FBL SERIES FUND INC, 497, 1998-05-04

FBL SERIES FUND INC
497, 1998-05-04

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<PAGE>
EQUITRUST SERIES FUND, INC.

Prospectus dated December 1, 1997
(as amended May 1, 1998)

EquiTrust Series Fund, Inc. (formerly known as 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
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 EquiTrust Investment Management Services, Inc.
(formerly known as 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. 17-19; "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, 1997 (as amended May 1, 1998), 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
Financial Highlights................................................................................... 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............................................................................. 26
Net Asset Value Information............................................................................ 27
Performance Information................................................................................ 28
Management of the Fund................................................................................. 30
Portfolio Transactions................................................................................. 31
Dividends and Taxes.................................................................................... 32
Organization of the Fund............................................................................... 33
General Information.................................................................................... 34
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
FARM BUREAU MUTUAL FUNDS Iowa Toll Free (800) 422-3175
5400 University Avenue, West Des Moines, Iowa 50266 Des Moines (515) 225-5586
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
-----------

THE FUND. EquiTrust 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 EquiTrust Investment Management
Services, Inc. ("EquiTrust" 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. 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 grade 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 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, 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 grade debt securities (debt securities rated
AAA, AA or A by Standard & Poor's or Aaa, Aa or A by Moody's), U.S.
Government securities and government agency securities, and preferred stock;
and (iii) high quality short-term money market instruments of the type in
which the Money Market Portfolio may invest.

1
<PAGE>
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 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 EquiTrust Marketing Services, Inc. (formerly known as 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. EquiTrust Investment Management
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 and Money Market Portfolios, .40% of average
daily net assets for the High Grade Bond Portfolio, .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. See "Management of the Fund--Investment Adviser." EquiTrust also
serves as distributor and principal underwriter for the Fund. EquiTrust pays
securities dealers a commission of up to 4.5% for sales of Portfolio shares and
a service fee, payable monthly, at the annual rate of .15% on assets maintained
and serviced in such Fund accounts. EquiTrust receives from the Fund a .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 EquiTrust Marketing Services, Inc., which is affiliated with EquiTrust.
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..................................... 0.65 0.92 0.95
------- ------ -----
Total Fund Operating Expenses.................. 1.65% 1.82% 2.00%
------- ------ -----
------- ------ -----

MONEY BLUE
MANAGED MARKET CHIP
------- ------ -----
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Management Fees.................................... 0.60% 0.25% 0.25%
12b-1 Fees......................................... 0.50 0.50 0.50
Other Expenses..................................... 0.85 1.25 0.99
------- ------ -----
Total Fund Operating Expenses.................. 1.95% 2.00% 1.74%
------- ------ -----
------- ------ -----
</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 $ 92 $ 110 $ 195
High Grade Bond........................................................... $ 68 $ 97 $ 119 $ 214
High Yield Bond........................................................... $ 70 $ 103 $ 128 $ 233
Managed................................................................... $ 70 $ 101 $ 125 $ 227
Money Market.............................................................. $ 70 $ 103 $ 128 $ 233
Blue Chip................................................................. $ 68 $ 95 $ 114 $ 205
</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 $ 52 $ 90 $ 195
High Grade Bond........................................................... $ 18 $ 57 $ 99 $ 214
High Yield Bond........................................................... $ 20 $ 63 $ 108 $ 233
Managed................................................................... $ 20 $ 61 $ 105 $ 227
Money Market.............................................................. $ 20 $ 63 $ 108 $ 233
Blue Chip................................................................. $ 18 $ 55 $ 94 $ 205
</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>
- --------------------------------------------------------------------------------
FINANCIAL
HIGHLIGHTS
---------------

The condensed financial information set forth below has been derived from
the financial statements and financial highlights of the Fund, of which the last
five years have been audited by independent auditors as set forth in their
report dated August 29, 1997. 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

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year........................ $ 14.68 $ 13.04 $13.07 $15.13 $12.48 $11.64 $11.02 $11.01 $10.48 $15.91
Income from Investment
Operations
Net investment income..... 0.18 0.27 0.43 0.60 0.51 0.48 0.58 0.58 0.57 0.32
Net gains or losses on
investments (both
realized and
unrealized).............. 2.89 2.10 0.65 (0.49) 2.75 0.93 0.65 0.05 0.57 (1.56)
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................. 3.07 2.37 1.08 0.11 3.26 1.41 1.23 0.63 1.14 (1.24)
Less Distributions
Dividends (from net
investment income)....... (0.18) (0.46) (0.39) (0.60) (0.48) (0.57) (0.61) (0.62) (0.61) (0.96)
Distributions (from
capital gains)........... (1.94) (0.27) (0.72) (1.57) (0.13) (3.23)
Distributions in excess of
net realized gains.......
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions......... (2.12) (0.73) (1.11) (2.17) (0.61) (0.57) (0.61) (0.62) (0.61) (4.19)
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
year........................ $ 15.63 $ 14.68 $13.04 $13.07 $15.13 $12.48 $11.64 $11.02 $11.01 $10.48
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
-------- ------- ------ ------ ------ ------ ------ ------ ------ ------
Total Return:
Total investment return
based on net asset value
(1)........................ 21.83% 18.41% 9.36% 0.34% 27.25% 12.51% 11.67% 5.90% 11.49% (11.70%)
Ratios/Supplemental Data:
Net assets, end of year
($000's omitted)........... 112,985 86,534 70,947 64,315 51,732 39,418 36,193 35,285 37,435 48,060
Ratio of net expenses to
average net assets......... 1.65% 1.62% 1.62% 1.60% 1.61% 1.69% 1.59% 1.62% 1.56% 1.39%
Ratio of net income to
average net assets......... 1.18% 1.87% 3.43% 4.05% 3.80% 3.99% 5.19% 5.31% 5.34% 2.98%
Portfolio turnover rate..... 77% 92% 85% 93% 92% 87% 59% 109% 172% 305%
Average commission rate per
share (2).................. $ 0.0520 $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),
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------ ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year.............................. $10.16 $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.......... 0.60 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)................... 0.34 (0.10) 0.16 (0.40) 0.13 0.62 0.20 (0.16) 0.26 (0.15)
------ ------ ------ ------ ------ ------ ------ ------ ------ ----------
Total from investment
operations...................... 0.94 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)....................... (0.60) (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.............. (0.60) (0.64) (0.66) (0.80) (0.82) (0.82) (0.78) (0.75) (0.74) (0.45)
------ ------ ------ ------ ------ ------ ------ ------ ------ ----------
Net asset value, end of year....... $10.50 $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)............. 9.56% 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)........................ 10,250 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...................... 1.82% 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...................... 5.85% 6.19% 6.29% 6.12% 6.59% 6.94% 7.78% 7.57% 7.57% 4.41%
Portfolio turnover rate.......... 30% 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),
--------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------- ------- ------- ------- ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year...... $ 9.99 $ 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............... 0.70 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)..... 0.61 (0.01) 0.13 (0.60) 0.46 0.65 0.19 (0.33) 0.09 (0.14)
------- ------- ------- ------- ------ ------ ------ ------ ------ ----------
Total from investment operations...... 1.31 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)............................ (0.70) (0.75) (0.78) (0.81) (0.83) (0.90) (0.94) (0.98) (0.93) (0.45)
Distributions (from capital gains).. (0.12) (0.03) (0.09) (0.16) (0.17)
Distributions in excess of net
realized gains..................... (0.01)
------- ------- ------- ------- ------ ------ ------ ------ ------ ----------
Total distributions................... (0.82) (0.78) (0.88) (0.97) (1.00) (0.90) (0.94) (0.98) (0.93) (0.45)
------- ------- ------- ------- ------ ------ ------ ------ ------ ----------
Net asset value, end of year............ $ 10.48 $ 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)...................... 13.29% 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)............................. 9,156 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% 2.00% 1.98% 1.77% 1.83% 2.01% 1.32%
Ratio of net income to average net
assets............................... 6.82% 7.44% 7.83% 7.68% 7.84% 8.79% 9.98% 10.00% 9.41% 4.47%
Portfolio turnover rate............... 45% 30% 23% 26% 56% 56% 78% 89% 70% 26%
Information assuming no voluntary
reimbursment by EquiTrust Investment
Management Services, Inc. of excess
operating expenses:
Per share net investment income....... $ 0.69 $ 0.73 $ 0.75 $ 0.79 $ 0.82
Ratio of expenses to average net
assets............................... 2.10% 2.22% 2.29% 2.17% 2.05%
Amount reimbursed..................... $ 8,681 $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.

(3) Computed on an annualized basis.

7
<PAGE>
MANAGED PORTFOLIO

<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
--------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------- -------- ------- ------- ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year......................... $ 13.38 $ 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..... 0.48 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).............. 1.91 1.54 0.47 (0.62) 1.87 0.82 0.03 (0.01) (0.10)
------- -------- ------- ------- ------ ------ ------ ------ ------ -------
Total from investment
operations................. 2.39 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)....... (0.46) (0.45) (0.56) (0.50) (0.52) (0.61) (0.66) (0.68) (0.65) (0.39)
Distributions (from
capital
gains)................... (1.21) (0.10) (0.14) (0.32) (0.15)
Distributions in excess of
net realized gains....... (0.10)
------- -------- ------- ------- ------ ------ ------ ------ ------ -------
Total distributions......... (1.67) (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......................... $ 14.05 $ 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)........................ 17.88% 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)........... 40,994 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......... 1.95% 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......... 3.48% 3.47% 4.86% 4.42% 4.54% 5.93% 6.51% 6.83% 6.42% 4.05%
Portfolio turnover rate..... 74% 81% 69% 29% 52% 77% 31% 73% 119% 53%
Average commission rate per
share (4).................. $0.0449 $ 0.0549
Information assuming no
voluntary reimbursment by
EquiTrust Investment
Management 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.

(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),
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------ ------- ------ ------ ------ ------ ------ ------ ------ ----------
<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 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations
Net investment income.................. 0.03 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......... 0.03 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)............................... (0.03) (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...................... (0.03) (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 $ 1.00
------ ------- ------ ------ ------ ------ ------ ------ ------ ----------
------ ------- ------ ------ ------ ------ ------ ------ ------ ----------
Total Return:
Total investment return based on net
asset value (2)......................... 3.51% 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)................................ 2,466 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% 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.................................. 3.46% 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% 0%
Information assuming no voluntary
reimbursement by EquiTrust Investment
Management Services, Inc. of excess
operating expenses:
Per share net investment income.......... $ 0.03 $ 0.03 $ 0.03
Ratio of expenses to average
net assets.............................. 2.28% 2.43% 2.20%
Amount reimbursed........................ $7,255 $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.

(3) Computed on an annualized basis.

9
<PAGE>
BLUE CHIP PORTFOLIO

<TABLE>
<CAPTION>
YEAR ENDED JULY 31 (EXCEPT AS INDICATED),
------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(1)
------- ------- ------ ------ ------ ------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year......... $ 26.26 $ 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.................. 0.16 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)........ 11.22 3.43 4.05 1.06 0.90 1.47 0.77 1.02 2.90 1.48
------- ------- ------ ------ ------ ------ ------ ------ ------ ----------
Total from investment operations......... 11.38 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)............................... (0.14) (0.19) (0.14) (0.14) (0.12) (0.24) (0.31) (0.28) (0.20)
Distributions (from capital gains)..... (0.30) (0.99) (0.01)
Distributions in excess of net realized
gains.................................
------- ------- ------ ------ ------ ------ ------ ------ ------ ----------
Total distributions...................... (0.44) (0.19) (0.14) (0.14) (0.12) (0.24) (1.30) (0.29) (0.20) 0.00
------- ------- ------ ------ ------ ------ ------ ------ ------ ----------
Net asset value, end of year............... $ 37.20 $ 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)......................... 43.77% 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)................................ 29,863 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.................................. 1.74% 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.................................. 0.49% 0.66% 0.92% 0.75% 0.73% 1.09% 2.06% 2.14% 2.25% 0.73%
Portfolio turnover rate.................. 0% 3% 1% 1% 0% 0% 5% 37% 0% 4%
Average commission rate per share (4).... $0.0559 $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.

(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) EquiTrust Investment Management 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 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 30% or more 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.

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

11
<PAGE>
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 Baa or lower by Moody's and
BBB 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 provide higher yields, such securities may be subject to
greater market fluctuations and risk of loss of

12
<PAGE>
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 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

13
<PAGE>
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
primarily 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 grade debt securities (debt securities
rated AAA, AA or A by Standard & Poor's or Aaa, Aa or A by Moody's), U.S.
Government securities and government agency securities, and preferred stocks;
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 grade 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 (over 100%) 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. Factors such as the maturity of the
securities and the type of issuer of the securities will affect yields and yield
differentials, which vary over time. 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 segregate the security on the
Fund's accounting records, 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 segregate the security on the Fund's accounting records, 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 EquiTrust 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.

INVESTMENTS IN CAPITAL SECURITIES

Each Portfolio (other than the Blue Chip and Money Market Portfolios) may
invest in capital (trust-preferred) securities. These securities are issued by
trusts or other special purpose entities created for the purpose of investing in
junior subordinated debentures. Capital securities, which have no voting rights,
have a final stated maturity date and a fixed schedule for periodic payments. In
addition, capital securities have provisions which provide preference over
common and preferred senior debt. The issuers of these securities may defer
interest payments for a number of years (up to five years), although interest
continues to accrue cumulatively. In addition, the trust may be terminated and
the debentures distributed in liquidation. Because of the structure of these
securities, they have the characteristics, and involve the associated risks, of
both fixed income and preferred equity securities. At the present time, the
Internal Revenue Service treats capital securities as debt. Proposed tax
legislation may cause this tax treatment to be modified in the future. In the
event that the tax treatment of interest payments of these types of securities
is modified, the Portfolio will reconsider the appropriateness of continued
investment in these securities. For purposes of percentage limitations
applicable to the Portfolio, these securities will be treated as debt
securities.

- --------------------------------------------------------------------------------
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

22
<PAGE>
Fund is open for business on each day the New York Stock Exchange is open for
trading (except the Fridays after Christmas Day and Thanksgiving Day). 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 per Portfolio, 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 is included in the back of this Prospectus.

Complete the Application and mail it with your check payable to the
appropriate Portfolio of the Fund to: EquiTrust Series Fund, Inc., 5400
University Avenue, West Des Moines, Iowa 50266-5997.

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).

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 EQUITRUST 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 it has
determined that the check has cleared, which may take up to 15 days from the
purchase date.

Redemptions can be requested by writing to the Fund, 5400 University Avenue,
West Des Moines, Iowa 50266-5997 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 EQUITRUST MARKETING SERVICES, INC. OR EQUITRUST
INVESTMENT MANAGEMENT SERVICES, INC. FOR REDEMPTIONS GREATER THAN $5,000, and
shall

23
<PAGE>
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
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 EquiTrust Marketing Services, Inc. or EquiTrust Investment
Management 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 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.

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.

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

24
<PAGE>
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.

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 401(m), 401(k) or 457(k)
accounts sponsored by FBL Financial Group, Inc. or its affiliated companies, or
with respect to withdrawals under the Fund's periodic withdrawal plan. EquiTrust
Investment Management 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.

25
<PAGE>
- --------------------------------------------------------------------------------
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 annual
withdrawable amount of 10% of the shareholder's declining account balance under
the plan) to be sent to the shareholder or a designated payee. (Account balance
and withdrawal limitations may be waived if the plan is established using life
expectancy factors to calculate a required minimum distribution.) 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. EquiTrust 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.

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. If a shareholder has elected to participate in the Automatic
Investment Plan, and all shares of an account with that option are exchanged for
shares of another portfolio, the Automatic Investment Plan will continue under
the account to which the shares were exchanged, until such time as the Fund is
notified in writing to discontinue the Plan.

EXCHANGE PRIVILEGE

A shareholder may exchange all or some shares of a Portfolio for shares of
any other Portfolio in the Fund, provided the accounts have like registrations,
if that Portfolio's shares are eligible 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

26
<PAGE>
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 ANY
PERSON, not just the shareholder of record (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 5400
University Avenue, West Des Moines, Iowa 50266-5997). 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 EquiTrust 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 EquiTrust 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),
Savings Incentive Match Plans for Employees (SIMPLEs) retirement plans,
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, SIMPLEs and Corporate Pension and Profit Sharing plans. A custodial
fee, currently $10.00, will be collected annually by liquidating shares, or
fractions thereof, from each participant's account(s). EquiTrust Investment
Management 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 Fridays after Christmas Day
and Thanksgiving Day), and on each other day on which there is sufficient

27
<PAGE>
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.

- --------------------------------------------------------------------------------
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

28
<PAGE>
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.

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.

29
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT
OF THE FUND
- ---------------

BOARD OF DIRECTORS

The Board of Directors has seven members, four 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

EquiTrust Investment Management 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, Lou Ann Sandburg, Sue A. Cornick, Kristi Rojohn
and Elaine A. Followwill. EquiTrust 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: EquiTrust Money Market Fund, Inc. and EquiTrust 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 EquiTrust 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.

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%
</TABLE>

30
<PAGE>
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS
-------------------------------------
FIRST SECOND OVER
$200 $200 $400
PORTFOLIO MILLION MILLION MILLION
- ----------------------------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Money Market..................................................... 0.25% 0.25% 0.25%
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, 1997 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, and .25% of the average daily net assets of the Money
Market and Blue Chip Portfolios.

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 price and 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 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.

31
<PAGE>
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 distributed 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 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.

If a shareholder has elected to receive dividends and/or capital gain
distributions in cash, from an account that remains open, and the postal or
other delivery service is unable to deliver those monies to the shareholder's
address of record, such shareholder's distribution option will automatically be
converted to having all dividend and other distributions reinvested in
additional shares, and the outstanding check will be voided and reinvested in
the account. If a shareholder has elected to receive dividends and/or capital
gain distributions in cash, from an account that is subsequently closed, and the
postal or other delivery service is unable to deliver checks to the
shareholder's address of record, such check will remain outstanding until it is
turned over to the appropriate state agency for escheat purposes. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks.

32
<PAGE>
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.

Currently, the Fund offers two classes of shares--Traditional Shares and
Institutional Shares, which have different expenses that will affect
performance. Institutional Shares are available for purchase exclusively by the
following investors: (a) retirement plans of FBL Financial Group, Inc. and its
affiliates; (b) the following investment advisory clients of EquiTrust: (1)
affiliated and unaffiliated benefit plans such as qualified retirement plans,
and (2) affiliated and unaffiliated banks and insurance companies purchasing for
their own accounts; (c) employees and directors of FBL Financial Group, its
affiliates, and affiliated state Farm Bureau Federations; (d) directors and
trustees of the Farm Bureau Mutual Funds; and (e) such other types of accounts
as EquiTrust as distributor of the Fund deems appropriate.

33
<PAGE>
The shares of each Portfolio have equal rights and privileges with all other
shares of that Portfolio except that Traditional Shares have separate and
exclusive voting rights with respect to the Fund's Rule 12b-1 Plan and each
share of a Portfolio represents an equal proportionate interest in that
Portfolio with each other share subject to any preferences (such as resulting
from Rule 12b-1 distribution fees with respect to the Traditional Shares). 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
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 November 14, 1997, 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.

Copies of year-end account statements may be obtained by calling the Fund at
our toll-free number (800) 247-4170 (in Iowa call toll-free (800) 422-3175, or
in the Des Moines metropolitan area call 225-5586), or by writing a letter to
the Fund. The prior year statement for regular accounts, and prior two year
statements for fiduciary accounts, will be provided at no charge to the
shareholder; thereafter, there will be a charge of $3 per copy. The cost of the
copies will be collected by redemption of shares, or fractions thereof, from the
shareholder's account. If the shareholder's account has been closed, the
applicable fees must be remitted with the request.

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, or when voting by class is appropriate.

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

34
<PAGE>
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

EquiTrust serves as the Fund's Shareholder Service, Dividend Disbursing and
Transfer Agent for a separate fee. EquiTrust 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 EquiTrust
pursuant to which EquiTrust performs accounting services for the Fund. In
addition, the agreement provides that EquiTrust shall calculate 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 EquiTrust 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

EquiTrust Investment Management 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 December 1, 1997.
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 Traditional Shares 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

35
<PAGE>
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, 1997, a total of $880,476 was paid
pursuant to the Plan. Of this amount, $263,672 was paid to EquiTrust Marketing
Services, Inc., the principal dealer for Fund shares, and the balance was
retained by the Distributor. EquiTrust Marketing Services, Inc. is an affiliate
of the Distributor.

The Distributor provides information and administrative services for Fund
shareholders of Traditional Shares 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 Traditional Shares 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 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.

36
<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, 1997. 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
PORTFOLIO BY PERCENTAGE OF
MOODY'S PORTFOLIO BY
MOODY'S RATING CATEGORY RATINGS S&P RATING CATEGORY S&P RATINGS GENERAL DEFINITION OF BOND
- ------------------------------ -------------- ------------------------------ ------------- ------------------------------
<S> <C> <C> <C> <C>
A............................. 12.11% A............................. 17.96% Upper medium grade
Baa........................... 16.01 BBB........................... 13.61 Medium grade
Ba............................ 26.53 BB............................ 25.67 Lower medium grade
B............................. 35.86 B............................. 34.81 Speculative
Caa........................... 1.54 CCC........................... More speculative
Ca............................ 0.19 D............................. 0.19 Highly speculative
Not Rated..................... 1.73 Not Rated..................... 1.73 Not rated by Moody's or S&P
Cash and Other Assets......... 6.03 Cash and Other Assets......... 6.03
-------------- -------------
100.00% 100.00%
</TABLE>

B-1
<PAGE>
HIGH GRADE BOND PORTFOLIO
COMPOSITION OF PORTFOLIO BY QUALITY

<TABLE>
<CAPTION>
PERCENTAGE OF
PORTFOLIO BY PERCENTAGE OF
MOODY'S PORTFOLIO BY
MOODY'S RATING CATEGORY RATINGS S&P RATING CATEGORY S&P RATINGS GENERAL DEFINITION OF BOND
- ------------------------------ -------------- ------------------------------ ------------- ------------------------------
<S> <C> <C> <C> <C>
Aaa........................... 25.07% AAA........................... 25.07% Highest quality
Aa............................ 3.60 AA............................ 8.67 High quality
A............................. 36.48 A............................. 35.40 Upper medium grade
Baa........................... 21.49 BBB........................... 18.32 Medium grade
Ba............................ 4.14 BB............................ 3.32 Lower medium grade
Not rated..................... 1.48 Not rated..................... 1.48 Not rated by Moody's or S&P
Cash and Other Assets......... 7.74 Cash and Other Assets......... 7.74
-------------- -------------
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

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

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 -- TRADITIONAL

PLEASE COMPLETE AND MAIL TO:
EQUITRUST SERIES FUND, INC.
5400 UNIVERSITY AVENUE
DES MOINES, IOWA 50266-5997

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. The Fund does not accept accounts
registered tenants-in-common.

/ / CUSTODIAL ACCOUNT
Uniform Gift or Transfer to Minors Act
/ / EDUCATION IRA ACCOUNT

- --------------------------------------------------------------
Custodian's or Responsible Individual's Name

- ------------------------------------------------------------------------------
Minor's Name

/ / TRUST, CORPORATION OR 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 and Education
IRAs)

- ------------------------------------------------------------------------------
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(S) OF BIRTH

- --------------------------------------------------------------

PROVIDE YOUR FARM BUREAU MEMBERSHIP NUMBER

- --------------------------------------------------------------
- -------------------------------------------------------------------

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. (No cash payment will be made for dividends in an amount less than
$10.)

/ / 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 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.

/ / SIMPLE / / IRA / / Education IRA

/ / Tax Deferred 403(b) / / SEP / / Roth IRA

/ / Qualified Pension and

Profit Sharing

DESIGNATED BENEFICIARY

(for use with tax qualified plans only)

- ------------------------------------------------------------------------------
Primary Beneficiary

- ------------------------------------------------------------------------------
Social Security Number Date of Birth

- ------------------------------------------------------------------------------
Contingent Beneficiary

- ------------------------------------------------------------------------------
Social Security Number Date of Birth

- ------------------------------------------------------------------------------
Contingent Beneficiary

- ------------------------------------------------------------------------------
Social Security Number Date of Birth

- ------------------------------------------------------------------------------
Spousal Consent of Non-Spouse Beneficiary
- --------------------------------------------------------------------------------

SIGNATURES
I certify that I have received, read and agree to the terms of the prospectus
for EquiTrust 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)

737-018AT (5/98)
<PAGE>

<TABLE>
<S> <C>
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN
SHAREHOLDER SERVICE, DIVIDEND Bankers Trust Company
DISBURSING AND TRANSFER AGENT Global Assets -- Insurance Group
EquiTrust Investment Management 16 Wall Street
Services, Inc. New York, New York 10005
5400 University Avenue
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>
Distributed by EquiTrust Investment Management 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.
/ / Registered representative of broker/dealer _________________________________
/ / 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. 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
7. NET WORTH: / / Less than $25,000 / / $25,000 to $50,000 / / $50,000 to
$100,000 / / $100,000 or over
8. SAVINGS: / / Less than $5,000 / / $5,000 to $10,000 / / $10,000 to $25,000
/ / $25,000 or over
9. OTHER ASSETS:
Amount / / Less than $10,000 / / $10,000 to $50,000 / / $50,000 to $100,000
/ / $100,000 or over
Description ________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
10. INVESTMENT OBJECTIVE: / / Growth of income and capital / / Current income
/ / Long-term capital appreciation / / Liquidity and
stability of principal
/ / Other (Specify) __________________________________

11. VOLATILITY TOLERANCE: / / Low / / Medium / / High
12. INSURANCE ON LIFE OF CUSTOMER: / / Less than $50,000 / / $50,000 to $100,000
/ / $100,000 to $250,000 / / $250,000 or over
13. OTHER INFORMATION CONSIDERED IN MAKING AN INVESTMENT RECOMMENDATION:
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
_____________________________________ ____________________________________
Signature of Customer Signature of Representative

737-018AT
<PAGE>
----------------------------
Farm Bureau Mutual Funds

EquiTrust Series Fund, Inc.

[LOGO]
PROSPECTUS
DECEMBER 1, 1997
(AS AMENDED MAY 1, 1998)

INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER

EQUITRUST INVESTMENT
MANAGEMENT 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 [LOGO]
WEST DES MOINES, IOWA 50266 [LOGO] [LOGO]
</TABLE>

737-018(12/97)
<PAGE>
EQUITRUST SERIES FUND, INC.

Supplement to Prospectus
Dated December 1, 1997
(as amended May 1, 1998)

INSTITUTIONAL SHARES

EquiTrust Series Fund, Inc., (the "Fund") currently offers two classes of
shares to provide investors with different purchasing options. These are
Traditional Shares, which are described in the prospectus, and Institutional
Shares, which are described in the prospectus as supplemented hereby.

Institutional Shares are available for purchase exclusively by the following
investors: (a) retirement plans of FBL Financial Group, Inc. and its affiliates;
(b) the following investment advisory clients of EquiTrust Investment Management
Services, Inc. ("EquiTrust"); (1) affiliated and unaffiliated benefit plans,
such as qualified retirement plans, and (2) affiliated and unaffiliated banks
and insurance companies purchasing for their own accounts; (c) employees and
directors of FBL Financial Group, Inc., its affiliates, and affiliated state
Farm Bureau Federations; (d) directors and trustees of the Farm Bureau Mutual
Funds; and (e) such other types of accounts as EquiTrust, the Fund's
distributor, deems appropriate. Institutional Shares currently are available for
purchase only from EquiTrust. Share certificates are not available for
Institutional Shares.

The primary distinctions between the classes of the Fund's shares lie in the
applicability of the contingent deferred sales charge and ongoing expenses,
including asset-based sales charges in the form of Rule 12b-1 distribution fees.
Institutional Shares are not subject to a contingent deferred sales charge or a
Rule 12b-1 distribution fee. Also, there is no administrative services fee
charged to Institutional Shares. As a result of the relatively lower expenses
for Institutional Shares, the level of income dividends per share (as a
percentage of net asset value) and, therefore, the available investment return,
will be higher for Institutional Shares than Traditional Shares.

The following information supplements the indicated sections of the
prospectus.

- --------------------------------------------------------------------------------

SUMMARY OF
EXPENSES
---------------

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES--INSTITUTIONAL SHARES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)............................................. None
Maximum Sales Load Imposed on Reinvested Dividends........... None
Deferred Sales Charge (as a percentage of redemption
proceeds)................................................... None
Redemption Fee............................................... None
Exchange Fee................................................. None
</TABLE>
<PAGE>
<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......................................... 0.00 0.00 0.00
Other Expenses (1)................................. 0.18 0.41 0.40
------- ------ -----
Total Fund Operating Expenses.................. 0.68% 0.81% 0.95%
------- ------ -----
------- ------ -----

MONEY BLUE
MANAGED MARKET CHIP
------- ------ -----
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Management Fees.................................... 0.60% 0.25% 0.25%
12b-1 Fees......................................... 0.00 0.00 0.00
Other Expenses (1)................................. 0.25 0.63 0.22
------- ------ -----
Total Fund Operating Expenses.................. 0.85% 0.88% 0.47%
------- ------ -----
------- ------ -----
</TABLE>

- ------------------------
(1) Other Expenses have been estimated for the first 12 months of operation.

EXAMPLE--INSTITUTIONAL SHARES

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
- ------------------------------------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
Value Growth.................................................................................... $ 7 $ 22
High Grade Bond................................................................................. $ 8 $ 26
High Yield Bond................................................................................. $ 10 $ 30
Managed......................................................................................... $ 9 $ 27
Money Market.................................................................................... $ 9 $ 28
Blue Chip....................................................................................... $ 5 $ 15
</TABLE>

The purpose of the preceding table is to assist investors in understanding
the various costs and expenses that an investor in Institutional Shares of the
Fund will bear directly or indirectly. 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.

Supplement dated December 1, 1997
(as amended May 1, 1998)
<PAGE>
APPLICATION FOR SHARES -- INSTITUTIONAL

PLEASE COMPLETE AND MAIL TO:
EQUITRUST SERIES FUND, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266-5997

DESIGNATE TYPE OF ACCOUNT & OWNER NAME(S)

/ / INDIVIDUAL OR JOINT ACCOUNT*
- --------------------------------------------------------------
Owner's Name

- ------------------------------------------------------------------------------
Joint Owner's Name
*Joint tenants with Right of Survivorship, The Fund does not accept accounts
registered tenants-in-common

/ / CUSTODIAL ACCOUNT
Uniform Gift or Transfer to Minors Act
/ / EDUCATION IRA ACCOUNT

- --------------------------------------------------------------
Custodian's or Responsible Individual's Name

- ------------------------------------------------------------------------------
Minor's Name

/ / TRUST, CORPORATION OR 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 and Education
IRAs)

- ------------------------------------------------------------------------------
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(S) OF BIRTH

- --------------------------------------------------------------

PROVIDE YOUR FARM BUREAU MEMBERSHIP NUMBER

- --------------------------------------------------------------
- -------------------------------------------------------------------

PORTFOLIO SELECTION*
______ 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. (No cash payment will be made for dividends in an amount less than
$10.)

/ / 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.

/ / Please send information on the Automatic Investment Plan
- -------------------------------------------------------------------

TAX QUALIFIED PLANS ONLY
A qualified application must be submitted in addition to this form.

/ / SIMPLE / / IRA / / Education IRA

/ / Tax Deferred 403(b) / / SEP / / Roth IRA

/ / Qualified Pension and

Profit Sharing

DESIGNATED BENEFICIARY
(required with tax qualified plans)