other Information; Underwriting
and Distribution Expenses
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage Commissions
18. Capital Stock and Other Securities Shareholder Voting Rights
19. Purchase, Redemption and Pricing of Securities Being
Offered Purchase and Redemptions; Net Asset Value
20. Tax Status Taxes
21. Underwriters Underwriting and Distribution Expenses
22. Calculation of Performance Data Performance Information
23. Financial Statements Financial Statements
</TABLE>
<PAGE>
FBL SERIES FUND, INC.
Prospectus dated December 1, 1996
FBL Series Fund, Inc. (the "Fund") is an open-end, diversified series
management investment company consisting of six Portfolios, each with its own
investment objectives and policies. For most purposes, each Portfolio operates
like a separate mutual fund issuing its own shares.
Value Growth Portfolio
(formerly named Growth Common Stock Portfolio)
High Grade Bond Portfolio
High Yield Bond Portfolio
Managed Portfolio
Money Market Portfolio
Blue Chip Portfolio
The Fund is designed for long-term investors, including those funding
tax-qualified investment plans such as IRAs or other retirement plans. The
Fund's investment adviser is FBL Investment Advisory Services, Inc.
THE HIGH YIELD BOND PORTFOLIO INVESTS PRIMARILY IN LOWER-RATED BONDS, COMMONLY
REFERRED TO AS "JUNK BONDS," WHICH ENTAIL GREATER RISKS, INCLUDING DEFAULT
RISKS, THAN THOSE ASSOCIATED WITH HIGHER-RATED SECURITIES. PURCHASERS SHOULD
CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS PORTFOLIO. SEE
"INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS--HIGH YIELD BOND
PORTFOLIO," P. 13-14; "PRINCIPAL RISK FACTORS--SPECIAL CONSIDERATIONS--HIGH
YIELD BONDS," P. 16-19; "APPENDIX B--PORTFOLIO COMPOSITION FOR HIGH YIELD
BONDS," P. B-1-B-2 AND "APPENDIX C--DESCRIPTION OF CORPORATE BOND RATINGS," P.
C-1-C-2.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET
PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
This Prospectus contains information about the Fund that a prospective
investor should know before investing. Please read it carefully and retain it
for future reference. A Statement of Additional Information for the Fund, dated
December 1, 1996, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available upon request and without charge from the Fund by writing or calling
the Fund at the address or telephone numbers set forth on the following page.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NO DEALER, SALESMAN, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THE PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE SECURITIES OF THE FUND IN ANY JURISDICTION IN WHICH SUCH SALE, OFFER
TO SELL OR SOLICITATION MAY NOT BE LAWFULLY MADE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Summary................................................................................................ 1
Summary of Expenses.................................................................................... 3
Condensed Financial Information........................................................................ 5
Investment Objectives and Policies of the Portfolios................................................... 11
Principal Risk Factors................................................................................. 16
Description of Certain Investment Techniques........................................................... 19
How to Buy Shares...................................................................................... 22
How to Redeem Shares................................................................................... 23
Other Shareholder Services............................................................................. 25
Net Asset Value Information............................................................................ 27
Performance Information................................................................................ 28
Management of the Fund................................................................................. 29
Portfolio Transactions................................................................................. 30
Dividends and Taxes.................................................................................... 31
Organization of the Fund............................................................................... 32
General Information.................................................................................... 33
Appendix A............................................................................................. A-1
Appendix B............................................................................................. B-1
Appendix C............................................................................................. C-1
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
YIELD AND PURCHASE INFORMATION
[LOGO] U.S. Toll Free (800) 247-4170
Iowa Toll Free (800) 422-3175
FARM BUREAU MUTUAL FUNDS Des Moines (515) 225-5586
5400 University Avenue, West Des Moines, Iowa 50266
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
-----------
THE FUND. FBL Series Fund, Inc. (the "Fund") is an open-end, diversified
series management investment company. The Fund is designed to provide an
opportunity for investors to pool their money to achieve economies of scale and
diversification and to permit investors whose portfolios may not be large enough
to qualify for individual management services to take advantage of the
professional investment expertise of FBL Investment Advisory Services, Inc.
("FBL" or the "Adviser"). The Fund currently issues shares in six investment
series (a "Portfolio" or the "Portfolios"), and the Board of Directors of the
Fund (the "Board of Directors") may establish additional Portfolios at any time.
The Fund is designed for long-term investors, including those who wish to
use shares of one or more Portfolios as a funding vehicle for tax-deferred
retirement plans (including tax-qualified retirement plans and Individual
Retirement Account (IRA) plans), and not for investors who intend to liquidate
their investments after a short period of time. A contingent deferred sales
charge (described below) is generally imposed on redemptions of shares within
six years of the date of purchase.
INVESTMENT OBJECTIVES. The Fund currently offers a choice of six investment
Portfolios, having the following investment objectives:
VALUE GROWTH PORTFOLIO (FORMERLY NAMED GROWTH COMMON STOCK
PORTFOLIO). This Portfolio seeks long-term capital appreciation. The
Portfolio pursues its objective by investing primarily in equity securities
of companies that the investment adviser believes have a potential to earn a
high return on capital and/or in equity securities that the investment
adviser believes are undervalued by the market place. Such equity securities
may include common stock, preferred stock and securities convertible or
exchangeable into common stock.
HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as high a level of
current income as is consistent with investment in a portfolio of debt
securities deemed to be of high quality by the Fund's investment adviser.
The Portfolio pursues this objective by investing primarily in debt
securities rated AAA, AA or A by Standard & Poor's Corporation or Aaa, Aa or
A by Moody's Investors Service, Inc. and in U.S. Government securities and
government agency securities.
HIGH YIELD BOND PORTFOLIO. This Portfolio seeks, as a primary
objective, as high a level of current income as is consistent with
investment in a portfolio of fixed-income securities rated in the lower
categories of established rating services. As a secondary objective, the
Portfolio seeks capital appreciation when consistent with its primary
objective. The Portfolio pursues these objectives by investing primarily in
fixed-income securities rated Baa or lower by Moody's Investors Service,
Inc. and/or BBB or lower by Standard & Poor's Corporation, or unrated
securities of comparable quality. AN INVESTMENT IN THIS PORTFOLIO MAY ENTAIL
GREATER THAN ORDINARY FINANCIAL RISK.
MANAGED PORTFOLIO. This Portfolio seeks the highest total investment
return of income and capital appreciation. The Portfolio pursues this
objective through a fully managed investment policy consisting of investment
in the following three market sectors: (i) growth common stocks and
securities convertible or exchangeable into growth common stocks, including
warrants and rights; (ii) high quality debt securities and preferred stocks
of the type in which the High Grade Bond Portfolio may invest; and (iii)
high quality short-term money market instruments of the type in which the
Money Market Portfolio may invest.
MONEY MARKET PORTFOLIO. This Portfolio seeks maximum current income
consistent with liquidity and stability of principal. The Portfolio pursues
this objective by investing in high quality
1
<PAGE>
short-term money market instruments. In light of the distribution services
fee (see "General Information--Distributor") and the contingent deferred
sales charge (see "How to Redeem Shares"), the Money Market Portfolio should
be viewed as part of a long-term investment in the Fund to be used in
conjunction with the other Portfolios, rather than as a typical money market
fund.
BLUE CHIP PORTFOLIO. This Portfolio seeks growth of capital and income.
The Portfolio pursues this objective by investing primarily in common stocks
of well-capitalized, established companies. Because this Portfolio may be
invested heavily in particular stocks or industries, an investment in this
Portfolio may entail relatively greater risk of loss.
There can be no assurance that the objectives of any Portfolio will be
realized. During periods when the investment adviser believes that the equity
market is overvalued, or, when warranted by other prevailing market or economic
conditions, the Value Growth Portfolio may hold substantial amounts of
non-equity investments. For further information regarding the investment
practices of the various Portfolios, see "Investment Objectives and Policies of
the Portfolios." For further information regarding the principal risk factors
associated with investment in any of the Fund's Portfolios, see "Principal Risk
Factors."
PURCHASES AND REDEMPTIONS. Shares of the Portfolios are available through
selected financial services firms such as broker/dealers, through registered
representatives of FBL Marketing Services, Inc. or directly from the Fund. The
minimum initial investment is $250, and subsequent investments may be in any
amount. Shares of a Portfolio are redeemable at the net asset value per share of
the Portfolio next determined after the Fund's receipt of a request in proper
form. There may be a contingent deferred sales charge imposed upon the
redemption of shares during the first six years after purchase, ranging from 5%
the first year to 1% during the sixth year. There is no contingent deferred
sales charge once shares have been held six years. Shares of a Portfolio may be
exchanged for shares of another Portfolio for a $5.00 exchange fee without any
contingent deferred sales charge. There is a distribution services fee of .50%
of the average daily net assets of the Fund. See "How to Buy Shares" and "How to
Redeem Shares."
INVESTMENT ADVISER AND DISTRIBUTOR. FBL Investment Advisory Services, Inc.
serves as the investment adviser for each of the Portfolios for an annual fee
that is based on the average daily net assets of each Portfolio and varies among
the Portfolios. The maximum annual fee rate is .25% of average daily net assets
for the Blue Chip Portfolio, .40% of average daily net assets for the High Grade
Bond and Money Market Portfolios, .50% of average daily net assets for the Value
Growth Portfolio, .55% of average daily net assets for the High Yield Bond
Portfolio and .60% of average daily net assets for the Managed Portfolio. These
fee rates are reduced when asset levels in a Portfolio exceed $200 million
(except for the Blue Chip Portfolio). See "Management of the Fund--Investment
Adviser." FBL also serves as distributor and principal underwriter for the Fund.
FBL pays securities dealers a commission of up to 4% for sales of Portfolio
shares and a service fee, payable monthly, at the annual rate of .15% on assets
maintained and serviced in Fund accounts. FBL receives from the Fund the .50%
annual distribution services fee and a .25% annual administrative services fee,
and receives directly any contingent deferred sales charge paid on the
redemption of shares. Firms to which commissions and service fees may be paid
include FBL Marketing Services, Inc., which is affiliated with FBL. See "General
Information--Distributor."
2
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY OF
EXPENSES
---------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases......................................... None
Maximum Sales Load Imposed on Reinvested Dividends.............................. None
Deferred Sales Load (As a percentage of redemption proceeds):
Year 1...................................................................... 5%
Year 2...................................................................... 4%
Year 3...................................................................... 4%
Year 4...................................................................... 3%
Year 5...................................................................... 2%
Year 6...................................................................... 1%
Year 7 and following........................................................ 0%
Redemption Fee.................................................................. None
Exchange Fee.................................................................... $5.00
</TABLE>
<TABLE>
<CAPTION>
HIGH HIGH
VALUE GRADE YIELD
GROWTH BOND BOND
------ ----- -----
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Management Fees.................................... 0.50% 0.40% 0.55%
12b-1 Fees......................................... 0.50 0.50 0.50
Other Expenses..................................... 0.62 0.95 0.95
------ ----- -----
Total Fund Operating Expenses.................. 1.62% 1.85% 2.00%
------ ----- -----
------ ----- -----
<CAPTION>
MONEY BLUE
MANAGED MARKET CHIP
------ ----- -----
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Management Fees.................................... 0.60% 0.40% 0.25%
12b-1 Fees......................................... 0.50 0.50 0.50
Other Expenses..................................... 0.81 1.10 1.04
------ ----- -----
Total Fund Operating Expenses.................. 1.91% 2.00% 1.79%
------ ----- -----
------ ----- -----
</TABLE>
3
<PAGE>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Value Growth.............................................................. $ 67 $ 94 $ 113 $ 202
High Grade Bond........................................................... $ 69 $ 98 $ 120 $ 217
High Yield Bond........................................................... $ 70 $ 103 $ 128 $ 233
Managed................................................................... $ 69 $ 100 $ 123 $ 223
Money Market.............................................................. $ 70 $ 103 $ 128 $ 233
Blue Chip................................................................. $ 68 $ 96 $ 117 $ 211
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption.
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Value Growth.............................................................. $ 17 $ 54 $ 93 $ 202
High Grade Bond........................................................... $ 19 $ 58 $ 100 $ 217
High Yield Bond........................................................... $ 20 $ 63 $ 108 $ 233
Managed................................................................... $ 19 $ 60 $ 103 $ 223
Money Market.............................................................. $ 20 $ 63 $ 108 $ 233
Blue Chip................................................................. $ 18 $ 56 $ 97 $ 211
</TABLE>
The purpose of the preceding table is to assist investors in understanding
the various costs and expenses that an investor in the Fund will bear directly
or indirectly. Long-term shareholders may pay more in total sales charges than
the economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc. The example should not be
considered to be a representation of past or future expenses. Actual expenses
may be greater or lesser than those shown. The example assumes a 5% annual rate
of return pursuant to the requirements of the Securities and Exchange Commission
and is not intended to be representative of past or future performance of the
Portfolios.
4
<PAGE>
- --------------------------------------------------------------------------------
CONDENSED
FINANCIAL
INFORMATION
---------------
The condensed financial information set forth below has been derived from
the financial statements and financial highlights of the Fund, which have been
audited by independent auditors. This table should be read in conjunction with
the financial statements and notes thereto included in the Annual Report to
Shareholders, which financial statements and notes are incorporated herein by
reference.
Selected data for a share of capital stock outstanding throughout each year:
VALUE GROWTH PORTFOLIO (FORMERLY NAMED GROWTH COMMON STOCK PORTFOLIO)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................ $13.04 $13.07 $15.13 $12.48 $11.64 $11.02 $11.01 $10.48 $15.91 $15.56
Income From Investment
Operations
Net investment income..... 0.27 0.43 0.60 0.51 0.48 0.58 0.58 0.57 0.32 0.30
Net gains or losses on
investments (both
realized and
unrealized).............. 2.10 0.65 (0.49) 2.75 0.93 0.65 0.05 0.57 (1.56) 2.18
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................. 2.37 1.08 0.11 3.26 1.41 1.23 0.63 1.14 (1.24) 2.48
Less Distributions
Dividends (from net
investment income)....... (0.46) (0.39) (0.60) (0.48) (0.57) (0.61) (0.62) (0.61) (0.96) (0.40)
Distributions (from
capital gains)........... (0.27) (0.72) (1.57) (0.13) (3.23) (1.73)
Distributions in excess of
net realized gains.......
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions......... (0.73) (1.11) (2.17) (0.61) (0.57) (0.61) (0.62) (0.61) (4.19) (2.13)
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year........................ $14.68 $13.04 $13.07 $15.13 $12.48 $11.64 $11.02 $11.01 $10.48 $15.91
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
------- ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return:
Total investment return
based on net asset value
(1)........................ 18.41% 9.36% 0.34% 27.25% 12.51% 11.67% 5.90% 11.49% (11.70%) 17.67%
Ratios/Supplemental Data:
Net assets, end of year
($000's omitted)........... 86,534 70,947 64,315 51,732 39,418 36,193 35,285 37,435 48,060 57,279
Ratio of net expenses to
average net assets......... 1.62% 1.62% 1.60% 1.61% 1.69% 1.59% 1.62% 1.56% 1.39% 1.04%
Ratio of net income to
average net assets......... 1.87% 3.43% 4.05% 3.80% 3.99% 5.19% 5.31% 5.34% 2.98% 2.02%
Portfolio turnover rate..... 92% 85% 93% 92% 87% 59% 109% 172% 305% 262%
Average commission rate per
share (2).................. $0.0529
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the year, reinvestment of all
dividends and distributions at net asset value during the year, and
redemption on the last day of the year. Contingent deferred sales charge is
not reflected in the calculation of total investment return.
(2) Average commission rate per share disclosure is not required for fiscal
years prior to July 31, 1996.
5
<PAGE>
HIGH GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
--------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.............................. $10.26 $10.13 $10.69 $10.68 $10.15 $ 9.95 $10.11 $ 9.85 $10.00
Income From Investment Operations
Net investment income.......... 0.64 0.63 0.64 0.70 0.73 0.78 0.75 0.74 0.45
Net gains or losses on
investments (both realized and
unrealized)................... (0.10) 0.16 (0.40) 0.13 0.62 0.20 (0.16) 0.26 (0.15)
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total from investment
operations...................... 0.54 0.79 0.24 0.83 1.35 0.98 0.59 1.00 0.30
Less Distributions
Dividends (from net investment
income)....................... (0.64) (0.63) (0.64) (0.70) (0.73) (0.78) (0.75) (0.74) (0.45)
Distributions (from capital
gains)........................ (0.16) (0.12) (0.09)
Distributions in excess of net
realized gains................ (0.03)
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total distributions.............. (0.64) (0.66) (0.80) (0.82) (0.82) (0.78) (0.75) (0.74) (0.45)
------ ------ ------ ------ ------ ------ ------ ------ ----------
Net asset value, end of year....... $10.16 $10.26 $10.13 $10.69 $10.68 $10.15 $ 9.95 $10.11 $ 9.85
------ ------ ------ ------ ------ ------ ------ ------ ----------
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total Return:
Total investment return based on
net asset value (2)............. 5.37% 8.23% 1.77% 8.10% 13.71% 10.29% 6.15% 10.68% 4.48%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's
omitted)........................ 9,122 8,345 7,596 8,047 7,676 4,276 3,635 3,317 2,968
Ratio of net expenses to average
net assets...................... 1.85% 1.99% 1.90% 1.79% 1.88% 1.62% 1.68% 1.84% 1.18%
Ratio of net income to average
net assets...................... 6.19% 6.29% 6.12% 6.59% 6.94% 7.78% 7.57% 7.57% 4.41%
Portfolio turnover rate.......... 34% 18% 42% 54% 45% 40% 66% 27% 19%
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
6
<PAGE>
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
-----------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------- ------- ------- ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 10.03 $ 10.00 $ 10.76 $10.47 $ 9.82 $ 9.62 $ 9.95 $ 9.86 $10.00
Income From Investment Operations
Net investment income......................... 0.75 0.78 0.81 0.83 0.90 0.95 0.98 0.93 0.45
Net gains or losses on investments (both
realized and unrealized)..................... (0.01) 0.13 (0.60) 0.46 0.65 0.19 (0.33) 0.09 (0.14)
------- ------- ------- ------ ------ ------ ------ ------ ----------
Total from investment operations................ 0.74 0.91 0.21 1.29 1.55 1.14 0.65 1.02 0.31
Less Distributions
Dividends (from net investment income)........ (0.75) (0.78) (0.81) (0.83) (0.90) (0.94) (0.98) (0.93) (0.45)
Distributions (from capital gains)............ (0.03) (0.09) (0.16) (0.17)
Distributions in excess of net realized
gains........................................ (0.01)
------- ------- ------- ------ ------ ------ ------ ------ ----------
Total distributions............................. (0.78) (0.88) (0.97) (1.00) (0.90) (0.94) (0.98) (0.93) (0.45)
------- ------- ------- ------ ------ ------ ------ ------ ----------
Net asset value, end of year...................... $ 9.99 $ 10.03 $ 10.00 $10.76 $10.47 $ 9.82 $ 9.62 $ 9.95 $ 9.86
------- ------- ------- ------ ------ ------ ------ ------ ----------
------- ------- ------- ------ ------ ------ ------ ------ ----------
Total Return:
Total investment return based on net asset value
(2)............................................ 7.67% 9.71% 1.88% 12.95% 16.44% 12.83% 6.92% 10.82% 4.71%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)........ 7,349 6,691 6,425 5,758 4,835 4,029 3,399 3,013 2,648
Ratio of net expenses to average net assets..... 2.00% 2.00% 2.00% 2.00% 1.98% 1.77% 1.83% 2.01% 1.32%
Ratio of net income to average net assets....... 7.44% 7.83% 7.68% 7.84% 8.79% 9.98% 10.00% 9.41% 4.47%
Portfolio turnover rate......................... 30% 23% 26% 56% 56% 78% 89% 70% 26%
Information assuming no voluntary reimbursment by
FBL Investment Advisory Services, Inc. of excess
operating expenses:
Per share net investment income................. $ 0.73 $ 0.75 $ 0.79 $ 0.82
Ratio of expenses to average net assets......... 2.22% 2.29% 2.17% 2.05%
Amount reimbursed............................... $15,361 $18,810 $10,754 $3,147
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
7
<PAGE>
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
--------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
----------- ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year......... $ 11.85 $11.62 $12.51 $10.77 $ 9.95 $ 9.92 $ 9.93 $ 9.93 $10.00
Income From Investment Operations
Net investment income.................. 0.46 0.56 0.55 0.54 0.61 0.66 0.68 0.65 0.42
Net gains or losses on investments
(both realized and unrealized)........ 1.54 0.47 (0.62) 1.87 0.82 0.03 (0.01) (0.10)
----------- ------ ------ ------ ------ ------ ------ ------ ----------
Total from investment operations......... 2.00 1.03 (0.07) 2.41 1.43 0.69 0.67 0.65 0.32
Less Distributions
Dividends (from net investment
income)............................... (0.45) (0.56) (0.50) (0.52) (0.61) (0.66) (0.68) (0.65) (0.39)
Distributions (from capital gains)..... (0.10) (0.14) (0.32) (0.15)
Distributions in excess of net realized
gains................................. (0.10)
----------- ------ ------ ------ ------ ------ ------ ------ ----------
Total distributions...................... (0.55) (0.80) (0.82) (0.67) (0.61) (0.66) (0.68) (0.65) (0.39)
----------- ------ ------ ------ ------ ------ ------ ------ ----------
Capital contribution from affiliate...... $ 0.03
----------- ------ ------ ------ ------ ------ ------ ------ ----------
Net asset value, end of year............... $ 13.33 $11.85 $11.62 $12.51 $10.77 $ 9.95 $ 9.92 $ 9.93 $ 9.93
----------- ------ ------ ------ ------ ------ ------ ------ ----------
----------- ------ ------ ------ ------ ------ ------ ------ ----------
Total Return:
Total investment return based on net
asset value (2)......................... 17.30%(3) 9.40% (0.61)% 23.02% 14.79% 7.05% 6.96% 4.88% 4.81%(5)
Ratios/Supplemental Data:
Net assets, end of year ($000's
omitted)................................ 27,470 21,105 19,100 8,257 3,887 3,935 3,594 3,399 3,301
Ratio of net expenses to average net
assets.................................. 1.91% 1.94% 1.96% 1.96% 2.07% 1.84% 1.84% 2.05% 1.29%
Ratio of net income to average net
assets.................................. 3.47% 4.86% 4.42% 4.54% 5.93% 6.51% 6.83% 6.42% 4.05%
Portfolio turnover rate.................. 81% 69% 29% 52% 77% 31% 73% 119% 53%
Average commission rate per share (4).... $0.0549
Information assuming no voluntary
reimbursment by FBL Investment Advisory
Services, Inc. of excess operating
expenses:
Per share net investment income.......... $ 0.53
Ratio of expenses to average net
assets.................................. 2.02%
Amount reimbursed........................ $3,497
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) The total investment return includes the effect of a capital contribution of
$0.03 per share. The return without the capital contribution would have been
17.13%.
(4) Average commission rate per share disclosure is not required for fiscal
years prior to July 31, 1996.
(5) Computed on an annualized basis.
8
<PAGE>
MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
--------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment Operations
Net investment income............................ 0.04 0.04 0.02 0.01 0.03 0.05 0.07 0.07 0.03
Net gains or losses on investments (both realized
and unrealized).................................
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total from investment operations................... 0.04 0.04 0.02 0.01 0.03 0.05 0.07 0.07 0.03
Less Distributions
Dividends (from net investment income)........... (0.04) (0.04) (0.02) (0.01) (0.03) (0.05) (0.07) (0.07) (0.03)
Distributions (from capital gains)...............
Distributions in excess of net realized gains....
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total distributions................................ (0.04) (0.04) (0.02) (0.01) (0.03) (0.05) (0.07) (0.07) (0.03)
------ ------ ------ ------ ------ ------ ------ ------ ----------
Net asset value, end of year......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------ ----------
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total Return:
Total investment return based on net asset value
(2)............................................... 3.64% 3.60% 1.47% 1.33% 2.82% 5.52% 6.93% 7.25% 4.93%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)........... 2,552 2,439 2,627 2,555 2,861 3,672 3,604 2,925 2,478
Ratio of net expenses to average net assets........ 2.00% 2.00% 1.93% 1.94% 2.00% 1.70% 1.65% 1.88% 1.79%(3)
Ratio of net income to average net assets.......... 3.58% 3.51% 1.45% 1.33% 2.83% 5.42% 6.65% 7.08% 4.74%(3)
Portfolio turnover rate............................ 0% 0% 0% 0% 0% 0% 0% 0% 0%
Information assuming no voluntary reimbursement by
FBL Investment Advisory Services, Inc. of excess
operating expenses:
Per share net investment income.................... $ 0.03 $ 0.03
Ratio of expenses to average net assets............ 2.43% 2.20%
Amount reimbursed.................................. $10,718 $4,948
</TABLE>
- ---------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
9
<PAGE>
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
--------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year................... $22.85 $18.75 $17.69 $16.78 $15.38 $15.61 $14.56 $11.57 $10.00
Income From Investment Operations
Net investment income............................ 0.17 0.19 0.14 0.13 0.17 0.30 0.32 0.29 0.09(5)
Net gains or losses on investments (both realized
and unrealized)................................. 3.43 4.05 1.06 0.90 1.47 0.77 1.02 2.90 1.48
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total from investment operations................... 3.60 4.24 1.20 1.03 1.64 1.07 1.34 3.19 1.57
Less Distributions
Dividends (from net investment income)........... (0.19) (0.14) (0.14) (0.12) (0.24) (0.31) (0.28) (0.20)
Distributions (from capital gains)............... (0.99) (0.01)
Distributions in excess of net realized gains....
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total distributions................................ (0.19) (0.14) (0.14) (0.12) (0.24) (1.30) (0.29) (0.20) 0.00
------ ------ ------ ------ ------ ------ ------ ------ ----------
Net asset value, end of year......................... $26.26 $22.85 $18.75 $17.69 $16.78 $15.38 $15.61 $14.56 $11.57
------ ------ ------ ------ ------ ------ ------ ------ ----------
------ ------ ------ ------ ------ ------ ------ ------ ----------
Total Return:
Total investment return based on net asset value
(2)............................................... 15.83% 22.77% 6.75% 6.21% 10.77% 8.36% 9.26% 27.94% 24.45%(3)
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)........... 14,641 9,657 6,745 5,415 4,405 3,883 3,166 2,001 1,358
Ratio of net expenses to average net assets........ 1.79% 1.78% 1.83% 1.90% 1.92% 1.63% 1.74% 2.02% 1.45%
Ratio of net income to average net assets.......... 0.66% 0.92% 0.75% 0.73% 1.09% 2.06% 2.14% 2.25% 0.73%
Portfolio turnover rate............................ 3% 1% 1% 0% 0% 5% 37% 0% 4%
Average commission rate per share (4).............. $0.0748
</TABLE>
- ------------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Period from December 1, 1987, date operations commenced, through July 31,
1988.
(2) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(3) Computed on an annualized basis.
(4) Average commission rate per share disclosure is not required for fiscal
years prior to July 31, 1996.
(5) FBL Investment Advisory Services Inc. reimbursed $548 under the terms of its
investment advisory and management services agreement.
10
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
AND POLICIES
OF THE PORTFOLIOS
----------------------------
Each Portfolio of the Fund has distinct investment objectives which it
pursues through separate investment policies as described below. There can be no
assurance that the objectives of any Portfolio will be achieved. The differences
in objectives and policies among the Portfolios can be expected to affect the
return of each Portfolio and the degree of market and financial risk to which
each Portfolio is subject.
The Statement of Additional Information contains specific investment
restrictions that govern the Portfolios' investments. Those restrictions
identified as fundamental policies, as well as the investment objectives and
investment policies described below in the first paragraph for each Portfolio
are fundamental policies, and may not be changed without a majority vote of the
outstanding shares of the affected Portfolio. See "General
Information--Shareholder Voting Rights." All other investment policies and
practices described in this Prospectus and in the Statement of Additional
Information are not fundamental and may be changed by the Board of Directors
without approval of the shareholders. Each Portfolio may engage in certain of
the portfolio strategies described in this Prospectus under "Description of
Certain Investment Techniques" and in the Statement of Additional Information.
"Appendix C-- Description of Corporate Bond Ratings" describes the ratings of
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation
("Standard & Poor's") that are referred to herein.
The portfolio turnover rates for the Portfolios are set forth under
"Condensed Financial Information." Portfolio turnover is calculated by dividing
the lesser of purchases or sales of a Portfolio's securities during a fiscal
year by the average monthly value of the Portfolio's securities during such
fiscal year. In determining the portfolio turnover rate, all securities whose
maturities or expiration dates at the time of acquisition were one year or less
are excluded. Turnover rates may be affected by factors such as purchase and
redemption requirements and market volatility, and may vary greatly from time to
time. Frequency of portfolio turnover will not be a limiting factor if the
investment adviser deems it desirable to purchase or sell securities. Increased
portfolio turnover may result in greater brokerage commissions and consequent
expense to the Portfolio. If any Portfolio were to derive more than 30% of its
gross income from the sale of securities held less than three months, it might
fail to qualify under the tax laws as a regulated investment company in
particular years and consequently would lose certain beneficial tax treatment of
its income; however, each Portfolio intends to continue to qualify as a
regulated investment company each year. See "Dividends and Taxes."
Following is a description of the investment objectives and certain of the
investment practices of each of the Fund's Portfolios. For a further description
of the investment practices of the various Portfolios, see "Description of
Certain Investment Techniques."
VALUE GROWTH PORTFOLIO
The Portfolio pursues its investment objective by investing primarily in
equity securities of companies that the investment adviser believes have a
potential to earn a high return on capital and/or in equity securities that the
investment adviser believes are undervalued by the market place. Such equity
securities may include common stock, preferred stock and securities convertible
or exchangeable into common stock.
11
<PAGE>
The Value Growth Portfolio may invest in securities of companies in cyclical
industries during periods when such securities appear to the investment adviser
to have strong potential for capital appreciation. The Portfolio may also invest
in "special situation" companies. A "special situation" company is one that, in
the opinion of the Fund's investment adviser, has potential for significant
future earnings growth but has not performed well in the recent past. These
situations may include companies with management turnaround, corporate or asset
restructuring or significantly undervalued assets.
The investment adviser's strategy for the Value Growth Portfolio is based
upon a value-oriented analysis of common stocks. Such an analysis focuses upon
evaluations of key financial ratios such as stock price-to-book value, stock
price-to-earnings, stock price-to-cash flow and debt-to-total capital. The
investment adviser attempts to determine the fundamental value of an enterprise
using the foregoing ratios and by evaluating an enterprise's balance sheet
(e.g., comparing the enterprise's assets with the purchase price of similar
recently acquired assets) as well as by using dividend discounting models.
The investment adviser's emphasis on fundamental analysis of each company's
prospects and the inherent value of its securities may result in a portion of
the Portfolio being invested in medium- or smaller-sized companies that are less
identifiable than larger, better-known companies or in companies that are not
perceived as being popular investments at a given time. The Adviser believes
that opportunities can be found at all size levels and, therefore, the Portfolio
may invest in companies of all sizes.
When warranted, in the opinion of the investment adviser, by prevailing
market or economic conditions, the Portfolio, for temporary defensive purposes,
may invest up to 100% of its assets in other types of securities, including
investment-grade commercial paper, corporate bonds, debentures, preferred
stocks, obligations of banks and savings institutions, U.S. Government
securities, government agency securities and repurchase agreements; or it may
retain funds in cash. "Investment-grade commercial paper" is commercial paper
rated A-2 or better by Standard & Poor's or Prime-2 or better by Moody's.
Through careful selection of individual securities, diversification of
investments by industry and type of security and constant supervision of the
investment portfolio, the investment adviser strives to reduce risk and thereby
conserve principal. However, the Portfolio's investments are subject to market
fluctuations and the risks inherent in all securities.
HIGH GRADE BOND PORTFOLIO
The investment objective of the High Grade Bond Portfolio is to provide as
high a level of current income as is consistent with investment in a portfolio
of debt securities deemed to be of high quality by the Fund's investment
adviser. The Portfolio pursues its objective by investing primarily in debt
securities rated AAA, AA or A by Standard & Poor's or Aaa, Aa or A by Moody's
and in U.S. Government securities and government agency securities.
From time to time, up to 20% of the Portfolio's total assets may be invested
in unrated debt securities or debt securities rated lower than the three highest
grades of Standard & Poor's or Moody's as described above, or in convertible
debt securities, convertible preferred stocks, or non-convertible preferred
stocks rated within the three highest grades of Standard & Poor's or Moody's
applicable to such securities. To the extent that the Portfolio does invest in
debt securities that are rated lower than A by Moody's or Standard & Poor's (or
are unrated but equivalent in quality to such securities), the Fund's investment
portfolio will be subject to relatively greater risk of loss of income and
principal as discussed under "Principal Risk Factors--Special
Considerations--High Yield Bonds." Securities rated Ba or lower by Moody's and
BB or lower by Standard & Poor's are considered by those rating agencies to have
varying degrees of speculative characteristics. Consequently, although they can
be expected to
12
<PAGE>
provide higher yields, such securities may be subject to greater market
fluctuations and risk of loss of income and principal than lower-yielding,
higher-rated fixed-income securities. It is intended that at least 65% of the
Portfolio's total assets will be invested in medium- and long-term debt
securities that are rated A or better or that are unrated but of equivalent
quality.
The Portfolio will not directly purchase common stocks. However, it may
retain up to 10% of the value of its assets in common stocks acquired either by
conversion of debt securities or by the exercise of warrants attached to debt
securities.
When warranted, in the opinion of the investment adviser, by prevailing
market or economic conditions, the Portfolio for temporary defensive purposes
may invest up to 100% of its assets in other types of securities, including
investment-grade commercial paper, obligations of banks and savings
institutions, U.S. Government securities, government agency securities and
repurchase agreements, or it may retain funds in cash.
Although in the opinion of the Fund's investment adviser, the risk of loss
of principal should be minimized by the quality of the investments in which the
Portfolio will invest primarily, the long maturities that typically provide the
best yields may subject the Portfolio to substantial price changes resulting
from market yield fluctuations. The market price of fixed-income securities such
as those purchased by the Portfolio is affected by changes in interest rates,
generally. The market value of fixed-income securities generally will fall as
interest rates rise, and rise as interest rates fall.
HIGH YIELD BOND PORTFOLIO
The primary investment objective of the High Yield Bond Portfolio is to
obtain as high a level of current income as is consistent with investment in a
portfolio of fixed-income securities rated in the lower categories of
established rating services. As a secondary objective, the Portfolio seeks
capital appreciation when consistent with its primary objective. The Portfolio
pursues its investment objectives by investing primarily in fixed-income
securities, including corporate bonds and notes, convertible debt securities and
preferred stocks that are rated in the lower categories of established rating
services (Ba or lower by Moody's and BB or lower by Standard & Poor's), or in
unrated securities of comparable quality. Such securities are commonly known as
"junk bonds."
Securities rated Ba or lower by Moody's and BB or lower by Standard & Poor's
are considered by those rating services to have varying degrees of speculative
characteristics. Consequently, although they can be expected to provide higher
yields, such securities may be subject to greater market fluctuations and risk
of loss of income and principal than lower-yielding, higher-rated fixed-income
securities. See "Principal Risk Factors--Special Considerations--High Yield
Bonds" for discussion of various risk factors relating to high yield bonds. The
investment adviser will not rely solely on the ratings assigned by the rating
services, and the Portfolio may invest, without limit, in unrated securities if
such securities offer, in the opinion of the investment adviser, a relatively
high yield without undue risk. Although the Portfolio will invest primarily in
lower-rated securities, it will not invest in securities in the lower rating
categories (Ca or lower for Moody's and CC or lower for Standard & Poor's)
unless the investment adviser believes that the financial condition of the
issuer or the protection afforded to the particular securities is stronger than
would otherwise be indicated by such low ratings.
The Portfolio anticipates that under normal circumstances more than 80% of
its assets will be invested in fixed-income securities, including convertible
and non-convertible debt securities and preferred stock, and that at least 65%
of its assets will be invested in debt securities. The remaining assets of the
Portfolio may be held in cash or investment-grade commercial paper, obligations
of banks and
13
<PAGE>
savings institutions, U.S. Government securities, government agency securities
and repurchase agreements. The Portfolio does not intend to invest in common
stocks, rights or other equity securities, but it may acquire or hold such
securities (if consistent with its objectives) when they are acquired in unit
offerings with fixed-income securities or in connection with an actual or
proposed conversion or exchange of fixed-income securities.
When changing economic conditions and other factors cause the yield
difference between lower-rated and higher-rated securities to narrow, the
Portfolio may purchase higher-rated securities if the investment adviser
believes that the risk of loss of income and principal may be substantially
reduced with only a relatively small reduction in yield. In addition, when
warranted, in the opinion of the investment adviser, by prevailing market or
economic conditions, the Portfolio for temporary defensive purposes may invest
up to 100% of its assets in investment-grade commercial paper, obligations of
banks and savings institutions, U.S. Government securities, government agency
securities and repurchase agreements, or it may retain funds in cash. The yield
on such securities may be lower than the yield on lower-rated fixed-income
securities.
Because an investment in high-yield securities entails relatively greater
risk of loss of income and principal, an investment in the Portfolio may not
constitute a complete investment program and may not be appropriate for all
investors.
MANAGED PORTFOLIO
The investment objective of the Managed Portfolio is to seek the highest
total investment return of income and capital appreciation. The Portfolio
pursues its objective through a fully managed investment policy consisting of
investment in the following three market sectors: (i) growth common stocks and
securities convertible or exchangeable into growth common stocks, including
warrants and rights; (ii) high quality debt securities and preferred stocks of
the type in which the High Grade Bond Portfolio may invest; and (iii) high
quality short-term money market instruments of the type in which the Money
Market Portfolio may invest.
The Portfolio's investment policy for the stock market sector is to invest
in those securities that appear to the investment adviser to possess above
average potential for appreciation in market value, usually as a result of the
issuer's relatively favorable prospects for improvement in earnings. Such
securities generally include those of companies with established records of
growth in sales or earnings, and companies with promising new products, services
or processes. The Portfolio's investment policies for the debt and money market
sectors are substantially identical to those of the High Grade Bond Portfolio
and Money Market Portfolio, respectively. The Managed Portfolio will, from time
to time, adjust the mix of investments among the three market sectors to
capitalize on perceived variations in return potential produced by the
interaction of changing financial markets and economic conditions. There are no
restrictions as to the proportion of one or another type of security which the
Portfolio may hold. Accordingly, the Portfolio may, at any given time, be
substantially invested in equity securities, in high quality debt securities, or
in high quality short-term money market instruments. Major changes in the
investment mix may occur over several years or during a single year or shorter
period depending upon market and economic conditions. The fact that the
investment mix may be adjusted from time to time may result in high portfolio
turnover and, consequently, high brokerage charges to the Portfolio.
Achievement of the Portfolio's objective depends on the investment adviser's
ability to assess the effect of economic and market trends on different sectors
of the market.
14
<PAGE>
MONEY MARKET PORTFOLIO
The investment objective of the Money Market Portfolio is to obtain maximum
current income consistent with liquidity and stability of principal. The
Portfolio pursues its objective by investing in high quality short-term debt
obligations denominated in U.S. dollars that are deemed to present minimal
credit risk.
Money market instruments which the Money Market Portfolio may purchase
include U.S. Government securities, government agency securities, obligations of
banks and savings institutions, commercial paper, short-term corporate debt
securities and repurchase agreements. Appendix A contains a more detailed
description of the money market instruments in which the Portfolio may invest.
The Portfolio's investments will be limited to money market instruments which
mature in thirteen months or less from the date of purchase; however, the
Portfolio may invest in repurchase agreements in which the underlying securities
have maturities in excess of one year from the date of purchase. In addition,
the Portfolio limits its investments to securities that meet the quality and
diversification requirements of Rule 2a-7 under the Investment Company Act of
1940 (the "Investment Company Act"). See Appendix A.
The dollar-weighted average maturity of the Portfolio will not exceed 90
days. The Portfolio seeks to maintain a constant net asset value of $1.00 per
share, and will use the amortized cost method of securities valuation. However,
there can be no guarantee that the Portfolio will be able to maintain a stable
net asset value of $1.00 per share. See "Net Asset Value Information." Because
of the short-term nature of the investments of this Portfolio, a portfolio
turnover rate is not applicable.
BLUE CHIP PORTFOLIO
The investment objective of the Blue Chip Portfolio is growth of capital and
income. The Portfolio pursues its objective by investing primarily in common
stocks of well-capitalized, established companies.
In pursuing its objective, the Portfolio will invest in stocks of
approximately 40 large, well-known companies that the Fund's investment adviser
believes to collectively comprise a representative cross-section of major
industries. Companies of this type are commonly referred to as "blue chip." Blue
chip companies are generally identified by their substantial capitalization,
established history of earnings and superior management structure. The
investment adviser will base its determination of the companies to be included
or retained in the Portfolio, not on the basis of any analysis of the companies'
underlying economic or financial fundamentals or of the relative value of the
securities, but rather on whether the companies in the Portfolio, taken
together, reasonably represent a cross-section of major industries. The Adviser
anticipates that the Portfolio will purchase approximately equal dollar amounts
of shares of each company. However, the Portfolio will not own positions of
equal value in the various companies, partly because of price fluctuations after
purchases by the Portfolio.
The Portfolio may, from time to time, have more than 5% of the value of its
total assets invested in each of one or more particular companies. However, as
to 75% of the Portfolio's total assets, no more than 5% of the Portfolio's total
assets (at the time of purchase) will be invested in securities of any one
issuer (other than the U.S. Government and its agencies and instrumentalities).
The concentration of a significant portion of its assets in stocks of one or a
few companies (or in a relatively limited number of industries) may subject the
Portfolio to increased risk of loss if those stocks (or stocks in those
industries) were to decline in value.
The Portfolio expects that it will remain substantially invested in stocks
at all times. However, at most times the Portfolio will hold a small portion of
its assets (not to exceed 15% of its total assets) in cash or cash equivalents
to accommodate redemptions and so as to avoid having to purchase stocks in small
quantities and thereby incur excessive brokerage costs. Any such cash balances
will be invested in high
15
<PAGE>
quality short-term money market instruments of the type in which the Money
Market Portfolio may invest, or retained in cash. The Portfolio will not engage
in the trading of securities for the purpose of realizing short-term profits.
- --------------------------------------------------------------------------------
PRINCIPAL RISK
FACTORS
- -----------------
GENERAL
In general, risk associated with the investments of a particular Portfolio
can be described in terms of current income volatility, financial risk and
market risk. Current income volatility refers to the degree and rapidity with
which changes in overall market interest rates affect the level of current
income. Financial risk refers to the ability of an issuer of a debt security to
pay, on a timely basis, principal and interest on such security. With respect to
the issuer of an equity security, financial risk refers to its earning stability
and overall financial soundness. Market risk for debt securities refers to the
fact that, as a general matter, the current value of debt securities varies
inversely with changes in prevailing interest rates; if interest rates rise, the
value of a debt security will tend to fall. Market risk for equity securities
refers to overall stock market valuation levels.
The VALUE GROWTH PORTFOLIO and BLUE CHIP PORTFOLIO are likely to be subject
to moderate levels of both market and financial risk.
The HIGH GRADE BOND PORTFOLIO is likely to be subject to moderate levels of
market risk and relatively low levels of financial risk and current income
volatility.
The HIGH YIELD BOND PORTFOLIO is likely to be subject to moderate levels of
market risk, relatively high levels of financial risk and relatively low levels
of current income volatility.
The market value of fixed-income securities is affected by changes in
general market interest rates. If interest rates decline, the market value of
fixed-income securities tends to increase; while if interest rates increase, the
market value of fixed-income securities tends to decrease. Highly rated
fixed-income securities tend to have lower interest rates and yields, and less
market or financial risk, than do lower-rated fixed-income securities.
Lower-rated and unrated securities generally have a greater degree of market and
financial risk than higher-rated securities, for reasons including the greater
possibility that issuers of lower-rated or unrated securities may not be able to
pay the principal and interest when due, especially during periods of adverse
economic conditions.
The MANAGED PORTFOLIO most likely will be subject to moderate levels of
market and financial risk and relatively low levels of current income
volatility, although current income volatility could be higher if the Portfolio
is heavily invested in short-term money market instruments.
The MONEY MARKET PORTFOLIO should be subject to little market or financial
risk because it invests in high quality short-term investments that reflect
current market interest rates. Although these types of securities generally are
considered to have low financial risk, there is some possibility that issuers
may fail to meet their principal and interest obligations on a timely basis. The
Portfolio could experience a high level of current income volatility because the
level of its current income directly reflects short-term interest rates.
16
<PAGE>
SPECIAL CONSIDERATIONS--HIGH YIELD BONDS
As reflected above, the High Yield Bond Portfolio intends to invest a
substantial portion of its assets in fixed-income securities offering high
current income. Additionally, subject to its specific investment objectives and
policies as described above, the High Grade Bond Portfolio may invest a portion
of its assets in such securities. Such high yielding fixed-income securities are
ordinarily in the lower rating categories of Moody's or Standard & Poor's (Ba/BB
or lower) or will be unrated securities of comparable quality. Such securities
are commonly known as "junk bonds." These lower-rated fixed-income securities
are considered, on balance, as predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with the terms of the
obligation and will generally involve more credit risk than securities in the
higher rating categories. The market values of such securities tend to reflect
individual corporate developments to a greater extent than do higher-rated
securities, which react primarily to fluctuations in the general level of
interest rates. Such lower-rated securities also tend to be more sensitive to
economic conditions than are higher-rated securities. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, regarding
lower-rated bonds may depress prices and liquidity for such securities. Factors
adversely affecting the market value of high yielding securities will adversely
affect a Portfolio's net asset value. In addition, a Portfolio may incur
additional expenses to the extent it were required to seek recovery upon a
default in the payment of principal or interest on its portfolio holdings.
Although some risk is inherent in all securities ownership, holders of
fixed-income securities have a claim on the assets of the issuer prior to the
holders of common stock. Therefore, an investment in fixed-income securities
generally entails less risk than an investment in common stock of the same
issuer.
The investment philosophy of the High Yield Bond Portfolio with respect to
high yield bonds is based on the premise that over the long-term a broadly
diversified portfolio of high yield fixed-income securities should, even taking
into account possible losses, provide a higher net return than that achievable
on a portfolio of higher-rated securities. The High Yield Bond Portfolio seeks
to achieve the highest yields possible while reducing relative risks through:
(a) broad diversification,
(b) credit analysis by the investment adviser of the issuers in which the
Portfolio invests,
(c) monitoring and seeking to anticipate changes and trends in the economy
and financial markets that might affect the prices of portfolio
securities.
The investment adviser's judgment as to the "reasonableness" of the risk
involved in any particular investment will be a function of its experience in
managing fixed-income investments and its evaluation of general economic and
financial conditions of a specific issuer.
In some circumstances, defensive strategies may be implemented to preserve
or enhance capital even at the sacrifice of current yield. Defensive strategies,
which may be used singly or in any combination, may include, but are not limited
to, investments in discount securities or investments in money market
instruments.
High yielding securities may be issued by corporations in the growth stage
of their development. They may also be issued in connection with a corporate
reorganization or as part of a corporate takeover. Companies that issue such
high yielding securities are often highly leveraged and may not have available
to them more traditional methods of financing. Therefore, the risk associated
with acquiring the securities of such issuers generally is greater than is the
case with higher-rated securities. For example, during an economic downturn or a
sustained period of rising interest rates, highly leveraged issuers of high
yielding securities may experience financial stress. During such periods, such
17
<PAGE>
issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations may also be
adversely affected by specific corporate developments, or the issuer's inability
to meet specific projected business forecasts or the unavailability of
additional financing. The risk of loss due to default by the issuer is
significantly greater for the holders of high yielding securities because such
securities are generally unsecured and are often subordinated to other creditors
of the issuer.
High yielding securities frequently have call or buy-back features that
would permit an issuer to call or repurchase the security from the Portfolio. If
a call were exercised by the issuer during a period of declining interest rates,
a Portfolio would likely have to replace such called security with a lower
yielding security, thus decreasing the net investment income to the Portfolio.
The premature disposition of a high yielding security because of a call or
buy-back feature, the deterioration of the issuer's creditworthiness or a
default may also make it more difficult for a Portfolio to time its receipt of
income, which may have tax implications.
A Portfolio may have difficulty disposing of certain high yielding
securities for which there is a thin trading market. Because not all dealers
maintain markets in all high yielding securities, there is no established retail
secondary market for many of these securities, and the Fund anticipates that
they could be sold only to a limited number of dealers or institutional
investors. To the extent there is a secondary trading market for high yielding
securities, it is generally not so liquid as that for higher-rated securities.
The lack of a liquid secondary market may have an adverse impact on market price
and a Portfolio's ability to dispose of particular issues when necessary to meet
the Portfolio's liquidity needs, or in response to a specific economic event
such as a deterioration in the creditworthiness of the issuer. The lack of a
liquid secondary market for certain securities may also make it more difficult
for the Fund to obtain accurate market quotations for purposes of valuing a
Portfolio's assets. Market quotations are generally available on many high yield
issues only from a limited number of dealers and may not necessarily represent
firm bids of such dealers or prices for actual sales.
It is likely that a major economic recession could severely affect the
market for and the values of high yielding securities, as well as the ability of
the issuers of such securities to repay principal and pay interest thereon.
A Portfolio may acquire high yielding securities that are sold without
registration under the federal securities laws and therefore carry restrictions
on resale. While many recent high yielding securities have been sold with
registration rights, covenants and penalty provisions for delayed registration,
if a Portfolio is required to sell such restricted securities before the
securities have been registered, it may be deemed an underwriter of such
securities as defined in the Securities Act of 1933, which entails special
responsibilities and liabilities. A Portfolio may incur special costs in
disposing of such securities, but will generally incur no costs when the issuer
is responsible for registering the securities.
A Portfolio may acquire high yielding securities during an initial
underwriting. Such securities involve special risks because they are new issues.
The Fund has no arrangement with any person concerning the acquisition of such
securities, and the investment adviser will carefully review the credit and
other characteristics pertinent to such new issues.
From time to time, there have been proposals for legislation designed to
limit the use of certain high yielding securities in connection with leveraged
buy-outs, mergers and acquisitions, or to limit the deductibility of interest
payments on such securities. Such proposals if enacted into law could reduce the
market for such securities generally, could negatively affect the financial
condition of issuers of high
18
<PAGE>
yield securities by removing or reducing a source of future financing and could
negatively affect the value of specific high yield issues. However, the
likelihood of any such legislation or the effect thereof is uncertain.
Zero coupon securities and pay in-kind bonds involve additional special
obligations. Zero coupon securities are debt obligations that do not entitle the
holder to any periodic payments of interest prior to maturity or to a specified
cash payment date when the securities begin paying current interest (the "cash
payment date"), and therefore are issued and traded at a discount from their
face amounts or par value. The discount varies depending upon the time remaining
until maturity or cash payment date, prevailing interest rates, liquidity of the
security and the perceived credit quality of the issuer. The discount, absent
financial difficulties of the issuer, decreases as the final maturity or cash
payment date of the security approaches. The market prices of zero coupon
securities are generally more volatile than those of securities that pay
interest periodically, and they are more likely to respond to changes in
interest rates than non-zero coupon securities having similar maturities and
credit quality. The credit risk factors pertaining to lower-rated securities
generally also apply to lower-rated zero coupon bonds and pay in-kind bonds.
Such zero coupon, pay in-kind or delayed interest bonds carry an additional risk
in that, unlike bonds that pay interest throughout the period to maturity, a
Portfolio will realize no cash until the cash payment date unless a portion of
such securities is sold and, if the issuer defaults, a Portfolio may obtain no
return at all on its investment.
Federal income tax law requires the holder of zero coupon securities or of
certain pay in-kind bonds (bonds that pay interest through the issuance of
additional bonds) to accrue income with respect to these securities prior to the
receipt of cash payments. To maintain its qualification as a regulated
investment company and avoid liability for federal income and excise taxes, a
Portfolio will be required to distribute income accrued with respect to these
securities and may have to dispose of portfolio securities under disadvantageous
circumstances in order to generate cash to satisfy these distribution
requirements.
Additional information concerning high yielding securities appears under
"Appendix C--Description of Corporate Bond Ratings."
- --------------------------------------------------------------------------------
DESCRIPTION OF
CERTAIN INVESTMENT
TECHNIQUES
------------------------
Except as otherwise noted below, the following investment strategies and
techniques may be used by all Portfolios.
FOREIGN SECURITIES
The Value Growth Portfolio and Managed Portfolio each may invest up to 25%
of its net assets in equity and debt securities of foreign issuers, and the High
Grade Bond Portfolio and High Yield Bond Portfolio each may invest up to 25% of
its net assets in debt securities of foreign issuers, to the extent the purchase
of such foreign securities is otherwise consistent with the Portfolio's
investment objectives. Investments will be made only in foreign securities that
are publicly traded in the U.S. and payable in U.S. dollars. The investment
adviser will apply standards for evaluating the quality and risk of investments
in foreign securities comparable to those it applies to investments in domestic
securities while also taking into consideration the opportunities and special
risks in connection with foreign securities.
19
<PAGE>
Investments in foreign securities can provide a Portfolio with more
opportunities for attractive returns, but they may also involve some special
risks such as exposure to potentially adverse local political and economic
developments; nationalization and exchange controls; potentially lower liquidity
and higher volatility; and possible problems arising from accounting,
disclosure, settlement, and regulatory practices that differ from U.S.
standards. Fluctuations in exchange rates may affect the earning power and asset
value of the foreign entity issuing the security and can either increase or
decrease the investment's value. Dividend and interest payments may be
repatriated based upon the exchange rate at the time of disbursement or payment,
and restrictions on capital flows may be imposed. The characteristics of the
securities in the Portfolios, such as the maturity and the type of issuer, will
affect yields and yield differentials, which vary over time.
WHEN-ISSUED OR DELAYED DELIVERY TRANSACTIONS
From time to time, in the ordinary course of business, each of the
Portfolios may purchase newly-issued securities appropriate for the Portfolio on
a "when-issued" basis and may purchase or sell securities appropriate for the
Portfolio on a "delayed delivery" basis. When-issued or delayed delivery
transactions involve a commitment by a Portfolio to purchase or sell particular
securities with payment and delivery to take place at a future date. These
transactions allow the Portfolio to lock in an attractive purchase price or
yield on a security the Portfolio intends to purchase or an attractive sale
price on a security the Portfolio intends to sell. Normally, settlement occurs
within one month of the purchase or sale. During the period between purchase or
sale and settlement, no payment is made or received by a Portfolio and, for
delayed delivery purchases, no interest accrues to the Portfolio. A Portfolio
will only make commitments to purchase securities on a when-issued or delayed
delivery basis with the intention of actually acquiring the securities, but it
reserves the right to sell such securities before the settlement date if deemed
advisable.
At the time a Portfolio makes the commitment to purchase a security on a
when-issued or delayed delivery basis, it will record the transaction and
reflect the amount due and the value of the security in determining its net
asset value. Likewise, at the time a Portfolio makes the commitment to sell a
security on a delayed delivery basis, it will record the transaction and include
the proceeds to be received in determining its net asset value; accordingly, any
fluctuations in the value of the security sold pursuant to a delayed delivery
commitment are ignored in calculating net asset value so long as the commitment
remains in effect. The market value of the when-issued or delayed delivery
securities at any time may be more or less than the purchase price to be paid or
the sale price to be received at the settlement date. To the extent that a
Portfolio engages in when-issued or delayed delivery transactions, it will do so
for the purpose of acquiring or selling portfolio securities consistent with the
Portfolio's investment objectives and policies and not for the purpose of
investment leverage or to speculate on interest rate changes.
The investment adviser does not believe that a Portfolio's net asset value
or income will be adversely affected overall by the purchase of securities on a
when-issued or delayed delivery basis. Each Portfolio will establish a
segregated account with the Fund's custodian bank in which the Portfolio will
maintain cash or U.S. Government securities or other high-grade debt obligations
at least equal in value to commitments to purchase securities on a when-issued
or delayed delivery basis; subject to this requirement, a Portfolio may purchase
securities on a when-issued or delayed delivery basis without limit. To the
extent that assets of a Portfolio are held in cash pending the settlement of a
purchase of securities, that Portfolio would earn no income. In the case of a
commitment to sell portfolio securities on a delayed delivery basis, each
Portfolio will instruct the custodian to hold the portfolio securities
themselves in a segregated account while the commitment is outstanding.
20
<PAGE>
LOANS OF PORTFOLIO SECURITIES
Each Portfolio may, from time to time, lend securities (but not in excess of
20% of its assets) from its Portfolio to brokers, dealers and financial
institutions, provided that: (i) the loan is secured continuously by collateral
consisting of U.S. Government securities, government agency securities, cash or
cash equivalents adjusted daily to have a market value at least equal to the
current market value of the securities loaned plus accrued interest; (ii) the
Portfolio may at any time call the loan and regain the securities loaned; and
(iii) the investment adviser (under the review of the Board of Directors) has
reviewed the creditworthiness of the borrower and has found such
creditworthiness satisfactory. The Portfolio will receive from the borrower
amounts equal to the dividends or interest paid on the securities loaned, and
will also earn income for having made the loan. Any cash collateral will be
invested in short-term securities, the income from which will increase the
return to the Portfolio.
WRITING COVERED CALL OPTIONS
Each Portfolio (other than the Money Market Portfolio) may write (sell)
covered call options on portfolio securities representing up to 100% of its net
assets in an attempt to enhance investment performance or to reduce the risks
associated with investments. A call option gives the purchaser the right to buy,
and the writer the obligation to sell, an underlying security at a particular
exercise price during the option period. A Portfolio will write call options
only on a covered basis, which means that the Portfolio will own the underlying
security subject to the call option at all times during the option period.
Options written by a Portfolio will normally have expiration dates between three
and nine months from the date written. Such options and the securities
underlying the options must both be listed on national securities exchanges,
except that debt securities and related options need not be so listed. The
advantage to a Portfolio of writing covered call options is that the Portfolio
receives a premium which constitutes additional income, which would serve both
to enhance investment performance and to offset in whole or in part any decline
in the value of the underlying security. However, the disadvantage is that
during the option period the Portfolio would give up the potential for capital
appreciation above the exercise price if the underlying security were to rise in
value; and that, unless a closing purchase transaction is effected, the
Portfolio will be required to continue to hold the underlying security for the
entire option period, and would bear the risk of loss if the price of the
securitiy were to decline.
INVESTMENT COMPANY SECURITIES
Each of the Portfolios may invest, subject to the investment limitations
described below, in shares of other investment companies which seek to maintain
a $1.00 net asset value per share ("Money Market Funds"). The Portfolios intend
to invest available cash balances in such Money Market Funds. In addition, the
Portfolios may invest in such Money Market Funds for temporary defensive
purposes (for example, when FBL believes such a position is warranted by
uncertain or unusual market conditions, or when liquidity is required to meet
unusually high redemption requests) or for other purposes. No more than 5% of
the value of a Portfolio's total assets will be invested in securities of Money
Market Funds. In addition, a Portfolio may hold no more than 3% of the
outstanding voting stock of any Money Market Fund. As a shareholder of another
investment company, a Portfolio would bear, along with other shareholders, its
pro-rata portion of the Money Market Fund's expenses, including advisory fees.
REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements as a means of earning
income for periods as short as overnight. A repurchase agreement is an agreement
under which the Portfolio purchases a security and the seller agrees, at the
time of sale, to repurchase the security at a specified time and price, thereby
determining the yield during the Portfolio's holding period. That yield is
determined by current short-term rates and may be more or less than the interest
rate on the underlying security. The value of
21
<PAGE>
the underlying securities is marked to market daily. If the value of the
underlying securities declined, the seller would be required to provide the
Portfolio with additional securities so that the aggregate value of the
underlying securities was at least equal to the repurchase price.
The Portfolios may also enter into a special type of repurchase agreement
known as an "open repurchase agreement." An open repurchase agreement varies
from the typical repurchase agreement in the following respects: (1) the
agreement has no set maturity, but instead matures upon 24 hours' notice to the
seller; and (2) the repurchase price is not determined at the time the agreement
is entered into, but instead is based on a variable interest rate and duration
of the agreement.
The Portfolios may enter into repurchase agreements only with banks or
securities dealers, and the underlying securities will consist of securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. If a seller of a repurchase agreement were to default, the
Portfolio might experience losses, including delays and expenses in enforcing
its rights. To minimize this risk, the investment adviser (under the review of
the Board of Directors) will review the creditworthiness of the seller, and must
find such creditworthiness satisfactory before a Portfolio may enter into the
repurchase agreement.
A Portfolio may invest no more than 10% of its net assets in repurchase
agreements maturing in more than seven days, and no more than 25% of its net
assets in repurchase agreements in which the underlying securities have
maturities in excess of one year, although there is no limit on the percentage
of each Portfolio's assets that may be invested in repurchase agreements that
mature in less than seven days and have underlying securities with maturities of
less than one year. Net assets are taken at market value at the time of each
purchase for purposes of the foregoing limitations. Open repurchase agreements
are considered to mature in one day.
- --------------------------------------------------------------------------------
HOW TO
BUY
SHARES
- ---------
Shares of the Fund's various Portfolios are sold on a continuing basis at
their net asset value next determined after a purchase order and payment are
received in proper form as described below. The Fund is open for business on
each day the New York Stock Exchange is open for trading (except the Tuesday
before Christmas and the day after Thanksgiving). The Fund reserves the right to
reject any purchase order and to change the minimum purchase requirements at any
time.
INITIAL PURCHASE
The minimum initial purchase is $250, except there is no minimum initial
investment for retirement accounts and accounts opened under bona fide payroll
deduction plans. There is no initial sales charge. An Application may be
obtained either from the Fund or from a registered representative of FBL
Marketing Services, Inc.
Complete the Application and mail it with your check payable to the
appropriate Portfolio of the Fund to: FBL Series Fund, Inc., 3820 109th Street,
Des Moines, Iowa 50391-7003.
SUBSEQUENT PURCHASES
Send the Fund a check (no minimum) payable to the appropriate Portfolio of
the Fund accompanied by a letter indicating the dollar value of the shares to be
purchased and identifying the Portfolio, the account number and registered
owner(s).
22
<PAGE>
PURCHASES BY WIRE (MONEY MARKET PORTFOLIO ONLY)
Purchases may be made in the Money Market Portfolio by wire transfer. If
making an initial purchase, call the toll free number (800) 247-4170 (in Iowa,
call toll free (800) 422-3175 or in the Des Moines metropolitan area call
225-5586) to obtain a Money Market Portfolio Account Number and provide the Fund
with your name, address and social security or tax identification number. Then,
simply instruct your bank to "wire transfer" funds to: BANKERS TRUST COMPANY,
ABA #021001033, DDA ACCOUNT #00220695 MONEY MARKET PORTFOLIO OF FBL SERIES FUND,
INC., FOR FURTHER CREDIT TO YOUR ACCOUNT REGISTRATION AND ACCOUNT NUMBER.
Finally, if making an initial purchase, complete an Application and mail it to
the Fund at the address listed under "Initial Purchase" above.
- --------------------------------------------------------------------------------
HOW TO
REDEEM
SHARES
---------
Upon receipt of an executed redemption request in proper form, as described
below, the Fund will redeem shares of a Portfolio at the next determined net
asset value. Proceeds payable upon redemption will be reduced by the amount of
any applicable contingent deferred sales charge. The Fund intends to pay
redemption proceeds within one business day after receipt of an executed
redemption request in proper form. If shares to be redeemed were purchased by
check, the Fund may delay transmittal of redemption proceeds until such time,
normally not more than 15 calendar days after the redemption request, that it
has assured itself that good payment has been collected for the purchase of such
shares.
The Adviser employs procedures designed to confirm that instructions
communicated by telephone are genuine, including requiring certain identifying
information prior to acting upon instructions, recording all telephone
instructions and sending written confirmations of instructions. To the extent
such procedures are reasonably designed to prevent unauthorized or fraudulent
instructions neither the Adviser nor the Fund would be liable for any losses
from unauthorized or fraudulent instructions.
Redemptions can be requested by writing to the Fund, 3820 109th Street, Des
Moines, Iowa 50391-7003 and requesting redemption of either the number or dollar
value of shares of a specified Portfolio. Any certificates for shares to be
redeemed must be included, duly endorsed. The letter (and certificates, if any)
must be signed exactly as the account is registered. On a jointly owned account,
all owners must sign. SIGNATURES OF ACCOUNT OWNERS MUST BE GUARANTEED BY A
COMMERCIAL BANK, TRUST COMPANY, MEMBER OF A STOCK EXCHANGE, SAVINGS AND LOAN
ASSOCIATION OR SAVINGS BANK, OTHER ELIGIBLE FINANCIAL INSTITUTION, OR A
REGISTERED REPRESENTATIVE OF FBL MARKETING SERVICES, INC. OR FBL INVESTMENT
ADVISORY SERVICES, INC., and shall include such other documentation of authority
as the Fund deems necessary in the case of estates, trusts, guardianships,
corporations, unincorporated associations and pension and profit sharing plans.
THE FUND CANNOT ACCEPT GUARANTEES FROM NOTARIES PUBLIC.
EXPEDITED REDEMPTION PROCEDURES (MONEY MARKET PORTFOLIO ONLY). Shareholders
may redeem shares of the Money Market Portfolio by telephone. The proceeds of
shares so redeemed (less any contingent deferred sales charge) will be sent by
Federal wire transfer to a single designated account maintained by the
shareholder at a domestic commercial bank that is a member of the Federal
Reserve System. To effect a redemption, a shareholder should call the Fund at
the appropriate number shown on the cover of the Prospectus between the hours of
8:00 a.m. and 4:30 p.m. (Central Time) on any day when the Fund is open for
business. Requests received by the Fund prior to the earlier of the close of the
23
<PAGE>
New York Stock Exchange or 3:00 p.m. (Central Time) will result in shares being
redeemed that day at the next determined net asset value, and the proceeds will
normally be sent to the designated bank account the following business day. The
minimum amount that may be wired is $10,000. The Fund reserves the right to
change this minimum or to terminate the wire redemption privilege. All
applications for telephone redemption service must have signatures guaranteed by
a commercial bank, trust company, member of a stock exchange, savings and loan
association or savings bank, other eligible financial institution, a registered
representative of FBL Marketing Services, Inc. or FBL Investment Advisory
Services, Inc. and shall include such other documentation of authority as the
Fund deems necessary in the case of estates, trusts, guardianships,
corporations, unincorporated associations and pension and profit sharing plans.
A shareholder wishing to use this method of redemption must complete the
appropriate portions of the Application and it must be on file with the Fund.
Once the form is on file, the Fund will honor redemption requests by any person
by telephone (using the toll free numbers listed on the cover page), telegraph
or other method without a signature guarantee from the shareholder or any other
person. The Fund is not responsible for the efficiency of the federal wire
system or the shareholder's bank. To change the name of the single designated
bank account to receive wire redemption proceeds, it is necessary to send a
written request with signatures guaranteed to the Fund. The Fund does not
currently charge for wiring funds, although the shareholder will be responsible
for any wire fees charged by the receiving bank. This procedure is not available
for Retirement Accounts or shares for which certificates have been issued.
Shareholders may not use expedited redemption procedures until the shares
being redeemed have been on the Fund's books for at least four days. There is no
such delay in redeeming shares that were purchased by wiring Federal Funds.
CONTINGENT DEFERRED SALES CHARGE. A contingent deferred sales charge is
imposed on that amount by which a redemption causes the current value of a
Portfolio account to fall below the total dollar amount of purchases of that
Portfolio's shares made during the preceding six years (reinvested dividends are
not considered purchases for this purpose). The charge is imposed upon
redemptions of shares in accordance with the following schedule:
<TABLE>
<CAPTION>
YEAR OF CONTINGENT
REDEMPTION DEFERRED SALES
AFTER PURCHASE CHARGE
- --------------------------------------------------- -------------------
<S> <C>
First.......................................... 5%
Second......................................... 4%
Third.......................................... 4%
Fourth......................................... 3%
Fifth.......................................... 2%
Sixth.......................................... 1%
Seventh and following.......................... 0%
</TABLE>
The following example will illustrate the operation of the contingent
deferred sales charge. Assume that an investor purchases $10,000 of a
Portfolio's shares and that 30 months later the value of the account has grown
through investment performance and reinvestment of dividends to $14,000. The
investor then may redeem up to $4,000 ($14,000 minus $10,000) without incurring
a contingent deferred sales charge. If the investor should redeem $5,000, a
contingent deferred sales charge would be imposed on $1,000 of the redemption.
The charge would be imposed at the rate of 4% ($40) because the redemption
occurred in the third year after the purchase. In determining whether a
contingent deferred sales charge is payable, it is assumed that the redemption
is made from the earliest purchase of shares.
24
<PAGE>
The contingent deferred sales charge will be waived in the event of the
death of the shareholder (including a registered joint owner), with respect to
redemptions in connection with distributions from a 401(m), 401(k) or 457(k)
plan, or with respect to withdrawals under the Fund's periodic withdrawal plan.
FBL Investment Advisory Services, Inc., the Fund's Distributor, receives any
contingent deferred sales charge directly.
INVOLUNTARY REDEMPTIONS. Due to the high cost of maintaining small
accounts, the Fund reserves the right to redeem a Portfolio account that falls
below $250 as a result of redemptions. Prior to effecting such an involuntary
redemption, shareholders will be notified in writing and will be allowed 60 days
to make additional purchases to bring the account up to the Portfolio's $250
minimum investment requirement. Any such involuntary redemption will not be
subject to a contingent deferred sales charge.
REDEMPTIONS IN-KIND. If the Board of Directors determines that it would be
detrimental to the best interests of the remaining shareholders of a Portfolio
to make payment wholly or partly in cash, the Fund may pay the redemption price
in whole or in part by the distribution in-kind of securities held by the
applicable Portfolio in lieu of cash in conformity with applicable rules of the
Securities and Exchange Commission. Investors may incur brokerage charges on the
sale of securities so received in payment of redemption. A redemption paid
in-kind is treated as a sale for federal income tax purposes even though the
shareholder may have received no cash. The Fund has elected to be governed by
Rule 18f-1 under the Investment Company Act pursuant to which the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1
percent of the net asset value of a Portfolio during any 90-day period for any
one shareholder of record.
- --------------------------------------------------------------------------------
OTHER
SHAREHOLDER
SERVICES
----------------
The Fund offers a number of shareholder services designed to facilitate
investment in shares of its Portfolios. Full details as to each of such services
and copies of the various plans described below can be obtained from the Fund.
PERIODIC WITHDRAWAL PLAN
A shareholder who owns in a single account $5,000 or more of a Portfolio's
shares may establish a Periodic Withdrawal Plan to provide for regular monthly,
quarterly or annual payments of a fixed dollar amount or fixed percent of the
account balance (with a minimum $100 annual payment and a maximum withdrawable
amount of 10% annually of the shareholder's initial account balance under the
plan) to be sent to the shareholder or a designated payee. Shares of a Portfolio
held in the shareholder's account having a net asset value of the amount of the
requested payment will be redeemed on or around the fifth business day before
the end of the applicable month and a check will be mailed to the shareholder
within seven days thereafter. Depending upon the size of the payments requested
and fluctuations in the net asset value of the shares redeemed, redemptions for
the purpose of making such payments may reduce or even exhaust the account. FBL
will waive the contingent deferred sales charge on redemptions made pursuant to
a periodic withdrawal program. The right is reserved to amend the periodic
withdrawal program on thirty days' notice. The program may be terminated at any
time by the shareholder or the Fund.
25
<PAGE>
AUTOMATIC INVESTMENT PLAN:
A shareholder may elect to participate in the Fund's automatic investment
plan. This plan enables a shareholder to automatically purchase shares of the
Fund on a monthly basis. A minimum initial investment of $50 per Portfolio
account is required to establish an automatic investment plan. Minimum monthly
investments of $25 per Portfolio account are necessary to maintain the plan. The
Fund will debit the shareholder's financial institution account and subsequently
purchase shares of the Fund having a net asset value of the amount of the
requested deposit on or around the 16th day of the month. Shareholders
interested in this plan must complete an automatic investment form available
from the Fund.
EXCHANGE PRIVILEGE
A shareholder may exchange all or some shares of a Portfolio for shares of
any other Portfolio in the Fund, if that Portfolio's shares are registered for
sale in the shareholder's state of residence, on the basis of each Portfolio's
relative net asset value per share next determined following receipt of an
exchange request in proper form. There is no minimum amount required to exercise
the exchange privilege between Portfolios, except that shareholders wishing to
open an account in a new Portfolio must meet the minimum purchase requirements
described under "How to Buy Shares." If the exchange involves the establishment
of a new account, an application for that account must be completed and mailed
to the Fund. Shares may be exchanged without any contingent deferred sales
charge but will be subject to a $5.00 exchange fee. Amounts exchanged retain
their original cost and purchase date for purposes of the contingent deferred
sales charge. If shares of the Portfolio being exchanged were acquired at
different times, the shares of the Portfolio acquired in the exchange will be
deemed to possess the same holding period (or exempt status) for contingent
deferred sales charge purposes as the shares being exchanged. Exercise of the
exchange privilege is treated as a sale for federal income tax purposes and,
depending on the circumstances, a capital gain or loss may be realized by the
shareholder. Shareholders are automatically provided the exchange privilege upon
establishment of an account with the Fund. Shareholders not interested in the
exchange privilege must check the appropriate box on the Application. The
exchange privilege may be provided after an account has been established by
completing an exchange form (obtainable from the Fund). Once the privilege has
been afforded a shareholder, exchanges may be authorized by telephone (by
calling one of the numbers shown on the front cover, from 8:00 a.m. to 4:30 p.m.
(Central Time) on any day that the Fund is open for business) or by letter (by
writing the Fund at 3820 109th Street, Des Moines, Iowa 50391-7003). Telephone
exchange requests received prior to the close of the New York Stock Exchange
(usually 3:00 p.m., Central Time) will be effected at that day's relative net
asset values.
Shares of FBL Money Market Fund, Inc. may be exchanged for shares of any
Portfolio of the Fund without imposition of an exchange fee. The exchange
privilege may be modified or terminated by the Fund at any time. An exchange
application must be on file with FBL Money Market Fund, Inc.
RETIREMENT PLANS
Eligible shareholders of the Fund may participate in a variety of qualified
retirement plans which are available from the Distributor. Some of the plans
currently offered are: Self-Employed Individual Retirement Plans (Keogh Plans),
Individual Retirement Accounts (IRAs), Simplified Employee Pension Plans (SEPs),
Tax-Sheltered 403(b) Plans, Corporate Pension and Profit Sharing Plans and
Public Employer Deferred Compensation Plans. The initial investment to establish
any such plan, and subsequent investments, may be in any amount (subject to plan
limitations). Investors Fiduciary Trust Company ("IFTC") of Kansas City,
Missouri serves as custodian and provides the required services for Keogh Plans,
IRAs, SEPs and Corporate Pension and Profit Sharing plans. A custodial fee,
currently $10.00, will
26
<PAGE>
be collected annually by liquidating shares, or fractions thereof, from each
participant's account(s). FBL Investment Advisory Services, Inc. performs plan
services for IFTC for a portion of the fee. Information with respect to these
plans is available upon request from the Fund.
Trustees of qualified retirement plans and 403(b)(7) custodial accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution which is transferred
directly to another qualified retirement plan, 403(b)(7) account or IRA.
Shareholders should consult their tax advisers regarding this 20% withholding
requirement.
- --------------------------------------------------------------------------------
NET ASSET
VALUE
INFORMATION
---------------
The net asset value per share of each Portfolio is determined as of the
earlier of 3:00 P.M. (Central Time) or the close of the New York Stock Exchange
on each day that the Exchange is open (except the Tuesday before Christmas and
the day after Thanksgiving), and on each other day on which there is sufficient
trading in the Portfolio's investments that it might affect the net asset value,
except that the net asset value of a given Portfolio will not be computed on a
day when no orders for purchase or redemption of shares of the Portfolio 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
net asset value per share of each Portfolio is computed by dividing the total
value of the Portfolio's securities and other assets, less liabilities, by the
total number of outstanding shares of such Portfolio. The Fund reserves the
right to calculate or estimate the net asset value of one or more Portfolios
more frequently than once daily if deemed desirable.
MONEY MARKET PORTFOLIO. The net asset value per share of the Money Market
Portfolio is ordinarily $1.00. The Money Market Portfolio's securities are
valued using the amortized cost method of valuation. This involves valuing a
security at cost on the date of acquisition and thereafter assuming a constant
accretion of a discount or amortization of a premium to maturity. For a further
discussion of the manner in which such values are determined, see the Statement
of Additional Information under the heading "Net Asset Value."
OTHER PORTFOLIOS. For all Portfolios other than the Money Market Portfolio,
Portfolio securities that are traded on a national exchange are valued at the
last sale price as of the close of business on the day the securities are being
valued, or, lacking any sales, at the mean between the closing bid and asked
prices. Securities other than money market instruments traded in the
over-the-counter market are valued at the mean between the bid and asked prices
or at the yield equivalent as obtained from one or more dealers that make
markets in the securities. Portfolio securities that are traded both in the
over-the-counter market and on a national exchange are valued according to the
broadest and most representative market; and it is expected that, for debt
securities, this ordinarily will be the over-the-counter market. Values of
securities and assets for which market quotations are not readily available are
determined in good faith by or under the direction of the Board of Directors.
Money market instruments are valued at market value, except that debt
instruments maturing in 60 days or less are valued using the amortized cost
method of valuation described above with respect to the Money Market Portfolio.
27
<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE
INFORMATION
- -----------------
From time to time, the Fund may advertise several types of performance
information for a Portfolio. All Portfolios, except the Money Market Portfolio,
may advertise "average annual total return" and "total return." The High Grade
Bond and High Yield Bond Portfolios may also advertise "yield." The Money Market
Portfolio may advertise "yield" and "effective yield." Each of these figures is
based upon historical results and is not necessarily representative of the
future performance of a Portfolio.
Average annual total return and total return figures measure both the net
income generated by, and the effect of any realized and unrealized appreciation
or depreciation of, the underlying investments in the Portfolio for the
designated period, assuming the reinvestment of all dividends and distributions
during the period. Thus, these figures reflect the change in value of an
investment in the Portfolio during a specified period. Average annual total
return will be quoted for at least one-, five- and ten-year periods (or, if such
periods have not yet elapsed, at the end of a shorter period corresponding to
the life of the Portfolio). Average annual total return figures represent the
average annual percentage change in the value of a specific dollar amount
invested in the Portfolio's shares for the designated period. Total return
figures are not annualized and represent the aggregate percentage or dollar
value change over the period.
Yield is a measure of the net investment income per share earned over a
specific one-month or 30-day period (seven-day period for the Money Market
Portfolio) expressed as a percentage of the Portfolio's net asset value per
share at the end of the period (except for the Money Market Portfolio where the
net asset value per share at the beginning of the period is used). Yield is an
annualized figure which means that it is assumed that the Portfolio generates
the same level of investment income over a one-year period. The effective yield
for the Money Market Portfolio is calculated similarly, but the net investment
income earned is assumed to be compounded when annualized. The Money Market
Portfolio's effective yield will be slightly higher than its yield due to this
compounding. Semi-annual compounding is assumed for Portfolios other than the
Money Market Portfolio.
From time to time, the Fund may include in its sales literature and
shareholder reports for the High Grade Bond and High Yield Bond Portfolios a
quotation of the current "distribution rate" for the Portfolios. The
distribution rate is simply a measure of the level of income and short-term
capital gain dividends distributed for a specified period. It differs from
yield, which is a measure of the income actually earned by the Portfolio's
investments and from total return, which is a measure of the income actually
earned by, plus the effect of any realized or unrealized appreciation or
depreciation of, such investments during the period. Distribution rate,
therefore, is not intended to be a complete measure of performance. Distribution
rate may sometimes be greater than yield since, for instance, it may include
short-term gains (which may be non-recurring) and may not reflect the
amortization of bond premiums.
Additionally, from time to time, in advertisements or reports to
shareholders, a Portfolio may compare its performance to that of the Consumer
Price Index or various unmanaged indexes such as the Dow Jones Industrial
Average, the Standard & Poor's 500, the Shearson/Lehman Government and Corporate
Bond Index and the Salomon Brothers High Grade Bond Index. A Portfolio may also
use mutual fund quotation services such as Lipper Analytical Services, Inc., an
independent mutual fund reporting service, or similar industry services, for
purposes of comparing a Portfolio's rank or performance with that of other
mutual funds having similar investment objectives. Performance comparisons
should not be considered representative of the future performance of any
Portfolio.
28
<PAGE>
The Portfolio's shares are sold at net asset value, and return and net asset
value will fluctuate, except that the Money Market Portfolio seeks to maintain a
$1.00 net asset value per share. Shares of the Portfolio are redeemable by an
investor at the then current net asset value, which may be more or less than
original cost. Yield and effective yield figures do not include the effect of
any contingent deferred sales charge. The standardized average annual total
return figures, calculated in accordance with a formula prescribed by the
Securities and Exchange Commission, include the effect of the contingent
deferred sales charge that may be imposed at the end of the period indicated. In
addition, average annual total return figures, which do not include the effect
of any contingent deferred sales charge, may also be used. Total return figures
may or may not include the effect of the contingent deferred sales charge that
may be imposed at the end of the period in question. Performance figures not
including the effect of the applicable contingent deferred sales charge would be
reduced if it were included. More information about performance figures is
included in the Statement of Additional information.
- --------------------------------------------------------------------------------
MANAGEMENT
OF THE FUND
---------------
BOARD OF DIRECTORS
The Board of Directors has nine members, five of whom are not "interested
persons" of the Fund as defined in the Investment Company Act. The Board of
Directors is responsible for the overall supervision of the operations of the
Fund and performs the various duties imposed on the directors of investment
companies by the Investment Company Act. The Board of Directors elects officers
of the Fund annually.
INVESTMENT ADVISER
FBL Investment Advisory Services, Inc., 5400 University Avenue, West Des
Moines, Iowa 50266, serves as the Fund's investment adviser pursuant to an
Investment Advisory and Management Services Agreement. The Adviser is an
indirect subsidiary of FBL Financial Group, Inc., an Iowa corporation. The
following individuals are officers and/or directors of both the Adviser and the
Fund: Stephen M. Morain, Thomas R. Gibson, Timothy J. Hoffman, Dennis M. Marker,
James W. Noyce, William J. Oddy, Richard D. Warming, Sue A. Cornick, Kristi
Rojohn and Elaine A. Followwill. FBL has served as the Fund's investment adviser
since the Fund commenced operations in 1971. The Adviser also acts as an
investment adviser to individuals, institutions and two other investment
companies: FBL Money Market Fund, Inc. and FBL Variable Insurance Series Fund.
Personnel of the Adviser also manage investments for the portfolios of insurance
companies.
The Adviser handles the investment and reinvestment of the Fund's assets,
and is responsible for the overall management of the Fund's business affairs,
subject to the review of the Board of Directors. Roger F. Grefe and Robert J.
Rummelhart serve as managers for various portfolios of the Fund. Mr. Grefe
joined FBL in 1986 and assumed responsibility for the management of Farm Bureau
Growth Fund, Inc., currently known as the Value Growth Portfolio. Additionally,
he assumed management of the Managed Portfolio at its inception in 1987. Mr.
Grefe is a graduate of Coe College in Cedar Rapids, Iowa and is a Chartered
Financial Analyst and NASD Registered Principal.
Mr. Rummelhart has managed both the High Grade Bond and High Yield Bond
Portfolios since their inception in 1987. He received his BA and MBA degrees
from the University of Iowa and is a Chartered Financial Analyst and NASD
Registered Representative.
29
<PAGE>
The Adviser provides investment supervision to the Blue Chip Portfolio
through the use of a team approach. As cash accumulates for investment, trading
personnel are notified to execute the necessary transactions in order to
maintain the relative weights of the equity securities in this Portfolio.
As compensation for the advisory and management services provided by the
Adviser, the Fund has agreed to pay the Adviser an annual management fee,
accrued daily and payable monthly, based on an annual percentage of the average
daily net assets of each Portfolio, as follows:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS
-------------------------------------
FIRST SECOND OVER
$200 $200 $400
PORTFOLIO MILLION MILLION MILLION
- ----------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Value Growth..................................................... 0.50% 0.45% 0.40%
High Grade Bond.................................................. 0.40% 0.35% 0.30%
High Yield Bond.................................................. 0.55% 0.50% 0.45%
Managed.......................................................... 0.60% 0.55% 0.50%
Money Market..................................................... 0.40% 0.35% 0.30%
Blue Chip........................................................ 0.25% 0.25% 0.25%
</TABLE>
The Adviser, at its expense, furnishes the Fund with office space and
facilities, certain business equipment, advisory, research and statistical
facilities, and clerical services and personnel to administer the business
affairs of the Fund. The Fund pays its other expenses which include, but are not
limited to, the following: the cost of net asset value calculations; portfolio
transaction costs; interest on Fund obligations; miscellaneous reports;
membership dues; reports and notices to shareholders; all expenses of
registration of its shares under federal and state securities laws; investor
services (including allocable telephone and personnel expenses); all taxes and
fees payable to federal, state or other governmental authorities; and the fees
and expenses of independent auditors, legal counsel, custodian, shareholder
service, transfer and dividend disbursing agent. For its services as investment
adviser and manager and for facilities furnished to the Fund during the fiscal
year ending July 31, 1996 the Adviser received management fees of .50% of the
average daily net assets of the Value Growth Portfolio, .40% of the average
daily net assets of the High Grade Bond Portfolio, .55% of the average daily net
assets of the High Yield Bond Portfolio, .60% of the average daily net assets of
the Managed Portfolio, .40% of the average daily net assets of the Money Market
Portfolio and .25% of the average daily net assets of the Blue Chip Portfolio.
The Adviser has agreed to reimburse any Portfolio to the extent that the
annual operating expenses (including the investment advisory fee but excluding
brokerage, interest, taxes, the distribution fee and extraordinary expenses) of
such Portfolio exceed 1 1/2% of average daily net assets. The amount reimbursed,
however, shall not exceed the amount of the advisory fee paid by the Portfolio
for such period.
- --------------------------------------------------------------------------------
PORTFOLIO
TRANSACTIONS
- -----------------
With respect to transactions in portfolio securities, whether through a
broker as agent or with a dealer as principal, the Adviser endeavors to obtain
for the Fund the most favorable prices and efficient execution of orders.
Subject to this primary consideration, the Adviser places substantially all the
Fund's portfolio transactions with brokerage firms that furnish research and
other services to the Fund. These services include, but are not limited to,
advice as to the advisability of purchasing or selling specific
30
<PAGE>
securities, furnishing of analyses and reports on particular securities or
industries, providing information on economic factors and trends, providing
computer software used in security analyses and providing technical market
analyses. Certain affiliates and other clients of the Adviser also place
portfolio transactions with these brokerage firms, and such affiliates and
clients share the benefits of the research and other services obtained from
these brokers. The Adviser regards information that is customarily available
only in return for brokerage as among the many elements to be considered in
arriving at investment decisions. No specific value can be determined for most
such information and services and they are deemed supplemental to the Adviser's
own efforts in the performance of its duties under the Investment Advisory
Agreement. Any research benefits derived are available for all clients.
The investment decisions for the Fund are reached independently from those
for the other funds and accounts managed by the Adviser. At certain times, one
or more Portfolios of the Fund may purchase identical securities at the same
time as the other funds and accounts managed by the Adviser. When multiple
accounts and/or funds have assets available for investment in the same
securities, 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 to the Fund arising out of simultaneous
transactions outweigh any disadvantages.
- --------------------------------------------------------------------------------
DIVIDENDS
AND TAXES
------------
DIVIDENDS
VALUE GROWTH AND BLUE CHIP PORTFOLIO DIVIDENDS. The Fund normally follows
the practice of distributing substantially all the net investment income and any
net short-term and long-term capital gains of these Portfolios after the close
of the Fund's fiscal year.
HIGH GRADE BOND AND HIGH YIELD BOND PORTFOLIO DIVIDENDS. The Fund normally
follows the practice of distributing substantially all the net investment income
and net short-term capital gains of these Portfolios monthly and distributing
any net long-term capital gains after the close of the Fund's fiscal year.
MANAGED PORTFOLIO DIVIDENDS. The Fund normally follows the practice of
distributing substantially all the net investment income of this Portfolio
quarterly and distributing any net short-term and long-term capital gains after
the close of the Fund's fiscal year.
MONEY MARKET PORTFOLIO DIVIDENDS. On each day that the net asset value per
share of the Money Market Portfolio is determined, the Money Market Portfolio's
net investment income will be declared, as of the earlier of 3:00 p.m. (Central
Time) or the close of the New York Stock Exchange, as a dividend to shareholders
of record prior to the declaration. Dividends will be reinvested or paid in cash
monthly. If a shareholder withdraws his or her entire account, all dividends
accrued to the time of withdrawal will be paid at that time.
GENERAL. Among other factors, the requirements of the Internal Revenue Code
may make it necessary or desirable to vary from the dividend practices as set
forth above. Dividends with respect to any Portfolio will be reinvested in
shares of that same Portfolio unless a shareholder indicates in writing a
31
<PAGE>
desire to receive them in cash; provided, however, that no cash payment will be
made for dividends in an amount under $10. Any such dividend amount under $10
will be reinvested in shares of that same Portfolio.
TAXES
It is the policy of each Portfolio to distribute annually substantially all
its net investment income and any net realized capital gains from the preceding
fiscal year. By doing so, each Portfolio intends to continue to qualify each
year as a regulated investment company under the Internal Revenue Code. By so
qualifying, a Portfolio will not be subject to federal income taxes to the
extent that its net investment income and net realized capital gains are
distributed.
Dividends will not be taxable to tax-exempt entities such as qualified
retirement plans (e.g., IRAs or qualified pension or profit sharing plans).
Dividends (whether paid in cash or in additional shares) derived from net
investment income or net short-term capital gains will be taxable to other
shareholders as ordinary income while net long-term capital gain dividends to
such shareholders will be treated as long-term capital gains regardless of the
length of time the shareholder held the Portfolio shares. For corporate
taxpayers, long-term capital gains are taxed at the same rates as ordinary
income, but for individual taxpayers, the maximum federal income tax rate on
long-term capital gains is 28%. The Fund will inform shareholders of the amount
and nature of such dividends as well as the amount of dividends eligible for the
"dividends received deduction" available to corporate shareholders. For
shareholders other than tax-exempt entities, an exchange of shares of one
Portfolio for shares of another Portfolio is ordinarily a taxable transaction.
Each Portfolio's dividends are paid on a per-share basis. At the time of
such payment, therefore, the value of each share will be reduced by the amount
of the payment. If a shareholder purchases shares shortly before the payment of
a dividend or distribution, that shareholder pays the full price for the shares
but receives some portion of the price back as a taxable dividend or
distribution. Shareholders will receive information annually as to the tax
status of distributions made by the Fund in each calendar year.
Dividends which a Portfolio declares in October, November or December to
shareholders of record as of a specified date in one of those months will be
treated for federal income tax purposes as received by such shareholders on
December 31 of the year declared, if paid during January of the following
calendar year.
The Fund is required by law to withhold 31% of taxable distributions to
shareholders who do not furnish their correct social security or taxpayer
identification number and in certain other circumstances.
- --------------------------------------------------------------------------------
ORGANIZATION
OF THE FUND
- ----------------
The Fund is an open-end, diversified series management investment company
registered under the Investment Company Act. The Fund was organized as a
corporation under the laws of Maryland on August 14, 1970 and has authorized
capital of 5,000,000,000 shares of common stock, $.001 par value.
The shares of each Portfolio have equal rights and privileges with all other
shares of that Portfolio and each share of a Portfolio represents an equal
proportionate interest in that Portfolio with each other share. Upon liquidation
of the Fund or any Portfolio, shareholders of a Portfolio are entitled to share
pro-rata in the net assets of that Portfolio available for distribution. Shares
have no preemptive or conversion rights and are fully paid and nonassessable by
the Fund. The Board of Directors may establish additional
32
<PAGE>
Portfolios at any time. The assets received by the Fund on the sale of shares of
each Portfolio and all income, earnings, profits and proceeds thereof, subject
only to the rights of creditors, are allocated to each Portfolio, and constitute
the assets of such Portfolio. The assets of each Portfolio are required to be
segregated on the Fund's books of account.
As of August 15, 1996, Farm Bureau Life Insurance Company, which provided
the initial capital for the Portfolios, owned more than 25% of the Money Market
Portfolio. Such shares have been acquired for investment and can only be
disposed of by redemption or transfer to an affiliate.
- --------------------------------------------------------------------------------
GENERAL
INFORMATION
---------------
REPORTS TO SHAREHOLDERS
Shareholders will receive unaudited semi-annual financial statements and
fiscal year-end financial statements audited by the Fund's independent auditors.
SHAREHOLDER INQUIRIES
Shareholders may make inquiries either by contacting their registered
representative or by writing or calling the Fund at the address or telephone
numbers as shown on the front cover.
SHAREHOLDER VOTING RIGHTS
Under the Fund's corporate charter, the Fund is not required to hold, and
does not expect to hold, annual shareholders' meetings. However, it will hold
special meetings of shareholders as required or deemed desirable for such
purposes as electing Directors, changing fundamental policies or approving an
investment management agreement. Shareholders will vote by Portfolio and not in
the aggregate, except when voting in the aggregate is permitted under the laws
of the State of Maryland and the Investment Company Act, such as for the
election of Directors.
Each member of the Board of Directors serves for a term of unlimited
duration, subject to the right of the Board of Directors or the shareholders to
remove such Director. The Board of Directors has the power to alter the number
of Directors and to appoint successor Directors provided that, immediately after
the appointment of any successor Director, at least two-thirds of the Directors
have been elected by the shareholders of the Fund. However, if at any time less
than a majority of the Directors holding office has been elected by the
shareholders, the Directors are required to call a special meeting of
shareholders for the purpose of electing Directors to fill any existing
vacancies in the Board.
As used in this Prospectus and in the Statement of Additional Information,
the phrase "majority vote" of a Portfolio (or of the Fund, as appropriate) means
the vote of the lesser of (i) 67% of the shares of the Portfolio (Fund) present
at a meeting if the holders of more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the Portfolio (Fund).
SHAREHOLDER SERVICE, DIVIDEND DISBURSING AND TRANSFER AGENT
FBL serves as the Fund's Shareholder Service, Dividend Disbursing and
Transfer Agent for a separate fee. FBL in turn has contracted with DST Systems,
Inc., an unrelated party, to perform certain services incidental to the
maintenance of shareholder accounts for a portion of the fee.
ACCOUNTING SERVICES
The Fund has entered into an accounting services agreement with FBL pursuant
to which FBL performs accounting services for the Fund. In addition, the
agreement provides that FBL shall calculate
33
<PAGE>
the Fund's net asset value in accordance with the Fund's prospectus and prepare
for Fund approval and use various tax returns and other reports. For such
services, each Portfolio pays FBL an annual fee, payable monthly, of .05% of the
Portfolio's average daily net assets, with the annual fee payable by a Portfolio
not to exceed $30,000.
DISTRIBUTOR
FBL Investment Advisory Services, Inc. (the "Distributor") also serves as
distributor and principal underwriter for the Fund pursuant to a distribution
agreement dated December 1, 1987, as amended November 25, 1991. Since the
distribution agreement provides for payment by the Fund of fees that are used by
the Distributor to pay for distribution services, the agreement, along with the
related dealer agreements (collectively, the "Plan"), is approved and reviewed
in accordance with Rule 12b-1 under the Investment Company Act, which regulates
the manner in which an investment company may, directly or indirectly, bear the
expenses of distributing its shares. Since the Plan applies to all Portfolios,
the fees paid by one portfolio may be used to finance distribution of the shares
of another portfolio and the distribution fee payable to the Distributor is
allocated among the Portfolios based on relative net asset size. The Distributor
bears all its expenses of providing services pursuant to the distribution
agreement, including the payment of any commissions and the preparation and
distribution of advertising or sales literature and bears the cost of printing
and mailing prospectuses to persons other than shareholders. For its services
under the distribution agreement, the Fund pays the Distributor a fee, payable
monthly, at the annual rate of .50% of average daily net assets of the Fund.
This fee is accrued daily as an expense of the Fund. The Distributor compensates
firms for sales of Portfolio shares at a commission rate of up to 4.5%. The
Distributor may from time to time pay additional commissions, service fees or
promotional incentives to firms that sell shares of the Fund. In some instances,
such additional commissions, fees or other incentives may be offered only to
certain firms who sell or are expected to sell during specified time periods
certain minimum amounts of shares of the Fund, or of other funds underwritten by
the Distributor. The Distributor receives any contingent deferred sales charges.
See "How to Redeem Shares." Firms to which service fees and commissions may be
paid include affiliated broker-dealers.
As a result of the commissions and other payments made by the Distributor,
the expenses incurred by the Distributor during the early years of the Plan,
which may include interest and overhead expenses, will exceed the fees received
by the Distributor under the Plan; however, it is possible that, during the
later years of the Plan, the fees paid by the Fund to the Distributor under the
Plan may exceed the Distributor's expenses. If the Plan is terminated in
accordance with its terms, the obligation of the Fund to make payments to the
Distributor pursuant to the Plan will cease and the Fund will not be required to
make any payments past the termination date. Thus, there is no legal obligation
for the Fund to pay any expenses incurred by the Distributor in excess of its
fees under the Plan, if for any reason the Plan is terminated in accordance with
its terms. Future fees under the Plan may or may not be sufficient to reimburse
the Distributor for its expenses incurred.
During the fiscal year ended July 31, 1996, a total of $678,920 was paid
pursuant to the Plan. Of this amount, $203,609 was paid to FBL Marketing
Services, Inc., the principal dealer for Fund shares, and the balance was
retained by the Distributor. FBL Marketing Services, Inc. is an affiliate of the
Distributor.
The Distributor provides information and administrative services for Fund
shareholders pursuant to an administrative services agreement ("Administrative
Agreement"). For such services, the Fund pays the Distributor a fee, payable
monthly, at an annual rate of .25% of average daily net assets of the Fund. The
Distributor may enter into related agreements with various financial services
firms, such as broker-dealer firms or banks ("firms"), to provide services and
facilities for their customers or clients who are
34
<PAGE>
shareholders of the Fund. The services and assistance that may be provided by
the Distributor or such firms may include, but are not limited to, assisting in
the establishment and maintenance of shareholder accounts and records,
furnishing information as to the status of shareholder accounts, processing
shareholder service requests, forwarding purchase and redemption requests,
responding to telephone inquiries, assisting shareholders with tax information
and such other services as may be agreed upon from time to time and as may be
permitted by applicable statute, rule or regulation. The Distributor pays each
firm a service fee, payable monthly, at the annual rate of .15 of 1% on assets
attributable to the firm that have been maintained and serviced in Fund
accounts.
35
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX A
-------------
MONEY MARKET INSTRUMENTS
The Money Market Portfolio invests in money market instruments maturing in
thirteen months or less from the time of investment, including the instruments
described below. In addition, the other Portfolios, subject to their respective
investment objectives, may invest in certain money market instruments.
U.S. GOVERNMENT SECURITIES: Bills, notes, bonds and other debt securities
issued by the U.S. Treasury. These are direct obligations of the U.S. Government
and differ mainly in the length of their maturities.
U.S. GOVERNMENT AGENCY OR INSTRUMENTALITY SECURITIES: Debt securities
issued or guaranteed by agencies or instrumentalities of the U.S. Government.
Although these securities are not direct obligations of the U.S. Government,
some are supported by the full faith and credit of the U.S. Treasury; others are
supported only by the limited right of the issuer to borrow from the U.S.
Treasury; and others depend solely upon the credit of the agency or
instrumentality and not the U.S. Treasury.
OBLIGATIONS OF BANKS OR SAVINGS INSTITUTIONS: Certificates of deposit,
bankers' acceptances and other short-term debt obligations of commercial banks
or savings and loan associations. None of the Portfolios will invest in any
instruments issued by a commercial bank unless it has total assets of at least
$100 million and has its deposits insured by the Federal Deposit Insurance
Corporation ("FDIC"). Similarly, the Portfolios will not invest in any
instrument issued by a savings and loan association unless it has total assets
of at least $100 million, has been issued a charter by the Office of Thrift
Supervision ("OTS") or was formerly a member of the Federal Home Loan Bank
System and is now subject to regulation by the OTS, and is insured by the FDIC.
However, the Portfolios may invest in an obligation of a bank or savings and
loan association with assets of less than $100 million if the principal amount
of such obligation is fully covered by FDIC insurance. The limit of such
coverage is currently $100,000.
COMMERCIAL PAPER: Short-term unsecured promissory notes issued by
corporations, primarily to finance short-term credit needs. The Portfolio will
only invest in U.S. dollar-denominated instruments which the Board of Directors
determines present minimal credit risks and which, at the time of acquisition,
generally are either:
1. rated in one of the two highest rating categories by at least two
nationally recognized statistical rating organizations ("NRSRO"); or
2. rated in one of the two highest rating categories by only one NRSRO if
that NRSRO is the only NRSRO that has rated the instrument or issuer; or
3. in the case of an unrated instrument, determined by the Board of
Directors to be of comparable quality to either of the above; or
4. issued by an issuer that has received a rating of the type described in
1 or 2 above on other securities that are comparable in priority and
security to the instrument.
In addition, the Fund will invest in commercial paper issued by major
corporations in reliance on the so-called "private placement" exemption from
registration by Section 4(2) of the Securities Act of 1933 ("Section 4(2)
paper") subject to the above noted requirements with respect to ratings. Section
4(2)
A-1
<PAGE>
paper is restricted as to disposition under the federal securities laws, and
generally is sold to institutional investors such as the Fund, who agree that it
is purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of the issuer or investment dealers who make a market in
the Section 4(2) paper, thus providing liquidity. The Fund's investment adviser
considers the legally restricted but readily saleable Section 4(2) paper to be
liquid; however, the paper will be treated as illiquid unless, pursuant to
procedures approved by the Board of Directors, a particular investment in
Section 4(2) paper is determined to be liquid. The investment adviser monitors
the liquidity of the Fund's investments in Section 4(2) paper on a continuing
basis.
OTHER CORPORATE DEBT SECURITIES: Outstanding nonconvertible corporate debt
securities (e.g., bonds and debentures) which were not issued as short-term
obligations but which have thirteen months or less remaining until maturity. The
Portfolio will only invest in such obligations if the Board of Directors
determines that they present minimal credit risk and are, at the time of
acquisition, rated AA/Aa or better by Standard & Poor's or Moody's and:
1. determined by the Board of Directors to be of comparable quality to
either 1 or 2 above; or
2. issued by an issuer that has received a rating of the type described in
1 or 2 above on other short-term securities that are comparable in
priority and security to the obligation.
REPURCHASE AGREEMENTS: See "Description of Certain Investment
Techniques--Repurchase Agreements."
FLOATING AND VARIABLE RATE SECURITIES: The Portfolio may invest in
instruments having rates of interest that are adjusted periodically or that
float continuously or periodically according to formulas intended to minimize
fluctuation in the value of the instruments ("Variable Rate Securities"). The
interest rate on a Variable Rate Security is ordinarily determined by reference
to, or is a percentage of, a specified market rate such as a bank's prime rate,
the 90-day U.S. Treasury Bill rate, or the rate of return on commercial paper or
bank certificates of deposit. Generally, the changes in the interest rate on
Variable Rate Securities reduce the fluctuation in the market value of such
securities. Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less than for fixed rate
obligations. Some Variable Rate Securities have a demand feature ("Variable Rate
Demand Securities") entitling the purchaser to resell the securities at an
amount approximately equal to the principal amount thereof plus accrued
interest. As in the case for other Variable Rate Securities, the interest rate
on Variable Rate Demand Securities varies according to some specified market
rate intended to minimize fluctuation in the value of the instruments. Some of
these Variable Rate Demand Securities are unrated, their transfer is restricted
by the issuer and there is little if any secondary market for the securities.
Thus, any inability of the issuers of such securities to pay on demand could
adversely affect the liquidity of these securities. The Portfolio determines the
maturity of Variable Rate Securities in accordance with Securities and Exchange
Commission rules which allow the Portfolio to consider certain of such
instruments as having maturities shorter than the maturity date on the face of
the instrument.
A-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX B
-------------
COMPOSITION OF BOND PORTFOLIOS BY QUALITY
The tables below reflect the average composition by quality rating of the
investment securities of the High Yield Bond Portfolio and the High Grade Bond
Portfolio for the fiscal year ended July 31, 1996. Percentages are weighted
averages based upon the portfolio composition at the end of each month during
the year. The percentage of total assets represented by bonds rated by Moody's
and Standard & Poor's ("S&P") is shown. The percentage of total assets
represented by unrated bonds is also shown. Although not specifically rated by
Moody's or Standard & Poor's, U.S. Government securities are reflected as Aaa
and AAA (highest quality) for purposes of these tables. The category noted as
"Cash and Other Assets" includes all assets other than the rated and unrated
bonds reflected in the table including, without limitation, equity securities,
preferred stocks, money market instruments, repurchase agreements and cash.
The allocations reflected in the tables do not necessarily reflect the view
of the investment adviser as to the quality of the bonds in the Portfolios on
the date shown; and they are not necessarily representative of the composition
of the Portfolios at other times. The composition of each Portfolio will change
over time.
HIGH YIELD BOND PORTFOLIO
COMPOSITION OF PORTFOLIO BY QUALITY
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
MOODY'S RATING PORTFOLIO BY PORTFOLIO BY GENERAL DEFINITION OF
CATEGORY MOODY'S RATINGS S&P RATING CATEGORY S&P RATINGS BOND
- ------------------- ----------------- ------------------- -------------- -------------------------
<S> <C> <C> <C> <C>
Aaa................ 1.05% AAA................ 1.05% Highest quality
A.................. 6.19 A.................. 5.91 Upper medium grade
Baa................ 7.65 BBB................ 9.23 Medium grade
Ba................. 37.48 BB................. 31.23 Lower medium grade
B.................. 37.08 B.................. 45.53 Speculative
Caa................ 3.50 CCC................ More speculative
Ca................. .75 D.................. .75 Highly speculative
Cash and Other Cash and Other
Assets............ 6.30 Assets............. 6.30
----------------- --------------
100.00% 100.00%
</TABLE>
B-1
<PAGE>
HIGH GRADE BOND PORTFOLIO
COMPOSITION OF PORTFOLIO BY QUALITY
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
MOODY'S RATING PORTFOLIO BY PORTFOLIO BY GENERAL DEFINITION OF
CATEGORY MOODY'S RATINGS S&P RATING CATEGORY S&P RATINGS BOND
- ------------------- ----------------- ------------------- -------------- -------------------------
<S> <C> <C> <C> <C>
Aaa................ 16.86% AAA................ 14.13% Highest quality
Aa................. 13.96 AA................. 21.84 High quality
A.................. 38.05 A.................. 28.78 Upper medium grade
Baa................ 20.90 BBB................ 23.32 Medium grade
Ba................. 3.43 BB................. 2.39 Lower medium grade
Not rated.......... 1.76 Not rated.......... 4.50 Not rated by Moody's or
S&P
Cash and Other Cash and Other
Assets............ 5.04 Assets............. 5.04
----------------- --------------
100.00% 100.00%
</TABLE>
The description of each bond quality category set forth in the tables above
is intended to be a general guide and not a definitive statement as to how
Moody's and Standard & Poor's define such rating category. A more complete
description of the rating categories is set forth under "Appendix C--
Description of Corporate Bond Ratings." The ratings of Moody's and Standard &
Poor's represent their opinions as to the capacity to pay interest and principal
of the securities that they undertake to rate. It should be emphasized, however,
that ratings are relative and subjective and do not evaluate market value risk.
After purchase by a Portfolio, an obligation may cease to be rated or its rating
may be reduced. Neither event would require a Portfolio to eliminate the
obligation from its portfolio. An issue may be unrated simply because the issuer
chose not to have it rated, and not necessarily because it is of lower quality.
Unrated issues may be less marketable.
B-2
<PAGE>
- --------------------------------------------------------------------------------
APPENDIX C
-------------
DESCRIPTION OF CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
anticipated are most unlikely to impair the fundamentally strong position
of such issues.
Aa: Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than with Aaa securities.
A: Bonds that are rated A possess many favorable investment attributes and
may be considered as upper medium-grade obligations. This rating
indicates an extremely strong capacity to pay principal and interest
which is considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa: Bonds rated Baa are considered medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba: Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not
well-safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa: Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest.
Ca: Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other market
shortcomings.
STANDARD & POOR'S CORPORATION
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in a small degree.
C-1
<PAGE>
A: Bonds rated A have a strong capacity to pay principal and interest,
although they are more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest
for bonds in this category, than for bonds in the A category.
BB-B-CCC-CC: Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such bonds will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "BB" may be modified by
the addition of a plus or minus sign to show relative standing within the
major rating categories.
NR: Not rated by the indicated rating agency.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
P-1: The rating P-1 is the highest commercial paper rating assigned by
Moody's and indicates that, in Moody's opinion, the issuer or supporting
institution has a superior ability for repayment of senior short-term
debt obligations. P-1 repayment ability will often be evidenced by many
of the following characteristics: (1) leading market positions in
well-established industries, (2) high rates of return on funds employed,
(3) conservative capitalization structures with moderate reliance on
debt and ample asset protection, (4) broad margins in earnings coverage
of fixed financial charges and high internal cash generation and (5)
well-established access to a range of financial markets and assured
sources of alternate liquidity.
P-2: The rating P-2 indicates that, in Moody's opinion, the issuer or
supporting institution has a strong ability for repayment of senior
short-term debt obligations. Strong ability for repayment will normally
be evidenced by many of the characteristics listed under the description
of "P-1." Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
STANDARD & POOR'S CORPORATION
A-1: This designation indicates that the degree of safety regarding timely
payment of debt having an original maturity of no more than 365 days is
either overwhelming or very strong.
A-2: This designation indicates that capacity for timely payment of debt
having an original maturity of no more than 365 days is strong; however,
the relative degree of safety is not as high as for issues designated
"A-1."
C-2
<PAGE>
APPLICATION FOR SHARES
[LOGO]
FBL SERIES FUND, INC.
Please Complete and Mail to:
FBL Series Fund, Inc.
3820 109th Street
Des Moines, Iowa 50391-7003
If you have any questions, please call toll-free at 1-800-422-3175 (in Iowa) or
1-800-247-4170 (National).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESIGNATE TYPE OF ACCOUNT & OWNER NAME(S)
/ / INDIVIDUAL OR JOINT ACCOUNT*
- --------------------------------------------------------------
Owner's Name
- ------------------------------------------------------------------------------
Joint Owner's Name
*Joint tenants with Right of Survivorship conclusively presumed unless noted
otherwise
/ / CUSTODIAL ACCOUNT
Uniform Gift or Transfer to Minors Act
- ------------------------------------------------------------------------------
Custodian's Name
- ------------------------------------------------------------------------------
Minor's Name
/ / TRUST, CORPORATION OF OTHER ENTITY ACCOUNT
- ------------------------------------------------------------------------------
Name of Trust, Corporation or Other Entity
- ------------------------------------------------------------------------------
Trustee(s') Name or Type of Entity
- ------------------------------------------------------------------------------
Date of Trust Agreement
PROVIDE YOUR TAX IDENTIFICATION NUMBER
- ------------------------------------------------------------------------------
Social Security or Tax ID Number
(Use minor's Social Security number for gifts/transfers to minors)
- ------------------------------------------------------------------------------
Joint Owner's or Custodian's Social Security or Tax ID Number
PROVIDE YOUR ADDRESS
- ------------------------------------------------------------------------------
Street or PO Box
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
City, State, Zip Code
PROVIDE YOUR DATE OF BIRTH
- --------------------------------------------------------------
- -------------------------------------------------------------------
PORTFOLIO SELECTION*
Minimum Initial Investment $250 per Portfolio
- ------ Value Growth $
- --------------
- ------ High Grade Bond $
- --------------
- ------ High Yield Bond $
- --------------
- ------ Managed $
- --------------
- ------ Money Market $
- --------------
- ------ Blue Chip $
- --------------
*If no Portfolio is designated, the Money Market Portfolio will be selected.
TO REINVEST YOUR DISTRIBUTIONS
Your dividends and capital gains will be reinvested unless you indicate
otherwise.
/ / Cash Dividends / / Cash Capital Gains
- -------------------------------------------------------------------
SPECIAL SHAREHOLDER PRIVILEGES
Exchange Between Funds* / / Yes / / No
I authorize exchanges between Portfolios upon instruction from any person by
telephone. If neither box is checked, the telephone exchange privilege will be
provided. Shares held in certificated form may not be exchanged.
Please send information on the following:
/ / Periodic Withdrawal Plan
/ / Automatic Investment Plan
*Subject to a $5.00 exchange fee.
- --------------------------------------------------------------------------------
TAX QUALIFIED PLANS ONLY
A qualified application must be submitted in addition to this form.
/ / Keogh / / IRA
/ / Tax Deferred 403(b) / / SEP
DESIGNATED BENEFICIARY
(required with tax qualified plans)
- ------------------------------------------------------------------------------
Primary Beneficiary
- ------------------------------------------------------------------------------
Social Security Number Date of Birth
- ------------------------------------------------------------------------------
Contingent Beneficiary
- ------------------------------------------------------------------------------
Social Security Number Date of Birth
- ------------------------------------------------------------------------------
Contingent Beneficiary
- ------------------------------------------------------------------------------
Social Security Number Date of Birth
- --------------------------------------------------------------------------------
SIGNATURES
I certify that I have received, read and agree to the terms of the prospectus
for FBL Series Fund, Inc. I have the authority and legal capacity to purchase
mutual fund shares, am of legal age in my state and believe each investment is
suitable for me. Under penalties of perjury, I certify that the number shown on
this form is a true and correct social security or tax identification number
and, to the best of my knowledge, I am not subject to backup withholding.
- ------------------------------------------------------------------------------
Signature of Applicant
- ------------------------------------------------------------------------------
Signature of Joint Applicant
- ------------------------------------------------------------------------------
Rep's Signature Number
- ------------------------------------------------------------------------------
Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Application must be accompanied or preceded by a current prospectus.
(Please Complete Reverse Side)
737-018A (12/96)
<PAGE>
Distributed by FBL Investment Advisory Services, Inc.
CONFIDENTIAL CUSTOMER RECORD
___________________________________ __________________________________
Name of
Customer Date
These questions are for the purpose of determining the suitability of a Fund
investment for you and are asked pursuant to rules established by the Securites
and Exchange Commission. Furnishing the answers is voluntary on your part;
however, the information will be treated confidentially and is intended to
assist in determining an appropriate recommendation.
/ / I elect not to provide the information below.
1. SEX: / / MALE / / FEMALE
2. DATE OF BIRTH: _________________________________________________
3. DEPENDENT CHILDREN: Number _______ Age of youngest _______ Age of oldest
_______
4. PRINCIPAL OCCUPATION: ______________________________________________________
5. NAME AND ADDRESS OF EMPLOYER: ______________________________________________
______________________________________________
6. INSURANCE ON LIFE OF CUSTOMER: / / Less than $25,000 / / $25,000 to $50,000
/ / $50,000 to $100,000 / / $100,000 or over
7. INVESTMENT OBJECTIVE: / / Growth of income and capital / / Current income
/ / Long-term capital appreciation / / Liquidity and
stability of principal
/ / Other (Specify) __________________________________
8. VOLATILITY TOLERANCE:/ / Low / / Medium / / High
9. NET WORTH: / / Less than $25,000 / / $25,000 to $50,000 / / $50,000 to
$100,000 / / $100,000 or over
10. SAVINGS: / / Less than $5,000 / / $5,000 to $10,000 / / $10,000 to $25,000
/ / $25,000 or over
11. OTHER ASSETS:
Amount / / Less than $10,000 / / $10,000 to $50,000 / / $50,000 to $100,000
/ / $100,000 or over
Description ________________________________________________________________
__
__
12. ANNUAL INCOME: / / Less than $10,000 / / $10,000 to $25,000
/ / $25,000 to $50,000 / / $50,000 to $100,000 / / $100,000 or
over
13. OTHER INFORMATION CONSIDERED IN MAKING AN INVESTMENT RECOMMENDATION:
____________________________________________________________________________
__
__
___________________________________ ___________________________________
Signature of Customer Signature of Representative
<PAGE>
<TABLE>
<S> <C>
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN
SHAREHOLDER SERVICE, DIVIDEND Bankers Trust Company
DISBURSING AND TRANSFER AGENT Global Assets -- Insurance Group
FBL Investment Advisory Services, Inc. 16 Wall Street
5400 University Avenue New York, New York 10005
West Des Moines, Iowa 50266
LEGAL COUNSEL INDEPENDENT AUDITORS
Vedder, Price, Kaufman & Kammholz Ernst & Young LLP
Suite 2600 Suite 3400
222 North LaSalle Street 801 Grand Avenue
Chicago, Illinois 60601 Des Moines, Iowa 50309
</TABLE>
<PAGE>
------------------------------------------------------------------------
Farm Bureau Mutual Funds
FBL Series Fund, Inc.
[LOGO]
PROSPECTUS
DECEMBER 1, 1996
INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER
FBL INVESTMENT ADVISORY
SERVICES, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IA 50266
1-800-247-4170 (OUTSIDE IOWA)
1-800-422-3175 (IN IOWA)
225-5586 (DES MOINES)
<TABLE>
<S> <C>
FARM BUREAU MUTUAL FUNDS
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266 [LOGO]
</TABLE>
737-018(12/96)
<PAGE>
PART B
FARM BUREAU MUTUAL FUNDS
FBL SERIES FUND, INC.
5400 University Avenue
West Des Moines, Iowa 50266
(515) 225-5586
STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 1, 1996
FBL Series Fund, Inc. (the "Fund") is an open-end, diversified management
investment company that consists of six Portfolios: the Value Growth Portfolio
(formerly named Growth Common Stock Portfolio), High Grade Bond Portfolio, High
Yield Bond Portfolio, Managed Portfolio, Money Market Portfolio and Blue Chip
Portfolio. Each Portfolio has distinct investment objectives and policies and
each is in effect a separate fund issuing its own shares.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of the Fund dated December 1, 1996. A
copy of the Prospectus may be obtained without charge by writing or calling the
Fund at the address and telephone number shown above.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES............................................................ B-1
Loans of Portfolio Securities........................................................................... B-1
Covered Call Options.................................................................................... B-1
Ginnie Mae Certificates................................................................................. B-2
INVESTMENT RESTRICTIONS................................................................................... B-3
Fundamental Policies.................................................................................... B-3
Non-Fundamental (Operating) Policies.................................................................... B-5
OFFICERS AND DIRECTORS.................................................................................... B-5
INVESTMENT ADVISER........................................................................................ B-11
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS.......................................................... B-13
UNDERWRITING AND DISTRIBUTION EXPENSES.................................................................... B-14
PURCHASES AND REDEMPTIONS................................................................................. B-15
NET ASSET VALUE........................................................................................... B-15
Money Market Portfolio.................................................................................. B-15
Other Portfolios........................................................................................ B-16
TAXES..................................................................................................... B-17
DIVIDENDS AND DISTRIBUTIONS............................................................................... B-18
Money Market Portfolio.................................................................................. B-18
PERFORMANCE INFORMATION................................................................................... B-18
SHAREHOLDER VOTING RIGHTS................................................................................. B-23
RETIREMENT PLANS.......................................................................................... B-23
Self-Employed Individual Retirement Plans............................................................... B-23
Individual Retirement Accounts.......................................................................... B-23
Tax-Sheltered 403(b) Plans.............................................................................. B-24
Corporate Pension and Profit Sharing Plans.............................................................. B-24
Public Employer Deferred Compensation Plans............................................................. B-24
General................................................................................................. B-24
OTHER INFORMATION......................................................................................... B-24
Principal Holders of Securities......................................................................... B-24
Custodian............................................................................................... B-25
Independent Auditors.................................................................................... B-25
Accounting Services..................................................................................... B-25
Shareholder Service, Dividend Disbursing and Transfer Agent............................................. B-25
Legal Matters........................................................................................... B-25
FINANCIAL STATEMENTS...................................................................................... B-25
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND TECHNIQUES
The investment objectives and policies of each of the Fund's six Portfolios
are set forth in the Prospectus under the heading "Investment Objectives and
Policies of the Portfolios." A description of certain investment strategies and
techniques applicable to some or all of the Portfolios is set forth in the
Prospectus under the heading "Description of Certain Investment Techniques." A
description of the money market instruments in which the Money Market Portfolio
may invest is contained in Appendix A to the Prospectus. A description of the
corporate bond and commercial paper ratings of Moody's Investors Services, Inc.
("Moody's") and Standard & Poor's Corporation ("Standard & Poor's") is contained
in the Prospectus.
The following is intended to augment the explanation in the Prospectus of
certain investment strategies and techniques applicable to one or more of the
Portfolios.
LOANS OF PORTFOLIO SECURITIES
Each Portfolio may from time to time lend securities (but not in excess of
20% of its assets) from its portfolio to brokers, dealers and financial
institutions, provided that: (i) the loan is secured continuously by collateral
consisting of U.S. Government securities, government agency securities, or cash
or cash equivalents adjusted daily to have a market value at least equal to the
current market value of the securities loaned plus accrued interest; (ii) the
Portfolio may at any time call the loan and regain the securities loaned; and
(iii) the Adviser (under the review of the Board of Directors) has reviewed the
creditworthiness of the borrower and found such creditworthiness satisfactory.
The collateral will be invested in short-term securities, the income from which
will increase the return to the Portfolio.
The Portfolio will retain all rights of beneficial ownership in the loaned
securities, including voting rights and rights to interest or other
distributions, and will have the right to regain record ownership of loaned
securities to exercise such beneficial rights. The Portfolio may pay reasonable
administrative, custodial and finders' fees to persons unaffiliated with the
Fund in connection with the arranging of such loans. Unless certain requirements
contained in the Internal Revenue Code are satisfied, the dividends, interest
and other distributions received by the Portfolio on loaned securities may not
be treated for tax purposes as qualified income for the purposes of the 90% test
discussed under "Taxes." Each Portfolio intends to loan portfolio securities
only to the extent that such activity does not jeopardize the Portfolio's
qualification as a regulated investment company under Subchapter M of the
Internal Revenue Code.
COVERED CALL OPTIONS
Each Portfolio (other than the Money Market Portfolio) may write (sell)
covered call options on its portfolio securities in seeking to enhance
investment performance. A call option is a short-term contract, ordinarily
having a duration of nine months or less, which gives the purchaser of the
option, in return for a premium paid, the right to buy, and the writer of the
option the obligation to sell, the underlying security at the exercise price at
any time prior to the expiration of the option period. An option is "covered" if
the writer owns the optioned security.
A Portfolio will write covered call options both to reduce the risks
associated with certain of its investments and to increase total investment
return. In return for the premium income, the Portfolio will forego the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price so long as its obligations under the contract
continue, except insofar as the premium represents a profit. Moreover, in
writing the option, the Portfolio will retain the risk of loss if the price of
the security declines, and the premium is intended to offset any such loss in
whole or in part. A Portfolio, in
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<PAGE>
writing call options, must assume that the call may be exercised at any time
prior to the expiration of its obligations as a writer and that in such
circumstances, the net proceeds realized from the sale of the underlying
securities pursuant to the call may be substantially below the prevailing market
price.
A Portfolio may write covered call options on debt securities that are
traded over-the-counter. When a Portfolio writes an over-the-counter option,
there is no assurance that the Portfolio will be able to enter into a closing
purchase transaction. It may not always be possible for the Portfolio to
negotiate a closing purchase transaction with the same dealer for the same
exercise price and expiration date as the option which the Portfolio previously
had written. Although the Portfolio may choose to purchase an option from a
different dealer, the Portfolio would then be subject to the additional credit
risk of such dealer. If the Portfolio is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or until it delivers the underlying security upon exercise.
GINNIE MAE CERTIFICATES
The High Grade Bond Portfolio, High Yield Bond Portfolio and Managed
Portfolio may each invest in Ginnie Mae certificates ("Ginnie Maes"). Ginnie
Maes are debt securities issued by a mortgage banker or other mortgagee and
represent an interest in pools of mortgage loans insured by the Federal Housing
Administration or the Farmers Home Administration, or guaranteed by the Veterans
Administration. Scheduled payments of principal and interest are made to the
registered holders of the Ginnie Maes. The Government National Mortgage
Association ("GNMA") guarantees the timely payment of monthly installments of
principal and interest on Ginnie Maes at the time such payments are due, whether
or not such amounts are collected on the underlying mortgages by the issuer of
the Ginnie Maes. The National Housing Act provides that the full faith and
credit of the United States is pledged to the timely payment of principal and
interest by GNMA of amounts due on these Ginnie Maes, and an assistant attorney
general of the United States has rendered an opinion that this guarantee by GNMA
is a general obligation of the United States backed by its full faith and
credit.
The Ginnie Maes in which these Portfolios may invest are of the "modified
pass-through" type, which means that GNMA guarantees the timely payment of
principal and interest installments (whether or not the amounts are collected by
the issuer of the Ginnie Maes). Under the other general type of Ginnie Maes,
referred to as "straight pass-through" Ginnie Maes, the payment of principal and
interest on a timely basis is not guaranteed.
The average life of Ginnie Maes varies with the maturities of the underlying
mortgage instruments with maximum maturities of 30 years. The average life is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities as the result of prepayments or refinancing of such
mortgages or foreclosure. Such prepayments are passed through to the registered
holder with the regular monthly payments of principal and interest, and have the
effect of reducing future payments. Due to the guarantee of Ginnie Maes by GNMA,
foreclosures impose no risk to the principal invested.
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgage and other social and demographic conditions. As
prepayment rates vary widely, it is not possible to accurately predict the
average life of a particular pool. However, statistics indicate that the average
life of the type of mortgages backing the majority of Ginnie Maes is
approximately 12 years. For this reason, it is standard practice to treat Ginnie
Maes as 30-year mortgage-backed securities that
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<PAGE>
prepay fully in the twelfth year. Pools of mortgages with other maturities or
different characteristics will have varying assumptions for average life. The
assumed average life of pools of mortgages having terms of less than 30 years is
less than 12 years, but typically not less than 5 years.
The coupon rate of interest on Ginnie Maes is lower than the interest rate
paid on the VA-guaranteed or FHA-insured mortgages underlying the certificates,
but only by the amount of the fees paid to GNMA and the issuer. Such fees in the
aggregate usually amount to approximately 1/2 of 1%.
Yields on pass-through securities are typically quoted by investment dealers
and vendors based on the maturity of the underlying instruments and the
associated average-life assumption. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. Prepayments generally occur when interest rates have
fallen. Reinvestments of prepayments at such times will be at lower rates, which
would lower the return of the Portfolios. The actual yield of each Ginnie Mae is
influenced by the prepayment experience of the mortgage pool underlying the
certificates and may differ from the yield based on the assumed average life.
Interest on Ginnie Maes is paid monthly rather than semi-annually as for
traditional bonds.
INVESTMENT RESTRICTIONS
FUNDAMENTAL POLICIES
In seeking to achieve its investment objective(s), each Portfolio has
adopted the following investment restrictions. These are fundamental policies
and may not be changed without a majority vote of the outstanding shares of each
Portfolio affected. As used in this Statement of Additional Information and in
the Prospectus, the phrase "majority vote" of a Portfolio (or the Fund) means
the vote of the lesser of (i) 67% of the shares of the Portfolio (Fund) present
at a meeting if the holders of more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the outstanding shares
of the Portfolio (Fund). A change in policy by only one Portfolio may be
effected by a majority vote of the outstanding shares of that Portfolio.
Except as noted below, each Portfolio may not:
1. As to 75% of the value of each Portfolio's total assets (except 100% for
the Money Market Portfolio), purchase securities of any issuer (other than U.S.
Government securities or government agency securities) if, as a result, more
than 5% of the value of the Portfolio's assets (taken at value at the time of
investment) would be invested in securities of that issuer.
2. Purchase more than 10% of the voting securities or more than 10% of any
class of securities of any issuer. (For this purpose all outstanding debt
securities of an issuer are considered as one class and all preferred stocks of
an issuer are considered as one class.)
3. Concentrate its investments in any one industry; however, it may invest
up to 25% of the value of its assets in any one industry. This restriction does
not apply to U.S. Government securities or government agency securities (or,
with respect to the Money Market Portfolio, obligations of banks or savings
institutions), or to instruments, such as repurchase agreements, secured by
these instruments.
4. Purchase securities of other investment companies except by purchase in
the open market involving only customary brokers' commissions (and in no event
to the extent of more than 5% of the value of the Portfolio's total assets), or
as part of a merger, consolidation or acquisition of assets.
B-3
<PAGE>
5. Purchase or sell (although it may purchase securities of issuers which
invest or deal in) interests in oil, gas or other mineral exploration or
development programs, real estate, commodities or commodity contracts.
6. Purchase any securities on margin (except that the Portfolio may obtain
such short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities) or make short sales unless, by virtue of its
ownership of other securities, it has the right to obtain securities equivalent
in kind and amount to the securities sold and, if the right is conditional, the
sale is made upon the same condition.
7. Purchase or retain the securities of any issuer if any of the officers
or directors of the Fund or of its investment adviser own individually more than
one-half of 1% of the securities of such issuer and together own more than 5% of
the securities of such issuer.
8. Issue senior securities, except as appropriate to evidence indebtedness
which a Portfolio is permitted to incur pursuant to (9) below.
9. Borrow money, except from banks for temporary or emergency purposes, and
in no event in excess of 5% of its total net assets, or pledge or mortgage more
than 15% of its gross assets.
10. Underwrite securities issued by others, except that it may be deemed to
be a statutory underwriter in the sale of any so-called restricted securities
which require registration under the Securities Act of 1933. In this connection,
the Money Market Portfolio or the Blue Chip Portfolio will not invest more than
10% of the value of its total assets in securities that are subject to legal or
contractual restrictions on resale, or are not readily marketable.
11. Participate on a joint (or a joint and several) basis in any trading
account in securities (but this does not include the "bunching" of orders for
the sale or purchase of portfolio securities with the other Portfolios or with
other investment company and client accounts managed by the Fund's investment
adviser or its affiliates to reduce brokerage commissions or otherwise to
achieve best overall execution, or to obtain securities on more favorable
terms).
12. Alone, or together with any other Portfolios, make investments for the
purpose of exercising control over, or management of, any issuer.
13. Lend money or securities, except as provided in (14) below (the making
of demand deposits with banks, and the purchase of securities such as bonds,
debentures, commercial paper and short-term obligations in accordance with the
Portfolio's investment objectives and policies, shall not be considered the
making of a loan). In addition, each Portfolio may not invest more than 10% of
its total assets (taken at market value at the time of each purchase) in
repurchase agreements maturing in more than seven days.
14. Lend its portfolio securities in excess of 20% of its net assets.
15. Invest in foreign securities, except as follows: the Value Growth and
Managed Portfolios may each invest up to 25% of its net assets in foreign equity
and debt securities traded on U.S. exchanges and payable in U.S. dollars, and
the High Grade Bond and High Yield Bond Portfolios may each invest up to 25% of
its net assets in foreign debt securities traded on U.S. exchanges and payable
in U.S. dollars.
16. Write, purchase or sell puts, calls or combinations thereof, other than
writing covered call options.
B-4
<PAGE>
17. Invest more than 5% of the value of its total assets in securities of
companies which have a record of less than three years continuous operation,
including in such three years the operation of any predecessor company or
companies, partnership or individual proprietorship if the company whose
securities are to be purchased by the Fund has come into existence as a result
of a merger, consolidation or reorganization or the purchase of substantially
all of the assets of such predecessor.
NON-FUNDAMENTAL (OPERATING) POLICIES
The following are non-fundamental (operating) policies approved by the Board
of Directors. Such policies may be changed by the Board of Directors without
approval of the Shareholders.
The Value Growth, High Grade Bond, High Yield Bond and Managed Portfolios
shall not:
(a) invest more than 15% of its total net assets in illiquid securities.
The Value Growth Portfolio shall not:
(b) purchase warrants, valued at the lower of cost or market, in excess of
5% of the value of the Portfolio's net assets. Included within that amount, but
not to exceed 2% of the value of the Portfolio's net assets, may be warrants
that are not listed on the New York or American Stock Exchange. Warrants
acquired by the Portfolio at any time in units or attached to securities are not
subject to this restriction.
The term "government agency securities" for purposes of investment
restriction 3 has the same meaning as that set forth in Appendix A to the
Prospectus. The term "commodities or commodity contracts" as used in investment
restriction 5 includes futures contracts.
If a percentage increase is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation.
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 (48)
Farmer; Chairman, FBL Financial Group, Inc.; President and Director, Iowa
Farm Bureau Federation, 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.
RICHARD D. HARRIS*, SENIOR VICE PRESIDENT, SECRETARY-TREASURER AND DIRECTOR (52)
Senior Vice President and Secretary-Treasurer, FBL Financial Group, Inc.,
Western Farm Bureau Life Insurance Company, Farm Bureau Life Insurance
Company, Universal Assurors Life Insurance
B-5
<PAGE>
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 Director, Public Policy Division, Iowa Farm
Bureau Federation; Director, Iowa FFA Foundation and Iowa Make-A-Wish
Foundation.
STEPHEN M. MORAIN*, SENIOR VICE PRESIDENT, GENERAL COUNSEL, ASSISTANT SECRETARY
AND DIRECTOR (51)
General Counsel and Assistant Secretary, Iowa Farm Bureau Federation;
General Counsel, Secretary and Director, Farm Bureau Management Corporation;
Senior Vice President and General Counsel, FBL Financial Group, 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 Insurance Company; Senior Vice President, General Counsel
and Director, FBL Investment Advisory Services, Inc. and FBL Marketing
Services, Inc.; Vice President and General Counsel, Western Farm Bureau Life
Insurance Company; 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 (52)
Executive Vice President, General Manager and Chief Executive Officer, FBL
Financial Group, Inc.; Executive Vice President and General Manager, 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 (46)
Vice President, Chief Marketing Officer, FBL Financial Group, 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 Educational 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 (52)
Vice President, Chief Operating Officer and Assistant General Manager, FBL
Financial Group, 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, and Director,
Communications Providers,
B-6
<PAGE>
Inc.; Vice President, Chief Operating Officer, Assistant General Manager and
Director, FBL Investment Advisory Services, Inc. and FBL Marketing Services,
Inc.; President and Director, FBL Real Estate Ventures, Ltd. and RIK, Inc.
RICHARD D. WARMING, VICE PRESIDENT, CHIEF INVESTMENT OFFICER (63)
Vice President, Chief Investment Officer and Assistant Treasurer, FBL
Financial Group, 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 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.
JAMES W. NOYCE, VICE PRESIDENT, CHIEF FINANCIAL OFFICER (40)
Vice President, Chief Financial Officer, FBL Financial Group, 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; Vice President, Treasurer and Director; FBL Leasing Services, Inc.
and RIK, Inc.; Vice President, Chief Financial Officer, Treasurer and
Director, FBL Investment Advisory Services, Inc. and FBL Marketing Services,
Inc.; Treasurer and Director, FBL Real Estate Ventures, Ltd.
DENNIS M. MARKER, INVESTMENT VICE PRESIDENT, ADMINISTRATION AND ASSISTANT
SECRETARY (45)
Investment Vice President, Administration, FBL Financial Group, Inc., 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 VICE PRESIDENT AND ASSISTANT
SECRETARY (36)
Market Conduct and Mutual Funds Vice President and Assistant Secretary, FBL
Investment Advisory Services, Inc. and FBL Marketing Services, Inc.
KRISTI ROJOHN, ASSISTANT SECRETARY (33)
Senior Compliance Assistant and Assistant Secretary, FBL Investment Advisory
Services, Inc. and FBL Marketing Services, Inc.
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<PAGE>
ELAINE A. FOLLOWWILL, ASSISTANT SECRETARY (26)
Compliance Assistant and Assistant Secretary, FBL Investment Advisory
Services, Inc. and FBL Marketing Services, Inc.
DONALD G. BARTLING, DIRECTOR (69)
Farmer; Partner, Bartling Brothers Partnership (farming business); Director,
Papio Missouri River Natural Resources District.
JOHN R. GRAHAM*, DIRECTOR (51)
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, and Farm Bureau Mutual Insurance
Agency of Kansas; Partner, Arthur-Graham Rental Properties, CM Brass and G&H
Real Estate Investments; Trustee, Master Teacher Employee Benefit Pension
Trust.
ERWIN H. JOHNSON, DIRECTOR (53)
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; Financial and Farm Management
Consultant; Iowa State University Overseas Projects.
ANN JORGENSEN, DIRECTOR (55)
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 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.
CURTIS C. PIETZ, DIRECTOR (65)
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.
B-8
<PAGE>
KENNETH KAY, DIRECTOR (53)
Farmer; Salesman, Pioneer Seed Corn; Voting Delegate, Vice President and
former President, Cass County Farm Bureau; Director, First Whitney Bank and
Trust; Board Member, Transportation Committee Chairman, Cass Atlantic
Development Corporation.
The officers and directors of the Fund also serve in similar capacities as
officers and directors of FBL Money Market 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 for
each directors' meeting attended. For the fiscal year ended July 31, 1996,
directors fees paid by the Fund totalled $2,645.
The following table sets forth the compensation received by all Directors of
the Fund, for the fiscal year ended July 31, 1996. The information in the last
column of the table sets forth the total compensation received by all Directors
for calendar year 1995 for services as a Director of the Fund and other funds in
the FBL Family.
<TABLE>
<CAPTION>
AGGREGATE PENSION AND RETIREMENT BENEFITS TOTAL COMPENSATION
COMPENSATION FROM ACCRUED AS PART OF FUND FROM ALL FUNDS IN
NAME OF DIRECTOR THE FUND EXPENSES THE FBL FAMILY
- --------------------------- ----------------- ------------------------------- -------------------
<S> <C> <C> <C>
Donald G. Bartling $ 460 0 $ 1,380
John R. Graham 460 0 1,380
Erwin H. Johnson 345 0 1,380
Ann Jorgensen 460 0 1,380
Eugene R. Maahs 0 0 0
Stephen M. Morain 0 0 0
Dale W. Nelson 460 0 1,380
Curtis C. Pietz 460 0 1,380
Edward M. Wiederstein 0 0 0
</TABLE>
As of August 15, 1996, the officers and directors as a group owned less than
1% of the then outstanding shares of the Fund.
INVESTMENT ADVISER
The following information supplements the information set forth in the
Prospectus under "Management of the Fund -- Investment Adviser." Pursuant to an
Investment Advisory and Management Services Agreement dated November 11, 1987
("Agreement"), FBL Investment Advisory Services, Inc. ("FBL" or the "Adviser")
acts as the Fund's investment adviser and manager subject to the review of the
Fund's Board of Directors. The Adviser 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 FBL Financial Group, Inc., an Iowa corporation, 54% 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 an investment adviser to
individuals, institutions and two other mutual funds: FBL Money Market 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 the 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.
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Under the Agreement, the Adviser regularly provides the Fund with investment
research, advice and supervision, and furnishes an investment program consistent
with the investment objectives and policies of each Portfolio, determining for
each Portfolio, what securities shall be purchased and sold and what portion of
the Portfolio's assets shall be held uninvested, subject always to: (i) the
provisions of the articles of incorporation, the Fund's by-laws, the Investment
Company Act of 1940 and applicable requirements of the Internal Revenue Code;
(ii) the Portfolio's investment objectives, policies and restrictions; and (iii)
such policies and instructions as the Board of Directors may from time to time
establish. The Adviser also advises and assists the officers of the Fund in
taking such steps as are necessary or appropriate to carry out the decisions of
the Board of Directors (and any committees thereof) regarding the conduct of the
business of the Fund. The Adviser has agreed to arrange for any of its officers
or directors to serve without salary as directors, officers or agents of the
Fund if duly elected to such positions.
The Adviser, at its expense, furnishes the Fund with office space and
facilities, simple business equipment, advisory, research and statistical
facilities, and clerical services and personnel to administer the business
affairs of the Fund. As compensation for the Adviser's investment advisory,
management and clerical services, as well as the facilities it provides and the
expenses it assumes, the Agreement provides for the payment of a monthly fee as
described in the Prospectus.
The Adviser is not required to pay expenses of the Fund other than those set
forth above. Each Portfolio will pay all other expenses incurred in its
operation, including a portion of the Fund's general administrative expenses,
allocated on the basis of the Portfolio's net asset value. Expenses that will be
borne directly by the Portfolios include, but are not limited to, the following:
net asset value calculations; portfolio transaction costs; interest on Fund
obligations; stock certificates; miscellaneous reports; membership dues; all
expenses of shareholders' and directors' meetings and of preparing, printing and
mailing proxy statements, reports and notices to shareholders; all expenses of
registering the Fund's shares under federal and state securities laws; the
typesetting costs of printing Fund prospectuses and supplements thereto;
investor services (including allocable telephone and personnel expenses); all
taxes and fees payable to federal, state or other governmental authorities; the
fees and expenses of independent public auditors, legal counsel, custodian,
dividend disbursing and transfer agent; fees of directors who are not affiliated
with the Adviser; insurance premiums for fidelity bond and other coverage of the
Fund's operations; and such non-recurring expenses as may arise including
actions, suits or proceedings affecting the Fund and the legal obligation the
Fund may have to indemnify its officers and directors with respect thereto. See
"Underwriting and Distribution Expenses" and "Other Information -- Accounting
Services" for a description of certain other Fund expenses.
The Agreement was approved on November 11, 1987 by a vote of the
shareholders of Farm Bureau Growth Fund, Inc.(1) and on December 1, 1987 by Farm
Bureau Life Insurance Company as the then sole shareholder of each of the other
seven Portfolios of the Fund, and was most recently approved for continuance on
August 17, 1995, by the Board of Directors, including a vote of a majority of
the Directors
- ------------------------
(1) The Fund, which was incorporated in Maryland on August 14, 1970, was
known as Farm Bureau Growth Fund, Inc. prior to the effectiveness of Articles of
Amendment to its charter on December 1, 1987 which, among other things, changed
its name to FBL Series Fund, Inc. and established eight Portfolios of the Fund
and designated the then current assets, liabilities and shareholders of Farm
Bureau Growth Fund, Inc. as the assets, liabilities and shareholders of the
Growth Common Stock Portfolio (which has since been renamed Value Growth
Portfolio) of FBL Series Fund, Inc. The meaning of the term "Value Growth
Portfolio" as used herein includes, where appropriate, Farm Bureau Growth Fund,
Inc. prior to December 1, 1987.
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<PAGE>
who are not "interested persons" of either party to the Agreement. Unless
earlier terminated as described below, the Agreement will remain in effect until
November 30, 1996. Thereafter, the Agreement will continue in effect, with
respect to a Portfolio, from year to year so long as its continuation is
approved at least annually by (a) the vote of a majority of those Directors who
are not parties to the Agreement or "interested persons" of either party to the
Agreement cast in person at a meeting called for the purpose of voting on such
approval, and (b) either (i) the vote of a majority of the Directors or (ii) the
vote of a majority of the outstanding shares of such Portfolio.
The Agreement will be deemed to have been approved (or amended) by the
shareholders of any Portfolio if a majority of the outstanding shares of that
Portfolio vote for approval (or amendment) of the Agreement, notwithstanding (a)
that the Agreement has not been approved (or amended) by a majority of the
outstanding shares of any other Portfolio, and (b) that the Agreement has not
been approved (or amended) by a vote of a majority of the outstanding shares of
the Fund. The Agreement may be terminated without penalty at any time upon 60
days' notice by either party, and will terminate automatically upon assignment.
The Agreement provides that the Adviser shall not be liable for any 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 a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties, or from reckless disregard by the Adviser of its
obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of such transactions will not be
influenced by existing or potential custodial or other Fund relationships.
The investment advisory and management fee expense for the fiscal years
ended July 31, 1996, 1995 and 1994 was $404,117, $331,615 and $294,555,
respectively, for the Value Growth Portfolio; $34,843, $31,381 and $30,712,
respectively, for the High Grade Bond Portfolio; $37,339, $35,015 and $33,735,
respectively, for the High Yield Bond Portfolio; $148,741, $118,526 and $85,361,
respectively, for the Managed Portfolio; $10,012, $10,035 and $10,596,
respectively, for the Money Market Portfolio; and $30,418, $19,647 and $14,982,
respectively, for the Blue Chip Portfolio.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
With respect to transactions in portfolio securities, whether through a
broker as agent or with a dealer as principal, the Adviser endeavors to obtain
for the Fund the most favorable prices and efficient execution of orders.
Subject to this primary consideration, the Adviser may place a Portfolio's
transactions with firms that furnish research, statistical and other services.
In particular, the Adviser may direct brokerage transactions to a specific
broker in return for certain data and research-oriented software. Certain
affiliates of the Adviser also place portfolio transactions with these brokerage
firms, and such affiliates share the benefits of the research and other services
obtained from these brokers.
Brokerage research services, as provided in Section 28(e) of the Securities
Exchange Act of 1934, include: advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issues, industries, securities, economic factors
and trends; portfolio strategy and performance of accounts; and the execution of
securities transactions and performance of functions incidental thereto (such as
clearance and settlement).
B-11
<PAGE>
The Fund paid brokerage commissions during the fiscal years ended July 31,
1996, 1995 and 1994 of $262,465, $199,427 and $156,305, respectively. The
Adviser regards information that is customarily available only in return for
brokerage as among the many elements to be considered in arriving at investment
decisions. No specific value can be determined for most such information and
services and they are deemed supplemental to the Adviser's own efforts in the
performance of its duties under the investment advisory agreement. Neither the
Adviser nor any of its affiliates will receive any brokerage business arising
out of the portfolio transactions of the Fund.
If, in the judgment of the Adviser, the Fund or any Portfolio will be
benefited by such supplemental research services, the Fund or such Portfolio is
authorized to pay greater spreads or commissions than another broker or dealer
may charge for the same transaction. Accordingly, while the Adviser generally
seeks reasonably competitive spreads or commissions, the Portfolios will not
necessarily be paying the lowest spread or commission available in every case.
The expenses of the Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information.
The Portfolios may deal in some instances in securities that are not listed
on a national securities exchange but rather are traded in the over-the-counter
market. The Portfolios may also purchase listed securities through the "third
market." Where transactions are executed in the over-the-counter market or third
market, the Adviser will seek to deal with primary market makers but, when
necessary, will utilize the services of brokers. In all such cases, the Adviser
will attempt to negotiate the best price and execution. Money market instruments
are generally traded directly with the issuer. On occasion, other securities may
be purchased directly from the issuer. The cost of a Portfolio's securities
transactions will consist primarily of brokerage commissions or dealer or
underwriter spreads.
Certain investments may be appropriate for certain of the Portfolios and for
other clients advised by the Adviser. Investment decisions for the Portfolios
and such other clients are made with a view to achieving their respective
investment objectives and after consideration of factors such as their current
holdings, availability of cash for investment and the size of their investments
in general. Frequently, a particular security may be bought or sold for only one
client, or in different amounts and at different times for more than one but
less than all clients. Likewise, a particular security may be bought for one or
more clients when one or more other clients are selling the security. In
addition, purchases or sales of the same security may be made for two or more
Portfolios or other clients at the same time. In such event, such transactions
will be allocated among the Portfolios or other clients in a manner believed by
the Adviser to be equitable to each. In some cases, this procedure could have an
adverse effect on the price or amount of the securities purchased or sold by a
Portfolio. It is the opinion of the Board of Directors that the benefits
available because of the Adviser's organization outweigh any disadvantages that
may arise from exposure to simultaneous transactions. Purchase and sale orders
for a Portfolio may be combined with those of other Portfolios or other clients
of the Adviser in the interest of the most favorable net results to the
Portfolio.
UNDERWRITING AND DISTRIBUTION EXPENSES
FBL Investment Advisory Services, Inc. (the "Distributor") also serves as
principal underwriter for the Fund under an Underwriting Agreement dated
December 31, 1983, and as distributor of the Fund's shares under a Distribution
Plan and Agreement dated December 1, 1987, as amended November 25, 1991
("Distribution Agreement"). See "General Information--Distributor" in the
Prospectus. The Distributor bears all its expenses of providing services
pursuant to the Distribution Agreement, including the payment of any
commissions, the preparation and distribution of advertising or sales
literature, and bears the cost of printing and mailing prospectuses to persons
other than shareholders. The Fund bears
B-12
<PAGE>
the cost of qualifying and maintaining the qualification of its shares for sale
under the securities laws of the various states and the expense of registering
its shares with the Securities and Exchange Commission.
The Distribution Agreement continues in effect from year to year so long as
such continuance is approved at least annually by a vote of the Board of
Directors of the Fund, including the Directors who are not "interested persons"
of the Fund and who have no direct or indirect financial interest in the
agreement. The Distribution Agreement automatically terminates in the event of
its assignment and may be terminated at any time without penalty by the Fund or
by the Distributor upon six months' notice. Termination by the Fund may be by
vote of a majority of the Board of Directors, or a majority of the Directors who
are not "interested persons" of the Fund and who have no direct or indirect
financial interest in the Distribution Agreement, or a "majority of the
outstanding voting securities" of the Fund as defined under the Investment
Company Act of 1940. The Distribution Agreement may not be amended to increase
the fee to be paid by the Fund without approval by a majority of the outstanding
voting securities of the Fund and all material amendments must in any event be
approved by the Board of Directors in the manner described above with respect to
the continuation of the Agreement. Shareholders vote in the aggregate and not by
Portfolio with respect to the Distribution Agreement.
Pursuant to an action by the Board of Directors on August 15, 1991, the
Board approved an amendment to the Distribution Agreement which provided for a
reduction in the distribution services fee and approved an Administrative
Services Agreement between the Fund and the Distributor which provides for an
administrative services fee to be paid to the Distributor. Effective November
25, 1991, the distribution services fee paid by the Fund to the Distributor was
lowered from .75% to .50% of average daily net assets of the Fund and an
administrative services fee of .25% of average daily net assets of the Fund will
be paid by the Fund to the Distributor.
The Fund paid annual distribution fees to the Distributor during the fiscal
years ended July 31, 1996, 1995 and 1994 of $678,920, $553,282 and $477,956,
respectively. During the fiscal year ended July 31, 1996, of the aggregate
amount of distribution fees paid to the Distributor, $203,609 was paid to FBL
Marketing Services, Inc., an affiliate of the Distributor, and the balance of
$475,311 was retained by the Distributor. During the fiscal year ended July 31,
1996, the Distributor incurred expenses in the approximate amounts noted:
$805,004 for commissions paid to Dealers for Fund sales, $189,459 for management
services, $22,957 for rent, $19,156 for report costs, $11,602 for telephone,
$7,490 for postage, $4,672 for printing and office supplies, and $3,970 for
furniture and equipment.
During the fiscal years ended July 31, 1996, 1995 and 1994 the Distributor
received $155,049, $135,141 and $49,718, respectively, in contingent deferred
sales charges.
The Distributor also acts as principal underwriter and sole distributor of
the shares of FBL Money Market Fund, Inc. and FBL Variable Insurance Series
Fund.
PURCHASES AND REDEMPTIONS
The following supplements the discussion in the Prospectus under the
headings "How to Buy Shares" and "How to Redeem Shares."
Shares of each Portfolio are sold at their respective net asset value next
determined after an order for purchase and payment are received in proper form.
Shares of each Portfolio are redeemed at their respective net asset value
next determined after a request for redemption is received in proper form. The
Fund may suspend the right of redemption or postpone the date of payment, with
respect to the shares of a Portfolio, during any period when
B-13
<PAGE>
(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 closing); (b) an emergency exists, as
determined by the Securities and Exchange Commission, as a result of which
disposal of such Portfolio's securities, or determination of the net asset value
of such Portfolio, is not reasonably practicable; or (c) the Securities and
Exchange Commission by order permits such suspension for the protection of
Shareholders. 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.
NET ASSET VALUE
The following supplements the discussion in the Prospectus under the heading
"Net Asset Value Information."
MONEY MARKET PORTFOLIO
The net asset value per share of the Money Market Portfolio is computed by
dividing the total value of the Portfolio's securities and other assets, less
liabilities (including dividends payable), by the number of shares outstanding.
The assets are determined by valuing the portfolio securities at amortized cost,
pursuant to Rule 2a-7 under the Investment Company Act. The amortized cost
method of valuation involves valuing a security at cost at the time of purchase
and thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument.
The purpose of the amortized cost method of valuation is to attempt to
maintain a constant net asset value per share of $1.00. While this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price the Portfolio
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
portfolio securities, 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 between the Portfolio's $1.00 per share net asset value and the net
asset value calculated by reference to market valuations were to occur, or if
there were any other deviations which the Board of Directors believes would
result in dilution or other unfair results material to Shareholders, the Board
of Directors would consider what action, if any, should be initiated.
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 can be expected to
increase; when yields increase, the market value of a Portfolio invested at
lower yields can be expected to decline. In addition, if the Portfolio has net
redemptions at a time when interest rates have increased, the Portfolio may be
forced to sell portfolio securities prior to maturity at a price below the
Portfolio's carrying value. Also, because the Portfolio generally will be valued
at amortized cost rather than market value, any yield quoted may be different
from the yield that would result if the entire Portfolio were valued at market
value, since the amortized cost method does not take market fluctuations into
consideration.
B-14
<PAGE>
OTHER PORTFOLIOS
The net asset value per share of each Portfolio other than the Money Market
Portfolio is computed by dividing the total value of the Portfolio's securities
and other assets, less liabilities, by the number of Portfolio shares then
outstanding. Securities traded on a national exchange are valued at the last
sale price as of the close of business on the day the securities are being
valued, or, lacking any sales, at the mean between closing bid and asked prices.
Securities, other than money market instruments, traded in the over-the-counter
market are valued at the mean between the bid and asked prices or at yield
equivalent as obtained from one or more dealers that make markets in the
securities. Securities traded both in the over-the-counter market and on a
national exchange are valued according to the broadest and most representative
market, and it is expected that for debt securities this ordinarily will be the
over-the-counter market. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors. Money market instruments are
valued at market value, except that instruments maturing in 60 days or less are
valued using the amortized cost method of valuation.
The proceeds received by each Portfolio for each issue or sale of its
shares, and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are allocated specifically to such Portfolio, and
constitute the underlying assets of such Portfolio. The underlying assets of
each Portfolio are segregated on the Fund's books of account and are charged
with the liabilities of such Portfolio and with a share of the general
liabilities of the Fund. Expenses with respect to any two or more Portfolios are
allocated in proportion to the net asset values of the respective Portfolios
except where allocations of direct expenses can otherwise be fairly made.
TAXES
For federal income tax purposes, each Portfolio is treated as a separate
entity. Each Portfolio intends to continue to qualify to be taxed as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended ("Code"). If a Portfolio qualifies as a regulated investment
company and complies with the provisions of the Code, such Portfolio will be
relieved from federal income tax on the part of its net ordinary income and net
realized capital gain that it distributes to its shareholders. To qualify for
treatment as a "regulated investment company," a Portfolio must, among other
things, derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock or securities or foreign currencies
(subject to the authority of the Secretary of the Treasury to exclude foreign
currency gains that are not ancillary to the Portfolio's principal business of
investing in stock or securities or options and futures with respect to such
stock or securities), or other income (including but not limited to gains from
options, futures, or forward contracts) derived with respect to its business of
investing in such stocks, securities, or currencies. In addition, to qualify for
treatment as a "regulated investment company," a Portfolio must derive less than
30% of its gross income in each taxable year from gains (without deduction for
losses) from the sale or other disposition of securities held for less than
three months. This rule may limit a Portfolio's ability to engage in futures and
options transactions.
A 4% excise tax is imposed on the excess of the required distribution for a
calendar year over the distributed amount for such calendar year. The required
distribution is generally the sum of 98% of a Portfolio's net ordinary income
for the calendar year plus 98% of its capital gain net income for the one year
period ending October 31. The Fund intends to declare or distribute dividends
from each Portfolio during the calendar year of an amount sufficient to prevent
imposition of the 4% excise tax.
B-15
<PAGE>
A portion of the ordinary income distributions from a Portfolio may be
eligible for the "dividends received deduction" available to corporate
shareholders. The aggregate amount eligible for the "dividends received
deduction" may not exceed the aggregate qualifying dividends received by such
Portfolio for the fiscal year. The portion of the income dividends paid during
the fiscal year ended July 31, 1996 that qualified for the "dividends received
deduction" available to corporate shareholders was as follows: 73% of the income
dividend paid December 28, 1995 by the Value Growth Portfolio; 57%, 56%, 50% and
53% of the income dividends paid November 7, 1995, December 28, 1995, April 30,
1996, and July 31, 1996, respectively, by the Managed Portfolio; and 82% of the
income dividend paid December 28, 1995 by the Blue Chip Portfolio.
If a shareholder exchanges shares of a Portfolio for shares of another
Portfolio of the Fund, the shareholder will recognize a gain or loss for federal
income tax purposes measured by the difference between the value of the shares
acquired and the basis of the shares exchanged. Such gain or loss will generally
be a capital gain or loss and will be a long-term gain or loss if the
shareholder has held his or her shares for more than one year. If a shareholder
realizes a loss on the redemption of shares of a Portfolio and invests in shares
of the same Portfolio within 30 days before or after the redemption, the
transactions may be subject to the wash sale rules resulting in a postponement
of the recognition of such loss for federal income tax purposes. Any loss
recognized on the disposition of shares of a Portfolio held six months or less
will be treated as long-term capital loss to the extent that the shareholder has
received any long-term capital gain dividends on such shares.
The discussion under "Dividends and Taxes" in the Prospectus, in conjunction
with the foregoing, is a general summary of applicable provisions of the Code
and Treasury Regulations now in effect as currently interpreted by the courts
and the Internal Revenue Service. The Code and these Regulations, as well as the
current interpretations thereof, may be changed at any time by legislative,
judicial or administrative action.
DIVIDENDS AND DISTRIBUTIONS
Reference is made to the discussion in the Prospectus under the heading
"Dividends and Taxes" for a more complete discussion of dividends and
distributions.
MONEY MARKET PORTFOLIO
The Portfolio declares dividends of all its daily net investment income on
each day the Portfolio's net asset value per share is determined. Dividends are
payable monthly and are automatically reinvested and distributed monthly on the
last business day of each month in full and fractional shares of the Portfolio
at the then-current net asset value unless a Shareholder requests payment in
cash. Each Shareholder will receive a monthly summary of the Portfolio's
activity, including information on dividends paid or reinvested.
Net investment income, for dividend purposes, consists of (1) accrued
interest income, plus or minus (2) amortized purchase discount or premium, plus
or minus (3) all short-term realized gains or losses and unrealized appreciation
or depreciation on portfolio assets, minus (4) all accrued expenses of the
Portfolio. Expenses of the Portfolio are accrued daily. So long as the portfolio
securities are valued at amortized cost, there will be no unrealized
appreciation or depreciation on such securities.
PERFORMANCE INFORMATION
As described in the Prospectus, a Portfolio's historical performance or
return may be shown in the form of "average annual total return" and "total
return" in the case of all Portfolios except the Money
B-16
<PAGE>
Market Portfolio; "yield" in the case of the High Grade Bond and High Yield Bond
Portfolios; and "yield" and "effective yield" in the case of the Money Market
Portfolio. These various measures of performance are described below.
Average annual total return and total return measure both the net income
generated by, and the effect of any realized and unrealized appreciation or
depreciation of, the underlying investments of a Portfolio over the specified
period. Yield is a measure of the net investment income per share earned over a
specific one-month or 30-day period (seven-day period for the Money Market
Portfolio) expressed as a percentage of the net asset value.
A Portfolio's standardized average annual total return quotation is computed
in accordance with a method prescribed by rules of the Securities and Exchange
Commission. The standardized average annual total return for a Portfolio for a
specific period is determined by assuming a hypothetical $1,000 investment in
the Fund's shares on the first day of the period at the then effective net asset
value per share ("initial investment"), and computing the ending redeemable
value ("redeemable value") of that investment at the end of the period. The
redeemable value includes the effect of the applicable contingent deferred sales
charge that may be imposed at the end of the period. The redeemable value is
then divided by the initial investment, and this quotient is taken to the Nth
root (N representing the number of years in the period) and 1 is subtracted from
the result, which is then expressed as a percentage. The calculation assumes
that all income and capital gains dividends by the Portfolio have been
reinvested at net asset value on the reinvestment dates during the period.
Standardized average annual total return figures for various periods are set
forth in the tables below. In addition, included in the table below are figures
for the average annual total return without the deduction of the contingent
deferred sales charge. Thus, the same formula as set forth above is used except
that the redeemable value has not been reduced by the applicable sales charge
for that period.
Calculation of a Portfolio's total return is not subject to a standardized
formula. Total return performance for a specific period is calculated by first
taking an investment (assumed to be $1,000) in the Fund's shares on the first
day of the period at the then effective net asset value per share ("initial
investment") and computing the ending value ("ending value") of that investment
at the end of the period. The ending value may or may not include the effect of
the applicable contingent deferred sales charge that may be imposed at the end
of the period. The total return percentage is then determined by subtracting the
initial investment from the value and dividing the difference by the initial
investment and expressing the result as a percentage. This calculation assumes
that all income and capital gains dividends by the Portfolio have been
reinvested at net asset value on the reinvestment dates during the period. Total
return may also be shown as the increased dollar value of the hypothetical
investment over the period. Total return figures for various periods are set
forth in the tables below.
The yield for a Portfolio, other than the Money Market Portfolio, is
computed in accordance with the formula set forth below, which is a standardized
method prescribed by rules of the Securities and Exchange Commission. The High
Grade Bond Portfolio's yield based upon the 30-day period ended
B-17
<PAGE>
July 31, 1996 was 6.30% and the High Yield Bond Portfolio's was 8.00%. A
Portfolio's yield is computed by dividing the net investment income per share
earned during the specific one-month or 30-day period by the offering price per
share on the last day of the period, according to the following formula:
<TABLE>
<S> <C> <C> <C>
[(a-b +1)(6) -1]
Yield = 2 -------------
cd
</TABLE>
<TABLE>
<C> <S>
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the offering price per share on the last day of the period.
</TABLE>
In computing yield, the Fund follows certain standardized accounting
practices specified by Securities and Exchange Commission rules. These practices
are not necessarily consistent with those that the Fund uses to prepare its
annual and interim financial statements in accordance with generally accepted
accounting principles.
The Money Market Portfolio'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 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 Money Market Portfolio's yield for the seven day period ended
July 31, 1996 was 3.65%.
The Money Market Portfolio's effective yield is determined by taking the
base period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is [(base period return
+1) raised to the 365/7] -1. The Money Market Portfolio's effective yield for
the seven day period ended July 31, 1996 was 3.72%.
A Portfolio's performance quotations are based upon historical results and
are not necessarily representative of future performance. The Fund's shares are
sold at net asset value, and return and net asset value will fluctuate except
that the Money Market Portfolio seeks to maintain a $1.00 net asset value per
share. Factors affecting a Portfolio's performance include general market
conditions, operating expenses and investment management. Shares of a Portfolio
are redeemable at net asset value, which may be more or less than original cost.
Redemptions within the first six years after purchase may be subject to a
contingent deferred sales charge that ranges from 5% the first year to 0% after
six years. Yield and effective yield do not include the effect of the contingent
deferred sales charge. The standardized average annual total return does include
the effect of the contingent deferred sales charge. Average annual total return
does not, and total return may or may not include the effect of the contingent
deferred sales charge that may be imposed at the end of the designated period.
Performance figures not including the effect of the contingent deferred sales
charge would be reduced if the charge were included. No adjustments are made for
taxes payable on dividends.
B-18
<PAGE>
The figures below show performance information for various periods ended
July 31, 1996. Because all of the Portfolios, with the exception of the Value
Growth Portfolio, have been in operation only since December 1, 1987, the
performance information reflects only a one hundred-four month period.
AVERAGE ANNUAL TOTAL RETURN TABLE
FOR PERIOD ENDED JULY 31, 1996
<TABLE>
<CAPTION>
STANDARDIZED AVERAGE ANNUAL
AVERAGE ANNUAL TOTAL RETURN
PORTFOLIO TOTAL RETURN (1) UNADJUSTED (2)
- ------------------------------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
Value Growth
10 years.................................................................... 9.81% 9.81%
5 years..................................................................... 12.97% 13.22%
1 year...................................................................... 13.41% 18.41%
High Grade Bond
Life of Portfolio (3)....................................................... 7.71% 7.71%
5 years..................................................................... 7.07% 7.37%
1 year...................................................................... 0.37% 5.37%
High Yield Bond
Life of Portfolio (3)....................................................... 9.42% 9.42%
5 years..................................................................... 9.34% 9.62%
1 year...................................................................... 2.67% 7.67%
Managed
Life of Portfolio (3)....................................................... 9.92% 9.92%
5 years..................................................................... 12.24% 12.49%
1 year...................................................................... 12.30% 17.30%
Blue Chip
Life of Portfolio (3)....................................................... 14.07% 14.07%
5 years..................................................................... 12.05% 12.30%
1 year...................................................................... 10.83% 15.83%
</TABLE>
- ------------------------
(1) The adjusted value represents the percentage change in the ending value
after the deduction of the contingent deferred sales charge.
(2) The unadjusted value represents the percentage change in the ending value
without the deduction of the contingent deferred sales charge.
(3) The High Grade Bond, High Yield Bond, Managed and Blue Chip Portfolios
commenced operations on December 1, 1987.
B-19
<PAGE>
TOTAL RETURN TABLE
FOR PERIOD ENDED JULY 31, 1996
<TABLE>
<CAPTION>
STANDARDIZED
TOTAL RETURN TOTAL RETURN
PORTFOLIO (1) UNADJUSTED (2)
- -------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
Value Growth
10 years...................................................................... 154.86 % 154.86%
5 years....................................................................... 84.03 % 86.03%
1 year........................................................................ 13.41 % 18.41%
High Grade Bond
Life of Portfolio (3)......................................................... 90.36 % 90.36%
5 years....................................................................... 40.68 % 42.68%
1 year........................................................................ 0.37 % 5.37%
High Yield Bond
Life of Portfolio (3)......................................................... 118.17 % 118.17%
5 years....................................................................... 56.26 % 58.26%
1 year........................................................................ 2.67 % 7.67%
Managed
Life of Portfolio (3)......................................................... 127.00 % 127.00%
5 years....................................................................... 78.11 % 80.11%
1 year........................................................................ 12.30 % 17.30%
Blue Chip
Life of Portfolio (3)......................................................... 213.02 % 213.02%
5 years....................................................................... 76.62 % 78.62%
1 year........................................................................ 10.83 % 15.83%
</TABLE>
- ------------------------
(1) The adjusted value represents the percentage change in the ending value
after the deduction of the contingent deferred sales charge.
(2) The unadjusted value represents the percentage change in the ending value
without the deduction of the contingent deferred sales charge.
(3) The High Grade Bond, High Yield Bond, Managed and Blue Chip Portfolios
commenced operations on December 1, 1987.
B-20
<PAGE>
SHAREHOLDER VOTING RIGHTS
All shares of the Fund have equal voting rights and may be voted in the
election of Directors and on other matters submitted to the vote of
shareholders. As permitted by Maryland law and the Fund's corporate charter,
there will normally be no meetings of shareholders for the purpose of electing
directors unless and until such time as fewer than a majority of the directors
holding office have been elected by shareholders. At that time, the directors
then in office will call a shareholders' meeting for the election of directors.
The directors shall normally continue to hold office and may appoint successor
directors, provided that immediately after the appointment of any successor
director, at least two-thirds of the directors have been elected by the
shareholders. The shares do not have cumulative voting rights, which means that
the holders of a majority of the shares voting for the election of directors can
elect all the directors. No amendment may be made to the Fund's corporate
charter without the affirmative vote of a majority of the outstanding shares of
the Fund.
In matters which only affect a particular Portfolio, the matter shall have
been effectively acted upon by a majority vote of that Portfolio even though:
(i) the matter has not been approved by a majority vote of any other Portfolio;
or (ii) the matter has not been approved by a majority vote of the Fund.
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,
reference is made to the Plan, Trust Agreement and Custodial Agreement available
from the Fund.
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 generally will 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-
B-21
<PAGE>
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.
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, 1996 received $88,412 for its
services of which $26,832 was remitted to Investors Fiduciary Trust Company.
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.
OTHER INFORMATION
PRINCIPAL HOLDERS OF SECURITIES
As of August 15, 1996, Farm Bureau Life Insurance Company (a wholly-owned
subsidiary of FBL Financial Group, Inc., an Iowa corporation), owned more than
25% of the Money Market Portfolio. As of
B-22
<PAGE>
August 15, 1996, Farm Bureau Life Insurance Company owned more than 5% of the
outstanding voting securities of the High Yield Bond Portfolio. Farm Bureau Life
Insurance Company indirectly owns FBL Investment Advisory Services, Inc., the
Fund's investment adviser, principal underwriter and distributor.
CUSTODIAN
Bankers Trust Company, 16 Wall Street, New York, New York 10005, currently
serves as custodian of all cash and securities owned by the Fund. The custodian
performs no managerial or policy-making functions for the Fund.
INDEPENDENT AUDITORS
The Fund's independent auditors are Ernst & Young LLP, 801 Grand Avenue,
Suite 3400, Des Moines, Iowa 50309. The independent auditors audit and report on
the Fund's annual financial statements, review certain regulatory reports and
perform other professional accounting, auditing, tax and advisory services when
engaged to do so by the Fund.
ACCOUNTING SERVICES
The Fund has entered into an accounting services agreement with FBL
Investment Advisory Services, Inc. ("FBL") pursuant to which FBL performs
accounting services for the Fund. In addition, the agreement provides that FBL
shall calculate the Fund's net asset value in accordance with the Fund's current
Prospectus and to prepare, for Fund approval and use, various tax returns and
other reports. For such services, each Portfolio pays FBL an annual fee, payable
monthly, of .05% of the Portfolio's average daily net assets, with the annual
fee payable by a Portfolio not to exceed $30,000. During the fiscal year ended
July 31, 1996, the aggregate amount of such fees paid to FBL was $57,481.
SHAREHOLDER SERVICE, DIVIDEND DISBURSING AND TRANSFER AGENT
FBL Investment Advisory Services, Inc. serves as the Fund's shareholder
service, transfer and dividend disbursing agent. FBL in turn has contracted with
DST Systems, Inc. ("DST"), an unrelated party, to perform certain services
incident to the maintenance of shareholder accounts. The Fund pays FBL an annual
fee of $7.00 to $9.00 per account and miscellaneous activity fees plus out of
pocket expenses, a portion of which is paid to DST. During the fiscal year ended
July 31, 1996, the aggregate amount of such fees paid to FBL was $381,239, of
which $232,739 was paid to DST.
LEGAL MATTERS
The firm of Vedder, Price, Kaufman & Kammholz, Chicago, Illinois, is counsel
for the Fund.
FINANCIAL STATEMENTS
The audited financial statements of the Fund, including the notes thereto,
contained in the Annual Report to Shareholders of FBL Series Fund, Inc. for the
fiscal year ended July 31, 1996, are incorporated herein by reference. A copy of
such Annual Report to Shareholders may be obtained without charge by contacting
the Fund.
B-23
<PAGE>
--------------------------
Farm Bureau Mutual Funds
FBL Series Fund, Inc.
[LOGO]
ANNUAL REPORT
JULY 31, 1996
INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER
FBL INVESTMENT ADVISORY
SERVICES, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IA 50266
1-800-247-4170 (OUTSIDE IOWA)
1-800- 422-3175 (IN IOWA)
225-5586 (DES MOINES)
This report is not to be
FARM BUREAU MUTUAL FUNDS distributed
5400 UNIVERSITY AVENUE unless preceded or accompanied by
WEST DES MOINES, IOWA 50266 [LOGO] a prospectus.
737-028(96)
<PAGE>
PRESIDENT'S LETTER
Dear Shareholder,
The Dow Jones Industrial Average reached its modern high on May 22, closing
at 5778.00. On July 23, it closed at 5346.55, a decline of 7.5% and not
insubstantial for a two-month period of time. It does not qualify, however, as a
"bear market". As of this moment, the Dow has returned to within striking
distance of 5700, reinforcing the notion that all equity market sell-offs are
buying opportunities.
But this rebound is different, in that net purchases of equity mutual funds
virtually ground to a halt during the month of July. For the week of July 17,
the industry experienced net redemptions, following months of $20 billion plus
injections into mutual funds. Whether investors will remain subdued for an
extended period is yet to be seen, as is the significance of this decrease in at
least one important source of market liquidity.
Notwithstanding the equity market behavior of the past few months, the fixed
income markets have witnessed more relative volatility over the past few years.
After a very strong bond market rally in 1995, we began this year with the
benchmark thirty-year Treasury yielding 5.95%, and by July we had moved to a
yield of 7.20%. Now, following July's more benign job statistics, the markets
are rallying again. Recall that the Labor Department releases on job creation in
the preceding five months have been somewhat of a trial for the bond and stock
markets. Each time, the market reacted negatively to what was perceived as too
much economic growth, which could rekindle inflation. It would seem to be an
awkward spot for equities to be when a rapidly growing economy knocks the market
down.
We believe that the equity markets will continue to see volatility in the
months ahead. Periodic corrections are quite normal to the stock market, but the
large number of shareholders arriving after 1990 have not seen a meaningful
setback. Accordingly, we encourage mutual fund investors to review the
longer-term characteristics of the financial markets to ensure that their asset
allocation decisions are truly appropriate to their investment objectives and
tolerance for risk.
For the actively managed portfolios of FBL Series Fund, Inc. (those other
than the passive Blue Chip Portfolio) we have sought to manage volatility by
constantly assessing the securities held to ensure that valuations are
reasonable. In so doing, we seek to produce attractive risk-adjusted performance
and create lasting value for our shareholders.
Below are activity and strategy summaries for the various portfolios of FBL
Series Fund, Inc.
GROWTH COMMON STOCK: The Growth Common Stock Portfolio benefitted from its
higher than average energy exposure. Approximately a year ago, the Portfolio had
25% of its assets in various energy company investments: oil and gas drilling,
oil and gas exploration and production, and related oil services. At the time we
made the investments, the energy industry was deeply out of favor and unloved by
Wall Street investors, allowing us to find many attractive and compelling
valuations where the private market value greatly exceeded the stock price,
spelling an investment opportunity. Twelve months later, many of these
investments appreciated 20% - 50% and, as a result, we have been taking profits
and begun searching for additional attractive investments. As of the writing of
this letter, our energy exposure has been reduced from 25% to approximately 20%
of total assets.
We continue to find value in owning smaller bank holding companies. The
growth prospects of these investments are well defined and many are attractive
merger candidates, adding to their upside potential. The banking sector
currently represents 14% of Portfolio assets. Our strategy in this market is
2
<PAGE>
to remain rational and objective when the market is not. This means that we are
willing to buy on bad news when we are able to establish a reasonable value for
the whole company well in excess of the current share price. This is the essence
of value investing. We also prefer to invest alongside good managements which
have a significant personal ownership stake in the company. Our goal is to be
invested in stocks which have appreciation potential at an acceptable level of
risk.
HIGH GRADE BOND: U.S. Treasury yields increased dramatically over the past
six months. For example, the 2-year, 10-year and 30-year Treasury issues yielded
4.92%, 5.57% and 6.02%, respectively, as of January 31, 1996, but as of July 31,
1996, were 6.22%, 6.79% and 6.97%.
In addition, corporate spreads remain at historically low levels, suggesting
that investors are not being well compensated for taking on the credit and
market risk inherent in corporate bonds. Because of this, we will probably look
to reduce the Portfolio's overall exposure to corporate bonds and increase its
holdings in mortgage-backed and/or Treasury issues.
The Portfolio continues to hold a significant portion of its assets in
high-coupon, callable bonds that offer attractive, incremental yields relative
to similar non-callable issues. Due to their call features, these types of
corporate issues tend to go up in price less than non-callable issues when
interest rates drop; and conversely, due to their incremental yield, tend to go
down less than non-callable issues when interest rates rise. Portfolio returns
should continue to lag other, more aggressive funds in both up and down markets.
HIGH YIELD BOND: During the past six months, the high yield bond market
outperformed the high grade corporate bond market. The reasons for this
outperformance were the naturally shorter duration and higher incremental income
of high yield bonds.
Throughout this period, the DLJ 100 High Yield Active Issues Index went from
a 10.15% yield and a 485 basis-point spread to a 11.13% yield and a spread of
491 basis-points. In general, we view these spread levels as reasonable, and
therefore no major changes to the Portfolio are contemplated at this time.
MANAGED: The Managed Portfolio continues to seek securities offering high
income with a modest growth potential. This Portfolio uses a value philosophy
but concentrates on securities that produce an income stream twice that of the
S&P 500. Currently, the S&P 500 is yielding a minuscule 2.2%. We achieve higher
income by investing in a mixture of high dividend-paying stocks, preferreds,
convertibles (debentures and preferreds) and corporate bonds.
We have continued to add to our convertible securities in the banking
sector. We continue to find value in owning the convertible securities of
smaller bank holding companies, as these securities are available with current
yields ranging from 4% - 6%, in addition to their attractive upside potential.
We have allowed cash to build up in anticipation of better values becoming
available in the market.
MONEY MARKET: Thus far in 1996, the money markets have gone directly from
an expectation of continued Federal Reserve easing following the January 25
basis-point decrease, to an expectation that the Fed would likely tighten
short-term rates as employment numbers began to show strength in the economy and
long-term rates pushed back above 7%. Most recently, expectations are that the
Fed will do nothing at its August meeting and possibly through the November
election. So while we have seen a relative period of calm in terms of Fed moves,
market expectations have moved short-term rates through some swings on either
side of the Fed. Looking ahead, we do not anticipate dramatic moves in short-
term rates at least until after the election.
3
<PAGE>
BLUE CHIP: True to its passive strategy, the performance of the Blue Chip
Portfolio over the past year has reflected that of the large capitalization
market sector which it represents. The Blue Chip Portfolio will, at all times,
remain substantially invested in common stocks of large companies. This
Portfolio is designed for those investors who prefer substantial exposure to
common stocks at all times or who wish to make their own market value judgments.
[INSERT SPECIMEN SIGNATURE]
EDWARD M. WIEDERSTEIN
PRESIDENT
August 27, 1996
4
<PAGE>
GROWTH COMMON STOCK PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE GROWTH COMMON STOCK PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C>
1 Year 5 Year
18.41% 13.22%
GROWTH COMMON STOCK PORTFOLIO
1986 10000
1987 11708
1988 10346
1989 11541
1990 12226
1991 13661
1992 15380
1993 19591
1994 19658
1995 21508
1996 25486
Past performance is not predictive of future performance.
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C>
1 Year 10 Year
18.41% 9.81%
S&P 500 STOCK COMPOSITE INDEX
1986 10000
1987 13923
1988 12298
1989 16217
1990 17266
1991 19473
1992 21958
1993 23861
1994 25097
1995 31635
1996 36861
Past performance is not predictive of future performance.
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
- -------------------------------------
1 YEAR 5 YEAR 10 YEAR
- ----------- ----------- -----------
<S> <C> <C>
18.41% 13.22% 9.81%
</TABLE>
For the twelve-month period ended July 31, 1996, the total return for the
Growth Common Stock Portfolio was 18.41% compared to the 16.52% total return
produced by the S&P 500 Stock Composite Index. Returns were primarily achieved
in the energy area where 20% of the Portfolio's assets were invested. Most
notably, the oil and gas drilling sector, as well as the oil and gas exploration
companies, provided the majority of returns to the Portfolio. Also, additional
incremental returns were received from the banking and finance industries. We
remain committed to the undervalued sectors of the market, the same industries
which aided our performance during the recent fiscal year. Cash is likely to
accumulate as we selectively take profits and await further investment
opportunities.
5
<PAGE>
HIGH GRADE BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE HIGH GRADE BOND PORTFOLIO AND LEHMAN BROTHERS AGGREGATE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C>
1 Year 5 Year
5.37% 7.37%
HIGH GRADE BOND PORTFOLIO
1987 10000
1988 10297
1989 11396
1990 12097
1991 13342
1992 15171
1993 16401
1994 16692
1995 18066
1996 19036
Past performance is not predictive of future performance.
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C>
1 Year Life of Portfolio
5.37% 7.71%
LEHMAN BROTHERS AGGREGATE INDEX
1987 10000
1988 10585
1989 12194
1990 13054
1991 14451
1992 16589
1993 18278
1994 18292
1995 20141
1996 21257
Past performance is not predictive of future performance.
</TABLE>
For the twelve-month period ended July 31, 1996, the 5.37% total return of
the High Grade Bond Portfolio was nearly equal to the 5.54% return of the Lehman
Brothers Mutual Fund Aggregate Index. The Portfolio continued to pursue an
investment strategy of holding a large position in high-coupon, callable bonds.
These bonds generally offer additional yield for taking on call risk and allow
for a more stable return to the Portfolio. Because these securities have a call
feature, they tend to underperform similar non-callable issues when interest
rates go down, and conversely, outperform similar non-callable issues when
interest rates rise.
6
<PAGE>
HIGH YIELD BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE HIGH YIELD BOND PORTFOLIO AND LEHMAN BROTHERS CORPORATE/HIGH YIELD INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C>
1 Year 5 Year
7.67% 9.62%
HIGH YIELD BOND PORTFOLIO
1987 10000
1988 10312
1989 11427
1990 12218
1991 13786
1992 16051
1993 18129
1994 18470
1995 20263
1996 21817
Past performance is not predictive of future performance.
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C>
1 Year Life of Portfolio
7.67% 9.42%
LEHMAN BROTHERS CORPORATE/HIGH YIELD INDEX
1987 10000
1988 10776
1989 12344
1990 13103
1991 14564
1992 17092
1993 19175
1994 19251
1995 21605
1996 22975
Past performance is not predictive of future performance.
</TABLE>
For the twelve-month period ended July 31, 1996, the 7.67% total return
produced by the High Yield Bond Portfolio was greater than the 6.45% return
produced by the Lehman Brothers Mutual Fund Corporate/High Yield Index. The
Portfolio maintains a larger percentage of its investments in high yield bonds
than the Lehman Brothers Corporate/High Yield Index and during the year, the
high yield market tended to outperform the high grade corporate bond market. In
addition, the Portfolio continued to hold a substantial portion of its assets in
high-coupon, premium-priced callable bonds. These bonds generally offer
additional yield for taking on call risk and allow for a more stable return to
the Portfolio. Because these securities have a call feature, they tend to
underperform similar non-callable issues when interest rates go down, and
conversely, outperform similar non-callable issues when interest rates rise.
7
<PAGE>
MANAGED PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE MANAGED PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C>
1 Year 5 Year Life of Portfolio
17.30% 12.49% 9.92%
MANAGED PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
1987 10000 10000
1988 10318 8833
1989 11007 11648
1990 11773 12401
1991 12603 13986
1992 14467 15770
1993 17798 17137
1994 17689 18025
1995 19352 22721
1996 22700 26475
Past performance is not predictive of future performance.
</TABLE>
The Managed Portfolio is an asset allocation portfolio and will not likely
mirror any particular index (equity or fixed-income) over time. During the
twelve-month period ended July 31, 1996, the Portfolio produced a total return
of 17.30% compared to the 16.52% total return produced by the S&P 500 Stock
Composite Index. The Managed Portfolio has emphasized securities producing
current income, and during the year, maintained a majority of its assets in
convertible securities. The majority of the Portfolio is represented by
high-income common stocks and convertibles of the following industry groups:
banking, energy and utilities. The Managed Portfolio also benefitted from
investors' renewed interest in energy stocks which were a significant part of
its assets. The Portfolio will continue to seek out high income, concentrating
on convertible issues of smaller banking situations. We continue to believe this
is a fertile investment area where we are paid (current income) to wait for the
profitable experience created by ongoing mergers and consolidations in the
banking industry.
8
<PAGE>
BLUE CHIP PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE BLUE CHIP PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
<S> <C> <C>
1 Year 5 Year Life of Portfolio
15.83% 12.30% 14.07%
BLUE CHIP PORTFOLIO S&P 500 STOCK COMPOSITE INDEX
1987 10000 10000
1988 11570 8833
1989 14802 11648
1990 16173 12401
1991 17525 13986
1992 19412 15770
1993 20618 17137
1994 22011 18025
1995 27023 22721
1996 31302 26475
Past performance is not predictive of future performance.
</TABLE>
The Blue Chip Portfolio is designed to represent the large capitalization
sector of the domestic equity market and remains substantially invested in
approximately 40 such common stock issues at all times. Accordingly, the
performance of this Portfolio will roughly parallel that of the Dow Jones
Industrial Average and the S&P 500 Stock Composite Index. As is apparent from
the line graph, the performance of the Blue Chip Portfolio, adjusted for
expenses, was similar to that of the S&P 500 Stock Composite Index for the
twelve-month period ended July 31, 1996.
9
<PAGE>
FBL SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1996
<TABLE>
<CAPTION>
GROWTH HIGH
COMMON STOCK GRADE BOND
PORTFOLIO PORTFOLIO
------------ ----------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost --
$83,630,501; $8,782,711; $7,170,126;
$26,306,834; $2,488,492; and $9,814,464,
respectively) (NOTE 5).......................... $85,946,944 $8,906,938
Cash.............................................. 51,545 47,197
Receivables:
Accrued dividends and interest.................. 153,346 160,861
Investment securities sold...................... 411,736 16,099
Prepaid expense and other assets.................. 1,073 1,308
------------ ----------
Total Assets...................................... $86,564,644 $9,132,403
------------ ----------
------------ ----------
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable:
FBL Investment Advisory Services, Inc. (NOTE
3).......................................... $ 14,104 $ 3,557
Accrued expenses................................ 16,663 6,672
------------ ----------
Total Liabilities................................. 30,767 10,229
Net assets applicable to outstanding capital stock
(NOTE 4)........................................ 86,533,877 9,122,174
------------ ----------
Total Liabilities and Net Assets.................. $86,564,644 $9,132,403
------------ ----------
------------ ----------
Shares issued and outstanding as of July 31,
1996............................................ 5,894,384 897,708
NET ASSET VALUE PER SHARE......................... $ 14.68 $ 10.16
------------ ----------
------------ ----------
</TABLE>
SEE ACCOMPANYING NOTES.
10
<PAGE>
<TABLE>
<CAPTION>
HIGH MONEY
YIELD BOND MANAGED MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at value (cost --
$83,630,501; $8,782,711; $7,170,126;
$26,306,834; $2,488,492; and $9,814,464,
respectively) (NOTE 5).......................... $7,058,968 $27,312,173 $2,488,492 $14,503,774
Cash.............................................. 107,751 81,404 67,558 131,206
Receivables:
Accrued dividends and interest.................. 192,833 115,411 2,496 19,166
Investment securities sold......................
Prepaid expense and other assets.................. 138 384 86 230
---------- ----------- ----------- -----------
Total Assets...................................... $7,359,690 $27,509,372 $2,558,632 $14,654,376
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable:
FBL Investment Advisory Services, Inc. (NOTE
3).......................................... $ 3,978 $ 7,017 $ 1,533 $ 5,772
Accrued expenses................................ 6,348 32,579 5,545 7,398
---------- ----------- ----------- -----------
Total Liabilities................................. 10,326 39,596 7,078 13,170
Net assets applicable to outstanding capital stock
(NOTE 4)........................................ 7,349,364 27,469,776 2,551,554 14,641,206
---------- ----------- ----------- -----------
Total Liabilities and Net Assets.................. $7,359,690 $27,509,372 $2,558,632 $14,654,376
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Shares issued and outstanding as of July 31,
1996............................................ 735,632 2,061,227 2,551,554 557,473
NET ASSET VALUE PER SHARE......................... $ 9.99 $ 13.33 $ 1.00 $ 26.26
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
11
<PAGE>
FBL SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED JULY 31, 1996
<TABLE>
<CAPTION>
GROWTH HIGH
COMMON STOCK GRADE BOND
PORTFOLIO PORTFOLIO
------------ -----------
<S> <C> <C>
INVESTMENT INCOME
Dividends......................................... $2,131,001
Interest.......................................... 682,898 $ 703,030
------------ -----------
Total Investment Income........................... 2,813,899 703,030
EXPENSES
Paid to FBL Investment Advisory Services, Inc.
(NOTE 3):
Investment advisory and management fees......... 404,117 34,843
Transfer and dividend disbursing agent fees..... 154,936 32,985
Distribution fees............................... 404,117 43,554
Administrative service fees..................... 202,059 21,777
Accounting fees................................. 30,000 4,356
Custodian fees.................................... 16,977 7,917
Legal fees........................................ 16,238 1,702
Audit fees........................................ 11,000 5,100
Directors' fees and expenses...................... 3,982 438
Reports to shareholders........................... 44,016 4,829
Registration fees................................. 15,179 3,535
Miscellaneous..................................... 4,820 803
------------ -----------
Total Expenses.................................... 1,307,441 161,839
Expense Reimbursement (NOTE 3)....................
------------ -----------
Net Expenses...................................... 1,307,441 161,839
------------ -----------
Net Investment Income............................. 1,506,458 541,191
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain from investment transactions.... 11,563,616 8,240
Change in unrealized appreciation/depreciation of
investments..................................... 6,359 (94,954)
------------ -----------
Net Gain (Loss) on Investments.................... 11,569,975 (86,714)
------------ -----------
Net Increase in Net Assets Resulting from
Operations...................................... $13,076,433 $ 454,477
------------ -----------
------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES.
12
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD MONEY
BOND MANAGED MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends......................................... $ 697,044 $ 240,236
Interest.......................................... $ 641,933 637,058 $ 139,715 57,113
--------- ---------- ----------- ----------
Total Investment Income........................... 641,933 1,334,102 139,715 297,349
EXPENSES
Paid to FBL Investment Advisory Services, Inc.
(NOTE 3):
Investment advisory and management fees......... 37,339 148,741 10,012 30,418
Transfer and dividend disbursing agent fees..... 36,561 83,148 15,010 58,599
Distribution fees............................... 33,945 123,951 12,516 60,837
Administrative service fees..................... 16,972 61,976 6,258 30,418
Accounting fees................................. 3,395 12,395 1,251 6,084
Custodian fees.................................... 8,638 10,420 6,055 11,279
Legal fees........................................ 1,316 5,064 490 2,575
Audit fees........................................ 5,000 5,800 4,600 5,100
Directors' fees and expenses...................... 332 1,208 124 576
Reports to shareholders........................... 3,727 13,335 1,409 6,323
Registration fees................................. 3,256 6,037 2,640 4,033
Miscellaneous..................................... 660 1,590 416 938
--------- ---------- ----------- ----------
Total Expenses.................................... 151,141 473,665 60,781 217,180
Expense Reimbursement (NOTE 3).................... (15,361) (10,718)
--------- ---------- ----------- ----------
Net Expenses...................................... 135,780 473,665 50,063 217,180
--------- ---------- ----------- ----------
Net Investment Income............................. 506,153 860,437 89,652 80,169
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain from investment transactions.... 99,065 2,276,504 187,256
Change in unrealized appreciation/depreciation of
investments..................................... (107,265) 531,462 1,321,836
--------- ---------- ----------- ----------
Net Gain (Loss) on Investments.................... (8,200) 2,807,965 1,509,092
--------- ---------- ----------- ----------
Net Increase in Net Assets Resulting from
Operations...................................... $ 497,953 $3,668,403 $ 89,652 $1,589,261
--------- ---------- ----------- ----------
--------- ---------- ----------- ----------
</TABLE>
13
<PAGE>
FBL SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
GROWTH
COMMON STOCK
PORTFOLIO
------------------------
YEAR ENDED JULY 31,
1996 1995
----------- -----------
<S> <C> <C>
OPERATIONS
Net investment income............................. $ 1,506,458 $ 2,285,143
Net realized gain (loss) from investment
transactions.................................... 11,563,616 2,239,764
Change in unrealized appreciation/depreciation of
investments..................................... 6,359 1,538,922
----------- -----------
Net Increase in Net Assets Resulting from
Operations...................................... 13,076,433 6,063,829
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
(NOTE 6)
Net investment income............................. (2,469,514) (1,942,351)
Net realized gain from investment transactions.... (1,454,239) (3,592,463)
Distributions in excess of net realized gain from
investment transactions.........................
----------- -----------
(3,923,753) (5,534,814)
CAPITAL SHARE TRANSACTIONS (NOTE 4)............... 6,434,694 6,102,860
CONTRIBUTION FROM AFFILIATE (NOTE 3)..............
----------- -----------
Total Increase (Decrease) in Net Assets........... 15,587,374 6,631,875
NET ASSETS
Beginning of year................................. 70,946,503 64,314,628
----------- -----------
End of year (including undistributed net
investment income as set forth below)........... $86,533,877 $70,946,503
----------- -----------
----------- -----------
Undistributed Net Investment Income............... $ 494,106 $ 1,457,162
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
---------------------- ----------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income............................. $ 541,191 $ 495,667 $ 506,153 $ 499,603
Net realized gain (loss) from investment
transactions.................................... 8,240 (33,881) 99,065 10,149
Change in unrealized appreciation/depreciation of
investments..................................... (94,954) 170,813 (107,265) 87,294
---------- ---------- ---------- ----------
Net Increase in Net Assets Resulting from
Operations...................................... 454,477 632,599 497,953 597,046
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
(NOTE 6)
Net investment income............................. (541,191) (495,667) (506,153) (499,603)
Net realized gain from investment transactions.... (21,547) (59,344)
Distributions in excess of net realized gain from
investment transactions......................... (24,669) (7,192)
---------- ---------- ---------- ----------
(541,191) (520,336) (527,700) (566,139)
CAPITAL SHARE TRANSACTIONS (NOTE 4)............... 863,859 636,952 688,604 234,188
CONTRIBUTION FROM AFFILIATE (NOTE 3)..............
---------- ---------- ---------- ----------
Total Increase (Decrease) in Net Assets........... 777,145 749,215 658,857 265,095
NET ASSETS
Beginning of year................................. 8,345,029 7,595,814 6,690,507 6,425,412
---------- ---------- ---------- ----------
End of year (including undistributed net
investment income as set forth below)........... $9,122,174 $8,345,029 $7,349,364 $6,690,507
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Undistributed Net Investment Income............... $ 0 $ 0 $ 0 $ 0
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
15
<PAGE>
FBL SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
------------------------
YEAR ENDED JULY 31,
1996 1995
----------- -----------
<S> <C> <C>
OPERATIONS
Net investment income............................. $ 860,437 $ 961,614
Net realized gain from investment transactions.... 2,276,504 176,989
Change in unrealized appreciation/depreciation of
investments..................................... 531,462 671,828
----------- -----------
Net Increase in Net Assets Resulting from
Operations...................................... 3,668,403 1,810,431
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
(NOTE 6)
Net investment income............................. (861,221) (963,801)
Net realized gain from investment transactions.... (188,116) (239,223)
Distributions in excess of net realized gain from
investment transactions......................... (161,255)
----------- -----------
(1,049,337) (1,364,279)
CAPITAL SHARE TRANSACTIONS (NOTE 4)............... 3,700,902 1,558,373
CONTRIBUTION FROM AFFILIATE (NOTE 3).............. 44,982
----------- -----------
Total Increase (Decrease) in Net Assets........... 6,364,950 2,004,525
NET ASSETS
Beginning of year................................. 21,104,826 19,100,301
----------- -----------
End of year (including undistributed net
investment income as set forth below)........... $27,469,776 $21,104,826
----------- -----------
----------- -----------
Undistributed Net Investment Income............... $ 488 $ 1,272
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
16
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
---------------------- -----------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
1996 1995 1996 1995
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income............................. $ 89,652 $ 87,948 $ 80,169 $ 72,767
Net realized gain from investment transactions.... 187,256 80
Change in unrealized appreciation/depreciation of
investments..................................... 1,321,836 1,636,574
---------- ---------- ----------- ----------
Net Increase in Net Assets Resulting from
Operations...................................... 89,652 87,948 1,589,261 1,709,421
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
(NOTE 6)
Net investment income............................. (89,652) (87,948) (87,281) (53,615)
Net realized gain from investment transactions....
Distributions in excess of net realized gain from
investment transactions.........................
---------- ---------- ----------- ----------
(89,652) (87,948) (87,281) (53,615)
CAPITAL SHARE TRANSACTIONS (NOTE 4)............... 112,704 (187,752) 3,481,955 1,256,850
CONTRIBUTION FROM AFFILIATE (NOTE 3)..............
---------- ---------- ----------- ----------
Total Increase (Decrease) in Net Assets........... 112,704 (187,752) 4,983,935 2,912,656
NET ASSETS
Beginning of year................................. 2,438,850 2,626,602 9,657,271 6,744,615
---------- ---------- ----------- ----------
End of year (including undistributed net
investment income as set forth below)........... $2,551,554 $2,438,850 $14,641,206 $9,657,271
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Undistributed Net Investment Income............... $ 0 $ 0 $ 34,363 $ 41,475
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
17
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
GROWTH COMMON STOCK PORTFOLIO
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
COMMON STOCKS (70.56%)
CHEMICALS AND ALLIED PRODUCTS (4.94%)
R.P. Scherer Corp........................................... 100,000(1) $ 4,275,000
COMMUNICATIONS (4.61%)
Lincoln Telecommunications Co............................... 245,500 3,989,375
DEPOSITORY INSTITUTIONS (3.19%)
CU Bancorp.................................................. 251,000 2,761,000
ELECTRIC, GAS AND SANITARY SERVICES (17.32%)
Citizens Utilities Co., Class B............................. 375,905 4,181,943
Howell Corp................................................. 198,600 2,780,400
Ferrellgas Partners, L.P.................................... 112,300 2,512,713
Montana Power Co............................................ 185,000 3,908,125
Western Gas Resources, Inc.................................. 108,800 1,604,800
-----------
14,987,981
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (5.10%)
Applied Materials, Inc...................................... 185,000(1) 4,416,875
FURNITURE AND FIXTURES (4.69%)
Ladd Furniture, Inc......................................... 369,017 4,059,187
HOLDING AND OTHER INVESTMENT OFFICES (5.69%)
General Growth Properties, Inc.............................. 200,000 4,925,000
INSTRUMENTS AND RELATED PRODUCTS (4.04%)
Pall Corp................................................... 145,000 3,498,125
INSURANCE CARRIERS (5.00%)
EMC Insurance Group, Inc.................................... 353,100 4,325,475
MOTION PICTURES (3.86%)
Disney (Walt) Co............................................ 60,000 3,337,500
NONDEPOSITORY INSTITUTIONS (0.36%)
Berkshire Hathaway, Inc..................................... 10(1) 309,000
PRINTING & PUBLISHING (2.23%)
Belo (A.H.) Corp............................................ 48,000 1,932,000
STONE, CLAY AND GLASS PRODUCTS (3.87%)
Lafarge Corp................................................ 183,700 3,352,525
</TABLE>
18
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH COMMON STOCK PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- -----------
<S> <C> <C>
TRANSPORTATION -- BY AIR (4.21%)
Petroleum Helicopters, Inc. (Non-Voting).................... 234,300 $ 3,455,925
Petroleum Helicopters, Inc. (Voting)........................ 12,350 185,250
-----------
3,641,175
WHOLESALE TRADE -- DURABLE GOODS (0.32%)
TBC Corporation............................................. 40,000(1) 275,000
WHOLESALE TRADE -- NONDURABLE GOODS (1.13%)
Super Valu Stores, Inc...................................... 35,000 975,625
-----------
Total Common Stocks........................................... 61,060,843
PREFERRED STOCKS (18.69%)
DEPOSITORY INSTITUTIONS (8.20%)
Community First Bankshares, Inc., Convertible............... 118,000 4,218,500
Sterling Financial Corp..................................... 99,300 2,879,700
-----------
7,098,200
ELECTRIC, GAS AND SANITARY SERVICES (0.78%)
Howell Corp................................................. 13,900 679,363
INSTRUMENTS AND RELATED PRODUCTS (3.93%)
US Surgical Corp............................................ 100,000 3,400,000
OIL AND GAS EXTRACTION (1.57%)
Chieftain International, Inc., Convertible.................. 50,200 1,355,400
WATER TRANSPORTATION (4.21%)
Sea Containers, Ltd., Convertible........................... 78,750 3,642,187
-----------
Total Preferred Stocks........................................ 16,175,150
<CAPTION>
PRINCIPAL
AMOUNT
-------------
<S> <C> <C>
CORPORATE BONDS (5.46%)
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (2.43%)
California Microwave, Convertible Sub. Deb., 5.25%, due
12/15/03.................................................. $ 2,600,000 2,099,500
HOLDING AND OTHER INVESTMENT OFFICES (3.03%)
Centennial Bancorp, Convertible Sub. Deb., 7.00%, due
5/01/04................................................... 2,073,000 2,623,775
-----------
Total Corporate Bonds......................................... 4,723,275
</TABLE>
19
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
GROWTH COMMON STOCK PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (4.61%)
UNITED STATES GOVERNMENT AGENCY (2.30%)
Federal Home Loan Mortgage Corp., due 9/12/96............... $ 2,000,000 $ 1,987,676
MONEY MARKET MUTUAL FUND (2.31%)
Dreyfus Treasury Cash Management, Class A................... 2,000,000 2,000,000
-----------
Total Short-Term Investments.................................. 3,987,676
-----------
Total Investments (99.32%).................................... 85,946,944
OTHER ASSETS LESS LIABILITIES (0.68%)
Cash, receivables and prepaid expense, less liabilities..... 586,933
-----------
Total Net Assets (100.00%).................................... $86,533,877
-----------
-----------
</TABLE>
(1) Non-income producing security.
SEE ACCOMPANYING NOTES.
20
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO
JULY 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
CORPORATE BONDS (70.29%)
APPAREL AND ACCESSORY STORES (4.04%)
TJX Companies, Inc., 9.50%, due 5/01/16.......................... $ 350,000 $ 368,690
COMMUNICATIONS (6.46%)
Hawaiian Telephone Co., 8.00%, due 9/01/01....................... 250,000 249,543
Pacific Telephone & Telegraph Co., 7.25%, due 2/01/08............ 350,000 339,542
----------
589,085
DEPOSITORY INSTITUTIONS (8.60%)
Midland America Capital Corp., 12.75%, due 11/15/03.............. 175,000 196,716
J.P. Morgan & Co., 7.25%, due 10/01/10........................... 350,000 337,165
Norwest Corp., 9.25%, due 5/01/97................................ 100,000 102,417
Third National Bank, 7.50%, due 11/15/02......................... 147,000 148,339
----------
784,637
ELECTRIC, GAS AND SANITARY SERVICES (12.44%)
MDU Resources Group, Inc., 9.125%, due 10/01/16.................. 200,000 213,350
New England Power Co., 8.00%, due 8/01/22........................ 400,000 394,004
Texas Eastern Transmission, 10.00%, due 10/01/11................. 150,000 158,503
Western Penn Power, 7.875%, due 12/01/04......................... 360,000 368,791
----------
1,134,648
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (2.75%)
Harris Corp., 7.75%, due 12/15/01................................ 250,000 251,347
FOOD AND KINDRED PRODUCTS (5.46%)
Anheuser-Busch Companies, Inc., 8.50%, due 3/01/17............... 133,000 137,780
Sara Lee Corp., 8.75%, due 5/15/16............................... 350,000 360,063
----------
497,843
GENERAL MERCHANDISE STORES (3.43%)
Dayton-Hudson Corporation, 9.25%, due 11/15/16................... 300,000 312,798
HOLDING AND OTHER INVESTMENT OFFICES (7.84%)
Federal Realty Investment Trust, 8.875%, due 1/15/00............. 350,000 365,873
Meditrust, 7.60%, due 9/13/05.................................... 350,000 349,717
----------
715,590
INSURANCE CARRIERS (3.69%)
Torchmark Corporation, 8.625%, due 3/01/17....................... 225,000 232,402
Torchmark Corporation, 9.625%, due 5/01/98....................... 100,000 104,569
----------
336,971
</TABLE>
21
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
OIL AND GAS EXTRACTION (2.49%)
Burlington Resources, Inc., 9.125%, due 10/01/21................. $ 200,000 $ 226,746
PETROLEUM AND COAL PRODUCTS (0.88%)
Pennzoil Co., 9.00%, due 4/01/17................................. 77,000 80,125
PRINTING AND PUBLISHING (3.36%)
Valassis Communications, Inc., 9.55%, due 12/01/03............... 300,000 306,246
RAILROAD TRANSPORTATION (4.00%)
Union Pacific Corp., 8.50%, due 1/15/17.......................... 350,000 364,693
SECURITY AND COMMODITY BROKERS (2.29%)
Lehman Brothers Holdings, Inc., 8.875%, due 11/01/98............. 200,000 208,516
TRANSPORTATION EQUIPMENT (2.56%)
Ford Motor Credit Co., 9.50%, due 9/15/11........................ 200,000 234,014
----------
Total Corporate Bonds.............................................. 6,411,949
ASSET-BACKED SECURITY (3.56%)
Federal Home Loan Mortgage Corp., 10.15%, due 4/15/06............ 320,608 325,090
MORTGAGE-BACKED SECURITIES (16.44%)
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) (0.71%)
Pool # 503442, 9.50%, due 7/01/05................................ 62,182 64,397
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (15.73%)
Pool # 144332, 9.00%, due 7/15/16................................ 45,150 47,774
Pool # 194692, 8.00%, due 5/15/17................................ 632,312 643,934
Pool # 236070, 10.00%, due 10/15/12.............................. 614,623 658,218
Pool # 307097, 9.00%, due 7/15/21................................ 80,969 85,219
----------
1,435,145
----------
Total Mortgage-Backed Securities................................... 1,499,542
SHORT-TERM INVESTMENTS (7.35%)
UNITED STATES GOVERNMENT AGENCIES
Federal Home Loan Bank, due 8/30/96.............................. 225,000 224,054
Federal Home Loan Mortgage Corp., due 9/26/96.................... 450,000 446,303
----------
Total Short-Term Investments....................................... 670,357
----------
Total Investments (97.64%)......................................... 8,906,938
</TABLE>
22
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH GRADE BOND PORTFOLIO
<TABLE>
<CAPTION>
VALUE
----------
<S> <C> <C>
OTHER ASSETS LESS LIABILITIES (2.36%)
Cash, receivables and prepaid expense, less liabilities.......... $ 215,236
----------
Total Net Assets (100.00%)......................................... $9,122,174
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
23
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
JULY 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
CORPORATE BONDS (93.00%)
AGRICULTURAL PRODUCTION -- CROPS (2.17%)
Chiquita Brands International, Inc., 11.50%, due 6/01/01........ $ 150,000 $ 159,188
AMUSEMENT AND RECREATION SERVICES (3.54%)
AMF Group, Inc., 10.875%, due 3/15/06........................... 260,000 260,325
APPAREL AND ACCESSORY STORES (4.92%)
Genesco, Inc., 10.375%, due 2/01/03............................. 150,000 150,750
TJX Companies, Inc., 9.50%, due 5/01/16......................... 200,000 210,680
----------
361,430
APPAREL AND OTHER TEXTILE PRODUCTS (6.47%)
Dan River, Inc., 10.125%, due 12/15/03.......................... 280,000 270,900
Fieldcrest Cannon, Inc., 11.25%, due 6/15/04.................... 200,000 204,500
----------
475,400
AUTO REPAIR, SERVICES AND PARKING (1.56%)
Envirotest Systems Corp., 9.625%, due 4/01/03................... 150,000 114,750
BUSINESS SERVICES (3.21%)
Borg-Warner Corp., 9.125%, due 5/01/03.......................... 250,000 236,250
COMMUNICATIONS (3.55%)
Panamsat, L.P., 9.75%, due 8/01/00.............................. 250,000 260,625
ELECTRIC, GAS AND SANITARY SERVICES (8.68%)
Montana Power Co., 7.50%, due 1/01/98........................... 136,000 136,783
New England Power Co., 8.00%, due 8/01/22....................... 250,000 246,252
Public Service Company of New Mexico, 5.875%, due 5/01/97....... 150,000 148,953
Texas Eastern Transmission Corp., 10.00%, due 10/01/11.......... 100,000 105,669
----------
637,657
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (2.99%)
Amphenol Corp., 12.75%, due 12/15/02............................ 200,000 220,000
FABRICATED METAL PRODUCTS (6.77%)
Jorgensen (Earle M.) Co., 10.75%, due 3/01/00................... 200,000 199,000
Ryerson Tull, Inc. 9.125%, due 7/15/06.......................... 300,000 298,875
----------
497,875
</TABLE>
24
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
FOOD STORES (4.42%)
P&C Food Markets, Inc., 11.50%, due 10/15/01.................... $ 150,000 $ 142,125
Penn Traffic Co., 10.25%, due 2/15/02........................... 200,000 182,500
----------
324,625
GENERAL MERCHANDISE STORES (4.38%)
Federated Department Stores, Inc., 10.00%, due 2/15/01.......... 300,000 321,813
INSURANCE CARRIERS (4.22%)
Torchmark Corp., 8.625%, due 3/01/17............................ 300,000 309,870
LUMBER AND WOOD PRODUCTS (8.22%)
Georgia-Pacific Corp., 9.875%, due 11/01/21..................... 330,000 358,997
Pacific Lumber Co., 10.50%, due 3/01/03......................... 250,000 245,000
----------
603,997
MISCELLANEOUS RETAIL (4.09%)
Eckerd Corp., 9.25%, due 2/15/04................................ 295,000 300,900
PAPER AND ALLIED PRODUCTS (3.38%)
Container Corp. of America, 9.75%, due 4/01/03.................. 250,000 248,125
PETROLEUM AND COAL PRODUCTS (2.47%)
Clark Oil & Refining Corp., 10.50%, due 12/01/01................ 175,000 181,563
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (3.84%)
Foamex, L.P., 9.50%, due 6/01/00................................ 182,000 182,910
Plastic Specialties & Technologies, Inc., 11.25%, due
12/01/03...................................................... 100,000 99,500
----------
282,410
STONE, CLAY AND GLASS PRODUCTS (6.43%)
Owens-Illinois, Inc., 11.00%, due 12/01/03...................... 200,000 216,500
USG Corp., 9.25%, due 9/15/01................................... 250,000 256,250
----------
472,750
TEXTILE MILL PRODUCTS (0.84%)
Bibb Co. (The), 14.00%, due 10/01/99............................ 125,000(1) 62,031
TRANSPORTATION EQUIPMENT (2.77%)
Preston Corp., 7.00%, due 5/01/11............................... 306,000 203,490
WATER TRANSPORTATION (4.08%)
Moran Transport Co., 11.75%, due 7/15/04........................ 300,000 300,000
----------
Total Corporate Bonds............................................. 6,835,074
</TABLE>
25
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
HIGH YIELD BOND PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENT (3.05%)
UNITED STATES GOVERNMENT AGENCY
Federal Home Loan Mortgage Corp., due 9/03/96................... $ 225,000 $ 223,894
----------
Total Investments (96.05%)........................................ 7,058,968
OTHER ASSETS LESS LIABILITIES (3.95%)
Cash, receivables and prepaid expense, less liabilities......... 290,396
----------
Total Net Assets (100.00%)........................................ $7,349,364
----------
----------
</TABLE>
(1) Company has been in default since the April 1, 1995 interest payment.
SEE ACCOMPANYING NOTES.
26
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (33.06%)
COMMUNICATIONS (2.49%)
Lincoln Telecommunications Co................................. 42,000 $ 682,500
DEPOSITORY INSTITUTIONS (0.92%)
Columbia Banking System, Inc.................................. 16,098 253,544
ELECTRIC, GAS AND SANITARY SERVICES (16.88%)
Citizens Utilities Co., Class B............................... 113,792 1,265,936
Montana Power Co.............................................. 57,600 1,216,800
Peoples Energy Corp........................................... 30,000 933,750
Western Gas Resources, Inc.................................... 82,800 1,221,300
-----------
4,637,786
HOLDING AND OTHER INVESTMENT OFFICES (5.29%)
General Growth Properties, Inc................................ 59,000 1,452,875
INSURANCE CARRIERS (4.68%)
EMC Insurance Group, Inc...................................... 105,000 1,286,250
MISCELLANEOUS RETAIL (2.80%)
Ferrellgas Partners, L.P...................................... 34,400 769,700
-----------
Total Common Stocks............................................. 9,082,655
PREFERRED STOCKS (28.64%)
DEPOSITORY INSTITUTIONS (6.24%)
Community First Bankshares, Inc., Convertible................. 33,000 1,179,750
Sterling Financial Corp....................................... 18,450 535,050
-----------
1,714,800
GAS PRODUCTION AND DISTRIBUTION (0.09%)
Western Gas Resources, Inc.................................... 1,000 24,625
HOLDING AND OTHER INVESTMENT OFFICES (2.46%)
Security Capital Industrial Trust............................. 29,000 674,250
INSTRUMENTS AND RELATED PRODUCTS (4.95%)
US Surgical Corp.............................................. 40,000 1,360,000
PETROLEUM AND COAL PRODUCTS (3.90%)
Ashland Oil Co................................................ 18,000 1,071,000
WATER TRANSPORTATION (3.87%)
Sea-Containers, Ltd., Convertible............................. 23,000 1,063,750
</TABLE>
27
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
WHOLESALE TRADE -- DURABLE GOODS (3.61%)
Kaman Corp.................................................... 20,000 $ 990,000
WHOLESALE TRADE -- NONDURABLE GOODS (3.52%)
Howell Corp................................................... 19,800 967,725
-----------
Total Preferred Stocks.......................................... 7,866,150
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
CORPORATE BONDS (15.92%)
COMMUNICATIONS (0.38%)
Hawaiian Telephone Co., 8.00%, due 9/01/01.................... $ 105,000 104,808
ELECTRIC, GAS AND SANITARY SERVICES (0.54%)
National Co-op Services Corp. (Arkansas Electric), 9.48%, due
1/01/12..................................................... 140,000 148,015
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (4.41%)
California Microwave, Inc., 5.25%, due 12/15/03............... 1,500,000 1,211,250
FOOD AND KINDRED PRODUCTS (1.04%)
Anheuser-Busch Companies, Inc., 8.50%, due 3/01/17............ 77,000 79,767
Sara Lee Corp., 8.75%, due 5/15/16............................ 200,000 205,750
-----------
285,517
HOLDING AND OTHER INVESTMENT OFFICES (2.80%)
Centennial Bancorp, Convertible Sub. Deb., 7.00%, due
5/01/04..................................................... 608,000 769,540
INSURANCE CARRIERS (0.94%)
Torchmark Corp., 8.625%, due 3/01/17.......................... 250,000 258,225
PETROLEUM AND COAL PRODUCTS (0.51%)
Pennzoil Co., 9.00%, due 4/01/17.............................. 133,000 138,397
PRIMARY METAL INDUSTRIES (4.54%)
Quanex Corp., 6.88%, due 6/30/07.............................. 1,300,000 1,248,000
RAILROAD TRANSPORTATION (0.76%)
Union Pacific Corp., Sinking Fund Deb., 8.50%, due 1/15/17.... 200,000 208,396
-----------
Total Corporate Bonds........................................... 4,372,148
SHORT-TERM INVESTMENTS (21.81%)
COMMERCIAL PAPER (7.37%)
Ford Motor Credit Corp., 5.31%, due 8/22/96................... 1,100,000 1,100,000
General Electric Capital Corp., 5.41%, due 8/01/96............ 925,000 925,000
-----------
2,025,000
</TABLE>
28
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
MANAGED PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
MONEY MARKET MUTUAL FUND (3.35%)
Dreyfus Treasury Cash Management, Class A..................... $ 920,000 $ 920,000
UNITED STATES GOVERNMENT AGENCIES (11.09%)
Federal Home Loan Bank, due 8/07/96........................... 1,550,000 1,548,623
Federal Home Loan Mortgage Corp., due 8/12/96................. 1,500,000 1,497,597
-----------
3,046,220
-----------
Total Short-Term Investments.................................... 5,991,220
-----------
Total Investments (99.43%)...................................... 27,312,173
OTHER ASSETS LESS LIABILITIES (0.57%)
Cash, receivables and prepaid expense, less liabilities....... 157,603
-----------
Total Net Assets (100.00%)...................................... $27,469,776
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
29
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
JULY 31, 1996
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON PRINCIPAL
PURCHASE DATE AMOUNT VALUE
------------- ----------- ----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (97.53%)
COMMERCIAL PAPER (13.72%)
NONDEPOSITORY INSTITUTIONS
American General Finance Corp., due 9/16/96......... 5.412% $ 125,000 $ 125,000
Ford Motor Credit Corp., due 8/12/96................ 5.329 100,000 100,000
General Electric Capital Corp., due 10/24/96........ 5.459 125,000 125,000
----------
Total Commercial Paper................................ 350,000
UNITED STATES GOVERNMENT AGENCIES (83.81%)
Federal Farm Credit Bank, due 9/05/96............... 5.433 200,000 198,963
Federal Home Loan Bank, due 8/20/96................. 5.332 300,000 299,170
Federal Home Loan Mortgage Corp., due 9/03/96....... 5.446 300,000 298,530
Federal Home Loan Mortgage Corp., due 10/11/96...... 5.472 225,000 222,630
Federal Home Loan Mortgage Corp., due 10/18/96...... 5.463 175,000 172,980
Federal National Mortgage Assoc., due 8/06/96....... 5.374 475,000 474,651
Federal National Mortgage Assoc., due 9/11/96....... 5.456 200,000 198,782
Federal National Mortgage Assoc., due 9/24/96....... 5.486 275,000 272,786
----------
Total United States Government Agencies............... 2,138,492
----------
Total Investments (97.53%).............................. 2,488,492
OTHER ASSETS LESS LIABILITIES (2.47%)
Cash, receivables and prepaid expense, less
liabilities......................................... 63,062
----------
Total Net Assets (100.00%).............................. $2,551,554
----------
----------
</TABLE>
SEE ACCOMPANYING NOTES.
30
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO
JULY 31, 1996
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- -----------
<S> <C> <C>
COMMON STOCKS (89.67%)
CHEMICALS AND ALLIED PRODUCTS (17.42%)
Bristol-Myers Squibb Co....................................... 3,127 $ 270,876
DuPont (EI) de Nemours & Co................................... 4,071 328,733
Eastman Chemical Co........................................... 2,571 134,335
Johnson & Johnson............................................. 8,720 416,380
Merck & Co., Inc.............................................. 5,573 358,065
Praxair, Inc.................................................. 9,261 355,391
Procter & Gamble Co........................................... 3,807 340,251
Union Carbide Corp............................................ 8,259 346,878
-----------
2,550,909
COMMUNICATIONS (3.25%)
American Telephone & Telegraph Co............................. 4,534 236,335
Bell Atlantic Corp............................................ 4,047 239,279
-----------
475,614
DEPOSITORY INSTITUTIONS (1.97%)
Morgan JP & Co., Inc.......................................... 3,353 288,358
EATING AND DRINKING PLACES (2.62%)
McDonald's Corp............................................... 8,279 383,939
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (2.57%)
General Electric Co........................................... 4,456 367,063
Imation Corporation........................................... 408(1) 9,282
-----------
376,345
FOOD AND KINDRED PRODUCTS (8.63%)
Coca-Cola Co. (The)........................................... 11,488 538,500
PepsiCo, Inc.................................................. 11,636 367,988
Philip Morris Companies, Inc.................................. 3,413 357,085
-----------
1,263,573
GENERAL MERCHANDISE STORES (4.48%)
Sears, Roebuck & Co........................................... 5,198 213,118
Wal-Mart Stores, Inc.......................................... 10,412 249,888
Woolworth (F.W.) Co. Ltd...................................... 10,033(1) 193,135
-----------
656,141
</TABLE>
31
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- -----------
<S> <C> <C>
INDUSTRIAL MACHINERY AND EQUIPMENT (4.28%)
Caterpillar, Inc.............................................. 5,829 $ 383,985
International Business Machines Corp.......................... 2,245 242,180
-----------
626,165
INSTRUMENTS AND RELATED PRODUCTS (2.18%)
Eastman Kodak Co.............................................. 4,285 319,768
INSURANCE CARRIERS (4.30%)
Allstate Corp................................................. 5,068 226,793
American International Group, Inc............................. 4,276 402,479
-----------
629,272
MOTION PICTURES (2.00%)
Disney (Walt) Co.............................................. 5,256 292,365
NONDEPOSITORY INSTITUTIONS (1.20%)
Dean Witter, Discover & Co.................................... 3,465 176,282
PAPER AND ALLIED PRODUCTS (3.52%)
International Paper Co........................................ 6,582 249,293
Minnesota Mining & Manufacturing Co........................... 4,084 265,460
-----------
514,753
PETROLEUM AND COAL PRODUCTS (10.67%)
Amoco Corp.................................................... 3,586 239,814
Chevron Corp.................................................. 4,881 282,488
Exxon Corp.................................................... 3,471 285,489
Mobil Corp.................................................... 2,671 294,812
Texaco, Inc................................................... 3,183 270,555
USX Corp. -- Marathon Group................................... 9,234 189,297
-----------
1,562,455
PRIMARY METAL INDUSTRIES (2.99%)
Aluminum Company of America................................... 5,242 304,036
Bethlehem Steel Corp.......................................... 13,411(1) 134,110
-----------
438,146
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (2.65%)
Goodyear Tire & Rubber Co..................................... 8,787 388,825
</TABLE>
32
<PAGE>
FBL SERIES FUND, INC.
SCHEDULE OF INVESTMENTS (CONTINUED)
BLUE CHIP PORTFOLIO
<TABLE>
<CAPTION>
SHARES
HELD VALUE
----------- -----------
<S> <C> <C>
SECURITY AND COMMODITY BROKERS (2.67%)
American Express Co........................................... 6,272 $ 274,400
Lehman Brothers Holding, Inc.................................. 5,024 116,180
-----------
390,580
TRANSPORTATION EQUIPMENT (11.07%)
Allied-Signal, Inc............................................ 7,852 461,305
Boeing Co. (The).............................................. 3,701 327,538
Ford Motor Co................................................. 8,288 269,360
General Motors Corp........................................... 4,356 212,355
United Technologies Corp...................................... 3,105 349,701
-----------
1,620,259
WHOLESALE TRADE -- DURABLE GOODS (1.20%)
Westinghouse Electric Corp.................................... 10,457 175,155
-----------
Total Common Stocks............................................. 13,128,904
<CAPTION>
PRINCIPAL
AMOUNT
-----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (9.39%)
UNITED STATES GOVERNMENT AGENCIES
Federal Farm Credit Bank, due 8/01/96......................... $ 475,000 475,000
Federal Home Loan Mortgage Corp., due 8/02/96................. 900,000 899,870
-----------
Total Short-Term Investments.................................... 1,374,870
-----------
Total Investments (99.06%)...................................... 14,503,774
OTHER ASSETS LESS LIABILITIES (0.94%)
Cash, receivables and prepaid expense, less liabilities....... 137,432
-----------
Total Net Assets (100.00%)...................................... $14,641,206
-----------
-----------
</TABLE>
(1) Non-income producing security.
SEE ACCOMPANYING NOTES.
33
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
FBL Series Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end, diversified management
investment company and operates in the mutual fund industry. The Fund consists
of six portfolios (known as the Growth Common Stock, High Grade Bond, High Yield
Bond, Managed, Money Market and Blue Chip Portfolios).
All portfolios, other than the Money Market Portfolio, value their common
stocks, corporate bonds, United States Treasury obligations and mortgage-backed
securities that are traded on any national exchange at the last sale price on
the day of valuation or, lacking any sales, at the mean between the closing bid
and asked prices. Investments traded in the over-the-counter market are valued
at the mean between the bid and asked prices or yield equivalent as obtained
from one or more dealers that make markets in the securities. Investments for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Directors. Short-term investments
(including repurchase agreements) are valued at market value, except that
obligations maturing in 60 days or less are valued using the amortized cost
method of valuation described below with respect to the Money Market Portfolio,
which approximates market.
The Money Market Portfolio values investments at amortized cost, which
approximates market. Under the amortized cost method, a security is valued at
its cost on the date of purchase and thereafter is adjusted to reflect a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the investment to the portfolio.
The value of the underlying securities serving to collateralize repurchase
agreements is marked to market daily. Should the value of the underlying
securities decline, the seller would be required to provide the applicable
portfolio with additional securities so that the aggregate value of the
underlying securities was at least equal to the repurchase price. If a seller of
a repurchase agreement were to default, the affected portfolio might experience
losses in enforcing its rights. To minimize this risk, the investment adviser
(under the supervision of the Board of Directors) will monitor the
creditworthiness of the seller of the repurchase agreement and must find such
creditworthiness satisfactory before a portfolio may enter into the repurchase
agreement.
The Fund records investment transactions generally one day after the trade
date. The identified cost basis has been used in determining the net realized
gain or loss from investment transactions and unrealized appreciation or
depreciation on investments. Dividends are taken into income on an accrual basis
as of the ex-dividend date and interest is recognized on an accrual basis.
Discounts and premiums on investments purchased are amortized over the life of
the respective investments.
Dividends and distributions to shareholders are recorded on the record date.
2. FEDERAL INCOME TAXES
No provision for federal income taxes is considered necessary because the
Fund is qualified as a "regulated investment company" under the Internal Revenue
Code and intends to distribute each year substantially all of its net investment
income and realized capital gains to shareholders. The cost of investments is
the same for both federal income tax and financial reporting purposes.
34
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. FEDERAL INCOME TAXES (CONTINUED)
At July 31, 1996, the High Grade Bond Portfolio had a net capital loss
carryforward of approximately $31,000, which will expire in 2003.
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into agreements with FBL Investment Advisory Services,
Inc. ("FBL Investment") relating to the management of the portfolios and the
investment of their assets. Pursuant to these agreements, fees paid to FBL
Investment are as follows: (1) annual investment advisory and management fees,
which are based on each portfolio's daily net assets as follows: Growth Common
Stock Portfolio - 0.50%; High Grade Bond Portfolio - 0.40%; High Yield Bond
Portfolio - 0.55%; Managed Portfolio - 0.60%; Money Market Portfolio - 0.40% and
Blue Chip Portfolio - 0.25%; (2) distribution fees, which are computed at an
annual rate of 0.50% of each portfolio's average daily net asset value and, in
part, are subsequently remitted by FBL Investment to retail dealers including
FBL Marketing Services, Inc. ("FBL Marketing"), an affiliate who serves as
principal dealer; (3) administrative service fees, which are computed at an
annual rate of 0.25% of each portfolio's average daily net asset value; (4)
shareholder service, transfer and dividend disbursing agent fees, which are
based on direct services provided and expenses incurred by the investment
adviser, plus an annual per account charge ranging from $7.00 to $9.00, with an
annual minimum account maintenance fee of $12,000 per portfolio; and (5)
accounting fees, which are based on each portfolio's daily net assets at an
annual rate of 0.05%, with a maximum per portfolio annual expense of $30,000.
FBL Investment has agreed to reimburse the portfolios annually for total
expenses (excluding brokerage, interest, taxes, the distribution fee and
extraordinary expenses) in excess of 1.50% of each portfolio's average daily net
assets. The amount reimbursed, however, shall not exceed the amount of the
investment advisory and management fees paid by the portfolio for such period.
During the year ended July 31, 1996, FBL Investment voluntarily reimbursed
the Managed Portfolio for losses relating to the sale of a restricted security
in the amount of $44,982. The transaction was recorded as a realized capital
loss and an offsetting capital contribution from an affiliate.
Certain officers and directors of the Fund are also officers of Farm Bureau
Life Insurance Company, FBL Investment, FBL Marketing and other affiliated
entities. At July 31, 1996, Farm Bureau Life Insurance Company, the indirect
parent of FBL Investment and FBL Marketing, owned shares of the Fund's
portfolios as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES
- --------------------------------------------------------------- ----------
<S> <C>
High Yield Bond................................................ 75,129
Money Market................................................... 1,910,602
</TABLE>
FBL Investment also owned shares of the Growth Common Stock Portfolio
aggregating 69,178 at July 31, 1996.
35
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS
Net assets as of July 31, 1996 consisted of:
<TABLE>
<CAPTION>
PORTFOLIO
-------------------------------------------------------------------------
GROWTH HIGH
COMMON HIGH GRADE YIELD MONEY BLUE
STOCK BOND BOND MANAGED MARKET CHIP
----------- ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Capital Stock (5,000,000,000 shares of $.001
par value Capital Stock authorized)......... $ 5,894 $ 898 $ 736 $ 2,061 $ 2,653 $ 557
Additional paid-in capital.................... 73,419,617 9,027,557 7,389,460 24,489,773 2,548,901 9,734,104
Accumulated undistributed net investment
income...................................... 494,106 488 34,363
Accumulated undistributed net realized gain
(loss) from investment transactions......... 10,297,817 (30,508) 70,326 1,972,115 182,872
Net unrealized appreciation (depreciation) of
investments................................. 2,316,443 124,227 (111,158) 1,005,339 4,689,310
----------- ---------- ---------- ----------- ---------- -----------
Net Assets.................................... $86,533,877 $9,122,174 $7,349,364 $27,469,776 $2,551,554 $14,641,206
----------- ---------- ---------- ----------- ---------- -----------
----------- ---------- ---------- ----------- ---------- -----------
</TABLE>
Transactions in Capital Stock for each portfolio were as follows:
<TABLE>
<CAPTION>
SHARES ISSUED IN
REINVESTMENT OF
DIVIDENDS AND NET INCREASE
SHARES SOLD DISTRIBUTIONS SHARES REDEEMED (DECREASE)
--------------------- --------------------- --------------------- ----------------------
PORTFOLIO SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------ --------- ---------- --------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended July 31, 1996:
Growth Common Stock........... 676,503 $9,680,344 272,420 $3,830,226 496,485 $7,075,876 452,438 $6,434,694
High Grade Bond............... 145,140 1,486,070 40,458 415,105 101,202 1,037,316 84,396 863,859
High Yield Bond............... 158,195 1,581,316 36,061 360,220 125,359 1,252,932 68,897 688,604
Managed....................... 388,866 5,132,422 72,358 945,921 180,489 2,377,441 280,735 3,700,902
Money Market.................. 524,983 524,983 20,508 20,508 432,787 432,787 112,704 112,704
Blue Chip..................... 176,665 4,548,977 3,471 85,480 45,260 1,152,502 134,876 3,481,955
Year Ended July 31, 1995:
Growth Common Stock........... 456,086 $5,716,180 465,616 $5,401,147 399,968 $5,014,467 521,734 $6,102,860
High Grade Bond............... 97,267 947,943 37,987 400,616 71,483 711,607 63,771 636,952
High Yield Bond............... 85,943 872,956 35,880 351,724 97,585 990,492 24,238 234,188
Managed....................... 206,561 2,362,969 107,958 1,216,938 178,193 2,021,534 136,326 1,558,373
Money Market.................. 194,697 194,697 19,711 19,711 402,160 402,160 (187,752) (187,752)
Blue Chip..................... 91,343 1,825,635 2,799 52,645 31,209 621,430 62,933 1,256,850
</TABLE>
36
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS
For the year ended July 31, 1996, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. Government securities) by portfolio, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ----------------------------------------------- ----------- -----------
<S> <C> <C>
Growth Common Stock............................ $74,938,787 $67,499,367
High Grade Bond................................ 3,111,851 2,771,564
High Yield Bond................................ 2,547,755 1,863,609
Managed........................................ 14,912,657 15,320,972
Blue Chip...................................... 3,018,744 321,285
</TABLE>
At July 31, 1996, net unrealized appreciation of investments by portfolio
was composed of the following:
<TABLE>
<CAPTION>
NET UNREALIZED
GROSS UNREALIZED APPRECIATION
---------------------------- (DEPRECIATION)
PORTFOLIO APPRECIATION DEPRECIATION OF INVESTMENTS
- ---------------------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C>
Growth Common Stock........................... $ 6,887,543 $ 4,571,100 $ 2,316,443
High Grade Bond............................... 196,768 72,541 124,227
High Yield Bond............................... 108,582 219,740 (111,158)
Managed....................................... 1,517,049 511,709 1,005,339
Blue Chip..................................... 4,786,980 97,670 4,689,310
</TABLE>
37
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income for the following portfolios are
declared daily and were payable on the last business day of the month as
follows:
<TABLE>
<CAPTION>
HIGH HIGH
GRADE YIELD MONEY
PAYABLE DATE BOND BOND MARKET
- ------------------------------------------------------------------ --------- --------- -----------
<S> <C> <C> <C>
August 31, 1995................................................... $ .0549 $ .0631 $ .0032
September 29, 1995................................................ .0530 .0611 .0030
October 31, 1995.................................................. .0561 .0639 .0032
November 30, 1995................................................. .0557 .0636 .0031
December 29, 1995................................................. .0525 .0632 .0032
January 31, 1996.................................................. .0551 .0660 .0034
February 29, 1996................................................. .0532 .0616 .0026
March 29, 1996.................................................... .0515 .0605 .0025
April 30, 1996.................................................... .0526 .0639 .0028
May 31, 1996...................................................... .0519 .0608 .0028
June 28, 1996..................................................... .0467 .0554 .0027
July 31, 1996..................................................... .0561 .0650 .0032
--------- --------- -----------
Total Dividends Per Share......................................... $ .6393 $ .7481 $ .0357
--------- --------- -----------
--------- --------- -----------
</TABLE>
38
<PAGE>
FBL SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (CONTINUED)
In addition, dividends and distributions to shareholders from net investment
income and net realized gain on investment transactions were paid during the
year ended July 31, 1996, for the following portfolios:
<TABLE>
<CAPTION>
ORDINARY INCOME DIVIDENDS: DIVIDEND PERCENT QUALIFYING
DECLARATION RECORD PAYABLE AMOUNT PER FOR DEDUCTION BY
PORTFOLIO DATE DATE DATE SHARE CORPORATIONS
- -------------------------------- ----------- --------- --------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Growth Common Stock............. 12/21/95 12/28/95 12/28/95 $ 0.4585 73%
Managed......................... 10/29/95 10/31/95 11/07/95 0.0825 57
Managed......................... 12/21/95 12/28/95 12/28/95 0.1196 56
Managed......................... 4/29/96 4/30/96 4/30/96 0.1175 50
Managed......................... 7/30/96 7/31/96 7/31/96 0.1275 53
Blue Chip....................... 12/21/95 12/28/95 12/28/95 0.1950 82
</TABLE>
<TABLE>
<CAPTION>
CAPITAL GAINS DISTRIBUTIONS: DIVIDEND
DECLARATION RECORD PAYABLE AMOUNT PER
PORTFOLIO DATE DATE DATE SHARE
- -------------------------------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Growth Common Stock............. 12/21/95 12/28/95 12/28/95 $ 0.2700
High Yield Bond................. 12/21/95 12/28/95 12/28/95 0.0325
Managed......................... 12/21/95 12/28/95 12/28/95 0.1029
</TABLE>
The capital gains distributions related to the Growth Common Stock, High
Yield Bond and Managed Portfolios include net short-term realized gains of
$1,152,619 ($0.2140 per share), $21,546 ($0.0325 per share) and $188,116
($0.1029 per share), respectively, that are taxable to shareholders as ordinary
income dividends.
39
<PAGE>
FBL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1996, 1995, 1994, 1993 AND 1992
<TABLE>
<CAPTION>
GROWTH
COMMON STOCK
PORTFOLIO
--------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $13.04 $13.07 $15.13 $12.48 $11.64
Income From Investment Operations
Net investment income......................... 0.27 0.43 0.60 0.51 0.48
Net gains or losses on investments (both
realized and unrealized).................... 2.10 0.65 (0.49) 2.75 0.93
------- ------- ------- ------- ------
Total from investment operations................ 2.37 1.08 0.11 3.26 1.41
------- ------- ------- ------- ------
Less Distributions
Dividends (from net investment income)........ (0.46) (0.39) (0.60) (0.48) (0.57)
Distributions (from capital gains)............ (0.27) (0.72) (1.57) (0.13)
Distributions in excess of net realized
gains.......................................
------- ------- ------- ------- ------
Total distributions............................. (0.73) (1.11) (2.17) (0.61) (0.57)
------- ------- ------- ------- ------
Net asset value, end of year...................... $14.68 $13.04 $13.07 $15.13 $12.48
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Total Return:
Total investment return based on net asset value
(1)........................................... 18.41% 9.36% 0.34% 27.25% 12.51%
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)........ 86,534 70,947 64,315 51,732 39,418
Ratio of net expenses to average net assets..... 1.62% 1.62% 1.60% 1.61% 1.69%
Ratio of net income to average net assets....... 1.87% 3.43% 4.05% 3.80% 3.99%
Portfolio turnover rate......................... 92% 85% 93% 92% 87%
Average commission rate per share (3)........... $.0529
Information assuming no voluntary reimbursement by
FBL Investment of excess operating expenses (see
NOTE 3):
Per share net investment income.................
Ratio of expenses to average net assets.........
Amount reimbursed...............................
</TABLE>
- ------------------------
Note: Per share amounts have been calculated on the basis of monthly per share
amounts (using average monthly outstanding shares) accumulated for the
period.
(1) Total investment return is calculated assuming an initial investment made
at the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(2) The total investment return includes the effect of the capital contribution
of $0.02 per share. The return without the capital contribution would have
been 17.13%.
(3) Average commission rate per share disclosure is not required for fiscal
years prior to July 31, 1996.
SEE ACCOMPANYING NOTES.
40
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
------------------------------------------------ ------------------------------------------------
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year......................... $10.26 $10.13 $10.69 $10.68 $10.15 $10.03 $10.00 $10.76 $10.47 $9.82
Income From Investment
Operations
Net investment income..... 0.64 0.63 0.64 0.70 0.73 0.75 0.78 0.81 0.83 0.90
Net gains or losses on
investments (both
realized and
unrealized)............. (0.10) 0.16 (0.40) 0.13 0.62 (0.01) 0.13 (0.60) 0.46 0.65
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations................ 0.54 0.79 0.24 0.83 1.35 0.74 0.91 0.21 1.29 1.55
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends (from net
investment income)...... (0.64) (0.63) (0.64) (0.70) (0.73) (0.75) (0.78) (0.81) (0.83) (0.90)
Distributions (from
capital gains).......... (0.16) (0.12) (0.09) (0.03) (0.09) (0.16) (0.17)
Distributions in excess of
net realized gains...... (0.03) (0.01)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions......... (0.64) (0.66) (0.80) (0.82) (0.82) (0.78) (0.88) (0.97) (1.00) (0.90)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year......................... $10.16 $10.26 $10.13 $10.69 $10.68 $9.99 $10.03 $10.00 $10.76 $10.47
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Return:
Total investment return
based on net asset value
(1)....................... 5.37% 8.23% 1.77% 8.10% 13.71% 7.67% 9.71% 1.88% 12.95% 16.44%
Ratios/Supplemental Data:
Net assets, end of year
($000's omitted).......... 9,122 8,345 7,596 8,047 7,676 7,349 6,691 6,425 5,758 4,835
Ratio of net expenses to
average net assets........ 1.85% 1.99% 1.90% 1.79% 1.88% 2.00% 2.00% 2.00% 2.00% 1.98%
Ratio of net income to
average net assets........ 6.19% 6.29% 6.12% 6.59% 6.94% 7.44% 7.83% 7.68% 7.84% 8.79%
Portfolio turnover rate..... 34% 18% 42% 54% 45% 30% 23% 26% 56% 56%
Average commission rate per
share (3).................
Information assuming no
voluntary reimbursement by
FBL Investment of excess
operating expenses (see NOTE
3):
Per share net investment
income.................... $0.73 $0.75 $0.79 $0.82
Ratio of expenses to average
net assets................ 2.22% 2.29% 2.17% 2.05%
Amount reimbursed........... $15,361 $18,810 $10,754 $3,147
</TABLE>
41
<PAGE>
FBL SERIES FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
--------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 11.85 $ 11.62 $ 12.51 $ 10.77 $ 9.95
Income From Investment Operations
Net investment income......................... 0.46 0.56 0.55 0.54 0.61
Net gains or losses on investments (both
realized and unrealized).................... 1.54 0.47 (0.62) 1.87 0.82
------- ------- ------- ------- ------
Total from investment operations................ 2.00 1.03 (0.07) 2.41 1.43
------- ------- ------- ------- ------
Less Distributions
Dividends (from net investment income)........ (0.45) (0.56) (0.50) (0.52) (0.61)
Distributions (from capital gains)............ (0.10) (0.14) (0.32) (0.15)
Distributions in excess of net realized
gains....................................... (0.10)
------- ------- ------- ------- ------
Total distributions............................. (0.55) (0.80) (0.82) (0.67) (0.61)
------- ------- ------- ------- ------
Capital contribution from affiliate (see NOTE
3)............................................ 0.03
------- ------- ------- ------- ------
Net asset value, end of year...................... $ 13.33 $ 11.85 $ 11.62 $ 12.51 $10.77
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Total Return:
Total investment return based on net asset value
(1)........................................... 17.30%(2) 9.40% (0.61%) 23.02% 14.79%
Ratios/Supplemental Data:
Net assets, end of year ($000's omitted)........ 27,470 21,105 19,100 8,257 3,887
Ratio of net expenses to average net assets..... 1.91% 1.94% 1.96% 1.96% 2.07%
Ratio of net income to average net assets....... 3.47% 4.86% 4.42% 4.54% 5.93%
Portfolio turnover rate......................... 81% 69% 29% 52% 77%
Average commission rate per share (3)........... $.0549
Information assuming no voluntary reimbursement by
FBL Investment of excess operating expenses (see
NOTE 3):
Per share net investment income................. $ 0.53
Ratio of expenses to average net assets......... 2.02%
Amount reimbursed............................... $ 3,497
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
------------------------------------------------ ------------------------------------------------
1996 1995 1994 1993 1992 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 22.85 $ 18.75 $ 17.69 $ 16.78 $ 15.38
Income From Investment
Operations
Net investment income..... 0.04 0.04 0.02 0.01 0.03 0.17 0.19 0.14 0.13 0.17
Net gains or losses on
investments (both
realized and
unrealized)............. 3.43 4.05 1.06 0.90 1.47
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations................ 0.04 0.04 0.02 0.01 0.03 3.60 4.24 1.20 1.03 1.64
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Less Distributions
Dividends (from net
investment income)...... (0.04) (0.04) (0.02) (0.01) (0.03) (0.19) (0.14) (0.14) (0.12) (0.24)
Distributions (from
capital gains)..........
Distributions in excess of
net realized gains......
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total distributions......... (0.04) (0.04) (0.02) (0.01) (0.03) (0.19) (0.14) (0.14) (0.12) (0.24)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Capital contribution from
affiliate (see NOTE 3)....
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of
year......................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 26.26 $ 22.85 $ 18.75 $ 17.69 $ 16.78
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Return:
Total investment return
based on net asset value
(1)....................... 3.64% 3.60% 1.47% 1.33% 2.82% 15.83% 22.77% 6.75% 6.21% 10.77%
Ratios/Supplemental Data:
Net assets, end of year
($000's omitted).......... 2,552 2,439 2,627 2,555 2,861 14,641 9,657 6,745 5,415 4,405
Ratio of net expenses to
average net assets........ 2.00% 2.00% 1.93% 1.94% 2.00% 1.79% 1.78% 1.83% 1.90% 1.92%
Ratio of net income to
average net assets........ 3.58% 3.51% 1.45% 1.33% 2.83% 0.66% 0.92% 0.75% 0.73% 1.09%
Portfolio turnover rate..... 0% 0% 0% 0% 0% 3% 1% 1% 0% 0%
Average commission rate per
share (3)................. $ .0748
Information assuming no
voluntary reimbursement by
FBL Investment of excess
operating expenses (see NOTE
3):
Per share net investment
income.................... $ 0.03 $ 0.03
Ratio of expenses to average
net assets................ 2.43% 2.20%
Amount reimbursed........... $ 10,718 $ 4,948
</TABLE>
43
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
FBL Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of FBL Series Fund, Inc. (comprising,
respectively, the Growth Common Stock, High Grade Bond, High Yield Bond,
Managed, Money Market and Blue Chip Portfolios) as of July 31, 1996, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1996, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the FBL Series Fund, Inc. at July
31, 1996, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
August 30, 1996
44
<PAGE>
FBL SERIES FUND, INC.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements:
(i) Financial Statements included in Part A of Registration Statement:
Condensed Financial Information at July 31, 1996
(ii) Financial Statements included in Part B of Registration Statement
through incorporation by reference to the 1996 Annual Report to
Shareholders of FBL Series Fund, Inc.:
Report of Independent Auditors Statements of Assets and Liabilities at
July 31, 1996
Statements of Operations for the year ended July 31, 1996
Statements of Changes in Net Assets for the years ended July 31, 1996
and 1995
Schedules of Investments at July 31, 1996
Notes to Financial Statements
(b) Exhibits:
<TABLE>
<C> <S>
1. (a) Articles of Incorporation (1)
(b) Articles of Amendment which became effective in 1977 and 1978 (2)
(c) Articles of Amendment which became effective on November 30, 1987 (3)
(d) Articles of Amendment which became effective on November 22, 1991 (12)
(e) Articles Supplementary to the Charter which became effective on
November 25, 1991 (12)
2. By-laws, as amended (3)
3. Inapplicable
4. Specimen copy of uniform common stock certificate (3)
5. Investment Advisory and Management Services Agreement dated November 11,
1987 (4)
6. (a) Underwriting Agreement dated December 31, 1983 (5)
(b) Form of Dealer Agreement (4)
(c) Administrative Services Agreement dated November 25, 1991 (9)
7. Inapplicable
8. Custodian Agreement dated January 12, 1993 (12)
9. (a) Fidelity Bond Joint Insureds Agreement (8)
(b) Joint Insureds D&O and E&O Agreement (3)
(c) Accounting Services Agreement (3)
(d) Shareholder Service, Dividend Distributing and Transfer Agent
Agreement dated September 1, 1995
10. Inapplicable
</TABLE>
C-1
<PAGE>
<TABLE>
<C> <S>
*11. Consent of Ernst & Young LLP
12. Inapplicable
13. Inapplicable
14. (a)(1) Form of Prototype Money Purchase Pension and Profit Sharing Plan,
as amended
(a)(2) Form of Adoption Agreements
(a)(3) Application Form for Keogh Plan (6)
(b)(1) Model Individual Retirement Account, Form 5305-A
(b)(2) Model IRA Disclosure Statement (7)
15. (a) Distribution and Shareholder Servicing Plan and Agreement dated as of
December 1, 1987 (4)
(b) Distribution and Shareholder Servicing Plan and Agreement dated
December 1, 1987, as amended November 25, 1991 (10)
16. Schedule for Computation of Performance Data (11)
*27. Financial Data Schedules
</TABLE>
- ------------------------
* Filed herewith
(1) Previously filed with the initial Registration Statement on Form S-5, filed
on or about September 26, 1970.
(2) Previously filed with Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1, filed on or about June 29, 1979.
(3) Previously filed with Post-Effective Amendment No. 22 to the Registration
Statement on Form N-1A, filed on or about December 1, 1987.
(4) Previously filed with Post-Effective Amendment No. 21 to the Registration
Statement on Form N-1A, filed on or about September 18, 1987.
(5) Previously filed with Post-Effective Amendment No. 18 to the Registration
Statement on Form N-1A, filed on or about October 2, 1984.
(6) Previously filed with Post-Effective Amendment No. 20 to the Registration
Statement on Form N-1A, filed on or about November 29, 1986.
(7) Previously filed with Post-Effective Amendment No. 14 to the Registration
Statement on Form N-1, filed on or about November 25, 1981.
(8) Previously filed with Post-Effective Amendment No. 23 to the Registration
Statement on Form N-1A, filed on or about November 30, 1988.
(9) Previously filed with Post-Effective Amendment No. 26 to the Registration
Statement on Form N-1A, filed on or about September 26, 1991.
(10) Previously filed with Post-Effective Amendment No. 26 to the Registration
Statement on Form N-1A, filed on or about September 26, 1991.
(11) Incorporated by reference from Post-Effective Amendment No. 23 to the
Registration Statement on Form N-1A, filed on or about November 30, 1988.
(12) Previously filed with Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A, filed on or about December 1, 1995.
C-2
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of August 31, 1996, the number of record holders of each class of common
stock of the Registrant were as follows:
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS
- -------------------------------------------------------- ----------------
<S> <C>
Value Growth Portfolio 11,501
High Grade Bond Portfolio 1,432
High Yield Bond Portfolio 1,567
Managed Portfolio 5,620
Money Market Portfolio 234
Blue Chip Portfolio 4,277
</TABLE>
ITEM 27. INDEMNIFICATION.
The Maryland Code, Corporations and Associations, Section 2-418, provides
for indemnification of directors, officers, employees and agents. Article XVI of
the Registrant's Articles of Incorporation restricts indemnification for any
officer or director in cases of willful misfeasance, gross negligence or
reckless disregard of the duties involved in the conduct of their offices.
Article XV of the Registrant's By-Laws provides for indemnification of officers
under certain circumstances.
The Investment Advisory and Management Services Agreement between the
Registrant and FBL Investment Advisory Services, Inc. ("Adviser") provides that,
in the absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties thereunder on the part of the Adviser, the
Adviser shall not be liable for any error of judgment or mistake of law, or for
any loss suffered by the Fund in connection with the matters to which such
Agreement relates.
In addition, the Registrant maintains a directors and officers "errors" and
"omissions" liability insurance policy under which the Registrant and its
directors and officers are named insureds.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("Act") may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the 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 whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Registrant's investment adviser is FBL Investment Advisory Services, Inc.
("FBL"). In addition to its services to Registrant as investment adviser,
underwriter, shareholder service, transfer and dividend disbursing agent, all as
set forth in parts A and B of this Registration Statement on Form N-1A, FBL acts
as adviser, underwriter, shareholder service, transfer and dividend disbursing
agent for FBL Money Market Fund, Inc., a diversified open-end management
investment company, and FBL Variable Insurance Series Fund , a diversified
open-end series management investment company.
C-3
<PAGE>
The principal occupations of the principal executive officers and directors
of FBL and their services as officers and employees of FBL Financial Group, Inc.
and its affiliates as disclosed below. The address of FBL Financial Group, Inc.
and its affiliates is 5400 University Avenue, West Des Moines, Iowa 50266.
<TABLE>
<CAPTION>
NAME AND POSITION(S)
WITH FBL PRINCIPAL OCCUPATIONS
- --------------------------------- -----------------------------------------------------------------------------
<S> <C>
*Stephen M. Morain, Senior Vice General Counsel and Assistant Secretary, Iowa Farm Bureau Federation; General
President, General Counsel and Counsel, Secretary and Director, Farm Bureau Management Corporation; Senior
Director Vice President and General Counsel, FBL Financial Group, 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 Insurance Company; Senior Vice President, General Counsel
and Director, FBL Marketing Services, Inc.; Vice President and General
Counsel, Western Farm Bureau Life Insurance Company; Director, Computer
Aided Design Software, Inc. and Iowa Business Development Finance
Corporation; Chairman, Edge Technologies, Inc.
Richard D. Warming, President and Vice President, Chief Investment Officer and Assistant Treasurer, FBL
Director Financial Group, 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 and South
Dakota Farm Bureau Mutual Insurance Company; President and Director, FBL
Leasing 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.
William J. Oddy, Vice President, Vice President, Chief Operating Officer and Assistant General Manager, FBL
Chief Operating Officer, Financial Group, Inc., Farm Bureau Life Insurance Company, Universal
Assistant General Manager and Assurors Life Insurance Company, Western Farm Bureau Life Insurance Company,
Director 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, and Director,
Communications Providers, Inc.; Vice President, Chief Operating Officer,
Assistant General Manager and Director, FBL Marketing Services, Inc.;
President and Director, FBL Real Estate Ventures, Ltd. and RIK, Inc.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION(S)
WITH FBL PRINCIPAL OCCUPATIONS
- --------------------------------- -----------------------------------------------------------------------------
<S> <C>
Dennis M. Marker, Investment Vice Investment Vice President, Administration, FBL Financial Group, Inc., Farm
President, Administration, Bureau Life Insurance Company, Universal Assurors Life Insurance Company,
Secretary and Director 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 Marketing Services, Inc.
Thomas R. Gibson, Executive Vice Executive Vice President, General Manager and Chief Executive Officer, FBL
President, General Manager and Financial Group, Inc.; Executive Vice President and General Manager, Farm
Director 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
Marketing Services, Inc.
Timothy J. Hoffman, Vice Vice President, Chief Marketing Officer, FBL Financial Group, Inc., Farm
President, Chief Marketing Bureau Life Insurance Company, Universal Assurors Life Insurance Company,
Officer and Director 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 Educational Services, Inc.
James W. Noyce, Vice President, Vice President, Chief Financial Officer, FBL Financial Group, Inc., Farm
Chief Financial Officer, Bureau Life Insurance Company, Universal Assurors Life Insurance Company,
Treasurer and Director 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; Vice President, Treasurer and Director; FBL Leasing Services, Inc.
and RIK, Inc.; Vice President, Chief Financial Officer, Treasurer and
Director, FBL Marketing Services, Inc.; Treasurer and Director, FBL Real
Estate Ventures, Ltd.
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) FBL Investment Advisory Services, Inc., the principal underwriter for
Registrant, also acts as the principal investment adviser, underwriter,
shareholder service, transfer and dividend disbursing agent for FBL Money Market
Fund, Inc., a diversified open-end management investment company and FBL
Variable Insurance Series Fund, a diversified, open-end series management
investment company.
C-5
<PAGE>
(b) The principal business address of each director and principal officer of
the principal underwriter is 5400 University Avenue, West Des Moines, Iowa
50266. See Item 28 for information on the principal officers of FBL Investment
Advisory Services, Inc., investment adviser and principal underwriter for the
Registrant.
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules thereunder will be
maintained at the offices of the Registrant and the offices of the Adviser, FBL
Investment Advisory Services, Inc., 5400 University Avenue, West Des Moines,
Iowa 50266.
ITEM 31. MANAGEMENT SERVICES.
Inapplicable.
ITEM 32. UNDERTAKINGS.
Inapplicable.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of West Des Moines and State of Iowa, on the 24th day of
September, 1996.
FBL SERIES FUND, INC.
By: /s/ EDWARD M. WIEDERSTEIN
--------------------------------------------
Edward M. Wiederstein, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacity and on the date indicated.
/s/ EDWARD M. WIEDERSTEIN President and Director September 24, 1996
- ------------------------------ (Principal Executive ------------------
Edward M. Wiederstein Officer) (dated)
Senior Vice President,
/s/ RICHARD D. HARRIS Secretary-Treasurer and September 24, 1996
- ------------------------------ Director (Principal ------------------
Richard D. Harris Financial and Accounting (dated)
Officer)
Senior Vice President,
/s/ STEPHEN M. MORAIN General Counsel, September 24, 1996
- ------------------------------ Assistant Secretary and ------------------
Stephen M. Morain Director (dated)
/s/ DONALD G. BARTLING September 24, 1996
- ------------------------------ Director ------------------
Donald G. Bartling* (dated)
/s/ JOHN R. GRAHAM September 24, 1996
- ------------------------------ Director ------------------
John R. Graham* (dated)
/s/ ERWIN H. JOHNSON September 24, 1996
- ------------------------------ Director ------------------
Erwin H. Johnson* (dated)
/s/ ANN JORGENSEN September 24, 1996
- ------------------------------ Director ------------------
Ann Jorgensen* (dated)
/s/ CURTIS C. PIETZ September 24, 1996
- ------------------------------ Director ------------------
Curtis C. Pietz* (dated)
*By: /s/ STEPHEN M. MORAIN
------------------------- Attorney-in-Fact, pursuant to Power of
Stephen M. Morain Attorney.
C-7
<PAGE>
Exhibit 11
[LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
FBL Series Fund, Inc.
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "General Information - Report to Shareholders" in the
Prospectus for FBL Series Fund, Inc. in Part A and "Other Information -
Independent Auditors" in Part B and to the incorporation by reference of our
report dated August 30, 1996 on the financial statements of FBL Series Fund,
Inc. in this Post Effective Amendment No. 31 to Form N-1A Registration Statement
under the Securities Act of 1933 (No. 2-38512) and in this Amendment No. 31 to
the Registration Statement under the Investment Company Act of 1940
(No. 811-2125).
/s/ Ernst & Young LLP
Des Moines, Iowa
September 20, 1996
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