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[LOGO]
EquiTrust Series Fund, Inc.
ANNUAL REPORT
JULY 31, 1999
INVESTMENT MANAGER AND
PRINCIPAL UNDERWRITER
EQUITRUST INVESTMENT
MANAGEMENT SERVICES, INC.
5400 UNIVERSITY AVENUE
WEST DES MOINES, IA 50266
1-800-247-4170 (OUTSIDE IOWA)
1-800-422-3175 (IN IOWA)
225-5586 (DES MOINES)
This report is not to be
distributed unless preceded or
accompanied
by a prospectus.
737-028(99)
<PAGE>
PRESIDENT'S LETTER
Dear Shareholder:
U.S. economic growth remains robust despite the effects of the 1998 global
financial crisis. The duration and strength of this expansion, combined with the
absence of the inflationary signals that normally develop in the later stages of
business cycles, have caused Federal Reserve Bank officials and others to ponder
whether old economic rules still apply to the U.S. economy.
The ability of our economy to demonstrate persistent rapid growth without
sparking inflation is likely being influenced by one of two sets of forces and
quite probably some combination of the two. Some have argued that we have
entered a "new era" of non-inflationary growth being driven by new,
productivity-enhancing technologies. Others suggest that the boom has been
motivated by consumers' increased willingness to spend, even in excess of
income.
While the exact magnitudes are subject to substantial debate, it seems clear
that consumption has increased and saving decreased, relative to income. This is
partially a reaction to increases in household net worth resulting from gains in
house prices and common stock prices.
The result of this wealth/spending effect is a record deficit between
private-sector saving and investment, which measures the extent to which U.S.
households and business firms are relying on the capital markets to finance
their spending. This imbalance has been financed by a decline in the federal
deficit and also by foreign capital inflows. With fiscal restraint set to reach
its limits and relative returns on U.S. financial assets diminishing as the
global economy recovers, the key question for the future is whether borrowers
may be forced to bid up interest rates in order to maintain the strong growth in
U.S. domestic spending. If so, a weaker dollar and concomitantly rising funding
costs could well be the forces that will have to intervene in order to rein in
U.S. growth.
The Federal Reserve, seeking to be pre-emptive, nudged the Fed Funds rate up
one quarter of one percent on June 30th. With the June unemployment rate at
4.3%, the Fed remains concerned that at some point the diminished labor supply
will lead to inflationary wage gains. Critics argue that productivity gains
driven by new technological developments will allow our economy to continue
generating non-inflationary growth even at relatively full employment.
Indeed, many of the normal inflation indicators continue to point toward
deflation or relative price stability. The Bridge CRB Commodity Index, which is
comprised of agricultural, energy and other commodities, is down 25% from the
previous Fed tightening, which took place in March of 1997. The price of gold,
which has historically been an indicator of rising inflation, is down 28% over
that same period. Some argue that pending central bank gold sales have
artificially depressed gold prices, but even so, gold prices hardly seem to be
flashing inflation warning signals. Durable goods prices have fallen for three
years in a row and are down 2.3% at an annual rate so far in 1999. Increasing
productivity could help explain this phenomenon if an increase in the supply of
goods soaks up excess liquidity, driving prices down.
Has our ability to grow so rapidly with low levels of inflation simply been
driven by an unlikely-to-be-sustained decline in the federal deficit and the
ability to import cheap goods and cheap funds from abroad during a now abating
global financial crisis? Or, has it been influenced primarily by dramatic
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productivity enhancements stemming from the implementation of new technology,
and as Bill Gates has suggested, this is just the beginning?
A Dow Jones Industrial Average above 10,000-11,000 seems priced for a very
positive answer to this question.
The Value Growth and Managed comments are from Roger F. Grefe, CFA,
Investment Management Vice President. The High Grade Bond and High Yield Bond
comments are from Robert J. Rummelhart, CFA, Fixed Income Vice President.
VALUE GROWTH: Performance for our fiscal year ending July 31, 1999 was very
disappointing. The Value Growth Portfolio's total return was-7.46% versus gains
of 20.15% for the S&P 500 Index.
Over the last year, our decision to underweight or avoid the high-flying
large-capitalization stocks, and to overweight the small- and mid-cap stocks has
worked against us. The market flocked toward the big household-name stocks,
turning its back on the small- to mid-size companies that comprise the bulk of
our Portfolio. In short, mid-cap, deep-value investing has had a severe bout of
underperformance. This can be illustrated by comparing the last 12-month returns
for the Standard & Poor's 500 Stock Index ("S&P 500") versus the Russell 2000
Index ("Russell 2000"). For the 12 months ending June 30, 1999, the S&P 500 was
up 22.72% versus a gain of 1.5% for the Russell 2000.
The ongoing contrast between the performance of the S&P 500 and the Russell
2000 is perhaps greater than we can ever recall. The S&P 500 is an index of
large cap stocks and the Russell 2000 is an index of mid- and small-cap stocks,
which excludes the 1000 largest stocks.
In calendar year 1998, 15 stocks, a mere 3% of the issues in the S&P 500,
accounted for 52% of the Index's performance. Of these 15 stocks, nine were
either technology or communications companies. If you owned these stocks, you
had a great 1998 and first six months of 1999. Most value investors did not own
those stocks. The trailing twelve-month price/earnings ratio at the end of 1998
for those stocks was 47.7 times, which is not a value-priced statistic. In
contrast, many of the stocks we own sell at price/ earnings ratios of 10 to 20
with excellent growth prospects.
Stock market commentators refer to this as narrowness. When market
performance is "narrow," a small number of stocks account for the performance of
an index and may not be representative of how stocks in general have performed.
Most of the time, a rising tide lifts all boats. This was not the case in 1998
or at the present time. Much of the effect stems from the fact that the popular
stock market indexes are capitalization weighted. The larger the market
capitalization of a company, the greater its contribution to the calculation of
the performance of an index. In the S&P 500, about 50 stocks, 10% of the number
of issues in the Index, generally account for approximately one-half of the
Index's weighting. While indexes in general are a reasonable barometer of stock
market performance, capitalization weighting can distort the picture and may not
be an accurate reflection of the average stock portfolio held by mutual funds,
individual investors, insurance companies, and banks, etc.
The skewing of the indexes to large companies is further compounded by a
concentration in large technology companies. The S&P 500 was historically an
index of industrial America. Today, it is increasingly concentrated in
technology stocks, which are currently measured by a different valuation model
than most stocks. Contrary to this valuation model, we agree instead with Marty
Whitman, a successful
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portfolio manager and analyst with MJ Whitman Advisers, who stated in a recent
article at his firm's website:
"The appreciation in market prices for the common stocks that make up
the leading indexes have, in recent years, so far outstripped the growth in
book value and earnings for the companies whose common stocks make up the
indexes that these market prices seem now to be grossly out of line with
corporate reality. Thus the possibilities for disaster. Here excellent past
performance seems likely to be a harbinger of future under-performance
insofar as one believes that over the long term, market prices for passively
owned common stocks will have a relationship to underlying corporate
fundamentals."
In contrast to the S&P 500, many common stocks, especially well-capitalized
small- to mid-size companies, currently seem to be priced at bargain prices
relative to long-term earnings prospects and current book values. This type of
pricing in markets for passive, minority investments seems to occur frequently
at times when the immediate earnings outlooks are unclear. Heartland Express,
Inc., based in Coralville, Iowa, is a leading short- to medium-haul truckload
carrier operating primarily east of the Rocky Mountains. Heartland has a very
impressive track record of revenue and earnings growth. Over the last ten years,
Heartland has posted compound annual growth in revenue and earnings of 22.6% and
21.3%, respectively. Limited driver availability caused Heartland's revenue
growth to stall in 1998. Consequently, the share prices are 40% off their highs,
with a forward price-earnings ratio of 14. Heartland has a strong balance sheet
with no debt and approximately $155 million in cash ($5.16 per share) and the
company's strong financial health should be most valuable in the next industry
downturn. The negative stock returns for Heartland are not a result of the
company doing badly. We believe this stock and many like it are being ignored or
sold as money flows to where the gains are being made in technology and Internet
stocks.
For value investors, such as ourselves, the focus is on investing in
companies at prices below the long-term value of the underlying businesses. For
a large and growing segment of investors, however, aligning price and value
simply is not relevant. Momentum investors, who continue to dominate today's
investing climate, concentrate on trends in earnings and stock prices; the value
of the company has little to do with their analysis. Index investors simply buy
whatever stocks inhabit their chosen index. These two types of investors give
merit to the theory that the stock market has become less efficient in recent
years because the nature and motives of investors have changed. This long bull
market has attracted millions of new investors who simply want a piece of the
action. Federal Reserve Chairman Alan Greenspan suggested the "lottery premium"
reason (i.e. the hope for the tiny chance of a large gain propels otherwise
sensible people to make irrational investment decisions).
History is full of examples of companies that never reached great
expectations such as those that are being placed on the technology companies
today. A portfolio of stocks with that much hype has never been a formula for
sound investing. Stocks today are being bought merely because they have gone up
in price and the approach has become self-fulfilling. Little or no consideration
is given to whether there is any investment value for a particular common stock.
"Value" has not been counting for much in the new paradigm. However, there is
likely to be a balancing of the scales in the future, with value demonstrating
its many fine investment attributes. We do not believe that efficiency in
pricing stocks has been destroyed for all time, only suspended for an
uncomfortably long period of time. We believe that the investments that we have
made in Allstate, American Water Works, Casey's General Stores, General Growth
Properties, Heartland Express, Manpower, Mony Group, 7-Eleven, Inc., Super
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Valu and many others are under-appreciated by today's investor. These companies
have bright futures, with very strong earning power, capable management and very
reasonable price to value ratios. We recommend that investors concentrate on
value investing and growth at a reasonable price. These are the types of
companies we own in the Value Growth Portfolio and that we believe will provide
attractive returns when the business value converges with the market value
through greater investor appreciation.
HIGH GRADE BOND: Treasury yields ended higher over our twelve-month
reporting period. For example, the 2-, 10- and 30-year Treasury issues yielded
5.48%, 5.49% and 5.71%, respectively, as of July 31, 1998 and 5.62%, 5.90% and
6.10%, as of July 31, 1999.
During the latter part of our reporting period, we have seen a dramatic
increase in Treasury yields as the market has become increasingly worried that
worldwide economic growth will accelerate and result in higher U.S. interest
rates. In addition, the spread level on high grade corporates has remained wide
as the market has had to absorb record levels of new corporate issuance at a
time when the market has become increasingly risk-averse. This combination of
higher Treasury yields and historically wide and medium corporate spread has
made medium and long-term corporates look very attractive and we have been
increasing our exposure to this asset class. Given this increased exposure, our
duration has increased to the point that it is now only slightly below that of
the Lehman Brothers Aggregate Index. As a result, our future returns should more
closely match those of the Aggregate Index.
HIGH YIELD BOND: During the past 12 months, the high yield bond market
underperformed the high grade corporate bond market. The greater yields on high
yield bonds were not enough to offset the widening of spreads in high yield
issues that took place over this period. According to the DLJ High Yield Index,
the average high yield spread was 409 basis points at the end of the second
quarter of 1998 compared to 553 basis points at the end of July 1999.
The Portfolio produced very good relative returns during this difficult
period due to our lower exposure to high yield issues. Given the current wider
spreads available on high yield issues, we will look to increase our exposure to
higher-yielding issues. It appears that we are finally getting fair compensation
for taking on credit risk, considering current economic conditions.
MANAGED: The Managed Portfolio emphasizes income with moderate growth
potential. Our goal is to produce income at twice the rate of the dividend yield
of the S&P 500 which continues to be a paltry 1.18%, the lowest in history. We
continue to find excellent investments that should easily equal or better our
hurdle rate of 2.4%. We have invested in some attractive convertible securities
(those exchangeable into common stock), hybrid securities with both bond and
equity characteristics. Convertibles provide more income and usually more
downside protection than the underlying common stock. We consider this to be an
attractive asset class for the Managed Portfolio as the income stream provides a
"paid to wait" investment strategy. Ultimately, we would like every underlying
common stock to perform well, thus enhancing the total return of the Managed
Portfolio.
Some very attractive convertible issues recently acquired are in the
healthcare area. Alza Corporation and Elan are specialty pharmaceutical firms
with excellent prospects. Both Alza and Elan were under selling pressure and the
stocks declined rapidly. The convertible bonds declined as well, providing an
excellent buying opportunity to own two high-quality healthcare firms. Alza is
now being acquired by Abbott Laboratories, another one of the Portfolio's
holdings that has a bright future at a reasonable price. Elan is a
pharmaceutical company offering other major pharmaceutical companies a full
range of drug delivery services. Elan is in the early stages of commercializing
about seven new drugs over the
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next 24 months, which is likely to transition earnings toward higher-margined
pharmaceutical products. The company is making steady clinical progress in a
range of new products centered on epilepsy, anti-migraine, chronic pain
management, multiple sclerosis and Alzheimer's disease. We suspect the low
price-earnings ratio of 17 could improve as the company makes progress on these
new compounds. We own the convertibles which provide a current yield of over 4%
and are convertible into 28.153 shares for each bond. We believe the company is
worth $50 a share, implying that the bonds could sell at $140 as opposed to
their current price of $105. The Managed Portfolio owns many similarly
attractive convertible positions where we are being "paid to wait."
MONEY MARKET: On June 30th, the Federal Reserve Bank raised the Federal
Funds rate by 25 basis points as expected, but did not change the discount rate
and also switched to a neutral bias. They explained their actions by saying that
the "full degree" of last year's easing was "no longer necessary." They also
said that despite tight labor markets, "productivity growth has contained
inflationary pressures."
During 1994, the Fed switched to a neutral bias after each of several
tightening moves. While real rates are currently much higher and the yield curve
much flatter compared to late 1993, the neutral bias alone provides little or no
indication as to the direction or timing of the Fed's next move. Currently, the
Fed Funds rate is 5.00% and a 90-day Treasury bill yields 4.62%.
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 8, 1999
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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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
VALUE GROWTH S&P 500 STOCK
PORTFOLIO COMPOSITE INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,590 $10,646
1991 $11,826 $12,006
1992 $13,306 $13,538
1993 $16,931 $14,712
1994 $16,989 $15,474
1995 $18,579 $19,505
1996 $22,000 $22,728
1997 $26,803 $34,551
1998 $22,416 $41,209
1999 $20,742 $49,513
AVERAGE ANNUAL TOTAL RETURN
1 Year -7.46%
5 Year 4.07%
10 Year 7.57%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
</TABLE>
For the twelve-month period ended July 31, 1999, the total return for the
Value Growth Portfolio was-7.46%, compared to 20.15% for 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) continuing outperformance of a few technology stocks, which due to their
generous valuation levels account for much of the return of the S&P 500 Index.
The S&P 500 was historically an index of industrial America. Today, it is
increasingly concentrated in technology stocks and potential future earnings are
much more important than current earnings. The pace of technological change is
so rapid, what is "cutting edge" one day can be passe the next. Ease of entry
and low capital requirements draw competition which is good for consumers but
bad for profits. Donaldson, Lufkin & Jenrette, a major investment firm, in a
recent newsletter reported that "...The recovery for mid- and small-caps
(stocks) has not been powerful enough to end an active bear market for the
average stock." Taking the universe of roughly 3700 stocks on the New York Stock
Exchange and NASDAQ with a market capitalization above $150 million, the
unweighted average decline so far in 1999 has been 25% compared to 29% a year
earlier. Therefore, if a decline of 20% or more defines a bear market, the
average stock has been in a bear market for more than a year.
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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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH GRADE LEHMAN BROTHERS
BOND MUTUAL FUND
PORTFOLIO AGGREGATE INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,615 $10,705
1991 $11,707 $11,851
1992 $13,313 $13,605
1993 $14,391 $14,991
1994 $14,647 $15,002
1995 $15,853 $16,519
1996 $16,704 $17,434
1997 $18,302 $19,310
1998 $19,492 $20,830
1999 $19,707 $21,349
AVERAGE ANNUAL TOTAL RETURN
1 Year 1.07%
5 Year 6.11%
10 Year 7.02%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
</TABLE>
During the twelve-month period ended July 31, 1999, the High Grade Bond
Portfolio underperformed the Lehman Brothers Mutual Fund Aggregate Index, as
reflected by the 1.07% total return produced by the Portfolio versus the 2.49%
total return produced by the Lehman Brothers Aggregate Index. The main factors
that caused this divergence in performance were Portfolio expenses, which were
not offset fully by the shorter effective duration of the High Grade Bond
Portfolio relative to the Lehman Brothers Aggregate Index.
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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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HIGH YIELD LEHMAN BROTHERS
BOND MUTUAL FUND CORPORATE/HIGH
PORTFOLIO YIELD INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,692 $10,615
1991 $12,064 $11,799
1992 $14,047 $13,847
1993 $15,865 $15,535
1994 $16,163 $15,597
1995 $17,733 $17,505
1996 $19,093 $18,615
1997 $21,703 $21,095
1998 $23,244 $22,722
1999 $23,446 $22,922
AVERAGE ANNUAL TOTAL RETURN
1 Year 0.87%
5 Year 7.72%
10 Year 8.89%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
</TABLE>
During the twelve-month period ended July 31, 1999, the 0.87% total return
produced by the High Yield Bond Portfolio trailed the 0.88% total return
produced by the Lehman Brothers Mutual Fund Corporate/High Yield Index. The main
factors causing this divergence in performance were Portfolio expenses, which
were not fully offset by the shorter effective duration of the High Yield Bond
Portfolio.
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MANAGED PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE MANAGED PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MANAGED S&P 500 STOCK
PORTFOLIO COMPOSITE INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,696 $10,646
1991 $11,450 $12,006
1992 $13,144 $13,538
1993 $16,170 $14,712
1994 $16,071 $15,474
1995 $17,581 $19,505
1996 $20,623 $22,728
1997 $24,522 $34,551
1998 $23,410 $41,209
1999 $21,945 $49,513
AVERAGE ANNUAL TOTAL RETURN
1 Year -6.26%
5 Year 6.43%
10 Year 8.18%
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. During the twelve-month period ended July 31, 1999, the
Portfolio produced a total return of-6.26% compared to 20.15% for 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 1.18%, 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. The Portfolio's significant difference in performance when
compared to the S&P 500's performance is a result of its emphasis on income and
growth. The Portfolio owns bonds and preferred stocks which have declined
modestly as interest rates have risen over the last six months. Bonds and
preferred stocks yielding 6-9% seem much cheaper then the S&P 500, which sells
at 33 times earnings. At these interest rates, investors are being compensated
to take the risk that recent low inflation may not be permanent. If and when the
economy slows, fixed-income securities should provide attractive total returns,
especially compared to stocks.
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BLUE CHIP PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE BLUE CHIP PORTFOLIO AND S&P 500
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BLUE CHIP S&P 500 STOCK
PORTFOLIO COMPOSITE INDEX
<S> <C> <C>
1989 $10,000 $10,000
1990 $10,926 $10,646
1991 $11,839 $12,006
1992 $13,114 $13,538
1993 $13,929 $14,712
1994 $14,870 $15,474
1995 $18,256 $19,505
1996 $21,147 $22,728
1997 $30,403 $34,551
1998 $33,898 $41,209
1999 $38,815 $49,513
AVERAGE ANNUAL TOTAL RETURN
1 Year 14.51%
5 Year 21.15%
10 Year 14.52%
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,
1999.
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EQUITRUST SERIES FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
July 31, 1999
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
------------- ------------
<S> <C> <C>
ASSETS
Investments in
securities, at value
(cost -- $90,402,254;
$14,717,282;
$13,511,841;
$43,062,328; $4,209,096;
and $36,856,970,
respectively)........... $ 88,818,631 $ 14,448,319
Cash.....................
Receivables:
Accrued dividends and
interest.............. 219,920 200,374
Prepaid expense and
other assets.......... 2,404 7,607
------------- ------------
Total Assets............. $ 89,040,955 $ 14,656,300
------------- ------------
------------- ------------
LIABILITIES AND NET
ASSETS
Liabilities:
Net outstanding
redemptions in excess
of bank balance....... $ 32,338 $ 13,704
Payables:
Portfolio securities
purchased........... 648,840
EquiTrust Investment
Management Services,
Inc................. 46,316 6,107
Dividends............
Accrued expenses..... 12,428 5,074
------------- ------------
Total Liabilities...... 739,922 24,885
Net assets applicable
to outstanding capital
stock................. 88,301,033 14,631,415
------------- ------------
Total Liabilities and
Net Assets............ $ 89,040,955 $ 14,656,300
------------- ------------
------------- ------------
NET ASSET VALUE PER
SHARE
Class A: Net Assets.... $ 82,902,244 $ 13,110,143
Shares issued and
outstanding....... 8,658,816 1,301,997
Net asset value per
share............. $ 9.57 $ 10.07
------------- ------------
------------- ------------
Class I: Net Assets.... $ 5,398,789 $ 1,521,272
Shares issued and
outstanding....... 562,482 151,017
Net asset value per
share............. $ 9.60 $ 10.07
------------- ------------
------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
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<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in
securities, at value
(cost -- $90,402,254;
$14,717,282;
$13,511,841;
$43,062,328; $4,209,096;
and $36,856,970,
respectively)........... $ 13,189,023 $ 40,841,546 $4,209,096 $ 60,621,162
Cash..................... 18,401
Receivables:
Accrued dividends and
interest.............. 208,904 199,266 2,533 43,445
Prepaid expense and
other assets.......... 246 972 78 874
------------ ------------ ------------- ------------
Total Assets............. $ 13,398,173 $ 41,041,784 $4,211,707 $ 60,683,882
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
LIABILITIES AND NET
ASSETS
Liabilities:
Net outstanding
redemptions in excess
of bank balance....... $ 16,926 $ 30,268 $ 2,270
Payables:
Portfolio securities
purchased...........
EquiTrust Investment
Management Services,
Inc................. 8,362 27,352 3,179 $ 31,030
Dividends............ 10 33,987
Accrued expenses..... 3,857 7,093 4,033 6,536
------------ ------------ ------------- ------------
Total Liabilities...... 29,155 98,700 9,482 37,566
Net assets applicable
to outstanding capital
stock................. 13,369,018 40,943,084 4,202,225 60,646,316
------------ ------------ ------------- ------------
Total Liabilities and
Net Assets............ $ 13,398,173 $ 41,041,784 $4,211,707 $ 60,683,882
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
NET ASSET VALUE PER
SHARE
Class A: Net Assets.... $ 11,734,184 $ 38,012,344 $3,467,039 $ 55,045,708
Shares issued and
outstanding....... 1,188,441 3,657,933 3,467,039 1,173,914
Net asset value per
share............. $ 9.87 $ 10.39 $ 1.00 $ 46.89
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Class I: Net Assets.... $ 1,634,834 $ 2,930,740 $ 735,186 $ 5,600,608
Shares issued and
outstanding....... 165,663 281,602 735,186 118,844
Net asset value per
share............. $ 9.87 $ 10.41 $ 1.00 $ 47.13
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
</TABLE>
13
<PAGE>
EQUITRUST SERIES FUND, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED JULY 31, 1999
<TABLE>
<CAPTION>
HIGH
VALUE GROWTH GRADE BOND
PORTFOLIO PORTFOLIO
------------ -----------
<S> <C> <C>
INVESTMENT INCOME
Dividends................ $ 1,238,135 $ 36,563
Interest................. 1,077,980 960,386
------------ -----------
Total Investment
Income.................. 2,316,115 996,949
EXPENSES
Paid to EquiTrust
Investment Management
Services, Inc.:
Investment advisory and
management fees....... 431,802 56,910
Transfer and dividend
disbursing agent
fees.................. 260,093 40,828
Distribution fees...... 407,948 63,881
Administrative service
fees.................. 203,974 31,941
Accounting fees........ 30,000 7,114
Custodian fees........... 27,846 7,041
Professional fees........ 30,050 8,608
Directors' fees and
expenses................ 2,215 373
Reports to
shareholders............ 65,135 9,946
Registration fees........ 17,415 8,471
Miscellaneous............ 3,382 (3,026)
------------ -----------
Total Expenses........... 1,479,860 232,087
Expense reimbursement....
Fees paid indirectly..... (1,114) (1,143)
------------ -----------
Net Expenses............. 1,478,746 230,944
------------ -----------
Net Investment Income.... 837,369 766,005
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss)
from investment
transactions............ (29,242,846) 159,598
Change in unrealized
appreciation/depreciation
of investments.......... 21,062,739 (790,290)
------------ -----------
Net Gain (Loss) on
Investments............. (8,180,107) (630,692)
------------ -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... $ (7,342,738) $135,313
------------ -----------
------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES.
14
<PAGE>
<TABLE>
<CAPTION>
HIGH
YIELD BOND MANAGED MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends................ $ 90,319 $ 1,632,793 $ 729,360
Interest................. 932,412 1,017,427 $199,680 232,973
----------- ------------ ------------- ------------
Total Investment
Income.................. 1,022,731 2,650,220 199,680 962,333
EXPENSES
Paid to EquiTrust
Investment Management
Services, Inc.:
Investment advisory and
management fees....... 71,230 254,437 9,918 131,256
Transfer and dividend
disbursing agent
fees.................. 50,676 177,735 17,941 178,614
Distribution fees...... 57,162 198,261 16,388 240,062
Administrative service
fees.................. 28,581 99,130 8,194 120,031
Accounting fees........ 6,475 21,203 1,984 26,251
Custodian fees........... 6,384 6,313 8,541 7,749
Professional fees........ 8,354 15,447 5,822 15,967
Directors' fees and
expenses................ 342 1,133 101 1,293
Reports to
shareholders............ 9,248 31,588 2,630 37,004
Registration fees........ 8,806 12,509 6,772 14,369
Miscellaneous............ (918) (2,177) (212) 1,886
----------- ------------ ------------- ------------
Total Expenses........... 246,340 815,579 78,079 774,482
Expense reimbursement.... (1,724)
Fees paid indirectly..... (996) (1,500) (819) (1,140)
----------- ------------ ------------- ------------
Net Expenses............. 245,344 814,079 75,536 773,342
----------- ------------ ------------- ------------
Net Investment Income.... 777,387 1,836,141 124,144 188,991
NET REALIZED AND
UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss)
from investment
transactions............ (29,781) (6,463,959) (147,965)
Change in unrealized
appreciation/depreciation
of investments.......... (625,744) 1,724,570 7,509,719
----------- ------------ ------------- ------------
Net Gain (Loss) on
Investments............. (655,525) (4,739,389) 7,361,754
----------- ------------ ------------- ------------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... $ 121,862 $ (2,903,248) $124,144 $ 7,550,745
----------- ------------ ------------- ------------
----------- ------------ ------------- ------------
</TABLE>
15
<PAGE>
EQUITRUST SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
VALUE GROWTH
PORTFOLIO
--------------------------
YEAR ENDED JULY 31,
--------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS
Net investment income.... $ 837,369 $ 1,012,376
Net realized gain (loss)
from investment
transactions............ (29,242,846) 11,985,876
Change in unrealized
appreciation/depreciation
of
investments............. 21,062,739 (32,362,087)
------------ ------------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... (7,342,738) (19,363,835)
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income:
Class A................ (896,298) (1,221,206)
Class I................ (71,985) (27,684)
Net realized gain from
investment transactions:
Class A................ (16,508,554)
Class I................ (353,089)
Distributions in excess
of net realized gain
from investment
transactions:
Class A................ (4,276,604)
Class I................ (248,105)
------------ ------------
Total Dividends and
Distributions........... (5,492,992) (18,110,533)
CAPITAL SHARE
TRANSACTIONS............ 3,404,142 22,221,812
------------ ------------
Total Increase (Decrease)
in Net Assets........... (9,431,588) (15,252,556)
NET ASSETS
Beginning of year........ 97,732,621 112,985,177
------------ ------------
End of year (including
undistributed net
investment income as set
forth below)............ $ 88,301,033 $ 97,732,621
------------ ------------
------------ ------------
Undistributed Net
Investment Income....... $ 282,790 $ 353,049
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES.
16
<PAGE>
<TABLE>
<CAPTION>
HIGH HIGH
GRADE BOND YIELD BOND
PORTFOLIO PORTFOLIO
------------------------ ------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income.... $ 766,005 $ 647,011 $ 777,387 $ 665,694
Net realized gain (loss)
from investment
transactions............ 159,598 4,789 (29,781) 53,172
Change in unrealized
appreciation/depreciation
of
investments............. (790,290) 66,274 (625,744) 14,546
----------- ----------- ----------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... 135,313 718,074 121,862 733,412
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income:
Class A................ (682,413) (596,349) (680,208) (607,470)
Class I................ (83,592) (50,662) (97,179) (58,224)
Net realized gain from
investment transactions:
Class A................ (74,415) (21,316) (65,632)
Class I................ (8,345) (2,821) (6,891)
Distributions in excess
of net realized gain
from investment
transactions:
Class A................ (84,990)
Class I................ (11,235)
----------- ----------- ----------- -----------
Total Dividends and
Distributions........... (848,765) (647,011) (897,749) (738,217)
CAPITAL SHARE
TRANSACTIONS............ 2,458,225 2,565,189 1,708,593 3,285,456
----------- ----------- ----------- -----------
Total Increase (Decrease)
in Net Assets........... 1,744,773 2,636,252 932,706 3,280,651
NET ASSETS
Beginning of year........ 12,886,642 10,250,390 12,436,312 9,155,661
----------- ----------- ----------- -----------
End of year (including
undistributed net
investment income as set
forth below)............ $14,631,415 $12,886,642 $13,369,018 $12,436,312
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Undistributed Net
Investment Income....... $ 0 $ 0 $ 0 $ 0
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
17
<PAGE>
EQUITRUST SERIES FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
MANAGED
PORTFOLIO
------------------------
YEAR ENDED JULY 31,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS
Net investment income.... $ 1,836,141 $ 1,529,466
Net realized gain (loss)
from investment
transactions............ (6,463,959) 2,740,231
Change in unrealized
appreciation/depreciation
of investments.......... 1,724,570 (6,713,655)
----------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... (2,903,248) (2,443,958)
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income:
Class A................ (1,708,510) (1,467,303)
Class I................ (127,401) (65,203)
Net realized gain from
investment transactions:
Class A................ (2,810,723)
Class I................ (63,897)
Distributions in excess
of net realized gain
from investment
transactions:
Class A................ (1,863,050)
Class I................ (128,794)
----------- -----------
Total Dividends and
Distributions........... (3,827,755) (4,407,126)
CAPITAL SHARE
TRANSACTIONS............ 1,310,015 12,221,133
----------- -----------
Total Increase (Decrease)
in Net Assets........... (5,420,988) 5,370,049
NET ASSETS
Beginning of year........ 46,364,072 40,994,023
----------- -----------
End of year (including
undistributed
net investment income as
set forth below)........ $40,943,084 $46,364,072
----------- -----------
----------- -----------
Undistributed Net
Investment Income....... $ 1,216 $ 1,350
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES.
18
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET BLUE CHIP
PORTFOLIO PORTFOLIO
---------------------- ------------------------
YEAR ENDED JULY 31, YEAR ENDED JULY 31,
---------------------- ------------------------
1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income.... $ 124,144 $ 105,196 $ 188,991 $ 188,270
Net realized gain (loss)
from investment
transactions............ (147,965) 224,325
Change in unrealized
appreciation/depreciation
of investments.......... 7,509,719 3,823,328
---------- ---------- ----------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations......... 124,144 105,196 7,550,745 4,235,923
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income:
Class A................ (102,909) (90,846) (176,178) (139,294)
Class I................ (21,235) (14,350) (29,314) (4,830)
Net realized gain from
investment transactions:
Class A................ (52,637) (22,251)
Class I................ (4,819) (681)
Distributions in excess
of net realized gain
from investment
transactions:
Class A................ (133,393)
Class I................ (12,080)
---------- ---------- ----------- -----------
Total Dividends and
Distributions........... (124,144) (105,196) (408,421) (167,056)
CAPITAL SHARE
TRANSACTIONS............ 1,001,217 735,292 6,473,226 13,098,493
---------- ---------- ----------- -----------
Total Increase (Decrease)
in Net Assets........... 1,001,217 735,292 13,615,550 17,167,360
NET ASSETS
Beginning of year........ 3,201,008 2,465,716 47,030,766 29,863,406
---------- ---------- ----------- -----------
End of year (including
undistributed
net investment income as
set forth below)........ $4,202,225 $3,201,008 $60,646,316 $47,030,766
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Undistributed Net
Investment Income....... $ 0 $ 0 $ 74,984 $ 88,993
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
19
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO
JULY 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- ------------
<S> <C> <C>
COMMON STOCKS (78.30%)
- ---------------------------
APPAREL & ACCESSORY STORES ( 0.43%)
Wolverine World Wide, Inc............. 32,000 $ 376,000
BUSINESS SERVICES (1.30%)
Man Power, Inc........................ 49,800 1,151,625
CHEMICALS AND ALLIED PRODUCTS (4.21%)
Elan Corp............................. 40,000(1) 1,162,500
Procter & Gamble Co................... 15,000 1,357,500
RPM, Inc.............................. 82,000 1,199,250
------------
3,719,250
COMMUNICATIONS (1.30%)
U.S. West, Inc........................ 20,000 1,146,250
DEPOSITORY INSTITUTIONS (4.02%)
Glacier Bancorp, Inc.................. 8,690 179,231
Golden West Financial Corp............ 10,000 959,375
Household International, Inc.......... 20,000 858,750
U. S. Bancorp......................... 50,000 1,556,250
------------
3,553,606
ELECTRIC, GAS AND SANITARY SERVICES (0.57%)
California Water Service Group........ 18,000 504,000
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (1.15%)
ECI Telecom, Ltd...................... 30,000 1,018,125
FOOD AND KINDRED PRODUCTS (12.19%)
ConAgra, Inc.......................... 120,000 3,067,500
Heinz (H.J.) Co....................... 20,000 942,500
Hershey Foods......................... 20,000 1,160,000
Interstate Bakers..................... 35,000 818,125
McCormick & Co. (Non-Voting).......... 40,000 1,322,500
Pepsico, Inc.......................... 40,000 1,565,000
Philip Morris Companies, Inc.......... 30,000 1,117,500
Sara Lee Corp......................... 35,000 770,000
------------
10,763,125
</TABLE>
20
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- ------------
FOOD STORES (7.22%)
<S> <C> <C>
7-Eleven, Inc......................... 1,156,600(1) $ 2,313,200
Albertson's, Inc...................... 20,000 993,750
Casey's General Store................. 199,250 3,063,469
------------
6,370,419
HEALTH SERVICES (4.46%)
Abbott Laboratories................... 20,000 858,750
Cardinal Health, Inc.................. 30,000 2,047,500
Watson Pharmaceuticals................ 30,000(1) 1,033,125
------------
3,939,375
HOLDING AND OTHER INVESTMENT OFFICES (2.27%)
MBIA, Inc............................. 20,000 1,145,000
Wintrust Financial Corp............... 47,750(1) 859,500
------------
2,004,500
INSTRUMENTS & RELATED PRODUCTS (1.24%)
Becton Dickinson & Co................. 40,000 1,097,500
INSURANCE CARRIERS (12.82%)
Allstate Corp......................... 71,000 2,520,500
American International Group, Inc..... 10,000 1,161,250
Jefferson Pilot Corp.................. 20,000 1,461,250
MONY Group, Inc....................... 44,500 1,368,375
Progressive Corp...................... 10,000 1,277,500
Reinsurance Group of America.......... 40,000 1,405,000
Transatlantic Holdings, Inc........... 20,850 1,546,809
United Fire & Casualty Co............. 22,750 574,438
------------
11,315,122
NONCLASSIFIABLE ESTABLISHMENTS (0.72%)
Service Corp. International........... 40,000 635,000
NONDEPOSITORY INSTITUTIONS (4.12%)
Berkshire Hathaway, Inc............... 30(1) 2,034,150
Federal Home Loan Mortgage Corp....... 20,000 1,147,500
SLM Holding Corp...................... 10,000 455,000
------------
3,636,650
OIL AND GAS EXTRACTION (0.96%)
Offshore Logistics.................... 70,000(1) 848,750
PETROLEUM & COAL PRODUCTS (1.29%)
Ashland Oil Co........................ 30,000 1,140,000
</TABLE>
21
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
------------- ------------
PRIMARY METAL INDUSTRIES (3.22%)
<S> <C> <C>
Northwest Pipe Company................ 159,000 $ 2,842,125
PRINTING AND PUBLISHING (2.28%)
Belo A.H. Corp........................ 51,500 1,039,656
Xerox Corporation..................... 20,000 975,000
------------
2,014,656
TRANSPORTATION BY AIR (2.08%)
Petroleum Helicopters, Inc.
(Voting)............................. 20,900 287,375
Petroleum Helicopters, Inc.
(Non-voting)......................... 134,400 1,545,600
------------
1,832,975
TRUCKING & WAREHOUSING (1.75%)
Heartland Express, Inc................ 100,000(1) 1,543,750
WATER TRANSPORTATION (2.88%)
American Water Works, Inc............. 85,000 2,544,687
WHOLESALE - DURABLE GOODS (1.63%)
TBC Corporation....................... 193,750(1) 1,441,016
WHOLESALE - NONDURABLE GOODS (4.19%)
McKesson HBOC, Inc.................... 35,000 1,087,188
Super Valu Stores, Inc................ 60,000 1,365,000
Unilever N.V.......................... 17,857 1,247,758
------------
3,699,946
------------
Total Common Stocks..................... 69,138,452
PREFERRED STOCKS (5.20%)
- -----------------------------
COMMUNICATIONS (1.85%)
Cellnet Funding, LLC.................. 89,000 1,635,375
HEALTH SERVICES (0.17%)
McKesson Financing Trust.............. 3,000 150,750
HOLDING & OTHER INVESTMENT OFFICES (1.92%)
General Growth Properties, Inc........ 73,240 1,693,675
OIL AND GAS EXTRACTION (1.26%)
Unocal Capital Trust.................. 20,000 1,115,000
------------
Total Preferred Stocks.................. 4,594,800
</TABLE>
22
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
VALUE GROWTH PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------- ------------
CORPORATE BONDS (14.51%)
- -----------------------------
<S> <C> <C>
CHEMICALS AND ALLIED PRODUCTS (0.72%)
Centocor, Inc., 4.75%, due 2/15/05.... $ 500,000 $ 638,570
HEALTH SERVICES (4.31%)
Alza Corp., 5.00%, due 5/01/06........ 1,000,000 1,369,410
Athena Neurosciences, Inc., 4.75%, due
11/15/04............................. 2,260,000 2,434,608
------------
3,804,018
OIL AND GAS EXTRACTION (1.20%)
Pride International, Inc., 6.25%, due
2/15/06.............................. 1,000,000 1,060,000
PRIMARY METAL INDUSTRIES (3.90%)
Quanex Corp., 6.88%, due 6/30/07...... 3,360,000 3,444,000
PRINTING AND PUBLISHING (4.38%)
Mail-Well, Inc., 5.00%, due
11/01/02............................. 3,700,000 3,863,170
------------
Total Corporate Bonds................... 12,809,758
<CAPTION>
SHARES
HELD
-------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (2.58%)
- -----------------------------------
MONEY MARKET MUTUAL FUND
Provident Treasury Cash Management.... 2,275,621 2,275,621
------------
Total Investments (100.59%)............. 88,818,631
OTHER ASSETS LESS LIABILITIES (-0.59%)
- ------------------------------------------
Cash, receivables, prepaid expense and
other assets, less liabilities....... (517,598)
------------
Total Net Assets (100.00%).............. $88,301,033
------------
------------
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
23
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO
JULY 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
PREFERRED STOCK (2.80%)
- ---------------------------
New Plan Excel Realty Trust........... 9,000 $ 409,500
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
CORPORATE BONDS (58.97%)
- -----------------------------
CHEMICALS AND ALLIED PRODUCTS (2.03%)
Rohm & Haas Co., 9.375%, due
11/15/19............................. $ 280,000 296,593
DEPOSITORY INSTITUTIONS (5.34%)
First Bank, N.A., 6.25%, due
8/15/05.............................. 450,000 445,347
J. P. Morgan & Co., 7.25%, due
10/01/10............................. 350,000 336,507
-----------
781,854
ELECTRIC, GAS AND SANITARY SERVICES (11.11%)
National Co-op Services Corp.
(Arkansas Electric), 9.48%, due
1/01/12.............................. 550,000 584,116
Oglethorpe Power (OPC Scherer),
6.974%, due 6/30/11.................. 679,000 672,101
Western Penn Power Co., 7.875%, due
12/01/04............................. 360,000 368,564
-----------
1,624,781
GENERAL MERCHANDISE STORES (2.82%)
J.C. Penney & Co., 8.25%, due
8/15/22.............................. 400,000 412,188
HOLDING AND OTHER INVESTMENT OFFICES (7.33%)
Federal Realty Investment Trust,
8.875%, due 1/15/00.................. 350,000 353,955
Meditrust, 7.60%, due 9/13/05......... 350,000 295,379
Washington REIT, 6.898%, due
2/15/18.............................. 450,000 423,184
-----------
1,072,518
INDUSTRIAL MACHINERY & EQUIPMENT (3.75%)
Thermo Fibertek, 4.50%, due 7/15/04... 650,000 549,250
NONDEPOSITORY INSTITUTIONS (3.40%)
Household Finance Co., 7.30%, due
7/30/12.............................. 300,000 295,707
Security Capital Pacific, 7.20%, due
3/01/13.............................. 225,000 202,379
-----------
498,086
OIL & GAS EXTRACTION (1.56%)
Burlington Resources, Inc., 9.125%,
due 10/01/21......................... 200,000 227,768
PAPER AND ALLIED PRODUCTS (1.82%)
Union Camp Corp., 8.625%, due
4/15/16.............................. 257,000 266,914
</TABLE>
24
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
RAILROAD TRANSPORTATION (0.41%)
<S> <C> <C>
Union Pacific Corp., 8.50%, due
1/15/17.............................. $ 58,000 $ 60,292
TEXTILE MILL PRODUCTS (3.61%)
Unifi, 6.50%, due 2/01/08............. 550,000 527,912
TRANSPORTATION BY AIR (9.16%)
Continental Airlines, Inc., 6.545%,
due 8/02/20.......................... 700,000 644,350
Northwest Airlines, 7.575%, due
9/1/20............................... 700,000 696,542
-----------
1,340,892
TOBACCO PRODUCTS (5.03%)
UST, Inc., 7.25%, due 6/01/09......... 750,000 735,420
TRANSPORTATION EQUIPMENT (1.60%)
Ford Motor Co., 9.215%, due 9/15/21... 200,000 233,876
-----------
Total Corporate Bonds................... 8,628,344
ASSET-BACKED SECURITIES (0.30%)
- ------------------------------------
Federal Home Loan Mortgage Corp.,
10.15%, due 4/15/06.................. 43,542 43,574
MORTGAGE-BACKED SECURITIES (27.70%)
- ------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) (0.20%)
Pool # 503442, 9.50%, due 7/01/05..... 27,849 28,754
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(GNMA) (27.50%)
Pool # 236070, 10.00%, due 10/15/12... 562,835 614,548
Pool # 1512, 7.50%, due 12/20/23...... 523,804 523,804
Pool # 22630, 6.50%, due 8/1/28....... 478,249 453,887
Pool # 2631, 7.00%, due 8/1/28........ 528,130 514,600
Pool # 2658, 6.50%, due 10/1/28....... 957,309 908,544
Pool # 2701, 6.50%, due 1/20/29....... 980,727 930,769
Pool # 144332, 9.00%, due 7/15/16..... 10,329 10,991
Pool # 194692, 8.00%, due 5/15/17..... 64,617 66,697
-----------
4,023,840
-----------
Total Mortgage-Backed Securities........ 4,052,594
UNITED STATES TREASURY OBLIGATION (2.89%)
- ------------------------------------------------
U.S. Treasury Note, 7.25%, due
8/15/04.............................. 400,000 422,816
</TABLE>
25
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH GRADE BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
SHORT-TERM INVESTMENTS (6.09%)
- -----------------------------------
<S> <C> <C>
UNITED STATES GOVERNMENT AGENCIES (4.56%)
Federal Home Loan Mortgage Corp., due
8/12/99.............................. $ 370,000 $ 369,397
Federal Home Loan Mortgage Corp., due
9/10/99.............................. 300,000 298,291
-----------
667,688
<CAPTION>
SHARES
HELD
----------
<S> <C> <C>
MONEY MARKET MUTUAL FUND (1.53%)
Provident Treasury Cash Management.... 223,803 223,803
-----------
Total Short-Term Investments............ 891,491
-----------
Total Investments (98.75%).............. 14,448,319
OTHER ASSETS LESS LIABILITIES (1.25%)
- -----------------------------------------
Cash, receivables, prepaid expense and
other assets, less liabilities....... 183,096
-----------
Total Net Assets (100.00%).............. $14,631,415
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
26
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO
JULY 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (0.67%)
- --------------------------
FOOD STORES
Penn Traffic.......................... 9,092 $ 89,784
PREFERRED STOCKS (8.78%)
- -----------------------------
DEPOSITORY INSTITUTIONS (2.07%)
CFB Capital I......................... 11,000 276,375
HOLDING AND OTHER INVESTMENT OFFICES (2.38%)
New Plan Excel Realty Trust........... 7,000 318,500
METAL MINING (4.33%)
Cameco Corp........................... 24,000 579,000
------------
Total Preferred Stocks.................. 1,173,875
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
CORPORATE BONDS (86.13%)
- -----------------------------
AMUSEMENT AND RECREATION SERVICES (1.62%)
AMF Bowling Worldwide, Inc., 10.875%,
due 3/15/06.......................... $ 260,000 217,100
APPAREL AND OTHER TEXTILE PRODUCTS (2.14%)
Dan River, Inc., 10.125%, due
12/15/03............................. 280,000 286,300
AUTO REPAIR SERVICE PARK (0.68%)
Budget Group, Inc., 9.125%, due
4/01/06.............................. 100,000 90,500
BUSINESS SERVICES (2.25%)
Cendant Corporation, 7.75%, due
12/01/03............................. 300,000 301,224
CHEMICALS & ALLIED PRODUCTS (8.86%)
Lyondell Chemical Co., 9.625%, due
5/01/07.............................. 600,000 618,000
Sterling Chemicals, Inc., 12.375%, due
7/15/06.............................. 400,000 411,000
Terra Industries, Inc., 10.5%, due
6/15/05.............................. 200,000 155,000
------------
1,184,000
COMMUNICATIONS (4.05%)
Savoy Pictures, 7.00%, due 7/01/03.... 550,000 541,750
DEPOSITORY INSTITUTIONS (2.59%)
First Bank, N.A., 6.25%, due
8/15/05.............................. 350,000 346,381
</TABLE>
27
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ------------
ELECTRIC, GAS AND SANITARY SERVICES (12.79%)
<S> <C> <C>
Allied Waste North America, 10.00%,
due 8/01/09.......................... $ 500,000 $ 498,750
ESI Tractebel, 7.99%, due 12/30/11.... 460,000 432,900
Gulf States Utilities, 8.94%, due
1/01/22.............................. 400,000 415,228
Waterford 3 Nuclear Power Plant,
8.09%, due 1/02/17................... 367,180 362,663
------------
1,709,541
ELECTRONIC AND OTHER ELECTRIC EQUIPMENT (2.62%)
Advanced Micro Devices, Inc., 11.00%,
due 8/01/03.......................... 360,000 349,650
FOOD STORES (0.30%)
Penn Traffic Co., 11.00%, due
6/29/09.............................. 47,850 40,314
GENERAL MERCHANDISE STORES (3.61%)
Woolworth, F.W., 7.00%, due 6/01/00... 500,000 482,500
HEALTH SERVICES (2.81%)
Tenet Healthcare, 7.625%, due
6/01/08.............................. 400,000 376,000
HOLDING AND OTHER INVESTMENT OFFICES (14.15%)
Bradley Operating, L.P., 7.20%, due
1/15/08.............................. 500,000 469,470
Federal Realty Investment Trust,
7.48%, due 8/15/26................... 600,000 610,952
Glenborough Properties, 7.625%, due
3/15/05.............................. 250,000 216,490
Price Development Company, 7.29%, due
3/11/08.............................. 250,000 236,617
SUSA Partnership, L.P., 8.20%, due
6/01/17.............................. 375,000 357,922
------------
1,891,451
INDUSTRIAL MACHINES AND EQUIPMENT (4.26%)
AGCO Corp., 8.5%, due 3/15/06......... 600,000 570,000
INSTRUMENTS AND RELATED PRODUCTS (4.58%)
Thermo Electron Corp., 4.25%, due
1/01/03.............................. 700,000 612,360
LUMBER AND WOOD PRODUCTS (3.48%)
Georgia-Pacific Corp., 9.875%, due
11/01/21............................. 330,000 360,238
Georgia-Pacific Corp., 9.125%, due
7/01/22.............................. 100,000 105,310
------------
465,548
METAL MINING (1.43%)
Inco Ltd., 9.875%, due 6/15/19........ 200,000 191,422
NONDEPOSITORY INSTITUTIONS (1.90%)
Macsaver Financial, 7.40%, due
2/15/02.............................. 300,000 253,500
</TABLE>
28
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
HIGH YIELD BOND PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ------------
OIL AND GAS EXTRACTION (5.18%)
<S> <C> <C>
Occidental Petroleum Co., 7.375%, due
11/15/08............................. $ 300,000 $ 294,141
Pool Energy Services, 8.625%, due
4/01/08.............................. 400,000 398,000
------------
692,141
PAPER AND ALLIED PRODUCTS (1.95%)
Container Corp. of America, 9.75%, due
4/01/03.............................. 250,000 261,250
REAL ESTATE (3.02%)
United Dominion Realty Trust, 8.125%,
due 11/15/00......................... 400,000 403,424
TRANSPORTATION SERVICES (1.86%)
Preston Corp., 7.00%, due 5/01/11..... 306,000 249,008
------------
Total Corporate Bonds................. 11,515,364
</TABLE>
<TABLE>
<CAPTION>
SHARES
HELD
----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (3.07%)
- -----------------------------------
MONEY MARKET MUTUAL FUND
Provident Treasury Cash Management.... 410,000 410,000
------------
Total Investments (98.65%)............ 13,189,023
OTHER ASSETS LESS LIABILITIES (1.35%)
- -----------------------------------------
Cash, receivables, prepaid expense and
other assets, less liabilities....... 179,995
------------
Total Net Assets (100.00%)............ $ 13,369,018
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES.
29
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO
JULY 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
<S> <C> <C>
COMMON STOCKS (10.76%)
- ---------------------------
CHEMICALS AND ALLIED PRODUCTS (1.36%)
RPM, Inc.............................. 38,000 $ 555,750
ELECTRIC, GAS AND SANITARY SERVICES (5.14%)
Idacorp, Inc.......................... 44,000 1,361,250
Northern States Power Co.
(Minnesota).......................... 33,000 742,500
-----------
2,103,750
FOOD & KINDRED PRODUCTS (4.26%)
ConAgra, Inc.......................... 21,975 561,736
Philip Morris Companies, Inc.......... 20,000 745,000
Sara Lee Corp......................... 20,000 440,000
-----------
1,746,736
-----------
Total Common Stocks..................... 4,406,236
PREFERRED STOCKS (51.82%)
- ------------------------------
DEPOSITORY INSTITUTIONS (9.95%)
CFB Capital I, Inc.................... 67,500 1,695,937
CFB Capital II, Inc................... 3,960 97,515
Harris Preferred Capital Group,
Inc.................................. 20,000 455,000
Taylor Capital Group, Inc............. 72,000 1,827,000
-----------
4,075,452
EATING & DRINKING PLACES (2.11%)
Wendy's Financing..................... 14,300 861,575
ELECTRIC, GAS AND SANITARY SERVICES (10.51%)
Citizens Utilities Trust.............. 30,500 1,547,875
Equitable Resources................... 50,000 1,162,500
Nisource, Inc......................... 22,000 1,056,000
Northwestern Capital Finance, Inc..... 23,200 536,500
-----------
4,302,875
HOLDING AND OTHER INVESTMENT OFFICES (7.36%)
General Growth Properties, Inc........ 90,000 2,081,250
Wintrust Capital Trust................ 37,500 932,813
-----------
3,014,063
INSURANCE CARRIERS (2.54%)
Equitable of Iowa Capital............. 40,546 1,041,525
MISCELLANEOUS MANUFACTURING INDUSTRIES (3.26%)
Cyprus Amax Minerals Co............... 30,000 1,335,000
</TABLE>
30
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- -----------
NONDEPOSITORY INSTITUTIONS (4.50%)
<S> <C> <C>
Mediaone Finance Trust................ 25,000 $ 668,750
Newell Financial Trust I.............. 22,000 1,171,500
-----------
1,840,250
OIL AND GAS EXTRACTION (5.58%)
EVI, Inc.............................. 40,000 1,545,000
El Paso Energy Capital Trust, Inc..... 15,000 740,625
-----------
2,285,625
PETROLEUM AND COAL PRODUCTS (2.66%)
Canadian Occident Petroleum........... 44,000 1,089,000
PIPELINES EXCLUDING NATURAL GAS (2.85%)
Enron Capital......................... 47,200 1,168,200
RAILROAD TRANSPORTATION (0.50%)
Union Pacific Capital Trust........... 4,000 202,500
-----------
Total Preferred Stocks.................. 21,216,065
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
CORPORATE BONDS (36.71%)
- -----------------------------
CHEMICALS AND ALLIED PRODUCTS (4.02%)
Centocor, Inc., 4.75%, due 2/15/05.... $ 500,000 638,570
Cetus Corp., 5.25%, due 5/21/02....... 1,000,000 1,005,000
-----------
1,643,570
COMMUNICATIONS (1.20%)
Telefonos de Mexico, 4.25%, due
6/15/04.............................. 500,000 491,795
ELECTRIC, GAS AND SANITARY SERVICES (0.33%)
National Co-op Services Corp.
(Arkansas Electric),
9.48%, due 1/01/12................... 126,000 133,816
HEALTH SERVICES (13.03%)
Athena Neurosciences, Inc., 4.75%, due
11/15/04............................. 2,000,000 2,154,520
Dura Pharmaceuticals, 3.50%, due
7/15/02.............................. 2,000,000 1,520,000
Healthsouth Corp., 3.25%, due
4/01/03.............................. 750,000 619,687
Quantum Healthcare Resources, 4.75%,
due 10/01/00......................... 1,125,000 1,040,625
-----------
5,334,832
</TABLE>
31
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MANAGED PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
METAL MINING (2.66%)
<S> <C> <C>
Teck Corp., 3.75%, due 7/15/06........ $1,500,000 $ 1,087,500
NONDEPOSITORY INSTITUTIONS (1.57%)
Consumer Portfolio Services, Inc.,
10.50%, due 4/15/04.................. 1,600,000 644,000
OIL AND GAS EXTRACTION (4.39%)
Diamond Offshore Drilling, 3.75%, due
2/15/07.............................. 1,700,000 1,798,481
PRIMARY METAL INDUSTRIES (4.33%)
Quanex Corp., 6.88%, due 6/30/07...... 1,730,000 1,773,250
PRINTING AND PUBLISHING (5.10%)
Mail-Well, Inc., 5.00%, due 11/1/02... 2,000,000 2,088,200
RAILROAD TRANSPORTATION (0.08%)
Union Pacific Corp., SFDEB, 8.50%, due
1/15/17.............................. 33,000 34,304
-----------
Total Corporate Bonds................... 15,029,748
<CAPTION>
SHARES
HELD
----------
<S> <C> <C>
SHORT-TERM INVESTMENTS (0.46%)
- -----------------------------------
MONEY MARKET MUTUAL FUND
Provident Treasury Cash Management.... 189,497 189,497
-----------
Total Investments (99.75%).............. 40,841,546
OTHER ASSETS LESS LIABILITIES (0.25%)
- -----------------------------------------
Cash, receivables, prepaid expense and
other assets, less liabilities....... 101,538
-----------
Total Net Assets (100.00%).............. $40,943,084
-----------
-----------
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
32
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
MONEY MARKET PORTFOLIO
July 31, 1999
<TABLE>
<CAPTION>
ANNUALIZED
YIELD ON
PURCHASE PRINCIPAL
DATE AMOUNT VALUE
---------- ---------- -----------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS (100.16%)
- --------------------------------------
COMMERCIAL PAPER (25.70%)
NONDEPOSITORY INSTITUTIONS
American General Finance,
4.89%, due 8/4/99............. 4.889% $ 210,000 $ 210,000
John Deere Capital Corp.,
5.07%, due 8/17/99............ 5.069 180,000 180,000
Ford Motor Credit Corp., 5.08%,
due 8/9/99.................... 5.079 180,000 180,000
General Electric Capital Corp.,
5.14%, due 8/20/99............ 5.142 115,000 115,000
IBM Credit Corp., 5.07%, due
8/10/99....................... 5.066 210,000 210,000
Texaco, Inc., 5.05%, due
8/23/99....................... 5.053 185,000 185,000
-----------
Total Commercial Paper........... 1,080,000
UNITED STATES GOVERNMENT AGENCIES (74.46%)
Federal Home Loan Bank, due
8/11/99....................... 5.006 250,000 249,623
Federal Home Loan Bank, due
8/18/99....................... 5.010 245,000 244,396
Federal Home Loan Mortgage
Corp., due 8/2/99............. 5.001 130,000 129,964
Federal Home Loan Mortgage
Corp., due 8/12/99............ 4.969 300,000 299,511
Federal Home Loan Mortgage
Corp., due 8/16/99............ 5.030 190,000 189,582
Federal Home Loan Mortgage
Corp., due 8/19/99............ 4.999 220,000 219,429
Federal Home Loan Mortgage
Corp., due 8/24/99............ 4.980 190,000 189,380
Federal Home Loan Mortgage
Corp., due 8/25/99............ 5.058 150,000 149,482
Federal Home Loan Mortgage
Corp., due 8/26/99............ 4.999 360,000 358,723
Federal National Mortgage
Assoc., due 8/3/99............ 5.037 135,000 134,944
Federal National Mortgage
Assoc., due 8/5/99............ 5.038 480,000 479,669
Federal National Mortgage
Assoc., due 8/6/99............ 5.089 270,000 269,774
Federal National Mortgage
Assoc., due 8/13/99........... 4.990 215,000 214,619
-----------
Total United States Government
Agencies........................ 3,129,096
-----------
Total Short-Term Investments....... 4,209,096
OTHER ASSETS LESS LIABILITIES (-0.16%)
- ------------------------------------------
Cash, receivables, prepaid
expense and other assets, less
liabilities..................... (6,871)
-----------
Total Net Assets (100.00%)......... $ 4,202,225
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
33
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO
JULY 31, 1999
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (89.66%)
- ---------------------------
CHEMICALS AND ALLIED PRODUCTS (11.42%)
Bristol-Myers Squibb Co............... 22,596 $ 1,502,634
DuPont (E.I.) de Nemours & Co......... 15,301 1,102,628
Lilly & Company....................... 6,886 451,894
Merck & Co., Inc...................... 19,384 1,312,054
Pfizer, Inc........................... 15,099 512,422
Procter & Gamble Co................... 13,489 1,220,755
Union Carbide Corp.................... 17,086 820,128
------------
6,922,515
COMMUNICATIONS (6.92%)
AT & T Corp........................... 19,857 1,031,323
Bell Atlantic Corp.................... 18,765 1,196,269
CBS Corp.............................. 27,073(1) 1,189,520
MCI Worldcom, Inc..................... 9,443(1) 779,047
------------
4,196,159
COMPUTER PROGRAMMING & SOFTWARE (1.32%)
Microsoft Corp........................ 9,354(1) 802,690
DEPOSITORY INSTITUTIONS (2.56%)
Bank America Corp..................... 9,809 651,072
J. P. Morgan & Co., Inc............... 7,043 900,624
------------
1,551,696
EATING AND DRINKING PLACES (2.24%)
McDonald's Corp....................... 32,630 1,360,263
ELECTRONIC & OTHER ELECTRIC EQUIPMENT (8.97%)
Cisco Systems, Inc.................... 15,066(1) 935,975
General Electric Co................... 15,115 1,647,535
Intel Corporation..................... 10,278 709,182
Lucent Technologies, Inc.............. 24,292 1,580,498
Raytheon Company...................... 8,166 567,537
------------
5,440,727
FOOD AND KINDRED PRODUCTS (4.54%)
Coca-Cola Co. (The)................... 17,908 1,080,076
PepsiCo, Inc.......................... 23,149 905,705
Philip Morris Companies, Inc.......... 20,642 768,914
------------
2,754,695
</TABLE>
34
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- ------------
GENERAL MERCHANDISE STORES (3.89%)
<S> <C> <C>
Sears, Roebuck & Co................... 13,457 $ 545,009
Wal-Mart Stores, Inc.................. 42,980 1,815,905
------------
2,360,914
HEALTH SERVICES (2.33%)
Johnson & Johnson..................... 15,323 1,411,631
INDUSTRIAL MACHINERY AND EQUIPMENT (7.18%)
Caterpillar, Inc...................... 20,293 1,189,677
Hewlett-Packard Co.................... 8,589 899,161
International Business Machines
Corp................................. 18,002 2,262,626
------------
4,351,464
INSTRUMENTS AND RELATED PRODUCTS (1.16%)
Eastman Kodak Co...................... 10,181 703,762
INSURANCE CARRIERS (4.23%)
Allstate Corp......................... 20,903 742,057
American International Group, Inc..... 15,696 1,822,698
------------
2,564,755
MOTION PICTURES (1.37%)
Disney (Walt) Co...................... 30,120 832,065
NONDEPOSITORY INSTITUTIONS (1.36%)
Citigroup, Inc........................ 18,568 827,437
PAPER AND ALLIED PRODUCTS (2.59%)
International Paper Co................ 15,452 789,984
Minnesota Mining & Manufacturing
Co................................... 8,898 782,468
------------
1,572,452
PETROLEUM AND COAL PRODUCTS (10.22%)
BP Amoco Corp......................... 11,462 1,328,159
Chevron Corp.......................... 10,465 954,931
Exxon Corp............................ 13,965 1,108,472
Mobil Corp............................ 11,406 1,166,264
Royal Dutch Petroleum Co.............. 12,607 769,027
Texaco, Inc........................... 13,979 871,066
------------
6,197,919
PRIMARY METAL INDUSTRIES (2.20%)
Alcoa, Inc............................ 22,294 1,334,853
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (1.38%)
Goodyear Tire & Rubber Co............. 15,766 833,627
</TABLE>
35
<PAGE>
EQUITRUST SERIES FUND, INC.
SCHEDULE OF INVESTMENTS
BLUE CHIP PORTFOLIO (CONTINUED)
<TABLE>
<CAPTION>
SHARES
HELD VALUE
---------- ------------
SECURITY AND COMMODITY BROKERS (4.75%)
<S> <C> <C>
American Express Co................... 11,620 $ 1,530,935
Morgan Stanley, Dean Witter, Discover
& Co................................. 14,974 1,349,532
------------
2,880,467
TRANSPORTATION EQUIPMENT (9.03%)
Allied-Signal, Inc.................... 26,215 1,695,783
Boeing Co. (The)...................... 15,860 719,648
Ford Motor Co......................... 17,862 868,540
General Motors Corp................... 10,969 668,423
United Technologies Corp.............. 22,846 1,523,543
------------
5,475,937
------------
Total Common Stocks..................... 54,376,028
SHORT-TERM INVESTMENTS (10.30%)
- ------------------------------------
MONEY MARKET MUTUAL FUND (0.95%)
Provident Treasury Cash Management.... 576,377 576,377
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
UNITED STATES GOVERNMENT AGENCIES (9.35%)
Federal National Mortgage Association,
due 8/25/99.......................... $1,540,000 1,534,730
Federal Home Loan Mortgage Corp., due
8/26/99.............................. 2,415,000 2,406,430
Federal Home Loan Mortgage Corp., due
8/25/99.............................. 1,105,000 1,101,185
Federal Home Loan Mortgage Corp., due
9/10/99.............................. 630,000 626,412
------------
5,668,757
------------
Total Short-Term Investments............ 6,245,134
------------
Total Investments (99.96%).............. 60,621,162
OTHER ASSETS LESS LIABILITIES (0.04%)
- -----------------------------------------
Cash, receivables, prepaid expense and
other assets, less liabilities....... 25,154
------------
Total Net Assets (100.00%).............. $ 60,646,316
------------
------------
</TABLE>
(1) Non-income producing securities.
SEE ACCOMPANYING NOTES.
36
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999
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).
Institutional shares ("Class I") 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.
Traditional shares ("Class A") 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 during the year ended July 31,
1999, 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.................. $239,251 $20,842 $14,185 $ 3,230
High Grade Bond............... 34,347 6,481 5,547 2,924
High Yield Bond............... 42,657 8,019 5,847 2,959
Managed....................... 161,715 16,020 9,429 3,080
Money Market.................. 9,731 8,210 4,171 2,601
Blue Chip..................... 158,288 20,326 11,176 3,193
</TABLE>
37
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Fund records investment transactions generally one day after the trade
date. The identified cost basis has been used in determining the net realized
gain or loss from investment transactions and unrealized appreciation or
depreciation on investments. Dividends are taken into income on an accrual basis
as of the ex-dividend date and interest is recognized on an accrual basis.
Discounts and premiums on investments purchased are amortized over the life of
the respective investments.
Dividends and distributions to shareholders are recorded on the ex-dividend
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, 1999, the Value Growth and Managed Portfolios had net capital
loss carryforwards of approximately $29,243,000 and $5,072,000, respectively,
which will expire in 2007.
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
38
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. MANAGEMENT CONTRACT AND TRANSACTIONS WITH AFFILIATES (CONTINUED)
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, LLC ("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, 1999. There can be no assurance that EquiTrust Investment
will continue to waive this expense beyond December 31, 1999.
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 1.50% for "Class A" and "Class I"
shares, respectively, based on 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.
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, 1999, 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 Bond......................... -- 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 100,017 shares of Value Growth Portfolio
(Class A) at July 31, 1999.
39
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. EXPENSE OFFSET ARRANGEMENTS
The Fund and other mutual funds managed by EquiTrust Investment have an
agreement with the custodian bank to indirectly pay a portion of the custodian's
fees through credits earned by the Funds' cash on deposit with the bank. Such
deposit agreement is an alternative to overnight investments.
5. CAPITAL SHARE TRANSACTIONS
Net assets as of July 31, 1999 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)....... $ 9,221 $ 1,453 $ 1,354 $ 3,940 $ 4,202 $ 1,293
Additional paid-in
capital................. 118,835,491 14,857,236 13,786,707 49,622,669 4,198,023 36,953,812
Accumulated undistributed
net investment income... 282,790 1,216 74,984
Accumulated undistributed
net realized gain (loss)
from investment
transactions............ (29,242,846) 41,689 (96,225) (6,463,959) (147,965)
Net unrealized
appreciation
(depreciation) of
investments............. (1,583,623) (268,963) (322,818) (2,220,782) 23,764,192
------------ ----------- ----------- ----------- ---------- -----------
Net Assets............... $ 88,301,033 $14,631,415 $13,369,018 $40,943,084 $4,202,225 $60,646,316
------------ ----------- ----------- ----------- ---------- -----------
------------ ----------- ----------- ----------- ---------- -----------
</TABLE>
40
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in Capital Stock for each portfolio were as follows:
YEAR ENDED JULY 31, 1999:
<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................ 1,093,340 334,499 278,716 411,574 2,379,910 301,869
Class I................ 136,043 21,652 29,023 61,989 275,807 42,315
Shares issued in
reinvestment of
dividends and/or capital
gains distribution:
Class A................ 572,232 55,948 58,350 317,600 41,669 8,453
Class I................ 24,347 2,805 3,959 17,659 5,547 797
Shares redeemed:
Class A................ (1,393,178) (177,704 ) (196,728) (660,841) (1,528,394) (188,360)
Class I................ (38,706) (3,696 ) (6,138) (25,818) (173,322) (11,583)
------------ ----------- ----------- ----------- ----------- -----------
Net Increase............. 394,078 233,504 167,182 122,163 1,001,217 153,491
------------ ----------- ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- ----------- -----------
Value of shares sold:
Class A................ $ 10,430,281 $3,508,582 $ 2,852,823 $ 4,477,308 $ 2,379,910 $12,875,650
Class I................ 1,225,133 225,669 287,297 671,578 275,807 1,817,166
Value issued in
reinvestment of
dividends and/or capital
gains distribution:
Class A................ 5,067,247 583,214 593,444 3,345,622 41,669 355,959
Class I................ 217,816 29,180 40,175 186,062 5,547 33,610
Value redeemed:
Class A................ (13,163,062) (1,849,459 ) (2,002,783) (7,091,136) (1,528,394) (8,095,048)
Class I................ (373,273) (38,961 ) (62,363) (279,419) (173,322) (514,111)
------------ ----------- ----------- ----------- ----------- -----------
Net Increase............. $ 3,404,142 $2,458,225 $ 1,708,593 $ 1,310,015 $ 1,001,217 $ 6,473,226
------------ ----------- ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- ----------- -----------
</TABLE>
41
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. CAPITAL SHARE TRANSACTIONS (CONTINUED)
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.
42
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. INVESTMENT TRANSACTIONS
For the year ended July 31, 1999, 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............................ $183,043,259 $153,665,472
High Grade Bond......................... 3,429,029 3,068,756
High Yield Bond......................... 7,521,722 5,293,371
Managed................................. 29,795,045 24,340,290
Blue Chip............................... 6,178,769 3,506,554
</TABLE>
At July 31, 1999, 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....................... $ 2,545,283 $ 4,128,906 $(1,583,623)
High Grade Bond.................... 149,272 418,235 (268,963)
High Yield Bond.................... 96,573 419,391 (322,818)
Managed............................ 964,733 3,185,515 (2,220,782)
Blue Chip.......................... 24,011,075 246,883 23,764,192
</TABLE>
43
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. 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 31, 1998.......... $0.0457 $0.0483 $0.0469 $0.0508 $0.0030 $0.0034
September 30, 1998....... 0.0524 0.0550 0.0522 0.0565 0.0029 0.0033
October 30, 1998......... 0.0427 0.0450 0.0493 0.0535 0.0028 0.0032
November 30, 1998........ 0.0496 0.0517 0.0477 0.0520 0.0026 0.0030
December 31, 1998........ 0.0433 0.0453 0.0522 0.0565 0.0026 0.0030
January 29, 1999......... 0.0439 0.0457 0.0460 0.0501 0.0024 0.0028
February 26, 1999........ 0.0413 0.0416 0.0392 0.0427 0.0022 0.0025
March 31, 1999........... 0.0586 0.0624 0.0658 0.0695 0.0026 0.0026
April 30, 1999........... 0.0443 0.0521 0.0495 0.0567 0.0026 0.0024
May 31, 1999............. 0.0385 0.0446 0.0423 0.0447 0.0027 0.0017
June 30, 1999............ 0.0488 0.0546 0.0592 0.0607 0.0025 0.0015
July 30, 1999............ 0.0478 0.0525 0.0526 0.0556 0.0026 0.0016
------- ------- ------- ------- ------- -------
Total Dividends per
Share................... $0.5569 $0.5988 $0.6029 $0.6493 $0.0315 $0.0310
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
The percentage of income dividends qualifying for deduction by corporate
shareholders for the High Yield Bond Portfolio is 5%.
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, 1999, for the following portfolios:
ORDINARY INCOME DIVIDENDS:
<TABLE>
<CAPTION>
DIVIDEND AMOUNT
PER SHARE
DECLARATION RECORD PAYABLE -------------------
PORTFOLIO DATE DATE DATE CLASS A CLASS I
- ------------------------- ----------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Value Growth............. 12/30/98 12/30/98 12/30/98 $ 0.1080 $ 0.1520
Managed.................. 10/29/98 10/31/98 11/07/98 0.1275 0.1142
Managed.................. 12/30/98 12/30/98 12/30/98 0.0810 0.1000
Managed.................. 4/30/99 4/30/99 5/07/99 0.1480 0.1470
Managed.................. 7/30/99 7/30/99 8/06/99 0.1130 0.1285
Blue Chip................ 12/30/98 12/30/98 12/30/98 0.1600 0.2940
</TABLE>
The percentage of income dividends qualifying for deduction by corporate
shareholders for the Value Growth, Managed and Blue Chip Portfolios are 100%,
32% and 100%, respectively.
44
<PAGE>
EQUITRUST SERIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS (CONTINUED)
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.................. 12/30/98 12/30/98 12/30/98 $0.0180
Value Growth.................. 1/29/99 1/29/99 1/29/99 0.4911
High Grade Bond............... 12/30/98 12/30/98 12/30/98 0.0615
High Yield Bond............... 12/30/98 12/30/98 12/30/98 0.0974
Managed....................... 1/29/99 1/29/99 1/29/99 0.5127
Blue Chip..................... 12/30/98 12/30/98 12/30/98 0.1695
</TABLE>
The capital gains distributions related to the High Yield Bond and Blue Chip
Portfolios include net short-term realized gains of $119,158 ($0.0965 per share)
and $46,000 ($0.0385 per share), respectively, that are taxable to shareholders
as ordinary income dividends.
45
<PAGE>
EQUITRUST SERIES FUND, INC.
FINANCIAL HIGHLIGHTS
YEARS ENDED JULY 31, 1999, 1998, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------
NET REALIZED
AND
NET ASSET UNREALIZED TOTAL
VALUE AT NET GAIN FROM
BEGINNING INVESTMENT (LOSS) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS OPERATIONS
--------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
VALUE GROWTH PORTFOLIO
Class A:
1999................................ $ 11.07 $ 0.09 $ (0.97) $ (0.88)
1998................................ 15.63 0.13 (2.26) (2.13)
1997................................ 14.68 0.18 2.89 3.07
1996................................ 13.04 0.27 2.10 2.37
1995................................ 13.07 0.43 0.65 1.08
Class I:
1999................................ $ 11.08 $ 0.19 $ (1.01) $ (0.82)
1998................................ 16.16 0.19 (2.83) (2.64)
HIGH GRADE BOND PORTFOLIO
Class A:
1999................................ $ 10.57 $ 0.56 $ (0.44) $ 0.12
1998................................ 10.50 0.60 0.07 0.67
1997................................ 10.16 0.60 0.34 0.94
1996................................ 10.26 0.64 (0.10) 0.54
1995................................ 10.13 0.63 0.16 0.79
Class I:
1999................................ $ 10.57 $ 0.60 $ (0.44) $ 0.16
1998................................ 10.53 0.42 0.04 0.46
HIGH YIELD BOND PORTFOLIO
Class A:
1999................................ $ 10.48 $ 0.60 $ (0.51) $ 0.09
1998................................ 10.48 0.65 0.07 0.72
1997................................ 9.99 0.70 0.61 1.31
1996................................ 10.03 0.75 (0.01) 0.74
1995................................ 10.00 0.78 0.13 0.91
Class I:
1999................................ $ 10.47 $ 0.65 $ (0.50) $ 0.15
1998................................ 10.52 0.45 0.02 0.47
<CAPTION>
LESS DISTRIBUTIONS
---------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS DISTRIBUTIONS
INVESTMENT FROM CAPITAL IN EXCESS OF TOTAL
INCOME GAINS NET REALIZED GAINS DISTRIBUTIONS
---------- ------------- ------------------ -------------
<S> <C> <C> <C> <C>
VALUE GROWTH PORTFOLIO
Class A:
1999................................ $ (0.11) $ -- $ (0.51) $ (0.62)
1998................................ (0.17) (2.26) -- (2.43)
1997................................ (0.18) (1.94) -- (2.12)
1996................................ (0.46) (0.27) -- (0.73)
1995................................ (0.39) (0.72) -- (1.11)
Class I:
1999................................ $ (0.15) $ -- $ (0.51) $ (0.66)
1998................................ (0.18) (2.26) -- (2.44)
HIGH GRADE BOND PORTFOLIO
Class A:
1999................................ $ (0.56) $ (0.06) $ -- $ (0.62)
1998................................ (0.60) -- -- (0.60)
1997................................ (0.60) -- -- (0.60)
1996................................ (0.64) -- -- (0.64)
1995................................ (0.63) -- (0.03) (0.66)
Class I:
1999................................ $ (0.60) $ (0.06) $ -- $ (0.66)
1998................................ (0.42) -- -- (0.42)
HIGH YIELD BOND PORTFOLIO
Class A:
1999................................ $ (0.60) $ (0.02) $ (0.08) $ (0.70)
1998................................ (0.65) (0.07) -- (0.72)
1997................................ (0.70) (0.12) -- (0.82)
1996................................ (0.75) (0.03) -- (0.78)
1995................................ (0.78) (0.09) (0.01) (0.88)
Class I:
1999................................ $ (0.65) $ (0.02) $ (0.08) $ (0.75)
1998................................ (0.45) (0.07) -- (0.52)
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
TOTAL
INVESTMENT
NET ASSET RETURN BASED
CAPITAL VALUE AT ON
CONTRIBUTION END OF NET ASSET
FROM AFFILIATE PERIOD VALUE (1)
-------------- --------- ------------
<S> <C> <C> <C>
VALUE GROWTH PORTFOLIO
Class A:
1999................................ $ -- $ 9.57 (7.46)%
1998................................ -- 11.07 (16.37)%
1997................................ -- 15.63 21.83%
1996................................ -- 14.68 18.41%
1995................................ -- 13.04 9.36%
Class I:
1999................................ $ -- $ 9.60 (6.83)%
1998................................ -- 11.08 (18.97)%(3)
HIGH GRADE BOND PORTFOLIO
Class A:
1999................................ $ -- $ 10.07 1.07%
1998................................ -- 10.57 6.53%
1997................................ -- 10.50 9.56%
1996................................ -- 10.16 5.37%
1995................................ -- 10.26 8.23%
Class I:
1999................................ $ -- $ 10.07 1.47%
1998................................ -- 10.57 4.40%(3)
HIGH YIELD BOND PORTFOLIO
Class A:
1999................................ $ -- $ 9.87 0.87%
1998................................ -- 10.48 7.10%
1997................................ -- 10.48 13.29%
1996................................ -- 9.99 7.67%
1995................................ -- 10.03 9.71%
Class I:
1999................................ $ -- $ 9.87 1.43%
1998................................ -- 10.47 4.62%(3)
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
NET ASSETS AT EXPENSES TO EXPENSES TO INCOME TO PORTFOLIO
END OF PERIOD AVERAGE NET AVERAGE NET AVERAGE NET TURNOVER
(IN THOUSANDS) ASSETS ASSETS ASSETS RATE
-------------- -------------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C>
VALUE GROWTH PORTFOLIO
Class A:
1999................................ $ 82,902 1.74% 1.74% 0.92% 220%
1998................................ 92,848 1.60% 1.60% 0.87% 217%
1997................................ 112,985 1.65% 1.65% 1.18% 77%
1996................................ 86,534 1.62% 1.62% 1.87% 92%
1995................................ 70,947 1.62% 1.62% 3.43% 85%
Class I:
1999................................ $ 5,399 1.19% 1.18% 1.48% 220%
1998................................ 4,885 0.73%(3) 0.73%(3) 0.64%(3) 217%(3)
HIGH GRADE BOND PORTFOLIO
Class A:
1999................................ $ 13,110 1.67% 1.66% 5.33% 29%
1998................................ 11,510 1.71% 1.71% 5.67% 38%
1997................................ 10,250 1.82% 1.82% 5.85% 30%
1996................................ 9,122 1.85% 1.85% 6.19% 34%
1995................................ 8,345 1.99% 1.99% 6.29% 18%
Class I:
1999................................ $ 1,521 1.26% 1.25% 5.74% 29%
1998................................ 1,376 0.95%(3) 0.95%(3) 3.89%(3) 38%(3)
HIGH YIELD BOND PORTFOLIO
Class A:
1999................................ $ 11,734 1.95% 1.94% 5.93% 44%
1998................................ 10,982 1.97% 1.97% 6.17% 30%
1997................................ 9,156 2.10%(4) 2.00% 6.82% 45%
1996................................ 7,349 2.22%(4) 2.00% 7.44% 30%
1995................................ 6,691 2.29%(4) 2.00% 7.83% 23%
Class I:
1999................................ $ 1,635 1.50% 1.49% 6.38% 44%
1998................................ 1,454 1.05%(3) 1.05%(3) 4.26%(3) 30%(3)
</TABLE>
47
<PAGE>
EQUITRUST SERIES FUND, INC.
FINANCIAL HIGHLIGHTS (CONTINUED)
YEARS ENDED JULY 31, 1999, 1998, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------
NET REALIZED
AND
NET ASSET UNREALIZED TOTAL
VALUE AT NET GAIN FROM
BEGINNING INVESTMENT (LOSS) ON INVESTMENT
OF PERIOD INCOME INVESTMENTS OPERATIONS
--------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
MANAGED PORTFOLIO
Class A:
1999................................ $ 12.15 $ 0.47 $ (1.25) $ (0.78)
1998................................ 14.05 0.44 (1.00) (0.56)
1997................................ 13.33 0.48 1.91 2.39
1996................................ 11.85 0.46 1.54 2.00
1995................................ 11.62 0.56 0.47 1.03
Class I:
1999................................ $ 12.13 $ 0.49 $ (1.21) $ (0.72)
1998................................ 14.21 0.34 (1.16) (0.82)
MONEY MARKET PORTFOLIO
Class A:
1999................................ $ 1.00 $ 0.03 $ -- $ 0.03
1998................................ 1.00 0.04 -- 0.04
1997................................ 1.00 0.03 -- 0.03
1996................................ 1.00 0.04 -- 0.04
1995................................ 1.00 0.04 -- 0.04
Class I:
1999................................ $ 1.00 $ 0.03 $ -- $ 0.03
1998................................ 1.00 0.02 -- 0.02
BLUE CHIP PORTFOLIO
Class A:
1999................................ $ 41.27 $ 0.13 $ 5.82 $ 5.95
1998................................ 37.20 0.18 4.08 4.26
1997................................ 26.26 0.16 11.22 11.38
1996................................ 22.85 0.17 3.43 3.60
1995................................ 18.75 0.19 4.05 4.24
Class I:
1999................................ $ 41.37 $ 0.38 $ 5.84 $ 6.22
1998................................ 36.77 0.29 4.51 4.80
<CAPTION>
LESS DISTRIBUTIONS
---------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS DISTRIBUTIONS
INVESTMENT FROM CAPITAL IN EXCESS OF TOTAL
INCOME GAINS NET REALIZED GAINS DISTRIBUTIONS
---------- ------------- ------------------ -------------
<S> <C> <C> <C> <C>
MANAGED PORTFOLIO
Class A:
1999................................ $ (0.47) $ -- $ (0.51) $ (0.98)
1998................................ (0.44) (0.90) -- (1.34)
1997................................ (0.46) (1.21) -- (1.67)
1996................................ (0.45) (0.10) -- (0.55)
1995................................ (0.56) (0.14) (0.10) (0.80)
Class I:
1999................................ $ (0.49) $ -- $ (0.51) $ (1.00)
1998................................ (0.36) (0.90) -- (1.26)
MONEY MARKET PORTFOLIO
Class A:
1999................................ $ (0.03) $ -- $ -- $ (0.03)
1998................................ (0.04) -- -- (0.04)
1997................................ (0.03) -- -- (0.03)
1996................................ (0.04) -- -- (0.04)
1995................................ (0.04) -- -- (0.04)
Class I:
1999................................ $ (0.03) $ -- $ -- $ (0.03)
1998................................ (0.02) -- -- (0.02)
BLUE CHIP PORTFOLIO
Class A:
1999................................ $ (0.16) $ (0.05) $ (0.12) $ (0.33)
1998................................ (0.16) (0.03) -- (0.19)
1997................................ (0.14) (0.30) -- (0.44)
1996................................ (0.19) -- -- (0.19)
1995................................ (0.14) -- -- (0.14)
Class I:
1999................................ $ (0.29) $ (0.05) $ (0.12) $ (0.46)
1998................................ (0.17) (0.03) -- (0.20)
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
TOTAL
INVESTMENT
NET ASSET RETURN BASED
CAPITAL VALUE AT ON
CONTRIBUTION END OF NET ASSET
FROM AFFILIATE PERIOD VALUE (1)
-------------- --------- ------------
<S> <C> <C> <C>
MANAGED PORTFOLIO
Class A:
1999................................ $ -- $ 10.39 (6.26)%
1998................................ -- 12.15 (4.54)%
1997................................ -- 14.05 17.88%
1996................................ 0.03(2) 13.33 17.30%(2)
1995................................ -- 11.85 9.40%
Class I:
1999................................ $ -- $ 10.41 (5.75)%
1998................................ -- 12.13 (6.31)%(3)
MONEY MARKET PORTFOLIO
Class A:
1999................................ $ -- $ 1.00 3.19%
1998................................ -- 1.00 3.65%
1997................................ -- 1.00 3.51%
1996................................ -- 1.00 3.64%
1995................................ -- 1.00 3.60%
Class I:
1999................................ $ -- $ 1.00 3.16%
1998................................ -- 1.00 2.47%(3)
BLUE CHIP PORTFOLIO
Class A:
1999................................ $ -- $ 46.89 14.51%
1998................................ -- 41.27 11.49%
1997................................ -- 37.20 43.77%
1996................................ -- 26.26 15.83%
1995................................ -- 22.85 22.77%
Class I:
1999................................ $ -- $ 47.13 15.18%
1998................................ -- 41.37 13.14%(3)
<CAPTION>
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------
RATIO OF NET
RATIO OF TOTAL RATIO OF NET INVESTMENT
NET ASSETS AT EXPENSES TO EXPENSES TO INCOME TO PORTFOLIO
END OF PERIOD AVERAGE NET AVERAGE NET AVERAGE NET TURNOVER
(IN THOUSANDS) ASSETS ASSETS ASSETS RATE
-------------- -------------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C>
MANAGED PORTFOLIO
Class A:
1999................................ $ 38,012 1.95% 1.95% 4.30% 67%
1998................................ 43,602 1.83% 1.83% 3.33% 66%
1997................................ 40,994 1.95% 1.95% 3.48% 74%
1996................................ 27,470 1.91% 1.91% 3.47% 81%
1995................................ 21,105 1.94% 1.94% 4.86% 69%
Class I:
1999................................ $ 2,931 1.47% 1.47% 4.78% 67%
1998................................ 2,762 1.03%(3) 1.03%(3) 2.30%(3) 66%(3)
MONEY MARKET PORTFOLIO
Class A:
1999................................ $ 3,467 1.91% 1.89% 3.13% 0%
1998................................ 2,574 1.95% 1.95% 3.57% 0%
1997................................ 2,466 2.28%(4) 2.00% 3.46% 0%
1996................................ 2,552 2.43%(4) 2.00% 3.58% 0%
1995................................ 2,439 2.20%(4) 2.00% 3.51% 0%
Class I:
1999................................ $ 735 2.22%(4) 1.97% 3.07% 0%
1998................................ 627 1.29%(3) 1.29%(3) 2.37%(3) 0%(3)
BLUE CHIP PORTFOLIO
Class A:
1999................................ $ 55,045 1.52% 1.52% 0.30% 7%
1998................................ 43,418 1.55% 1.55% 0.49% 3%
1997................................ 29,863 1.74% 1.74% 0.49% 0%
1996................................ 14,641 1.79% 1.79% 0.66% 3%
1995................................ 9,657 1.78% 1.78% 0.92% 1%
Class I:
1999................................ $ 5,601 0.94% 0.94% 0.88% 7%
1998................................ 3,613 0.76%(3) 0.76%(3) 0.51%(3) 3%(3)
</TABLE>
49
<PAGE>
EQUITRUST SERIES FUND, 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) Period from December 1, 1997 (date Class I operations commenced) through
July 31, 1998. Ratios presented have not been annualized.
(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 as shown:
<TABLE>
<CAPTION>
PER SHARE
NET INVESTMENT AMOUNT
YEAR INCOME REIMBURSED
---- --------------- -----------
<S> <C> <C> <C>
HIGH YIELD BOND PORTFOLIO
Class A 1997 $0.69 $ 8,681
1996 0.73 15,361
1995 0.75 18,810
MONEY MARKET PORTFOLIO
Class A 1997 $0.03 $ 8,681
1996 0.03 10,718
1995 0.03 4,948
Class I 1999 $0.03 $ 1,724
</TABLE>
50
<PAGE>
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.
(comprised of the Value Growth, High Grade Bond, High Yield Bond, Managed, Money
Market and Blue Chip Portfolios) as of July 31, 1999, 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, 1999, 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, 1999, 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 27, 1999
51
