<PAGE> 1
FARM BUREAU MUTUAL FUNDS
[FARM BUREAU LOGO]
EQUITRUST SERIES
FUND, INC.
ANNUAL REPORT
JULY 31, 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 (DEMOINES)
[FARM BUREAU LOGO]
FARM BUREAU THIS REPORT IS NOT TO BE
FINANCIAL SERVICES DISTRIBUTED UNLESS PRECEDED OR
LIVING BESIDE YOU. WORKING FOR YOU. ACCOMPANIED BY A PROSPECTUS.
FARM BUREAU MUTUAL FUNDS
5400 UNIVERSITY AVENUE
WEST DES MOINES, IOWA 50266
737-128 (98)
<PAGE> 2
PRESIDENT'S LETTER
Dear Shareholder:
For the twelve-month period ended July 31, 1998, the S&P 500 was up 19.27%
on a total return basis. The Dow Jones Industrial Average (DJIA) rose 9.89%
during the same period, while the Russell 2000 small cap index was up only 2.31%
through July (each of these returns assumes reinvestment of dividends).
Total return for long-term Treasury bonds was 12.9% for the period, as
rising bond prices caused yields to decline five- to six-tenths of one percent
by July 31st. The already flat yield curve has flattened even further. During
the period, the incremental yield for extending from 2-year to 10-year
maturities went from 28 hundredths of one percent to only one hundredth (i.e.
the 2-year yield was 5.48% and the 10-year, 5.49%). While nominal yields are the
lowest observed in the last 20 to 30 years, real yields (inflation adjusted) are
not. Inflation, as measured by the Consumer Price Index (CPI) remains stable.
The twelve-month CPI through June was 1.68% and 1.05% as of July 31st. The
Federal Reserve remains concerned, however, that tight labor market conditions
may lead to outsized wage gains, which could in turn accelerate consumer price
inflation.
The Federal Reserve has enacted no change in short-term interest rates
since March of 1997. By leaving rates unchanged while inflation has declined,
the Fed has enacted a de facto tightening. Strength in the domestic economy has
caused the Fed to remain firm, but most of the world's economies are in a very
different situation. The United States is facing tight labor market conditions
and a stock market that some consider irrationally exuberant, or at least
potentially so. But when the camera rolls back to a bigger, more global
perspective, the picture becomes less clear. Alan Greenspan is increasingly
assuming the role of central banker for the world. In his own words, a
tightening by the Fed "could have outsized effects on very sensitive financial
markets in Asia."
The financial markets have focused most of their attention on Asia during
recent months. The Asian crisis is not stabilizing as rapidly as the Mexican
Peso crisis that took place in 1995. In late July, Federal Reserve Chairman Alan
Greenspan told Congress that the Asian crisis "has shown no evidence of
stabilization at this point."
Even now, the damage is not limited to Asia. Resultant falling commodity
prices are straining Russian and Latin American economies dependent on natural
resource sales for a large portion of government revenues. The impact of falling
commodity prices can be felt at home as well. Prices for agricultural
commodities have suffered due to diminished Asian demand and industrial
commodities have been adversely affected. Copper is down 35% over the past year,
at its lowest level since 1987. Crude oil plummeted from $20 a barrel in the
first quarter of 1997 to under $13 recently, a drop of more than 30%. In many
instances, stock prices for companies in these industries or those who serve
them are down by nearly 50% from 52-week highs.
To the extent that the outcome of the Asian crisis depends on political
decisions, the potential impact on domestic financial markets cannot be gauged
with any certainty as the U. S. stock market has seen a significant decline
since July 31, 1998. Two of the Fund's portfolios that invest primarily in
common stocks, the Value Growth Portfolio and the Blue Chip Portfolio, have
experienced similar declines during this time period and investors should
recognize that there is a certain degree of volatility with investments of this
nature. As always, our value-oriented investment strategies are to
2
<PAGE> 3
assess the risk-adjusted potential for long-term returns by seeking to use the
market's uncertainty to our shareholders' advantage. The following paragraphs
describe how we are seeking to strike a balance between the risks we see and
potential long-term returns for the various EquiTrust Series Fund Portfolios:
VALUE GROWTH: The recent market squall has adversely affected the current
returns. Suffering the most during this market decline have been energy-related
stocks, as the market seems to be very skeptical about the future outlook for
oil and gas prices. For the first seven months of 1998, the Standard & Poor's
Drilling and Equipment Index was down over 25%, while the S&P 500 was up over
10%. The selling of these issues was sparked by fears of lower oil industry
capital expenditures in 1998, due to sharply lower oil prices. Although a
reduction in near term capital spending is occurring, we believe that drilling
activity will continue to increase in the long term, and as a result, these
stocks are on the "bargain table." At today's depressed prices, they are selling
at about one-half of their replacement value (the cost of building new rigs
today to match the current fleet). It would seem that once the selling pressure
abates, the upside potential for these companies is 50-100%.
Most recently, after appreciating approximately 25% through March, drilling
stocks held in this Portfolio have suffered a severe reversal in price. One of
the stronger performing companies we own is Transocean Offshore, Inc. Transocean
provides contract drilling services for offshore oil and gas wells, primarily in
the North Sea, Gulf of Mexico, Persian Gulf, West Africa, and off the coasts of
Brazil, Egypt, and India. Its focus is on technically demanding deepwater/harsh
environment drilling. Transocean is doing well despite soft oil prices. Average
dayrates (daily rental for rigs in dollars) for the company's fleet of
semisubmersible rigs and drillships increased to nearly $113,000 in the first
quarter, up about 30% from a year ago, yet the stock is down from a high of $60
to a yearly low of $26.
The company has firm contract commitments from Chevron and Unocal for a
total of $745 million on two new ultra-deepwater drillships currently under
construction. The ships, which will be capable of drilling at depths down to
10,000 feet and will cost in excess of $300 million each, are scheduled for
completion in the year 2000. We think the limited supply of rigs capable of
drilling in deepwater and harsh environments will support high utilization
(number of rigs working, expressed as a percentage of 100) and dayrates for
Transocean's fleet in the coming years. The stock sells at 12 times the 1998
earnings estimate, versus the S&P, which sells at 24 times the 1998 earnings
estimate. This stock is a good example of our value-oriented investment
approach, by paying 50 cents for every dollar's worth of "business value." In
other words, we believe the company is worth approximately $70/share. The only
reason that it is this inexpensive, is because of the short-term pessimism
relating to all energy stocks.
Contrast Transocean at 12 times earnings, selling at half of replacement
value, with Amazon.com which now has a market capitalization of $5.4 billion
(shares outstanding x market price) and exceeds the market capitalizations of
the two largest U.S. booksellers, Barnes & Noble and Borders, combined.
Moreover, Amazon has yet to produce one cent of net income and is not expected
to for a couple of years. Of course by Internet standards, Amazon is a seasoned
company now that it has been public for over 14 months. To us, this represents
rampant speculation, likely to lead to a severe downward adjustment. We believe
that the business of making sure the U.S. has a secure daily energy supply is
still the most important industry in our country, and, if we ever have another
energy shock (1974-1982 was the last one), it would reverberate more painfully
through our economy today than it did in the 1970's. Oil and gas are still
non-renewable sources of energy.
3
<PAGE> 4
When a barrel of oil is consumed, it is gone and cannot be replaced. In other
words, current depletion is offsetting most supply additions, while long-term
global demand is increasing. The Value Growth Portfolio has invested in the
energy area with the prospect, that over the next 5-10 years, the growth
potential could be extremely rewarding.
In addition to the drastic sell-off of energy stocks, small- and mid-cap
stocks have taken more than their fair share of a market drubbing. On the
NASDAQ, according to CNN, an amazing 71% of stocks are down 30% or more. All in
all, the Value Growth Portfolio has experienced its own bear market. However,
while prices can and may go lower, we believe many of these issues are at give-
away prices and selling at substantial discounts to their true business value.
The likely scenario, as it has played out in the past, is that the blue chips
may catch up on the downside. The timing of these developments remains to be
seen.
HIGH GRADE BOND: Treasury yields declined 25 to 60 basis points during the
twelve-month period ended July 31, 1998. For example, the 2-, 10- and 30-year
Treasury issues yielded 5.72%, 6.01% and 6.30%, respectively, as of July 31,
1997, and 5.48%, 5.49% and 5.71% as of July 31, 1998.
At the present time, the yield curve is very flat with the 10-year Treasury
yielding about the same as the short-term Federal Funds rate of 5.50%. Because
the market is already pricing in an imminent reduction in short-term rates by
the Federal Reserve, the market could "sell-off" if the Federal Reserve holds
rates steady. Given the cross-currents of a strong domestic economy on the one
hand and low current inflation rates and the Asian economic crisis on the other,
we feel the Federal Reserve will be on hold for at least several more months.
Based on this outlook, we currently plan to maintain the Portfolio's duration at
a level below the Lehman Brothers Aggregate Index. As a result, our returns
should continue to lag those of more aggressive bond funds in both up and down
markets.
HIGH YIELD BOND: During the past twelve months, the high yield bond market
outperformed the high grade corporate bond market. Both fundamental and
technical factors contributed favorably to this market's performance during this
period. On the fundamental side, a healthy economy and improvement in market
credit quality resulted in a very low rate of actual defaults in the high yield
market. On the technical side, strong demand for high yield issues allowed the
market to easily absorb new issuance.
During much of this period, the yield pick-up on high yield issues remained
near historically low levels, which meant there was little cushion to absorb any
negative surprises that might occur. Consequently, we shifted most of our new
purchases toward investment grade or higher rated high yield issues. In the last
several months, we have seen a general expansion in credit spreads that has made
high yield issues appear more compelling. As a result, we will be more inclined
to expand our holdings of high yield issues in the future.
MANAGED: The Managed Portfolio's convertible holdings insulated it against
the significant downdrafts that have been occurring in the broad market. The
convertible exposure affords the Portfolio downside protection in what is likely
to be a highly volatile market. At the same time, our convertible exposure
produces an attractive income stream averaging close to 4.5% before expenses.
With the overall market performance suffering, income will likely regain its
status as a meaningful component of total return (income + price appreciation).
The recent severe "sell-off" has created further opportunity for purchases of
attractive convertibles. The stocks of many fine companies have fallen 25-50%
from the highs of March. Some of these companies have convertibles available
that are now becoming (as a result of the decline) very attractively priced.
Dura
4
<PAGE> 5
Pharmaceuticals, a specialty respiratory pharmaceutical and pulmonary drug
delivery company, is one such example. Dura's common stock, which has fallen
from a high of $53 to its current price of $24, has a 3.5% convertible debenture
due July 15, 2002, that trades at $86, providing a current yield of 4.06%
(coupon/price) and a yield to maturity (income + price growth to par) of over
7.5%. This is an attractive income and growth opportunity. The 7.5% yield to
maturity, which is equivalent to a straight bond yield, should provide excellent
downside protection, with long-term growth potential. We are looking for similar
convertible opportunities in these extremely volatile markets and hope to
capitalize on this development.
MONEY MARKET: Alan Greenspan met before the Senate in July for his
semi-annual "Humphrey Hawkins testimony" and delivered a message of neutrality.
He indicated the U.S. economy is headed for a soft landing from its recent rapid
growth rate, suggesting that central bankers won't raise - or lower - interest
rates anytime soon. Volatility in overseas markets is also contributing to
Greenspan's solid position, that if the U.S. lowers interest rates, further
financial asset erosion could occur. With an outlook of neutrality, we are
remaining in short defensive debt instruments such as high-grade commercial
paper and agency discount notes.
BLUE CHIP: True to its passive strategy, the performance of the Blue Chip
Portfolio over the past year has reflected that of the large capitalization
market sector which it represents. The Blue Chip Portfolio will remain
substantially invested in common stocks of large companies and is designed for
those investors who prefer substantial exposure to common stocks at all times or
who wish to make their own market value judgments.
/s/ Edward M. Wiederstein
EDWARD M. WIEDERSTEIN
PRESIDENT
September 9, 1998
5
<PAGE> 6
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
VALUE GROWTH PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE VALUE GROWTH PORTFOLIO AND S&P 500
COMPARISON GRAPH
<TABLE>
<CAPTION>
-------------------------------
AVERAGE ANNUAL TOTAL RETURN
-------------------------------
<S> <C> <C>
1 Year 5 Year 10 Year
-------------------------------
-16.37% 5.77% 9.59%
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P 500 STOCK
(FISCAL YEAR COVERED) VALUE GROWTH PORTFOLIO COMPOSITE INDEX
<S> <C> <C>
1988 10000 10000
1989 11148 13187
1990 11806 14039
1991 13184 15833
1992 14834 17853
1993 18876 19401
1994 18940 20406
1995 20713 25722
1996 24526 29972
1997 29882 45563
1998 24990 54343
Past performance is not predictive of future performance.
</TABLE>
For the twelve-month period ended July 31, 1998, the total return for the
Value Growth Portfolio was -16.37%, compared to the 19.27% total return (income
and price appreciation) produced by the S&P 500 Stock Composite Index. The wide
difference in performance is due to two main factors: (1) the huge disparity in
returns of large companies and small companies, and (2) the severe
under-performance of energy related issues. In a July 30, 1998 Wall Street
Journal article, "For Thousands of Stocks, Bear Market Is Here," the fact that
small company stocks are being unmercifully pummeled was supported with Salomon
Smith Barney quoted to say that the average stock, with a market value of $250
million or less, is down 43% from its 52-week high. Additionally, we contend
that these stocks have also felt the force of indiscriminate selling pressure.
Another contributing factor is the suffering by oil service issues experiencing
their worst decline in many years due to the falling price of oil with most
companies' stock prices falling approximately 70% from their recent highs.
Despite the Portfolio's purchase of these companies after falling 50%, their
continued slide has hurt its short-term performance.
6
<PAGE> 7
HIGH GRADE BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
HIGH GRADE BOND PORTFOLIO AND LEHMAN BROTHERS MUTUAL FUND AGGREGATE INDEX
COMPARISON GRAPH
<TABLE>
<CAPTION>
-------------------------------
AVERAGE ANNUAL TOTAL RETURN
-------------------------------
<S> <C> <C>
1 Year 5 Year 10 Year
-------------------------------
6.39% 6.23% 7.98%
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MEASUREMENT PERIOD HIGH GRADE BOND MUTUAL FUND
(FISCAL YEAR COVERED) PORTFOLIO AGGREGATE INDEX
<S> <C> <C>
1988 10000 10000
1989 11068 11520
1990 11748 12332
1991 12958 13652
1992 14734 15672
1993 15928 17268
1994 16211 17281
1995 17546 19028
1996 18488 20082
1997 20257 22243
1998 21550 23994
Past performance is not predictive of future performance.
</TABLE>
During the twelve-month period ended July 31, 1998, the High Grade Bond
Portfolio underperformed the Lehman Brothers Mutual Fund Aggregate Index, as
reflected by the 6.39% total return produced by the Portfolio versus the 7.87%
total return produced by the Lehman Brothers Aggregate Index. The main factors
that caused this divergence in performance were Portfolio expenses and the
shorter effective duration of the High Grade Bond Portfolio relative to the
Lehman Aggregate Index.
7
<PAGE> 8
HIGH YIELD BOND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE HIGH YIELD BOND
PORTFOLIO AND LEHMAN BROTHERS MUTUAL FUND CORPORATE/HIGH YIELD INDEX
COMPARISON GRAPH
<TABLE>
<CAPTION>
-------------------------------
AVERAGE ANNUAL TOTAL RETURN
-------------------------------
<S> <C> <C>
1 Year 5 Year 10 Year
-------------------------------
7.14% 7.95% 9.93%
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
LEHMAN BROTHERS
MUTUAL FUND
MEASUREMENT PERIOD HIGH YIELD BOND CORPORATE/HIGH
(FISCAL YEAR COVERED) PORTFOLIO YIELD INDEX
<S> <C> <C>
1988 10000 10000
1989 11082 11455
1990 11849 12159
1991 13369 13515
1992 15566 15861
1993 17581 17794
1994 17912 17865
1995 19651 20050
1996 21158 21321
1997 24050 24161
1998 25767 26024
Past performance is not predictive of future performance.
</TABLE>
During the twelve-month period ended July 31, 1998, the 7.14% total return
produced by the High Yield Bond Portfolio trailed the 7.71% total return
produced by the Lehman Brothers Mutual Fund Corporate/High Yield Index. The main
factors causing this disparity in performance returns were Portfolio expenses
and the fact that the Portfolio maintained a larger percentage of its
investments in high yield bonds than the Lehman Brothers Corporate/High Yield
Index. During this time period, the high yield market tended to outperform the
high grade corporate bond market.
8
<PAGE> 9
MANAGED PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
MANAGED PORTFOLIO AND S&P 500
COMPARISON GRAPH
<TABLE>
<CAPTION>
-------------------------------
AVERAGE ANNUAL TOTAL RETURN
-------------------------------
<S> <C> <C>
1 Year 5 Year 10 Year
-------------------------------
-4.54% 7.68% 9.58%
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
MEASUREMENT PERIOD MANAGED S&P 500 STOCK
(FISCAL YEAR COVERED) PORTFOLIO COMPOSITE INDEX
<S> <C> <C>
1988 10000 10000
1989 10668 13187
1990 11410 14039
1991 12215 15833
1992 14022 17853
1993 17250 19401
1994 17144 20406
1995 18756 25722
1996 22000 29972
1997 26160 45563
1998 24973 54343
Past performance is not predictive of future performance.
</TABLE>
The Managed Portfolio is an asset allocation portfolio with an emphasis on
securities producing income and moderate growth potential, and will not likely
mirror any particular index (equity or fixed-income) over time. It meets this
objective by maintaining a majority of its assets in convertible bonds and
preferred stocks. The Portfolio's recent performance has been hindered because
many of these convertible securities were in the energy area. During the
twelve-month period ended July 31, 1998, the Portfolio produced a total return
of -4.54% compared to the 19.27% total return (income and price appreciation)
produced by the S&P 500 Stock Composite Index. The Managed Portfolio will
continue to seek out high income, concentrating on convertibles and higher
yielding common stocks. The dividend yield on the S&P 500 is a paltry 1.6%, and
we believe that from these market levels, income will take on a larger role in
producing attractive low-risk total returns. The Managed Portfolio is uniquely
positioned for this type of environment.
9
<PAGE> 10
BLUE CHIP PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
BLUE CHIP PORTFOLIO AND S&P 500
COMPARISON GRAPH
<TABLE>
<CAPTION>
-------------------------------
AVERAGE ANNUAL TOTAL RETURN
-------------------------------
<S> <C> <C>
1 Year 5 Year 10 Year
-------------------------------
11.49% 19.47% 15.80%
-------------------------------
</TABLE>
<TABLE>
<CAPTION>
MEASUREMENT PERIOD BLUE CHIP S&P 500 STOCK
(FISCAL YEAR COVERED) PORTFOLIO COMPOSITE INDEX
<S> <C> <C>
1988 10000 10000
1989 12794 13187
1990 13978 14039
1991 15147 15833
1992 16778 17853
1993 17821 19401
1994 19024 20406
1995 23356 25722
1996 27054 29972
1997 38897 45563
1998 43368 54343
Past performance is not predictive of future performance.
</TABLE>
The Blue Chip Portfolio is designed to represent the large capitalization
sector of the domestic equity market and remains substantially invested in
approximately 40 such common stock issues at all times. Accordingly, the
performance of this Portfolio will roughly parallel that of the Dow Jones
Industrial Average and S&P 500 Stock Composite Index. As is apparent from the
line graph, the performance of the Blue Chip Portfolio, adjusted for expenses,
was similar to that of the S&P 500 for the twelve-month period ended July 31,
1998.
10
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(This page has been left blank intentionally.)
11
<PAGE> 12
EQUITRUST SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1998
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
------------ ----------
<S> <C> <C>
ASSETS
Investments in securities, at value (cost -- $113,269,390;
$12,137,572; $12,021,288; $49,953,104; $3,190,075; and
$30,603,429, respectively)................................ $90,623,028 $12,658,899
Cash........................................................ 42,246 33,554
Receivables:
Accrued dividends and interest............................ 117,590 203,506
Investment securities sold................................ 7,014,532 7,861
Prepaid expense and other assets............................ 3,974 381
----------- -----------
Total Assets................................................ $97,801,370 $12,904,201
=========== ===========
LIABILITIES AND NET ASSETS
Liabilities:
Portfolio securities purchased............................
Payable to EquiTrust Investment Management Services,
Inc.................................................... $ 39,955 $ 6,460
Dividends payable.........................................
Accrued expenses.......................................... 28,794 11,099
----------- -----------
Total Liabilities........................................... 68,749 17,559
Net assets applicable to outstanding capital stock.......... 97,732,621 12,886,642
----------- -----------
Total Liabilities and Net Assets............................ $97,801,370 $12,904,201
=========== ===========
NET ASSET VALUE PER SHARE
Class A: Net Assets........................................ $92,847,809 $11,510,298
Shares issued and outstanding..................... 8,386,422 1,089,254
Net asset value per share......................... $ 11.07 $ 10.57
=========== ===========
Class I: Net Assets........................................ $ 4,884,812 $ 1,376,344
Shares issued and outstanding..................... 440,798 130,256
Net asset value per share......................... $ 11.08 $ 10.57
=========== ===========
</TABLE>
See accompanying notes.
12
<PAGE> 13
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------- --------- ------------ ---------
<S> <C> <C> <C>
$12,324,214 $46,007,752 $3,190,075 $46,857,902
5,357 162,324 15,370 170,619
245,806 252,887 5,018 46,809
369 1,535 120 1,263
- ----------- ----------- ---------- -----------
$12,575,746 $46,424,498 $3,210,583 $47,076,593
=========== =========== ========== ===========
$ 122,400
7,189 $ 12,189 $ 1,164 $ 27,729
30,316
9,845 17,921 8,411 18,098
- ----------- ----------- ---------- -----------
139,434 60,426 9,575 45,827
12,436,312 46,364,072 3,201,008 47,030,766
- ----------- ----------- ---------- -----------
$12,575,746 $46,424,498 $3,210,583 $47,076,593
=========== =========== ========== ===========
$10,982,371 $43,602,012 $2,573,854 $43,418,220
1,048,103 3,589,600 2,573,854 1,051,952
$ 10.48 $ 12.15 $ 1.00 $ 41.27
=========== =========== ========== ===========
$ 1,453,941 $ 2,762,060 $ 627,154 $ 3,612,546
138,819 227,772 627,154 87,315
$ 10.47 $ 12.13 $ 1.00 $ 41.37
=========== =========== ========== ===========
</TABLE>
13
<PAGE> 14
EQUITRUST SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED JULY 31, 1998
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
------------ ----------
<S> <C> <C>
INVESTMENT INCOME
Dividends.................................................. $ 1,023,729 $ 33,638
Interest................................................... 1,841,981 805,678
------------ --------
Total Investment Income.................................... 2,865,710 839,316
EXPENSES
Paid to EquiTrust Investment Management Services, Inc.:
Investment advisory and management fees.................. 589,203 45,457
Transfer and dividend disbursing agent fees.............. 235,745 34,730
Distribution fees........................................ 572,191 52,536
Administrative service fees.............................. 286,096 26,268
Accounting fees.......................................... 30,000 5,682
Custodian fees............................................. 19,234 3,749
Professional fees.......................................... 33,325 7,717
Directors' fees and expenses............................... 2,706 255
Reports to shareholders.................................... 56,304 5,187
Registration fees.......................................... 21,355 8,898
Miscellaneous.............................................. 7,175 1,826
------------ --------
Total Expenses............................................. 1,853,334 192,305
------------ --------
Net Investment Income...................................... 1,012,376 647,011
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investment transactions............. 11,985,876 4,789
Change in unrealized appreciation/depreciation of
investments.............................................. (32,362,087) 66,274
------------ --------
Net Gain (Loss) on Investments............................. (20,376,211) 71,063
------------ --------
Net Increase (Decrease) in Net Assets Resulting from
Operations............................................... $(19,363,835) $718,074
============ ========
</TABLE>
See accompanying notes.
14
<PAGE> 15
<TABLE>
<CAPTION>
HIGH YIELD
BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------- ----------- ------------ ----------
<S> <C> <C> <C>
$ 50,569 $ 1,209,202 $ 555,002
823,337 1,156,977 $162,547 201,846
-------- ----------- -------- ----------
873,906 2,366,179 162,547 756,848
58,998 276,527 7,315 93,182
41,236 143,609 12,216 137,847
49,149 221,943 12,627 176,762
24,575 110,972 6,313 88,381
5,364 23,044 1,463 18,636
5,903 1,989 3,826 9,631
7,555 15,529 5,325 13,203
249 1,034 66 781
4,831 20,473 1,364 15,474
8,405 14,939 6,615 12,509
1,947 6,654 221 2,172
-------- ----------- -------- ----------
208,212 836,713 57,351 568,578
-------- ----------- -------- ----------
665,694 1,529,466 105,196 188,270
53,172 2,740,231 224,325
14,546 (6,713,655) 3,823,328
-------- ----------- -------- ----------
67,718 (3,973,424) 4,047,653
-------- ----------- -------- ----------
$733,412 $(2,443,958) $105,196 $4,235,923
======== =========== ======== ==========
</TABLE>
15
<PAGE> 16
EQUITRUST SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VALUE GROWTH
PORTFOLIO
-------------------------------
YEAR ENDED JULY 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income....................................... $ 1,012,376 $ 1,185,220
Net realized gain (loss) from investment transactions....... 11,985,876 10,703,882
Change in unrealized appreciation/depreciation of
investments............................................... (32,362,087) 7,399,282
------------ ------------
Net Increase (Decrease) in Net Assets Resulting
from Operations........................................... (19,363,835) 19,288,384
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A................................................... (1,221,206) (1,089,763)
Class I................................................... (27,684)
Net realized gain from investment transactions:
Class A................................................... (16,508,554) (11,584,328)
Class I................................................... (353,089)
------------ ------------
Total Dividends and Distributions........................... (18,110,533) (12,674,091)
CAPITAL SHARE TRANSACTIONS.................................. 22,221,812 19,837,007
------------ ------------
Total Increase (Decrease) in Net Assets..................... (15,252,556) 26,451,300
NET ASSETS
Beginning of year........................................... 112,985,177 86,533,877
------------ ------------
End of year (including undistributed net investment income
as set forth below)....................................... $ 97,732,621 $112,985,177
============ ============
Undistributed Net Investment Income......................... $ 353,049 $ 589,563
============ ============
</TABLE>
See accompanying notes.
16
<PAGE> 17
<TABLE>
<CAPTION>
HIGH GRADE BOND HIGH YIELD BOND
PORTFOLIO PORTFOLIO
- ----------------------------- ----------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
- ----------------------------- ----------------------------
1998 1997 1998 1997
- ----------- ----------- ----------- ----------
<S> <C> <C> <C>
$ 647,011 $ 562,752 $ 665,694 $ 564,387
4,789 (9,430) 53,172 94,434
66,274 330,826 14,546 399,538
- ----------- ----------- ----------- ----------
718,074 884,148 733,412 1,058,359
(596,349) (562,752) (607,470) (564,387)
(50,662) (58,224)
(65,632) (91,491)
(6,891)
- ----------- ----------- ----------- ----------
(647,011) (562,752) (738,217) (655,878)
2,565,189 806,820 3,285,456 1,403,816
- ----------- ----------- ----------- ----------
2,636,252 1,128,216 3,280,651 1,806,297
10,250,390 9,122,174 9,155,661 7,349,364
- ----------- ----------- ----------- ----------
$12,886,642 $10,250,390 $12,436,312 $9,155,661
=========== =========== =========== ==========
$ 0 $ 0 $ 0 $ 0
=========== =========== =========== ==========
</TABLE>
17
<PAGE> 18
EQUITRUST SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
--------------------------------
YEAR ENDED JULY 31,
--------------------------------
1998 1997
------------- ------------
<S> <C> <C>
OPERATIONS
Net investment income....................................... $ 1,529,466 $ 1,177,452
Net realized gain (loss) from investment transactions....... 2,740,231 2,864,737
Change in unrealized appreciation/depreciation of
investments............................................... (6,713,655) 1,762,964
----------- -----------
Net Increase (Decrease) in Net Assets Resulting from
Operations................................................ (2,443,958) 5,805,153
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
Class A................................................... (1,467,303) (1,173,550)
Class I................................................... (65,203)
Net realized gain from investment transactions:
Class A................................................... (2,810,723) (2,710,983)
Class I................................................... (63,897)
----------- -----------
Total Dividends and Distributions........................... (4,407,126) (3,884,533)
CAPITAL SHARE TRANSACTIONS.................................. 12,221,133 11,603,627
----------- -----------
Total Increase (Decrease) in Net Assets..................... 5,370,049 13,524,247
NET ASSETS
Beginning of year........................................... 40,994,023 27,469,776
----------- -----------
End of year (including undistributed net investment income
as set forth below)....................................... $46,364,072 $40,994,023
=========== ===========
Undistributed Net Investment Income......................... $ 1,350 $ 4,390
=========== ===========
</TABLE>
See accompanying notes.
18
<PAGE> 19
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
- --------------------------- -----------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
- --------------------------- -----------------------------
1998 1997 1998 1997
- ---------- ---------- ----------- -----------
<S> <C> <C> <C>
$ 105,196 $ 91,101 $ 188,270 $ 100,574
224,325 5,998
3,823,328 7,741,835
- ---------- ---------- ----------- -----------
105,196 91,101 4,235,923 7,848,407
(90,846) (91,101) (139,294) (90,090)
(14,350) (4,830)
(22,251) (184,842)
(681)
- ---------- ---------- ----------- -----------
(105,196) (91,101) (167,056) (274,932)
735,292 (85,838) 13,098,493 7,648,725
- ---------- ---------- ----------- -----------
735,292 (85,838) 17,167,360 15,222,200
2,465,716 2,551,554 29,863,406 14,641,206
- ---------- ---------- ----------- -----------
$3,201,008 $2,465,716 $47,030,766 $29,863,406
========== ========== =========== ===========
$ 0 $ 0 $ 88,993 $ 44,847
========== ========== =========== ===========
</TABLE>
19
<PAGE> 20
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (62.12%)
APPAREL AND ACCESSORY STORES (1.23%)
Gymboree Corp. ........................................... 100,000(1) $1,200,000
BUSINESS SERVICES (1.61%)
Olsten Corp. ............................................. 170,000 1,572,500
COMMUNICATIONS (.72%)
Andrew Corp. ............................................. 40,000(1) 705,000
ELECTRIC, GAS AND SANITARY SERVICES (7.79%)
Airgas, Inc. ............................................. 120,000(1) 1,620,000
Citizens Utilities Co., Class B........................... 690 6,037
Equitable Resources....................................... 82,200 2,024,175
Matrix Service Co. ....................................... 609,800(1) 3,963,700
-----------
7,613,912
ELECTRONICS & OTHER ELECTRIC EQUIPMENT (3.30%)
Diebold, Inc. ............................................ 40,000 1,010,000
FSI Int'l, Inc. .......................................... 70,000(1) 573,125
Park Electrochemical Corp. ............................... 13,500 256,500
Rohn Industries, Inc. .................................... 402,500 1,383,595
-----------
3,223,220
HEALTH SERVICES (3.42%)
Mallinckrodt, Inc. ....................................... 70,000 1,938,125
Medpartners, Inc. ........................................ 100,000(1) 512,500
Phycor, Inc. ............................................. 98,000(1) 894,250
-----------
3,344,875
HEAVY CONSTRUCTION (.93%)
Stone and Webster, Inc. .................................. 25,000 906,250
HOLDING AND OTHER INVESTMENT OFFICES (.16%)
Wintrust Financial Corp. ................................. 7,000(1) 157,500
INDUSTRIAL MACHINERY & EQUIPMENT (5.75%)
Baker Hughes, Inc. ....................................... 100,000 2,443,750
Varco International, Inc. ................................ 200,000 3,175,000
-----------
5,618,750
</TABLE>
20
<PAGE> 21
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
INSTRUMENTS & RELATED PRODUCTS (1.94%)
Allied Healthcare Products................................ 369,630(1) $ 1,155,094
Moore Products Co. ....................................... 10,000 275,000
Polaroid Corp. ........................................... 14,000 462,000
-----------
1,892,094
INSURANCE CARRIERS (3.19%)
Amerus Life Holdings, Inc. ............................... 55,000 1,715,312
Danielson Holding Corp. .................................. 167,200(1) 1,003,200
MMI Companies, Inc. ...................................... 20,000 402,500
-----------
3,121,012
METAL MINING (10.57%)
Barrick Gold Corp. ....................................... 170,000 2,783,750
Glamis Gold, Ltd. ........................................ 522,900(1) 1,634,062
Kinross Gold Corp ........................................ 558,124(1) 1,395,310
Newmont Mining Corp. ..................................... 180,000 3,397,500
TVX Gold, Inc. ........................................... 485,000(1) 1,121,563
-----------
10,332,185
MISCELLANEOUS RETAIL (1.29%)
Southland Corp. .......................................... 470,000(1) 1,263,125
NONMETALLIC MINERALS EXCLUDING FUELS (2.34%)
De Beers Cons Mines....................................... 140,000 2,290,316
OIL AND GAS EXTRACTION (13.14%)
Copper Cameron Corp. ..................................... 20,000(1) 701,250
Diamond Offshore Drill.................................... 100,000 3,281,250
EVI Weatherford, Inc. .................................... 40,000(1) 1,030,000
Global Industries......................................... 200,000 2,487,500
Grey Wolf, Inc. .......................................... 210,000(1) 420,000
Marine Drilling Co. ...................................... 50,000(1) 556,250
Offshore Logistics........................................ 100,000(1) 1,087,500
Parker Drilling Corp. .................................... 100,000(1) 518,750
Transocean Offshore, Inc. ................................ 70,000 2,760,625
-----------
12,843,125
PRINTING AND PUBLISHING (1.13%)
John H Harland Co. ....................................... 70,000 1,102,500
RAILROAD TRANSPORTATION (1.20%)
Union Pacific Corp. ...................................... 28,000 1,176,000
</TABLE>
21
<PAGE> 22
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
WATER TRANSPORTATION (.79%)
Hvide Marine, Inc. ....................................... 70,000(1) $ 770,000
WHOLESALE TRADE - DURABLE GOODS (.81%)
TBC Corporation........................................... 126,100(1) 788,125
WHOLESALE TRADE - NONDURABLE GOODS (.81%)
Howell Corp............................................... 83,530 788,314
-----------
Total Common Stocks......................................... 60,708,803
PREFERRED STOCKS (3.92%)
HOLDING AND OTHER INVESTMENT OFFICES (1.29%)
General Growth Properties, Inc............................ 50,000(1) 1,262,500
OIL AND GAS EXTRACTION (.93%)
Chesapeake Energy Corp.................................... 25,000 906,250
RAILROAD TRANSPORTATION (.28%)
Union Pacific Cap Trust................................... 6,000 273,000
WHOLESALE-NONDURABLE GOODS (1.42%)
Howell Corp............................................... 35,000 1,389,062
-----------
Total Preferred Stocks...................................... 3,830,812
PRINCIPAL
AMOUNT
----------
CORPORATE BONDS (.81%)
OIL AND GAS EXTRACTION
Nabors Industries, Inc.................................... $ 700,000 789,796
SHORT-TERM INVESTMENTS (25.88%)
COMMERCIAL PAPER (10.82%)
Ford Motor Credit Corp., 5.54%, due 8/18/98............... 2,400,000 2,400,000
General Electric Capital Corp., 5.53%, due 8/26/98........ 3,300,000 3,300,000
John Deere Capital Corp., 5.56%, due 8/12/98.............. 4,875,000 4,875,000
-----------
10,575,000
MONEY MARKET MUTUAL FUND (.41%)
Provident T-Fund.......................................... 400,000 400,000
</TABLE>
22
<PAGE> 23
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
UNITED STATES GOVERNMENT AGENCIES (14.65%)
Federal Home Loan Bank, due 9/02/98....................... $1,300,000 $ 1,293,772
Federal Home Loan Mortgage Corp., due 9/01/98............. 5,100,000 5,076,056
Federal National Mortgage Assoc., due 8/07/98............. 1,400,000 1,398,723
Federal National Mortgage Assoc., due 9/16/98............. 5,000,000 4,965,181
Federal National Mortgage Assoc., due 9/22/98............. 300,000 297,648
Federal National Mortgage Assoc., due 10/05/98............ 1,300,000 1,287,237
-----------
14,318,617
-----------
Total Short-Term Investments................................ 25,293,617
-----------
Total Investments (92.73%).................................. 90,623,028
OTHER ASSETS LESS LIABILITIES (7.27%)
Cash, receivables, prepaid expense and other assets, less
liabilities............................................ 7,109,593
-----------
Total Net Assets (100.00%).................................. $97,732,621
===========
</TABLE>
(1) Non-income producing securities.
See accompanying notes.
23
<PAGE> 24
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES
HELD VALUE
--------- -----------
<S> <C> <C>
PREFERRED STOCK (3.58%)
New Plan Realty........................................... 9,000 $ 461,250
<CAPTION>
PRINCIPAL
AMOUNT
--------
<S> <C>
CORPORATE BONDS (67.09%)
COMMUNICATIONS (2.80%)
Comcast Cable Communications, Inc., 8.50%, due 5/01/27.... $300,000 360,714
DEPOSITORY INSTITUTIONS (7.63%)
First Bank, N.A., 6.25%, due 8/15/05...................... 450,000 450,643
J. P. Morgan & Co., 7.25%, due 10/01/10................... 350,000 353,717
Midland America Capital Corp., 12.75%, due 11/15/03....... 175,000 178,351
-----------
982,711
ELECTRIC, GAS AND SANITARY SERVICES (20.47%)
Narragansett Electric Co., 9.125%, due 5/01/21............ 450,000 511,114
National Co-op Services Corp., 9.48%, due 1/01/12......... 559,000 595,760
New England Power Co., 8.00%, due 8/01/22................. 400,000 440,680
Oglethorpe Power, 6.974%, due 6/30/11..................... 700,000 718,662
Western Penn Power, 7.875%, due 12/01/04.................. 360,000 371,427
-----------
2,637,643
FOOD AND KINDRED PRODUCTS (.55%)
Anheuser-Busch Companies, Inc., 8.50%, due 3/01/17........ 69,000 71,362
GENERAL MERCHANDISE STORES (3.44%)
J.C. Penney & Co., 8.25%, due 8/15/22..................... 400,000 443,716
HOLDING AND OTHER INVESTMENT OFFICES (9.10%)
Federal Realty Investment Trust, 8.875%, due 1/15/00...... 350,000 363,051
Meditrust, 7.60%, due 9/13/05............................. 350,000 357,494
Washington Reit, 6.898%, due 2/25/08...................... 450,000 452,484
-----------
1,173,029
NONDEPOSITORY INSTITUTIONS (4.18%)
Household Finance Co., 7.30%, due 7/30/12................. 300,000 308,916
Security Capital Pacific, 7.20%, due 3/01/13.............. 225,000 229,824
-----------
538,740
OIL & GAS EXTRACTION (1.97%)
Burlington Resources, Inc., 9.125%, due 10/01/21.......... 200,000 253,186
PAPER AND ALLIED PRODUCTS (4.20%)
Union Camp Corp., 8.625%, due 4/15/16..................... 516,000 541,513
</TABLE>
24
<PAGE> 25
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<S> <C> <C>
PRINTING AND PUBLISHING (2.61%)
Valassis Communications, Inc., 9.55%, due 12/01/03........ $300,000 $ 336,663
RAILROAD TRANSPORTATION (2.37%)
Union Pacific Corp., 8.50%, due 1/15/17................... 293,000 305,608
SECURITY AND COMMODITY BROKERS (1.57%)
Lehman Brothers Holding, Inc., 8.875%, due 11/01/98....... 200,000 201,642
TEXTILE MILL PRODUCTS (4.20%)
Unifi, 6.50%, due 2/01/08................................. 550,000 541,371
TRANSPORTATION EQUIPMENT (1.99%)
Ford Motor Co., 9.215%, due 9/15/21....................... 200,000 257,468
-----------
Total Corporate Bonds....................................... 8,645,366
ASSET-BACKED SECURITIES (.77%)
Federal Home Loan Mortgage Corp., 10.15%, due 4/15/06..... 98,807 99,825
MORTGAGE-BACKED SECURITIES (13.57%)
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) (0.30%)
Pool # 503442, 9.50%, due 7/01/05......................... 37,134 38,654
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (13.27%)
Pool # 1512, 7.50%, due 12/20/23.......................... 683,126 700,416
Pool # 144332, 9.00%, due 7/15/16......................... 31,671 34,146
Pool # 194692, 8.00%, due 5/15/17......................... 302,167 318,218
Pool # 236070, 10.00%, due 10/15/12....................... 581,887 632,441
Pool # 307097, 9.00%, due 7/15/21......................... 22,768 24,391
-----------
1,709,612
-----------
Total Mortgage-Backed Securities............................ 1,748,266
UNITED STATES TREASURY OBLIGATION (3.37%)
U.S. Treasury Note, 7.25%, due 8/15/04.................... 400,000 434,432
</TABLE>
25
<PAGE> 26
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (9.85%)
UNITED STATES GOVERNMENT AGENCIES
Federal Home Loan Mortgage Corp., due 8/06/98............. $700,000 $ 699,470
Federal National Mortgage Assoc., due 9/24/98............. 575,000 570,290
-----------
Total Short-Term Investments................................ 1,269,760
-----------
Total Investments (98.23%).................................. 12,658,899
OTHER ASSETS LESS LIABILITIES (1.77%)
Cash, receivables, prepaid expense and other assets, less
liabilities............................................ 227,743
-----------
Total Net Assets (100.00%).................................. $12,886,642
===========
</TABLE>
26
<PAGE> 27
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
JULY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<S> <C> <C>
CORPORATE BONDS (84.63%)
AMUSEMENT & RECREATION SERVICES (2.25%)
AMF Bowling Worldwide, Inc., 10.875%, due 3/15/06......... $260,000 $ 279,500
APPAREL AND OTHER TEXTILE PRODUCTS (2.40%)
Dan River, Inc., 10.125%, due 12/15/03.................... 280,000 298,200
AUTO REPAIR, SERVICES AND PARKING (1.20%)
Envirotest Systems Corp., 9.625%, due 4/01/03............. 150,000 150,000
COMMUNICATIONS (7.61%)
Comcast Cable Communications, Inc., 8.50%, due 5/01/27.... 350,000 420,833
Savoy Pictures, 7.00%, due 7/01/03........................ 550,000 525,250
-----------
946,083
DEPOSITORY INSTITUTIONS (2.82%)
First Bank, N.A., 6.25%, due 8/15/05...................... 350,000 350,501
ELECTRIC, GAS AND SANITARY SERVICES (22.19%)
Cleveland Electric Illum., 8.375%, due 12/01/11........... 600,000 620,046
Esi Tractebel, 7.99%, due 12/30/11........................ 460,000 462,300
Narragansett Electric Co., 9.125%, due 5/01/21............ 400,000 454,324
New England Power Co., 8.00%, due 8/01/22................. 250,000 275,425
Niagara Mohawk Power, 7.875%, due 4/01/24................. 500,000 516,035
Waterford 3 Nuclear Power Plant (Entergy Louisiana, Inc.),
8.09%, due 1/02/17..................................... 400,000 431,176
-----------
2,759,306
EATING AND DRINKING PLACES (4.07%)
Tricon Global Restaurants, Inc., 7.65%, due 5/15/08....... 500,000 505,685
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (3.01%)
Advanced Micro Devices, Inc., 11.00%, due 8/01/03......... 360,000 374,850
FOOD STORES (2.19%)
P&C Food Markets, Inc., 11.50%, due 10/15/01.............. 150,000 117,375
Penn Traffic Co., 10.25%, due 2/15/02..................... 200,000 155,000
-----------
272,375
HEALTH SERVICES (3.23%)
Tenet Healthcare, 7.625%, due 6/01/08..................... 400,000 401,108
</TABLE>
27
<PAGE> 28
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<S> <C> <C>
HOLDING AND OTHER INVESTMENT OFFICES (16.54%)
Bradley Operating LP, 7.20%, due 1/15/08.................. $500,000 $ 502,795
Federal Realty Investment Trust, 7.48%, due 8/15/26....... 600,000 646,019
Glenborough Properties, 7.625%, due 3/15/05............... 250,000 251,595
Price Development Company, 7.29%, due 3/11/08............. 250,000 254,673
SUSA Partnership, L.P., 8.20%, due 6/01/17................ 375,000 401,774
-----------
2,056,856
INSTRUMENTS AND RELATED PRODUCTS (.92%)
Thermolase Corp., 4.375%, due 8/05/04..................... 140,000 114,766
LUMBER AND WOOD PRODUCTS (5.95%)
Georgia-Pacific Corp., 9.875%, due 11/01/21............... 330,000 371,554
Georgia-Pacific Corp., 9.125%, due 7/01/22................ 100,000 110,162
Pacific Lumber Co., 10.50%, due 3/01/03................... 250,000 258,750
-----------
740,466
MISCELLANEOUS RETAIL (2.52%)
Eckerd Corp., 9.25%, due 2/15/04.......................... 295,000 313,399
NONDEPOSITORY INSTITUTIONS (2.37%)
Macsaver Financial, 7.40%, due 2/15/02.................... 300,000 294,783
OIL AND GAS EXTRACTION (1.19%)
Dawson Production Services, Inc., 9.375%, due 2/01/07..... 150,000 148,313
PAPER AND ALLIED PRODUCTS (2.16%)
Container Corp. of America, 9.75%, due 4/01/03............ 250,000 268,750
TRANSPORTATION SERVICES (2.01%)
Preston Corp., 7.00%, due 5/01/11......................... 306,000 249,390
-----------
Total Corporate Bonds....................................... 10,524,331
SHARES
HELD
--------
PREFERRED STOCK (5.24%)
DEPOSITORY INSTITUTIONS (2.36%)
CFB Capital I, 8.875% Cumulative Capital Securities....... 11,000 292,875
HOLDING AND OTHER INVESTMENT OFFICES (2.88%)
New Plan Realty Trust..................................... 7,000 358,750
-----------
Total Preferred Stocks...................................... 651,625
</TABLE>
28
<PAGE> 29
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
--------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (9.23%)
MONEY MARKET MUTUAL FUND (2.82%)
Provident T-Fund.......................................... $350,765 $ 350,765
UNITED STATES GOVERNMENT AGENCIES (6.41%)
Federal Home Loan Mortgage Corp., due 8/06/98............. 300,000 299,773
Federal Home Loan Mortgage Corp., due 8/31/98............. 500,000 497,720
-----------
797,493
-----------
Total Short-Term Investments................................ 1,148,258
-----------
Total Investments (99.10%).................................. 12,324,214
OTHER ASSETS LESS LIABILITIES (.90%)
Cash, receivables, prepaid expense and other assets, less
liabilities............................................ 112,098
-----------
Total Net Assets (100.00%).................................. $12,436,312
===========
</TABLE>
See accompanying notes.
29
<PAGE> 30
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (21.54%)
ELECTRIC, GAS AND SANITARY SERVICES (9.37%)
Citizens Utilities Co., Class B........................... 197,578 $ 1,728,807
MidAmerican Energy Holdings Co............................ 40,000 815,000
Otter Tail Power Co....................................... 50,000 1,800,000
-----------
4,343,807
FORESTRY (2.72%)
Weyerhaeuser Co........................................... 30,000 1,260,000
HOLDING AND OTHER INVESTMENT OFFICES (4.42%)
General Growth Properties, Inc............................ 56,375 2,050,641
INSTRUMENTS AND RELATED PRODUCTS (3.88%)
Pall Corp................................................. 80,000 1,800,000
OIL AND GAS EXTRACTION (1.15%)
Offshore Logistics........................................ 49,200(1) 535,050
-----------
Total Common Stocks......................................... 9,989,498
OPTION (0.01%)
Security Capital Group.................................... 1,730(1) 216
PREFERRED STOCKS (27.72%)
DEPOSITORY INSTITUTIONS (8.92%)
CFB Capital I, 8.875% Cumulative Capital Securities....... 67,500 1,797,187
Harris Preferred Capital Group, Inc....................... 20,000 502,500
Taylor Capital Group, Inc................................. 72,000 1,836,000
-----------
4,135,687
ELECTRIC, GAS AND SANITARY SERVICES (2.74%)
Equitable Resources....................................... 50,000 1,246,875
Western Gas Resources, Inc................................ 1,000 24,938
-----------
1,271,813
HOLDING AND OTHER INVESTMENT OFFICES (0.55%)
General Growth Properties, Inc............................ 10,000(1) 252,500
INSURANCE CARRIERS (1.94%)
Equitable of Iowa Capital................................. 34,146 898,467
MISCELLANEOUS MANUFACTURING INDUSTRIES (2.91%)
Cyprus Amax Minerals Co................................... 30,000 1,350,000
</TABLE>
30
<PAGE> 31
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
NONDEPOSITORY INSTITUTIONS (1.69%)
Hvide Capital Trust....................................... 20,000 $ 785,000
OIL AND GAS EXTRACTION (6.88%)
Chesapeake Energy Corp.................................... 26,000 942,500
EVI, Inc.................................................. 40,000 1,490,000
El Paso Ener Cap Trust I, 4.75%........................... 15,000 757,500
-----------
3,190,000
RAILROAD TRANSPORTATION (0.39%)
Union Pacific Cap Trust................................... 4,000 182,000
WHOLESALE TRADE-NONDURABLE GOODS (1.70%)
Howell Corp............................................... 19,800 785,812
-----------
Total Preferred Stocks...................................... 12,851,279
PRINCIPAL
AMOUNT
----------
CORPORATE BONDS (36.87%)
ELECTRIC, GAS AND SANITARY SERVICES (0.29%)
National Co-op Services Corp.(Arkansas Electric), 9.48%,
due 1/01/12............................................ $ 128,000 136,417
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (5.01%)
California Microwave, Inc., Convertible Sub. Deb., 5.25%,
due 12/15/03........................................... 1,500,000 1,203,060
Sunbeam Corp., due 3/25/18................................ 5,000,000 1,121,200
-----------
2,324,260
FOOD AND KINDRED PRODUCTS (0.09%)
Anheuser-Busch Co., 8.50%, due 3/01/17.................... 40,000 41,370
HEALTH SERVICES (6.02%)
Dura Pharmaceuticals, 3.50%, due 7/15/02.................. 2,000,000 1,729,000
Quantum Healthcare Resources, 4.75%, due 10/01/00......... 1,125,000 1,065,938
-----------
2,794,938
INSURANCE CARRIERS (2.41%)
NAC RE Corp., 5.25%, due 12/15/02......................... 1,000,000 1,115,280
METAL MINING (2.35%)
Teck Corp., 3.75%, due 7/15/06............................ 1,500,000 1,091,250
</TABLE>
31
<PAGE> 32
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
MISCELLANEOUS MANUFACTURING INDUSTRIES (4.58%)
Halter Marine Group, Inc., 4.50%, due 9/15/04............. $ 625,000 $ 526,325
Parker Drilling Corp., 5.50%, due 8/01/04................. 2,000,000 1,597,140
-----------
2,123,465
NONDEPOSITORY INSTITUTIONS (3.43%)
Consumer Portfolio Services, Inc., 10.50%, due 4/15/04.... 1,600,000 1,588,000
OIL AND GAS EXTRACTION (9.92%)
Diamond Offshore Drilling, 3.75%, due 2/15/07............. 1,700,000 1,802,323
Nabors Industries, Inc., 5.00%, due 5/15/06............... 1,700,000 1,918,076
Pride International, Inc., 6.25%, due 2/15/06............. 810,000 878,607
-----------
4,599,006
PETROLEUM AND COAL PRODUCTS (2.39%)
Trizec Hahn Corp., 3.25%, due 12/10/18.................... 1,800,000 1,109,682
RAILROAD TRANSPORTATION (0.38%)
Union Pacific Corp., SFDEB, 8.50%, due 1/15/17............ 167,000 174,186
-----------
Total Corporate Bonds....................................... 17,097,854
SHORT-TERM INVESTMENTS (13.09%)
COMMERCIAL PAPER (1.94%)
Ford Motor Credit Company, 5.54%, due 8/14/98............. 900,000 900,000
UNITED STATES GOVERNMENT AGENCIES (8.06%)
Federal Home Loan Mortgage Corp., due 8/5/98.............. 800,000 799,513
Federal Home Loan Mortgage Corp., due 8/21/98............. 2,100,000 2,093,626
Federal Home Loan Mortgage Corp., due 8/27/98............. 250,000 249,012
Federal Home Loan Mortgage Corp., due 9/10/98............. 600,000 596,407
-----------
3,738,558
MONEY MARKET MUTUAL FUND (3.09%)
Provident T-Fund.......................................... 1,430,347 1,430,347
-----------
Total Short-Term Investments................................ 6,068,905
-----------
Total Investments (99.23%).................................. 46,007,752
OTHER ASSETS LESS LIABILITIES (0.77%)
Cash, receivables, prepaid expense and other assets, less
liabilities............................................ 356,320
-----------
Total Net Assets (100.00%).................................. $46,364,072
===========
</TABLE>
(1) Non-income producing securities.
See accompanying notes.
32
<PAGE> 33
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
JULY 31, 1998
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON
PURCHASE PRINCIPAL
DATE AMOUNT VALUE
---------- --------- ----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (99.66%)
COMMERCIAL PAPER (25.15%)
NONDEPOSITORY INSTITUTIONS
American General Finance, 5.59%, due 9/18/98....... 5.587% $150,000 $ 150,000
Deere & Company, 5.56%, due 9/04/98................ 5.562 155,000 155,000
Ford Motor Credit Corp., 5.54%, due 8/25/98........ 5.543 150,000 150,000
General Electric Capital Corp., 5.60%, due
9/15/98.......................................... 5.596 100,000 100,000
IBM Credit Corp., 5.53%, due 9/29/98............... 5.529 150,000 150,000
Texaco, Inc., 5.55%, due 8/06/98................... 5.554 100,000 100,000
----------
Total Commercial Paper.................................. 805,000
UNITED STATES GOVERNMENT AGENCIES (74.51%)
Federal Home Loan Bank, due 8/20/98................ 5.545 100,000 99,712
Federal Home Loan Bank, due 8/26/98................ 5.485 150,000 149,431
Federal Home Loan Bank, due 10/21/98............... 5.528 100,000 98,788
Federal Home Loan Mortgage Corp., due 8/3/98....... 5.539 125,000 124,962
Federal Home Loan Mortgage Corp., due 8/18/98...... 5.536 125,000 124,679
Federal Home Loan Mortgage Corp., due 8/28/98...... 5.572 100,000 99,590
Federal Home Loan Mortgage Corp., due 9/01/98...... 5.557 100,000 99,530
Federal Home Loan Mortgage Corp., due 9/08/98...... 5.528 175,000 173,999
Federal Home Loan Mortgage Corp., due 9/10/98...... 5.539 125,000 124,246
Federal Home Loan Mortgage Corp., due 9/24/98...... 5.549 125,000 123,982
Federal Home Loan Mortgage Corp., due 10/06/98..... 5.532 125,000 123,762
Federal Home Loan Mortgage Corp., due 10/09/98..... 5.556 100,000 98,961
Federal Home Loan Mortgage Corp., due 10/14/98..... 5.547 100,000 98,888
Federal Home Loan Mortgage Corp., due 10/23/98..... 5.578 100,000 98,747
Federal National Mortgage Assoc., due 8/07/98...... 5.555 150,000 149,863
Federal National Mortgage Assoc., due 8/12/98...... 5.539 100,000 99,833
Federal National Mortgage Assoc., due 8/14/98...... 5.567 150,000 149,703
Federal National Mortgage Assoc., due 9/22/98...... 5.497 125,000 124,029
Federal National Mortgage Assoc., due 10/16/98..... 5.572 125,000 123,566
Federal National Mortgage Assoc., due 10/19/98..... 5.593 100,000 98,804
----------
Total United States Government Agencies................. 2,385,075
----------
Total Short-Term Investments............................ 3,190,075
OTHER ASSETS LESS LIABILITIES (0.34%)
Cash,receivables, prepaid expense and other assets,
less liabilities................................... 10,933
----------
Total Net Assets (100.00%).............................. $3,201,008
==========
</TABLE>
See accompanying notes.
33
<PAGE> 34
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO
JULY 31, 1998
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (94.28%)
CHEMICALS AND ALLIED PRODUCTS (16.89%)
Bristol-Myers Squibb Co................................... 11,298 $ 1,287,266
DuPont (EI) de Nemours & Co............................... 15,301 948,662
Eastman Chemical Co....................................... 9,620 545,935
Johnson & Johnson......................................... 15,323 1,183,702
Merck & Co., Inc.......................................... 9,692 1,195,145
Praxair, Inc.............................................. 18,146 893,690
Procter & Gamble Co....................................... 13,489 1,070,689
Union Carbide Corp........................................ 17,086 820,128
-----------
7,945,217
COMMUNICATIONS (5.47%)
American Telephone & Telegraph Co......................... 13,238 802,554
Bell Atlantic Corp........................................ 18,765 851,462
CBS Corp.................................................. 27,073 918,790
-----------
2,572,806
DEPOSITORY INSTITUTIONS (1.89%)
J. P. Morgan & Co., Inc................................... 7,043 887,418
EATING AND DRINKING PLACES (2.32%)
McDonald's Corp........................................... 16,315 1,090,046
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (5.68%)
General Electric Co....................................... 15,115 1,349,958
Lucent Technologies, Inc.................................. 12,146 1,122,746
Raytheon Co............................................... 3,704 200,711
-----------
2,673,415
FOOD AND KINDRED PRODUCTS (6.91%)
Coca-Cola Co. (The)....................................... 17,908 1,444,952
PepsiCo, Inc.............................................. 23,149 898,470
Philip Morris Companies, Inc.............................. 20,642 904,378
-----------
3,247,800
GENERAL MERCHANDISE STORES (5.26%)
Sears, Roebuck & Co....................................... 13,457 682,943
Venator Group, Inc........................................ 30,255(1) 434,916
Wal-Mart Stores, Inc...................................... 21,490 1,356,556
-----------
2,474,415
</TABLE>
34
<PAGE> 35
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------ -----
<S> <C> <C>
INDUSTRIAL MACHINERY AND EQUIPMENT (4.63%)
Caterpillar, Inc.......................................... 20,293 $ 984,210
International Business Machines Corp...................... 9,001 1,192,633
-----------
2,176,843
INSTRUMENTS AND RELATED PRODUCTS (1.82%)
Eastman Kodak Co.......................................... 10,181 856,477
INSURANCE CARRIERS (5.24%)
Allstate Corp............................................. 20,903 887,071
American International Group, Inc......................... 10,464 1,578,102
-----------
2,465,173
MOTION PICTURES (2.21%)
Disney (Walt) Co.......................................... 30,120 1,037,258
PAPER AND ALLIED PRODUCTS (2.88%)
International Paper Co.................................... 15,452 689,545
Minnesota Mining & Manufacturing Co....................... 8,898 666,238
-----------
1,355,783
PETROLEUM AND COAL PRODUCTS (10.61%)
Amoco Corp................................................ 17,324 723,277
Chevron Corp.............................................. 10,465 864,671
Exxon Corp................................................ 13,965 979,295
Mobil Corp................................................ 11,406 795,568
Texaco, Inc............................................... 13,979 850,098
USX Corp.-Marathon Group.................................. 22,826 778,937
-----------
4,991,846
PRIMARY METAL INDUSTRIES (2.88%)
Aluminum Company of America............................... 11,147 772,627
Bethlehem Steel Corp...................................... 53,749(1) 581,161
-----------
1,353,788
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (2.04%)
Goodyear Tire & Rubber Co................................. 15,766 960,740
SECURITY AND COMMODITY BROKERS (7.64%)
American Express Co....................................... 11,620 1,282,557
Lehman Brothers Holding, Inc.............................. 13,975 1,006,200
Morgan Stanley, Dean Witter, Discover & Co................ 14,974 1,303,674
-----------
3,592,431
</TABLE>
35
<PAGE> 36
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------ -----
<S> <C> <C>
TRANSPORTATION EQUIPMENT (9.91%)
Allied-Signal, Inc........................................ 26,215 $ 1,140,353
Boeing Co. (The).......................................... 15,860 615,566
Ford Motor Co............................................. 17,862 1,017,018
General Motors Corp....................................... 10,969 793,196
United Technologies Corp.................................. 11,423 1,094,466
-----------
4,660,599
-----------
Total Common Stocks......................................... 44,342,055
PRINCIPAL
AMOUNT
----------
SHORT-TERM INVESTMENTS (5.35%)
UNITED STATES GOVERNMENT AGENCIES (4.77%)
Federal Home Loan Mortgage Corp., due 8/12/98............. $ 700,000 698,832
Federal Home Loan Mortgage Corp., due 8/13/98............. 450,000 449,180
Federal Home Loan Mortgage Corp., due 9/01/98............. 1,100,000 1,094,835
-----------
2,242,847
MONEY MARKET MUTUAL FUND (0.58%)
Provident T-Fund.......................................... 273,000 273,000
-----------
Total Short-Term Investments................................ 2,515,847
-----------
Total Investments (99.63%).................................. 46,857,902
OTHER ASSETS LESS LIABILITIES (0.37%)
Cash, receivables, prepaid expense and other assets, less
liabilities............................................ 172,864
-----------
Total Net Assets (100.00%).................................. $47,030,766
===========
</TABLE>
(1) Non-income producing security.
See accompanying notes.
36
<PAGE> 37
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
1. SIGNIFICANT ACCOUNTING POLICIES
EquiTrust Series Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as an open-end, diversified management
investment company and operates in the mutual fund industry. The Fund currently
consists of six portfolios (known as the Value Growth, High Grade Bond, High
Yield Bond, Managed, Money Market and Blue Chip Portfolios). Prior to May 1,
1998, the Fund was named FBL Series Fund, Inc.
On December 1, 1997, the initial purchases of Institutional shares ("Class
I") of the Fund were made by Farm Bureau Life Insurance Company. Prior to the
initial Class I share purchases, the Fund issued only one class of shares. These
shares, known as Traditional shares ("Class A"), also continue to be offered
after December 1, 1997.
Class I shares are available for purchase exclusively by the following
investors: (a) retirement plans of FBL Financial Group, Inc. and its affiliates;
(b) investment advisory clients of EquiTrust Investment Management Services,
Inc. ("EquiTrust Investment"), including affiliated and unaffiliated benefit
plans, such as qualified retirement plans, and 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 Fund and affiliated
funds; and (e) such other types of accounts as EquiTrust Investment, the Fund's
distributor, deems appropriate. Class I shares currently are available for
purchase only from EquiTrust Investment. Share certificates are not available
for Class I or Class A shares.
Class A shares are subject to a declining contingent deferred sales charge
("CDSC") on shares redeemed within six years of purchase. Class I shares are not
subject to a CDSC. Class I shares do not bear any distribution fee or
administrative service fee. The shares of each Portfolio have equal rights and
privileges with all other shares of that Portfolio except that Class A shares
have separate and exclusive voting rights with respect to the Fund's Rule 12b-1
Plan. 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 Class A shares).
In addition, the Board of Directors of the Fund declares separate dividends on
each class of shares.
The Fund allocates daily all income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses to each class of shares
based upon the relative proportion of the value of shares outstanding of each
class. Expenses specifically attributable to a particular class are charged
directly to such class. As noted previously, distribution fees and
administrative fees are only charged against Class A shares. Other
class-specific expenses charged to each class
37
<PAGE> 38
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
during the year ended July 31, 1998, which are included in the corresponding
captions of the Statements of Operations, were as follows:
<TABLE>
<CAPTION>
TRANSFER AND DIVIDEND
DISBURSING AGENT FEES REGISTRATION FEES
--------------------- ------------------
PORTFOLIO CLASS A CLASS I CLASS A CLASS I
--------- --------- -------- ------- -------
<S> <C> <C> <C> <C>
Value Growth......................................... $221,393 $14,352 $12,619 $3,209
High Grade Bond...................................... 30,822 3,908 4,963 3,414
High Yield Bond...................................... 37,258 3,978 4,540 3,415
Managed.............................................. 132,613 10,996 9,677 3,409
Money Market......................................... 8,585 3,631 4,550 1,921
Blue Chip............................................ 126,290 11,557 7,968 3,411
</TABLE>
All portfolios, other than the Money Market Portfolio, value their common
and preferred stocks, corporate bonds, United States Treasury obligations and
mortgage-backed and asset-backed securities that are traded on any national
exchange at the last sale price on the day of valuation or, lacking any sales,
at the mean between the closing bid and asked prices. Investments traded in the
over-the-counter market are valued at the mean between the bid and asked prices
or yield equivalent as obtained from one or more dealers that make markets in
the securities. Investments for which market quotations are not readily
available are valued at fair value as determined in good faith by the Board of
Directors. Short-term investments (including repurchase agreements) are valued
at market value, except that obligations maturing in 60 days or less are valued
using the amortized cost method of valuation described below with respect to the
Money Market Portfolio, which approximates market.
The Money Market Portfolio values investments at amortized cost, which
approximates market. Under the amortized cost method, a security is valued at
its cost on the date of purchase and thereafter is adjusted to reflect a
constant amortization to maturity of the difference between the principal amount
due at maturity and the cost of the investment to the portfolio.
The value of the underlying securities serving to collateralize repurchase
agreements is marked to market daily. Should the value of the underlying
securities decline, the seller would be required to provide the applicable
portfolio with additional securities so that the aggregate value of the
underlying securities was at least equal to the repurchase price. If a seller of
a repurchase agreement were to default, the affected portfolio might experience
losses in enforcing its rights. To minimize this risk, EquiTrust Investment, the
investment manager, (under the supervision of the Board of Directors) will
monitor the creditworthiness of the seller of the repurchase agreement and must
find such creditworthiness satisfactory before a portfolio may enter into the
repurchase agreement.
The Fund records investment transactions generally one day after the trade
date. The identified cost basis has been used in determining the net realized
gain or loss from investment transactions and unrealized appreciation or
depreciation on investments. Dividends are taken into income on an
38
<PAGE> 39
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
accrual basis as of the ex-dividend date and interest is recognized on an
accrual basis. Discounts and premiums on investments purchased are amortized
over the life of the respective investments.
Dividends and distributions to shareholders are recorded on the record
date.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. FEDERAL INCOME TAXES
No provision for federal income taxes is considered necessary because the
Fund is qualified as a "regulated investment company" under the Internal Revenue
Code and intends to distribute each year substantially all of its net investment
income and realized capital gains to shareholders. The cost of investments is
the same for both federal income tax and financial reporting purposes.
At July 31, 1998, the High Grade Bond Portfolio had a net capital loss
carryforward of approximately $35,000, which will expire from 2003 through 2005.
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES
The Fund has entered into agreements with EquiTrust Investment relating to
the management of the portfolios and the investment of their assets. Pursuant to
these agreements, fees paid to EquiTrust Investment are determined as follows:
(1) annual investment advisory and management fees, which are based on each
portfolio's average daily net assets as follows: Value Growth
Portfolio -- 0.50%; High Grade Bond Portfolio -- 0.40%; High Yield Bond
Portfolio -- 0.55%; Managed Portfolio -- 0.60%; Money Market Portfolio -- 0.25%;
and Blue Chip Portfolio -- 0.25%; (2) distribution fees, which are computed at
an annual rate of 0.50% of the average daily net asset value attributable to
Class A shares of each portfolio and, in part, are subsequently remitted by
EquiTrust Investment to retail dealers including EquiTrust Marketing Services,
Inc. ("EquiTrust Marketing"), an affiliate who serves as principal dealer; (3)
administrative service fees, which are computed at an annual rate of 0.25% of
the average daily net asset value attributable to Class A shares of each
portfolio; (4) shareholder service, transfer and dividend disbursing agent fees,
which are based on direct services provided and expenses incurred by the
investment adviser, plus an annual per account charge ranging from $7.00 to
$9.00; and (5) accounting fees, which are based on each portfolio's daily net
assets at an annual rate of 0.05%, with a maximum per portfolio annual expense
of $30,000. EquiTrust Investment voluntarily waived the minimum fee associated
with the shareholder service, transfer and dividend disbursing agent fees for
both classes of shares, effective December 1, 1997 through December 31, 1998.
There can be no assurance that the Advisor will continue to waive this expense
beyond December 31, 1998.
EquiTrust Investment has also agreed to reimburse the portfolios annually
for total expenses (excluding brokerage, interest, taxes, the distribution fee
and extraordinary expenses) in excess of
39
<PAGE> 40
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
1.50% of each portfolio's average daily net assets. The amount reimbursed,
however, shall not exceed the amount of the investment advisory and management
fees paid by the portfolio for such period. For the year ended July 31, 1998,
the Fund's expenses were below the reimbursement threshold, and accordingly, no
amounts were reimbursed by EquiTrust Investment.
Certain officers and directors of the Fund are also officers of FBL
Financial Group, Inc., EquiTrust Investment, EquiTrust Marketing and other
affiliated entities. At July 31, 1998, Farm Bureau Life Insurance Company, a
wholly-owned subsidiary of FBL Financial Group, Inc., owned shares of the Fund's
portfolios as follows:
<TABLE>
<CAPTION>
PORTFOLIO CLASS A CLASS I
- --------- --------- -------
<S> <C> <C>
Value Growth............................................ -- 154,703
High Grade.............................................. -- 94,967
High Yield Bond......................................... 75,129 95,057
Managed................................................. -- 70,373
Money Market............................................ 1,910,602 500,000
Blue Chip............................................... -- 27,196
</TABLE>
EquiTrust Investment also owned 93,471 shares of Value Growth Portfolio
(Class A) at July 31, 1998.
4. CAPITAL SHARE TRANSACTIONS
Net assets as of July 31, 1998 consisted of:
<TABLE>
<CAPTION>
PORTFOLIO
--------------------------------------------------------------------------------------
VALUE HIGH GRADE HIGH YIELD MONEY BLUE
GROWTH BOND BOND MANAGED MARKET CHIP
------------ ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Capital Stock (5,000,000,000
shares of $.001 par value
Capital Stock
authorized)................ $ 8,827 $ 1,219 $ 1,187 $ 3,818 $ 3,201 $ 1,140
Additional paid-in capital... 115,475,503 12,399,245 12,078,281 48,312,776 3,197,807 30,480,739
Accumulated undistributed net
investment income.......... 353,049 1,350 88,993
Accumulated undistributed net
realized gain (loss) from
investment transactions.... 4,541,604 (35,149) 53,918 1,991,480 205,421
Net unrealized appreciation
(depreciation) of
investments................ (22,646,362) 521,327 302,926 (3,945,352) 16,254,473
------------ ----------- ----------- ----------- ---------- -----------
Net Assets................... $97,732,621 $12,886,642 $12,436,312 $46,364,072 $3,201,008 $47,030,766
============ =========== =========== =========== ========== ===========
</TABLE>
40
<PAGE> 41
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in Capital Stock for each portfolio were as follows:
YEAR ENDED JULY 31, 1998, EXCEPT AS NOTED:
<TABLE>
<CAPTION>
PORTFOLIO
-------------------------------------------------------------------------------------
VALUE HIGH GRADE HIGH YIELD MONEY BLUE
GROWTH BOND BOND MANAGED MARKET CHIP
------------ ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A..................... 923,923 202,173 254,193 780,549 907,070 364,035
Class I*.................... 472,840 131,383 141,498 237,341 738,716 93,877
Shares issued in reinvestment
of dividends and/or capital
gains distribution:
Class A..................... 1,289,518 42,416 46,304 301,506 21,307 4,356
Class I*.................... 309 1,053 1,438 2,683 2,350 --
Shares redeemed:
Class A..................... (1,055,225) (131,700) (126,422) (410,544) (820,239) (119,265)
Class I*.................... (32,351) (2,180) (4,117) (12,252) (113,912) (6,562)
------------ ----------- ----------- ----------- --------- -----------
Net Increase.................. 1,599,014 243,145 312,894 899,283 735,292 336,441
============ =========== =========== =========== ========= ===========
Value of shares sold:
Class A..................... $ 13,236,345 $ 2,131,708 $ 2,667,819 $10,655,935 $ 907,070 $14,203,276
Class I*.................... 6,710,307 1,387,293 1,489,392 3,192,435 738,716 3,521,895
Value issued in reinvestment
of dividends and/or capital
gains distribution:
Class A..................... 17,330,978 436,835 485,942 3,997,003 21,307 158,461
Class I*.................... 4,149 11,348 15,093 40,897 2,350 --
Value redeemed:
Class A..................... (14,624,572) (1,379,042) (1,329,561) (5,497,121) (820,239) (4,519,381)
Class I*.................... (435,395) (22,953) (43,229) (168,016) (113,912) (265,758)
------------ ----------- ----------- ----------- --------- -----------
Net Increase.................. $ 22,221,812 $ 2,565,189 $ 3,285,456 $12,221,133 $ 735,292 $13,098,493
============ =========== =========== =========== ========= ===========
</TABLE>
* Period from December 1, 1997, (date operations commenced) through July 31,
1998.
41
<PAGE> 42
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
YEAR ENDED JULY 31, 1997:
<TABLE>
<CAPTION>
PORTFOLIO
--------------------------------------------------------------------------------------
VALUE HIGH GRADE HIGH YIELD MONEY
GROWTH BOND BOND MANAGED MARKET BLUE CHIP
------------ ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
Class A.................... 960,670 181,281 182,441 743,749 917,859 281,505
Shares issued in reinvestment
of dividends and/or capital
gains distribution:
Class A.................... 844,969 40,462 46,867 269,908 23,674 9,088
Shares redeemed:
Class A.................... (471,818) (143,086) (90,912) (156,795) (1,027,371) (45,240)
----------- ----------- ---------- ----------- ----------- -----------
Net Increase (Decrease)...... 1,333,821 78,657 138,396 856,862 (85,838) 245,353
=========== =========== ========== =========== =========== ===========
Value of shares sold:
Class A.................... $14,626,866 $ 1,859,302 $1,852,541 $10,143,104 $ 917,859 $ 8,778,631
Value issued in reinvestment
of dividends and/or capital
gains distribution:
Class A.................... 12,429,493 415,160 477,374 3,607,125 23,674 269,828
Value redeemed:
Class A.................... (7,219,352) (1,467,642) (926,099) (2,146,602) (1,027,371) (1,399,734)
----------- ----------- ---------- ----------- ----------- -----------
Net Increase (Decrease)...... $19,837,007 $ 806,820 $1,403,816 $11,603,627 $ (85,838) $ 7,648,725
=========== =========== ========== =========== =========== ===========
</TABLE>
5. INVESTMENT TRANSACTIONS
For the year ended July 31, 1998, the cost of investment securities
purchased and proceeds from investment securities sold (not including short-term
investments and U.S. Government securities) by portfolio, were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- --------- ------------ ------------
<S> <C> <C>
Value Growth.................................... $185,309,725 $185,931,826
High Grade Bond................................. 5,731,426 3,462,667
High Yield Bond................................. 5,351,529 2,964,732
Managed......................................... 38,997,337 25,651,913
Blue Chip....................................... 13,406,683 934,379
</TABLE>
42
<PAGE> 43
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENT TRANSACTIONS (CONTINUED)
At July 31, 1998, net unrealized appreciation (depreciation) of investments
by portfolio was composed of the following:
<TABLE>
<CAPTION>
NET UNREALIZED
GROSS UNREALIZED APPRECIATION
---------------------------- (DEPRECIATION)
PORTFOLIO APPRECIATION DEPRECIATION OF INVESTMENTS
- --------- ------------ ------------ --------------
<S> <C> <C> <C>
Value Growth....................... $ 80,568 $22,726,930 $(22,646,362)
High Grade Bond.................... 535,630 14,303 521,327
High Yield Bond.................... 412,605 109,679 302,926
Managed............................ 1,402,902 5,348,254 (3,945,352)
Blue Chip.......................... 16,502,786 248,313 16,254,473
</TABLE>
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income for the following portfolios are
declared daily and were payable on the last business day of the month as
follows:
ORDINARY INCOME:
<TABLE>
<CAPTION>
HIGH GRADE HIGH YIELD MONEY
BOND BOND MARKET
------------------ ------------------ ------------------
PAYABLE DATE CLASS A CLASS I CLASS A CLASS I CLASS A CLASS I
- ------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
August 29, 1997................... $0.0509 $0.0549 $0.0033
September 30, 1997................ 0.0520 0.0557 0.0036
October 30, 1997.................. 0.0473 0.0573 0.0033
November 26, 1997................. 0.0420 0.0455 0.0024
December 31, 1997................. 0.0618 $0.0589 0.0644 $0.0618 0.0034 $0.0037
January 30, 1998.................. 0.0447 0.0501 0.0533 0.0604 0.0029 0.0038
February 27, 1998................. 0.0567 0.0592 0.0570 0.0609 0.0025 0.0030
March 31, 1998.................... 0.0494 0.0503 0.0529 0.0541 0.0029 0.0030
April 30, 1998.................... 0.0447 0.0476 0.0535 0.0573 0.0032 0.0033
May 29, 1998...................... 0.0523 0.0531 0.0517 0.0534 0.0028 0.0034
June 30, 1998..................... 0.0502 0.0506 0.0523 0.0537 0.0030 0.0014
July 31, 1998..................... 0.0457 0.0462 0.0507 0.0533 0.0026 0.0028
------- ------- ------- ------- ------- -------
Total Dividends Per Share......... $0.5977 $0.4160 $0.6492 $0.4549 $0.0359 $0.0244
======= ======= ======= ======= ======= =======
</TABLE>
43
<PAGE> 44
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (CONTINUED)
In addition, dividends and distributions to shareholders from net
investment income and net realized gain on investment transactions were paid
during the year ended July 31, 1998, for the following portfolios:
ORDINARY INCOME DIVIDENDS:
<TABLE>
<CAPTION>
DIVIDEND AMOUNT PERCENT
PER SHARE QUALIFYING FOR
DECLARATION RECORD PAYABLE ------------------ DEDUCTION BY
PORTFOLIO DATE DATE DATE CLASS A CLASS I CORPORATIONS
- --------- ----------- -------- -------- ------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Value Growth.............. 12/30/97 12/30/97 12/30/97 $0.1670 $0.1770 49%
Managed................... 10/29/97 10/31/97 11/07/97 0.1225 N/A 44%
Managed................... 12/30/97 12/30/97 12/30/97 0.0850 0.0911 49%
Managed................... 4/30/98 4/30/98 5/07/98 0.1235 0.1570 45%
Managed................... 7/31/98 7/31/98 8/07/98 0.1121 0.1100 45%
Blue Chip................. 12/30/97 12/30/97 12/30/97 0.1565 0.1775 77%
</TABLE>
CAPITAL GAINS DISTRIBUTIONS:
<TABLE>
<CAPTION>
DIVIDEND
AMOUNT
DECLARATION RECORD PAYABLE PER SHARE
PORTFOLIO DATE DATE DATE (BOTH CLASSES)
- --------- ----------- -------- -------- --------------
<S> <C> <C> <C> <C>
Value Growth............................... 12/30/97 12/30/97 12/30/97 $2.2575
High Yield Bond............................ 12/30/97 12/30/97 12/30/97 0.0725
Managed.................................... 12/30/97 12/30/97 12/30/97 0.9000
Blue Chip.................................. 12/30/97 12/30/97 12/30/97 0.0250
</TABLE>
The capital gains distributions related to the Value Growth, High Yield
Bond and Managed Portfolios include net short-term realized gains of $4,014,649
($0.5375 per share), $27,957 ($0.0281 per share) and $806,491 ($0.2525 per
share), respectively, that are taxable to shareholders as ordinary income
dividends.
44
<PAGE> 45
(This page has been left blank intentionally.)
45
<PAGE> 46
EQUITRUST SERIES FUND, INC
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1998, 1997, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- --------------------------
NET ASSET NET REALIZED DIVIDENDS
VALUE AT NET AND UNREALIZED TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT FROM CAPITAL
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME GAINS
--------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
VALUE GROWTH PORTFOLIO
Class A:
1998................. $15.63 $0.13 $(2.26) $(2.13) $(0.17) $(2.26)
1997................. 14.68 0.18 2.89 3.07 (0.18) (1.94)
1996................. 13.04 0.27 2.10 2.37 (0.46) (0.27)
1995................. 13.07 0.43 0.65 1.08 (0.39) (0.72)
1994................. 15.13 0.60 (0.49) 0.11 (0.60) (1.57)
Class I: (5)
1998................. $16.16 $0.19 $(2.83) $(2.64) $(0.18) $(2.26)
HIGH GRADE BOND PORTFOLIO
Class A:
1998................. $10.50 $0.60 $ 0.07 $ 0.67 $(0.60) $ --
1997................. 10.16 0.60 0.34 0.94 (0.60) --
1996................. 10.26 0.64 (0.10) 0.54 (0.64) --
1995................. 10.13 0.63 0.16 0.79 (0.63) --
1994................. 10.69 0.64 (0.40) 0.24 (0.64) (0.16)
Class I: (5)
1998................. $10.53 $0.42 $ 0.04 $ 0.46 $(0.42) $ --
HIGH YIELD BOND PORTFOLIO
Class A:
1998................. $10.48 $0.65 $ 0.07 $ 0.72 $(0.65) $(0.07)
1997................. 9.99 0.70 0.61 1.31 (0.70) (0.12)
1996................. 10.03 0.75 (0.01) 0.74 (0.75) (0.03)
1995................. 10.00 0.78 0.13 0.91 (0.78) (0.09)
1994................. 10.76 0.81 (0.60) 0.21 (0.81) (0.16)
Class I: (5)
1998................. $10.52 $0.45 $ 0.02 $ 0.47 $(0.45) $(0.07)
<CAPTION>
LESS DISTRIBUTIONS
-----------------------------
DISTRIBUTIONS
IN EXCESS OF
NET REALIZED TOTAL
GAINS DISTRIBUTIONS
------------- -------------
<S> <C> <C>
VALUE GROWTH PORTFOLIO
Class A:
1998................. $ -- $(2.43)
1997................. -- (2.12)
1996................. -- (0.73)
1995................. -- (1.11)
1994................. -- (2.17)
Class I: (5)
1998................. $ -- $(2.44)
HIGH GRADE BOND PORTFOLIO
Class A:
1998................. $ -- $(0.60)
1997................. -- (0.60)
1996................. -- (0.64)
1995................. (0.03) (0.66)
1994................. -- (0.80)
Class I: (5)
1998................. $ -- $(0.42)
HIGH YIELD BOND PORTFOLIO
Class A:
1998................. $ -- $(0.72)
1997................. -- (0.82)
1996................. -- (0.78)
1995................. (0.01) (0.88)
1994................. -- (0.97)
Class I: (5)
1998................. $ -- $(0.52)
</TABLE>
46
<PAGE> 47
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
TOTAL ---------------------------------------------------------------------
INVESTMENT
CAPITAL NET ASSET RETURN NET ASSETS RATIO OF RATIO OF NET AVERAGE
CONTRIBUTION VALUE AT BASED ON AT END NET EXPENSES INCOME TO PORTFOLIO COMMISSION
FROM AFFILIATE END OF NET ASSET OF PERIOD TO AVERAGE AVERAGE TURNOVER RATE PER
(SEE NOTE 3) PERIOD VALUE(1) (IN THOUSANDS) NET ASSETS NET ASSETS RATE SHARE(3)
- -------------- --------- ---------- -------------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$11.07 -16.37% $ 92,848 1.60% 0.87% 217% $0.0519
15.63 21.83% 112,985 1.65% 1.18% 77% 0.0520
14.68 18.41% 86,534 1.62% 1.87% 92% 0.0529
13.04 9.36% 70,947 1.62% 3.43% 85% --
13.07 0.34% 64,315 1.60% 4.05% 93% --
$11.08 -18.97% $ 4,885 0.73% 0.64% 217% $0.0519
$10.57 6.53% $ 11,510 1.71% 5.67% 38% $ --
10.50 9.56% 10,250 1.82% 5.85% 30% --
10.16 5.37% 9,122 1.85% 6.19% 34% --
10.26 8.23% 8,345 1.99% 6.29% 18% --
10.13 1.77% 7,596 1.90% 6.12% 42% --
$10.57 4.40% $ 1,376 0.95% 3.89% 38% $ --
$10.48 7.10% $ 10,982 1.97% 6.17% 30% $ --
10.48 13.29% 9,156 2.00% 6.82% 45% --
9.99 7.67% 7,349 2.00% 7.44% 30% --
10.03 9.71% 6,691 2.00% 7.83% 23% --
10.00 1.88% 6,425 2.00% 7.68% 26% --
$10.47 4.62% $ 1,454 1.05% 4.26% 30% $ --
</TABLE>
47
<PAGE> 48
EQUITRUST SERIES FUND, INC
FINANCIAL HIGHLIGHTS (CONTINUED)
YEARS ENDED JULY 31, 1998, 1997, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
---------------------------------------- --------------------------
NET ASSET NET REALIZED DIVIDENDS
VALUE AT NET AND UNREALIZED TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INVESTMENT GAIN (LOSS) INVESTMENT INVESTMENT FROM CAPITAL
OF PERIOD INCOME ON INVESTMENTS OPERATIONS INCOME GAINS
--------- ---------- -------------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
MANAGED PORTFOLIO
Class A:
1998............. $14.05 $0.44 $(1.00) $(0.56) $(0.44) $(0.90)
1997............. 13.33 0.48 1.91 2.39 (0.46) (1.21)
1996............. 11.85 0.46 1.54 2.00 (0.45) (0.10)
1995............. 11.62 0.56 0.47 1.03 (0.56) (0.14)
1994............. 12.51 0.55 (0.62) (0.07) (0.50) (0.32)
Class I:(5)
1998............. $14.21 $0.34 $(1.16) $(0.82) $(0.36) $(0.90)
MONEY MARKET PORTFOLIO
Class A:
1998............. $ 1.00 $0.04 $ -- $ 0.04 (0.04) $ --
1997............. 1.00 0.03 -- 0.03 (0.03) --
1996............. 1.00 0.04 -- 0.04 (0.04) --
1995............. 1.00 0.04 -- 0.04 (0.04) --
1994............. 1.00 0.02 -- 0.02 (0.02) --
Class I:(5)
1998............. $ 1.00 $0.02 $ -- $ 0.02 $(0.02) $ --
BLUE CHIP PORTFOLIO
Class A:
1998............. $37.20 $0.18 $ 4.08 $ 4.26 $(0.16) $(0.03)
1997............. 26.26 0.16 11.22 11.38 (0.14) (0.30)
1996............. 22.85 0.17 3.43 3.60 (0.19) --
1995............. 18.75 0.19 4.05 4.24 (0.14) --
1994............. 17.69 0.14 1.06 1.20 (0.14) --
Class I:(5)
1998............. $36.77 $0.29 $ 4.51 $ 4.80 $(0.17) $(0.03)
<CAPTION>
LESS DISTRIBUTIONS
-----------------------------
DISTRIBUTIONS
IN EXCESS OF
NET REALIZED TOTAL
GAINS DISTRIBUTIONS
------------- -------------
<S> <C> <C>
MANAGED PORTFOLIO
Class A:
1998............. $ -- $(1.34)
1997............. -- (1.67)
1996............. -- (0.55)
1995............. (0.10) (0.80)
1994............. -- (0.82)
Class I:(5)
1998............. $ -- $(1.26)
MONEY MARKET PORTFOLIO
Class A:
1998............. $ -- $(0.04)
1997............. -- (0.03)
1996............. -- (0.04)
1995............. -- (0.04)
1994............. -- (0.02)
Class I:(5)
1998............. $ -- $(0.02)
BLUE CHIP PORTFOLIO
Class A:
1998............. $ -- $(0.19)
1997............. -- (0.44)
1996............. -- (0.19)
1995............. -- (0.14)
1994............. -- (0.14)
Class I:(5)
1998............. $ -- $(0.20)
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
TOTAL ---------------------------------------------------------------------
INVESTMENT
CAPITAL NET ASSET RETURN NET ASSETS RATIO OF RATIO OF NET AVERAGE
CONTRIBUTION VALUE AT BASED ON AT END NET EXPENSES INCOME TO PORTFOLIO COMMISSION
FROM AFFILIATE END OF NET ASSET OF PERIOD TO AVERAGE AVERAGE TURNOVER RATE PER
(SEE NOTE 3) PERIOD VALUE(1) (IN THOUSANDS) NET ASSETS NET ASSETS RATE SHARE(3)
- -------------- --------- ---------- -------------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $12.15 -4.54% $43,602 1.83% 3.33% 66% $0.0561
-- 14.05 17.88% 40,994 1.95% 3.48% 74% 0.0449
0.03 13.33 17.30%(2) 27,470 1.91% 3.47% 81% 0.0549
-- 11.85 9.40% 21,105 1.94% 4.86% 69% --
-- 11.62 -0.61% 19,100 1.96% 4.42% 29% --
$ -- $12.13 -6.31% $ 2,762 1.03% 2.30% 66% $0.0561
$ -- $ 1.00 3.65% $ 2,574 1.95% 3.57% 0% $ --
-- 1.00 3.51% 2,466 2.00% 3.46% 0% --
-- 1.00 3.64% 2,552 2.00% 3.58% 0% --
-- 1.00 3.60% 2,439 2.00% 3.51% 0% --
-- 1.00 1.47% 2,627 1.93% 1.45% 0% --
$ -- $ 1.00 2.47% $ 627 1.29% 2.37% 0% $ --
$ -- $41.27 11.49% $43,418 1.55% 0.49% 3% $0.0505
-- 37.20 43.77% 29,863 1.74% 0.49% 0% 0.0559
-- 26.26 15.83% 14,641 1.79% 0.66% 3% 0.0748
-- 22.85 22.77% 9,657 1.78% 0.92% 1% --
-- 18.75 6.75% 6,745 1.83% 0.75% 1% --
$ -- $41.37 13.14% $ 3,613 0.76% 0.51% 3% $0.0505
</TABLE>
49
<PAGE> 50
EQUITRUST SERIES FIND, INC.
NOTES TO FINANCIAL HIGHLIGHTS
(1) Total investment return is calculated assuming an initial investment made at
the net asset value at the beginning of the period, reinvestment of all
dividends and distributions at net asset value during the period, and
redemption on the last day of the period. Contingent deferred sales charge
is not reflected in the calculation of total investment return.
(2) During the year ended July 31, 1996, EquiTrust Investment voluntarily
reimbursed the Managed Portfolio for losses relating to the sale of a
restricted security in the amount of $44,982. The transaction was recorded
as a realized capital loss and an offsetting capital contribution from an
affiliate. The total investment return includes the effect of the capital
contribution of $0.02 per share. The return without the capital contribution
would have been 17.13%.
(3) Average commission rate per share disclosure is not required for fiscal
years prior to July 31, 1996.
(4) Without the Manager's voluntary reimbursement of a portion of certain of its
expenses (see Note 3 to the financial statements) for the periods indicated,
the following funds would have had per share net investment income and the
ratios of expenses to average net assets as shown:
<TABLE>
<CAPTION>
PER SHARE RATIO OF EXPENSES
NET INVESTMENT TO AVERAGE NET AMOUNT
YEAR INCOME ASSETS REIMBURSED
---- -------------- ----------------- ----------
<S> <C> <C> <C> <C>
HIGH YIELD PORTFOLIO
Class A 1997 $0.69 2.10% $ 8,681
1996 0.73 2.22% 15,361
1995 0.75 2.29% 18,810
1994 0.79 2.17% 10,754
1993 0.82 2.05% 3,147
MONEY MARKET PORTFOLIO
Class A 1997 $0.03 2.28% $ 7,255
1996 0.03 2.43% 10,718
1995 0.03 2.20% 4,948
MANAGED PORTFOLIO
Class A 1993 $0.53 2.02% $ 3,497
</TABLE>
(5) Period from December 1, 1997 (date operations commenced) through July 31,
1998. Ratios presented have not been annualized.
50
<PAGE> 51
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
EquiTrust Series Fund, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of EquiTrust Series Fund, Inc., formerly
known as FBL Series Fund, Inc. (comprising, respectively, the Value Growth, High
Grade Bond, High Yield Bond, Managed, Money Market and Blue Chip Portfolios) as
of July 31, 1998, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting the EquiTrust Series Fund, Inc.
at July 31, 1998, and the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Des Moines, Iowa
August 28, 1998
51
